The views expressed are his own

India shows link between crude oil and gold

uk canada goose outlet Clyde Russell is a Reuters columnist. The views expressed are his own.

By Clyde Russell

LAUNCESTON, Australia, Dec Canada Goose Coats On Sale 4 cheap canada goose uk (Reuters) A common theme in recent gold market Canada Goose Jackets reports is the link between price movements in the precious metal and crude oil.

While there certainly appears to be a valid correlation in recent years, one that has canada goose coats strengthened in recent months, events in India show a different, unexpected link between the two commodities. 28 by scrapping the so called 80 20 rule, under which canada goose 20 canada goose uk outlet percent of all imported gold had to be re exported in the form of jewellery.

Gold traders had been expecting a tightening of restrictions on Canada Goose Online gold rather than a loosening, and while a 10 percent customs duty remains, the likelihood is that India will now import more of the yellow metal and reclaim from China cheap Canada Goose its title as the world top importer.

The government of new Prime Minister Narendra Modi, which ordered the relaxation, and the Reserve canada goose coats on sale Bank of India, which canada goose uk shop announced the move, didn provide any reasons.

But it not hard to see canada goose clearance a canada goose factory sale link with crude oil, and to a lesser extent coal.

Crude is India largest import item by value, followed by gold. Together they accounted for 42 percent of all imports in October.

However, oil imports by value are falling sharply, with October canada goose uk black friday $12.36 billion being 19.2 percent below the same month last year.

This represents a reduction Canada Goose online in buy canada goose jacket the current account deficit of about $2.6 billion, and that just one month of oil imports.

OIL canada goose clearance sale SAVINGS OUTWEIGH ANY GOLD GAINS Assuming Brent oil remains around the current $70 a barrel, India would stand to save about $52.7 billion on oil imports in 2015 versus 2013.

This is based on an average Brent oil price of around $108 a barrel in 2013 and daily imports of around 3.8 million barrels, which is what they have been in the first 10 months of this year.

In contrast, even if gold imports recover to 2013 levels of just under 1,000 tonnes from canadian goose jacket the current likely 2014 outcome of around 850 tonnes, the extra cost comes nowhere near the saving on oil.

The spot gold price Canada Goose Parka averaged $1,411 an ounce in 2013, meaning India imports of 974 tonnes canada goose store cost about $44 billion. If gold averages around $1,200 an ounce in 2015, 1,000 tonnes would cost about $38.4 billion.

This means that, at current prices, India can actually increase gold imports to record levels and still not add to the current account deficit.

Look at these figures and it not hard to see why gold imports suddenly became less of canada goose sale an economic concern than they were two or three years ago, when they were rising uk canada goose even as the gold price reached a record above $1,900 an ounce in September 2011.

In fact, canadagoosejacketsalesca the current account deficit has largely disappeared Canada Goose Outlet as a concern for Modi government, given the steep declines in the prices of oil, gold and coal.

Even rising coal imports won add much to the Canada Goose sale deficit, with prices likely to be at least $10 to $15 a tonne lower next canada goose black friday sale year than they were in 2013.

Even if coal imports jump to 210 million tonnes in the fiscal year starting April 2015, as forecast buy canada goose jacket cheap by consultants OreTeam, that won cost significantly more than the 168.4 million tonnes imported in the fiscal year ended March 2014.