GOLD INVESTORS BE CAUTIOUS!

                                        - Mr. Prithviraj Kothari : MD, RSBL(Riddisiddhi Bullions Ltd.)

                                 

On Friday, Gold prices were moving between small gains and small losses as the markets were quite calm as investors reined in their trading activity ahead of a long weekend in U.K. and the U.S. Spot gold was down 0.2% at $1,291.32 during trading hours where as silver was 0.3% lower at $19.391 an ounce. 

Through the week gold prices were held in a tight range between around $1280 and $1315. 

Gold prices remained low this week on strong dollar and the remarks released by the FED of a positive US economic recovery but with the Ukrainian elections Sunday, news out of the region may finally give the gold market the catalyst it needs to break through.

The market has been pulled between good news and bad news and this is what is given gold that pull and push. The big question and the reason why we are stuck in this range is the uncertainty about where to go next and need to determine what themes should be the overall driver for this sector at the moment. 

Global monetary factors in particular continue to favour gold.  In addition, geopolitical risk remains high, particularly as the Ukraine elections approach, and, longer-term, Russia and China cosy up, a significant long-term global game-changer to which Washington appears oblivious.

• Holdings in exchange traded products backed by physical gold continue to hit new 4½ year lows while physical demand may receive a boost from pent up Indian demand later this year when import restrictions are expected to be eased by the new government.
• In India, the government has just authorized seven more private agencies to import gold, thus easing gold import restrictions, which will lead to lower premiums and a rise in gold demand as the wedding and festive seasons will start in August. The easing out of the 80:20 rule is still a drag, however the relaxation to include the trading houses should be seen as a positive development. 
• The record high premiums that were being charged in the market have and will continue to drop drastically as supplies will be good. The premiums have fallen from record highs to nearly $40 which is expected to reduce to $25 as the time passes by. Usually 30-35 Tonnes of gold is imported, but With this rule relaxation, supply is expected to increase to  60-70 tonnes
• In Europe, the ECB is expected to ease monetary policy in the 5 June meeting as inflation is too low and economic growth is too slow at 0.2 percent in Q1
• According to a recent Bloomberg/CME Precious Metals Conference, the East holds the key to gold’s outlook. With China printing its money faster than mining its gold, consumers will continue to demand gold to protect them against inflation

To sum it up, gold prices have got glued to the $1300 level and until we see a critical shift in market dynamics such as correction in the equities market or some statement from the Fed or some escalation in crisis, we continue to see gold in this range.

Gold has been moving in this sideways pattern for over a month and has formed a wave like pattern.

Now what we need to watch for is more important-

• We will keep an eye on Ukraine’s 25 May presidential vote, 
• The U.S. April durable goods orders and March housing prices on 27 May, 
• The U.S. Q1 GDP second release and Japan April CPI and industrial production on 29 May, 
• The Philadelphia Fed President Plosser’s (FOMC voter) speech 
• The April U.S. Core PCE Price Index on 30 May. 

As per the current market trends gold is expected to range between $1272- $1310 in the international market and Rs.27,000- Rs.28,500 in the domestic market.

On the other hand silver is expected to move between  $18.85- $20.20 and Rs.39,500- Rs.41,500 in the international and domestic markets respectively.

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- "MODIfying India"

http://www.riddisiddhibullionsltd.blogspot.in/2014/05/modifying-india.html

MODIfying India

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

Firstly, heartiest congratulations to Mr. Narendra Modi on his historic win. It was a time for celebration for entire India. messages, jokes, headlines etc were exchanged as Mr. Narendra Modi enjoyed a momentous win in the worlds largest democracy.

As India welcomes its most awaited PM with open arms, we saw Mr. Modi's effect extending across all assets class.

Friday at the prospect of a stable government led by Mr. Modi, whose own state, Gujarat, prospered under his leadership. stocks and the rupee jumped on optimism that Modi will make good on campaign promises to create jobs and attract foreign investment in all sectors except for multi-brand retail.

Indian rupee also benefited, strengthening to an 11-month high of 58.63 rupees to the U.S. dollar Friday. and Sensex sky rocketed at 25,000 (1400 points up.) while results were still being out.

This appreciation of the rupees pushed bullion prices down.

Gold and silver tumbled terribly on Friday. Though in the international market gold was at a weekly gain, in India , the prices declined as the rupee strengthened. Gold plunged almost 350 rupees and silver was down 825 rupees on the commodities exchange. Meanwhile, in the international market gold was playing a different move.

After dropping more than 1 percent on Wednesday, spot gold prices gained on Thursday as investors digested comments by Federal Reserve chair person that central banks are in no rush to reduce the size of its balance sheet. 

The yellow metal was also supported by escalation of geo-political tensions as pro-Moscow separatists in eastern Ukraine ignored a call by Russian President Vladimir Putin to postpone a referendum on self-rule, a move that could lead to war. However, comments from European Central Bank President Mario Draghi's that the bank may act to stem falling inflation at its June meeting knocked the euro and the strength in dollar capped sharp gains in prices.

Gold prices fell on Thursday on positive US unemployment claims data which weakened the precious metals complex while dollar strength added to the bearish sentiments.

Stronger growth is expected post the poor winter growth. backed up by data this week showing strong housing starts and an uptick in consumer prices, might move up the Fed's plans for raising benchmark interest rates from near zero.

Half of the sates in US now have unemployment rates below 6 per cent. This figure shows that the jobs market in US is improving but at a slow pace. While employers in 39 states added jobs, we see that hiring too is picking up well.

On Friday, Gold saw slight gains in Asia before it fell to $1291.95  and then bounced back to $1296.09 in the next four hours of trade, but it then dropped to a new session low of $1288.02 after  housing data was released and the yellow metal ended with a loss of 0.19%.  Silver slipped to as low as $19.271 and ended with a loss of 0.62%.

The Economy

Report	For	Reading	Expected	Previous
Housing Starts	Apr	1072K	975K	947K
Building Permits	Apr	1080K	1008K	1000K
Michigan Sentiment	May	81.8	84.5	84.1

Source- http://news.goldseek.com/GoldSeeker/1400271241.php

For now, the gold market’s key drivers are, first and foremost, the flow of U.S. economic indicators as they affect expectations about prospective Federal Reserve monetary policy . . . and, second, of a more temporary nature, the ebb and flow of geopolitical anxieties arising from events in and around Ukraine.

Now that India has formed  a stable government and that the world picture is minutely fading and getting clear, market players are once again expected a rally in gold prices.

Reasons Being- 

Import duty reforms in India- The his morning, for example, as I write the news has come through that India’s ruling Congress party has conceded defeat in the world’s biggest democratic election to Narendra Modi’s BJP which may even win enough votes to take power on its own without its coalition partners. The BJP is thought to be more sympathetic to gold and could repeal, or reduce, the import restrictions that have led to India falling from first place as the world’s biggest gold consumer. 

This will lead to a rise in demand for gold from India which in turn will push gold prices high.

Physical Demand- Demand for gold from China is also expected to provide support for gold. This factor will give gold a wild card entry into the bulls market. over the next three to five years the demand from Asia and, also from Central Banks which have been buying gold rather than selling it over the past couple of years, will actually be sufficient to drive the gold price higher.

U.S. Economy- Many traders expect the US economy to deteriorate further which will compel the Fed to rethink about its policy prospects. The recent statistical improvement in the U.S. economy is little more than a bounce back from the past winter’s weather-induced economic chill. 

As a more realistic view of economic prospects takes hold, the financial markets will re-assess expectations of Fed policy – and this could be the catalyst triggering a resumption of gold’s long-term bull market. 

At the same time, equities are due for a setback – perhaps mild, more likely not so gentle. Either way, the competition for investment funds between equities and gold – a competition that equities have won in recent years – will shift increasingly toward bullion

when we expect to see a deterioration in the economic indicators and a reassessment of Fed policy prospects.

De- Dollarization- Russia is actively pushing on with plans to put the US dollar in the rear-view mirror and replace it with a dollar-free system. Or, as it is called in Russia, a “de-dollarized” world.

Russian Ministry of Finance wants to reduce the share of dollar denominated transactions and is hence ready to green light a plan to radically in the role of Russian ruble in export operations. Dollar will then be replaced by gold. This too will give a support to gold prices.

Geo-political tensions in Russia-  as we all know, tensions in Russia can escalate any moment thus increase the chances of a war. Any spark in the geo-political crisis in Russia will shoot up gold prices.

Meanwhile, gold is expected to range between $1272 to $1310 in the international market and Rs. 28,000- Rs.29,000 in the domestic market. 

On the other hand silver is expected to range between $18.80-$20.00 and Rs.40,000- Rs.42,500 in the international and domestic markets respectively.

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 on a see-saw"

http://www.riddisiddhibullionsltd.blogspot.in/2014/05/gold-on-see-saw.html

My view on the closure of London Silver Market Fixing

On 14th May, 2014 the London Silver Market Fixing (the ‘Company’) Limited announced that it will cease to administer the London Silver Fixing with effect from close of business on 14 August 2014. Until then DB, HSBC and the Bank of Nova Scotia will remain members of the Company and the Company will administer the London Silver Fixing and continue to liase with the FCA and other stakeholders.



The LBMA's decision to stop London Silver Market fixing will bring in a lot of hurdles for silver importers in India. Across the world, LBMA prices have always been considered as benchmark prices. The biggest issue will be that there won’t be any benchmark price to look upon. Transparent fair prices will be required for the market to sustain and LBMA will have to choose other alternatives for fixing Silver market prices.

GOLD ON A SEE SAW

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

The year began on a positive note for gold after a terribly weak performance in 2013. By 2014, Mid February gold was once again enjoying the status of the most sought after metal, as we saw the yellow metal moving on the road of recovery.

Now gold is being pulled between bullish and bearish factors. Gold prices peaked in march, but the pull back and consolidation is now lasting a bit too long to be considered healthy. Moreover, ETF redemptions are on the rise and this has given rise to the bearish pull for gold. Gold is now sitting on a see saw and is caught between US recovery on one side and the rising Geo-political tensions on the other.

Russian crisis brings along with it a strong bullish background for gold. But at the same time the global economic development, has shifted investors focus from gold to equities and pushed gold into the bear market. In addition, other markets are doing better and you need look no further than the fact that US equities are setting fresh record highs and corporate confidence seems to be picking up, as there has been a revival in M&A activity. Strong equities are therefore raising the opportunity cost of holding Gold.

Last year gold did disappoint many investors but still it has not been pushed out of the market. It's a temporary phase and key market players still believe that gold will soon begin to rally.

As such, we think the market could quickly get interested in Gold again if other markets start to correct, especially as Gold prices are much closer to their lows than highs. A relaxation in India’s import restrictions could be a bullish development, as could a pick-up in geopolitical tension. Nearly 70% reduction in Gold imports as compared to last year will surely please the new government with the reduction in CAD woes.

It's always stated that gold enjoys the status of a safe haven asset during times of uncertainty. Ukraine tensions have been behind much of gold's 7 percent rise this year. Pro-Moscow separatists in eastern Ukraine ignored a public call by Russian President Vladimir Putin to postpone a referendum on self-rule, declaring they would go ahead on Sunday with a vote that could lead to war. The decision, which contradicted the conciliatory tone set by Putin just a day earlier, caused consternation in the West, which fears the referendum will tear Ukraine apart. While on Saturday, tensions were running at fever pitch in eastern Ukraine on the eve of an independence referendum, as rebels briefly held several Red Cross staff on suspicion of espionage. These rebels voted for self rule. Ukraine's acting President Oleksander Turchinov sad that those stand for self rule do not understand that it would mean complete destruction of the economy , social programme and life in general for the majority of the population in these regions.

But, many traders fear the gains would dissipate quickly once the situation is resolved. Many gold analysts have said that the precious metal has remained resilient the past few weeks as fundamentals remain negative for the asset, such as the Fed's commitment to continue to scale back economic stimulus.

Data released on Thursday stated that the number of Americans filing new claims for unemployment benefits fell more than expected last week, indicating the labour market was strengthening despite a run-up in applications in prior weeks.

Overall, Gold posted second straight weekly decline as more strong U.S. data showed that the world's largest economy was recovering well, supportive of the Federal Reserve's stance to keep trimming monetary stimulus. Moreover, the European Central Bank stayed committed over leaving its main interest rates unchanged. Physical demand has also been muted despite the drop in prices, with many hoping that a stabilization in prices would bring back buyers.

Last year, Chinese demand for gold surged as many buyers entered the market at dips. That, along with strength in retail demand in Western markets, helped drive a 35 percent surge in physical investment last year to 47.1 million ounces and Jewellery consumption also rose 22 percent to 81.7 million ounces.

The Fed’s ongoing reduction in its bond purchases, easing concerns about fiscal situations on both sides of the Atlantic and low inflation are all headwinds for the yellow metal for the rest of 2014. This brief detention underscored jitters in the two regions of east Ukraine ahead of the disputed referendum likely to result in a new spike of Geo-political tensions.

We cannot then, underestimate gold. 

The trade range for Gold and Silver is expected to be as follows:

In the international markets gold and silver are expected to range between $1270 -$1310 and $18.20 - $20.50 respectively. While in the SPOT (delivery based) domestic markets Gold and Silver are expected in the range of INR 28,300 to 29,700 and INR 40,500 - INR 44,000 respectively

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Ukraine Reigns Over Gold Prices"

http://riddisiddhibullionsltd.blogspot.in/2014/05/ukraine-reigns-over-gold-prices.html

UKRAINE REIGNS OVER GOLD PRICES!!

                                    - By Mr. Prithviraj Kothari, MD,RSBL

Gold has been showing quite interesting movements lately. 

Last week, gold was lying at a three month low of $1,270 an ounce post the economic recovery and reduced safe haven appeal. This negative sentiment continued this week as Gold rose slightly but remained below $1,300 an ounce on Tuesday as the market focused on the U.S. Federal Reserve's policy meeting and expectations for strong U.S. data, with prices underpinned by uncertainty over Ukraine. The Fed did give a positive and upbeat assessment of the U.S economy and announced another cut in its massive bond buying program.

Following the previous 3 tapers, The US Central Back reduced its monthly asset buying to $45 billion for the fourth time on 30th April. This $10 billion cut has compelled the market players to believe that further reductions in measured steps are likely.

Positive economic growth was visible from the reports released during the week.  Gold further dropped post the release of the payrolls data, which showed that U.S. employers boosted payroll in April by the most in two years. Moreover unemployment rate stands at 6.3% which is much lower as compared to 6.7% last month.

This downtrend was further supported, as outflows from the world biggest  bullion fund resumed after a one and a half week halt. Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, fell 0.3 percent to 785.55 metric tons during the week, the lowest level since January 2009, according to data on its website. Outflows totalled 25.1 tons last month, more than offsetting combined gains of 19.9 tons in February and March

Spot gold fell 0.2 percent to $1,289.10 on Thursday, after losing 0.4 percent on Wednesday. Trading was thin as several Asian markets, including China, Hong Kong and Singapore, were closed for the Labour Day holiday.

However, traders remained cautious in expectation of further developments in the Ukrainian crisis and Friday changed the world scenario for gold as increased geo political tensions gave the yellow metal that much needed push. Demand for gold stepped up as the flaring of Ukraine's violence started making markets nervous and pushes the international price of the Gold above $1300.

Ukraine sent armoured vehicles and artillery to retake Slovyansk, a stronghold for pro-separatist forces, defying President Vladimir Putin’s demand to pull back troops with Russia’s army massed across the border. 

Acting President Oleksandr said that  many pro-Russia rebels had been killed, injured and arrested in the eastern city of Slovyansk. In a statement, he said the operation in the rebel-held city was not going as quickly as hoped. Separatists shot down two Ukrainian army helicopters, killing a pilot and a serviceman and further injuring seven.

The UN Security Council met in emergency session at Russia's request. In fact, catastrophic consequences have been signalled by Moscow's ambassador if Kiev's military operation in eastern Ukraine were not stopped.

Investors have now put the Ukraine issue above everything. As the week began gold was seen moving down post the Fed tapering, but rising geopolitical tensions and heavy short-covering helped bullion reverse an initial sharp sell-off. 

2014, witnessed 8.4 percent gain in bullion amidst signs of faltering U.S. economic growth and mounting political crisis in Eastern Europe. Any elevation in the ongoing crisis will give a further push to gold.

After nearly three months of continued strikes over wages, Platinum mines in South Africa are still far away from solution. This is significantly increasing the buying interest and pushing prices to new levels.

What to expect next week:
1. ISM non-manufacturing PMI on Monday
2. Fed's Yellen testify to Join Economic Committee on Wednesday
3. ECB press conference on Thursday. 

The trade range for gold and silver is expected to be as follows-

In the international markets gold and silver are expected to range between $1277 - $1320 and $18.15 - $21.00 respectively. While in the domestic markets gold and silver are expected to move in the range of INR 29,000 - INR 30,500 and INR 41,000 - INR 44,000 respectively.

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

- Previous article- "Gold Gains Momentum, Investors Gain Confidence!"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/gold-gains-momentum-investors-gain.html