ESCALATING TENSIONS.....ESCALATING PRICES!!!!

by Mr. Prithviraj Kothari, MD, RSBL

In the past week gold and silver dropped drastically. Even the ongoing tensions in Russia and Israel could not provide support to gold. US laying sanctions along with European counter parts on Russia hasn't proven that effective till now whereas the cease fire process between Israel and Hamas group has gone for a toss.

It is very difficult to list "a" particular reason for fall in gold prices. Rise and decline are both influenced by a variety of factors. 

CHINA: 

China has been one of the key drivers of gold in recent years, but now there is word that China may be increasingly less important to the gold story.

While the U.S. economy recovers, China’s demand for gold plummeted in the first six months of 2014. This helped to allow gold to fall back under the $1,300 per ounce mark on Thursday, after having been up more than 8% so far in 2014. Demand in China for gold was down by a whopping 62% for gold bars, and gold coin demand was also down by a sharp 44%.

China announced gold consumption figures for the first half of 2014. The China Gold Association announced that they fell to 569.45 tons as demand for gold bars declined 62 % to 105.58 tons, the world’s largest consumer said. Gold coins and other uses of gold dropped 44 % to 10.95 tons, while use in jewellery rose 11 % to 426.17 tons and industrial use climbed 11 % to 26.75 tons.

Last year was a record and China and the nation’s consumers are focusing on other internal and external issues rather than gold. Still, this drop in demand is much more than many industry observers might have assumed.

US ECONOMY:
After China it was key US economic indicators that continued to pressurize gold.

The number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years last week, suggesting the labour market recovery was gaining traction. The belief that the US economy is on the path of recovery pulled gold prices down. 

Geo-political tensions: 
Escalating geopolitical tensions have induced support to Gold prices. 

The U.S. stated late Thursday that Russian troops or pro-Russia rebels are shooting artillery shells at Ukraine targets from within Russia’s border. Russian President Vladimir is facing more pressure to expedite the investigation into the crash of a Malaysian passenger on July 17 in Ukraine.

Meantime, the Israel-Hamas fighting continued to be intense. Gaza authorities said Israeli forces shelled a shelter at a U.N.-run school on Thursday, killing at least 15 people. Fighting this month in Gaza has killed more than 800 Palestinians and 35 Israelis. 

Ukraine and Russia traded accusations of cross-border shelling as tensions between the ex-Soviet neighbors intensified. 

The growing tensions and havoc on Eastern Europe and the Middle East this week has boosted demand for safe haven assets liked Gold. 

Spot gold was up 0.7 percent at 1,301.81 an ounce, after losing nearly 1 percent on Thursday, when it hit its lowest since June 19 at $1,287.46. Gold rose on Friday, re-bouncing from the previous session's drop to a one-month low, as heightened tensions between Russia and the West over Ukraine and situation of Gaza not getting better prompted speculators to buy back their bearish bets ahead of the weekend.

RUSSIA AND TURKEY:  
Gold holdings in Russia's and Turkeys bullion reserves increased in June as both countries lifted their reserves.

Russia, the world's fifth-largest bullion holder after the United States, Germany, Italy and France, increased its gold holdings by 16.8 tonnes to 1,094.8 tonnes in June, the IMF's International Financial Statistics report showed.

Turkey, the world's 12th-largest nation in terms of gold ownership, raised its precious metal by 9.9 tonnes to 512.9 tonnes for the month. It counts gold held on deposit with it by commercial banks as part of the central bank's bullion holdings.

THE BANK ESPIRITO SANTO- This crisis has been contagious for the world. When the world of electronic finance catches the flu, the true nature is all systems fail. One of Portugal's largest banks, Espirito Santo, sent waves through the financial system when we learned they would default on a payment. And they have been fighting against bankruptcy ever since.

Next week, will be a week to watch. 

• Comex expiry for Gold contracts on 28th July.
• 2nd Quarter Advance GDP release on Wednesday morning
• Wednesday afternoon we will hear the results of a two day FOMC meeting. 
• The Non-Farm Payrolls Report for July on Friday August 1. 
• The Chicago PMI, Michigan Sentiment, and the ISM Index
• Geo political tensions.

Lots more in the basket and lots of surprises for precious metals. These factors will surely influence gold prices...what we need to see is HOW?

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1292-$1334 an ounce	Rs.27,700-Rs.28,700 per 10 gram
SILVER	$20.15- $21.50 an ounce	Rs.43,600-Rs.46,000 per kg

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 - "Gold and Silver On A  Swing"
http://www.riddisiddhibullionsltd.blogspot.in/2014/07/gold-and-silver-on-swing.html

GOLD AND SILVER ON A SWING

by Mr. Prithviraj Kothari, MD, RSBL

Last year investors sent bullion tumbling by the most in three decades which they kept dumping the metal recently.  But gold has once again become a valuable commodity. Demand for gold is increasing and prices are defying bearish forecasts.

Gold has proved that the bearish sentiment in the market was indeed just a thought and gold's performance this year has proved it. 

US economy is on the path of recovery and it is clearly visible from the recent government data that was released. Prices are speculated to retreat by the end of the year and inflation concerns along with pockets of unrest are sending investors into gold as a safe haven.

Violence spread in the Ukraine and Iraq and the Fed's reservations that it will keep interest rates near record lowed has kept gold prices high.

The gold and silver market heated up last week after they didn’t do much in the previous week. The minutes of the FOMC meeting may have partly contributed to the rally of precious metals by the end of last week: The minutes revealed the FOMC may keep the interest rates for a long time until the inflation start to pick up towards the Fed’s target of 2%. This dovish tone may have sparked another rally of gold and silver. 

During last week, the price of gold increased by 1.27%; the average price reached $1,326.88/t. oz which was 0.21% above last week’s average. 

The FOMC dovish policy is getting gold and silver back and is boosting up their prices too.

Moreover, if the Chinese economy doesn't show much progress, it will play a secondary role in impacting the bullion market. But on the other hand if the US economy moves on the path of recovery then it will pull up equities and curb down the rally of gold and silver.

Short term concerns over inflation and the ongoing geopolitical turmoil in many parts of the world has been the main reason behind pushing gold prices high. 

Gold was once again on the see saw this week. As the week began, gold fell sharply. On Monday, gold witnessed on profit taking after reaching the highest level since March in the previous week and ahead of Federal Reserve Chair Janet Yellen’s congressional testimony. 

There was a rally in gold prices on Thursday, over the tragic plane crash incident and a pickup in hostilities in the Israeli-Hamas conflict.

On Thursday, The Malaysian Airlines Boeing 777 flying from Amsterdam to Kuala Lumpur was "blown out of the sky", by a ground launched missile killing nearly 300 people aboard and sharply raising the stakes in a conflict between Kiev and pro-Moscow rebels that has set Russia and the West at daggers drawn.

The blame game , cranked up global pressure which created a way for a local conflict.

Ukraine's state security chief accused two Russian military intelligence officers of involvement with pro-Russian rebels in the downing of a Malaysian airliner on Thursday, releasing chilling testimony of what he called an "inhuman crime."

This incident kept gold over $1300. Gold for August delivery, the most actively traded contract, jumped $7.50 or 0.6 percent to close at $1,309.40 an ounce on the Comex division of the New York Mercantile Exchange on Friday. Gold for August delivery scaled an intraday high of $1,325.50 and a low of $1,305.00 an ounce.

But by Friday, gold pulled back from the knee-jerk reaction. The safe-haven benefits for gold faded on Friday, with the precious metal dropping in electronic trading, as a lack of physical follow-through made that upward move unsustainable.

Moreover, SPDR Gold Trust, the world's largest gold backed exchange traded fund, said its holdings fell 2.69 tonnes to 803.34 tonnes on Thursday.

But the yellow metal is still down nearly 2 per cent for the week, following a six week winning line over fears as Portugal financial crisis faded and investors worry about a sooner than expected hike in US interest rates

Even if U.S. rates don’t change before the second quarter of next year, the upside potential for gold over the medium term will remain capped and we may see some price pressure in the back of speculative selling, 

Next week’s economic reports are fairly light, with consumer price index data and existing home sales due out Tuesday, new home sales on Thursday and durable goods orders on Friday.

Still, gold markets will continue to watch geopolitical events, especially ahead of the weekend, which could produce more headlines out of Russia and Ukraine over the downed jet and the Middle East, where Israel has launched a ground offensive in Gaza.

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1292-$1328 per ounce	Rs.27,500-Rs.29,000 per 10 gram
SILVER	$20.45-$21.70 per ounce	Rs.44,000-Rs. 47,000 per kg

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 -
"Precious Metals.....Indeed Precious"
http://www.riddisiddhibullionsltd.blogspot.in/2014/07/precious-metalsindeed-precious.html

PRECIOUS METALS....INDEED PRECIOUS!!!

by Mr. Prithviraj Kothari, MD, RSBL

Ever since I have started my blog, you must have noticed that I first analyse the international markets and then the domestic markets. But since this week was an important and crucial week for gold in Indian market, as it was the newly formed government's first budget since election, I would like to glance through the domestic markets first.

The previous government had over the past two years raised the import tax on gold to 10% from 2% and mandated that 20% of imports had to be re-exported to stem a slide in the value of the rupee and narrow the current-account deficit. There were widespread expectations that some reduction in the import duty would be announced in the Budget. Traders expected at least a 2-4 per cent cut of import tax on gold. Also, some relaxation in the 80:20 scheme that was imposed by the Reserve BANK of India (RBI) last year, was expected.

But traders were left astonished as India's new government left import taxes on gold unchanged in its annual budget. Premium on gold had disappeared in the last two weeks on expectations that the government would relax restrictions on imports as India's current-account deficit more than halved to $32 billion last fiscal year.

After Finance Minister Arun Jaitley concluded his budget speech on Thursday, gold in India climbed $30 above the international price of $1329.50 an ounce. Indian gold futures jumped 2% on Thursday, widening the premium over global prices which had narrowed on the duty cut expectation.

Simultaneously, we saw gold prices zooming in the international markets too. Factors for the same were:

EU Data:  Gold rallied on sliding European equities and a weak euro zone industrial output data. Given the recent weak economic data coming out of the European Union, traders will be closely watching European bond yields, for clues on European investor confidence. The European Union sovereign debt crisis is not that far removed from the market place. 

Chinese Data: Chinese trade data was much below expectations. China’s exports grew by 7.2%, year-on-year, in June, which was below market expectations of a 10% rise

Portugal trouble: There were reports that a major bank or banks in Portugal are in trouble. Europe's stock markets suffered heavy falls on Thursday as troubles at Portugal's largest listed lender, Banco Espirito Santo (BES), sparked fears of a possible return to the dark days of the euro zone debt crisis. Banco Espirito Santo SA sought to calm investors after a parent company missed payment on short-term notes. 

Middle East tensions: Middle East tensions escalated as Israel this week launched a military offensive on the Gaza strip. Heavy fighting too was reported overnight. This once again focused traders attention on the Middle East. At least 78 Palestinians, most of them civilians, have been killed. This situation is a potential time bomb that could further incite unrest in other parts of the Middle East.

Ukraine's fight back: Ukrainian forces regained more ground but sustained further casualties on Thursday in clashes with separatists, while two Western allies urged Russia's Vladimir Putin to exert more pressure on the rebels to find a negotiated end to the conflict. Russia threatened Ukraine on Sunday with "irreversible consequences" after a man was killed by a shell fired across the border from Ukraine, an incident Moscow described in warlike terms as aggression that must be met with a response.

FOMC Meet: The market place has pretty much digested Wednesday afternoon’s FOMC minutes from June. They further stated that the Fed is on track and to end its monthly bond-buying program (quantitative easing) in October. Further there was no specific sign as to when the U.S central bank will start to raise interest rates but there were definitely expectations in the market that it won't take place this year and this sentiment was further reinforced by Wednesdays latest FOMC minutes.

After analyst downgrades of gold that we've all heard over the last year, money is now pouring into the metal at the slightest bit of unease.

The value of the gold funds rose by $5 billion this year as prices rallied 10 percent. The metal has rebounded from last year’s 28 percent plunge that was triggered by muted inflation and as investors shunned the metal in favour of equities. The Hedge funds and money managers increased their bullish bets on Gold by 7,344 lots to 14,272, the highest since March, in the week to July 8. In Silver, they raised their bullish bets by 7,819 contracts to 44,517, a peak since December, according to the data from the Commodity Futures Trading Commission on Friday.

For now, Gold’s performance has proven the bears wrong so far this year. The bulls are being rewarded.

Following the market consensus that had recently emerged, LBMA announce that CME group and Thomson Reuters have been selected to provide the solution for the London Silver Price Mechanism.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1324-$1367  per ounce	Rs.28,000-Rs.29,000 per 10gm
SILVER	$20.90- $22.00  per ounce	Rs.45,500- Rs.47,500 per kg

- Previous blog -

"Geopolitical Cover for GOLD"

Link it to: http://www.riddisiddhibullionsltd.blogspot.in/2014/07/geopolitical-cover-for-gold.html

Geopolitical cover for GOLD!

                                                        - Mr. Prithviraj Kothari, MD, RSBL

Till 2012, gold was considered as the highest return generating asset in its class. From December 2008 - June 2011 bullion climbed 70 per cent as the Fed bought debt and held borrowing costs near zero percent to spur economic growth after the recession. Prices ended the 12-year bull run last year as inflation remained low and on concern that the U.S. central bank would slow the pace of monetary stimulus.

Lately gold has been abandoned by many as investors seem to be captivated by other assets like equities. The equity market continues to attract money as people expect that the economy will improve further.

Though gold has risen lately, many investors believe that this price rise won't last for long and any easing of the geopolitical tension would bring gold prices down. It was these tensions that gave gold the all needed boost at the beginning of the week. Gold prices jumped 6.1 percent for the month, while recording a gain of 3 percent for the quarter ended June.

Gold was up on Monday and climbed to a three-month high on Tuesday as a softer dollar and escalating violence in Iraq increased the metal's appeal, boosting inflows into the top bullion-backed fund. Spot gold climbed to $1,332.10 an ounce, its highest since March 24 during the trading hours.

Post the release of employment data, gold tumbled as the nonfarm payrolls data was much stronger than expected. This data was released on Thursday as Friday was a holiday. The U.S. Labor Department said the U.S. added 288,000 jobs in June, with the unemployment rate falling to almost a six-year low of 6.1%. The headline figure was sharply above the consensus estimate of slightly more than 200,000 new jobs, while the jobless rate fell 0.2 basis point from last month’s 6.3%.

In addition, the government upwardly revised the May job figure to 224,000 from 217,000 and April job gains to 304,000 from 282,000.Wage gains remained as expected, up 0.2%, and the labour-force participation rate was also flat at 62.8%. US jobs data released Thursday supplied evidence that the country's economy is growing, with the unemployment rate nearing a six-year low.

As U.S. markets were closed in recognition of Independence Day, investors will have to wait until after the holiday long weekend to determine the full impact of Thursday’s much better-than-expected nonfarm payrolls report.

On Friday, gold prices rose as they were reinforced by mixed European shares and tensions in Iraq and Ukraine. But data indicating that the US economy is strengthening may soon reduce demand for the precious metal.

The yellow metal has benefited from its traditional haven status in recent months. However, when geopolitical tensions ease, less-committed investors are sure to exit; and one can expect gold to return to its downward trajectory witnessed since April last year.

Moreover, demand from two of the worlds largest consumers of gold has dampened in the recent months with slowdown in Chinese imports as well as continuing lacklustre performance by India. Customs duty of 10 per cent ad valorem and export obligation (80:20 scheme) have discouraged gold imports into India.

Meanwhile, a Bloomberg report indicated gold shipments into India may have plunged 77 percent in the first half amid government restrictions such as higher taxes on bullion imports.

However Modi’s government has hinted that it will relax some of the restrictions. Loosening those restrictions could help to revive Indian gold demand and further push gold prices higher. The next big event on the domestic front is the First Budget of the new government to go live on 10th July, 2014.

Meanwhile we expect gold and silver to trade in the following prices range:

METAL	INTERNATIONAL	DOMESTIC - RSBL BENCHMARK PRICE
GOLD	$1291 - $1345  an ounce	INR 27,500 - INR 29,500  per 10 gm
SILVER	$20.20 - $22.00  an ounce	INR 43,000 - INR 47,500  per kg

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 - "Halfway through 2014...But where is gold heading for??"

http://www.riddisiddhibullionsltd.blogspot.in/2014/06/half-way-through-2014but-where-is-gold.html