BY ONOME AMUGE
Gold took a further beating, falling deeper into bearish territory to hit seven-month lows after the government in New Delhi, India’s capital city, raised import taxes on the yellow metal to support its weakened currency (rupee) which traded at record-lows against the US dollar.
India, the world’s second-largest gold consumer after China, increased its basic import duty on gold from 7.5 percent to 12.5 percent.
As a result, front-month gold futures for August on New York’s Comex dipped $5.80 or 0.3 percent at $1,801.50 an ounce. August gold had plunged earlier in the session to $1,873.45 an ounce, its lowest since the $1,781 level recorded on December 9, 2021. Gold also lost more than 2 percent in June, rounding out a straight month of bearish figures.
Ajay Kedia, director at Kedia Commodities in Mumbai, in a comment published by Reuters, explained that the move by the Indian authorities will immediately affect the metal’s demand, even though the third quarter usually sees strong physical buying amid festivals.
According to market reports, India and China alternate as the biggest buyers of gold and any policy move by the two on the metal typically gets traders dealing in the precious metal on edge.
Market dealers said gold’s third consecutive weekly demand was also a consequence of the Federal Reserve’s relentless effort in curtailing inflation by doubling the Fed funds before the end of the year.
Despite the gloomy market, some gold traders maintained optimism about prospects in the near term.
Phillip Streible, precious metals strategist for Blue Line Futures in Chicago, said gold has without doubt had a disappointing second quarter. On the bright side, he said the metal is probably right where it’s going to start rebounding.
Streibe added that the dollar’s strength will likely decline once the Fed pulls the brakes on rate hikes,while bond yields will surge again, indicating inflation, which works well for gold.