India has scrapped a tax on the purchase of gold.
Previously, cash purchases of gold jewellery of Rs 2 lakh and over were subject to a 1 per cent tax collected asource. Now, though, the government has chosen to raise that threshold to Rs 5 lakh as of 1st June 2016.
First Post reports that stocks such as PC Jwellers, TBZ and Gitanjali Gems “soared up to 4.3 percent on the BSE” in response to the news.
The measure is hoped to boost demand in the country’s cooling gold sector. Indeed, rising importy duty and relatively high prices have already weighed upon demand, while jewellers recently went on strike in response to an excise duty imposed from 1st March 2016. Jewellers have only recently reopened following the action, which is also hoped to stimulate demand from buyers once more.
Bullion gets a boost as Indian jewellery strike ends
22nd April 2016
Bullion got a boost this month, as the Indian jewellery strike came to an end.
Jewellery retailers across India, one of the world’s biggest gold markets, went on strike last month, in protest against a sales tax on gold jewellery that was reintroduced four years after it was abolished.
The strike saw India’s gold imports plummet 80.5 per cent year-on-year in March to $973 million, the government announced this week.
The end therefore prompted a boost in demand, as buyers returned to shops to snap up jewellery. However, the rebound in demand was not as strong as initially hoped.
“Demand is better than last week, but it is lower than expected,” Harshad Ajmera, owner of wholesaler JJ Gold House, told Reuters. “We were expecting retail consumers’ rush as jewellery shops were closed for a long time. We couldn’t see that kind of rush.”
The shops open just in time for Akshaya Tritiya in May, the second-biggest gold-buying festival after Dhanteras. However, buyers have been deterred by the precious metal’s price, which has rallied recently.
Gold price reached a five-week high of $1,270.10 an ounce on Thursday, on course for a weekly rise of 1 per cent.
Dealers were therefore offering discounts of up to $8 per ounce, with discounts as high as $53 per ounce at one point in late February.
If gold prices have already rallied, then what is fuelling the rebound?
Physical demand continues to be “extremely low” reports Yahoo! Finance.
Indeed, gold has instead been boosted in value by the performance of the US dollar, which has lost ground in the wake of scaled-back expectations of interest rate hike by the Federal Reserve, which has become increasingly dovish since its bullish outlook last year.
The dollar and bullion have always operated in counterpoint with each other, partly as a safe haven reaction to any wider economic concerns. Gold’s performance, though, is also rubbing off on other precious metals: silver prices “exploded” on Thursday, reports Business Insider, as silver’s price tracks that of gold and the gap between the two is narrowing.
Platinum and palladium have also enjoyed improvements in recent weeks, notes Bullion Desk, with values up $12 and $2 respectively.
Their performance, meanwhile, will reflect back on gold.
“The fact that the industrial precious metals are in the driving seat and not gold prices again suggests this is more than merely a counter-trend move in the precious metals. We would not be surprised if this ends up dragging gold prices higher,” FastMarkets head of research William Adams told the Business Insider.Google+