Gold prices rebounded a bit and drew closer to the $930 area following yesterday's selling waves. In the early hours on Tuesday, traders were looking at marginally higher oil ($64.58 per barrel - still, almost $10 away from recent fund-driven rally values) and a leveling out and even a small slippage in the greenback (to around $80.10) before jumping into the market as it was setting up for the NY opening. The rebound was seen as capped by resistance up near and beyond the $940 area at the moment. Support was still expected to manifest itself under $920 and probably grow stronger, near $912, should the metal slip to such levels soon.
The opening came, and showed spot gold with a $4.5 per ounce gain, at $929.40 in New York. Participants are still on dollar-watch as investors await anything in the way of concrete words about it and the global economy, to emerge from the G-8 summit following tomorrow's start of same in Italy. Leaders are gathering under a cross-current of mixed and extremely fuzzy economic news. For example, UK factory production dropped unexpectedly for the first time in three months this morning, while German manufacturing orders spiked by 4.4% in May - the most in about two year. Go make investment sense and position yourself in markets based on news and statistics that change 180 degrees sometimes within a one-week timeframe. If you have money to burn, that is.
Silver advanced 9 cents to start at $13.34 while platinum added only a modest $1 to open at $1145 and palladium gained $4 to $244 this morning. GM found a way to eventually emerge from Chapter 11 but this development did not appear to faze the noble metals markets. It's (still) about the basic automotive demand, stupid.
Over in India, where import duties were doubled on bullion as of yesterday, the World Gold Council envisions gold making its way into the country the 'old-fashioned' way; on little boats belonging to smugglers. Where there is a will (ingness to buy gold) there will be a way (found to fill such need). Just remains to be seen how much or how little gold will be demanded in the home stretch of the year if in fact four-digit gold price predictions prove to be valid.
Speaking of demand, well, there are two trends to be kept on the market radar's centre at this time. One is the demand for dollars, the other, the lack of demand for most other stuff. Investment-flavoured, or not.
Further resilience was observed in the US dollar overnight, as continued safe-haven inflows buoyed the currency and helped it remain above the 80-mark on the trade-weighted index. Suddenly, global investors are less than certain that the recovery they believed to have spotted in early spring will have the stamina it was thought to have initially had. As a result, the greenback and the yen have been attracting attention from safe-haven seekers, while the effects on equities and commodities (for at least the past couple of weeks) have not been exactly what speculators had in mind.
Here is the big problem, as far as most of these markets are concerned. And, concerned they are, make no mistake. China - the darling of the ChIndia crowd (you know, the one that bets everything on these two countries' putative future demand for just about everything) is stumbling. Intense as its leadership's focus on reviving the economy may be, the country is having some difficulties easily climbing out of the credit crisis quicksand pit. As a result, both UBS and Deutsche Bank pounced on the ChIndia mythos that is so strongly entrenched among commodity bulls, and dumped collective buckets of cold water on their enthusiasm.
More on India gold smuggling:
India banned gold imports in 1947, net imports (practically all of it illegally smuggled) increased progressively to 80-90 tons per annum during 1950s and close to 150 tons per annum during 60s and early 70s.
After the sharp decline in the 1970s gold imports again surged in the 1980s and following the lifting of the ban and permitting of imports in 1992, the rate of imports increased sharply in 1990s.
There was a big spurt in gold consumption in India following economic liberalization of gold imports in 1992. Gold consumption remained around 400-425 tons in the next couple of years. Before resuming the rising trend, estimated consumption was more than trice the level recorded in 1990 and nearly 70% higher than in 1992.
Till 1991 practically all these imports were obtained by smuggling. But with liberalization, the share of smuggled gold has progressively declined both in absolute terms (from an estimated 290 tons in 1994 to 94 tons in 1998), and even more so in relation to total consumption (from over 70 percent in 1990 to less than an 80 in 1998).
The decline in smuggled gold was the direct result of progressive realization of gold imports (subject to payment of 15% duty) and a considerable narrowing in the margin between international and domestic price of gold. This margin in 1998 was close to the import duty on gold. However the volume of smuggling (90-100 tons a year) remains quite large in India. A smuggler who successfully escapes the customs net stills stands to make substantial profits.
A major step in the development of gold markets in India was the authorization in July 1997 by the RBI to commercial banks to import gold for sale or loan to jewelers and exporters. Initially, seven banks were selected for this purpose on the basis of certain specified criteria like minimum capital adequacy, profitability, risk management expertise, previous experience in this area, etc.
Source : Commodityonline