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