Gold prices have been range-bound in recent weeks but traders have turned optimistic, as the festive season has begun. This is already getting reflected in imports.

Inching up of premiums for physical delivery of gold suggest demand is returning. A fortnight earlier, the premiums were marginal and, on some occasions, there was a discount to the landed cost of imports. In the past few days, premiums of $10-12 an ounce are quoted.

Import figures have been rising. In the past three months, 214 tonnes are estimated to have entered India. Gold import was 64 tonnes in August 2012; it had fallen to 10 tonnes in August 2013 due to stringent and ambiguous import norms. However, in August this year, 70 tonnes are estimated to have been imported. It was 47 tonnes in July due to June's carry-forward stock; June import was an estimated 97 tonnes.

Bachhraj Bamalva, director, All India Gems and Jewellery Trade Federation, said: "Consumer demand is expected to pick up in the next one or two weeks. And, manufacturers' demand has started, as they want to be prepared to meet festive and marriage season purchases." Also, prices are down 15.7 per cent over a year. Last year in end-August, gold was Rs 33,265 per 10g here; it is now Rs 28,050. Consumers waiting for long are likely to now come forward.

The increase in demand is expected to result in a further rise in premiums. A source close to importers of gold said, "We see premiums going up to $20-25 an ounce in the near future." Another private sector importer said premiums might stabilise around $25. At that level, there will be an attraction to import more, which will keep premiums under check.

Gold prices internationally are widely expected to fall or stay subdued but in India the rising premiums should adjust the falling price. Gold has fallen four per cent in six weeks abroad, from a recent high of $1,338.6 an ounce in mid-July to $1,287.8 at present.

Even exchange-traded fund investors globally booked some profit. Their holding with the largest one, SPDR, has come down in the past six weeks.

In India, investment demand has not returned. However, the jewellery segment has seen improvement.The World Gold Council said in its report on the gold demand trend for the June quarter: "Bar and coin investors continue to sit on the sidelines. Indian investment demand, already enormously overshadowed by last year's record levels, continued to be hampered by government policies banning coin imports. Sales of coins and investment products during the auspicious Akshaya Tritiya festival were very muted, with many consumers instead shifting their attention to jewellery.

Source:- business-standard.com