GOLD LOSES DIRECTION: RSBL

By Mr. Prithviraj Kothari, MS RSBL

Amidst continued uncertainty regarding the Fed’s monetary policy, gold has off late, lost direction. 

It was moving in the positive territory. But on Friday, but gold erased intra-day gains, closing down on the day and lower on the week. The yellow metal yielded to pressure from a strong rally in the U.S. dollar.

The dollar gained ground, especially versus the Euro, following this week's European Central Bank meeting that hinted at further monetary easing this year. The dollar also garnered additional strength in the wake of interest rate cuts by the People's Bank of China (PBOC) on Friday. 

Some market analysts feel that the overnight monetary policy action by the Chinese central bank has created some mixed sentiments in the market. Moreover, before China’s announcement, the European Central Bank (ECB) announced that it is leaving the door open for more quantitative easing measures or even pushing the deposit rate deeper into negative territory in December.

Gold was a little changed on Thursday afternoon in London after the ECB decided to leave the rates unchanged.

The spot gold price was last seen trading in the range of $1,162.8 to $1,172.0.

Adding to the sentiments, was data indicators coming in from US: 

•  US weekly unemployment claims rose by 3,000, to 259,000 in the week ending October 17, 2015. However, they were below the forecast of 265,000 and under the psychologically important 300,000 mark.

• The House Price Index (HPI) for August came lower than expected at 0.3 percent as did CB leading index at -0.2 percent.

•  Existing home sales were better than expected at 5.55 million.

Now that we have some crucial data coming in next week, not only from the US but other leading and developing economies as well, some analysts feel the Federal Reserve is losing its dominance in the marketplace.

Gold traders are bracing for a heavy slate of U.S. economic releases next week, along with key central bank meetings from the U.S. Federal Reserve and the Bank of Japan. The focus could be on BoJ that meets next week and there is a growing expectation that it will announce new easing measures, which are expected to remain steady.

Moreover, the central bank is also slated to release its Outlook Report with forecasts for inflation and the GDP. 

Meanwhile in the domestic market, we saw a sluggish demand for gold. Following the nine-day Hindu festival of Navratri, India celebrated Dussehra on Thursday where demand for gold usually rises as people consider it auspicious to buy gold on this day.

But, a slow and easing demand for gold further declined the prices even though globally gold prices were rising.

The fourth quarter is typically a strong period for gold purchases in India, the world’s second biggest bullion consumer, due to festivals and weddings.

Demand from rural areas has been hit particularly hard, as farmers suffer from the first back-to-back drought in India in three decades.

Two-thirds of gold demand in India comes from farmers and residents of small villages who see jewellery as way to store wealth. But lower-than-normal monsoon rainfall this year due to El Nino weather pattern has eroded rural incomes.

One of the most awaited meetings of the Fed, due on October 27-28, could turn out to be a non-event for gold traders as markets speculate a delay in interest rate hike. The Fed's statement will be released on Wednesday and there is no press conference associated with this meeting. 

Apart from the Fed policy, traders are also monitoring the U.S. debt-ceiling situation. The U.S. federal government is moving closer to the deadline where it needs to raise the nation's $18.1 trillion borrowing limit.

The important reports coming in next week are:

·         Monday: Home Sales

·         Tuesday: Durable goods and consumer confidence

·         Thursday: Third quarter GDP and pending homes sales

·         Friday: The core PCE index on Friday. 

Next week's main event:

These events may provide clues of economic strength and inflation that could support potential for a Fed rate hike in December. 

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-
"Data- Dependent Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/data-dependent-gold.html
 

IT'S A GREECE GAME FOR GOLD:RSBL

                                                         By Mr. Prithviraj Kothari, MD, RSBL

A very boring week for Gold and rest of the precious metals complex. An extremely tight price range trading showing no clear indication for the next move in price. The $1200 level remains significant for Gold while for Silver it is $16.20, where it continues to place selling pressure.

During the last week it rallied well to move from a two month low near $1160 back up to above $1190 again before easing back to the $1180 level. The key $1170 level has consistently provided solid support and has held it up now for a couple of months.

Somehow the important data released from the US:

• US unemployment claims were in line with forecasts at 271,000.
• US GDP released on Wednesday showed that the retraction in Q1 was just -0.2% better than the expectation of -0.7%, increasing the necessary confidence in US economy growth.
• University of Michigan Consumer sentiment was 96.1, besting forecasts of 94.6, while inflation was rose 2.7 percent.
• Personal spending month-over-month in May was up 0.9 percent, above forecasts of 0.7 percent.

While recent positive US economic data strengthened the dollar and led to speculation over interest rate hike this year, the Greece negotiations have gone haywire.

Talks between Athens and its creditors have failed completely. Still there have been some signs of hope being shown by either parties. But if I understand, tomorrow being Greece's payment date to IMF, I feel they would default. Euro-zone rejected Greek's request for a one month extension to its bailout creating a non-payment type of scenario.

Greek prime minister Alexis Tsiparis called a referendum on July 5 for the Greek bill to approve the bailout demands. Like expected, Greece announced capital controls and will keep its banks closed on Monday until further notice. I feel it is the darkest hour in Greek's economy. 

Even when I see the potential Grexit, there are more chances that gold will be on a bearish side for the week to come particularly if Thursday’s nonfarm payrolls report shows the labor market is gaining strength. Positive data will provide the Fed the reason they need to raise interest rates in September.

So now it all depends on the Greece Game and the important US data.

The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

"An Important Week For Gold: RSBL:

http://riddisiddhibullionsltd.blogspot.in/2015/06/an-important-week-for-gold-rsbl.html

Gold prices Fall after hitting key resistance! - RSBL

                                                               - Mr. Prithviraj Kothari, MD - RSBL

Another buying opportunity or it is a one such half hearted rally? A question that is pushing investors away from the precious metals complex. I would do my best to give you an idea by starting a gist of things that took place over the week.

The above picture depicts the Gold price range for the entire week (Picture taken from RSBL SPOT terminal). The week started off from where it closed, at a doorstep of the key resistance level US$1238. In almost all my previous blogs have emphasized on this particular level, that if broken, we can expect some change in trend. But it didn't. Gold continues to oscillate around USD $1200 with initial support sitting around this level.

Last week did show us, some spectacular movement in Silver where it broke key levels to enter in the range of US$17. Like Gold it did take a beating and US$17 does act as a short term base for the Silver metal. (image taken from RSBL SPOT terminal).


Key levels do make a lot of difference when the metal prices try to change a trend. But what caused this sudden drop:

1. U.S. housing starts jumped to their highest level in nearly 7 and a half years in April and building permits soared, providing hopeful signs for US economy gaining grounds over a dismal first quarter.

2. U.S. CPI data for April showed a +0.1% increase (expected: 0.1%) to mark the third monthly increase. The core CPI too read 0.3% (expected 0.2%), the largest increase since 3-4 years.

3. One of the most prominent news coming out of the week was from Federal Reserve Chair Janet Yellen. While speaking at the Greater Providence Chamber of Commerce on Friday, she addressed, ".... If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the Federal Funds target rate." A step to increase the rate hike is inversely proportional to gold price rise.


That goes without saying that U.S. data is highly influential for movements in precious metal complex prices as the other data that could have given a better support, weren't that influential:

1.  According to the latest CFTC data, hedge funds and money managers have hiked their net long silver stance to a near 10 month high and boosted their bullish gold bets to its biggest since March (+123k contracts, +77k prior week) for the week up to May 19.

2.  Greece cannot make debt repayments to the International Monetary Fund (IMF) next month unless it achieves a deal with creditors, its interior minister said on Sunday, the most explicit remarks yet from Athens about the likelihood of default if talks fail. European leaders told Greece on Friday to return to the negotiating table for "intensive work" to wrap up a reform agreement before cash runs out, sidestepping Athens' demand for a comprehensive, long-term solution to its troubles.

3. Iraqi forces recaptured territory from advancing Islamic State militants near the recently-fallen city of Ramadion Sunday, while in Syria the government said the Islamists had killed hundreds of people since capturing the town of Palmyra.

4. Russia's gold reserves rose to 40.1 million troy ounces as of May 1 compared with 39.8 million ounces a month earlier, the central bank said on Wednesday.

On the domestic front,  India could allow individuals deposit a minimum of 30 grams of gold with banks in return for interest payments to help monetize large quantities of the metal lying with households, a step that is aimed at cutting expensive imports. India released a draft documents of gold monetization plan on Tuesday.


Looking at the price jump from Silver, it does look a strong price comeback for me. I have always asked my readers to be invested in Silver. A metal that has multiple functionality.

With the FED meeting round the corner at Greek debt payment on June 5th, a lot more lies for the price movements in precious metals. Still the range play continues and strong conviction from Bears and Bulls is lacking.

It was a memorial day in US and spring bank holiday in UK, due to which price movements were muted yesterday.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1194 - $1238 an ounce	Rs.26,700 - Rs.28, 500 per 10g
SILVER	$16.70 - $18.00 an ounce	Rs.38,500 - Rs.42,000 per kg

The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog - RSBL: GOLD CONTINUES TO RISE!
http://riddisiddhibullionsltd.blogspot.in/2015/05/rsbl-gold-continues-to-rise_17.html

RSBL: GOLD CONTINUES TO RISE!

                                                           By Mr. Prithviraj Kothari, MD,RSBL

Overall, it was a good week for gold as prices rallied with a weekly gain of 3.1 percent, following a spate of negative numbers from the US which unsettled investors and weighed on the dollar.

Let’s have a look at the important highlights of the week:

•  US retail sales on Wednesday at 0.0 percent missed consensus of 0.3 percent while the core figure at 0.1 percent fell short of the expected 0.4 percent gave the yellow metal the impetus to move higher
• Holdings in the world's largest gold backed exchange traded fund, SPDR Gold Shares, fell 0.61 percent on Thursday to a four month low of 723.91 tons
• Physical buying slowed in Asia as higher prices kept some consumers away. In China, premiums eased about 50 cents to $1 an ounce over the global benchmark on Friday, from premiums of $2-$3 earlier in the week
• Industrial production in the U.S. declined in April, reflecting a drop in mining and utilities output, a report from the Federal Reserve showed Friday.
• Hedge fund and money managers increased net long positions in Gold and Silver ended May, 12th - U.S. Commodity Futures Trading Commission data showed on Friday.
• Geopolitical tension surged in Iraq where Islamic State militants said they had taken full control of the western Iraqi city of Ramadi on Sunday in the biggest defeat for the Baghdad government since last summer. 
• A surprise drop in US producer prices in April, signaled heightened disinflation risks plaguing the world’s biggest economy
• Silver has been a part of 8% rally which places it strongly in the channel where it leads the precious metals group with gains over the whole year. 

There have also been reports that Europeans are snapping up gold in fear that a Greek exit from the euro zone could wreak havoc on the economy. 

While on US front, The longer the flow of poor data exists, the greater will be the doubts on US economy.  Economists predicts that the Fed may raise short term interest rates in September while the other chunk of the market predicts that the hike may get delayed until later in fourth quarter or even next year.

I do agree that US data continues to dominate the market's movements with physical support going a bit low as the price rise, but for this rally to sustain, I strongly feel that all the factors of momentum need to be pressed at the right time. Otherwise the rally is bound to fade. A key technical resistance of US$1238 needs to be taken out of GOLD.

If we see all the factors that are influencing Gold and precious metals price movement, one common rule is generated which needs to be followed. You should not abandon precious metals be it Gold or Silver or Platinum. They are rare, have the status of safe haven, central banks monetary policy support and used in something that everybody loves: jewellery. Every buy on dips is worth the money.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1210 - $1250 an ounce	Rs.27,000 - Rs.29,000 per 10g
SILVER	$17.00 - $18.00 an ounce	Rs.39,000 - Rs.42,000 per kg

The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

http://riddisiddhibullionsltd.blogspot.in/2015/05/rsbl-gold-below-peoples-radar.html

RSBL: A VOLATILE WEEK WAITS FOR GOLD

                                                                  - By Mr. Prithviraj Kothari, MD, RSBL

The week was interesting for gold especially for gold traders and investors, as they enjoyed the doubts surrounding the dramatic and volatile moves which later kept the market wondering whether the yellow metal will be bullish or bounce back from its high prices.

Last Monday’s price action promised much, promptly reversing the previous Friday’s losses and surging back above the resistance level at $1190 per ounce to close at $1203.20 per ounce. This bullish sentiment continued into Tuesday, albeit on dropping volume with the price action just managing to breach the resistance at $1210 per ounce, thereby giving longer term investors hope this could be the start of some sort of retrieval.

However, Wednesday’s price action was unable to follow through, before Thursday’s dramatic move when the gold bears once again took control, sending gold prices hitting through the $1190 per ounce support region, accompanied by high volume and validating the move lower.

Friday’s price action followed through with further selling, but on lower volume as the platform of support in the $1174 per ounce region was duly tested before gold closed the week at $1174.50 per ounce. Spot gold was last at $1,171.70/1,172.60 per ounce, down $11.50 on the previous session’s close and around intraday lows – it struck its cheapest since March 20 at $1,170.20 earlier. 

The precious metals’ moves may have been worsened as parts of China, India and parts of Europe were absent for May Day holidays.

But there is a bullish sentiment for gold in the market. SPDR Gold trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.32 percent to 741.75 tonnes on Friday.

Currently, Equities seem to be in a bubble zone and are prone to devaluation. In such case there is a chance that both Wall Street and world stock markets will tumble down especially when there is clarity on signs that the Fed is beginning to tighten-up its current zero interest-rate policy – and this could be the spark that triggers a resumption of the long-term bull market in gold.  

Factors that support this bullish sentiments are-

• Persian Gulf Crisis
• Russian- Ukraine escalating tensions in Europe
• Greece default
• Increase in demand for gold as a safe haven appeal keeping in mind the above mentioned points

Thus yet another volatile week waits for gold as investors and traders prepare for April’s employment report on Friday. Volatility will be an important factor for the gold market next week and the ones that will be actively creating volatile situations are:
 

Employment Report: Currently there are expectations in the market that the U.S may have created 210,000 jobs in April. If it so happens then gold prices are expected to remain near the bottom end of their current range and if employment comes in above 200,000 then prices could fall below current support.

Other Data: Although the biggest data report will come at the end of the week, ahead of the employment report, markets will receive ISM non-manufacturing data on Tuesday and private company employment data from ADP Wednesday.

Britain: Apart from the key economic indicators coming in from U.S, there are chances that Britain’s federal elections on May 7 could have an impact on gold markets is the results show a majority for Conservatives, who have said that if they win they will hold an referendum on its membership to the European Union by 2017. Analysts have noted that a Britain’s exit from the EU could pose a threat to the euro, which would create safe-haven demand for gold prices. Currently polls show a close race between Britain’s federal parties.

Reassessment of economic prospects – and revised financial-market expectations of Fed policy – sometime in the next few months could support a spring-summer recovery in the price of gold, lifting the yellow metal up and out of its recent trading range.

  
Until that happens, gold prices will likely remain “range-bound” in the short term, perhaps through midyear or longer, trading mostly between a floor price of $1,175 and a ceiling around $1,225.  

As these boundaries are approached or briefly broached, technical traders will continue to step in as buyers or sellers, respectively, keeping the yellow metal’s price relatively stable within this range.  

Despite some disagreement among the voting members of the Fed’s FOMC policy-setting committee, the Fed will likely honor its pledge not to begin easing up on interest rates until the economy shows clear signs of a continuing and sustainable expansion. 

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1163-$1207 an ounce	Rs.26,500- Rs.27,300 per 10g
SILVER	$15.73-$16.48 an ounce	Rs.35,000- Rs.38,000 per kg

 

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

"RSBL: Friendly News ....But Gold Fails To Ignite"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-friendly-newsbut-gold-fails-to.html

RSBL: A PUZZLED MARKET FOR GOLD

 By Mr. Prithviraj Kothari, MD, RSBL

It was a rather confused market for gold this week. The negatives pushed gold high while the stability kept it low. 

Though it was a neutral week for gold, it managed to stabilize over $1200 an ounce. The recent gains on gold prices have been supported by-

• The sluggish reports from the US economy
• The dreary March payrolls report from the Labor Department
• The slowly advancing US housing reports
• Rise in SPDR Gold Shares
• The uncertainties about Greece’s finances
• Other geopolitical tensions

The sluggish economic reports have raised the expectations that the US central bank would not be hiking the interest rates before September. 

The weak economic data this week did not have much impact on gold prices. Neither the US housing reports nor the declining dollar – gold prices did not bank on any of these factors. 

The gold price remained in positive territory in Friday afternoon trading despite the dollar managing to claw back.  Spot gold was seen trading at $1,204.70/1,205.50 per ounce was up $7 on the previous session’s close. Reasons supporting this are:

Greece Crisis: Investors shifted focus to gold to seek safe haven after world stock markets tracked lower over worries of a potential Greek debt repayment default. 


Meanwhile, Consumer prices in the euro zone rose for the second straight month in March, not enough to pull annual inflation out of negative territory but another positive sign as the currency bloc looks to escape prolonged deflation.

Sluggish reports from US: US Industrial production disappointed in March to print -0.6% (expected: -0.3%) to suffer its largest fall in well over two years. US retail sales too printed a lower figure of 0.9% vs 1.1% expected

SPDR Gold trust- Holdings of SPDR Gold Trust, the world's largest gold backed exchange traded fund, remained unchanged at 736.08 tons, from its previous close of 734.29 tons

Demand for Gold: Physical buying in the world's top two gold consuming countries is expected to rise. A spate of manufacturing data from all the world’s major economies next week as well as the key Hindu festival of Akshaya Tritiya in India on Tuesday, which is widely regarded to be the most auspicious day in the country’s calendar to buy gold, could prove key to near-term direction. India’s March gold imports rose 94 percent year-on-year to $4.98 billion, according to the  trade ministry.

In the week to come factors supporting a bullish sentiment for Gold are: 

Weak US Dollar: A weak U.S. dollar could end up taking some momentum away from equity markets and that could help gold prices. Further weakness in the dollar could push up gold prices as bullion is seen as a safe-haven asset.

Eurozone: Negative bond yields in Europe continue to make the yellow metal an attractive safe-haven investment. Meeting of Eurozone ministers on the 24th April where Greece debt deal issue will take the center stage.

Economic Data from US: Though it will be a slow week for economic data, it will play a crucial role in influencing gold prices and the highlight will come on Friday with the release of U.S. durable goods for March. Disappointing economic data will make it clear the Federal Reserve will be unable to raise rates as high or as fast as markets are currently expecting and as a result, gold will benefit.

US rate hike: The G-20 did acknowledge the  fact that a FED tightening could send shock waves around the Globe.

For the time being Markets are puzzled when it comes to Gold price move. Until we get clear-cut news from the U.S. economy; that will allow the Fed to make a definitive move on rates or the clearance on Greece debt deal issue, Gold is bounded in a range of $1170 to $1238.

TRADE RANGE:
 

METAL	INTERNATIONAL price	DOMESTIC price
GOLD	$1194- $1230 an ounce	Rs.26,500- Rs.27,800 per 10gm
SILVER	$15.63- $17.00 an ounce	Rs.35,000-Rs.37,500 per kg

Investment tip:

For Gold: BUY ON DIPS

For Silver: Buy for future. Some facts:
1. 750 million ounces of Sivler are produced everyday which is worth US$14 billion. A price tag which is nothing in the current world. Individual companies are brought and sold at this price level.
2. New silver deposit exploration has found very little over the last decade.
3. Uses of Silver have been growing consistently in medical, Solar, Industrial etc fields. Relating to its increasing demand. A did read in an article that if the Silver is used at the current rate and only this much production happens across the world, then it can be extinct in the next 25 years or so.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

"RSBL: Good Opportunity To Buy Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-good-opportunity-to-buy-gold.html