The market dipped below $1,200 an ounce in overnight trading for the first time since June.
Meanwhile, even though traders and analysts say there is potential for more weakness, some also say support could emerge at some point, particularly on further price dips.
Indian authorities have hinted at easing restrictions on gold imports once the country’s current-account deficit narrows, and whenever this happens, any increase in gold imports combined with already-strong demand in China should help underpin the yellow over the long term, says HSBC. The bank cites a report in the Economic Times of India saying that the Reserve Bank of India would favor easing curbs on the gold trade once the current-account deficit is more manageable. Governor Raghuram Rajan reportedly said the deficit needs to stabilize without distortions such as higher import duties on gold, which incentivizes bullion smuggling. Earlier in the year, the RBI hiked the duty on raw gold imports to 10% and gold jewelry imports to 15%, up from 4% at the beginning of the year.
“An increase in Indian imports at the same time (that) imports remain strong to China and other emerging-market nations is very likely to provide long-term support to gold prices,” HSBC concludes.
Source : Allen Sykora of Kitco News