GOLD ONCE AGAIN SURRENDERS IN FRONT OF THE DOLLAR

by Mr. Prithviraj Kothari, MD, RSBL

Firstly, on behalf of RSBL, I would like to wish you a very Happy and Prosperous New Year. We hope that this new Hindu Year brings in optimism in your life along with the precious metals market industry, other investment assets and the world economy.

Gold prices reached to three session highs by Monday lunchtime in London. Gold prices touched $1246 an ounce which is considered to be a crucial trading range for gold. Thanks to last week stock rally, gold prices gained as European stock markets reversed half of Friday's big bounce.

Let's have a look at some market making news that happened over the week:

• The U.S. dollar is up  5 % this year against a basket of 10 leading currencies. 
• The country’s unemployment rate is at a six-year low, suggesting the world’s biggest economy will survive slowdowns in Europe and ⦁ Asia. 
• The European Central Bank plans to stimulate growth by buying asset-backed debt, aimed at boosting the ECB's own balance-sheet by €1 trillion in a bid to avoid deflation for the 18-nation currency zone through monetary stimulus.
• Economists cut estimates for Chinese growth after disappointing data on industrial profits, factory output and credit. Chinese central bank will inject short-term loans into major banks this week drove Beijing's 1-year money market rate down to 2.99% – its lowest level in 25 months .
• The global economy was further threatened over the spreading Ebola virus threatens the global economy further.

Gold prices recovered on Thursday, and was seen trading around $1232-$1233. Post the US data release, investors once again were confused between gold and equities as the dollar rose and safe haven demand for gold declined. Gold prices fell to a one-week low at $1232.55 per ounce on Friday in London as safe haven demand was eroded after a rebound in US equities and a strengthening dollar.

Even when the US economy is showing signs of strengthening, Investors have plenty to be concerned about: Russian-inspired insurrection in Ukraine, Occupy Central protests in Hong Kong, the spread of Ebola from Africa to Europe and the U.S., war in the Middle. One thing they can leave off the list: inflation.

Whereas FED shall ponder on the below 2 points:

1) QE (Quantitative Easing): The Fed has bought $3.95 trillion of securities since 2008, a program called quantitative easing, or QE. The Fed official are worried about prices remaining too low as the cash that is currently there in the financial system has raised worries about incipient inflation.

The Fed’s bond-buying program, which the central bank plans to end this month, appears to have succeeded in stimulating the economy without debasing the currency because banks are holding onto reserves instead of lending. Falling prices, or deflation, can create a vicious circle of less spending and declining wages.

2) Consumer Spending: Low wages and low spending on consumer products will also keep a lid on inflation.

This was a snapshot of the world scenario. 

But where domestic markets are concerned, this year too gold sales shot up during the 5 day festive season. Tuesday being Dhanteras, gold demand was quite high as it is considered auspicious to buy gold on this day. Gold purchases in India gathered pace since Tuesday as consumers took advantage of a year-on-year drop in the price of the metal at the most-auspicious time to buy it. The prices seem to have dropped at the right time and markets saw people rush to buy gold at dips.

Now the international and domestic markets will have their eyes glued on the Fed policy makers meet scheduled on October 28-29.

TRADE RANGE

METAL	INTERNATIONAL Gold/Silver price range	DOMESTIC  Gold/Silver price range
GOLD	$1208- $1247 an ounce	Rs. 26,750- Rs. 27,800 per 10gm
SILVER	$16.85- $17.64 an ounce	Rs. 38,000- Rs.40,000 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 Tend to Move Side-Ways"

http://riddisiddhibullionsltd.blogspot.in/2014/10/gold-tend-to-move-side-ways.html

WISHING EVERYONE A VERY HAPPY DIWALI AND A PROSPEROUS NEW YEAR AHEAD

GOLD TEND TO MOVE SIDE-WAYS

by Mr. Prithviraj Kothari, MD, RSBL

As we just thought gold was acting positive and making a comeback, it proves us wrong by the end of Friday.

Gold erased this year’s gains earlier this month on the outlook for higher borrowing costs as the U.S. economy improves. Bullion has since rebounded as the Fed signalled a worldwide economic slowdown may delay interest-rate increases and as equities to commodities slid.

The week was decent enough for gold in the domestic markets, but then internationally showed a sideways performance.

Internationally, gold prices declined after the U.S data reports were in. The better than expected consumer sentiment data lowered gold's safe haven appeal while on the other hand the ongoing concerns over global economic growth and a recovery in global stock markets gave the yellow-metal some support.

Equities and bond yields dropped sharply and the uncertainty over the Fed's hike in interest rates have changed the sentiment for gold from bearish to neutral. Gold showed mixed trends in the week over various economic figures coming in from US

• U.S retail sales and inflation numbers slumped
• Core Retail Sales dipped 0.2%, its first decline since April 2013.
• This indicated to a decline in consumer spending which one of the key indicators of economic growth
• PPI fell by 0.1%, after a reading of 0.0% a month earlier
• US Unemployment Claims dropped to 264 thousand, marking a 14 -year low. 
• Manufacturing numbers were a mix, as Industrial Production gained 1.0%, its best showing since November. 
• The Philly Fed Manufacturing Index dipped to 20.7 points, but this beat the estimate of 19.9 points.

So it was quite a volatile market for gold and there were several factors responsible for this volatility.

DISAPPOINTING GLOBAL GROWTH AND MIXED US DATA REPORTS-

The global equity drop was induced by the European equities sell-off, which was prompted by the negative August industrial production data from Germany and the market's disappointment with the lack of further monetary announcements by the ECB to fight deflation and a likely recession in Europe. The September U.S. retail sales of -0.3%, an inflation expectation of 1.5% in 2019, and foreign growth slowdown have fuelled growth recovery concerns in the U.S. The September manufacturing output climbed 0.5% compared to -0.5% in August, which can signal that the U.S. recovery is holding up.

GOLD DEMAND

The global equity tumult and the ongoing geopolitical concerns have raised the appetite for gold even though the inflationary pressure has created a negative attitude for gold.

The U.S. SPDR gold trust holdings have risen 0.20% this week after declining for four consecutive weeks. 

Moreover demand for gold from India has risen ahead of the biggest festive season of Diwali and many have made their purchases at dips. India's September gold imports jumped sharply to $3.75 billion ahead of the wedding and festival season, data from the trade ministry showed.

Meanwhile in China, the world's largest consumer for gold, has witnessed a significant drop in demand for gold even though price are running low but demand here is also expected to pick up. Growth in Gold mine output from China is set to slow significantly in coming years in the face of declining ore grades and waning profitability, an analyst at Business Monitor International said on Friday.

Now we need to see what's in basket for gold in the coming week. Gold could trade sideways next week and multiple factors are expected to influence the price of the precious metal.

FED- markets will keep an eye in the Fed Chair's speech this Friday

US- Traders will be tracking news coming in from the equity markets, alongside news about a likely global slowdown, the future pace of US stimulus, US interest rates, the Ebola scare in the US , the U.S leading indicators index , the U.S September new home sales, the U.S September CPI, September US leading indicators index and geopolitical tensions the world over.

CHINA-Next week, we will monitor the September China industrial production data, the Q3 China real GDP growth.

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 -

"Is Gold Making A  Comeback?"

http://riddisiddhibullionsltd.blogspot.in/2014/10/is-gold-making-comeback.html

IS GOLD MAKING A COMEBACK?

by Mr. Prithviraj Kothari, MD, RSBL

Gold has fallen nearly 40% from its 2011 high above $1900 to reach below $1200 at the start of the week. A resurgent dollar, coupled with positive U.S. economic data, had been driving gold's declines over the past few weeks. Investors tend to withdraw from non-interest-bearing assets to seek higher yields elsewhere when the dollar gains.

But gold picked momentum in the past seven days. We finally saw gold catching a bid on global risk aversion. It has rebounded nearly 4 percent from the 15-month low of $1,183.46 it hit on Monday on heavy selling pressure that followed a better-than-expected U.S. payrolls report last week.

There were various factors responsible for the rise in prices-

• The end of QE
• Geopolitical uncertainty
• Falling global growth estimates

All these factors once again made gold a good prospect as a safe haven asset.

On the second day of the week, gold was up after the  International Monetary Fund cut its global economic growth forecasts and weak German industrial data stoked further concerns. Following this the dollar fell which further gave a push to gold prices.

Gold rose consecutively for four days marking its longest winning gain in seven months. In fact traders witnessed heavy short covering for gold rise over the Fed minutes which created uncertainty over the timing of a Fed interest rate rise.

*source- www.kitco.com

The minutes of their last policy meeting showed that they are still struggling to come to grips with the dual threats of a stronger dollar and a global slowdown and hence they were further uncertain about linking the interest rate rise to U.S economic progress. Equities further weakened on concerns over global growth mainly in China and Europe.

Gold prices bounced off 2014 lows this week after testing support around the $1,180 area, a price gold hadn’t seen since June and December 2013. Analysts said short covering, which is the buying back of previously sold positions, and the return of Chinese traders from their Golden Week holiday helped return the yellow metal above $1,200.

However, In India it's a different scenario this year. Last year the volumes were much high as people rushed to buy gold, when prices crashed. This year prices have been consistently low. Moreover, disappointing monsoons and continued import restrictions have also affected gold demand in India.

Now the market awaits movement in equities, dollar and crude oil which could have a major role in influencing gold prices. Also, gold-market watchers will keep an eye on the Indian market to gauge metal demand ahead of the Diwali holiday later this month. Apart from this, the market player will also watch the economic data that will be flowing in- China releases a slew of economic reports, while The U.S. will see inflation data with the producer price index expected to show falls in energy and food prices, reflecting the recent drop in commodity prices.

If the US equities market continue to drop then it could create a favourable position for gold but if investors flush in more money into equities keeping the "buy on dips" funda in mind then we could see the dollar rally and gold would once again be pulled back from its gains.

Current view: BUY ON DIPS

Trade Range:

METAL	INTERNATIONAL price range	DOMESTIC price range
GOLD	$1207 - $1242 an ounce	Rs.26,500 - Rs.28,000 per 10 gm
SILVER	$16.85 - $17.85 an ounce	Rs.38,000 - Rs.40,000 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's Future at Stake!"

http://riddisiddhibullionsltd.blogspot.in/2014/10/golds-future-at-stake.html

GOLD'S FUTURE AT STAKE!!

by Mr. Prithviraj Kothari, MD, RSBL

As 2014 began, it was all green for gold. Investors thought that gold has once again entered the bull market. But this week gold shunned all its gains in 2014 and fell 0.7 per cent.

On the other hand the dollar reached a four year high this week as there were high expectations in the market that more jobs were added in three months. This further added to the speculation the Fed may raise interest rates next year.

When the dollar gets strong and the U.S. yields are higher than gold is counted as one of the least attractive investments. The feeling that investors had about gold in 2008, they are feeling the same for dollar now as all investors are bullish about the dollars prospects. 

Now gold has been abandoned by many as this metal is not paying interest and  Gold was also depressed by a rebound in European shares, which had slumped on Thursday on disappointment the European Central Bank wasn't more aggressive at its meeting. Dollar has strengthened more than a per cent against a basket of other currencies and is on a straight track of gains for the 12th week. 

The non-farm report. US non-farm payrolls rose by 248,000 jobs, and the jobless rate fell to 5.9 percent last month, the lowest since July 2008,as stated by the Labour Department. The change in total non-farm payroll employment for July was revised from 212,000 to 243,000, and the change for August was revised from 142,000 to 180,000. With these revisions, employment gains in July and August combined were 69,000 more than previously reported.

Post this report spot gold fell as much as 1.4 percent to its lowest since Dec. 31 at $1,195.38 an ounce and was down 1.3 percent at $1,197. It was for the first time in 2014 that gold fell below $1200 on Friday as the dollar strengthen over the positive US non-farm payroll data. Gold fell even further when the markets agreed that the interest rate hike could happen by mid-2015 or even earlier.

Rising interest rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value.

Moreover, SPDR Gold Trust, the top gold-backed exchange-traded fund and a good proxy for investor sentiment, said its holdings fell 1.19 tonnes to 767.47 tonnes on Thursday - a new low since December 2008. This declined gold prices further. 

Apart from the data reports released during the week, it was weak physical demand that could not provide support to gold prices.

Demand from China was low as the Chinese markets remain closed for a week long holiday. Though gold prices did get some support from the Pro-democracy rallies in Hong Kong but it was not enough to reverse all the losses from a stronger dollar.

Now the markets await for the Chinese and Indian markets come back next week, they may see lower prices as a good buying opportunity, so possibly some support will come from physical demand in Asia and in the U.S. the Fed policymakers will scrutinize the data as they prepare for a policy meeting on Oct. 28-29

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1180- $1207 an ounce	Rs. 26,000- Rs. 27,500 per 10gm
SIILVER	$16.40- $17.50 an ounce	Rs. 37,000- Rs. 40,000 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 -
"Dollar Drawing Directions For Gold" - http://riddisiddhibullionsltd.blogspot.in/2014/09/dollar-drawing-directions-for-gold.html