Gold futures have suffered a blow in commodities trading this morning (February 21st), as India is set to increase its import taxes for the second time this year.
The country – which is the world's biggest buyer of the precious metal – is seeking to narrow a widening current account deficit, curbing demand for gold in jewellery and investment.
Buying gold is considered auspicious in India during the festival and wedding season, which lasts from August to the new year.
Indeed, imports surged by 62 per cent to 255 tonnes in the final three months of last year on expectations of higher import duties and strong demand coinciding with these occasions, according to the World Gold Council.
Finance minister Palaniappan Chidambaram – who is looking to curb the spending deficit by way of tax increases – will present India's annual budget next week.
At 11:00 GMT, the Forex Gold Index declined by more than two per cent to $1568.50 per ounce.
Find out about commodities trading and learn CFD strategies at City Index.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.