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Gold Price Hits 10-Wk Low in Sterling, Euro, India Duty Hike will "Significantly Hit" Gold Demand, US Inflation "Rears Its Head"

The Gold Price fell to $1641 per ounce Friday morning in London – a loss of 4.4% on the week – as stocks and commodities were broadly flat, with stock markets looking set for a weekly gain by Friday lunchtime in London. 

On the currency markets, the Pound and Euro both rallied against the Dollar following the release of the latest US inflation data, while over in India the government announced it is to double its duty on gold imports as a percentage of the Gold Price.

Silver Prices fell to $32.14 per ounce – a 6.3% loss for the week as we headed towards the weekend.

"Gold still appears to be taking a hit," says a report from German refiner Heraeus.

"If it is to escape the downward trend in the short term, it will have to overcome the price resistance at $1726 per ounce...only then will it begin moving up again."

"Near-term resistance ," add technical analysts at bullion bank Scotia Mocatta, "is at the 200 day moving average, currently at $1682...key resistance is at $1716, last week's high."

The Gold Price in Euros fell to a 10-Week Low at €40,266 per kilo (€1252 per ounce) on Friday. Sterling Gold Prices also hit their lowest levels in 10 weeks , dropping to £1041 per ounce.

Both currencies jumped against the Dollar immediately following the release of US consumer price index inflation data. The seasonally-adjusted CPI rose 0.4% in February, its biggest rise for 10 months, while the unadjusted annual rate held at 2.9%, according to the Bureau of Labor Statistics.

 "Inflation is rearing its head," says Bill Gross, head of the world's largest bond fund Pimco. 

"We're seeing that in oil prices and other commodities, and we're seeing it in the numbers."

The BLS says 80% of the monthly rise is accounted for by higher gasoline prices. Gas prices rose 6% last month, compared to 0.9% in January and the biggest jump since December 2010, following recent gains on the oil futures market.

Britain and the US meantime look set to co-operate on releasing strategic oil reserves, Reuters reports.

"This has to be discussed broadly," Britain's prime minister David Cameron, who has been on an official visit to the US this week, said on Thursday.

"It's something worth looking at."

The Brussels-headquartered Society for Worldwide Interbank Financial Telecommunication (SWIFT), the world's major international messaging service for financial transactions, is to cut services to Iran's financial institutions effective from tomorrow.

“Disconnecting banks is an extraordinary and unprecedented step for SWIFT," said chief executive Lazaro Campos yesterday.

"It is a direct result of international and multilateral action to intensify financial sanctions against Iran."

Over in India, the world's largest gold consumer last year, the government announced Friday that it is doubling the import duty on gold from 2% to 4%. This follows a similar increase in India's gold import duty back in January.

The duty hike "will reduce demand for gold significantly" reckons Bombay Bullion Association president  Prithviraj Kothari. Kothari forecasts that gold demand in India could drop by 30% this year, the Wall Street Journal reports.

"Today's duty increase will dampen Indian demand," agrees UBS precious metals strategist Edel Tully.

"The Indian market will wait for lower prices and there is also the risk that this duty hike will lead to increased smuggling."

India set a record last year when it imported 969 tonnes of Gold Bullion.

"One of the primary drivers of the current account deficit has been the growth of almost 50% in imports of gold and other precious metals in the first three quarters of this year," said Indian finance minister Pranab Mukherjee, who was announcing next year's budget.

There are also potential signs that gold imports to China, the world's second largest gold market, are starting to concern authorities. 

China's National Bureau of Statistics meantime has revealed that officials in the northern city of Hejin reported "seriously untrue" economic data last year, newswire Bloomberg reports.

Here in the UK, chancellor George Osborne is considering cutting the top rate of income tax from 50p to 45p in next week's Budget, according to press reports.

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