Gold demand in India was significantly lower than usual ahead of a key festival season owing to higher taxes and new industry rules,
Asia Gold-India’s festive glitter dimmed by new tax regime, rules
Gold demand in India was significantly lower than usual ahead of a key festival season owing to higher taxes and new industry rules, while a drop in prices spurred limited buying in other Asian hubs.
“Demand from jewellers rises sharply ahead of Dussehra festival. This year, due to higher tax and other government rules, demand is very weak,” said N. Vijay, a bullion dealer from Salem in the southern Indian state of Tamil Nadu.
Indians will celebrate Dussehra on Saturday, when buying gold is considered auspicious.Discounts offered by dealers widened to up to $6 an ounce this week from $4 last week.The sales tax on gold was hiked to 3 percent from 1.2 percent starting July 1.
In August, India also brought its bullion industry under the Prevention of Money Laundering Act (PMLA), making it mandatory for jewellers to keep records of customers’ personal identification numbers for transactions above 50,000 Indian rupees.
“Retail demand has been weak since the government implemented PMLA,” said a Mumbai-based dealer with a private bank.Gold smuggling in India could rise during the upcoming peak holiday season as buyers try to sidestep the new tax and rules. spot gold XAU= was headed for its third straight weekly decline, pressured by a stronger dollar amid prospects for a December interest rate hike in the United States.
Premiums in top consumer China rose to an $8-$10 per ounce range over the benchmark, compared with $4-$5 last week.“This week, it (demand in China) seems to be picking up a bit because of the price decline,” a Hong Kong-based gold refiner said, adding that activity will be quiet next week due to the Golden Week holidays.
Hong Kong premiums were quoted in the 50 cents to 90 cents range, versus the 40 cents-$1 level previously.However, demand in China, especially for jewellery, continued to be soft due to a shift to lower-carat pieces and gem sets from heavier-weighted pieces, Standard Chartered (LON:STAN) analysts said in a note.“While investment demand remains healthy, the overall trend is softer.”
In Singapore, premiums of 50 cents to $1 were quoted, versus the 80 cents level last week.
“When prices dropped, we saw a slowdown in activity as clients now exercise cautious ‘wait and see’ approach to see where prices are heading,” said Joshua Rotbart, managing partner of J. Rotbart & Co in Hong Kong.In Japan, discounts narrowed to 30-40 cents from last week’s 50 cents amid a drop in local rates, a Tokyo-based trader said.
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