Gold News

Gold Bullion Pops Over $1300 as India Elections End, Gold-Friendly BJP Expected to Win

GOLD BULLION prices popped to a 3-session high above $1300 per ounce Monday lunchtime in London, reversing an overnight drop as analysts and traders looked to events in Ukraine, India and China for speculative support.
 
Called a "farce" by the interim government in Kiev, and not backed by Moscow, the weekend's unofficial poll in east Ukraine's Donetsk region voted unanimously to join Russia.
 
New data in China – the world's No.1 gold bullion importer, producer and consumer in 2013 – meantime showed a further slowdown in new lending by commercial banks, but money-supply growth accelerated above 13% year on year in April, recovering from March's multi-year low.
 
Former world No.1 consumer India imported 75% less gold bullion last month than April last year's record monthly inflow, figures this weekend showed, helping the trade deficit drop 4% in Dollar terms from March to $10.1 billion.
 
Today marks the last day of voting in India's national elections, with the opposition BJP's Narendra Modi widely expected to become prime minister.
 
"Modi has said any action on gold should take into account the interests of the public and traders," reports BusinessWorld magazine, "not just economics and policy."
 
But while seen to back the gold industry's calls for an end to the restrictions in India's election campaign, the BJP's election manifesto was silent on gold import rules.
 
Spring 2013's gold price crash unleashed such strong demand from Indian households that the government hiked import duty to 10%, banning the import of gold bullion coins and investment medallions.
 
The Reserve  Bank of India then imposed an effective ban on gold bullion imports in July – again aimed at reducing the country's large Current Account Deficit with the rest of the world – by demanding that 20% of any new shipments must be sold export before being released from customs for domestic use.
 
Last month's annualized drop in gold bullion imports does not account for smuggling volumes, which have leapt according to customs officials.
 
"Any relaxation of the import restrictions in India," says French investment bank and London market-maker Societe Generale's analyst Robin Bhar, "particularly the 80:20 rule could unleash further fresh local demand, which would add to upside price potential."
 
For now – and with gold bullion premiums inside India dropping back to $100 per ounce over the world's London benchmark – "Physical [Asian] demand is currently evaporating at prices over $1300," says Bhar, "although there is every possibility that the market can adjust to higher prices later in the year."
 
Over in China, the most active gold bullion contract on the Shanghai Gold Exchange today closed some $1.70 per ounce above equivalent London quotes, extending its premium into a second week after a rare run of trading below international prices.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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