Mumbai/Bengaluru: Gold was sold at a discount to official prices in India for the first time in one-and-a-half months this week, ahead of the implementation of the goods and services tax (GST) from 1 July, while higher prices kept buyers on the sidelines elsewhere in Asia.

Spot gold hit a five-week high of $1,273.74 earlier this week, boosted by demand for safe-haven assets due to political tensions in the US and Europe.

“The ongoing Ramadan festival could spur some buying, but demand is likely to remain slow afterwards," said a Singapore-based bank dealer.

Demand remained tepid in India, the world’s second largest consumer, with dealers offering a discount of up to Rs64 an ounce to official domestic prices. Last week, they charged the same amount per ounce as a premium. The domestic price includes a 10% import tax.

“Jewellers have trimmed purchases despite offering discounts. They have ample inventories, but retail demand is faltering," said Daman Prakash Rathod, a director at MNC Bullion, a wholesaler based in Chennai.

India is going to introduce the new goods and services tax (GST) from 1 July that will replace a slew of central and state levies, but the government is yet to fix a tax rate for gold under it. The tax slab for gold is likely to be decided on 3 June. Anticipating a higher tax rate, many jewellers advanced buying in the last few months and it could mean the country’s gold imports could plunge during the traditional period of peak demand in the second half of the year.

“Many jewellers advanced purchases expecting a higher GST rate. Now, they don’t need to buy," said a Mumbai-based dealer with a private bank.

In top consumer China, a festive holiday in the beginning of the week limited the possibility of any new purchases, said a Hong Kong-based precious metals refiner.

China, Hong Kong and Taiwan markets were closed for holidays on Monday and Tuesday for the annual Dragon Boat festival.

Premiums were seen at $7 an ounce in China and 60 cents to $1 an ounce in Hong Kong, both unchanged from the previous week, traders said.

Prices in Tokyo were quoted at a discount of 25 cents to 50 cents, compared with a discount of 50 cents last week. However, platinum sales rose on buying for investment, said a Tokyo-based trader.

Meanwhile, premiums in Singapore were in a range of 60 cents to $1, compared with $1 in the previous week. Reuters

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