LONDON: Gold fell below $1,400 an ounce yesterday, extending losses on worries over demand in the world’s largest consumer, India, after the government further restricted imports of the metal.
The Reserve Bank of India extended an imports restriction on banks, which was introduced last month, to all nominated agencies and trading houses and said that any imports of gold will only be allowed to meet exporters’ need of gold jewellery.
This came after India’s gold imports jumped to around 162 tonnes in May from 142.5 tonnes in April.
“The news that the RBI will curb imports of gold by agencies has weighed prices down today as it is a wider restriction and could imply lower imports of gold into the country,” Societe Generale analyst Robin Bhar said.
“Also, considering that we are at the end of the wedding and festival season, June imports could come in the 50-to-100 tonne region.”
Spot gold fell as much as 1.3 percent to a session low of $1,393.40 an ounce. It stood at $1,397.10 by 1353 GMT, down 1 percent. Gold futures for August delivery fell 1.1 percent to $1,396.40 an ounce.
The metal was also undermined by a stronger dollar, up 0.2 percent, and uncertainty over the timing of a pullback in the U.S. Federal Reserve’s stimulus programme also continued to unnerve investors.
Prices had risen nearly two percent on Monday, when data showed U.S. manufacturing activity had slowed to the lowest level in nearly four years, weakening arguments for the Fed to slow its $85bn monthly bond-purchase scheme. The central bank said in May that it would scale back its easing sooner if economic indicators showed signs of continued strengthening.
US economic data will therefore remain in focus this week - monthly non-farm payroll figures will be released on Friday - in the run-up to the Federal Reserve’s next policy meeting later in June.
“Gold received a lift from the weaker dollar and lower yields yesterday after disappointing manufacturing data but short sellers in gold are still pretty stubborn and we are still in a wait-and-see period ahead of more US data this week,” Saxo Bank senior manager Ole Hansen said.
In bond markets, US 10-year Treasury yields were steady above 2.1 percent, bolstered by comments of two top Fed officials that the central bank could reduce bond buys this summer if the economy improved.
As gold has no interest rate, the rise in returns from US bonds and other markets is seen as a negative signal. Reuters
