Gold has now climbed to $1319, up 2.4% on the day, as traders buy back into the market after yesterday’s sell-off. The large downside move on Tuesday was attributed to the Indian tariff hike on gold imports. In 2012, India accounted for 20% of global demand for the precious metal, and the Indian government has increased the tariff on gold imports three times this year in an effort to reduce its current account deficit.
The US government is just over two weeks away from reaching its debt ceiling, at which point the Washington administration will no longer be able to borrow money. In August 2011 the US government decided to increase the debt ceiling, resulting in the US being downgraded. This pushed the price of gold to an all-time high. So if traders fear that no agreement will be reached over the debt ceiling now, we could see gold trade higher.
At 8.30pm, Ben Bernanke of the Federal Reserve will make an announcement. If Mr Bernanke gives any indications that the stimulus package will not be trimmed for a few months, this could provide gold with another reason to rally.