-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)
Is something wrong with market? Yes that's exactly what traders and investors were discussing. Gold has just touched $1400 which was once seen an untrue level after the fall. Will it be able to cross it and reach new highs is what the below given factors can forecast.
The main highlight for this week was the depreciating rupee. Initially the markets expected rupee to return from the level of 62. Then they claimed 64. But the rupee made new low of 65 against the dollar. Now it is expected to depreciate further to 70. However, by Friday evening rupee returned to the levels of 63.90
The economy is facing a slump. Inflation is at a high, growth has hampered and equities have shattered.
Although the government has been trying its level best to intervene at all critical levels and control the rupee, nothing seems to be helping.
This drop in the rupee pushed gold and silver upwards.
Strong US Dollar and rise in treasury yields were seen pressuring the commodity movement to certain extent. In the United States, ten-year treasury yields climbed to 2.92%, the highest since July 2011 after FOMC minutes were failed to give any further details on tapering monetary stimulus. Investors hope that the Central Bank may start tapering its monetary stimulus later this year.
Gold prices in the global market edged up on Friday after weekly US unemployment claims recorded an upward movement. However, concerns over the withdrawal of US monetary stimulus were seen pressuring the yellow metal prices to certain extent.
Gold jumped to a 11-week high, topping $1,400 an ounce in spot trading, as sales of new U.S. homes fell more than forecast, boosting speculation that the Federal Reserve will maintain economic stimulus. Sales of newly built homes in July plunged more than 13 percent, the most in more than three years, government data showed today. The 394,000 annualised pace compared with a drop to 487,000 forecast by analysts in a Bloomberg survey. Fed policy makers said they are “broadly comfortable” in scaling back debt purchase if the economy strengthens.
By Friday evening gold was seen trading at 1397$ up by 21$ and silver was up by 95 cents, trading at 24.07$
In the physical markets, renewed labour unrest in South Africa sent platinum and palladium higher on Thursday, and this too, provided an element of support to both gold and silver.
By Friday evening, in the domestic markets too we saw gold and silver rocketing. Gold climbed by INR 750 trading approximately at INR 31,900 per 10 gram and silver was up INR 2200 reaching a high of INR 53,400 per kg.
The fact that gold managed to reverse its losses and close modestly higher on the day was quite impressive and likely had something to do with the fact that better-than-expected Chinese data which suggests that the economy is stabilizing, potentially a positive in terms of future Chinese gold demand
Another report that caught attention was the World old Council's gold consumer demand report. The impressive thing to note was that Gold consumer demand rose by more than half in the second quarter of this year thanks to strong demand in China and India, the World Gold Council (WGC) said.
In India, the Gold Trade holds steady in spite of the government imposing import tax hikes on gold in an attempt to reduce the country’s current account deficit. In fact, according to the WGC, gold jewellery, bar and coin demand in India alone was 70 percent stronger in the second quarter of 2013 compared to the same quarter last year.
Consumer demand in China continued to show strong growth, totalling 276t in the second quarter, a rise of 87% compared to the same quarter last year, as investors used the lower gold price to buy in advance of expected future price rises. Jewellery demand in the quarter was 153t, up 54% on the same quarter last year, while bar and coin investment was 123t, up 157% on Q2 2012.
Recent falls in the gold price have boosted demand significantly – it rose 53 percent in the April-June period from the same three months of last year, the WGC said in a report on Thursday.
Looking at the good monsoons of India and the festive season closing by, the domestic prices for precious metals need to be watched closely. Whether supply will be able to meet the demand will be the question that every Indian attached to precious metals will be having in their mind.
“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 -
"Precious Metals on the Run"
No comments:
Post a Comment