- 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
why spur in bullion prices post budget?
ReplyDeleteYesterday, Indian budget surprised bullion markets by keeping the import duty on gold and silver unchanged at 10 percent.
ReplyDeleteOver the months we have read in newspapers that lot of Gold is being brought in India through illegal channels. To curb this, I did expect Government to make some changes in the import policy.
So with the current set of rules, the supply to the market is less which has led to high premiums. Due to this reason, what people and bullion market people expected yesterday dint happen and so the premium increased with its comparison with International gold market prices.
I am sure government knows the best in this case as to what is good for India's economy and future.
thank U
ReplyDeletedear sir, do you think investment in gold at this point of time would be beneficial as a long term investment , lets say 5 to 10 years.
ReplyDeletedear sir, do you think investment in gold as a long term scenario would be beneficial,for a term of 5 to 10 years.
ReplyDeleteThanks for your comment.
ReplyDeleteGold is not an asset that should be bound with price moves rather it should be always connected with your security of investments. When I say that Gold investment should be a temporary phase of your life, rather a continuous approach through which you will have security of your future.
Let me point out some of the facts that will give you an idea as to why Gold is always a good investment option throughout your life an not only 5 to 10 years:
1. China and Russia have accumulated more Gold than ever. Countries like them do understand the importance of Gold and what it is without owning it.
2. Over the years, wars have been fought for Gold. Paper currency is an inflated one with banks across the world trying to support their economies by providing necessary support programmes. In that they are printing money at a faster scale than ever. What if this system takes an ugly turn?
3. Geo-politically countries across the world are continuously getting engaged in some means of warfare. Due to this, other countries have to face the wrath of expensive goods from that country.
These are just a few set of reasons where you can understand that, there has to be something on which a world would rely on. Safe haven, security and top of that one of the best performing asset are few feathers to the metal's cap. So I do feel that an investment portfolio should have Gold in it.