Traders are taking a shine to gold exchange traded funds Monday, speculating on easing bullion import curbs in India after Narendra Modi’s win in the national elections.
Rising for the first time in three sessions, the SPDR Gold Shares (NYSEArca: GLD) was up 0.1% Monday. GLD has gained 7.2% year-to-date.
COMEX gold futures were up 0.2% Monday, trading around $1,296 per ounce.
According to Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation, India’s new government could cut the 10% import tax on gold in July and ease back on rules for importers to supply 20% of purchases to jewelers for re-export by mid-June, reports Swansy Afonso for Bloomberg. [More Election Help for India ETFs]
“There is a lot of optimism that India will slash the tariff rate,” Tommy Capalbo, a broker at Newedge Group in New York, said in a separate Bloomberg article. “People expect India’s demand to rise in the second half of the year.”
Cutting down on restrictions would bolster supplies to local jewelers ahead of the traditional festival season in August through October.
Nevertheless, Crisil Ltd. warned that while the Indian rupee is strengthening and the diminishing current account deficit allows some room to ease the gold import limits, gold is not at the top of the new government’s agenda. India originally introduced the import curbs to help reduce the record current-account deficit and the depreciating rupee currency.