Gold could struggle to move higher in the near-term as a worse-than-expected Indian monsoon and a robust rupee have generated significant headwinds.
Gold for December settlement of the Comex division of the New York Mercantile Exchange was last up $1.30 or 0.1 percent to $1,122.70 per ounce. Trade has been in a narrow range of $1,114.70 to $1,126.0.
Physical demand for gold remains subdued as the Indian rupee touched new highs recently, Standard Bank said in a note.
India is one of the world’s largest consumer of gold because rural farmers do not have access to standard lines of credit. Therefore, many store a majority of their wealth in physical properties like gold.
“Foreign exchange uncertainty, plus dollar gold price weakness, coupled with an uncertain outlook for rural incomes given the mixed monsoon season (deficient rainfall across Western and Northern provinces) make for a nervous environment for gold wholesalers,” the bank added.
Elsewhere, the People’s Bank of China (PBoC) over the last month has devalued the yuan to stimulate exports and discourage imports.
The data bears this out with imports falling 14.3 percent in August in yuan-denominated terms while exports fell 6.1 percent.
The world’s second largest economy is facing a major slowdown as it transitions for an investment-based economy to one relying on consumption.
In response, the PBoC increased its gold reserves last month by $2.6 billion to $61.8 billion, according to an announcement on the central bank’s website. This points to PBoC gold purchases of 16 tonnes, slightly lower than the 19 tonnes it purchased in July.
“China’s currency depreciation seems to have been the catalyst for causing investors to rethink, deleverage and take profits/liquidate in the broader markets,” FastMarkets’ William Adams said.
In data, US NFIB small business index in August was 95.9, in-line with estimates of 96 and labour market conditions at 2.1 were up from the previous reading of 1.8.
Turning to US equities, the Dow Jones industrial average and S&P were up 1.8 percent and 1.6 percent respectively, while the dollar was 0.1 percent softer at $1.1183 against the euro.
As for other precious metals, Comex silver for December settlement jumped 18.6 cents or 1.3 percent to $14.735 per ounce. Trade has ranged from $14.440 to $14.880.
Platinum for October delivery rose $11.60 to $1,004.0 per ounce, while the most-actively traded palladium contract was at $588.0, up $10.85.
(Editing by Tom Jennemann)
The post Gold prices muted by India demand jitters appeared first on The Bullion Desk.
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