Fluctations as India Increases Gold & Silver Tax

August 14, 2013 at 08:49

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Gold fluctuated between gains and losses as investors weighed the U.S. Federal Reserve’s next step on monetary stimulus against signs of increased demand.

Bullion dropped as U.S. retail sales climbed for a fourth month and India raised duties on gold imports for a third time this year, halting a four-day, 4.3 percent rally.

Gold slumped 21 percent this year on speculation the Fed will scale back its $85 billion in monthly bond buying. A survey this month showed 65 percent of economists expect the Federal Open Market Committee to reduce asset purchases in September, probably starting with a cut of $10 billion, compared with half of economists in a July poll.

“Investors are likely to stay cautious ahead of the Fed’s meeting next month as any signs of stimulus withdrawal is bearish for gold,” Xia Yingying, an analyst at Nanhua Futures Co., said from Hangzhou. “Buying activity in Asia has been robust, with demand in China supporting gold above $1,300. There are still people out there who will buy when the price falls.”

In China, the world’s largest consumer after India, the volume for Shanghai’s benchmark spot contract rose to a one-week high of 10,435 kilograms yesterday from 9,182 kilograms on Aug. 12, according to the Shanghai Gold Exchange.

India raised tariffs on gold and platinum imports to 10 percent from 8 percent, while the levy on silver was boosted to 10 percent from 6 percent, the Ministry of Finance said in a notification in parliament. The moves are intended to rein in a record current-account deficit, fueling speculation that gold smuggling may increase.

Assets in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, were unchanged for a second day yesterday at 911.13 metric tons after gaining on Aug. 9 for the first time since June 10. Holdings have shrunk 33 percent this year. Money managers who oversee more than $100 million in equities are required to file 13F forms by this week to detail changes in holdings in the second quarter, when bullion plunged 23 percent.