IS IT THE CALMNESS BEFORE A GOLD THUNDERSTORM??

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

Gold has always been the most favourite metal in its class as it has given tremendous returns since the past 12 years. In fact it has history of 12 years of gains which is why it enjoys the status of a safe haven asset.

But this year gold has fallen almost 20 percent over issues that the Fed would start tapering its easy money police by cutting its $85 billion monthly bond purchases. This has fuelled gold's appeal as a hedge against inflation.

The Fed who first stated that they may begin tapering n September, later released a statement that it might cut its easy money policy if the economic data released is positive and meets certain levels of growth.

The metal, however, has rallied about 8 percent in less than two weeks as disappointing U.S. economic data and lingering budget uncertainties in Washington increased gold's safe-haven appeal.

The recent trend in gold and its volatile reaction to the most recent economic release show the market is still heavily data-dependent for price direction.

After the US shutdown and the temporary delay of the Debt ceiling, the market believes that the worse is yet to come and that US has still not started walking on the path of recovery. these actions will further delay the Feds bond tapering act.

And that will be beneficial for gold and silver.

Bullion was headed for a 1.7 percent gain on the week, having hit four-week highs on Thursday as it benefited from weaker-than-expected U.S. non-farm payrolls data earlier in the week. 

Gold broke the $1350 level for the first time in more than a month as it rose 1 per cent on Thursday. All these upward movements were justified with the expectations that the Federal Reserve will continue its monetary stimulus due to disappointing US jobless claims data,

Bullion prices rallied after the number of Americans filing new claims for unemployment benefits fell less than expected last week. The jobs data bolstered expectations the Fed will not start to rein its stimulus program until well into next year.

Gold inched up slightly on Friday as disappointing U.S. economic data reinforced expectations that the U.S. Federal Reserve will keep its stimulus intact well into 2014.

Spot gold was up $4.62, or 0.34 percent, at $1,351.16 an ounce during the day, hovering below its highest level since Sept. 20 of $1,351.61.

Bullion eked out gains even as the dollar recovered from a nearly nine-month low against a basket of currencies. Other reasons cited for this gain in gold prices was technical buying and a two month high in the open interest for US gold futures

Some players think that gold is poised to rise into an upcoming Fed meeting as economic data isn’t thought to be strong even to alter the Fed’s decision to delay tapering. While the Nonfarm payroll report released earlier this week was considered old news, the government shutdown is thought to have added to the slowing in the US. 

Seeing gold stand up in the face of adverse currency market action was also seen as a positive by some traders . 

An issue that might provide gold with some support early next week is the prospect of a platinum strike in South Africa next week.

The gain in spot prices has further deterred physical demand in most Asian countries. 

In India, premiums were at a record high of $120 an ounce as dealers struggled to meet demand amid tight supplies.

Diwali is just round the corner and demand for gold in India is expected to soar (though it will be just half of last years demand).

However, dealers are struggling to get supplies and thus paying hefty premiums to fill in the gap.

Indian sellers have struggled to source supplies for domestic use for almost three months, since the central bank introduced a rule that required 20 percent of all imports be re-exported. 

   

In fact premiums are elevated and are expected to rise further... and the expectation is that they (stocks) are likely to run out completely around November at a time when the demand will be the highest on account of Diwali

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Financial calamity avoided or the worse is yet to come??"

http://www.riddisiddhibullionsltd.blogspot.in/2013/10/financial-calamity-avoided-or-worse-is.html

FINANCIAL CALAMITY AVOIDED OR THE WORSE IS YET TO COME??

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

Gold was going gaga over the week. Usually, we don't see much trading, just a few hundred lots of gold futures, on an early Thursday morning in New York. But what we saw this Thursday came as a shock. A wave of buy orders worth over $2.3 billion gushed into the market.

While other commodities declined, gold prices rose on Thursday despite dollars drop.

In just 10 minutes gold prices rose 3 per cent. It created a rhythm for the next 12 hours of trade. In fact many traders and investors were baffled and bewildered as they have seen such inexplicable soaring prices and trade surges over the past two weeks and this time too there were no explanations.

Spot gold rallied to a session high of $1,324.06 per ounce , up more than 3 percent on the day.

Late on Wednesday, the U.S. Congress approved an 11th-hour deal to end a partial government shutdown and pull the world's biggest economy back from the brink of a debt default that could have threatened financial calamity.

The US government shutdown ended and the nations borrowing authority was extended as US President Barack Obama signed in to the deal.

It funds the government until January 15 and raises the debt limit until February 7 so there is the possibility of another manufactured crisis in Washington early next year.

The resolution reached in Congress avoiding US government default left investors sufficiently uncertain that US dollar fell, bond yields eased and gold and other precious metals jumped

Despite the US signing a deal for the debt ceiling and putting a halt to the shutdown, we saw an opposite reaction in the market. 

Gold held onto 3 percent gains throughout the session as the dollar tumbled on Thursday following the U.S. congressional deal to restart the government and avoid a federal debt default.

Now what compelled this behavior????

Investors and traders are concerned that this extension of the debt ceiling had only delayed another shutdown by a few months. In fact, in February, once again they predict another shutdown in Congress between republicans and Democrats. if this happens then we should await a worsened economic scenario and even higher gold prices. 

Moreover, gold once again caught the investors attention as the dollar slumped on ideas that the extension of the debt ceiling and economic damage done to economy as a result of the government shutdown may delay the Fed from tapering in December

The US debt deal is being taken as a positive factor for gold as it will last just a few months. Investors say that it's just a temporary solution which has raised uncertainty once again over the Fed's decision to taper its bond buying.

The two-week shutdown and acrimonious debate over raising the U.S. debt ceiling have knocked investor and business confidence, denting growth prospects for the world's largest economy.

Markets will now refocus on economic news and the timeline for the US Federal Reserve's tapering of its monetary stimulus bond-buying programme. The Fed surprised financial markets in September by opting to delay the start of stimulus reduction.

The Fed is committed to purchasing $85 billion in new debt per month in an open-ended programme (QE). Accommodative measures from the US central bank are supportive of gold because extra liquidity tends to debase the dollar and create future inflationary risks.

Meanwhile in the Asian markets too there were a few factors that soared gold prices.

China's Dagong ratings agency downgraded America to an ‘A -' rating from ‘A’ after the US Congress only avoided defaulting on its debt by a couple short hours.

The decision taken by Dagong has caused precious metal prices to soar, all gaining by around 2-3 percent and breaking away from the remaining commodities sector,

In India, gold was being sold at a hit record premium of $100 an ounce.  A shortage f supplies to me the festive demand has resulted in this high premium.  Due to the additional premiums, quoted gold prices in India are 8 percent higher than the current spot price of $1,261 an ounce Banks, the primary dealers of bullion, are currently importing the yellow metal chiefly for exporters, as under the so-called 80/20 principle, jewellery exporters get priority for supplies over domestic manufacturers. The principle, part of a package of measures announced in July aimed at cutting India’s current account deficit by reducing gold imports, states that 20 percent of all gold imported into India must be re-exported.

Following government clarifications, banks have begun to process fresh orders, but the rule will still inhibit imports.

But nonetheless, the demand supply gap is widening and affecting gold prices.

The trade range for gold this week is expected to be $1290-$1350 (an ounce) in the international markets and Rs.29000- Rs.32000 (per 10gm) in the domestic markets.

The primary purpose of this blog (Prithviraj Kothari - MD, RSBL |  Bullion market blog) is to educate the masses of the current happenings in the Bullion world.
- Previous blog -
"US Deal or No Deal"
http://riddisiddhibullionsltd.blogspot.in/2013/10/us-deal-or-no-deal.html

U.S. DEAL OR NO DEAL?

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

Firstly, I apologize to my readers for not posting the Blog on Saturdays, that I usually do. We were busy with the SPARSH – Touch of Elegance store launch in Borivali, Mumbai. Secondly, what just happened to Gold on the day of my store launch? Gold sent the entire market into shockwaves.

It lost $30 in just two minutes. There was huge sell order that triggered the plunge. This single order was said to be the culprit as it took gold down to a three month low. Friday extended bullion's drop to a fourth consecutive day, its longest losing streak since late June. For the week, the metal was down 3.4 percent, its sixth weekly decline in seven weeks. 

Gold's sudden price tumble was a result of hedge funds and institutional investors flooding the gold futures market with sell orders. Spot gold was down 1.5 percent at $1,266.80, having earlier fallen as much as 1.8 percent to its lowest since July 10 at $1,262.14 an ounce.  An unusual large sale order in New York Futures and signs that a deal strike to avert potential US debt default prompted investors to sell and flee the market.

Gold is generally viewed as a safe haven asset in turmoil. But some confusion prevails in the market that has set gold moving on the other side.

However, later in the day markets attention was again moved towards the data that was out for release. Though gold was under selling pressures, the losses were almost halted by data that showed US weekly jobless claims touched a six month high in the previous week. Gold was quickly sold below 1300 again, but had to rally when US jobless claims came out with a 374’000 number and headline traders let it jump to the day’s high of 1312. The U.S. Bureau of Labor Statistics however said the number was wrong, due to a new computer system in California, as well as the government shutdown, so that gains were immediately given back.

Trading volume, which has been light this week, heated up briefly for about 10 minutes in U.S. morning trade. Prices remained range bound, with buyers on the sidelines due to a lack of U.S. data and anxiety over how the stand-off in Washington will play out, as a U.S. government shutdown continues. 

Gold remains vulnerable and possibly quite volatile in the short term but it is becoming increasingly attractive to long-term buyers with a significant rise in the price all the more likely over the next three-to-five years.

The uncertainty over the US government shut down is expected to create a negative impact on consumer spending, unemployment and economic activity. And if the impact will last longer then it's is less likely that the Federal Reserve would make any pending change in the US monetary policy. The Federal Reserve will not risk adoption of policies that might trigger a full-blown recession.

The current situation of the market place is that the US government will come to a budget agreement and raise the debt ceiling. But, in case that does not happen, the market has to be prepared for soaring gold prices as the yellow metals will once again dress up as a safe haven asset.

In the domestic markets, it's the demand numbers that's playing games. Despite seasonal demand, there is a weak trend in the domestic market. However, the demand is expected to pick up as rural income is expected to boost.

India gold purchases may go up this year on likely firm rural demand boosted by higher than expected monsoon showers, weak yellow metal prices. A report by the WGC expected demand to high in gold this quarter. Crashing international prices are also prompting buyers to enter the market at dips.

First thing that Indians stock is food and then Gold,. Gold, in India, is always considered above all other asset classes. Be it equities, real estate, funds etc. Demand for gold is expected to increase in the days to come.

Looking ahead, Indian festival and wedding-related demand, restocking by jewellery manufacturers worldwide in anticipation of Christmas and New Year retail buying, continuing strong demand from China, and a pick-up in central-bank acquisitions, should underpin the gold price and could contribute to a resumption of the long-term uptrend in the metal’s price.

Gold in the international and domestic markets is expected to trade in the range of $1230- $1320 an ounce and Rs.27,000- Rs. 31,000 per 10 gram respectively.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Only one thing is certain for gold.....uncertainty"

http://www.riddisiddhibullionsltd.blogspot.in/2013/10/only-one-thing-is-certain-for-gold.html

RSBL's SPARSH - Touch of Elegance - Second showroom!

With the grand success of our first showroom, our valuable clientele wanted us to bring the creations in the suburbs of Mumbai. So here we are, justifying my Motto: “Make products that meet customer needs”. 

We are delighted to announce the opening of our second Sparsh – Touch of Elegance showroom in Mumbai. The city continues to be an important market for us, one we take pride in and understand perfectly. Few challenges faced by the Gold & Diamond jewellery sector of India which will be catered by this product are transparent pricing scenario when it comes to making charges & raw materials costs like Diamonds etc and absolute brand assurance. We are confident that the new showroom will set new standards in jewellery sales in the area and help us move forward in our business endeavours. Customer satisfaction is our utmost priority and the showroom promises to provide patrons a completely new experience in buying high quality one-of-a-kind jewellery.

                                     

INVITATION FOR THE OPENING OF RSBL SPARSH'S SECOND SHOWROOM!

We find great pleasure in cordially inviting you to the Grand opening of our second exclusive Gold & Diamond Jewellery showroom of Sparsh-Touch of Elegance by RSBL. Please find the details below.

Your presence will be highly honoured.

ONLY ONE THING IS CERTAIN FOR GOLD....... UNCERTAINTY!

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

The U.S. shut down was the most discussed topic last week. The world largest economy might be pushed into default in case of a failure to increase the debt limit. Though the partial shutdown did not create much impact on gold prices globally, this shutdown along with the debt ceiling will surely have a major impact on bullion prices worldwide.

As shutdown enters its second week, there prevails lot of uncertainty in the markets.

Gold fell on Thursday, as investors booked profits after the previous session's gains due to uncertainty about a partial U.S. government shutdown and slow demand in key physical markets. 

It rose 2.2 percent on Wednesday, posting the biggest daily gain in two weeks, as the dollar fell to an eight-month low and no end appeared in sight to the shutdown. 

Gold prices closed lower on Friday, held down by dollar strength to lose more than 2% for the week after having been batted around by the U.S. government shutdown and debt-ceiling worries.

Gold was trading in a tight range during Asian hours on Friday as the Chinese markets were closed for a national holiday through Monday and simultaneously there was not much US data expected or released through the week.

In such an uncertain environment where even a partial shutdown is expected to move gold prices higher and increase its demand as a safe haven asset, we found an exactly opposite trend prevailing in the market. Demand for gold crumpled as there was speculation in the market that the effect of the partial U.S. government shutdown will be short lived.

In the past too, such stand offs have been resolved at the last minute just before a major deadline. the same was expected this time too. But now the scenario seems to be changing,

As many as 800,000 U.S. federal employees are temporarily out of work. Congress also faces a dispute over raising the $16.7 trillion debt ceiling this month.

Further, the market is starting to look ahead toward the Oct. 17 date by which the Treasury has said it will hit its borrowing authority, meaning another potential political fight over the debt ceiling.

While the temporary U.S. government shutdown has not been a positive driver for prices, the risk of a debt ceiling breach holds scope to reignite interest.

Other factors that could influence the market next week include minutes of the last meeting of the Federal Open Market Committee and the return of Chinese buyers after a week-long holiday.

Next week, As India marks the onset of the festive season (to begin with Navratri) and Chinese buyers are back after an extended holiday,  demand for gold is expected to increase. Whatever the case, many anticipate the metal will get a lift if the political stalemate and U.S. government shutdown goes into a second week. Meanwhile, a week-long Chinese holiday will end next week, bringing potential buyers of physical metal back into the market. All these factors will extend a supporting hand for gold.

Traders who have been active in the market have been closely watching the US data on the labour and housing markets. Key figures will help in judging the strength of the US economy which in turn could decide when the Federal Reserve would begin cutting back its bullion-friendly stimulus measures

Fed officials have said this week that the lack of data was making it difficult to read the economy and the Fed might have to keep monetary policy for longer to help offset the harm caused by political fighting in Washington.  Spot gold eased 0.1 percent to $1,315.44 an ounce by 0307 GMT after sharp swings earlier in the week.

This shutdown has also started affecting economic data releases. US nonfarm payrolls, considered the most importantly monthly data release in financial markets, is unlikely be published as scheduled.

Thus has left the data calendar rather light, with August German PPI coming in at -0.1 per cent, 0.2 percent points below the forecast.

The International Monetary Fund managing director Christine Lagarde among others, has warned that the US and the global economy could be dragged into further difficulty unless the US can resolve both issues (shutdown and debt ceiling) quickly. In the rest of the precious metals, trade has been broadly stable, though most lost some ground.

Platinum and palladium slipped $1. Platinum last $50 in this week, a fall of 3.5 per cent and palladium dropped $32 (4.3per cent). Silver was down five cents at $21.60 per ounce.

The trade range for gold in the international and domestic market in the coming week is expected to be $1301-$1370 an ounce and Rs.28,500- Rs.31,000 per 10 gram respectively.

Now all eyes are glued on the debt ceiling.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Debt Ceiling or Death Ceiling for Gold?"

http://www.riddisiddhibullionsltd.blogspot.in/2013/09/debt-ceiling-or-death-ceiling-for-gold.html