Gold Falls Below $1600 for First Time in 6 Months, “Sharp Move Could Trigger Stronger Demand”
Wednesday, 20 February 2013
THE SPOT gold price dropped below $1600 an ounce for the first time in six months Wednesday, as the Dollar strengthened and stock markets were broadly flat, ahead of the publication of the latest Federal Reserve policy meeting minutes later today.
Silver fell to $29.19 an ounce, also a six month low, while other commodity prices were little changed on the day.
Major government bond prices fell, with UK Gilts dropping sharply along with the Pound following the latest Bank of England minutes.
Dealers in India reported an increase in gold buying today, with some citing next week’s budget as a factor.
“Most people in the market are concerned about policy changes in the budget,” one dealer in Mumbai told newswire Reuters this morning.
“Some sort of measures to curb gold imports can be there, that’s why bullion players, especially jewelers, are increasing their stock levels.”
Last month, India raised the import duty on gold from 4% to 6%, with authorities having cited gold imports as a factor exacerbating the current account deficit.
Over in China, trading volumes on the Shanghai Gold Exchange continued to fall Wednesday, having set a record on Monday as the exchange re-opened following Lunar New Year week.
“We have seen quite strong interest in the domestic market as prices weaken,” says one trader in Beijing, “although such demand is unable to push prices much higher…once prices stabilize around this level, we may see demand dwindle. But another sharp retreat or rally in prices will trigger a lot of investment and physical gold demand.”