On Wednesday, the price of gold rose due to speculation that India gold demand will soon increase. As Federal Reserve chairman, announced that increasing oil prices may spur inflation, experts said that precious metal demand built up from a five-day jewelry shop shutdown in India may lead prices of the golden metal higher.
India is the largest global buyer of the metal and the shutdown is scheduled to end today. Jewelers in India have been protesting recently announced governmental tax increases that could cause retail gold prices to jump by 6.3 percent. In a report written yesterday, UBS AG London analyst Edel Tully noted that demand may have built due to the closures. Frank McGhee, Integrated Brokerage Services LLC head dealer, stated that the short-term inflationary conditions and India rejoining the market will be positive for the golden metal over the short-term.
On the New York Comex, the price of futures for gold spot price increased 0.2 percent, settling at $1,750.30 per ounce by 1:37 PM on Wednesday. On March 14, prices saw their eight-week low when they dropped to $1,648.70. So far this year, the metal has rallied 5.3 percent. During the same period, retail prices for gasoline have increased 18 percent and they reached a ten-month peak of $3.614 per gallon on Tuesday. In his Wednesday testimony to the House Committee on Oversight and Government Reform, FED reported that higher fuel costs cause consumption spending to increase and have a negative effect on the economy.
The Federal Reserve chairman recommended the shoring up of European banks. He stated that though pressures in Europe have decreased, the economic and financial situation on the continent “remains difficult [according to Bloomberg].” R.J. O’Brien & associates senior commodity broker Phil Streible told Bloomberg that this could lead to additional quantitative easing within Europe, which would be “supportive of gold [according to Bloomberg].”
In other global news affecting the golden metal, the government in the West African country of Mali was recently overthrown and the national constitution has been suspended due to a dispute regarding handling of an insurgency. The Malian army is currently battling rebelling Touareg separatists in the northern region. Mali and Tanzania compete to be the third-largest gold producing country in Africa. In 2021, approximately 44 metric tons of the metal were produced in Mali.
Both Randgold Resources Ltd. and AngloGold Ashanti Ltd., which is the third-largest global gold producer, have operations in Mali. A transitional council is now running the government and elections will determine a new leader. Malian soldiers have complained of being unprepared and lacking resources to stop the Azawad National Liberation Movement. A desire for autonomous rule within northern Mali has led to a two-month rebellion by this group. David Zounmenou, a researcher at the Institute for Security Studies in South Africa, informed Bloomberg that the mutiny is of a large scale. He said that “deep divisions” about handling the insurgency could result in “some instability while this plays out [according to Bloomberg].”