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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • India Gold Premiums Coming Down 0 comments
    May 25, 2014 4:24 AM | about stocks: GLD

    The RBI announced an easing of gold imports on 21 May 2014.

    Only banks could import gold under the 20:80 export rule. But now also star trading houses and premier trading houses can import gold under this 20:80 export rule. This revised guideline has come into force with immediate effect.

    Today, the US gold price is $1300/ounce. The total Indian premium was around 20% (import duty of 10% + premium of 10%) a few weeks ago. Today the premium is apparently 82 USD. That's a premium of 6.3%. That means the Indian premium has already started to come down. And it is expected that this premium will come down another 50 USD, which is another 4% lower. Also, it is likely that import tax duty will go back to 6-8% from 10%, which will make premiums go down some more.

    With Indian premiums now dropping, this will lead to a higher physical demand. I expect that this higher demand will send gold prices higher in a few weeks from now.

    Why do I think this? Just look at the chart above. When the Indian gold premium (red line) goes down, the US gold price (grey line) goes up.

    Stocks: GLD
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