IS IT TIME TO ADOPT GOLD OR ABANDON IT??

                                       -By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold and silver showed mixed sentiments last week and continued to make wave like movements despite many news that did the rounds in the previous week. Mixed movements in the forex market could have resulted in the mixed movements witnessed in the commodities market so far.

Gold and Silver slightly declined on Tuesday, after the news from Cyprus that its parliament passed on the bailout plan. On the other hand, other commodities prices such as oil prices and the stock market indexes such as S&P 500 rose. The shift in market sentiment towards bullish may also have contributed to decline in demand for precious metals and other safe haven investments. 

However, On Wednesday, though gold and silver opened with a negative note, they managed to bounce back by late evening. Causing the climb was a fall in U.S. equities which made the metal more appealing as an investment. In addition, continuing euro zone fears, following developments in Italy, gave gold extra upside impetus. The speculation around Cyprus bailout plan is currently pulling down the Euro and EU stock markets. These speculations have helped rally gold and silver prices. 

The Cyprus bailout is a wake-up call to buy gold. All those who have waited long to buy gold, can now start making decisions. With Europe's unsolvable debt crisis and America's own unemployment problems wherein for the first-time jobless claims rose by 16,000 to 357,000 in the week ended March 23, the highest level in more than a month, it's only a matter of time before we witness another gold rally.

Thanks to the Federal Reserve, central banks around the world are losing trust in the U.S. dollar; which used to be the “safe haven” currency. As more countries print paper money, known as “fiat currency,” the same countries will be reluctant to hold the fiat currencies of other countries in their reserves. Gold bullion is becoming a need for central banks, and I believe central banks will buy more gold bullion, because they have to, as paper money becomes too plentiful. While central banks are buying gold bullion at a rate not seen in 49 years, the price of gold bullion has declined—actions that bring forward the question of price manipulation in the gold market. If gold prices are indeed being suppressed, which is very difficult to prove, the end result will eventually be a major breakout for gold bullion prices on the upside. 

To give you an idea, China has the biggest reserve in the world—worth more than $3.0 trillion. But compared to the gold bullion holdings of other major central banks, China is still far behind. The U.S., Germany, and Italy hold more than 70% of their reserves in gold bullion. Imagine what would happen to gold bullion prices if China even just tried to double its gold reserves. In the backdrop of the gold bullion buying spree, central banks around the world are printing paper money, working to depreciate their currencies to jumpstart exports. (Source: business2community.com)

I feel its matter of time. If things get messier for either, investors can see gold easily hitting $2,000/ounce by the end of the year.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”


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"Cyprus gives gold a helping hand"

http://riddisiddhibullionsltd.blogspot.in/2013/03/cyprus-gives-gold-helping-hand.html

CYPRUS GIVES GOLD A HELPING HAND

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold traded near a 3-1/2-week high on Friday, underpinned by safe-haven demand on the fear of a potential financial meltdown in Cyprus, which has put bullion on track for its biggest weekly rise in four months. The clock is ticking for Cyprus to come up with a solution to clinch an international bailout; otherwise it could face the collapse of its financial system and likely exit from the euro zone.  

 The Cyprus crisis has offered gold a helping hand, after investors had been pulling out of the precious metal and piling into stock markets which have rallied this year on a brighter economic outlook. The other reason for this upmove is the fact that FOMC’s decision is still active to keep policy unchanged. 

Gold traded as high as $1,608.63/oz, its first break above the $1,600/oz marker since late February, but pared its gains as a stronger U.S. dollar damped buying. On Thursday, the price of gold rose by 0.39% to $1,613.8; Silver also increased by 1.37% to $29.19

U.S. dollar gold prices continued to hover around $1610 per ounce Friday morning, dipping back below that level after making gains in Asian trading, while stocks and commodities were flat on the day ahead of a vote by Cyprus’s parliament on measures aimed at raising money and securing a bailout. 

European patience with Cyprus is running out after Cypriot lawmakers rejected a plan to tax bank deposits agreed on last weekend by the 17 euro-area finance ministers. The same finance chiefs are now considering a plan to shutter the two biggest banks in Cyprus and freeze the assets of uninsured depositors, four European officials said yesterday. European and Cypriot officials were locked in talks to find a formula to avert the Mediterranean island’s financial collapse, struggling to forge consensus on a bailout package before the European Central Bank cuts funding. Cyprus’s options narrowed on Friday after Russia spurned a bid for a loan and coalition lawmakers in Germany dismissed the Cypriot government’s latest rescue proposals. That left the troika of international creditors to hammer out fresh terms with President Nicos Anastasiades’s coalition focusing on the fate of Cyprus’s ailing banks. The ECB has said it will cut off emergency funding to Cypriot banks at the end of Monday, March 25 unless there is a deal. 

Looking ahead to early next week, Cyprus is going to remain front and centre and euro-zone confidence readings for March will also be significant next week.

Holdings of SPDR Gold Trust, the world’s largest gold ETF, fell 0.902 tons from the previous session to 1,221.26 tons on March 21, the lowest since July 2011. The fund is headed for a twelfth week of outflows.  Adding to the headwind, a string of U.S. data on Thursday, including on the labour market, factory activity and home sales, pointed to a growing momentum in the U.S. economy, diminishing gold’s appeal as an investment vehicle during time of economic and political distress.

On the other hand demand from India, the world's biggest gold consumer, languished before next week's Holi festival, a period considered inauspicious for gold purchases, coinciding with the end of the financial year when traders prefer to keep low inventories.

 I am eyeing key resistance at $1,620 an ounce, a price unseen since Feb. 26. A break above that level could rekindle enthusiasm in trading. All said, Thanks to Cyprus, that gold has started glittering again!

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

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"Speaker at Dubai Precious Metals Conference 2013"

http://riddisiddhibullionsltd.blogspot.in/2013/03/glad-to-be-speaker-at-dubai-precious.html

SPEAKER AT DUBAI PRECIOUS METALS CONFERENCE 2013

Dubai Multi Commodities Centre - Government of Dubai, has taken an initiative of organizing a Conference with Foretell Business Solutions: Dubai Precious Metals Conference.

Theme of the conference: Enhancing the Global Precious Metals Supply Chain

I am glad to be a part of this conference. I will be providing insights on the topic: Gold consumption giants; opportunities linking the UAE with China, India and the U.S.
1. How can the UAE strengthen its ties with India?
2. What does it take to serve the Chinese markets?
3. Going west; can Dubai explore the third largest consumption hub?    

Time & date of my Speech: 11:15 am – 12:00 noon, 7th April, 2013.
Venue: Almas Conference Centre, Almas Tower, Jumeirah Lakes Towers, Dubai      
Looking forward to see you there!                                        

For further info. kindly check: http://www.dpmc.ae/index.html

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

"0.1% VAT increase on precious metals"

http://riddisiddhibullionsltd.blogspot.in/2013/03/01-vat-increase-on-precious-metals.html

0.1% VAT INCREASE ON PRECIOUS METALS

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

The Maharashtra government will raise the value added tax on gold, silver, other precious metals, diamonds, and jewellery to 1.1% from 1.0% earlier, State Finance Minister Ajit Pawar said today in his budget for 2013-14 (Apr-Mar). 

The government is planning to implement GST and LBT by the end of this year. If this actually takes place, then I feel there was no such requirement for this step. The hike will directly have an effect on imports. Gold price in Maharashtra will become costlier by INR 6,000 per kg(inclusive of Octroi and additional VAT) when compared to other states. This additional cost will definitely reduce the demand for gold in Mumbai and will have a negative impact on the gem and Jewellery sector. 

Mumbai is the hub for jewelry manufacturers. All machine chain bangles are made in Mumbai  along with hand made jewellery which is made in rest of Maharashtra. This additional VAT will compel manufacturers to shift their base to other states. Hence the rate of unemployment will rise. If this tax was levied all over India, then it wouldn't have made much a difference. But since it is levied only in Maharshtra, gold here will become more expensive than other states and people will prefer to buy from other centers. We have already witnessed a shift of silver business to other states. Levy of this extra VAT will also move gold business away from Maharashtra.  It will create a major impact not only on demand but also the workers especially the small business units. The government has to take some initiative to protect the interests of workers and the entire bullion industry.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”


- Previous blog -

"Investors being loyal to gold"

http://riddisiddhibullionsltd.blogspot.in/2013/03/investors-being-loyal-to-gold.html

INVESTORS BEING LOYAL TO GOLD

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold was set for the first back to back weekly advance since January, as investors weighed prospects for more stimulus against improving U.S. economic data. Silver, platinum and palladium headed for weekly losses.

Gold and silver moved away from the weekly gain and slightly declined on Wednesday. This decrease corresponded with the drop of leading currencies against the USD such as Euro and Aussie Dollar. The US Retail Sales report published on Tuesday also showed that economic activity in US grew as retail sales rose last month by the highest rate in months. This could be the reason behind the restrained drop in bullion prices.

The US federal budget report too stated that the fiscal deficit so far in 2013 is 15% lower than in 2012. This too is an indication for a downturn in financial risk of the US economy.

This decline in prices moves an investor away from Gold, as they do not consider gold to be a safe haven asset in such situation.

Stronger U.S. economic data like the lower Jobless claims, higher industrial production etc, recently, has lead to the selling pressure for gold. But again, it can be argued gold prices have held up fairly well in the wake of that stronger U.S. data.

Many investors still believe that there is still upward scope in gold and it is more sensible in being loyal to it. Counting quantitative easing measures in key economies and lurking risks in the euro zone are amongst the favorite reason to own gold as gold is always considered a hedge against inflation and economic distress

Looking at the Asian markets, gold demand was quite calm as most people have already made their purchases last month when gold prices dipped considerably.

However, importers now expect a rising demand for gold once the fiscal year ends and the festival of Holi onsets in India. Holi, Gudi Padwa and Akshaya Tritya are considered to be very auspicious days t buy gold and all these festivals are lined up for the month of March and April.

Bullion market participants will be watching the Federal Reserve's policy meeting next week. A hawkish tone would further hurt investors' interest in gold, but Asian buyers would make purchases if prices drop near February's levels.

Till then one needs to find answers to the following

Will the Euro crisis resurface after months of blissful peace?

A positive takeaway on gold is whether the good US economic data will continue to get better after sequester?

Can central banks continue to contain inflation after the rampant money printing programme?

The current situation seems to set gold as a better alternative should all of the above negative economic sentiment resurface. Gold prices have come down considerably and left an upside gap despite all the negative sentiments it has been receiving. 

We are not gold bugs at all just a humble observer who wish to share our views on why holding some precious metals is important.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”


- Previous blog -

"Is the gold cycle about to turn???"

http://riddisiddhibullionsltd.blogspot.in/2013/03/is-gold-cycle-about-to-turn.html

IS THE GOLD CYCLE ABOUT TO TURN???

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

As the US economy recovers and the investment holdings collapse, the cycle for gold is probably expected to turn. Gold is caught between conflicting signals neighbouring the prospects for continued central bank monetary accommodation. 

Gold traded in a narrow range and hovered around $1,575 an ounce on Wednesday, evoking little interest from investors who switched to riskier assets as confidence in the global economy grew. The exodus of investment from gold-backed exchange-traded funds underscored the sober sentiment for the precious metal and overshadowed physical purchases of the metal in Asia

Private investors added physical gold following the metal's heavy sell off late in February, underpinning a market hit hard by heavy fund liquidation last month.

SPDR Gold Trust, the world's biggest gold ETF, said its holdings dropped on Tuesday in the eleventh session of straight decline to a 16-month low of 1,244.855 tons.

Spot gold edged up 0.2 percent to $1,585, drifting within a $1,564-$1,587 range that it established recently. Spot gold has fallen nearly 6 percent so far this year and is down about 18 percent from a record high of $1,920.30 an ounce hit in September 2011.

The price of gold fell to a seven-month low near $1,550 an ounce on Feb. 21, hit by talk of hedge fund liquidation and fears the Federal Reserve might halt its stimulus earlier than expected. 

Gold prices dipped to two-week low by falling Rs 200 to Rs 29,850 per 10 gm in the domestic market this Friday on stockists selling, triggered by a weak global trend. Silver followed suit and dropped by Rs 360 to Rs 54,960 per kg on reduced off take by industrial units and coin makers.

Traders said stockists selling in tandem with a weak global trend where gold fell before a report that is forecast to show the US labour market improved, damping expectations for further stimulus and boosting the dollar, dampened the sentiment. As expected, there was great improvement in the labour report. Gold lowered On Friday after U.S. employment data showed the economy added many more jobs last month than expected. Employers added 236,000 jobs last month, far above the 160,000 jobs forecast by economists. The unemployment rate fell two-tenths of a percentage point to 7.7%, the lowest level since the end of 2008. The report is a clear indication that the [U.S.] economy is successfully navigating against the headwinds from fiscal graveness.

Attention will now turn to the next meeting of the Federal Reserve's policy board, scheduled for March 19-20, to see if the central bank is any closer to rolling back its easy-money policies in the wake of strengthening economic data. The Fed has said it will consider raising policy interest rates when unemployment falls to hits 6.5%.

Now the question of concern for the precious metals market is that how far the Fed will continue its stimulus plan.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

"Post budget reactions"

http://riddisiddhibullionsltd.blogspot.in/2013/02/post-budget-commment.html