80:20 cheer for Indian consumer

In a move that finally laid to rest all speculation, the 80:20 rule on gold imports which required that 20 per cent of every consignment of imported gold needs to be exported, stands withdrawn with effect from November 28.

The move is a result of the easing of the pressure on the current account deficit and rupee stability. While jewellers will welcome the move as this may see their margins improve and they can stop fretting over options of sourcing raw material, the move is good news for consumers too.

Ever since the 80:20 rule was introduced, gold prices in India started to quote at a premium to international prices. At one point, in fact, the premium was $110 per ounce.

But slowly as the demand dried and the government also reversed some of its restrictions on gold imports and allowed more agencies to import the metal, market premium on gold dropped.

Currently, the premium on gold in the market is $5-6 an ounce, say market men. Now, with the 80:20 rule removed, this premium may also go. So, gold rates may come down a bit more for consumers.

Gold futures contract may see some correction this week as prices adjust to the drop in premium, but because the rupee is also slightly weaker, your losses may be contained. Anyway, keep an eye on international gold prices too before making bets on the metal. Last week, MCX gold futures dropped to ₹25,794, down 2 per cent. MCX silver futures closed at ₹34,527, down 4 per cent.

Traders saw a lower price drop compared with the price in the international market as rupee weakened against the greenback. Rupee closed at 62.03 versus the US dollar from 61.7 in the previous week.

On the charts

Both MCX Gold and MCX Silver look bearish on the charts. But, they can move in any direction based on new developments this week. So, trade with tight stop losses. MCX Gold (₹25,794) has support at ₹25,500. If this is cut, the contract can move to ₹25,300 or ₹25,000. Once below ₹25,000, the fall can be very quick.

On the higher side, the first resistance is at ₹26,000 with the target at ₹26,500. MCX Silver (₹34,527) has its support ₹34,500. If this level is cut again this week, it can move lower to ₹34,000 and ₹33,500. On the higher side, the targets are ₹35,000 and ₹36,000.

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