Gold prices traded near a six-week high, set for the longest weekly rally since September 2012. Gold bullion for Feb delivery on the Comex shot up to $1267 yesterday, the highest since Dec. 10 and up 2.8% this week. Investors also assessed whether the U.S. Federal Reserve will keep reducing stimulus and on increased physical demand in China. Gold demand from China was stronger at the beginning of January due to purchases ahead of the Lunar New Year holiday. Analysts expect overall Chinese purchases to slow this year as buyers wait for prices to stabilize. A recent spate of weak economic numbers are also making some people fear that China may not buy as much gold as last year.
Fed policy makers meet Jan. 28-29 after deciding in December to cut monthly bond buying as the economy improved, helping to halt gold’s 12-year bull run. Gold prices rose yesterday as purchases of previously owned homes in the U.S. and the Chicago Federal National Activity Index trailed estimates, while the number of Americans continuing to receive jobless benefits unexpectedly rose. In China, volumes for the benchmark contract on the Shanghai Gold Exchange rose yesterday to the most since Jan. 6, when levels reached an eight-month high.
The Indian government had restricted gold imports to contain a ballooning current account deficit, Finance Minister P. Chidambaram reiterated in a Bloomberg Television interview that gold imports will be curbed into the next fiscal year. Congress President Sonia Gandhi wrote a letter to the commerce ministry seeking lower import duties on bullion, CNBC Awaaz television reported yesterday.
Sonia Gandhi seeks easing of gold curbs
Congress party chief Sonia Gandhi has asked the government to review tough import restrictions on gold, which include a record 10 percent import duty, a television channel and a news website said on Thursday.
Her intervention is likely to create pressure for an easing of rules that have hammered the bullion industry and brought a surge in gold smuggling, but the finance minister said the curbs would not be rolled back anytime soon.
India used to be the world’s biggest buyer of bullion until the government and central bank stepped in last year with import curbs aimed at reducing a record current-account deficit.
The jewelry industry has been calling for a reduction in the duty and a relaxation of a Reserve Bank of India (RBI) rule that calls for 20 percent of imports to be turned around as jewelry exports. Business has shrunk under the curbs and gold smuggling is rising.
“You are requested to kindly look into the matter for appropriate action,” said a letter written by Gandhi’s office to the Ministry of Commerce and Industry, according to the Financial Express website quoting a report by Press Trust of India.
Earlier, television channel CNBC Awaaz said Gandhi had written to the government asking for restrictions to be eased, citing sources that it did not identify.
Reuters has not yet been able to confirm the existence of the letter from Gandhi’s office or the Congress party.
Gandhi, who has no executive role in government, was responding to calls on her from the All India Gems and Jewellery Trade Federation, according to the report carried by the Financial Express.
Government sources told Reuters earlier this month that New Delhi was considering easing restrictions.
Finance Minister P. Chidambaram, in an interview with CNBC television on Thursday in Davos, Switzerland, ruled out any change in restrictions until the current-account deficit was under control. He said he had not read Gandhi’s letter.
“Until we have a firm grip on the current-account deficit I do not contemplate any roll back in any measure. We will have a full idea of the current-account deficit only when the budget is presented and when the year comes to an end,” Chidambaram said.
India’s budget will be presented in February and its fiscal year ends on March 31.