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Informist, Tuesday, Aug 20, 2024

 

MUMBAI – Gold demand in India is likely to get a boost following pro-gold measures announced in the Union Budget, Kavita Chacko, India research head, World Gold Council, said in a note. We expect the changes to collectively add 50 tn or more to gold demand in Jul-Dec, she added.

 

Domestic gold prices have fallen due to a significant 9% reduction in import duty announced in the Union Budget, presented in July. "The duty cut has reduced the landed cost of gold, leading to a 6?crease in the domestic landed price since the cut was implemented," Chacko said.

 

The lower import duty has boosted consumer demand ahead of the festival season and pushed the domestic gold price to a premium relative to the landed price following five months of discounts. Wholesalers who had inventory purchased under the old customs duty, began selling gold at a premium to the landed cost to mitigate their losses, she said.

 

Despite the recent duty cut, domestic gold prices have gained 10% year-to-date, Chacko said. Similarly, global gold prices gained 18% this year, amid strong central bank purchases, elevated geopolitical risks and intensifying expectations of a monetary policy pivot from the US Federal Reserve, the research head said.

 

The premium on the domestic gold price to the international price moderated to $5 per oz from $28 per oz, because of the rise in international gold prices and the potential adjustment in inventory valuations, she said. 

 

Meanwhile, there was a notable increase in investments channelled into gold exchange-traded funds, consequent to the changes introduced in the Union Budget on Jul 23, Chacko said. During the month, Indian gold ETFs recorded net inflows totalling 13.4 bln rupees, the highest monthly inflows since February 2020 and 84% higher than in June this year. "Interestingly, while gross fund inflows nearly doubled on month from 7.5 bln rupees to 14.6 bln rupees, redemptions also rose from 260 mln rupees in June to 1.28 bln rupees," she added.

 

Today, gold prices on COMEX hit an all-time high on dovish comments from Fed officials. San Francisco Fed President Mary Daly and Minneapolis Fed President Neel Kashkari signalled that they would be open to a rate cut at the September FOMC meeting. The most-traded October gold contract on COMEX hit an all-time high of $2,541.9 per oz, up nearly 1% from its previous close. At 1745 IST, the most-active October gold contract on COMEX was up 0.9% at $2,541.2 per oz.  End

 

US$1 = 83.79 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Sandeep Sinha

Edited by Aditya Sakorkar

 

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