India’s failure to cut duty hurts gold prices
India’s decision to maintain an import duty on gold surprised investors, dealing a fresh blow to a metal that has been hit hard this year by a strengthening U.S. dollar and a series of policy shifts around the globe.
Gold for April delivery GCJ5, -0.08% , the most actively traded contract, sank $4.90, or 0.4%, to $1,208.20 a troy ounce on the Comex division of the New York Mercantile Exchange.
Investors had been hoping India would reduce the duty, likely boosting demand for gold from the world’s largest consumer. The decision adds to broad crosscurrents for gold, which tends to appreciate at times of economic uncertainty but does less well in more placid periods because it offers buyers no periodic payments, or yield.
“You can add this to the long list of disappointments for gold,” said Vedant Mimani, who helps manage $80 million for ACGO Funds in Miami. Mr. Mimani has been neutral on gold this year, believing U.S. monetary policy will play a central role in determining price direction in the market. “Gold keeps trying to hang its hat on some sort of change or something positive around the corner that doesn’t seem to materialize,” he said.
While demand for gold in India is closely watched given the country snapped up a quarter of the world’s supply last year, it’s a relatively minor development. Still, hopes that India would cut or eliminate India’s import duty had given some bullish investors hopes it would prove a positive for the market.
India’s gold imports had slowed in the weeks leading up to the budget announcement, as some wholesalers delayed purchases in anticipation of a tax cut. While imports are expected to rise in the near term now that the uncertainty is removed, some traders said Indian gold demand is likely to be lower over this year as the import tax tempers investors’ interest.
Source: MarketWatch – India’s failure to cut duty hurts gold prices
