Gold Bar
Gold prices set to drop next week. Reuters

Gold prices hovered near a two month high in London on 30 June as geopolitical tensions in Iraq and the Ukraine propped up the precious metal.

Spot Gold was trading at $1,314.99 an ounce at 9:32 BST in London, Bloomberg data showed. Prices struck $1,325.95 an ounce on 24 June, the highest since 15 April, 2014.

Prices have risen some 2.4% in the second-quarter of 2014.

US Gold for delivery in August shed 0.3% to $1,315.70 on the Comex.

Barclays said in a note to clients: "Gold's recent gains are unlikely to last over the longer term.

"If and when geopolitical tensions ease, we continue to expect gold to return to its downward trajectory."

Commerzbank Corporates & Markets said in a note: The [US] CFTC's data on the market positioning of speculative financial investors on the COMEX, published [27 June] showed that net long positions in silver and gold had been hugely expanded in the week to 24 June...Net long positions in gold doubled to almost 100,000 contracts, putting them at their highest level since the end of March.

"This was attributable both to the covering of short positions and to the expansion of long positions. As such, there is much to suggest that the price recovery seen in recent weeks was largely speculatively driven and that correction potential has built up as a result. According to the All India Gems & Jewellery Trade Federation, only 150 [tones] of gold were imported to India in the first half of [2014], following the unusually high figure of 650 [tones] in the same period [of 2013].

"According to the Federation, gold imports in the second half of the year will depend to a major extent on what political decisions are taken. In July, the new federal budget will be approved for the [2014-15] fiscal year, which is likely to have an impact on imports, for it will then be revealed whether the import restrictions for gold are to be reduced or indeed entirely lifted under the new Prime Minister [Narendra] Modi."

India Gold Imports

Gold and silver imports into India plunged 40% to $33.46bn (£19.66bn, €24.50bn) in the financial year 2013-14 in the wake of hard-hitting government restrictions.

Three upward revisions to the import duties on gold in 2013, to a record 10%, and restrictions tying purchases to exports, discouraged gold buying in Asia's third-largest economy in 2013.

While official imports in 2013 reached 750 tonnes, an additional 200 tonnes was believed to have been smuggled to India, according to estimates from the World Gold Council (WGC).