Gold set to get a battering from Indian duty, US data

Chennai-INDIA (Aug 14)  Gold prices are likely to head south in the domestic spot and futures markets on the Government raising import duty and indications that the US could begin tapering its bond purchase programme to boost its economy.

The Government on Tuesday raised the Customs duty on gold and silver to 10 per cent to net additional income but more importantly, bridge the widening current account deficit.

Prices surged on the spot market last evening but the rise is unjustified given the fact that duty for the gold that is being bought at retail outlets has already been paid.

That plus the over one per cent drop in the global market could see prices of the yellow metal slip to around Rs 28,500 for 10 gm.

Rupee, Fed effect

With the Government announcing some more measures to curb the rupee’s fall against the dollar, it could also put pressure on the yellow metal.

Atlanta Federal Reserve Bank President Dennis Lockhart’s indications that the US Fed could begin cutting its $85 billion a month purchase of bond will also have a bearish effect.

Investors who raised their holdings of gold in exchange-traded funds last weekend, haven’t added more as SPDR Trust, world’s largest gold-exchange traded fund, reported unchanged holdings of 911.13 tonnes.

In Asian trade, spot gold fell to $1,320.98 an ounce and gold futures maturing in December to $1,320.10.

In the domestic market on Tuesday, gold for jewellery (99.5% purity) ended at Rs 29,520 for 10 gm and pure gold (99.9% purity) at Rs 29,660.

On MCX, gold October contracts, ruling at Rs 28,795, could drop to levels of Rs 28,500.

German, France GDP data

Later in the day, gold could take cues from GDP data from France and Germany as also the Euro zone, Bank of England jobless and the weekly mortgage market index from the US.

Crude oil will also head south on indications that stockpiles in the US increased.

Brent crude oil contracts maturing in September ruled at $109.46 a barrel and West Texas Intermediate crude for the same month at $106.55.