India’s Gold Rebate Nearly Doubles Even as Prices Fall
Gold discounts in India widened this week amid an end to the wedding season and a rise in prices from recent lows. According to Reuters news agency, dealers in India this week offered a discount of up to $9 an ounce from official domestic prices, more than last week’s $5 discount. Gold rates in India include 10.75% import and 3% GST. As wedding season draws to a close, retail demand this month is expected to be subdued.
On Friday, gold prices in India (MCX futures) fell 0.6% to settle at ₹50,984 for 10 grams. Despite the correction, gold is on the rise ₹1,000 from the May low of ₹49,700.
In global markets, gold fell sharply on Friday as better-than-expected U.S. jobs data raised fears of aggressive monetary policy tightening. The US dollar also strengthened. Spot gold fell 1% to $1,848.67 an ounce.
Data released on Friday showed that the nonfarm payrolls in the United States in May rose by 390,000 compared to the Bloomberg survey estimate of 318,000. Meanwhile, the unemployment rate remained unchanged at 3.6%. during the month.
Higher US interest rates increase the opportunity cost of holding gold, which does not bear interest, while boosting the dollar in which bullion is valued.
At the same time, “gold is also supported by safe-haven buying amid growing challenges to the global economy, persistent inflation and geopolitical tensions. heightened inflation fears,” Kotak Securities said in a note. “ETF flows, however, show that investors are using higher prices to exit the market.”
The trend in the US dollar, bond yields and equities may continue to affect gold and silver and the focus will be on economic data, central bank comments and developments related to the spread of the virus and to the Russian-Ukrainian war, the brokerage said.
The US Federal Reserve is expected to raise rates by 50 basis points at its next two meetings.
On silver, Kotak Securities said “the outlook for industrial metals has improved with China lifting virus-related restrictions, but growth concerns persist. ETF outflows show weaker interest investors.”
U.S. stocks fell sharply on Friday after May hiring data beat expectations, suggesting the labor market remains robust enough for the Fed to hike rates quickly as it battles price gains dazzling. (With contributions from the agency)