Gold prices hit a month high a day after the Reserve Bank of India tightened gold import norms to curb the increasing gold imports which have contributed to a widening current account deficit.
The price of the precious metal increased by Rs.685 at Rs.28,365 per 10 grams in the New Delhi area on the back of healthy buying following RBI's fresh import norms. Gold had last touched the price level on June 19, 2013.
Not only gold prices, scrip of companies engaged in jewellery business too rose.
Stocks of firms like Tribhovandas Bhimji Zaveri (TBZ) at the Bombay Stock Exchange (BSE) rose around 6.29 percent at Rs.211.25 from its previous close of Rs.198.75. Titan Industries' share went up by 5.85 percent at Rs.275.25 from its previous close of Rs.260.05 and PC Jeweller's stocks gained 18.70 percent at Rs.88.25 from its previous close of Rs.74.35.
According to market analysts, the new guidelines which also gave a clarification on the continuation of gold leasing from banks to companies and that the importers have to ensure 20 percent of total shipped in material to be used for export purposes, helped some of the companies gain in the day's trade.
A month ago, RBI has allowed jewellers to import gold only for export purposes, whereas gold leasing for domestic consumption was banned. In gold leasing jewellery companies do not require to pay upfront on gold purchases uptill a period of 90-180 days.
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To control the current account deficit, the government has taken a slew of measures to curb demand for gold, which accounts for a large share of the country's imports. The government had also increased duty on gold twice in the past five months.
India's current-account deficit for the 2012-13 stood at $87.8 billion, or 4.8 percent of the nation's gross domestic product (GDP) from $78.2 billion, or 4.2 percent in 2011-12.
"Nominated agencies will ensure that at least one fifth of every lot of import of gold is exclusively made available for the purpose of export. They shall make available gold in any form for domestic use only to entities engaged in jewellery business," the RBI had said in a statement Monday.