In Indian bullion markets, imports were deferred with a view of the streets expected a reduction in import duties on gold in Indian union budget. The Trade Ministry in India introduced a proposal which would see the import duty on gold being reduced by 80% from 10% to just 2%. However with unchanged import duties, festival and wedding season related demand, Gold imports tend to increase as it is a luring frame for jewelers. Hence trade deficit may have widened on increased gold imports.According to Standard Chartered: “It is expected that the trade deficit in March to be increased to USD 7.5 bn from USD 6.8bn in February owing to the sharp increase in gold imports, which likely more than doubled to USD 4.5bn on pent-up demand. Expectation of exports is to have contracted for a fourth consecutive month, falling c.16% yoy, although they likely increased m/m”.Since trade deficit represents outflow of domestic currency to overseas markets. One can eye on buying gold as two dealings, using Indian Rupee to buy US Dollars and then using US Dollars to buy gold. In this case, the weak Indian Rupee will get fewer US Dollars and hence lesser amount of gold for a given Rupee value. If the Rupee weakens against these currencies, gold prices will likely appreciate in Rupee terms.Prevailing ticker of USD/INR is at 62.3273 and 67.3775 against EUR as on mid-market rates: 17/04/2014, 10:27 UTC.
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