Gold trades at a discount in India. Should you buy the yellow metal now as the festive season kicks off?

Local gold dealers have been offering a discount of up to $2.5 per ounce over the official domestic prices, which was being sold at a premium of $3 last week. Gold rates in India include 15 per cent import duty and 3 per cent GST.

In the international markets, gold prices have been struggling near two-and-a-half-year lows, but the bullion is trading about a per cent higher or up by Rs 226 at Rs 49,628 on

. Spot prices of gold were around Rs 49,500 on Monday.

The spot prices are below Rs 50,000 per 10 grams since September 15, whereas the yellow metal hasn’t touched the Rs 51,000 mark since the end of August 2022.

The gold prices, which steadied as the session progressed, pared some losses after falling to $1,626.41, their lowest level since April 2020. However, analysts expect more falls in the non-yielding bullion.

COMEX gold slipped below $1650/oz, the lowest since April 2020, as a stronger dollar and higher treasury yields dampened demand for the yellow metal, said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research, Kotak Securities.

The US 10-year yield has come close to the 2010 high in reaction to Fed’s aggressive monetary tightening stance, he said.

“The dollar is trading strongly this morning; however, we need to see whether it sustains above the resistance zone.”

The dollar index, which gauges the greenback versus six peers, was flat after scaling a fresh peak in 2002, boosted by a plunge in British sterling. Gold is priced in dollars internationally, and expensive dollars are fading the bullion’s appeal.

Higher US interest rates dull the zero-yielding bullion’s appeal while bolstering the dollar. Gold prices have fallen more than 20 per cent since scaling above the key $2,000 per-ounce mark in March.

Anuj Gupta, Vice President – Commodity and Currency Research,

, said that the yellow metal lost its shine on the back of corrections in the global market and a higher dollar index.

“However, this is a good time to buy gold for Indian buyers in this festival season,” he added. “Rupee depreciation will provide support to the gold domestically.”

Analysts believe that corrected prices are likely to attract buying at lower levels; a sustained rise is unlikely until the US dollar reverses from the top.

Ravi Singh, Vice President and Head of Research, ShareIndia, suggested buying gold above Rs 49,500 for a target of Rs 49,700, whereas he IS recommended to short the yellow metal below Rs 49,300 for a target of Rs 49,100.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)