Once again the long, slow and difficult process of climbing higher has been quickly abandoned by gold in favour of an aggressive move lower. Two events look to have been the catalyst for this move, but the fact that the precious metal has found it so difficult to climb through the $1350 level has ultimately been costly.
The first reason for this is the expectation of a relatively quick resolution to the current political standoff in the US, meaning the demand for safe haven investments has dropped. By 4pm (London time) the gold price was hovering around the $1286 level and was showing every sign of being able to fall further.
The second issue for the markets is the increase in the Indian government’s tariffs for gold and silver imports. This is a continuation of its efforts to stabilize the rupee as, like so many other developing nations, they have suffered from the market aggressively devaluing its strength. Considering the popularity of gold in India and the fact that this is the third time tariffs have been raised, it is questionable whether they will be able to do this again. The fact that India accounts for 20% of global demand has in no small part helped thump the price.