This is what we have been asking for, says bullion association

The Reserve Bank of India (RBI), on Wednesday, allowed star trading houses (STH) and premier trading houses (PTH) to import gold under the 20:80 scheme. This follows representations made by jewellers and bullion dealers over the last several months.

The guidelines specifically tackle the 20:80 scheme, which were introduced to combat a huge current account deficit (CAD) last year.

According to the guidelines of the scheme, importers can buy gold provided a fifth of the imported quantum is exported as finished products like jewellery.

The RBI has also permitted banks to provide gold metal loans (GML) to domestic jewellery manufacturers out of the eligible domestic import quota to the extent of GML outstanding on their books as on March 31, 2013.

The RBI had banned import of gold through star trading houses in August 2013 but this led to a rise in the parallel market, resulting in high premiums.

“The number of institutions which can now import gold will go up, and this will increase supply of gold which was choked,” Suresh Jain, Director, India Bullion & Jewellers Association (IBJA), said, adding that it was a very welcome step. “This is exactly what we have been asking for,” he said.

Once there was relaxation, there would be an easing of prices, said one bullion dealer.

“It is a relaxation, and the very indication of the likely relaxation saw premium drop from $125 levels two weeks ago to $80 an ounce,” Mr. Jain said, adding, “It will surely go down even further and could drop to $20 an ounce level.’’

Mr. Jain felt that gold price could reach Rs.26,000 per 10 gram level soon and would remain flat.

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