Gold price discounts fall as arbitrage window shrinks
Mumbai-India (Apr 23) It's 20 days since jewellers ended their 40-day national strike against a new excise duty but the demand for gold has not improved. However, the discounts that were quoted on the prices compared to its cost of import have fallen sharply, from a high of $37.5 an ounce in mid-February and $25 in March to $5 now.
The discount has fallen more as the arbitrage window between the spot market and futures on the Multi Commodity Exchange (MCX) was shrinking, rather than demand coming in. Ajay Kedia, director, Kedia commodities, said: “In the past fortnight, traders were buying gold from the spot market as it was quoted much lower compared to the futures price and selling on the MCX at a higher price. As a result, the MCX price came under pressure, while the discount in spot was getting reduced. It is now only $3.75 an oz.”