Gold trades at $78 discount in India after tariff shock hits demand

Gold traded at a discount of as much as $78 an ounce in India this week, after the government raised import tariffs to 15% from 6% to curb overseas purchases and protect foreign-exchange reserves.

"Retail buyers are a bit confused by the recent price swings after the government raised import duty earlier this month," a Kolkata-based jeweller said. "Most of them are just waiting for prices to settle down."

The discount narrowed from record levels of as much as $207 an ounce the prior week, according to Reuters data. India raised import tariffs on gold and silver to 15% from 6% earlier this month, inclusive of 3% sales levies. Jewellers are reluctant to build stocks as the wedding season draws to a close and uncertainty persists over retail demand, a Mumbai-based bullion dealer at a private bank said.

The discount in India, the world's second-largest gold consumer, signals weakened demand that could weigh on global prices. Spot gold fell to a near two-month low on Wednesday, weighed down by higher Treasury yields and a stronger dollar.

In China, the top consumer, bullion traded at premiums of $10 to $20 an ounce over the global benchmark, narrowing from $15 to $20 the prior week. "Fed rate-hike anxiety, rising bond yields, and dollar strength continue to weigh on gold in China," Bernard Sin, regional director of Greater China at MKS PAMP, said. "Near-term, physical demand remains caught between conflict-driven safe-haven demand and policy-driven headwinds."

In Hong Kong, gold traded at par to premiums of $2 an ounce. In Japan, gold was sold at a discount of $0.25 an ounce. In Singapore, gold was sold at premiums of $1 to $3 an ounce.

Spot gold rose 1.4% to $4,570.88 an ounce on Monday, supported by a weaker dollar and lower oil prices as investors weighed prospects of a breakthrough in US-Iran peace negotiations. Silver climbed 3.9% to $78.42 an ounce, platinum rose 1.9% to $1,959.85 an ounce, and palladium gained 1.9% to $1,373.25 an ounce.

Kevin Warsh was sworn in as chair of the Federal Reserve on Friday at a time when surging gasoline prices due to the Iran war are pushing up inflation and eroding consumer sentiment. The next catalyst for gold prices will be the Fed's June rate decision and any progress in US-Iran talks that could affect the dollar and oil prices.

This article is for informational purposes only and does not constitute investment advice.