We reported yesterday of a black market forming in Turkey with outrageous premiums forming for gold coins. India is experiencing a similar gold rush as prices roam around multi-year lows. Last week, Bombay Bullion Association Predisent Mohit Khamboj predicted 4 tons in sales on Tuesday and Wednesday and expected upwards of 4 tons on Thursday, which happened to fall on the Hindu festival of Pushya Nakshatra.
Gold sales had cooled down in January, when import duties for gold were raised from 4% to 6%. However, even before the major crash of last week, demand was picking up as the wedding season and hence gold buying season was around the corner. The steep price drop added further fuel to the mix and create a buying spree like no other, causing premiums to shoot to $8-10 over the spot price, a level that has not been seen in 2 years.
Other Asian countries are reporting similar premium surges,with Singapore gold premiums reaching heights not seen since late 2008 and gold premiums in Hong Kong touching an 18-month peak.
Despite premiums up to 4 times higher than usual peak demand periods, many gold dealers are simply not selling, with an estimated 9 tons on the sidelines waiting for higher prices in order for stakeholders to recoup losses incurred already by steep import duties and higher purchase costs. With the gold buying festival known as Akshaya Tritiya around the corner on May 13, business are looking to restock their shelves. In India where gold is very much a part of tradition, no price or external factor can impact people’s desires for the shiny metal.