GOLD PRICES tumbled more than $20 per ounce in quiet London business Thursday morning, falling with world stock markets after the week's "three-day rally [in gold] prompted some profit-taking" according to one trading desk.

 

This week's US budget deal will also "add pressure on gold and silver," reckons a note from Standard Bank's commodity team.

 

Although "tiny, miniscule" according to some commentators, the deal between Republican and Democrat politicians to avert a repeat of the debt-ceiling shutdown in Feb. 2014 now means "another hurdle to economic growth in the US has been removed," writes analyst Walter de Wet, "and this increases the probability that the US Fed may start to reduce their asset purchases this month."

 

So "from a tactical perspective," Standard Bank's de Wet concludes, "we still believe that gold should be sold into rallies."

 

Overnight "ranges and volumes were subdued as the market waits for better sell levels [ie, higher gold prices]," says one Asian dealing desk in a note.

 

"There has not been a great deal of action from China," says another, pointing to the Shanghai premium falling to $5 per ounce above London gold prices, down from $7 on Wednesday.

 

"We will need to see some swings in [prices] to have renewed interest."

 

Over in India today, formerly the world's No.1 gold consumer market, "As inflation comes down and as financial assets become more attractive, perhaps part of the demand for gold can come down too," said C.Rangarajan, chief of the prime minister's Economic Advisory Council, at an economics conference in Delhi.

 

"We can probably tolerate $30 billion worth of import of gold."

 

Indian gold imports have totaled nearer $50 billion over the last 12 months, and are blamed by the Economic Times today for " inflating India's current account deficit to a historic high of 4.8% of GDP in 2012-13."

 

"The fact that India," said investor, fund manager and best-selling author Jim Rogers to BullionVault on Wednesday, "which has been the largest buyer, has reduced its buying a lot is one of the main factors that's causing gold prices to go down."

 

Noting plans to "mobilize" existing consumer gold holdings, "If the Indian politicians somehow get their people to sell gold, whoo! Who knows how low gold prices could go?"

 

Adding that he has hedged a portion of his personal gold holdings against further price falls, but not his silver position, Jim Rogers says the US budget deal means "the government is under no constraint. Central banks can [also] print as much as they want.

 

"With all this staggering amount of currency debasement, gold has got to be a good place to be down the road once we get through this correction."

 

Right now, says Jim Rogers, "I'm not buying either gold or silver...but if I had to buy one today, I'd buy silver because it certainly has gone down more than gold. So on a historic priced-basis if nothing else, I'd rather own silver."