MUMBAI (Reuters) – Gold prices in India rose above the psychologically important 50,000 rupees level for the first time on Wednesday, as expectations of more stimulus to resuscitate pandemic-hit economies lifted the metal’s appeal as an inflation-hedge.
Local gold futures reached an all-time high of 50,085 Indian rupees ($671.61) per 10 grams on Wednesday, taking their gains to 28% in 2020 after rising a quarter in 2019.
However, the price rise dampened retail demand for gold in India, the world’s second largest consumer of the precious metal.
Overseas, spot gold jumped more than 1% on Wednesday to its highest in nearly nine years, driven by a weaker dollar and safe-haven buying.
Although the price rise has been dampening retail demand, investment demand has been improving lately, said a Mumbai-based bank dealer with a bullion importing bank.
“But the share of investment demand is very small compared to retail purchases,” he said.
In the spot market, gold prices flipped into discounts due to weak demand.
In thin trade, dealers were offering a discount of up to $5 an ounce over official domestic prices on Wednesday, down from last week’s premium of $2. The domestic price includes a 12.5% import tax and 3% sales tax.
“I couldn’t sell a gram of gold today,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.
“Prices rose too much too quickly. Buyers will wait for a few days to see whether they sustain at higher levels,” Ajmera said.
India’s gold imports in the June quarter plunged 96% from a year earlier to 13 tonnes after shipments virtually ground to a halt in April and May.
Local silver prices jumped more than 8% on Wednesday to 62,200 rupees per kg, the highest in 7-1/2 years.
Reporting by Rajendra Jadhav; Editing by Krishna Chandra Eluri and Elaine Hardcastle
Our Standards:The Thomson Reuters Trust Principles