India Stands Strong Against Gold Import Duties

Yesterday, gold and silver futures gained for the first time in three sessions, thanks to the weak prices luring buyers in. It’s good to see gold over $1,400 once again despite fears of the Fed scaling back bond purchases.

Yesterday, dovish FOMC member and Boston Fed Bank President, Eric Rosengren, told the Economic Club of Minnesota that it may be sensible to consider a reduction in the Fed’s bond purchases in the coming months but that it would be premature to stop them completely given the unemployment rate and the low core inflation level. Rosengren believes unemployment levels will fall to 7.25% by the end of the year.

The World Gold Council yesterday released a report stating that total demand for India’s gold imports in the first quarter of 2013 look to match half of those for the year of 2012, around 300-400 tonnes. The lobbying group see Asian gold demand reaching record levels in Q1 as they pick up the supply freed up by the ETF outflows.

A finance minister yesterday told the Wall Street Journal that the Indian government may look to implementing further measures aimed at restricting imports at the beginning of June. High import levels in May despite import duties have clearly taken the government by surprise and they are now waiting for the full month’s data before deciding if further steps need to be taken. The low prices in April clearly meant that the newly raised import duty of 6% was not as much of a burden on buyers as the authorities had expected.

Holdings in the SPDR Gold Trust (GLD), the world’s largest gold-backed ETF, climbed for the first time since May 9th yesterday. The gold price remains 4.6% down for the month and holdings in gold-backed ETFs remain down by 18% for the year.

Premiums in Singapore have reportedly reached record highs this week, at $7 to spot London process, we also hear anecdotally that premiums in India have reached 6% in the last week.

Yesterday a small acknowledgement from a central banker that depreciation of a currency may not be all it’s cracked up to be; Charlie Bean, Bank of England policy maker, suggested that the 25% fall in the pound sterling’s value in the last five years had failed to have a positive effect on the ability of the UK to export, ‘our market share, which had been rising strongly before the crisis has flattened off, rather than accelerating.’ Since the UK first entered the recession export growth figures have been just 1.5%.

Messages on how to fix the financial crisis across Europe and the countries within the EU continue to be somewhat a mixed bag. Despite the IMF telling George Osborne that his deficit reduction plan should be slowed down, the OECD and EC have now come out in favour of the Chancellor’s plans and believe he should push for the spending deficit to happen quicker. The EC has, however, shifted its focus from government debt and is instead focusing on the labour markets. The Commission has given troubled governments such as France, Spain and Belgium an extra year to get borrowing under control. Italy was congratulated for its efforts in controlling the deficit.