Advertisement

Asia Gold-Import tax hike clouds India demand outlook, China activity picks up

By Rajendra Jadhav and Eileen Soreng

July 1 (Reuters) - Physical gold dealers in India offered steep discounts this week as demand remained weak, with an import tax hike likely to further sap interest, while top consumer China saw activity bounce back slowly as it emerged from COVID-led curbs.

India raised its basic import duty on gold to 12.5% from 7.5% as the government tries to bring down the trade deficit.

"Jewellery buying was weak for the past few weeks. Now it will fall further because of the price rise," said Prithviraj Kothari, managing director of RiddiSiddhi Bullions.

This week, discounts rose to about $40 an ounce over official domestic prices — inclusive of the 12.5% import and 3% sales levies — from last week's $8 discounts.

Dealers were offering hefty discounts on Friday but demand was still very poor, said a Mumbai-based dealer with a private bank.

"Consumers will take time to adjust to higher prices," he said.

In China, gold changed hands at $4-$7 an ounce premiums over global benchmark spot prices.

"Market players are optimistic about the gradual reopening in several cities and extended hours for trading yuan," said Bernard Sin, Regional Director, Greater China at MKS PAMP.

"Several notable Chinese banks had begun importing gold into China."

While economic activity regained some momentum in June after lockdowns in various regions were rolled back as COVID-19 cases fell, headwinds still persist and there were fears of a recurrent wave of infections.

"Income expectations are still depressed, so couple that with the impact of high oil prices and there is no excess capacity for gold purchases," said StoneX analyst Rhona O'Connell.

In Hong Kong, gold was sold at anywhere between 80 cents an ounce to $1.80 premiums.

In Japan, gold was sold at a discount of 25 cents, a trader said. (Reporting by Eileen Soreng, Bharat Govind Gautam and Arundhati Sarkar in Bengaluru, Rajendra Jhadav in Mumbai; Editing by Kim Coghill)