-- Published: Monday, 26 May 2014 | Print  | Disqus 

India’s penal gold taxes were one of the main drivers to lower gold prices last year. But the overwhelming victory of new prime minister Narenda Modi is expected to throw that leverage into reverse with hedge funds also taking their cue from Indian buyers.

‘It’s only a matter of time before these restrictions on gold are removed completely by the new Indian government,’ World Gold Council MD Marcus Grubb told the Telegraph. ‘Gradually, a number of things are now adding up to make investors more positive about gold.’

October festival

The newspaper reported that some experts see the unpopular gold import regulations being relaxed by the Hindu Diwali religious festival in October, often the trigger for a seasonal uplift in gold prices.

Even with the gold tax in place India was still the second largest importer of gold in the world after China last year with 825 tonnes imported against 860 in 2012, albeit illegal imports are thought to have added 200 tonnes as Indians usually buy gold whenever prices are low.

After the 28 per cent price correction last year the gold price is up eight per cent this year and gold ranks among the best performing major assets, while global stocks have mainly moved sideways. Actual gold demand was steady with global jewellery consumption up three per cent to 571 tonnes in Q1 and investment demand dipping from 288 to 282 tonnes.

ETPs to buy?

The market remains poised for a rebound. The Exchange Traded Products have stopped selling. That was what powered gold prices lower last year, far exaggerating the impact of the gold tax in India that many investors took as a reason to sell. Will the buying by ETPs now resume?

This year geopolitical fears like the crisis in the Ukraine have warmed buyers’ interest, though gold’s reaction has been a little lacklustre. It may take a return of official Indian buying to really stoke confidence further.

Gold bears predicting $1,050 an ounce as soon as tomorrow have been left looking stupid so far. Indian democracy may just have voted for higher gold prices. Perhaps that is what you might expect in the world’s biggest hoarder of the yellow metal.

Peter Cooper
www.arabianmoney.net

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 -- Published: Monday, 26 May 2014 | E-Mail  | Print  | Source: GoldSeek.com

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About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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