Record Gold Discounts Widen Amid Import Duty Hike in India

Gold discounts in India surged to over $200 an ounce due to a 15% import duty hike. The increase triggered investor selling, aiming to cash in on gains, amidst weak demand. Concerns about potential smuggling were raised due to widened margins for grey-market operators.

Gold discounts in India widened to a record over $200 on Wednesday after a hike in import duties, leading to increased investor selling. The Indian government upped import tariffs on gold and silver to 15% from 6%, aiming to curb purchases and ease pressure on foreign exchange reserves.

"Discount levels were crazy in the physical market. We were double-checking prices before executing deals," stated the head of a bullion division at a Mumbai-based private bank. Dealers offered discounts up to $207 an ounce on Wednesday, compared to $17 on Tuesday, factoring in import and sales levies.

The rise in local gold prices caused some investors to sell off gold even at large discounts. Gold futures soared by 7.2% to a two-month high, prompting profit bookings in gold ETFs, further increasing market supply. Retail buyers and jewellers remained cautious, exacerbating selling pressure. Concerns about increased smuggling were also noted due to widened margins for grey-market operators.