-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)
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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.
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"FED UP?????"
Hello sir. I am a regular follower of your blog and really it serves the purpose of educating and updating me with the latest in bullions.Thanks for the same.
ReplyDeleteConsidering the latest developments like Nuclear deal and probable US QE3 tapering, and also the fact that gold is closing negative for the first time in last 13 years, puts more pressure on prices in coming days. So can it be safe to state that we wont be seeing gold crossing all time highs in immediate future ? although it may correct a bit more ?
Thank you so much for your appreciation!
ReplyDeleteI do agree that there is a lot of pressure on international Gold prices due to the reasons that you have mentioned, but I would not rule out the fact that new highs for Gold aren't possible in the distant future if not the immediate one.
Firstly lets take the domestic case. Gold prices in India haven't fallen as compared to its international counterpart due to rupee depreciation and Government policies. The whole price picture will be decided on these 2 points only.
Internationally, China has been supportive with regards to physical purchase of Gold. Along with China, central banks across the world, have been investing strongly in Gold. If I take them into consideration, there is a fundamental price support for Gold rather than a speculative one.
All these factors can always lead to new highs for Gold. With the improving economies there is always a fear deep inside everyone that what if the doomsday is near.