Gold up on weaker dollar; India budget eyed for import duty cut

Jul 10 2014, 10:06 IST
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Summary'India may cut gold import duty at budget'

Gold edged up for a second session on Thursday as the dollar weakened after minutes of the Federal Reserve's recent policy meet gave no indication of when U.S. interest rates will rise.

Markets were also eyeing developments in India, the world's No.2 gold consumer after China, where the new government is expected to cut a record high import duty on the precious metal at the fiscal budget to be presented later in the day.

Spot gold rose 0.3 percent to $1,329.45 an ounce by 0332 GMT, after gaining 0.5 percent in the previous session, aided by the dollar that hit a one-week low against a basket of major currencies.

A weaker dollar makes commodities priced in the greenback attractive for holders of other currencies.

Gold had come under pressure after last week's strong U.S. jobs report that stoked speculation of an early hike in rates, but the Federal Reserve gave no such indications, according to the minutes from the June meeting.

Higher rates would encourage investors to withdraw money from non-interest-bearing assets such as gold.

"If gold can break resistance at $1,335, then it can go all the way to $1,380," said a precious metals trader. "The weaker dollar after the Fed minutes is helping."

"People are watching India today to see if there will be any cut in import duty, though a reduction is already priced in." India last year took steps to curb gold purchases and imposed a record 10 percent duty on imports in an effort to reduce its high current account deficit.

The new government led by Narendra Modi had indicated earlier that they would ease the restrictions, with expectations mounting that an announcement could come on Thursday when the government presents its first fiscal budget.

India is likely to cut its gold import duty to 6 percent in Thursday's budget, leading to a rise in imports in the second half, a senior official at the country's biggest gold trade group said.

Indian gold imports slid by a fifth last year, so any jump in imports from the country would likely underpin gold prices.

Among other precious metals, platinum and palladium continued to gain amid fears over supply issues from major producer South Africa.

Palladium rose for a 14th straight session to trade near its highest since February 2001.

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