Gold trades at big premium as import restriction hits supply

Premiums for delivery Rs 900 per 10 gram, importers, traders mint monet due to restriction on imports

The price of gold at Zaveri Bazaar here is still quoting at a very high premium compared to the cost of imports, indicating the acute shortage of ready-delivery gold, due to the restriction on imports.

Against the landed cost of Rs 27,300 per 10g, the Zaveri Bazar price closed at Rs 28,220; it was Rs 155 per 10g higher compared to Wednesday. In the normal days, the premium was Rs 250-300 per 10g.

The volatile rupee has also contributed to the higher premium. Jewellers say till a few days earlier, the premium on the landed cost was Rs 1,200 per 10g, as some bear investors were trapped and were ready to pay a high premium to give delivery. These contracts have expired and the premiums have come down but are still higher than normal.

On July 22, the Reserve Bank of India had removed the previous restriction on gold import but said 20 per cent of imports should be supplied to exporters and till the exports were completed, fresh imports could not be made. The rule had effectively frozen imports. A trader said delivery wasn’t available as some banks with exporters as clients were only importing gold and jewellers were ready to pay a high premium to keep jewellery ready in stock, ahead of the festival season.

  Haresh Soni, president of the All India Gems and Jewellery Federation,  said hundreds of thousands of artisans were idle ahead of the festivals. He said, “Jewellers and traders should stop selling coins and bars to reduce the demand for gold and, as a result, imports. They should also incentivise the melting of old jewellery, rather than selling new gold for jewellery. This will be in the national interest and also the jewellers’ interest.”

Importing banks are charging higher than normal premiums and so are bullion traders. The market hopes RBI will re-clarify on the policy shortly, to allow more of import.