India gold price discounts increase to 3-year highs after import duty hike

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Domestic yellow metal prices in India jumped to a record on Friday following an unpredicted rise in the import duty in country’s budget, hitting the demand and forcing dealers to offer the highest discount in nearly 3 years.

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Dealers in nation, the world’s 2nd biggest gold consumer, were offering the discounts of up to 30$ an ounce — highest since the August 2016 — over official domestic prices, versus 25$ discounts seen last week. The Finance minister Nirmala Sitharaman raised import duties on the precious gold and other precious metals to 12.5 percent from 10 percent in her first federal budget on Friday, a move industry official said could dampen retail demand and boost the smuggling.

Gold futures jumped more than 2 percent following budget statement to hit a record high of 35,100 per 10 grams. Local prices have risen more than 11 % in 6 weeks.

Demand was lackluster in other Asian hubs as well, with benchmark spot yellow metal prices having risen more than 10 percent so far this year.

In China, premiums dipped to an 11$ to 12$ an ounce range over benchmark compared with 12$-14$ last week, as demand remained quiet, traders said.

In Singapore and Hong Kong, premiums remained unaffected from last week at 40-60 cents per ounce and 50 cents-1.20$ respectively.

A dip of nearly 100$ in benchmark prices could stoke demand for physical yellow metal, traders said.

Asian hubs also saw high volumes of scrap yellow metal coming on to market as customers resorted to selling back yellow metal to cash in on higher prices.

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