CHINA SUPPORT FOR GOLD!

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

The world witnessed one of the greatest historic deals as an agreement was reached between the United States and Iran over Iran's nuclear ambitions. This breaking news on the geo political front created hype hoopla in the market.

However, the sentiments subdued on Thursday as the US markets were for the annual Thanksgiving. Hence gold managed to snap a two day losing streak with spot prices closing at $1243.60. Overall Gold had nothing to gobble about this week, with the precious metal mired in the $1,240 range amid low volumes due to the US Thanksgiving holiday.

Gold is down 6.1 percent in November, the worst performance since June, when prices touched a 34-month low of $1,180.50, and is little changed this week. The deal between US and Iran showed signs of decreased tensions in the Middle East which in turn pushed down gold and oil prices. Peace between the two countries means that Iranians will push up crude supplies and this created a drop in prices.

U.S. data this week showed jobless claims unexpectedly fell and leading economic indicators rose for a fourth month. Fed minutes released on Nov. 20 signalled that policy makers expected an improving economy to warrant trimming debt purchases in coming months. Also the jobs reports showed a 10,000 drop in weekly jobless claims, and this pushed gold futures under the 1240$ mark to 1239.60$.

Moreover, holdings in the world’s largest gold exchange-traded fund, the SPDR Gold Trust, fell by 5.7 tonnes on Wednesday, to their lowest level since 2009, Reuters reported

However, the losses were limited by a weaker dollar.

But what came as a silver lining in the dark clouds was the demand for gold from China. This is one country that hasn't lost its appetite for gold and has now set to become the largest consumer of gold in the world taking over India that has been sitting at this position since years. The Asian nation imported a whopping 131 tonnes of gold in October through Hong Kong — the sixth month in a row that China has brought in greater than 100 tonnes of the yellow metal. On Thursday, traded volumes of 99.99 percent purity gold on the Shanghai Gold Exchange hit their highest in seven weeks further driving the momentum on the physical market front.  As the Chinese gold demand will continue to pick up before the lunar New Year at the end of January 2014, China will likely overtake India as the largest consumer in the world in 2013. 

When looking at India; the average import of gold by India was around 60-80 mt per month (up to September). However, most of the gold imports took place during the first six months of this year, after which imports declined sharply. China, in comparison, has imported on average 80mt per month from only Hong Kong (total China gold imports could be higher). 

But the import numbers from India and China should be viewed in light of ETF liquidations. Over the course of the year, ETF liquidation has flooded the market with gold, in particular in April, May and June. The liquidation in April in particular almost matched combined imports into China and India for that month. Furthermore, since July, Indian imports have slowed substantially.

Looking at all this physical demand for gold is not the key driver for gold prices. There are other factors responsible for its movement. The prices of the metal move more on the basis of developments in the paper market as well tracks the comments and policy directives from major global central banks.

This is why Gold despite being having decent physical market demand is headed for its biggest monthly drop since June while is on track to its first annual loss in 13 years. 

What one needs to monitor is the final November PMI from China, E17, U.K. as well as the U.S. on 2 December, the U.S. initial jobless claims and the U.K. and the ECB monetary policy decisions on 5 December as well as the November U.S. non-farm payrolls, the unemployment rate, and the October core PCE price index

The extended rise in US and other western equity indices is leading traders and investors away from gold which is treated as a hedge against economic and financial uncertainty

The trade range for gold is $1210- $1277 an ounce in the international market and Rs.29500- Rs. 31,500 per 10 gram in the domestic market.

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 -

"FED UP?????"

http://www.riddisiddhibullionsltd.blogspot.in/2013/11/fed-up.html

"FED" UP?????

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

Post 2008 gold prices have sky rocketed and this made gold an investors favourite. Following the 2008 crisis, investors turned to gold as a hedge against inflation that was expected to rise as a result from central banks effort to stabilise the economy through bond purchases. But 2013 has been considered one of the worst years for bullions as it turned tabled for all precious metals.

Now with the US economy in the recovery mode and with inflation being more or less tame, many investors have disowned and abandoned gold and shifted to equities.

By the end of 2013 we see that god prices have tumbled 26 per cent over the uncertainty that the Federal Reserve will start to cut its monthly bind buying program which has even strengthened the dollar. Global demand for the precious metal fell 21 percent in the third quarter as investors continued to dump holdings through exchange-traded funds and central banks slowed purchases, the World Gold Council said.

After Janet Yellen's statement released last week, many believe that the uncertainty over Fed bond buying program has been lifted. Janet Yellen — the likely next Fed chair — said last week that she would press forward with the bank’s ultra-easy monetary policy until officials were confident a durable economic recovery was in place that could sustain job creation. Gold witnessed selling pressure immediately after the minutes of the latest meeting of the Fed raised supposition that the central bank could taper its bond buying program, as soon as December

Gold declined this week and it enters the sharpest weekly drop in more than two months as gold prices plunged on Friday. Spot gold was up 0.1% to $1,242.91 an during the trading hours, after hitting a fresh four-and-a-half-month low of $1,236.29 in the previous session

Furthermore, gold prices remained under pressure after data that showed that US consumer prices last month rose at the slowest pace in four years. This clearly indicates that inflation has been contained and when inflation is tame who would buy gold.

Summing it up, the week was not so good for gold because:

1. The Fed’s massive bond-buying programme has burnished gold’s appeal as a hedge against inflation

2. Solid US data over the past few weeks was hurting bullion prices as it could bolster the case for curbing stimulus soon.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 3.6 tonnes to their lowest since early 2009 at 856.71 tonnes on Thursday. Outflows have totalled 450 tonnes this year

Earlier this month the European Central Bank announced a surprise interest rate cut which put more pressure on gold. It also drove up the value of the dollar versus the euro and made investors loos its faith in gold as a store of value

Moreover, what cane as a surprise package was the announcement coming in From China stating that they have taken a step further in liberalizing the gold market. Swap trading on the Shanghai based China Foreign Exchange Trade system has been started by interbank gold.

Bullion has slumped 26 percent this year to $1,245.45 an ounce in London, reaching $1,236.88 yesterday, the lowest since July 9. The declines are another blow in what's been an awful year for gold bulls

Virtually it was the same scenario for other precious metals as we saw platinum struggling and silver trying to keep up.

Silver, like gold, is still a sell into rallies.

Gold support is at $1,238 and $1,227. Resistance is at $1,253 and $1,272. Silver support is at $19.50 and $18.85, resistance is at $20.37 and $20.65.

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 -
"QE Support- US reamins fragile"
http://www.riddisiddhibullionsltd.blogspot.in/2013/11/qe-support-us-remains-fragile.html

QE SUPPORT- US REMAINS FRAGILE

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

2013 ends on a red note for gold as it heads for its first annual drop in 13 years.

Gold has seen a lot of movements throughout the year. The main reason for this drop was the uncertainty over the QE tapering. QE was responsible to set record highs for gold and the same is the reason for its downfall in 2013. Even today, QE tapering is under one’s scanner- the question is not IF but WHEN.

Gold has been disowned by many, as investors have lost faith in this yellow metal and it is no longer considered a safe haven asset. Though investors have not been buying much gold, lower prices have boosted the demanded for jewellery coins and bars. These have mainly been purchased by the small time buyers.

Increased central banks liquidity has always benefited gold over the past years. However gold has fallen nearly 25 per cent since the Fed stated that it could begin slowing its $85 billion in monthly bind purchases. This week did see a lot of news impacting Gold prices - Statement by Mrs. Yellen, weaker US dollar, SPDR Gold Trusts holding and the gold demand from China and India.

Statement released by Janet Yellen, who is nominated to take charge of the central bank next year, moved the table for gold. Janet Yellen’s confirmation that she will continue the stimulus program of the fed so long as the economic recovery in the U.S. remains fragile was the big news for the bullion market

A weaker dollar index against a basket of major currencies also boosted gold buying,

Also, prominent hedge fund Paulson & co maintained its stake in SPDR Gold Trust. The SPDR gold ETF saw no change in its holdings and no change in the in the Gold Trust, leaving their holdings at 865.713 tonnes and 172.21 tonnes. These also supported the prices.

Demand from China, India and the Middle East surged a combined 27 percent in the 12 months through September, the World Gold Council estimates. Central banks bought 93t of gold in Q3 2013, reserves up almost 300t year-to-date

With India's 10% gold import duty on top of other capital controls, the price one has to pay for gold in India has reached a record spread of 21.6%. A premium of nearly $120 has attracted lot of Scrap gold in the market.

Gold gained nearly one percent this week till Friday, but prices were pulled back on Friday,

It recovered to be flat on the day after the dollar fell 0.3 percent against a basket of currencies, which followed data showing U.S. industrial output had slipped last month for the first time since July

Headlines about potential production threats continued to hit the wires, with Amplat reporting a two day sit-in strike by 2300 workers and Zimbabwe’s President Mugabe saying it may halt exports of raw Platinum to South Africa in order to force the mining companies to build a refinery in the country. Zimbabwe is the second largest Platinum producing country after South Africa. Further support came from a leak of semi-annual Johnson Matthey Platinum Group Metals Reports. According to an apparent leak by Fastmarkets, Platinum slipped deeper into deficit in the first half of 2013, due to strong global demand growth. It forecast a deficit of 605’000 ounces for 2013, mainly driven by an uptake in industrial usage. Wage negotiations continue in the platinum sector in South Africa. A price range for the next 6 months is of $1360 – 1580 per ozs.

China's domestic mining industry does produce a lot of gold. For 2013, it is estimated to be 440 tonnes.  However, China and its miners have a serious problem. Remaining mineable reserves are put at 1,900 tonnes. So unless China can turn up some major discoveries - and they have been somewhat unsuccessfully looking - then they have less than five years of production remaining. China's government has urged national gold producers to boost development of overseas resources in neighboring countries and in Africa and Latin America, according to its 12th Five-Year Plan which ends in 2015.

Next week, we need to note Bernanke's speech, Draghi's speech, the October FOMC minutes release as well as the US October CPI, retail sales and existing home sales on 20 November as well as Germany November IFO business climate index on 22 November.

Whether gold breaks out of that range depends on the direction of the U.S. dollar and further sentiment about the fate of the Federal Reserve’s quantitative easing program vs. what one has to pay in countries where there are no such controls or import duties.

Gold support is at $1,274 and $1,269. Resistance is at $1,292 and $1,310. Silver support is at $20.60 and $20.38, resistance is at $21.02 and $21.40.

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 -

"All Glitters or Just Jitters for Gold"

http://www.riddisiddhibullionsltd.blogspot.in/2013/11/all-glitters-or-just-jitters-for-gold.html

ALL GLITTERS OR JUST JITTERS FOR GOLD?

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

Gold made a snake; like movement last week , ending on a downward note as the week concluded. 

The dollar pushed broadly higher against the other major currencies on Friday, after the release of strong U.S. jobs data fuelled further speculation that the Federal Reserve could soon begin tapering its stimulus program. 

Gold has lost about a fifth of its value this year after these news. The bond purchases and low interest rates has burnished gold's inflation-hedge appeal.

However, lately, as the Fed delayed its decision to taper its monetary easing , the market was compelled to believe that the FED may not start withdrawing its support for the economy soon and this gave the yellow metals a rebound in the recent weeks.

The FED also stated that they needed enough evidence about the progress of the US economy to taper its program. Hence this week as the US data reports were released, the market scenario changed.

Gold showed wave like movements this week ending on a downwards pattern as the week concluded.

The prices of gold and silver changed direction again and bounced back on Thursday along with other commodities prices including crude oil and natural gas.

Gold prices fell under $1,300 after a much stronger-than-expected U.S. October nonfarm payrolls report released on Friday.

Having touched 1-week highs above $1419 per ounce on Thursday, gold fell back through $1400 on Friday as European stock markets erased earlier losses.

Among other precious metals, silver was down one percent at 21.53 an ounce and platinum was trading at $1439.49 an ounce, down by 0.6 per cent.

Rallying US equities and a soaring US dollar sent gold to a three week low as bullion underperformed silver and platinum group metals.

GOLD and silver prices whipped sharply Friday lunchtime in London, as new US jobs data matched analyst forecasts with a 175,000 rise in Non-Farm Payrolls for May and a slight rise in the jobless rate to 7.6%.

The Labor Department said 204,000 jobs were created in October, nearly double the expectations going into the report. September and August employment numbers were revised up by a combined 60,000, while the unemployment rate rose to 7.3% from 7.2%. That was likely an effect of the shutdown.

Though researchers believe that the Federal Shutdown have impacted the jobs figures,  the Labour Department said that survey responses have been normal.

In fact, this stronger than expected US jobs report has led to a downfall in gold prices and is expected to continue to do so in the near future.

Gold market watchers said prices fell on thoughts that the stronger jobs report, along with Thursday’s higher-than-expected gross domestic product data, mean the Federal Reserve may consider tapering its bond-buying program known as quantitative easing, earlier than expected.

This news may have contributed to the strengthening of the USD.  The American trade balance deficit declined – exports of goods rose by a larger rate than imports had during September. This news was also a positive signs for the progress of the U.S economy. Nonetheless, there are still concerns in regards In Europe MPC and ECB kept their respective short term rate unchanged.

But any concrete comment can be made only when the debt ceiling crisis (which has been temporarily resolved) will re surface in Feb.

Till then we need to keep patience.

Other reports that will hold importance for gold is the UoM Consumer sentiment, China Industrial Production and Chinas Trade Balance

As of the previous monthly report, China’s trade balance increased to a $27.7 billion surplus; if the surplus will further expand, it could indicate that China’s economic growth is increasing and thus may positively affect prices of precious metals.

Meanwhile, we celebrated Dhanteras and Diwali last week, two festivals closely associated with bullion buying and the country's wedding season, another major driver of gold sales, is in full swing.

But scarcity of physical gold coupled with weak rupee put a huge damper on sales for gold this year.

In fact, gold sales this year have been just 50 per cent of last year's sales. On the other hand we saw more demand for silver and platinum coins.

Nonetheless, as the marriage season is in full swing we see more demand coming in for gold jewellery and the demand supply gap of gold will soon be filled.

the trade range for gold for this week is expected to be Rs.29,000- Rs.31,000 per 10 gram

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 -

"Halloween Hangover for gold"

http://www.riddisiddhibullionsltd.blogspot.in/2013/11/halloween-hagover-for-gold.html

Happy Diwali


Have a Wonderful Year Ahead Filled With Peace, Prosperity and Happiness

HALLOWEEN HANGOVER FOR GOLD

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

The Halloween fever seems to have caught hold to gold too as we saw some tricks and treats for the yellow metal.

There were mixed sentiments in the market as the much awaited Fed meeting concluded on the 30th Oct. The Federal Reserve has offered a bundle of surprises this week due to which gold and other precious metals fell on Thursday.

The US Central bank stated that it will keep buying $85 billion in bonds a month for the time being.  The Federals Reeves October policy statement further confused the market as some believe that there is soft growth seen for US while some believe that the situation may worsen.

On Thursday, a sharp rise in the dollar index  broadly pressured commodities after data showed business activity in the U.S. 

Spot gold was down 1.4 percent at $1,323.69 an ounce during the trading hours.

The Fed's comments about the U.S. economy continuing to expand at a moderate pace and lower-than-expected inflation weighed down on gold.

The expectation of Fed tapering further down the road has already been factored into the gold market, and its comment about moderate growth and no inflation triggered some selling.

Moreover as the month ended we saw people shedding off their positions which led to decline in gold prices.

The Fed wants more evidence that the economic progress and growth of the labour market is sustainable. hence they haven't hurried a lot and kept the pace of the QE unchanged for the time being

The U.S. latest weekly jobless claims decreased 10,000 to 340,000 compared to the expectation of 338,000. In Europe, the October inflation rate fell to an almost four-year low of 0.7 percent compared to an expected 1.1 percent, opening the door for the ECB to ease monetary policy further

Nonetheless the Fed has still left open the possibility of tapering open in December or January. This resulted in a decline in gold prices.

However, the market detects a slightly hawkish tone by the Fed, who has left open the possibility of tapering in December or January. As a result, the U.S. stocks and the gold prices got beaten down while the dollar surged. 

Meanwhile, Fed officials continue scratching their heads on what they could do to avert a potential hyperinflation in the near future without damaging the recovering economy.

Gold surged more than 4 percent when the Fed Open Market Committee released its previous policy statement on Sept. 18. Some analysts said the support from U.S. monetary stimulus will eventually fade. 

The market is again divided into two sets of believers- some say that there are hopes of recovery ahead while some say that is going to be a long hard road ahead as the world economy plod along the edge of recession, deflation and then a small recovery. 

While in the Indian markets, the Festival of lights did add much brightness. The demand for gold has not been  as impressive as last year.

Gold sales during India’s festive season have slumped to half their usual levels this year 

India is known as the world’s biggest consumer of gold and sales  traditionally peak around Diwali, the Hindu festival of lights, which is seen  as a particularly auspicious time to buy.    

Diwali has been calm. Sales are down 50 percent compared to last year. There's no demand because prices have soared so much, the economy is slow and inflation is high.

Moreover scarcity of gold has resulted in life high premiums being charged. However, as the 8o 20 policy has been introduced, this demand supply gap will soon be filled and won last much. in fact it will tackled post Diwali.

Gold is expected to trade in the range of Rs.29,500- Rs.31,500 this week.

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 -

"Is it the calmness before a gold thunderstorm"

http://www.riddisiddhibullionsltd.blogspot.in/2013/10/is-it-calmness-before-gold-thunderstorm.html