The heavy discount on physical gold remains intact across much of India this week while high inventories and dwindling demand continue to take their toll. Discounts are still averaging around $8 per ounce to the London spot price on .995 gold in Ahmedabad, a gateway for gold into Mumbai, although larger international dealers are still holding out for smaller discounts or even parity on some higher-quality brands, they said. Large inventories have been amassed since late last year and a seasonal slowdown is in full effect, they added. The country has imported a sizeable volume of gold since the removal of the 80:20 legislation in November – around 63 tonnes in May, 81 tonnes in April and 125 tonnes in March. Sources suggest another 50-60 tonnes came in to India in June. Many will hold onto the metal until demand picks up and the market swings back to premiums particularly when much of India is monitoring developments in this year’s monsoon season. Rainfall has been much better than expected across some areas of the country, reportedly climbing to around 15 percent above the long-term average in places, prompting many of India’s farmers to accelerate some crop preparations. India’s Meteorological Department had suggested that rainfall would be below the long-term average, pushing the country into drought territory. But it is too early to say whether or not the rains will continue to fall – Mumbai, for example, has been without rain for four or five days, pushing back the point at which farmers will come to the market to buy jewellery. The domestic agricultural sector accounts for as much as 60 percent of gold demand – having limited access to the formal banking system, farmers use gold as a primary store of wealth. In other markets, the premium in Shanghai was quoted at $1.50-2 over the London spot price, returning to the range that it has held in since March after ticking higher last week to $4 when buyers reacted to the drop in the international price, local traders said. Withdrawals from SGE vaults have been increasing, however. Withdrawals in the week ending June 19 of 54.2 tonnes were a four-month high and up from 46.15 tonnes in the previous week. More than 1,115 tonnes have passed through the vaults this year. This follows a 36-percent increase in gold imports into mainland China from Hong Kong in May although sources attributed this to restocking, saying that demand for bars has yet to materialise. Still, many predict a ‘normalisation’ of demand soon particularly at current prices. In Hong Kong, traders noted another uptick in enquiries. With the price now at its lowest in more than three month around $1,162 per ounce, local sources pegged the premium at $1 over spot. The downbeat tone in Hong Kong and a weaker yen continue to keep gold demand subdued in Tokyo. The market is still in a discount, local traders said, with discounts of around 50 cents for fresh bars of reputable brand and around $1-2 on recycled and lesser brands. In Turkey, the lira has strengthened in recent weeks after hitting an all-time low on June 9 amid political uncertainty stemming from inconclusive national elections, bringing the local price of gold off four-year highs. Gold is available at slight premiums of around 50 cents in some places on the favoured LBMA .995 1kg bar but is largely around parity overall. In Dubai, the market continues to fluctuate either side of level – sources quoted the market at parity on good delivery .995 bars. In Singapore, the premium has slipped to $1, sources said, while in Bangkok gold is at a premium of around $1 on bars direct from the refiner and at a discount of $1 on recycled bars. - See more at: http://www.bulliondesk.com/gold-news/physicals-indian-gold-still-at-heavy-discount-inventories-keep-rising-97179/#sthash.QK87dmUp.dpuf

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