-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.
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"All Glitters or Just Jitters for Gold"
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