Indian policymakers decided raising again imports tariff on gold and cutting silver imports tariff. This decision may affect the demand for gold and silver in India, which could also have some effect on the prices of precious metals.
This isn’t the first time in which Indian policymakers decided to make such changes on precious metals imports. Earlier this year, India raised import tax on gold and lowered it for silver. In response the demand for silver sharply rose in the past several months in India: During the first quarter of fiscal year of 2014, silver imports jumped by 311% (year-over-year). This recent decision is likely to further expand the demand for silver and cut down the demand for gold. Keep in mind, however, the effect on higher demand for silver in India on the silver price is likely to be weak compared to the potential effect on future developments in the U.S.
Despite the decision to lower import tariff on silver, the prices of both gold and silver are currently sharply falling. The recent developments in the U.S regarding the budget talks, which have led to a government shutdown and the debates over raising the debt ceiling again are likely to fuel the high volatility in the precious metals markets. If the volatility continues to rise, it may eventually result in the CME raising the margins requirements on gold and silver contracts as it did back in June.
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