A rush by Indian consumers to buy gold jewelry and coins after the biggest plunge in prices in three decades is prompting jewelers to offer premiums on imports as traders and banks run out of stockpiles, a trade group said.
Jewelers in big cities are paying as much as 800 rupees ($14.73) per 10 grams (0.02 pounds) while retailers in some remote areas are paying about 1,200 rupees per 10 grams as a premium, Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation, said by phone today.
Buyers are flocking to jewelry stores and bank outlets to buy ornaments, coins and bars ahead of India’s main wedding and festival seasons after gold slumped to a two-year low. Standard Chartered Plc’s gold shipments to India last week exceeded the previous record by 20% and were double the week before, London-based analyst Dan Smith said by phone today.
Gold has declined 15% in London trading this year, completing its descent into a bear market, and fell the most since 1983 in the two days through April 15 on growing speculation that a recovery in the U.S. will curb demand for the metal as a store of value.
“There is scarcity of raw material in the market and demand is good now,” Soni said. “We don’t have a choice but to pay a premium to get the raw material on time. We normally don’t pay premium on imports.”
Overseas purchases of gold may jump 36% to 305 metric tons in the three months ending June from 225 tons a year earlier, Mohit Kamboj, president of the Bombay Bullion Association Ltd., said in a phone interview last week. Imports may climb as much as 20% this month from year earlier, he said.
“Banks and agents don’t have much gold left to sell and jewelers are buying at a premium to meet the rise in retail demand,” Kamboj said. “Small and retail investors are buying more coins and bars. Looking at the rate at which people are buying, imports are bound to rise.”
Futures on the Multi Commodity Exchange of India Ltd. tumbled to as low as 25,270 rupees per 10 grams on April 16, the cheapest since September 2011. The June-delivery contract traded 0.3% lower at 26,275 rupees by 6:55 p.m. in Mumbai.
The Akshaya Tritiya festival on May 13 is considered by India’s more than 900 million Hindus as the traditional day to buy precious metals. Gold is bought during festivals and marriages as part of the bridal trousseau or gifted in the form of jewelry by relatives. The main festival season runs from August to October followed by the wedding season from November to December and from late March through early May.
India has tripled import taxes from as low as 2% in January last year after the current-account shortfall, the broadest measure of trade, widened and the rupee slumped to a record against the U.S. dollar. The current-account deficit widened to $32.6 billion in the last quarter of 2012.