NEW YEAR "COUNT" "DOWN" FOR GOLD

                                       

Firstly, wishing all readers a Very Happy New Year in advance. As we give farewell to 2012 and welcome 2013 with a bang, we wish the same for the economy worldwide and for all markets. 

Currently, the most talked about topic this new years eve is the "THE GREAT FISCAL CLIFF " and what effect will it have globally, once some decision  is arrived on the same.

In simple terms, fiscal cliff refers to the economic effects that could result from automatic tax increases and a corresponding reduction in the US Budget deficit beginning in 2012 if existing laws remain unchanged.

Gold and silver continued to slowly change during recent days. The recent attempts of President Obama to reach an agreement with Congress regarding to avoid the fiscal cliff didn’t seem to impress investors of bullion up to now

The prices of gold and silver remained nearly unchanged in recent days as they have shifted with an unclear trend. This low movement is likely to continue especially as the trading volume is picking up following the holiday break. The recent U.S reports including new home sales and jobless claims may have contributed to the strengthening of the USD against some currencies and thus may have curbed the recent rise in the prices of gold and silver. Nonetheless, as long as the movement of precious metals remains low, this could be just a matter of market shifts or noise.

Investors and traders continue to worry about the U.S. fiscal cliff negotiations that have stalled and now with only a few days left for U.S. lawmakers to reach a deal. there was no progress on the matter as of Thursday afternoon. That did prompt some mild safe-haven demand for gold on Thursday. U.S. lawmakers have until January 3 to come to agreement before the government falls off the fiscal cliff. Uncertainty is not preferred by any market and hence most markets remain edgy  as the deadline draws closer.

President Obama was due to hold talks with congressional leaders later on Friday, as part of ongoing negotiations on how best to tackle the US federal deficit. The US economy is due to hit the so-called fiscal cliff next week unless Congress agrees to halt planned spending cuts and extend tax cuts from the Bush administration.

The spot market gold price fell back to $1660 an ounce Friday morning, close to where it started the week,  ahead of talks in Washington aimed at avoiding the $600 billion "fiscal cliff" of spending cuts and tax rises due within days.

Silver meantime eased back towards the $30 an ounce mark, while other commodity prices were little changed.

On the currency markets, the Euro fell against the Dollar Friday morning, dropping 0.6% in two hours, with traders blaming thin volumes and stop loss selling.

It’s also worth noticing the developments in India and China two of the leading importers of gold and silver worldwide. These economies haven’t performed well during 2012. Furthermore, the devolution of the Indian Rupee against the USD during the year (mainly during the first half of the year) may have curbed the demand for gold and could continue to do so in 2013. Nonetheless, if India and China will show signs of recovery during the year, this could contribute to the rise in the prices of gold and silver via an increase in the demand for these precious metals.

Challenging time for the Safe metal!

Almost the whole world is focused on the world’s biggest economy taking its fiscal cliff decision. An agreement is must and that will decide the future of US economy and to some extent even the global economy. Ratings firm Fitch said on Wednesday it is more likely to strip the United States of its triple-A status if a political deal is not reached to halt $600 billion of spending cuts and tax hikes set for early next year.

U.S. stocks and almost all the equity markets around the world are witnessing the best Bull Run over a long time as President Barack Obama and Republicans continued budget talks which are looking fruitful.

Beyond asset purchases by the U.S. Federal Reserve, as increased liquidity is usually beneficial for gold as some investors consider the metal to be hedge against inflation, uncertainties still linger over the U.S. "fiscal cliff" and debt ceiling, Gold prices have sunk to their lowest level in three months as pessimism over the US fiscal-cliff negotiations pushed prices below a key technical level, triggering a wave of selling.

Initially trading near unchanged, gold prices retrenched after House Speaker John Boehner said he was working on a back-up plan should US budget deficit talks with President Barack Obama fall through. The pair had been negotiating a deal to avoiding a sweeping package of automatic tax increases and spending cuts known as the fiscal cliff.

Investors turned aggressively against precious metals yesterday, as a generally quiet day turned into a dramatic sell-off after the London PM fix. Gold which has been struggling to unhinge itself from the $1,700/oz level, dropped to a low of around $1,660/oz. Physical buying was evident; although, even coupled with a weaker dollar this was not enough to turn the tide. Clearly, participants are feeling vulnerable. Dallas Fed President Fisher once again downplaying the benefits of QE yesterday did not help.

Gold is well supported at USD 1660 levels. Short term down trend is being witnessed and the bullish picture can only be witnessed after USD 1730. While Silver has not been able to cross the 34.50 mark, and it’s once again on its way to test the support level at 31.50. Only sustainable prices above 34.50 would improve the technical picture.

Gold and silver prices tumbled at the national front too on heavy selling by stockists sparked by global meltdown amid sluggish domestic demand at existing higher levels. While gold tumbled by Rs 500 to Rs 31,200 per 10 gm, silver dropped by Rs 1,300 to Rs 60,000 per kg. In addition, sluggish domestic demand at prevailing higher levels and some investors seen shifting their funds from weakening bullion to rising equity further dampened the sentiment, they said.

On the domestic front, gold of 99.9 and 99.5 per cent purity tumbled by Rs 500 each to Rs 31,200 and Rs 31,000 per 10 gm, respectively. The metal had climbed by Rs 275 in yesterday. Similarly, silver ready dropped by Rs 1,300 to Rs 60,000 per kg and weekly-based delivery by Rs 1,170 to Rs 60,680 per kg.

Gold importers in India, the world's biggest buyer of the metal, continued picking up bargains for weddings as a stronger rupee weighed on the yellow metal, extending losses to the lowest level in nearly two weeks.

Looking at the current scenario, safe haven metal status is being challenged which would allow the short term down trend to continue.

GOLD & SILVER go HAYWIRE!

This week was completely haywire for precious metals.

Gold and silver went down and then bounced back on Wednesday. However, on Thursday gold and silver plunged down big time. On Thursday, the price of gold fell by 1.21% to $1,695.9; Silver price also plunged by 4.18% to $32.3. During the month, gold declined by 0.88%; silver, by 2.73%.

In the Indian markets, Gold fell Rs. 230 per 10 gram and silver fell by a whooping Rs.1700 per kg. It seems the recent FOMC decision didn’t help rally precious metals prices. On Wednesday, several U.S reports came out: retail sales rose by 0.3% during November; the PPI sharply fell by 0.8% last month; jobless claims declined again 29k to reach 343k. These reports suggest that the U.S economy is progressing and the inflation isn’t expanding.

The FOMC announced on Wednesday it will expand QE3 by start purchasing at the beginning of 2013 long term treasuries securities at a rate of $45 billion per month. This plan will substitute operation twist and will come in addition to the $40 billion mortgage backed securities purchase plan

However, the prices of gold and silver changed direction and plunged on Thursday despite the launch of the extended QE3. This drop in prices is an indication that many investors have cashed their investment in precious metals as these metals haven’t performed that well during the year 2012.Moreover, these investors might be waiting for the outcome of the budget talks in Congress and the consequences of the fiscal cliff.

Some bargain hunting had also occurred in gold after the metal fell below $1,700 an ounce overnight. The metal rose Wednesday on news of more Federal Reserve quantitative easing. But the inducement to lock in profits as we near year-end was strong, and therefore gold sold off. 

Meanwhile, markets were knocked back further on fading hopes that euro bloc leaders would reach broad agreement on Friday to tackle the region's debt crisis after Germany rejected draft proposals that would increase the euro zone's firepower in dealing with the credit crisis. Germany rejected some measures in draft conclusions from the summit, including giving the European Stability Mechanism (ESM) a banking license and issuing common euro-zone debt.

As far as currencies were concerned, The Euro/ USD remained unchanged on Thursday at 1.3077. During the month, the Euro/USD rose by 0.7%. Several currencies such as Aussie dollar depreciated yesterday against the USD by 0.26%. The correlations among gold, silver Euro and Aussie have weakened in recent days: during November/December, Thus, if the Euro and other risk currencies will decline against the USD, they are likely to pull down gold and silver.

Now, as we move towards the end of 2012, all eyes await the ‘fiscal cliff’ decision. We hope 2013 will have lots of positive sentiments in basket as far as precious metals are concerned.

HOLD YOUR GOLD!

Last week we saw gold and silver going zigzag and then closing on a lower side by Friday. The prices of gold and silver changed direction and tumbled down on Tuesday and thus resume their downward trend from last week. The ongoing concerns regarding the fiscal cliff are likely to contribute to the volatility of precious metals in the weeks to follow. The prices of gold and silver continue to zigzag as both metals tumbled down. Other leading commodities prices such as crude oil and natural gas also fell on Wednesday.

Gold prices closed under $1,700 for the second consecutive day on the Comex division of the New York Mercantile Exchange Wednesday.

On Tuesday, the price of gold fell by 1.49% to $1,694.4; Silver price also tumbled down by 2.89% to $32.73. During the week, gold declined by 0.92%; silver, by 1.442%.
However the week opened with a positive note. Over the weekend, figures showed that Chinese exports in November increased by 2.9 percent to $179.4 billion, albeit hopes were for 9.6 percent growth in shipments. Imports were unchanged from the previous month at $159.8 billion.

Gold prices hit their highest for a week in Monday morning bullion trading in Europe, with the precious metals sector in a positive frame of mind ahead of this week's US FOMC meeting

The focus of the U S market place this week remained in the ‘fiscal cliff’ tax increases and spending cuts. This fast approaching ‘fiscal cliff’ is the most discussed issue worldwide as it will play an important role for all major markets.

U.S. lawmakers are still jawboning on the matter, with the market place paying less attention to the politicians’ rhetoric. While the market place presently perceives odds are higher than not that there will be a last-minute agreement among U.S. lawmakers to avoid the fiscal cliff, the overall situation has been a bearish drag on many markets, including the raw commodities and stock markets.

All eyes stay glued on the much awaited FOMC meeting of the Federal Reserve to be held next week on December 11 and 12. This will be the last meeting of 2012 and major topics of discussion include The “Operation Twist” program that comes to an end and the FOMC members have to take a decision on the extension of the bond buying program. There is a belief that the Fed will continue to purchase the US treasuries and launch ‘QE 4’ at this meeting. If this happens then precious metals market tends to remain bullish.

Asian stocks rallied on news that Chinese government officials have said they want to stimulate their economy by implementing more construction projects. Also, China’s purchasing managers index showed further expansion in November. This news is an underlying supportive factor for the metals markets.

Moreover, the upcoming reports including: U.S non-manufacturing PMI could moderately affect commodities markets. If the PMI will rise again it may pull up commodities prices. Australia’s employment report could affect not only the Aussie dollar but also precious metals prices. If this report will show the economy isn’t doing well, it could adversely Australia’s currency. This, in turn, could adversely affect precious metals. Finally, if the Euro and other “risk currencies” will rally against the USD, they are likely to pull up precious metals. 

The Euro/ USD increased again on Tuesday by 0.31% to 1.3094. During the week, the Euro/USD rose by 0.83%. 

The correlations among gold, Euro and Aussie are still strong even thought they have recently weakened: during November and December. Thus, if the Euro and other risk currencies will rise again against the USD, they are likely to pull up gold and silver.

FISCAL CLIFF HANGS DOWN GOLD!

Gold prices ended Friday weaker, following weakness in equities.

Gold fell almost a per cent on Friday and declined consecutively for the second month. This decline was due to investor worries over the US Fiscal Cliff resolution. 

In the Indian market, by the end of Friday’s trading session gold was down by almost 400 rupees per 10 gram and silver by 1700 rupees per kg. Global news led to these volatile movements in the domestic markets.

Some believe that the fiscal crisis might lead to a recession. Some even lightened their positions in gold as they feared that a failure to reach a budget deal could lower gold’s appeal as an inflation hedge.

Moreover the end of month profit making saw an outbreak of sells orders. Bullion prices saw a further drop after John Boehner (Speaker of the House) said that lawmakers from his Republican party and President Barrack Obama were in a state of deadlock over a budget deal that needed to avoid a $600 billion fiscal cliff.

Apart from the Fiscal Cliff there is a lot in basket for gold and other precious metals. Important US Economic Data, monthly employment data are also due. Global manufacturing data will soon be released, including China's November HSBC manufacturing PMI, the U.S. November ISM manufacturing index and the November Euro zone PMI. However, investors believe that any development regarding the fiscal cliff will overshadow all these data reports.

Currently markets worldwide have glued their eyes on the fast approaching “fiscal cliff”.

However some investors believe that fiscal cliff might even push up gold prices further. Their reasoning is that precious metals are now an asset class, and just like every other asset class prices will fall as investors turn to cash while some debate that it will pull down the prices as the demand for gold as a safe haven will decline.

Failure to avert the cliff will push the US into recession and will pose significant difficulties for the world’s largest economy if they are to continue their economic recovery from the GFC.

As long as the fiscal cliff debate continues, gold prices should remain within their current narrow trading band. Till then Gold’s ability to hold the low $1,700 area suggests that the market has strong support at that region.

GOLD INTO FOCUS ONCE AGAIN

Gold and silver were on a downward move till Thursday. The decline was mainly due to the two important data reports that were published on Thursday. The US CPI edged up by 0.1% and the Philly Fed Survey showed that that manufacturing deteriorated due to Hurricane Sandy.

The US Jobless Claims reports also added to the decline in gold and silver prices.

On Thursday, the price of gold declined by 0.94% and settled at $1,713.8; Silver also decreased by 0.64% to $32.67. During November, gold slipped by 0.31%; silver rose by 1.1%.

However, Friday was altogether a different picture. Gold  edged up reaching 1713 $.

The EU economic news and the ongoing US Fiscal Cliff worries put traded and investors in a risk averse frame of mind,

If the so-called fiscal cliff package of measures comes in as planned on January 1, the US economy would likely tip back into recession, which would have a devastating effect globally.

The fiscal cliff is essentially, a combination of the expiration of Bush era tax cuts, 8-10% spending cuts in defense and non-defense programs, and the raising of the debt ceiling.  If all components of the Cliff were to come to pass, we would see a crippled US economy that is thrust deeply into recession, and a weakened national defense. 

It will result in an increase in inflation and will thus push up gold prices even further. Some expect gold to cross the $2000 mark too.

This fiscal cliff will have the greatest effect globally and it has already taken over the Euro zone. It poses to be one of the greatest threats to global recovery,

Financial markets were also on edge after Gaza militants fired rockets at both Jerusalem and Tel Aviv, aiming for Israel’s political and commercial hearts and prompting the country to call up thousands more reservists in readiness for potential ground operations.

Moreover on the geopolitical front, the rising unrest in Israel resulted in pushing up gold and crude oil.

Israel’s pledge to take out more Hamas leaders has led to increased tensioned in the Middle East. This situation would turn investors towards gold thus pushing up gold even further.

Gold being eyed by investors will result in increased demand for gold.

Adding to this, the two world giants- India and China have also shown great demand for gold. Demand in India, the world’s biggest gold buyer, rose to 223.1 tonnes in the third quarter, a sharp jump from the 181.3 tonnes in the second quarter and the 204.8 tonnes from the same period last year 

Indian demand was probably due a rebound after several weak quarters, and a strengthening rupee probably provided a catalyst for the third-quarter increase. 

Chinese demand has also feel to a disappointing 176.8 tonnes in the 3rd quarter.

Slower economic growth was blamed by the council, which said stronger conditions on the 4th quarter may increase demand in china.

That is quite likely, but Chinese demand will probably only grow significantly when a rising price trend is re-established or domestic inflation rises again. 

Given that China and India together account for about half of total gold demand, it seems logical to assume they are vital to the outlook  for prices. 

Meeting with Deputy Governor of RBI: Dr. Subir Vithal Gokarn

Meeting with Deputy Governor of the Reserve Bank of India: Dr. Subir Vithal Gokarn on 9th November, 2012. As Deputy  Governor,  Dr. Gokarn looks after the Monetary Policy Department, Department of Economic Analysis and Policy, Department of Statistics and Information Management, Department of Communication and Deposit Insurance and Credit Guarantee Corporation. Dr. Gokarn also represents the Reserve Bank at the G-20 Deputies’ forum.

This meeting touchbased on various prospects so as to enhance the bullion business growth of India.

Gold hangs around the Fiscal Cliff!

Gold slid 2% in heavy last fortnight, breaking below $US1690 an ounce for the first time in about two months as an encouraging US nonfarm payrolls report lowered expectations for economic stimulus provided by global central banks. Gold slid to an eight-week low as the dollar jumped after data showing higher-than-expected US job creation

However, last week opened with an upsurge movement for gold. Gold was up by almost 400 rupees and was seen trading at INR 31,100 on Monday. Predicting an Obama win on November 6th resulted in onside upward movement for gold and silver.

On Tuesday, the most powerful man of the World was re elected: US President Barrack Obama. As we see him march towards his second term, we expect the commodities market to march upwards too.

On Wednesday, gold prices spent some time weaving in and out of positive and negative territory, rising to as high as $1,733 and falling to as low as $1,703. They had climbed nearly $32 on Tuesday, before the election results.

In a five-day long rally, gold prices regained Rs 32,000 per 10 gm level after six-week in the national capital on Friday on sustained buying by stockists to meet the rising festive demand amid a firming global trend.

The seesaw effect in gold prices is very much related to gold’s positive reaction to U.S. debt worries, with weakness from Europe sitting on the other side of the seesaw holding a very, very heavy key to the U.S. dollar.

Obama has always been the markets favorite. His win will bring in positive sentiments for the market. Romney was considered as a threat to the market as he did not believe in the policy of printing currency to accelerate the economy.

This would have inevitable resulted in the dollar strengthening short term, which would have a reverse correlation the price of gold, as the dollar strengthens the price of gold often declines.

Nonetheless, gold will be touching the roof in the days to come. Re election of Obama means that FED chairman Bernanke continues his term and hence the monetary measures remain more or less unchanged

Gold had rallied to an 11-month high above $1,795 an ounce on October 5 after the US Federal Reserve announced a third round of aggressive economic stimulus in September. Gold prices then drifted back to nine-week lows around $1,672 due to uncertainty over the policy impact of the US election.

Analysts and investors were already shifting focus to the fiscal challenges facing Mr. Obama in his second term. Obama's top priority now is to rectify the fiscal cliff.
Gold and Silver jumped near to higher levels of the month following supportive festival demand ahead of Diwali. 

The festive season has seen heavy buying by stockists and retailers. The recent dip in prices has pushed the demand for gold even further. 

Considering a further hike in prices, people have started buying gold and hence this festive season the demand has been much better than expected

CATCH ME LIVE on CNBC AWAAZ!!

WATCH ME LIVE ON CNBC AWAAZ  as I join a PANEL DISCUSSION today from 11.30 to 12.00 am

The OBAMACONOMY!

The Most powerful man of the World is here: US President Barrack Obama. As we see him march towards his second term we expect the commodities market to march upwards too. 

Obama has always been the markets favorite. His win will bring in positive sentiments for the market.

Romney was considered as a threat to gold prices as he did not believe in the policy of printing currency to accelerate the economy.

This would have inevitably resulted in the dollar strengthening short term, which would have a reverse correlation with the price of gold, as the dollar strengthens the price of gold often declines.

Nonetheless, gold will be touching the roof in the days to come. Re election of Obama means that FED chairman Bernanke continues his term and hence the monetary measures remain more or less unchanged.

In the short and medium term gold is expected to move in the range of INR 30,000 - 30,500 per 10gm on the lower side and INR 32,000 - 33,000 on the higher side.
In the long term gold is expected to move in the range of INR 29,000 - 29,500 on the lower side and INR 33,000 - 35,000 on the higher side.

GOLD nearing 1650?

                                                 

Gold and silver tumbled once again this week with other commodities like crude and stocks.

This was over lapped with the depreciation of the Euro and other important currencies against the USD.

Bullion has fallen around 5% since hitting an 11 month high above $1795 an ounce in early October after the excitement ignited  by the US Federal Reserve’s ;attest programme of purchasing mortgage backed debt died down.


Spot gold traded near weeks low at around $1703. Silver too was hovering around $31.70.
The main topic for discussion this week was The FOMC statement. US Flash Manufacturing PMI, Bank of Canada’s Monetary Policy, ECB President Speaks and German 10 year bond auction.

Flash manufacturing and services PMI data from the euro zone was mixed. While French data beat expectations, German figures disappointed - the German Ifo business climate also fell to its lowest since March 2010 at 100.

Poor German manufacturing and services PMIs pulled down the euro zone-wide reading. The euro zone flash manufacturing PMI was expected at 45.3 but came in at 46.6, while the services PMI at 46.2 was below the forecast 46.5.

All told, the 17-nation Euro zone "sank further into decline at the start of the fourth quarter," added the Market PMI survey, pegging the drop in manufacturing and service output at its fastest pace in more than three years.

The much awaited FOMC meet that concluded on Wednesday did not bring many changes for the market.

The Fed acknowledged the unemployment rate remains at an unhealthy and elevated level. It concurred companies are sorely feeling adverse effects to their bottom line from slowing growth. And while the ailing housing market is showing some signs of life, the Fed agreed housing has a way to go before a recovery can be called. Other than the inflation comment, nothing game-changing was announced, unlike last month's delivery of QE3. 

The announcement or lack thereof wasn't a surprise and didn't mean much to markets.
Maybe one of the reasons for such a calm statement was the proximity of the US Presidential polls to be held on November 4.

It is highly unlikely that the Fed will adjust interest rates or modify quantitative easing (QE3) programmed before that. Comments from FED “To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.  The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.  These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.”

Worldwide, the economy is weakening resulting in high inflation. The developed and the emerging economies like Euro, India, China and Japan haven’t shown much signs of a better growth.

Gold’s recent decline has also been driven by uncertainty related to the so called ‘fiscal cliff’, automatic spending cuts and tax rises which threaten to send the country back into recession if Congress fails to reach a deficit reduction deal by end of 2012.

Today in India – the world's largest consumer market, where next month's Diwali festival will mark the peak of annual demand – dealers saw "bargain hunting" by jewelers and other stockists.

Some positive events to watch out for include the upcoming festival and marriage seasons for the Indian consumers to buy gold. Bullion price in India has retreated 4.4% from the high reached on 14 September. Gold demand is expected to rise in Q4 2012 due to weaker prices and stronger jewelry and investment purchases. 

The trend seen over the years is that gold prices rise during Diwali and Silver manage to edge up post Diwali.

Now with the festival of lights just being a few days away, all we can say that we hope that Gold illuminates too this Diwali.

SONE pe ZANJEER!

 Few of my images from an interview cum panel discussion on a special show named “Sone pe Zanjeeer” aired on CNBC Awaaz on 27th October. It was a special story covering gold, its side effects and alternate ways of reducing fiscal deficit rather than levying high import duty on gold.

It was my call that the government must introduce gold bond schemes in the market. This is the best way to get the household gold into the market. This gold in turn will be borrowed and lent. This will in turn balance the economy. 

          In 2010, 1006 tonnes of gold were imported where this figure dropped to 933.4 tonnes in 2011.

Levying import duty on gold will surely reduce imports and balance the deficit but it will also encourage illegal channels of getting gold into India. Hence the government should execute other alternative modes like gold bonds etc rather than levying high import duties on gold.

GOLD FAILS TO BREACH THE $1800 MARK

Last month gold was at an 11 month high. It increased by almost $65 in September following the Fed’s announcement of QE3 launch.

However this week there were mixed sentiments from the market. In the beginning of the week, Gold gained support from ETF buying. Gold holdings with SPDR ETF hit record high level last week and rose for the eleventh consecutive week. Also supporting gold price were the continuing labor problems in South Africa. As per latest reports, mine workers have rejected revised pay offer by gold companies. Tensions could rise in coming days as mining firms may prepare to carry out more mass firings if the strikers don’t return to work. Meanwhile, central banks have continued to take measures to support their economy. 

But Gold failed to breach the $1800 mark.  Spot gold was down 1.2 per cent at $US1720.90 an ounce in late New York trade, after hitting a low of $US1715.79, which marked the cheapest price since September 7.

Gold also notched a near 2 per cent decline this week, its biggest weekly drop in about 4 months. The metal has so far failed to trade above $US1800 an ounce this year.
Gold fell over 1 per cent to a one-month low on Friday, its biggest daily drop in more than three months, hit by technical selling and tumbling US equities on economic uncertainty around the world.

The yellow metal has also been hurt by positive economic data coming out of the US, which means a quicker end to QE3 than expected. QE increases gold's allure as a hedge against inflation amid currency depreciation.

Gold also shrugged off the largely better-than-expected Chinese numbers - third-quarter GDP growth at 7.4 percent on the same quarter of last year was in line with most forecasts but a drop from 7.6 percent in the second quarter.

Moreover, weakening performances from companies like Microsoft etc resulted in a fall in equity markets which in turn showed its reflection on gold.

In other precious metals, silver was last at $32.37-32.42 per ounce, down 45 cents on Thursday’s close, platinum at $1,628.75-1,638.75 was down $9.75 and palladium was $4.20 lower at $636-642.

Now, focus will continue on major economies. For US, focus will be on US economic data and comments from Fed officials. Fed has already announced additional asset purchases which are supportive for gold however economic numbers will give an idea as to how long the bond purchases will continue. For euro-zone, focus will be on development in Spain, Italy and Greece. Market confidence is shaky as regional economies remain under pressure however continued measures by European leaders will limit downside.
Traders are now worrying that without a clear catalyst to push prices higher, gold will continue to drift lower in the coming weeks.

Gold Loses its Glitter

Last fortnight gold reached $1796.5- an 11 month high; following comments by ECB president Mario Draghi that more bailouts maybe approaching. He stated that “euro” is irreversible and that the bank was equipped to purchase the bonds of indebted countries.
Positive jobs figures, which raised hopes that Federal Reserve intervention through a third round of quantitative easing (QE3) will be short-lived, have boosted the US currency, while the euro has been under pressure from news that Spain may resist asking Brussels for a bailout. 

However last week, gold was moving on a slightly lower side- at around $1765 on Thursday morning. A stern warning by the IMF on global economic growth and a slow development of the Chinese economy resulted in this downfall.

On Monday, Gold was down 1.2% at 1733$ per ounce. This yellow metal hit a one week low following news from Euro Zone officials that Spain could ask for financial aid from the bloc.

Heavy fund liquidation and technical selling also pressured gold as data showed U.S. retail sales rose in September after Friday's strong consumer sentiment data. Bullion could see more weakness as investors feared the Fed might curb its stimulus due
to a brighter economic outlook

Gold rose to a 2012 high of $1,795.69 an ounce earlier this month. However, several subsequent rallies to break above $1,800 an ounce had failed and were met by heavy technical selling.

Also weighing on gold was data showing Chinese inflation was subdued in September while exports had rebounded at nearly twice the rate expected, dampening expectations for easing measures in the world's second largest economy.

This week the main topics of discussion are- revised German and French CPI data, Italian Bond sales results, US Q3 earnings and the LME week.

The Italian Bond Sale Results May Spark Euro zone Crisis Fears if Yields Rise. The European Union sovereign debt crisis and specifically the countries of Greece and Spain remain a major worry for traders and investor

LME week is to be held in London whereby the London Metal Exchange holds a series of events and meetings. Moreover, the US dollar index and crude oil prices will have a significant effect on silver and gold prices.

With little practical value, and most supply tied up in central bank vaults, gold is the most speculative commodity of all.

Nonetheless Gold, which is seen an alternative to currency, say investors, has the capacity to drive into tens and thousands of dollars. That’s the kind of appeal gold has.

Oh my GOLD!

Reasons for price rise in Gold

Rise in gold prices can be attributed to various reasons - global crisis, economic growth data from various countries, rising unrest in Syria etc. Gold prices fluctuate on a weekly basis due to data released from various countries which directly affect bullion prices.

Moreover, when the world is under turmoil, everyone wants to be on the safer side and there is no better option than gold which has always proved to be a safe haven asset and has given highest returns compared to other assets in its class. This heavy buying has also been cited as one of the reasons in increase in gold prices.

But in relation to the international prices, the domestic prices of gold have comparatively surged much higher. This is due to the depreciation of the rupee against the dollar.

Falling rupee along with increased duties has peaked gold towards its life time high.

The demand supply gap

As the gold demand/supply gap widens against supply, central banks can help fill the widening supply gap with easy-rate gold leasing to keep the market price of gold from rising too fast, or in a reverse scenario of an imbalanced gap against demand, to raise gold leasing rates to slow flow of gold into the market to keep the market price of gold from falling too fast.

Explanation- Demand for gold is majorly categorized into 3 sections - industrial demand , investment demand and demand for Jewelery. Supply of gold comes from mine production, recycled gold and central banks. Of these, central banks play an important role in filling up the demand supply gap for gold. Rise of any commodity is decided in the basis of its demand vs supply. When the demand for gold is much higher than its supply then the central banks offers gold at easy lending rates in order to increase its supply in the market and fill up the imbalanced gap against demand.

And in a reverse scenario, it can increase the lending rates of gold in order to curb its supply and thus prevent the prices from falling further.

Why people buy in spite of hike in prices?

If we see the Indian markets, gold is a part of its culture. Here the basic mentality of an Indian is that invest your money in GOLD FIRST....other things can wait. And more so, it's an age old tradition of buying gold on auspicious occasions like Akshaya Tritiya, Dhanteras and Diwali. Any marriage in India is incomplete without the purchase of gold- be it any form- jewellery, coins, bars etc.

Moreover, keeping the price movements in mind, many believe that prices of gold will reach new heights. Keeping this hike in mind the find it wise t buy gold even if it's at its life time high.

Region wise demand of gold

As per the World Gold Council, last year was a milestone year for gold as global demand for the yellow metal grew 0.4% to 4,067.1 tons at an estimated value of $205.5 billion -- the highest tonnage level with a value exceeding $200 billion since 1997. The increase was mainly propelled by the investment sector, particularly in India, China and Europe.

In the first quarter of fiscal 2012, gold demand was at 1097.6 tons, a 5% year over year decline. Increase in investment demand was offset by declines in demand for jewelry and in the technology sectors, due to higher prices. Central banks continued to be purchasers of gold, accounting for around 7% of total gold demand, at 80.8 tons.

However, in absolute terms, gold demand in the quarter was valued at $59.7 billion, a 16% jump compared with the first quarter of fiscal 2011. Average gold price in the first quarter stood at $1,690.57. This was 22% above the prior fiscal's quarter. In value terms, all the sectors of gold demand posted growth, barring physical bars and the official sector.

Investment demand posted robust growth in the quarter, particularly led by ETFs and similar products. Gold demand in the technology sector was at 107.7 tons, a 7% decline year-over-year due to higher gold prices, weak consumer demand, higher inventories and the uncertainty in Europe.

Jewelry demand dipped 6% to 519.8 tons due to higher price levels. The 22% higher quarterly average price suggests that jewelry demand is not directly related to price. Value of jewelry demand grew 14% to a record $28.3 billion. China, Russia and Egypt recorded growth, while weakness was witnessed in India, a number of Middle Eastern markets and in Europe.

Jewelry demand in India, otherwise a major consumer of gold, was down 19% and investment demand declined 46%. This was mainly due to a sharp decline in the rupee, which led to higher local prices, rise in import taxes on gold and imposition of excise duty on jewelry in that country. However the excise duty was later withdrawn by the government. Gold in India is currently at an all-time high in rupee terms.

GOLD ALL SET TO SHINE

Last week again, gold reacted to various factors like US jobless claims report, SPDR Gold Trust, Canada Employment report and ECB Interest rates.

News released in the market that European Central Bank was prepared to buy bonds to help the nations facing economic turmoil which led to a rise in gold prices with gold reaching almost an 11 month high of $1796.5 on Thursday.

Investors have been closely eyeing the result of Bank of Japan’s policy meeting which is expected to keep things unchanged for Japan

Another important data for gold market is the US jobless claims report. The report showed an al together different picture of the US economy. Unemployment rate unexpectedly fell to 7.8% in September, down from 8.1%, as a survey of U.S. households showed 873,000 more Americans had jobs compared to a month earlier. January 2009 has witnessed such low unemployment rates.

A bettering economy showed signed of development. Good economic news is good political news which also adds up to good financial news. Hope this reports make the picture brighter for precious metals.

 In Canada, the jobs data was mixed with the unemployment rate rising one-tenth of a point to 7.4 per cent in September even as the economy added 52,100 jobs: five times the number expected.

The Federal Reserve said last month it will purchase USD40 billion of mortgage-backed securities every month until the labor market improves. The labor market has to improve for QE3 or else the FED might have to introduce other stimulus measures.

The labor unrest in South Africa has spread to more mines run by the world’s top platinum producer Anglo American Platinum in a wave of wildcat strike action that has hit the country’s mining sector.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings hit a record high of 1333.44 tonnes by Oct. 4. 

Vagueness over Spain’s request for a full scale bail out has also affected the markets. Analysts and market players predict the Spain might go in for a full scale sovereign bail out but Spain’s Prime Minister – Mariano Rajoy denied the same

A bailout would allow the ECB to step in and buy Spanish sovereign debt, which would result in reduced borrowing costs for the debt-strapped nation. But Spain has been reluctant to do so because it may come with conditions on its budget. 

Moreover, gold prices are expected to rise further given the tensions prevailing on the Syria - Turkey border.

With an overvalued currency, tightened credit conditions and the prospect of higher interest rates, the economy could be vulnerable to a further slowdown from the under two per cent pace recorded so far this year 

Meanwhile, in India, Stockists have been buying gold heavily given the rise in demand with the onset of the festive season. And a recent dip in rupee has led to re stocking of inventory by these stockists as they expect a rise in gold prices before Diwali and the beginning of the marriage season

WAIT & WATCH: The mantra for precious metals!

Gold and silver did not show much movement and remained almost stable on Wednesday.

Gold edged up by 0.3% last week and reached an average of $1772.34 which is higher than the last week average of $1749.04. Silver too increased by 1.8% and reached an average of $34.6 compared to last week’s $33.99

Apart from the regular reports like US jobless claims, Euro zone crisis, launch of QE3, Chinese growth data etc, other factors that were responsible for movements in the markets were the US home sales and core durable goods report, the ETP’s report, the Italian bond auction and most importantly the relation between dollar and various currencies.

The Euro and the Australian dollar declined against the US dollar. This could be one of the reasons that could have restrained the recovery of precious metals. The relation between the US dollar and other currencies plays an important role in the movement of gold and silver prices. A further decline of the Euro against the US dollar could pull down the prices of precious metals.

The German Bond Auction (to be held on Thursday) may relieve the market of its bullish sentiments if it is held out successfully.

Reports claim that the ETPs continue to raise their bets on silver as the amount held in ETPs has reached 18,525.76 metric tons which is only 0.6% shy from its record high from last year. This suggests that many bullion traders still have faith in precious metals.

Moreover the comment by the President of Federal Bank of Philadelphia (on the recent decision of the launch of QE3) that it may not help recover the US economy has once again created some doubts in the minds of market players and has thus created a negative impact on precious metals

While the fresh EU turmoil is pressuring the raw commodity sector this week, and the precious metals have chosen to follow, it’s seems that if there is a serious deterioration in the ongoing EU debt crisis, then gold prices would see fresh, strong safe-haven demand surface.

Summing it up, gold and silver will continue to remain more or less stable unless there is some big proclamation regarding the above mentioned reports. The launch of QE3 did have positive effect on precious metals but some constructive data from the other sources together will help boost the prices further. The markets will mainly await the ECB President speech, the US core durable goods report, the home sales report, Final GDP estimate and the jobless claims report.

Plenty in basket – We just need to wait and watch.

Felicitation of Mumbai Police commissioner: Satyapal Singh

          I am glad to be a part of the felicitation ceremony for our Mumbai Police Commissioner Satyapal Singh. Prior to being appointed the Mumbai police chief, Mr Singh was Maharashtra's additional director general of police. He has also served as the Joint Commissioner of Police (Crime) in Mumbai, Nagpur's police commissioner special inspector general of police of the Konkan range.

          He has also been on deputation to the CBI and received a special service medal for extraordinary work in the in Naxalite areas of Andhra Pradesh and Madhya Pradesh. He received the President's Police Medal for distinguished service in 2004, the President's Police Medal for meritorious service in 1996 and the DG's Insignia in the same year.

        - Along with Mr. Paras Gundecha {Chairman, Gundecha builders and Gundecha group of companies. President, MCHI (Maharashtra Chamber of Housing Industry)}

I feel Mumbai's top cop: Satyapal Singh, will surely set things right for the city!

THE INDIA INTERNATIONAL GOLD CONVENTION 2012

The India International Gold Convention 2012 was a great expecience, especially when you get to share the speakers panel with great personalities like:

 

Mr. Anup K Pujari (Chairman- DGFT)

Mr. S.K. Jindal (Chairman- Jindal Group)

Mr. Rajan Venkatesh (Director- Bank of Nova Scotia)

Mr. Rajesh Khosla (Managing Director - MMTC {PAMP INDIA}

 

Mr. Mayak Khemka (MD- Khemka Group of Companies)

 Mr. Bhargava Vaidya (BN Vaidya and Associates)

           and many such important speakers. Adding to it, we were highly impressed by the response and success of the IIGC held at Novotel,  Hyderabad, India (24-25-26 August 2012)

SILVER IS BACK!

Last week bullions were seen hovering around many factors that were responsible for its volatility - Economic Stimulus, Spain Bailout, Speculation, Japanese and Chinese growth data, Jobless claims report etc.

Gold on Friday traded at $1786.35 an ounce - moving up by 18 dollars. This resulted due to a blend of news from China that they had lowered rates to boost liquidity in the ongoing operations and the other news coming from Spain that they have officially asked for a bail out.

Spain's conservative Prime Minister Mariano Rajoy had in the past insisted Madrid would not become the fourth European capital in recent years to apply for such a bailout, but sources indicate such a programme is now likely.

Bullions were mainly benefited by the various economic stimulus actions taken by central banks globally. Following the US and the Central Bank, the Bank of Japan too enlarged the size of asset buying in order to foster economic growth,

The dollar eased after lying low since months and the Euro also improved. Moreover, Gold ETF’s have attracted investors too. The world’s top gold exchange traded fund the SPDR Gold trust reported their current holdings that are at the highest level since August.

Within a fortnight we saw gold and silver bouncing to and fro from highs and low. The recent announcement by the Fed, in which they declared the launch of QE3, has been one of the main reasons behind this upward trend. Now, looking into the near term future, launch of QE3 means a strong stimulus plan that will lead to monetary easing and better liquidity in the markets. This in turn will bring about growth in the economy which will also reflect on the industrial sector. Thus, demand for silver will rise keeping in mind its vast use in various industries ranging from jewellery, automobiles, chemicals etc.

This makes silver the next favorite metals for analysts. Moreover in the Indian market (which waits the festive season) demand for silver is going to rise. Last year we saw silver touching almost Rs. 75,000 per kg. With current range for silver being Rs.60,000 - Rs.62,000 per kg, there is great space on the upper scale for silver to rise. Silver is expected to move within the range of Rs. 58,000- Rs. 72,000 per kg till Diwali.

Stockists have already starting making purchases keeping in mind the demand for this metal during the festive season.

Gold has historically been considered to be a store of value and an inflation hedge and increasingly it is being utilized as a monetary instrument but the now the focus seems to be shifting to silver- at least in the near future

Fed launches QE3: Markets get relief!!!

Last week we saw great volatility in precious metals. Gold that had reached a high of Rs. 32,200 per 10gram had plunged down to almost Rs. 31,800 and then bounced back to a new high of Rs. 32,650 after the Fed meeting. Such huge fluctuations were seen after Bernanke’s speech, in which he announced the launch of QE3.

Internationally, gold will cross $1800 ounce by year end, effect of which will be seen on the domestic prices too where gold is expected to cross Rs. 35,000 per 10 gram by year end.

The commodity and financial markets were shocked with the announcement made by the FED on Thursday. The Fed decided of buying open ended asset. This decision of the Fed created great impact on the markets in Thursday and Friday and it will continue to show it’s after affected in the weeks to come.

The market was surprised by this asset buying decision of the Fed. Traders and analysts did expect a third round of quantitative easing, but they did not expect that the Fed would take the asset buying decision.

The Fed declared that it would continue to buy asset until the labor market improved and the economy began to grow. Moreover the Fed said that it would continue with stimulus even if inflation began to exceed the

Apart from the meeting, other factors that are likely to influence the market are:

1. Tensions prevailing in the Middle East as more embassies are under the threat of attack.

     2. Business data, GDP growth released by the US, Euro zone and China

     3. Philly Fed Index and Empire State Index scheduled for discharge.

Apart from gold, one metal that has once again caught attention by investors is silver. Gold has already marked its lifetime high by crossing Rs. 32,200 and on the higher side is expected to touch 35,000. However, for silver there is immense space for growth. Last year silver peaked to almost 75,000 per kg. With current silver prices hovering at around 65,000 per kg and there are bright chances of an upward movement towards its peaked point. Silver is surely going to be the next favorite metal.