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Faced with abundance of supply and weak demand, gold is currently quoted at a discount of $2-10 an oz (Rs 40-220 for 10gm) across all major cities.
Standard gold in the popular Zaveri Bazaar in Mumbai was quoted at Rs 27,150 for 10 gm on Thursday, unchanged from the previous day. Gold for near-month delivery on the Multi Commodity Exchange was trading at Rs 27,085 for 10 gm, a rise of 0.48 per cent from the previous day.
Importers fear Russia might start selling gold from its reserves to arrest the fall in the rouble, which has hit a five-year low. The World Gold Council estimates Russia as the world's eighth largest in terms of official gold holding at 1,035.2 tonnes, nearly eight per cent of its forex reserves, as of December 2013. Analysts expect gold prices to fall going forward.
"Those importers who bought gold at lower than the current rate are selling the bullion with a discount," Jain added.
The commerce ministry reported a 571 per cent increase in gold imports into India at $5.61 billion in November this year, compared with $835.83 million in the corresponding month last year. This translated into 146 tonnes of gold import in November, the highest since May 2013.
Amid concerns of further curbs, banks and star trading houses intensified bullion imports during the September-November 2014 period, totalling 366 tonnes against around 100 tonnes in the comparable period last year.
However, in a surprise move, the Reserve Bank of India scrapped the 80:20 scheme on November 29, under which a fifth of imported gold would have to be supplied to jewellery exporters. Now, banks and star trading houses can import gold without any restrictions. However, markets still anticipate a curb on gold import as finance minister Arun Jaitley said the government was watching the move (gold import), while speaking on the country's trade deficit recently.
"While importers have started clearing imported gold resulting in rising supply, the demand has declined steeply due to the absence of any buying occasions such as weddings and festivals. Jewellers are keeping their fingers crossed for sales during Christmas, which is more of global than local. The overall demand is 50 per cent lower today (Thursday)," said Ketan Shroff, director, Penta Gold, a bullion dealer.
With high volatility in prices, buyers have deserted the Street. Gold price moved declined by $18-20 an oz on Tuesday and recovered the following day amid expectations that US Fed chair Janet Yellen might announce future plans for interest rate hike. However, the US Fed kept the plan unchanged saying that there would be no change in the plan in interest rate hikes in the next few meetings.
With Fed's 'unchanged' decision, gold price has been moving in a close range and is currently trading at $1,205 an oz.
In India, however, retail buyers abstained from fresh purchases owing to the ongoing inauspicious month of Paush.
"The retail consumer demand will resume only after Makar Sankranti, which normally falls in January 14," said Lalit Jagawat, proprietor, Nakoda Bullion.
