Gold News

Strong US Housing Data See Gold Prices Erase Last of Week's Gain as BJP's Modi Wins Landslide in India

GOLD PRICES dropped $5 per ounce from a tight range around $1295 lunchtime Friday in London, erasing the last of the week's earlier 1.5% gains to 1-month highs after new US housing data beat analyst forecasts.
 
The month-long national election in India – the world's No.1 gold consumer market until 2013 – meantime showed a landslide for the pro-business BJP led by Narendra Modi.
 
Giving the strongest reading since November, new US housing starts data for last month were outpaced by new building permits – reported at the best since July 2008 above 1.0 million annualized.
 
"Gold does require some credit for its resilience in recent weeks," analysts at Swiss investment and bullion bank UBS had said earlier in a note
 
Even though UBS now expects gold prices to drop to $1250 per ounce over the next month, "Given weak sentiment, poor physical demand, a stronger Dollar and on balance better US data, gold has in fact performed adequately." 
 
Friday morning – and despite the BJP's clear victory – "To say Asia was quiet today would be an understatement," said a note from Swiss refining and finance group MKS.
 
An outspoken critic of how smuggling has leapt following the incumbent Congress party's anti-gold import rules, Modi was backed by the leaders of the India Bullion and Jewellers Association, who led celebrations today in Mumbai's Zaveri Bazaar.
 
India's largest public-sector trading body, MMTC, today saw its joint-venture gold processing plant at Hewat with Pamp of Swizterland accepted onto the London Bullion Market Association's Good Delivery list.
 
Good Delivery accreditation enables a refiner to produce gold bars for the wholesale bullion market centered in London.
 
Ahead the BJP's landslide victory, "Over last two to three weeks, we have seen people coming to the market to sell gold," the Economic Times quotes Mumbai scrap gold director Anish Jitendar Jain.
 
"They feel that gold prices will fall further as the Rupee will get stronger after the elections...[and] want to safeguard any decline in their assets."
 
Gold prices in India – where import duty stands at 10%, and legal imports are effectively banned by the central bank's so-called 80:20 rule – plunged 1.7% on Friday, The Hindu reports, as the Rupee touched new 10-month highs on the currency market.
 
Recovering 17% from last September's all-time low however, the Rupee then eased back, and the Mumbai stockmarket also fell, dropping more than 5% – and erasing the day's earlier gains – after news of Modi's victory was confirmed.
 
Meantime in Russia – where state metals depository Gokhran said it will start buying palladium to rebuild stocks, as suggested since mid-2013 – gold mining over the first 3 months of this year was reported almost 20% higher from Q1 2013, the Gold Industrialists' Union said.
 
The Union had previously forecast Russia's gold-mining output – the world's 3rd largest – would ease back this year from 2013's record.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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