Delhi is all set to emerge as the fourth hub for gold sales in the country after Ahmedabad, Mumbai and Agra, according to industry sources. This is following a cut in value-added tax on gold to 0.1 per cent from 1 per cent, in keeping with the industry's demand.
The VAT-related move, according to industry participants, is likely to make gold cheaper in the state by about Rs 63 per 10 gm.
"This move may even help Delhi become a hub for gold buying, for jewellery as well as investment purposes," said Rakesh Saraf, general secretary of Delhi's Karol Bagh Jewellers' Association and proprietor of Delhi-based Girdhari Lal Saraf Jewellers.
The state government's decision came after neighbouring states like Uttar Pradesh and Rajasthan had allowed only 0.25 per cent VAT on gold vis-a-vis 1 per cent in Delhi.
It will, however, take another three-four days for the notification to reach the market, and only after this consumers will benefit from cheaper rates, especially in the current times when the domestic gold prices are hovering around a high of Rs 7,400 per 10 gm.
With a section of the market believing that gold prices will cross the $500 an ounce mark by December, prices may get a speculative boost. Today, overseas spot gold at 1500 IST was trading at $492-493 an ounce after touching a high of $495 an ounce earlier in the day. Earlier, in December 1987, gold had touched the $500 an ounce level.
Initially, the pressure of the marriage season's jewellery buying drove people to shell out extra money for jewellery purchases of gold. However, later they restricted their gold buying with the price trend moving northward, and even shifted to diamond jewellery purchases.
"Following the buying spree at the start of the marriage season gold jewellery sales are down to mere 40-50 per cent of traditional sales," said a Delhi-based jewellery.
With its prices expected to remain over Rs 7,100-7,200 per 10 gm, the demand for the yellow metal in the next two-three months will be hit. "The price of gold has to remain within people's reach to rise further. Too high a price always chokes demand and thus, makes a price dip inevitable," said a trader with a public bank.
The fundamentals keeping gold bullish in the medium term are overseas speculative fund-buying, supported by inflation concerns; news that Russia's Central Bank may double its current gold reserves; and likely rise in the crude oil prices with the winter setting in.
Notwithstanding, Asian markets: especially India: are still bullish on the demand front with the ongoing wedding season, which though may hold the prices on the higher side.
The domestic gold prices are likely to remain higher also following the rupee weakening against the greenback, which has made gold imports into the country slightly expensive.
| GOLD FEVER |
