'Severe shortage' pushes India gold premiums back to $130 an ounce

Gold import duties have been pushed up tenfold – from 1% at the start of 2012 to 10% today. Excise duties now stand at 9% while new rules such as strictly cash only for imports, transaction taxes and even bans on gold-backed exchange traded fund investments have stymied India's gold industry.

But the government import restrictions have led to a scarcity of physical gold inside the country (despite the concomitant increase in smuggling) which coupled with the weak rupee are putting a huge damper on sales of gold this year.

The sub-continent celebrated Dhanteras and Diwali, two festivals closely associated with bullion buying, last month, but 2013 turned out to be a subdued year.

Now that the country's wedding season, another major driver of gold sales, is in full swing, premiums demanded by Indian gold traders from jewelers are shooting up again.

"Gold premiums shot back to $130 [an ounce above the London price fix] levels mainly on the back of severe shortage of supply and also due to slowdown in recycled gold trade," the All India Gems and Jewellery Trade Federation said on Monday.

That is double the $60 – $70 an ounce premium paid during the festivals when many Indian families opted to pay to have their gold melted and made into new jewelry and gifts.

Read More: www.mining.com/severe-supply-shortage-pushes-india-gold-premiums-to-130-an-ounce-55072/