Gold Climbs First Time in Three Days on India Demand Speculation

May 19, 2014 2:35 pm ET

May 19 (Bloomberg) -- Gold futures climbed for the first time in three sessions on speculation that the newly elected Indian government will relax import restrictions, increasing demand for the precious metal.

India, the world’s biggest bullion consumer after China, will probably cut the 10 percent tax on shipments in July and relax rules on importers, Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation, said today. The new finance minister will decide on easing, Reserve Bank of India Governor Raghuram Rajan said last week.

“There is a lot of optimism that India will slash the tariff rate,” Tommy Capalbo, a broker at Newedge Group in New York, said in a telephone interview. “People expect India’s demand to rise in the second half of the year.”

Gold futures for June delivery rose less than 0.1 percent to settle at $1,293.80 an ounce at 1:41 p.m. on the Comex in New York. This year, prices have climbed 7.6 percent amid signs of escalating geopolitical tension in Ukraine.

“Gold remains an important element of global monetary reserves,” the European Central Bank and 20 euro region central banks said in a statement. They signed their fourth gold accord, and the agreement has no cap on sales for the first time. “The signatories note that, currently, they do not have any plans to sell significant amounts of gold.”

The statement is positive for gold because it indicates the metal will continue to be an important part of central bank reserves, Bernard Sin, head of currency and metal trading at MKS (Switzerland) SA, a Geneva-based refiner, said by e-mail today.

Paulson Holding

Gold has retreated 7.1 percent since reaching a six-month high in March, and Goldman Sachs Group Inc. is among those who say the decline has further to go. Prices tumbled by the most in three decades in 2013, and U.S. equities rose to records since then. Billionaire John Paulson kept his gold holding unchanged in the first quarter, having told clients in November that he personally wouldn’t invest more money in his bullion fund.

On the New York Mercantile Exchange, palladium futures for June delivery rose 0.1 percent to $815.60 an ounce. Prices have gained 14 percent this year amid supply concerns in Russia and South Africa, the world’s biggest producers. Platinum futures for July delivery climbed 0.3 percent to $1,470.20 an ounce.

Silver futures for July delivery advanced 0.1 percent to $19.353 an ounce on the Comex.