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Gold rates: In futures markets, prices are around  ₹52,000 per 10 gram
Gold rates: In futures markets, prices are around 52,000 per 10 gram

Gold price discount in India highest in more than a month

  • Gold prices in India are down about 4,000 from the highs hit earlier this month
  • Domestic gold prices in India include 12.5% import and 3% GST

Discounts on physical gold in India rose to a more than one month high amid weak demand and more imports. Physical gold dealers in India offered discounts of up to $20 an ounce against official domestic prices as compared to $2 premiums last week, Reuters reported. Domestic gold prices in India include 12.5% import and 3% GST.

In the futures market, October gold futures fell 0.3% to 52,001 per 10 gram on Friday. On a week-on-week comparison, gold prices were mostly flat. But from August 7th highs of about 56,200, gold is down more than 4,000 per 10 gram.

"A significant amount of gold was imported from Dubai last week and customs cleared that this week. But demand is not there because of volatile prices," said Chanda Venkatesh, managing director of bullion merchant CapsGold, told Reuters.

Gold prices have been on a wild ride after hitting new highs earlier this month. Minutes from the U.S. central bank's last policy meeting released earlier this week showed policymakers were concerned the economy faced a highly uncertain path and more monetary support may be needed, although they downplayed the need for yield caps and targets.

Despite the current volatility in gold prices, the yellow metal is up over 25% so far this year. Central banks have rolled out massive stimulus and cut interest rates to near zero to combat the economic toll from the coronavirus crisis. This has increased the safe haven appeal of gold, considered a hedge against inflation and currency debasement.

On the other hand, the US dollar has been volatile, making gold volatile. The US dollar index rose 0.46% on Friday amid strong US economic data that also sparked in rally in stock markets.

Gold remains sensitive to movements in the US dollar and US monetary policy expectations.

Many analysts have a bullish view on gold for the mid to long term because of the ultra loose monetary policy pursued by the central banks.

Money-printing by central banks amid near-zero interest rates to ease the economic fallout from the pandemic have bolstered gold's appeal as a hedge against inflation and currency debasement. (With Agency Inputs)

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