This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

India Trade Requirements Limit Prospects for Gold Rally

Stocks in this article: GLD

NEW YORK ( TheStreet) -- Gold prices are showing some bounce after the initial market declines that followed Federal Reserve Chairman Ben Bernanke's congressional testimony last week.

Bernanke essentially suggested that it is too early to know when the Federal Reserve will start making reductions to monetary stimulus programs. The uncertainty created by the directionless commentary generated a selloff in gold.

But the prospect of continued stimulus is ultimately bearish for the dollar and positive for gold, as the metal shows a strong history of inverse correlation relative to the U.S. currency.

The latest strength has sent gold prices through closely watched technical resistance levels at $1,330 per ounce, and this is leading to renewed speculation that this year's bear trends have bottomed out.

Short-term rallies in gold have generated highs near $1,340 per ounce, posting single-session gains of more than 3%. Daily moves of this magnitude have not been seen since June 2012, so when we look at things from a short-term perspective, it can be easy to buy into the optimism and start projecting larger runs higher.

But before we look at these moves as a new buying opportunity, we should note some of the factors that could stall any rallies that might be seen into the end of the year.

The latest example can be seen in announcements that India will place additional restrictions on gold bullion imports. India was the world's largest gold consumer last year, and these restrictions should have a bearish impact on market prices, as measures to curb demand create negative scenarios when we look at the bigger picture.

Specifically, these measures will require 20% of all imported gold lots to be made exclusively available for export, and will be applied to all forms and purities of the metal (to include everything from unrefined gold to minted coins).

Gold importers in India will be allowed to supply jewelry businesses and outlets selling to jewelers, but 20% of the initial shipment will be held in customs bonded warehouses. Those importers will not be able to make new overseas purchases until 75% of that deposit has been exported. This will likely result in declines for in-bound shipments of gold bullion for the third and fourth quarters, as these required impositions reduce incentives and limit major centers of global market demand.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs