GOLD GLITTERS...SILVER SPARKLES....PLATINUM POLISHES

Precious metals seemed to be on fire this week. Gold reaching its life time high of Rs. 31,300 (999 purity per 10gm) in the physical market where as silver and platinum reached Rs. 57,000(per kg) and  Rs. 29,600 (per 10gm) respectively.

Bright chances of another round of QE3 led to sharp rises in gold and silver prices where as labour unrest in Lonmin’s mine in South Africa resulted in the platinum volatility.

In the international market, gold rose to a 16-week high to USD 1,665.09 an ounce and silver gained by 2.5 percent to USD 30.57 an ounce

Rise in international gold prices affected the domestic prices too. Internationally, gold reached its highest level in the past three months. Rising gold rates along with the appreciation of the rupee against the dollar led to this huge leap. Indian rupee appreciated to 55.41 against the US dollar on Thursday. 

Minutes of the FOMC meeting resulted in rallying of gold and silver. The FOMC meet brightened the chances of another quantitative easing plan. US economy has been growing but at a very slow pace. The homes sales report and jobless claims report didn’t seem to be much positive. These stats will strongly affect bullion prices.

Moreover Central bank has been buying 150 tonnes of gold. Along with his there is huge SPDR ETF buying too.

Gold has always been considered as a safe haven asset and during these times of uncertainty investors are turning to gold to be on the safer side. Where traders and stockists are concerned, they too have started piling up their stocks ahead of the biggest festive and marriage seasons of the year (September- December) in India.

Looking at platinum, this metal has also shown great volatility in this week. The unrest at Lonmins mine in South Africa has spread to two other mines. Platinum prices continued to soar due to concerns of supply trouble after 44 people died during strikes at a pit owned by Lonmin.

About a fifth of global platinum production is idled in South Africa resulting in supply shortage and soaring prices.

It seems likely that these protests will affect the other precious metals too including the gold mining sector.

Outlook for gold is bullish with the yellow metal is expected to reach $ 1800 an ounce by September end.

WE NEED A GOOD MONSOON....SOON!!!!

Every year, the entire country - be it the big time investors or the small hard working farmers- all await for the most important months of the year- The June- September Monsoons.

Though India has been in the limelight for its technological, infrastructural and outsourcing developments, about two-thirds of the country's one billion people depend on farming for a livelihood and agriculture accounts for about one-quarter of the gross domestic product.

A good monsoon strengthens the rural consumption power which in turn creates an impact on growth. This clearly indicates that growth of the Indian Economy is largely dependent on agriculture, a good harvest and more importantly a good monsoon.

This entire cycle affects not only then rural areas but also the urban economy. Equities, real estate, precious metals, commodities etc all are somewhere or the other, directly or indirectly affected by monsoons.

India can hardly afford a dreadful monsoon as it has already been facing a setback due to global slowdown, domestic inflation and an uncertain economy.

Though monsoons have recovered in the past 10 days, India is still under the shadow of a drought. The entire economy now depends on what will happen by August end.

Talking about precious metals, gold has not shown as much movement as it had in 2011. A year ago gold was heading toward $2000 an ounce but has dropped back to the $1500 range and has been lying there since quite some time. However in the Indian markets, gold is much costlier than what it was last year- thanks to the appreciation of the rupee.

Another factor that has played an important role in gold prices in India is the monsoon. India- which the largest consumer of gold in the world has been facing a very weak downpour. India’s rainfall total this year is about 20 percent below its 50-year average, and possible drought will adversely affect gold consumption as the focus would turn to food and survival

So far, in June, rain deficit has already reached 41%. Rural India still accounts for 60% to 70% of gold sales in the country and if the monsoon is below normal this year, gold purchases will struggle to cross the 600 tonne mark this year.

India's demand for gold has reportedly fallen far more drastically than that of the world. In the first quarter of 2012, domestic demand for the yellow metal witnessed a 30% crash year on year. Imports too have crashed. India's gold and silver imports have fallen 52% in May. April too witnessed a decline, with gold and silver down by 33% to $3.1 billion. Imports of the yellow metal had already shrunk in the January to March 2012 period.  

Though India's annual monsoon rains had covered almost half of the country at the start of June, there has been a palpable slowdown, with no signs of a pick-up and a forecast of bright, sunny days. 

Where the entire country eagerly waits for a heavy downpour, analysts are pessimist about a good monsoon and predict a dark cloud that will bear no rainfall

GOLD SILVER GOING ZIG ZAG

Gold and silver prices continued to move upwards as both precious metals edged up on Thursday. These metals rose despite the decline of the Euro and perhaps due to the appreciation of other “risk currencies” including Aussie dollar and Canadian dollar. The recent U.S reports didn’t seem to have much of an effect on the financial markets: U.S jobless claims declined 6k to 361k; U.S trade balance deficit (goods and services) declined to $42.9 billion in June 2012. This news may have contributed to the appreciation of the USD.

Gold edged up again on Thursday by 0.26% to $1,620.2; Silver rose by 0.08% to $28.10. During the month, gold edged up by 0.35%; silver, by 0.66%

This entire week, commodity prices played around the following lines- 

Great Britain PPI input- UK Producers Price Index for Input Prices rose by 1.3 per cent in July in monthly terms up from a revised 2.9 per cent decrease in June, while the PPI Input Prices annually fell by 2.4 per cent in July up from a revised 3 per cent decrease in June, according to the Office of National Statistics. The monthly PPI input prices increased less than the expected 1.5 per cent increase and annually dropped more than the forecast at 1.50 per cent decrease. Furthering this, precious metals edged up.

US Federal Budget Balance- Uncertainty over whether the US Federal Reserve and European Central Bank will take further steps to boost their economies has so far deterred a stronger move in gold prices, and bullion remains below last September’s record high at around $1,920 an ounce. Should the Fed signal it intends to implement a third round of monetary easing at the next meeting, it would probably boost precious metals, which are seen as a hedge against inflation.

Chinas trade Balance-  China’s General Administration of Customs said exports grew just one percent in July year-on-year to $176.9 billion, while imports rose 4.7 percent to $151.8 billion, cutting the trade surplus to $25.1 billion from $31.7 billion in June.

The data follow results on Thursday showing Chinese retail sales, industrial output and inflation eased in July, indicating the export-driven economy was feeling the effects of Europe’s debt crisis lowering demand in the key market.

China New loans-  China's new loans in July came in at 540 billion yuan, a weaker reading than the 920 billion yuan from June. The latest data missed analysts' estimates of 701 billion yuan. This resulted in an upward movement in gold.

The U.S federal budget report signalled the progress of the U.S economy and, in turn, affected the USD and commodities prices. The Canadian employment report affected the Canadian dollar that tends to be linked with bullion rates.  The Chinese reports also affected commodities prices as they have shown a sharp change. These reports have shown a decline in trade activity and new loans which in turn suggested that China’s economy is slowing down and this slow groth has adversely affected bullion rates. 

Finally, the ongoing decline of the Euro during the week could continue to curb the rally of bullion rates, while the rise in Aussie dollar and other “risk currencies” is contributing to the recovery of precious metals prices.

With a lack of major, market-moving fundamental news this week, precious metals market watchers are focusing more on the key outside markets. The U.S. dollar index was higher in Thursday, which did limit the upside in the precious metals. Meantime, crude oil prices were slightly higher on Thursday, which did somewhat limit selling pressure in gold and silver. Oil bulls have upside near-term technical momentum after prices Wednesday hit a 2.5-month high. The precious metals markets will continue to look closely at how these two key “outside markets” trade on a daily basis.

In the Indian markets, there was a news leak of increase in duty on gold. However these were rumors and nothing concrete has been announced yet.

Onset of the festive season has seen rise in demand but it is comparatively low. High gold prices and economic turmoil are creating this slug.

Mean while, Gold and silver are still zigzagging with an unclear trend as they haven’t shifted from their respective price range. 

GOLD OUTLOOK REMAINS POSITIVE IN THE MEDIUM TERM

The month of August began with a downfall for precious metals. Bullions rates didn’t do much as both gold and silver prices scaled down. Other commodities like oil and US stock markets declined too.

Precious metals were seen hovering around the declaration of results of the FOMC meeting that concluded on Wednesday.

Gold Prices fell below $1600 an ounce Wednesday afternoon in London, reversing the gains of the last week, following better-than-expected US jobs data. Silver Prices meantime dropped as low as $27.21 an ounce – also back to where they were last week.

However, after the weeks downfall, gold and silver managed to edge up by Friday.

Gold for December delivery advanced $18.60, or 1.2%, to settle at $1,609.30 an ounce on the Comex division of the New York Mercantile Exchange. The metal declined 0.5% on the week, however. Silver for September delivery rose 81 cents, or 3%, to settle at $27.80 an ounce. Silver rose 1.1% on the week. A strong nonfarm payroll report combined with a positive ISM Services print supported the day's gains. Nonfarm payrolls came in at 163K versus the expected 100K while nonfarm private payrolls added 172K against expectations of a 105K increase. The unemployment rate of 8.3% ticked up from its previous reading of 8.2%. 

Lower dollar adds further glaze Bullion metal prices ended higher at Comex on Friday, 03 August 2012 snapping a three-day losing streak after U.S. employment data showed a rebound in hiring last month and as the dollar traded weaker

The Fed said during the FOMC statement that it will continue swapping $667 billion of short-term debt with longer-term securities to lengthen the average maturity of its holdings, an action named ‘Operation Twist’. The central bank will also continue reinvesting its portfolio of maturing housing debt into agency mortgage-backed securities. The Fed left unchanged its statement that economic conditions would likely warrant holding the benchmark Fed funds rate near zero “at least through late 2014.”

Given the active central bank calendar, every fresh data point will be analyzed for how it might affect the likelihood of additional stimulus programmes. According to Wednesday’s ADP Employment report the US economy added 163,000 private sector nonfarm jobs in July – over a third more than the consensus forecast among analysts. It is therefore not surprising that gold dipped after the release of mostly positive US macroeconomic reports over the past 24 hours.

The FOMC meeting will be followed by the meetings of European Central Bank of England on Thursday, where all analysts are eyeing on more stimulus following by a declaration made by ECB president last week.

Mario Dargi told in a meeting in London , last week, that the ECB stood ready to do whatever it takes to save the euro, which means that the banks is preparing to re enter the bond markets.

Asian markets too traded with a negative bias on Wednesday mainly on the back of weak manufacturing data from china, which expanded at the slowest pace in eight months

The outlook for precious metals in the medium-term, however, remains positive because the central banks will have to undertake an expansive monetary policy sooner or later. They are just waiting for the right time; they don't want to use the last cartridge too soon