Gold continues to sold at a discount in India despite sharp price fall1 min read . Updated: 13 Sep 2020, 12:10 PM IST
- The coronavirus pandemic and high prices have hit gold demand in India
- Gold prices in India are now down about ₹5,000 from last month's highs
Despite a sharp price fall from last month's highs, physical gold dealers in India continued to offer discounts for a fourth straight week amid weak demand. Dealer offered discounts of $30 an ounce over official domestic prices, Reuters reported, as compared to last week's $40. Gold prices in India, the second-biggest buyer after China, include 12.5% import duty and 3% GST.
The coronavirus pandemic and high prices have already hit gold demand in India and demand took a further hit due to the start of 'Shradh' period, which is considered inauspicious to buy gold and other assets.
Gold prices in India ended the week at ₹51,280 per 10 gram. The precious metal is down about ₹5,000 per 10 gram from record highs of ₹56200, hit last month. But from the start of this year, gold is up about 30% this year, tracking a global rally.
Analysts say that covid vaccine developments and improving economic data present near-term headwinds to gold but low and negative interest rates, weaker US dollar and expectations of further stimulus will keep gold supported.
Despite weak physical demand, investment demand for gold remained strong in India. Gold ETFs saw an inflow of ₹908 crore in August, the fifth month of inflow in a row. This takes the net inflow in gold exchange traded fund or ETF category to ₹5,356 crore in January-August period of 2020.
Gold demand in India usually picks in the run-up to the October-November festival season but dealers says that a worsening COVID-19 outbreak and weak economy has hammered sentiment. India's economy contracted by nearly a quarter in April-June quarter.