Back in October in Futures magazine I wrote at length in the article Brave New World for Gold that the most beneficial move for the gold market would be a reduction in the taxes on the sale of gold in the Asian market. So as we approach the end of the Year the Indian government in a rather rapid fashion has working in concert with the Reserve Bank of India towards lowering the current 10% import duty which is referred to as the 80-20 rule.
So if this tax or duty could be lowered over the next few weeks India will enjoy a rather large influx of metals purchases bleeding over from the merchant side of the gold market but just as importantly there will be the flow from the off the books trade as well. India has long wanted the black market gold sales migrated back onto the regulated books and with a reduction in the tax base this should bring about this shift rather rapidly.
Now as to the strength or weakness of the metals market. The overall well-being of the metals is going to be split by the collapse of the oil market. With less funds flooding into the Middle East we will see the demand for metals reduced over the short term unless we drop down to levels which make it very attractive.
Also with the Ruble in free fall the overall demand from Russia for gold to stockpile in the Central Bank will have to wane just due to the degradation of the currency itself. The other side of the coin is that as the price drifts to lower levels you will see the natural occurring demand start to go up. Also with the current moves occurring in Shanghai on the gold exchange (SGE) you will see an increase over the next three of a rather large increase in gold bullion. So the question is low taxes and demand or lower demand and sliding currencies. Which will win remains to be seen but I hope an unencumbered free market in the largest Democracy wins out.