Gold steady as Indian eases gold restrictions

An easing of Indian gold restrictions wasn’t enough to help gold stay above USD $1300oz overnight, with the metal trading in a range between USD $1290oz and USD $1305oz.

Currently sitting at USD $1293oz, the metal is essentially flat for the week, and barely positive for the month of May, with traders focusing on other markets with more short term profit potential.

Referring to developments in India, and the Reserve Bank there has decided to relax gold import controls, a move that ANZ thinks could lead to Indian gold imports doubling in the next few months. The changes allow private trading houses to import gold for domestic purposes, subject to existing 20/80 rules, effectively putting them on an equal footing with banks.

The move, largely expected due to the election of ‘pro gold’ Narendra Modi, could be only the first step in liberalising the gold industry after a series of draconian measures were undertaken in 2013 to minimise gold imports, with ANZ noting that “it may be no coincidence that Prime Minister Modi’s home state of Gujarat, and Rajahstan, a state where the BJP won all parliamentary seats, are also the states that house India’s largest bullion industries”.

Last years restrictions on bullion didn’t so much stop Indian gold demand as futher damage global sentiment towards the metals, which were already reeling due to ETF outflows, higher bond yields and the Fed’s signalled tapering (amongst other things). Therefore, the most important thing to come out of the move announced by the RBI may simply be improved sentiment towards the sector. A European QE or a tapered taper from the Fed would add to this.

On the economic front overnight, it was a mixed set of data. Starting in Europe, where, according to Westpac:

“The Eurozone composite PMI fell slightly to 53.9 from 54.0 in the previous month. The breakdown showed a disappointing manufacturing reading, which dropped to 52.5 from 53.4, although the weaker than expected number was not a surprise after the sharp drop in the German number and the decline in French confidence earlier. The services reading by contrast unexpectedly rose to 53.5 from 53.1 in the previous month. The overall composite reading remains at high levels and is still consistent with ongoing expansion in economic activity, but the overall mixed readings, also at country level, highlight fresh downside risks.”

It was mixed in the US too, with rising initial jobless claims and a miss on existing home sales. Despite this, the Markit Manufacturing PMI rose as did the Kansas Fed survey.

Markets will be watching new homes sales tonight Until next week.