Gold News

Gold Bullion Slips as Rupee Hits New Low Before Diwali But India's Silver Imports Surge

GOLD BULLION prices fell to multi-week lows against major Western currencies in London trade Wednesday, but held firm for households in the precious metal's No.2 consumer market of India as the Rupee fell to fresh all-time lows on its foreign exchange rate just as gold buying for the key festival of Diwali is set to begin.
Dollar-priced bullion dropped to $1633 per ounce, down within $20 of last month's 2-year lows, as world stock markets snapped this week's previously sharp bounce on a fresh surge in longer-term borrowing costs in the bond market.
Silver also slipped but held a small gain for the week so far at $18.48 per ounce.
Most commodity markets also fell with equity, gold and bond prices, but crude oil rose as the European Union moved to impose sanctions against major oil producer Iran over supplying military drones to Russia used in attacking civilians in Ukraine.
The UK Prime Minister meantime contradicted her new finance minister – brought in following the chaotic market reaction to her previous choice's unfunded tax cuts – over a key commitment to raise state pensions in line with inflation, confirmed this morning at a fresh 4-decade UK high of 10.1% per year in September.
"India will definitely see better [gold bullion and jewelry] demand than the first half of the year, but it is not going to be as good as it was last year," says P.R.Somasundaram, regional chief of the mining industry's World Gold Council.
Silver, in contrast, is seeing record-heavy imports to India in 2022 according to expert panellists speaking this week at global industry-body the London Bullion Market Association's annual conference, with Mark Woolley of secure logistics specialists Brink's – voted best speaker by this year's LBMA attendees – saying that an additional 3,000 tonnes had gone in since the data available for this chart in his presentation was updated to July.
Chart of global silver flows excluding London, 2018-2022. Source: Brink's at LBMA 2022 conference
Ahead of Sunday's festive-day of Dhanteras, internet search volumes for precious metals' terms in India is running 40% above year-ago levels, says analysis from Justdial, part of grocery and general-store giant Reliance Retail.
Gold-related terms account for 70% of that search volume.
"Gold should find physical market support given seasonal demand ahead of Diwali," reckons a note from bullion market-maker Standard Chartered.
"[But] if physical demand fails to cushion the downside during October, gold could find itself open to sharp declines in coming weeks."
Attendees of the LBMA's annual conference yesterday forecast that gold bullion will trade at $1830 per ounce this time next year, trimming their average outlook by $20 from when they were asked at the start of the event on Monday morning.
Gold bullion meantime touched 3-week Euro lows at €1668 and 5-week lows for UK investors below £1450 per ounce.
Benchmark US Treasury yields today rose above 4.10% per annum on 10-year debt, the highest since the Lehmans' crash phase of the global financial crisis in October 2008.
Germany, France and Italy also saw their borrowing costs rise, back towards last week's 11-year highs of 2.42%, 3.03% and 4.89% respectively. But UK borrowing costs fell back, with yields on 30-year UK debt down to the lowest in 2 weeks at 4.17% per annum – almost 1 percentage point below the last month's double-peak at 2-decade highs – after the Government of Liz Truss unwound almost all of last month's unfunded tax-cutting plans and the Bank of England said it won't sell any longer-dated Gilts until at least the start of 2023 as part of its rate-rising and quantitative tightening plans.
"India is relatively insulated from global volatility due to the sovereign's limited reliance on external financing," says ratings agency Fitch.
For the currency, "I look at it not as Rupee sliding but Dollar strengthening," says India's Finance Minister Nirmala Sitharaman of the drop to new all-time lows beneath INR 83 per Dollar.
The Reserve Bank of India last month raised its key interest rate to 5.9% in face of 7.4% annual consumer-price inflation.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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