FED'S POLICY STATMENTS – Predictable I feel?

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

Why did the financial world react in this manic-depressive way to a statement that was bland and predictable? Why do investors keep gambling vast sums of money in speculations on changes in monetary policy when Bernanke has tried to make crystal clear that significant changes are unlikely, at least until the end of the year? I think no one would have any clue with respect to these questions.

As always the effect on Gold is felt in a big way. Gold fell for a third straight session on Thursday after U.S. Federal Reserve Chairman Ben Bernanke hinted at reducing an $85 billion bond-buying programme, which has increased the precious metal’s appeal as a hedge against inflation. While Bernanke said the central bank needs to see further progress in the U.S. economy before the Fed scales back monetary stimulus, he also added that a decision to adjust it could come in the “next few meetings” if the economy looked set to maintain momentum. Down nearly 20 percent this year, gold could come under more selling pressure as investors increasingly price in a stimulus cut ahead of the Fed’s next policy meeting on June 18-19.

But Gold markets did manage to regain some composure yesterday. We saw a steady climb towards the $1,400/oz level until the US market opened. Some profit-taking took the US market lower, although a recovery soon took the price to a relatively stable trading range, just above $1,390/oz. The stability continued during Asian trading, with the price remaining in a very tight band of around $1,390/oz to $1,395/oz.

As pointed out earlier, I do feel that more upside for gold is in the offing. Even taking a slowing of Fed quantitative easing into account, we still feel that the environment remains supportive of a higher gold price—global liquidity should continue to grow, although maybe at a slower pace, and real long-term interest rates across the globe look set to remain low for some time still. Nevertheless, I cannot discount the investor apathy towards the metal and acknowledge that it will take some doing to restore confidence. Consequently, while I do still foresee upside for gold, these gains will most likely be hard won. The first challenge will be to push strongly past the $1,400/oz hurdle.

Physical demand remains strong in the major Gold consuming countries, where China has seen a daily increase in physical trading volumes. How tight the physical market still is, is reflected in the premium of 50 USD still paid today in Shanghai over the international price. Premiums in India started to cool off, as the weaker Rupee drove local Gold prices up and some Gold has restarted to be imported into the country, however rather sluggishly. Top gold buyer India, which had seen gold imports jump 138 percent in April, is facing a slowdown as the peak wedding season comes to an end and its central bank imposes new rules to reduce a deficit. 

There is no doubt gold is still one of the attractive assets at present as economic uncertainty is not over across the developed world. Federal Reserve has created money, but that money has not been circulated into economy as banks are still tentative to flood the market with easy money. Economists are apprehensive that when this money will be circulated, inflation may trigger in a big way. But that theory will be tested when the actual event happens.

The Fed will probably want to see six months of strong employment and at least two quarters of 3 percent gross domestic product growth before it seriously considers tightening. In the meantime, big market reactions to comments from the Fed chairman, like those Wednesday, will mostly be reversed – expensively for those investors who replace analysis with wishful thinking.

In short, there are still reasons to buy gold; there are reasons to hold gold; there are reasons not to go aggressive in investment. So, my gold may remain in a range ($1325-1550/oz) till September (German Election may be the next trigger).

“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 gold losing its safe haven appeal" 
http://riddisiddhibullionsltd.blogspot.in/2013/05/is-gold-losing-its-safe-haven-appeal.html

RIDDISIDDHI BULLIONS LTD. FORAYS INTO DIAMOND JEWELLERY

Mumbai, 12th May 2013: Diamonds are said to be woman's best friend. And RSBL promises to strengthen this friendship even further.

We at RSBL, announce our foray into diamond jewellery uncer our promoed company- RSBL DIA Jewels Pvt. Ltd. and bring to you and exquisite line of jewellery collection:       

                                           Sparsh- touch of elegance 

A name to reckon with elegance shall leave you mesmerized with its intricate designs and inimitable craftsmanship. True to the essence of RSBL, RSBL DIA Jewels reflects the best what it has always been doing – “Strengthening the trust”.

Inspired by nature, this collection has a piece that engulfs ones soul. The collection comprises of 18K diamond jewellery that has pieces tailor made which suits every women’s varied moods and styles. Each masterpiece is crafted uniquely symbolizing the uniqueness that each woman carries within her. The brand promises the quality without compromise and it will always endeavor craftsmanship that's beyond comparison and at the same time maintaining the company traditions.

Sparsh – touch of elegance also has an exclusive collection designed for special occasions. Celebrate those enduring moments with its splendid pieces. Be the cynosure of all eyes on your wedding, charm everyone with your ornate jewels on your mehendi or bask in the glory of your inimitable jewels on the reception. Steal your betrothed’s heart on your engagement and relish everyone’s attention on Diwali with their unique and elegant jewels. The collection covers products like beautiful rings, pendants, ear rings, bracelets, and classy diamond sets etc. 

Keeping the design, style and quality in mind RSBL DIA jewels strictly adheres to quality and authenticity by providing certificate of purity and authenticity with each masterpiece. There would not be even a minor difference in the stated quality of diamond or gold. 

A truly unique service that Sparsh – touch of elegance will provide to its clientele is Buy back facility. It’s one of the first of its kind where a client can exchange their old jewellery of Sparsh – touch of elegance with a new one from its store.

Sparsh – touch of elegance jewellery is as inimitable as you, while the jewels are uniquely yours for these are designed especially for you. So, feel special with Sparsh – touch of elegance jewellery. With Sparsh – touch of elegance from RSBL DIA Jewels, RSBL shall continue to provide you with similar levels of service, upholding the same values and the commitment. 

I am glad that people of India now say, what is the RSBL price of Gold rather than Gold price. RSBL has strived hard to provide transparent benchmark prices for Gold. My motto has always been “Make products that meet customer needs”. Looking at the current pricing scenario of the Diamond jewellery market, I felt it is high time that we have a brand that people can trust, that provides value for money and most importantly provides transparent prices so that they can buy without any hesitation. Like Gold, diamonds have always given good returns. I am proud to bring Sparsh – touch of Elegance collection to you.

                                                   

Showroom Address: RiddiSiddhi Bullions Ltd, Bullion House, 115, Tambakata Lane, 2nd Floor, Opp Dagina Bazaar, Pydhonie, Mumbai - 400 003. India.

Web: http://rsbldiajewels.co.in/

IS GOLD LOSING ITS SAFE HAVEN APPEAL?

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

Last week started with festivities for India as we celebrated the auspicious day of Akshaya Tritiya on 13th may. It is considered auspicious to buy gold on this day and hence the demand for gold on this particular day is expected to go up.

But this year demand for gold was not as predicted.  Whatever demand came in was mainly from retailers because the wholesalers and other bullion dealers had already made their purchases during the gold crash that was witnessed between April 12- April 16. Majority  of the purchases were made during this period. Adding to this slide in demand were the anti LBT protests which brought the major gold hubs to a standstill and buyers were confused as to where to procure their gold from.
Hence the overall demand for gold on this Akshaya Tritiya was not up to the mark.

Though world over people were shifting focus from gold to other assets in its class, the lower prices attracted buyers in China-- the world's second largest buyer of gold after India. In fact in Hong Kong and Singapore, gold bars were traded at an all time high premium, paying nearly 40 USD.

In the international markets,  gold prices dropped compelling investors to shift to other asset forms apart from gold. It seems that gold is losing its appeal as a safe haven asset after the gold crash that recorded the worst daily crash in 30 years. This week too gold dropped to a four week low and a straight fall for a seventh session on Friday.

It was the longest flash in four years as there were rumours making rounds that soon the Federal Reserve may rein in the monetary easing, thus lifting the dollar.

One of the reasons behind this decline in gold prices is the perception of investors that gold below $1400 an ounce will take much time to bounce back and hence introduce near term pressure on gold. It has also triggered heavy selling and prompted investors to favour other asset forms.

Spot gold hit a four month low at $1376 an ounce.

There was heavy liquidation coming in from New York's SDPR Gold Trust, that reported an outflow of another 5.7 tonnes on Thursday, bringing the drop in its holdings this week to more than 10 tonnes.

A strengthening US Dollar and a massive selling of exchange traded funds, together, triggered a downfall in gold prices. Moreover, there is a positive sentiment in the market about the recovery of the US economy.

Economists are looking for a stronger growth in the second half of the year and in the early 2014.

Though the development is slow, economists say that the stronger than expected improvement in several areas including labour market and retail sales has compelled investors and general public to believe that development an recovery is on its way.

A stronger US economy brings in concern for gold as people tend to shift to other investment forms like equities that are bound to shoot up when the economy revives,

For this week, the range for gold in the domestic market is expected to be around Rs.25,000 - Rs.27,500 per 10 gram.


“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 - 

"Debate over Fed QE3 measures raises concern for gold" 

http://riddisiddhibullionsltd.blogspot.in/2013/05/debate-over-fed-qe-measures-raises.html

DEBATE OVER FED QE MEASURES RAISES CONCERN FOR GOLD

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

Spot gold fell as low as $1,420.60 an ounce and was last down 1.4 percent at $1,437 an ounce on Friday.

Throughout the week gold seemed consolidated in a narrow range and on Friday the prices slid. A strong USD performance against major currencies, took the wind out of the sails of Gold yesterday.

There were lot of news making rounds on the last two days of the week. Majorly, the news came in from the US, showing signs of US economic growth. Weekly data showed that US layoffs fell to pre recession levels for the first time. Fed official had made an announcement earlier that a strong labour market will compel them to roll back easy money measures. This created nervousness amongst investors who now worry that if Fed curtails its bond buying programs then gold will decline even further.

Gold is always considered as a safe haven asset and investors purchase gold to guard against the perceived risk of a weaker dollar and higher inflation. But when the economy recovers investors shy away from the yellow metal and move focus to riskier assets like equities that are tend to give better returns in a recovering economy. Gold is priced in dollars and becomes more expensive for foreign buyers when the dollar strengthens against other currencies.

The Fed's quantitative easing measures have always been a major support to bullion in recent years and any such measure by the Fed of curtailing its policies will boost the appeal of stocks at the expense of gold.

Gold price direction next week is likely to be influence by the strength of the U.S. dollar, along with U.S. economic data. Another, Interesting news that will be the released, is of 13-F filings in the US next week on May 15, where institutional investors will report their holdings at the end of Q1 and market participants are keen to see whether prominent investor Paulson and others had reduced Gold holdings.

If the reports and economic indicators turn out to be balanced and better than expected the gold will decline further but if the data comes out lower than anticipated then it would push gold prices further.

Nonetheless the main topic for debate remains that what the Federal Reserve will do with its quantitative easing measures.

Meanwhile on the domestic front, there was surprising news for the bullion market. RBI (Reserve bank of India) made an announcement that banks can import gold only to meet the genuine needs of exporters of gold jewellery. The central bank also restricted the facility of loans against gold coins per customer to gold coins weighing up to 50 gm.

This move was taken mainly to curb the import of gold. But, I don't think that the new announcement by RBI will have much an impact on the prices or demand for the yellow metal. Imports too are not expected to decline too much.

In fact or focus now will be on the monsoons. If there will be an average rainfall then import would be around 800 tonnes. The reason behind this is the demand for gold that comes from rural areas. Around 60 per cent of gold demand is from rural areas. So an average monsoon will reduce their purchasing power and thus affect the demand for gold.

On the other hand a good monsoon can push up the import figures above 1000 tonnes.

In case that happens then prices are tend to go upward.

In the next 6 months gold is expected to move in the range of Rs. 25000 - Rs. 30000 in the domestic markets

“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 - "Gold on Life support"
http://riddisiddhibullionsltd.blogspot.in/2013/05/gold-on-life-support.html

GOLD ON LIFE SUPPORT

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

Gold prices climbed up on Thursday and it showed recovery for the first time in 10 months as the metal's inflation-hedge appeal jumped following the ECB rate cut. Adding to this, the hopes of easing measures by the US Federal Reserve continued to boost gold and silver. The price of gold increased by 1.48% to $1,467.6; Silver rose by 3.40% to $23.81. During the week, gold rose by 1.0%; silver, by 0.2%.

Spot metal was last at $1,477.05/1,477.85 per ounce, up $10.35 on the close and making gains for the second session in a row. It has now also edged $1.55 above the previous weekly close, putting it on course for two consecutive higher weekly closes

Investors in the market were taken aback by the ECB when it decided to lower its short term interest rate to an all time low of .50 per cent. 

Jobless Claims report was due on Friday afternoon and gold drifted higher in its new range just before that. However, nothing happened as expected. The Jobless claims in US had reduced and the unemployment rate fell to 7.5 per cent. Just before the report was out gold was seen trading at 1487$ per ounce. However, later in the evening it dropped to 1445$. American employers took on more workers than forecast in April and the jobless rate unexpectedly fell to a four-year low of 7.5 percent, reflecting confidence in the outlook for the world’s biggest economy. Payrolls expanded by 165,000 following a revised 138,000 increase in March that was larger than first estimated, Labour Department figures showed today in Washington. Revisions added a total of 114,000 jobs to the counts for February and March.

The drop in jobless claims came as a surprise with economists expecting claims to edge up to 345,000 from the 339,000 originally reported for the previous week. Separately, the U.S. Commerce Department said the nation's trade deficit narrowed to $38.8 billion in March from a revised $43.6 billion in February. 

Officials at the Fed are still looking for greater progress in reducing unemployment. The central bankers said earlier this week that they plan to maintain their $85 billion monthly pace of bond purchases to spur growth and employment prospects and are prepared to raise or lower the level of purchases as the economic outlook evolves.

The Fed stated that though the jobless claims have dropped and the Labour market conditions have improved, the unemployment rate is still eminent.

Central bankers said that though we have seen a recovery in consumer spending, business investment and the housing industry the fiscal policy is restraining growth.

Till then gold seems to be on a life support system.

Trade range for gold for the  week is 1430- 1505 $ in the international market and in the Indian markets it is expected to move within 26500-28000 rupees per 10 gram.

“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 -
"Gold tend to move side ways"
http://riddisiddhibullionsltd.blogspot.in/2013/04/gold-tend-to-move-sideways.html