Gold Prices Rose due to Increase in Import Duty Tax in by India

  • Commodities Analysis

Gold yesterday settled up by 2.77% at 51917 as India increased its import tax on gold in a surprise move that aims to reduce inflows to the world’s second-largest consumer after the country’s ballooning trade gap pushed its currency to a record low. The import duty on gold was increased to 12.5% from 7.5%, according to a government notice dated June 30.
India’s gold purchases had been picking up in the past year after buying slumped during the pandemic and the country imported the most gold in a decade in 2021, according to the World Gold Council. Indians consider gold to be auspicious and a store of value, and the country relies entirely on imports to meet demand. Physical gold dealers in India offered steep discounts as demand remained weak, with an import tax hike likely to further sap interest, while top consumer China saw activity bounce back slowly as it emerged from COVID-led curbs.
India raised its basic import duty on gold to 12.5% from 7.5% as the government tries to bring down the trade deficit. This week, discounts rose to about $40 an ounce over official domestic prices from last week's $8 discounts. In China, gold changed hands at $4-$7 an ounce premiums over global benchmark spot prices. In Hong Kong, gold was sold at anywhere between 80 cents an ounce to $1.80 premiums.
Technically market is under fresh buying as the market has witnessed a gain in open interest by 1.24% to settle at 11142 while prices are up 1400 rupees, now Gold is getting support at 51086 and below same could see a test of 50254 levels, and resistance is now likely to be seen at 52391, a move above could see prices testing 52864.  
Trading Ideas:
# Gold trading range for the day is 50254-52864.
# Gold prices rose due to an increase in import duty tax in by India.
# India raises import duty on bullion to 12.5% from 7.5% earlier
# Imports in 2021 surged to the highest in a decade: WGC

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