THE YELLOW METAL IS ALL GOING GREEN

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

In 2008, when the financial crisis rattled economies, investors inevitably resorted to the perceived safety of gold - and its price escalated from $800 to $1900 an ounce. This, in turn, accelerated the exploration for yet more gold. And gold became the most sought after metal. But in 2013, gold plunged 28 percent, the most since 1981, amid a U.S. equity rally to a record and speculation that the Federal Reserve will scale back monetary stimulus.

There were quite a many investors who abandoned gold and wrote it off. They declared that gold was ready for a bear market and that it has lost all its glitter. But the ones who are still loyal to gold hold a strong belief that gold will shoot up this year and perform well. I think gold is all set to prove this true.

This month, gold has jumped 5.2 percent. The losses in equities market has once again shifted focus from financial markets to bullions. This week gold saw a 5 per cent gain- thanks to equities. 

A global fight from emerging markets and declines in equities increased gold status as a safe haven asset and it rose to a two month high on Friday.

Fluctuations in the currency markets led by  plummeting Argentina peso and Turkish Lira prompted investors to buy gold.

This was not the sole reason behind the yellow metal prices going green.

- The options market expires next Tuesday, on 28th January. Buying sentiment behind this expiry has pushed gold prices higher.

- Also, the market has seen a big inflow for the so-called gold spider ETF. Recent inflows are also encouraging. Gold ETFs on Friday scored their biggest daily inflow since October 2012.

- The Chinese lunar new year is also playing its part for physical metal demand, as customers are rushing in to grab the metal at a cheaper price. The Lunar Year holiday will start next Friday (31st January) but gold dealers in China have made their purchases well in advance. Increasing demand for coins, bars and jewellery has pushed up gold prices.

- There are talks in the market that the government may relax certain import restrictions. Gold shot up and after murmurings that the punitive taxes on gold in India may be reduced. Congress party chief Sonia Gandhi has asked the government to review tough import restrictions on gold, which include a record 10% import duty.This will result in higher demand for gold and may push prices further.

- Also we see many investors shuffling their portfolios in January after what they have witnessed the year before. In Jan 2014 we saw that the equity market has not given satisfactory returns hence many investors are again allocating major chunk to gold and other precious metals.

- The world has a picture that banks have been selling off gold. But what came as a shock to the market that Germany failed to get its gold back. On January 16, 2013 Germany’s central bank, the Bundesbank, said it will ship back home all 374 tonnes it had stored with the Banque de France in Paris, as well as 300 tonnes held in Manhattan by the US Federal Reserve, by 2020. the Germans have managed to bring home a paltry 37 tonnes of gold.

And a mere 5 tonnes of that came from the US, the rest from Paris. The Fed holds 45% of the total 3,396 tonnes German gold. Now what conspiracy lies behind this pull back is certainly unclear.

Meanwhile, A quiet Monday, following Martin Luther King day in the US saw most interest in Platinum trading, which was driven to a high of 1473 USD per ounce by the AMCU calling also for strikes at Impala. - First day of the week. A strike at South African platinum mines paralyzed the world’s three biggest producers of the metal for a second day as talks to resolve the dispute over pay broke up until Jan. 27. Nearly 70,000 employees downed tools at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc mines, where 70% of global platinum is produced. Hence, Platinum is 6% higher this month. 

While the yellow metal may take a back seat to other asset classes this year, but strong physical demand will sustain elevated average price this year. 

But investors have to be “cautious and quick” in taking profits because if the FED announces further tapering of its bond-buying program at its meeting next week, the dollar could soar, which could be a bearish sign for gold.

Nonetheless, momentum is still pointing up for now.

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 -

"Up Down- Gold Price trend Unclear"

http://www.riddisiddhibullionsltd.blogspot.in/2014/01/up-down-up-gold-prices-trend-unclear.html

UP DOWN UP- GOLD PRICE TREND UNCLEAR

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

So far...so good...it has been a decent start for gold. In the first fortnight of 2014, gold scaled up by 3.7 per cent. As we all know that 2013 has been one of the worst performing years for gold and it was down almost 28 per cent. It even ended a 12 year bull run for gold. All this may sound very repetitive as I have mentioned this time and again in all my articles lately.

But this has cropped up again as at this point where some believe that gold is making a comeback it is very important to know that is actually where gold is headed. 

Throughout the week, there were not one but many factors that played a pivotal role for gold's price movement:

• Strengthening of US dollar
• Federal Budget Balance
• Beige book
• Fed Chairman Ben Bernanke’s speech.
• Core CPI m/m
• Building permits
• German Buba President Weidmann’s speech

The recent disappointment in non-farm payroll report may have lowered the chances of FOMC reducing its stimulus program in the near future. But that does not mean that we can expect Gold to begin a new rally? There are various reasons for it. One of the major concerns is the demand for leading precious metals’ ETF including iShares Gold Trust (IAU) and SPDR Gold (GLD) continued to diminish. During January, SPDR Gold’s holdings declined by 1%. 

But the upper trend did continue during the start of this week too. Gold rose to its highest level in a month on Tuesday at $1,255.00 an ounce due to a drop in equities and uncertainty over the U.S. growth outlook after a disappointing jobs report last week.  But later in the day, gold lowered. It fell nearly 1 per cent as a rally in U.S. equities that was sparked by encouraging December retail sales data dampened buying sentiment among bullion investors. 

On Wednesday too, gold fell as the dollar rallied over producer prices data released in US. It showed that the price has risen sharply in December, even though there were few signs of sustained price pressures.

Supporting investor appetite for riskier assets like equities, the Federal Reserve said in its Beige Book published late on Wednesday; the U.S. economy continued to grow at a moderate pace from late November to the end of 2013, with some regions of the country expecting a pick-up in growth.

Thursday followed suit, as a developing global economy bettered the market scenario for equities and gold lost its appeal as an alternative investment and made it vulnerable to further losses.

Gold rallied towards the $1,255 level but it failed to go through it because there is no investor interest, and there may be a push towards the $1,210/$1,200 area.

Gold now relies on macroeconomic events that are coming up for the month of Jan:

1) The FOMC meeting: 

The next meeting of the Fed's FOMC (Federal Open Market Committee) is on Jan. 28-29, while the next major U.S. data figure is the U.S. weekly jobless claims report, scheduled for release

2) Physical Demand from China:

In China, the biggest physical market for gold, demand has picked up since the beginning of the month in the build-up to the Lunar New Year, when the metal is bought for good fortune and given as gift. 

China has become the third-largest holder of gold, according to a Bloomberg Industries report. Gold holdings were nearly 2,710 metric tons, compared with the last reported holdings of 1,054 tons in April 2009, according to the report. Italy’s holdings are 2,451.8 tons, and France owns 2,435.4 tons, according to the World Gold Council data. The US is the biggest holder with 8,133.5 tons. The PBOC reported in April 2009 that its official gold reserves stood at 1,054 tons – and it has not reported any increase in official gold reserves since that announcement nearly five years ago,

China will continue to add its official gold holdings in a bid to raise the status of its currency, the Yuan and strengthen it.

So now all eyes on the upcoming FOMC meeting and wait for the best to happen

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 -

"Gold rolling around payroll"

http://riddisiddhibullionsltd.blogspot.in/2014/01/gold-rolling-around-pay-roll.html

GOLD ROLLING AROUND PAY ROLL

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

New Year’s first full week began with a green note for gold where the weakness on Wall Street widened bullions rally.

However, Gold fell on Tuesday and Wednesday.  An expectation of a positive US jobs data (slated to release on 10th Jan), compelled investors and traders to believe that the Federal Reserve will continue to scale back its monetary stimulus on the pillars of a recovering economy.

After a consecutive fall of two days, gold prices gained momentum on Thursday ahead of the key U.S. nonfarm payrolls report. This report was a deciding factor for the Fed whether it will continue its tapering. The change in private payroll data by ADP on Wednesday showed a strong increase by 238,000 and also exceeded the prior figure of 215,000 for the month of November.

In either ways, traders were ready for some volatility in precious metals.

Finally the tussle between bears and bulls end with the release of Non-Farm Employment Change data released on Friday where Bulls gained an upper hand. A weaker than expected US jobs data supported the fact that US Federal Reserve would now go slow on its tapering.

US nonfarm payrolls rose just 74,000 in December, the smallest increase in nearly three years and far below the 196,000 forecast by economists. The unemployment rate fell 0.3 percentage points to 6.7%.

The year began on a good note for gold and it has performed well till date. Since the beginning of 2014, gold has rallied 3 per cent compared to its 28 per cent loss in 2013, which has been one of the worst performing years for gold.

Although gold is consolidating in the $1,215 to $1,250 range, my technical view sees that internationally the metal is a sell into rallies. The FOMC minutes from the December FOMC meeting, released Thursday morning IST, provided little information that the market has not already priced in. Therefore, ETF holdings have likely to continue their downward trend for the time being while the Fed slows its asset purchases.

The current market trend seen in the first two weeks of 2014:

Global ETF holdings keep falling, losing another 2moz in the last three weeks to reach 56.9moz. - The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Share, reported its first outflow of 2014, of 1.5 tonnes, taking its holdings to a 5 year low of 793.21 tonnes

Meanwhile SGE volumes have picked up ahead of Chinese New Year on 31 January. Trading volumes on the SGE, a physical platform, have also picked up. Volumes hit an eight-month high on Monday, but the buying pace has now slowed from that peak The Chinese New Year, which will be celebrated on Jan. 31, typically prompts a spurt in bullion purchases as the precious metal is bought for good fortune and given as gifts. Premiums for 99.99 percent purity gold on the Shanghai Gold Exchange (SGE) climbed to over $20 an ounce this week, up from single digit premiums late last year. 

Indian premiums over spot remain high and will likely continue until the end of the wedding season in Feb­ruary or until the Indian government brings about a change in policies

Meanwhile, Ben Bernanke, who steps down as head of the Fed at the end of January, gave an upbeat assessment on Friday of the U.S. economy in coming quarters, though he did temper the good news in housing, finance and fiscal policies by repeating that the overall recovery clearly remains incomplete.

Gold support is at $1,233 and $1,227. Resistance is at $1,262 and $1,275.

Silver support is at $19.30 and $19.75. Resistance is at $20.42 and $20.54.

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 -

"Precious Sweet Revenge- Whats Next??"

http://www.riddisiddhibullionsltd.blogspot.in/2014/01/precious-sweet-revenge.html

2013-2014 Gold view by Prithviraj Kothari - ET now (+playlist)

PRECIOUS SWEET REVENGE- WHATS NEXT??

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

In the first trading week of 2014, gold was seen taking revenge to all those investors who shifted from gold to equities and other assets in 2013. Many claimed that gold has lost its glitter and is no more a return generating asset. By its performance in the first week of 2014, gold put a lock to many peaking mouths. In fact other precious metals like silver and platinum followed suit , with platinum touching a six-week high and palladium climbing to a three-week high, heading for its biggest weekly gain since October.

But then again debaters said that gold has shown similar trend in 2013. Recalling gold in 2013 at this time of the year, I remember that gold moved sharply in Jan but then plunged terribly throughout the year. On 2nd Jan, 2013, gold opened at $1664. Then in Feb it was seen trading at $1660 while in March it was $1570. It was consistently seen moving down throughout the year. It crashed drastically in June and touched the 1182 mark on the last day of the year. All the hype and hoopla created by gold in the beginning of 2013, seemed to have vanished gradually by the end of 2013.  

Quantitative easing has always been a positive factor for gold as it held down interest rates and stoking inflation fear. But then on the other side, as labour reports and other data showed that the US economy is improving, it initiated scaling back of the stimulus programme. This is stinging into gold’s glitter.

Many investors lost faith in gold as in bullion-backed exchange-traded products shrank for the first time since the first fund was introduced in 2003. Heavy outflows from gold-exchange traded funds also reflected investors' diminishing interest. Holdings on SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell three tonnes to their lowest since January 2009 at 801.2 tonnes.  

Since October 2013, gold has been performing poorly. As it entered 2014, gold was seen to be in its best performance since October, as it rose to a two week high on Friday. This upsurge was supported by Chinese demand for gold.  Chinese demand is likely to stay strong in the build up to the Lunar New Year on Jan 31st, when gold is traditionally given as a gift.

Based on published data, Chinese physical gold imports will end 2013 at more than double 2012's record levels, at roughly 1,000 tonnes (below data is through October); and who knows how much more demand the unpublished data would uncover?

For gold, the major costs of mining - i.e., mining and reserve replacement - is at least $1,500/oz., per this quote from Gold Fields' CEO, Nick Holland (Gold Fields is the world's fourth largest gold producer). As for silver, St. Angelo proved prices must be above $25/oz. to enable the mining industry to produce positive cash flow. Now as per the current price levels, I fear if the mines can operate, forget making money out of it. 

Expectations that U.S. economy will improve and the rest of the world's growth will stabilise in 2014 have further undermined the case for holding bullion, as investors look to put their money in riskier assets such as equities.

The US Fed has to be very cautious while scaling back its stimulus program as the much claimed recovery is still happening at a slow pace and can take a halt at any point of time.

There is not much evidence that the global economy is improving. A tapering of QE can have negative effects on all the important stock market which is generally considered as an indicator of growth, development and progress

Things do seem to be improving in the Euro zone too.

All these aspects compel us to think that gold & other bullion metals could have a bearish price impact, technically. But fundamentally, supports do remain strong. 

Well it's too early to comment given the fact that there are a lot of important events coming up for precious metals in the months to come. My take would be a Gold’s price to 30% while Silver price rise to 40%.

Gold in the coming week is expected to trade between $1185 to $1252 an ounce in the international market and Rs.29,000 to Rs. 31,000 per 10 gram in the domestic markets

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 -

"2013's Last blog"

http://www.riddisiddhibullionsltd.blogspot.in/2013/12/2013s-last-blog.html

HAPPY NEW YEAR

WISHING EVERYONE A VERY HAPPY NEW YEAR. MAY 2014 GLITTER LIKE GOLD, SHINE LIKE SILVER AND PROSPER LIKE PLATINUM FOR YOU. 

GOOD LUCK AHEAD!!!!