Mid-Day Gold & Silver Market Report – 3/16/2012

Timothy Oakes

3/16/2012 11:56:00 AM

INDIA PLANS GOLD TAX HIKE; OIL PRICES RESUME CLIMB  

The Gold price was still down at midday trading on a one-two punch of increased duties on bullion in India and continued upbeat U.S. economic data. India’s Finance Minister Pranab Mukherjee unveiled India’s 2012-13 budget today, which called for an increase in taxes on Gold. This would mark the second time India has increased taxes on precious metals imports this year. Mukherjee indicated that India’s current account deficit is linked to the nearly 50 percent increase in precious metals imports. India has been a cornerstone of the bullion market, importing a record 969 metric tons last year alone. Climbing Treasury yields and the continued increase in the strength of the dollar also are adding to the downward pressure on Gold. Increasingly positive data indicates the U.S. economy may be healthier than expected.

Oil has moved back above $124 a barrel in response to restricted Iranian imports and reduced capacity. “Spare capacity is really very tight, and any natural disaster or problem in the Middle East could be a real problem,” said Rob Montefusco at Sucden Financial. The tight rules on Iran are even disrupting oil shipments to Asia, and many Eastern oil purchasers are calling on Western officials to revise sanctions. Any news on economic sanctions is viewed as isolating Iran, but domestically the rising prices at the gas pump continue to be of great concern to U.S. consumers. The rising gasoline prices could derail any good economic news or recovery.

German Chancellor Angela Merkel has said that a decision on reinforcing the firewall that is the euro area’s financial backstop will be made by the International Monetary Fund in a meeting next month. Merkel has indicated there are discussions about “combination possibilities” for the rescue funds ahead of the meeting in Copenhagen. There are concerns among finance ministers on what to do with the temporary European Financial Stability Facility, which manages rescue programs for Ireland, Portugal and Greece, and its permanent successor, the European Stability Mechanism. “What’s clear is that we need to settle on a position with a view to the IMF’s spring meeting, because the topic will surely come up, and because there have been offers by the international community” to boost the IMF’s anti-crisis resources, Merkel told reporters in Munich today. “You can count on us setting the course by the end of March.”

At noon (CDT), the APMEX precious metals spot prices were:

• Gold - $1,656.40 – Down $4.60.
• Silver - $32.63 – Down $0.14.
• Platinum - $1,675.50 – Down $9.40.
• Palladium - $701.30 – Down $8.60.