Indian gold futures jumped 2 percent on Thursday, widening the premium over global prices which had narrowed on the expectation of a duty cut.
               
India's biggest gold trade group had said on Wednesday that the finance minister would likely cut the gold import duty to 6 percent in the newly elected government's first budget presentation.
             
"This will essentially force jewellers, who were on the sidelines expecting a duty cut, to re-stock," said Sudheesh Nambiath, senior analyst with Thomson Reuters GFMS.
 
Premiums should recover to USD 20-30 an ounce in the next few days, he said, against USD 10 on Wednesday.
               
India, desperate to trim a gaping current account deficit, took a slew of measures last year to curb demand for bullion, its second-biggest import after oil.
               
Besides the duty imposed by the Finance Ministry, India's central bank also imposed the so-called 80-20 rule that required a fifth of all bullion imports be re-exported.
               
The rules have crimped supply and pushed premiums up to as high as USD 160 an ounce in December.
               
Market expectations for a duty cut had climbed after the election of Narendra Modi as India's new prime minister less than two months ago.
               
Modi, who leads the pro-business Bharatiya Janata Party, had earlier indicated his willingness to remove the gold curbs, saying any action on gold should take into account the interests of the public and traders, not just economics and policy.
               
"Our expectations have not been met," said Pankaj Kumar Parekh, vice-chairman of the Gems and Jewellery Export Promotion Council, which groups more than 3,000 exporters. "We will take up the matter with the finance ministry."
               
Gold for August delivery on the Multi Commodity Exchange rose to as much as 28,225 rupees, up 2.2 percent. The contract traded at 28,087 rupees at 0847 GMT.
 
Indian gold imports plunged by a fifth last year though jewellery and investment demand rose 13 percent, causing a spurt in smuggling.
               
The World Gold Council reckons that 200-250 tonnes of gold have been smuggled into India since the imposition of import controls. Only 2.5 tonnes of smuggled gold have been seized by law enforcement agencies, according to government officials.

Gold, silver extend gains on sustained buying, global cues

Gold prices rose further by Rs 75 to Rs 28,200 per 10 grams, extending Wednesday's gains in the national capital on increased buying by jewellers and retailers amid a firming global trend.

Silver followed suit and gathered Rs 100 to Rs 45,200 per kg.

Marketmen said the rise in gold prices was mostly attributed to increased buying by jewellers and retailers amid a firming trend overseas as the dollar fell after US Federal Reserve released minutes of its last meeting and tension increased in the Middle East, boosting demand for a haven.

Gold in Singapore, which normally sets the price trend on the domestic front, rose by 0.3 percent to USD 1,331.46 an ounce and silver by 0.2 percent to USD 21.16 an ounce.

In Delhi, gold of 99.9 and 99.5 percent purity advanced by Rs 75 each to Rs 28,200 and Rs 28,000 per 10 grams, respectively. It had gained Rs 65 on Wednesday.

Sovereigns, however, remained flat at Rs 24,900 per piece of eight grams in limited deals.

In line with a general firm trend, silver ready rose by Rs 100 to Rs 45,200 per kg and weekly-based delivery by Rs 110 to Rs 45,045 per kg. The white metal had gained Rs 200 in the previous session.

On the other hand, silver coins enquired at last level of Rs 79,000 for buying and Rs 80,000 for selling of 100 pieces in restricted buying.

JPN/Agencies

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