In a first, gold price rose above $1,200 for the first time since late October with the Swiss voters rejecting a proposal to boost its reserves, the softening of the dollar and weakening appetite for high-risk assets.
Gold slid to $1,142.91 as the Swiss voters rejected the proposal to lift central bank gold holdings to 20% of its forex reserves. The move, had it been passed, would have forced the Swiss central bank to purchase 1,500 tons of the precious metal, at the cost of 60b Swiss francs ($62b.)
Traders judged that the move was overdone and gold bounced back to a peak of $1,197.10.
Japan’s credit rating was cut on Monday by Moody’s Investor service to A1 from Aa3, citing “heightened uncertainty over Japan’s ability to cut its fiscal deficit” after Prime Minister Shinzo Abe decided last month to delay an increase in the national sales tax scheduled to take effect next year. The move sent the Japanese Yen to a seven-year low against the Euro, simulating some demand for gold.
On Friday, India, the second biggest consumer of gold, decided to scrap a rule mandating traders to export 20% of all gold imported into the country.
RBI Governor Raghuram Rajan termed the move “reasonable,” and added that the government will review its gold import policies.
Other Countries
On the other hand, China, the world’s largest consumer, saw a drop in demand for gold, reeling against the tough crackdown on corruption by its government, which began earlier this year. The country is expected to consume about 850-900 ton gold this year, contrasting to the record of more than 1,000 tons in 2013.
The softening of the US dollar also supported gold’s rally, as a weaker greenback boosts commodities traded in the dollar, making them cheaper for holders of other currencies.
Spot gold was up 4% at $1,216 an ounce.
Posting this year’s biggest single-day rise of Rs 840 ($13.57), gold today regained the Rs 27,000 ($436.3) per ten gram level after a gap of over one month in the national capital, tracking rebounds in global markets.
After losing Rs 730 in last six sessions after the RBI eased imports curbs by scrapping 80:20 scheme, gold staged a strong comeback by rising Rs 840 to close at Rs 27,040 per ten grams, a level last seen on October 30.
Silver also recorded a significant gain of Rs 2,700 to Rs 37,000 per kg on increased offtake by industrial units and coin makers.
