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Jul 25, 2013, 05.53 PM IST | Source: Reuters

Gold premiums jump as festivals near

Premiums rose four fold to USD 20 an ounce on London prices on Thursday after the Reserve Bank of India tightened gold imports, making them dependent on export volumes with an eye to reducing a record current account deficit.

Gold premiums in India, the world's biggest buyer of the metal, jumped on Thursday due to short supplies even as traders, looking to stock up for festivals, waited for prices to fall further from their highest level in more than a month.

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Premiums rose four fold to USD 20 an ounce on London prices on Thursday after the Reserve Bank of India tightened gold imports, making them dependent on export volumes with an eye to reducing a record current account deficit.

"Premiums have shot up as there is no gold supply, even after paying USD 20 premium, it is difficult to get gold," said Bachhraj Bamalwa, a director at the All India Gems and Jewellery Trade Federation, adding "banks are not committing anything for supply of gold for next week."

Premiums would shoot up to USD 30-40 an ounce in August, if the same import policy continues, said Mayank Khemka, managing director with Khemka Group, a wholesaler in New Delhi.

The festival season starts in mid-August and will peak with Dhanteras in November. The wedding season also starts around that period.

"Current policy is very detrimental and domestic jewellers won't get any supplies," causing premiums to shoot up, said Khemka.

On the Multi Commodity Exchange, gold prices eased from their highest level in more than a month.

At 4.09 p.m., the most-active gold for August delivery on the Multi Commodity Exchange (MCX) was 0.53 percent lower at Rs 27,105 per 10 grams, easing from the previous day's high of Rs 27,716, a level last seen on June 20.

Silver for September was 1.42 percent lower at Rs 40,760 per kg.

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