The Centre’s curbs on gold mean fewer investment options and lower liquidity. So, how does an investor get around this?
The price of 24-carat gold in the international market is $1320/ounce. In rupee terms this works out to Rs 25,727/10 gm. But did you know that you cannot buy gold today at anything less than Rs 30,000 per 10 gm? Gold in India is now at a 15 per cent premium to international prices. Just last year, you coughed up only a 2-3 per cent premium.
One reason for this is the import duty hikes, which have pegged up duty on gold imports from 4 per cent in December last year to 10 per cent now. But the many restrictions on gold imports have also resulted in a severe short supply of gold in domestic markets, leading to a further ‘mark-up’ by suppliers. Since June, gold prices have rallied 20 per cent in India (helped partly by rupee depreciation). Gold has risen only 6 per cent in the international market.
The widening premium on Indian gold has not deterred shoppers at Zaveri Bazaar or T.Nagar, but it sure has hit investors. Units of gold-backed exchange traded funds are trading at a 5-6 per cent premium to their true worth ...