The prices of gold are on the rise and the highest since last April, after the governor of the Federal Reserve, Janet Yellen, reiterated after the board of the FOMC on June 18, that rates will remain low for a long time. And on the other side of the Atlantic, the ECB is convincing investors that the monetary policy is very accommodative for at least another 2 ½ years.
But the euphoria would not last long. According to the average of 15 estimates of as many analysts, the price of gold should be at $ 1,250 an ounce in the next quarter, 5% less than the current prices. In the last quarter, the average drops again to $ 1,240, rising to $1,300 an ounce in the first quarter of 2015. But if these are the estimates to June 18, two days later were down to $1,225 and $1,270 respectively.
After losing 28% in 2013, that there would be much interest in the yellow metal it would also demonstrate the low volume of trading in London: 18.3 million ounces per day, in the first 4 months of the year – 16% compared to the same period of 2013, its lowest level since 2010, according to the London Bullion Market Association.
The measures in India
The question, however, could brighten up a bit with some new features coming from India, where the new prime minister Narendra Modi may submit by 10 July a bill to reduce or eliminate the restrictions imposed on imports over a year ago on Gold, aimed at reducing the large deficit in the current account.
The goal seems to have been reached, as the red current has dropped to 37.4 billion at the end of March this year from 87.8 billion a year earlier. The restrictions consist today in a 10% tax and oblige the buyer to use at least 20% of the gold imported for exports, according to the so-called rule of 80:20.
The limitations allowed India to overtake China as the largest importer in the world in 2013. Thanks to policies of more pro-business and the confidence that Modi is engendering among investors, such restrictions could be torn down and that – it is estimated – in the current year could lead to an increase in gold imports by 25% to 800 tons, although still lower than the 845 tonnes imported in the year 2012-2013.
65% of purchases come from rural India, where the monsoon is expected, which could greatly weaken the demand. For this, promotions are happening on all over the country to stimulate sales. According to global analyzes, however, the price of gold is not expected to surge, indeed. And the fight against inflation announced by Modi could help to weaken the exploded imports of metal in recent years to protect themselves from price boom.