Gold prices jumped $28 to a six-week high Thursday while the Dow fell more than 200 points in afternoon trading.
February gold ended the day up $25.80 to $1,264.50 an ounce. Spot gold finished up $28.10 at $1,265.50.
Precious metal traders cited short covering, bargain hunting, and technical buying behind gold's gains. Unquestionably propelling the yellow metal's ascent Thursday was the steep intraday 217.42 point, or 1.33%, Dow plunge.
But the biggest reason for why gold is up today was this news out of India...
India's government is considering lifting at least part of the country's gold import duties on its citizens.
"The story about Sonia Gandhi [Indian National Congress Party Chief] talking about lifting the gold-import [restrictions] could be a huge deal," Phil Flynn, senior market analysts at Price Futures Group told Kitco. "If they take steps to remove the restrictions, that could mean a real surge in demand at a time when the physical market is relatively tight. That is an important story."
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Indian citizens are key bullion buyers. However, their gold consumption habit was choked off over the last year due to hefty duties imposed by the Indian government aimed at curbing the country's swollen current account deficit.
Marking its third increase since March 2012, India's finance ministry lifted the import tax on gold to 10% from 8% in August 2013. That meant Indians had to pay a 20% premium for coveted gold.
But the limits have hurt gold-related businesses and gold buyers. It has also led to some sophisticated smuggling.
Smugglers have been hiding gold in imported cars. Customs officials at the country's airports report a significant spike in seized gold. Plus, there have also been reports of people using mules to swallow gold before crossing borders.
Today's news could direct that gold demand to the market and push up prices even higher.
And today's gold rise could be just the start of the metal's rebound, when you look at these factors...
Asian demand for gold buying is among the "fundamental gold drivers" we profiled last week.
These drivers outline simple economics that point to higher gold prices in 2014.
Money Morning Global Resources Specialist Peter Krauth says fundamental drivers for gold "are so numerous I hardly know where to start."
He outlined the biggest four here - along with the best way to play gold today.
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