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Indian gold moves back to premium against dollar spot prices

London — Gold bars imported into India moved back Tuesday to a premium against dollar spot prices for the first time since August as demand continued to rise before Diwali, sources said.

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"The rise in Indian premiums is a result of both higher demand coming in on the back of lower dollar prices, and a further reduction in custom duties for imported gold," one Ahmedabad based refiner told Platts.

The variable import duty was cut to Rupee 2,413/10 grams ($112.99/oz) from Rupee 2,543.33/10 grams last week.

"Everything has been all good since October 23 when the market started buying. From November 11, India will be closed for a good four days because of Diwali -- but business will come back starting November 16," said another refiner.



While there was some skepticism among market participants on whether demand could be sustained after Diwali, there was a consensus that Indian gold bars could remain at a premium against dollar spot prices until year-end.

"After Diwali, the wedding season properly starts -- which should keep demand high. However, India is a price taker in the gold market and dollar prices are looking increasingly uncertain following poor macroeconomic forecasts released yesterday. On the whole, I think dollar prices could remain low enough for strong Indian buying to continue," said one Indian trader.

London Bullion Market Association gold prices moved below $1,100/oz on Friday following speculation around the Fed raising interest rates, with spot gold prices trading at $1,093.02/mt as of 1135 GMT Tuesday.

But the Organization for Economic Co-operation and Development lowered its global economic growth forecast in a report released Monday, fueling doubt over a Fed rate rise.

"At the moment, there is a lot of uncertainty surrounding where the gold price will go before the end of the year. But we think price direction will be better known in two weeks time," said an Indian refiner.

Market participants further noted that demand would remain robust so long as dollar prices did not exceed the $1,150/oz range.

The Platts Gold Premium India was assessed at a $2/oz premium to the London price Tuesday, up $2/oz from Monday, with stronger demand heard across India ahead of Diwali.

UBS said in a note sentiment for gold remained weak in other emerging economies.

"Conversations with local market participants in China revealed that sentiment towards gold remains broadly negative in line with global trends -- the sense is that lower gold prices appear to be the path of least resistance for now, and few are willing to step in front of that trend," it said.

China gold premiums were heard at around $3/oz Tuesday, and have been heard trending between $1-$5/oz over the past month.

--Henry Van, henry.van@platts.com
--Edited by Jeremy Lovell, jeremy.lovell@platts.com