Mumbai: Gold demand in India remained subdued despite a drop in prices as retail demand was squeezed by cash crunch, while jewellers were delaying purchases expecting a fall in prices next week.
Dealers in the world's No.2 consumer of the metal were offering a discount of up to USD 5 an ounce this week over official domestic prices that include a 10 percent import tax, compared with a discount of up to USD 4 last week. Indian gold prices fell to 27,700 rupees per 10 grams on Friday, the lowest level since Feb. 8.
"Everyone is running business with limited inventory. Jewellers are waiting for correction in prices and want to see how demonetization pans out," said Daman Prakash Rathod, a director at MNC Bullion, a wholesaler in south Indian city of Chennai. Last month, Prime Minister Narendra Modi scrapped 500 and 1,000 rupee banknotes, or 86 percent of the value of cash in circulation, in part of a crackdown on corruption, tax evasion and militant financing. Indian jewellers rely on the wedding season for an uptick in demand during winter months after the end of key festivals such as Diwali, but this year wedding demand has fallen sharply due to cash crunch, jewellers said.
India's overseas purchases of gold could halve to 50 tonnes in December after jumping to the highest level in 11 months in November. In Hong Kong and Singapore sellers offered premiums of between USD 1-USD 1.50 an ounce. Discounts in Tokyo remained at 50 cents this week.
