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Friday, July 24, 2015 8:48:22 AM
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Jul 24, 2015 - 1:32 PM GMT
by Ian Walker
Gold in India has moved into a premium as consumers react to the collapse in international prices, while demand ramps up ahead of the fast-approaching festival season.
Gold for immediate delivery has reversed from a discount of around $5 to a premium of $2 per ounce above the London spot price on .995 gold, traders in India told FastMarkets. The market in India has not been in a premium since April.
Just 14 days ago, discounts were around $8, however a collapse in the international spot price on Monday and better-than expected rainfall across much of the country has helped push the price back into a premium.
Despite the modest uptick in demand, much of the market still remains on the sidelines, expecting further declines in the gold price in the near-term, particularly following extended media coverage of the event that has seen much of the mainstream press pick up the story.
Metals Focus’ Chirag Sheth notes that should there be further contractions, a drop to 24,000 rupees per 10 grams would see “a sharp sharp increase in demand, especially as August is the month on the cusp of entering the peak demand season.”
Local traders say that there has also been a rush of fabrication demand ahead of the widely-anticipated India International Jewellery Show in early August.
Monsoons also continue to lift sentiment – rainfall across much of India’s key agricultural areas in eastern and western Maharashtra and the Northern states has been much better than forecast – 20 percent more than the long-term average in places, according to the Indian Meteorological Department dated July 23.
The domestic agricultural sector accounts for as much as 60 percent of gold demand as farmers use gold as a primary store of wealth because they have limited access to the formal banking system. Any disruptions to annual rainfall can have a profound effect on the local gold market.
- See more at: http://www.bulliondesk.com/gold-news/physicals-gold-india-swings-to-premium-as-international-price-collapses-98259/#sthash.ljr0M1SF.dpuf
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