Gandhi comments light fire under gold price

The price of gold jumped by more than $28 an ounce to a more than 2-month high on Thursday, on hopes that top consumer of the metal India may soon lifts curbs on bullion imports.

In lunchtime trade on the Comex market in New York, February gold futures changed hands at $1,262.30 up $23.60 or 1.9% from yesterday's close and off slightly from a high for the day of $1,267.00.

Volume was brisk and by 1pm EST the number of February gold, the most active contract, changing hands already stood at 177,000, compared average daily volumes on the exchange of less around 160,000. Volumes for gold delivered in April was also up at some 40,000 contracts.

Sonia Gandhi, leader of India's Congress party and ruling alliance, has asked the Indian government to relax gold import curbs ahead of parliamentary elections later this year reports the Times of India.

Long the top importer of gold, India fell behind China in 2013 after bullion import duties were pushed up tenfold – from 1% at the start of 2012 to 10% – and other rules such as strictly cash only for imports, mandatory re-export of 20% of imports and transaction taxes stymied India's gold industry.

During the sub-continent's celebration of Dhanteras and Diwali in November, two festivals closely associated with bullion buying, and the subsequent wedding season, premiums over the London fix demanded by Indian gold traders from jewelers shot up as high as $140 an ounce.

Lifting the restrictions, which will be made easier by gains for the rupee from historic lows set last year and an improving balance of payments, could unleash the pent up demand in India which during good years take in more than a 1,000 tonnes of world supply.

The closely watched Thomson Reuters GFMS update to its 2013 world gold survey released today details how the centre of gravity in the physical market "moved dramatically eastwards during the middle of 2013 as professional investor disgorged metal, for it to be snapped up by rampant demand in Asia and the Middle East."

This trend is likely to continue in 2014, the authors note, which will keep the gold market in "fundamental balance," but the average gold price is expected to be 13% lower than during 2013 at $1,225 an ounce for the year.