Delhi Declaration Highlights Economic Tensions: April 18, 2012

Gold and silver prices were flat over the course of yesterday – apart from a dramatic dip and recovery mid morning EDT; the bears managing to knock the gold price down to $1,635 briefly, before news that the Indian central bank was cutting interest rates by 50 basis points encouraged buying. Silver lost around 1.1% at the same time as the decline in gold, but recovered to close up slightly for the day.

Indian gold demand is 50% below demand at the same point last year, and traders in the country had hoped that the upcoming Akshay Tritiya festival would compensate them for the disruptions to metal trading that they have experienced recently. Alas, WSJ quotes Prithviraj Kothari, president of the Bombay Bullion Association, noting “gold purchases during the festival week will likely be no more than 10-15 metric tons, compared with 30-40 tons a year earlier.”

In other slightly older news from the subcontinent, the leaders of Brazil, Russia, India, China and South Africa met in Delhi last month for the fourth annual “BRICS summit” – with the summit declaration providing plenty of pointed remarks as far as monetary policy is concerned. In their words: “excessive liquidity from the aggressive policy actions taken by central banks to stabilise their domestic economies have been spilling over into emerging market economies, fostering excessive volatility in capital flows and commodity prices.” It also called for an “increase in the voice and representation” of developing economies, and “a just international monetary system that can serve the interests of all countries.”

Over at the Cobden Centre blog, John Butler provides an insightful “translation” from the language of diplomacy into plain English. Nevertheless, even phrased diplomatically, this “Delhi Declaration” shows the irritation that BRICS politicians feel about excessively loose monetary policy from the likes of the Fed and European Central Bank – something that Brazil’s President Dilma Rouseff made very clear to President Obama recently. The days when such leaders desisted from confronting a US president so openly are well and truly over.