Spot Gold Up as Market Mulls Fed Minutes, Indian Rule Change

Frankfurt (May 22)  Gold prices edged higher on the European spot market Thursday, as traders weighed signs of optimism over the U.S. economy against news that India's central bank has eased restrictions on gold imports.

Spot gold was up 0.3% at $1,294.80 a troy ounce in morning European trade. Silver was 0.6% higher at $19.513 an ounce.

Gold fell Wednesday after minutes from the U.S. Federal Reserve's April meeting reinforced the central bank's outlook for a gradually improving economy.

Fed officials spent a considerable amount of time discussing how to manage interest rates when they eventually start to raise credit costs and how to better convey their thinking to the public. Gold is a zero-yielding asset and struggles to compete against interest-bearing investments like Treasury bonds when interest rates rise.

News that India's central bank will allow private trading companies to bring gold into the country was welcomed. The move comes amid widespread expectation that a newly elected government would ease curbs on gold imports, which have damped India demand for gold in recent months.

"India's appetite for gold may pick up" as a result of the rule change, said HSBC analyst James Steel. "The announcement is a sign that the Reserve Bank of India is slowly starting to address the onerous restrictions put in place last year on the gold trade and may raise optimism for an eventual roll back of the bullion import taxes."

In other precious metals Thursday, platinum was up 0.5% at $1,475.30 an ounce and palladium was up 0.1% at $826.75 an ounce.