The gold price briefly scaled $1,300 an ounce on Thursday on news India’s central bank had eased some curbs on imports of the precious metal in place for more than a year.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery in afternoon trade exchanged hands for $1,295.20 an ounce, up $7.10 from Thursday’s trading session but down from earlier highs of $1,304.
Gold was helped by news that the Reserve Bank of India is relaxing a rule that called for the mandatory re-export of 20% of all gold cargoes and allowing trading houses and certain banks to boost imports.
Other measures imposed by India’s finance ministry, fighting a deep current account deficit and a weak currency, including import duties that have risen tenfold and transaction taxes remain in place, but with the change of leadership in the country those could go too.
Government import restrictions have led to a scarcity of physical gold inside India which increased smuggling activity and sent premiums paid over the London price to rocket to as much as $170 an ounce during the gold festivals and wedding season.
It has since come down but ahead of the announcement, premiums still hovered around $60 above the international ruling price.
According to the Indian Express, the rupee price of gold tumbled to its lowest level in nine months after the RBI move and is expected to come in line with global prices over the next few months.
The import restrictions saw gold demand on the subcontinent, which was overtaken by China as the world’s top consumer of gold in 2013, plummet during the first quarter.
According to the World Gold Council, jewellery consumption in India declined 9% to 145.6 tonnes, while India’s bars and coins buying showed a huge drop-off of 54% to 98 tonnes.
Overall gold demand in India slid 26% during the first three months of 2014. Despite the curbs overall Indian consumption still rose by more than 100 tonnes to 975 tonnes last year while according to some estimates “unofficial imports” almost doubled to more than 100 tonnes.
Making it easier to import gold via official channels should reduce smuggling or the “grey” market as it is referred to in India.
Image of Golden Temple in Amritsar, Punjab by Dainis Matisons
