Gold Premiums in India Surge to Two and a Half Month High

Gold premiums in India reached their highest level in over two and a half months this week, as Indian banks continued to hold back on bullion imports despite the resolution of an authorisation delay that had briefly stranded tonnes of gold and silver at customs earlier this month.

Dealers quoted premiums of up to $15 an ounce over official domestic prices this week, inclusive of 6 percent import duty and 3 percent sales levies, the highest since February 7. This marked a significant reversal from last week, when dealers had quoted discounts of up to $4 an ounce.

The reluctance of Indian banks to import gold is attributed to uncertainty over the applicable tax on gold. Despite the resolution of the authorisation delay, the tax ambiguity has kept banks on the sidelines. The disruption began earlier this month when the government delayed issuing an authorisation order, forcing Indian banks to halt gold and silver imports entirely and leaving significant quantities of bullion stranded at customs.

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Domestic gold prices were trading around Rs 1,51,200 per 10 grams on Friday, after hitting a one-month high of Rs 1,55,065 rupees last week. Demand has also softened following Akshaya Tritiya on April 19, one of the most auspicious days in the Indian calendar for gold purchases, though buying was weaker than usual this year.

In China, the world's top gold consumer, bullion traded at premiums of $9 to $12 an ounce over the global benchmark this week, sharply up from $3 to $6 last week. The rise in premiums was attributed to renewed physical demand at current price levels.

Internationally, spot gold prices were headed for a weekly decline after a four-week winning streak, as elevated oil prices stoked inflation fears amid ongoing Middle East tensions. In Hong Kong, physical gold traded at par to premiums of $1.80, while in Japan gold was sold at par with spot prices.

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