-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.”
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"Post budget reactions"
I was expecting this article, Till date we heard about Economy crises, Country level economy cries, crude oil cries which indirectly depends on Gold.
ReplyDeleteNow we are going to face new crises i.e. Currency Cries all over the world and Developed or upcoming developing country buy more and more Gold to fix Currency Crises which is directly depends on Gold Reserve.
Just wait and watch for next 2 to 3 years.... you will Gold will bounce back like anything and expecting $4000 per ounce.
Yes Wait and watch! Nice thought.
DeleteAs a layman i couldnt take message out of this blog..pls help me by sharing your views on how doesn US economy recovery will impact gold prices in india...wherther it will be up or down in coming months..your views on this..
ReplyDeleteDear Suhas,
ReplyDeleteThanks for your query.
US economy recovery is being witnessed over the past months through their economic data. What happens here is as the economy improve, people reduce their investment in Gold and prefer riskier assets.This does not mean that investing in Gold will completely stop or not give returns.
Gold as an investment has really delivered the savers in terms of both returns and consistency in the return. Gold over the 40 year period between 1970 and 2010, has yielded an average annual return of 11.2% against the annual average inflation (WPI base) of 7.4% during the same period. Besides, gold has over-performed inflation in 36 out of the 40 years.
With regards to Indian prices, Gold price in India can dip to some extent but more or less it will be range bound i.e. INR 28,500 to 32,500. This could be due to the weakness in rupee and the duty structure on the commodity.
in short term shall we expert 28500 in (mcx)
ReplyDelete1.which level is good buying level?????
As per my understanding, the economies are improving which in turn creates a selling pressure on Gold in International markets. For Indian markets, the rupee depreciation gives a cushion for the falling prices.
DeleteShort term buying at INR 28,500 will give good returns.
what about silver? what rates range is expected in india . will silver outperform gold?
ReplyDeleteI strongly feel that Silver returns will outperform Gold. Silver should remain in the range of $26.50 to $37 while in Indian terms it buying around INR 49,000 - 50,000 will give you an upside of INR 63,000.
DeleteMy view in Silver is bullish as this metal belongs to Base metals category too alongwith Precious metals. Economies improvement will surely lift the Base metals prices. This will in turn lead to an increase in Silver prices too.
thanks for d views.
ReplyDeletelooking to buy silver at 49-50k inr, hope it comes down.