Gold soars by Rs 840 in biggest gain this year

Gold prices surged by Rs 840 on Tuesday to regain the Rs 27,000 per ten gram level after a gap of more than one month in the Capital to record the biggest single-day rise this year.

Rising international prices of the precious metal and increase in domestic demand from jewellers and retailers during the wedding season also bolstered sentiment. After losing Rs 730 in last six sessions since the Reserve Bank of India (RBI) eased imports curbs by scrapping the 80:20 scheme, gold prices bounced back to close at Rs 27,040, a level last seen on October 30. Silver also recorded a significant gain of Rs 2,700 to Rs 37,000 per kg on increased offtake by industrial units and coin makers.

In the international market, gold prices went up 3.69 per cent, the biggest gain since September 19, to $1,218.10 an ounce in New York on Monday.

Falling crude prices revived demand for the precious metal as a store of value, bullion traders said. Globally, silver also surged 7.3 per cent to $16.69 an ounce on Monday, the highest gain since September 2013.

Meanwhile, RBI governor Raghuram Rajan hinted that the duty structure for gold could be changed. Rajan said there are some requests to change the duty structure and that government will take decision on it.

The United Progressive Alliance government had increased import duty on gold to 10 per cent in 2013.

Rajan said that the government had decided to scrap the controversial 80:20 scheme to reduce gold imports was put in place to check the widening current account deficit.

"The decision to scrap the 80:20 scheme is a reasonable one and let us see how it plays out. I think the fact that we have a substantial fall in crude imports means that we have some room to sustain an expansion in another import," Rajan said at the post policy meeting with reporters.

Under the scheme, at least, 20 per cent of imported gold had to be mandatorily exported before bringing in new lots. The scheme was leading to increased smuggling of gold and giving undue benefits to select importing entities.