Gold In A Tight Spot; India Hikes Import Tariff

Mumbai-India (Oct 30)  Gold futures are trading in a tight rope ahead of the much awaited outcome of the Federal Reserve's monetary-policy meeting. The hike in tariff value of the imported gold pushed up the local prices above Rs 30200 levels today.

The government of India hiked the import tariff value of gold to $442 per ten gram today amid short supply of gold in domestic market during the festival season. The tariff value, the base price at which the customs duty is determined to prevent under-invoicing, stood at $418 per 10 gram for gold during the last fortnight.

However, the import tariff value of silver has been kept unchanged at $699 per kg. Similarly, the tariff value of other imported items such as brass scrap, poppy seeds, areca nut and some edible oils has also been kept unchanged.

The tariff value on imported gold has been revised upward taking into account the price volatility of the precious metal in the global market. In the domestic market, gold is being sold at a high premium due to supply crunch caused by government measures to restrict the import of precious metal in an effort to cut current account deficit.

India, the world's largest consumer of gold, has imported 393.68 tonnes of the yellow metal during the April-September period of this year, as per official data. The government has taken several steps to reduce gold imports including hike in custom duties.

MCX December bullion futures are trading up nearly Rs 60 at Rs 30200 per 10 grams. The metal may face a resistance near Rs 30300-400 levels today with supports around Rs 29900-750 levels.

International December gold futures are trading down flat at $ 1344.8 an ounce on the Comex division of the New York Mercantile Exchange. Yesterday, it shed $6.70, or 0.5%, to settle at $1,345.50 an ounce.

In focus today is the Federal Open Market Committee's two-day meeting, which started yesterday and concludes today. The policy makers are likely to reiterate that they want to see data indicating the world's largest economy is prepared for a reduction in the U.S. central bank's debt purchases, currently $85 billion a month. Many key Fed watchers now expect tapering to begin in March 2014, particularly after the release of weaker-than-expected jobs data for September.