THE YELLOW METAL IS ALL GOING GREEN

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

In 2008, when the financial crisis rattled economies, investors inevitably resorted to the perceived safety of gold - and its price escalated from $800 to $1900 an ounce. This, in turn, accelerated the exploration for yet more gold. And gold became the most sought after metal. But in 2013, gold plunged 28 percent, the most since 1981, amid a U.S. equity rally to a record and speculation that the Federal Reserve will scale back monetary stimulus.

There were quite a many investors who abandoned gold and wrote it off. They declared that gold was ready for a bear market and that it has lost all its glitter. But the ones who are still loyal to gold hold a strong belief that gold will shoot up this year and perform well. I think gold is all set to prove this true.

This month, gold has jumped 5.2 percent. The losses in equities market has once again shifted focus from financial markets to bullions. This week gold saw a 5 per cent gain- thanks to equities. 

A global fight from emerging markets and declines in equities increased gold status as a safe haven asset and it rose to a two month high on Friday.

Fluctuations in the currency markets led by  plummeting Argentina peso and Turkish Lira prompted investors to buy gold.

This was not the sole reason behind the yellow metal prices going green.

- The options market expires next Tuesday, on 28th January. Buying sentiment behind this expiry has pushed gold prices higher.

- Also, the market has seen a big inflow for the so-called gold spider ETF. Recent inflows are also encouraging. Gold ETFs on Friday scored their biggest daily inflow since October 2012.

- The Chinese lunar new year is also playing its part for physical metal demand, as customers are rushing in to grab the metal at a cheaper price. The Lunar Year holiday will start next Friday (31st January) but gold dealers in China have made their purchases well in advance. Increasing demand for coins, bars and jewellery has pushed up gold prices.

- There are talks in the market that the government may relax certain import restrictions. Gold shot up and after murmurings that the punitive taxes on gold in India may be reduced. Congress party chief Sonia Gandhi has asked the government to review tough import restrictions on gold, which include a record 10% import duty.This will result in higher demand for gold and may push prices further.

- Also we see many investors shuffling their portfolios in January after what they have witnessed the year before. In Jan 2014 we saw that the equity market has not given satisfactory returns hence many investors are again allocating major chunk to gold and other precious metals.

- The world has a picture that banks have been selling off gold. But what came as a shock to the market that Germany failed to get its gold back. On January 16, 2013 Germany’s central bank, the Bundesbank, said it will ship back home all 374 tonnes it had stored with the Banque de France in Paris, as well as 300 tonnes held in Manhattan by the US Federal Reserve, by 2020. the Germans have managed to bring home a paltry 37 tonnes of gold.

And a mere 5 tonnes of that came from the US, the rest from Paris. The Fed holds 45% of the total 3,396 tonnes German gold. Now what conspiracy lies behind this pull back is certainly unclear.

Meanwhile, A quiet Monday, following Martin Luther King day in the US saw most interest in Platinum trading, which was driven to a high of 1473 USD per ounce by the AMCU calling also for strikes at Impala. - First day of the week. A strike at South African platinum mines paralyzed the world’s three biggest producers of the metal for a second day as talks to resolve the dispute over pay broke up until Jan. 27. Nearly 70,000 employees downed tools at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc mines, where 70% of global platinum is produced. Hence, Platinum is 6% higher this month. 

While the yellow metal may take a back seat to other asset classes this year, but strong physical demand will sustain elevated average price this year. 

But investors have to be “cautious and quick” in taking profits because if the FED announces further tapering of its bond-buying program at its meeting next week, the dollar could soar, which could be a bearish sign for gold.

Nonetheless, momentum is still pointing up for now.

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 -

"Up Down- Gold Price trend Unclear"

http://www.riddisiddhibullionsltd.blogspot.in/2014/01/up-down-up-gold-prices-trend-unclear.html

GOLD ROLLING AROUND PAY ROLL

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

New Year’s first full week began with a green note for gold where the weakness on Wall Street widened bullions rally.

However, Gold fell on Tuesday and Wednesday.  An expectation of a positive US jobs data (slated to release on 10th Jan), compelled investors and traders to believe that the Federal Reserve will continue to scale back its monetary stimulus on the pillars of a recovering economy.

After a consecutive fall of two days, gold prices gained momentum on Thursday ahead of the key U.S. nonfarm payrolls report. This report was a deciding factor for the Fed whether it will continue its tapering. The change in private payroll data by ADP on Wednesday showed a strong increase by 238,000 and also exceeded the prior figure of 215,000 for the month of November.

In either ways, traders were ready for some volatility in precious metals.

Finally the tussle between bears and bulls end with the release of Non-Farm Employment Change data released on Friday where Bulls gained an upper hand. A weaker than expected US jobs data supported the fact that US Federal Reserve would now go slow on its tapering.

US nonfarm payrolls rose just 74,000 in December, the smallest increase in nearly three years and far below the 196,000 forecast by economists. The unemployment rate fell 0.3 percentage points to 6.7%.

The year began on a good note for gold and it has performed well till date. Since the beginning of 2014, gold has rallied 3 per cent compared to its 28 per cent loss in 2013, which has been one of the worst performing years for gold.

Although gold is consolidating in the $1,215 to $1,250 range, my technical view sees that internationally the metal is a sell into rallies. The FOMC minutes from the December FOMC meeting, released Thursday morning IST, provided little information that the market has not already priced in. Therefore, ETF holdings have likely to continue their downward trend for the time being while the Fed slows its asset purchases.

The current market trend seen in the first two weeks of 2014:

Global ETF holdings keep falling, losing another 2moz in the last three weeks to reach 56.9moz. - The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Share, reported its first outflow of 2014, of 1.5 tonnes, taking its holdings to a 5 year low of 793.21 tonnes

Meanwhile SGE volumes have picked up ahead of Chinese New Year on 31 January. Trading volumes on the SGE, a physical platform, have also picked up. Volumes hit an eight-month high on Monday, but the buying pace has now slowed from that peak The Chinese New Year, which will be celebrated on Jan. 31, typically prompts a spurt in bullion purchases as the precious metal is bought for good fortune and given as gifts. Premiums for 99.99 percent purity gold on the Shanghai Gold Exchange (SGE) climbed to over $20 an ounce this week, up from single digit premiums late last year. 

Indian premiums over spot remain high and will likely continue until the end of the wedding season in Feb­ruary or until the Indian government brings about a change in policies

Meanwhile, Ben Bernanke, who steps down as head of the Fed at the end of January, gave an upbeat assessment on Friday of the U.S. economy in coming quarters, though he did temper the good news in housing, finance and fiscal policies by repeating that the overall recovery clearly remains incomplete.

Gold support is at $1,233 and $1,227. Resistance is at $1,262 and $1,275.

Silver support is at $19.30 and $19.75. Resistance is at $20.42 and $20.54.

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 -

"Precious Sweet Revenge- Whats Next??"

http://www.riddisiddhibullionsltd.blogspot.in/2014/01/precious-sweet-revenge.html

2013-2014 Gold view by Prithviraj Kothari - ET now (+playlist)

2013's LAST BLOG!!!!

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

As I begin to write the last blog of 2013, I would like to thank all my readers, followers and friends who have been through this journey. Though it has been just two years since I started my blog, your extended support and constant following has made sure that I do not take a break. 

It is for the first time in 30 years that gold is heading for a negative return. In fact 2013 has been one of the worst years for gold. With the end of 2013, we also see an end to a 12 year rally. This decline was driven by low interest rates and  certain steps taken by global central banks to foster the economy. 

Gold was once again seen trading at 1185 (the low it reached in June 2013). This drop came in when the Fed announced its tapering plan. This was the same reason that had plunged gold prices in June when the Fed had for the very first time stated that it would soon taper its QE. Though that time there was a lot of uncertainty prevailing in the market as to how and when the scaling back would be executed, until Fed finally implemented the tapering plan in December.

Gold traded flat around $1,200 an ounce on Tuesday as activity slowed before Christmas, while signs of a steady U.S. economic recovery could deter investor interest as the metal heads for its biggest annual loss in 32 years.

U.S. economic data on Monday showed consumer spending rose in November at the fastest pace since June, while consumer sentiment hit a five-month high heading into the year-end.

The euro zone crisis has more or less stabilised, global economy seemed to be improving and the US too plans to taper its QE. Though all this makes gold a bit unfavourable in the year to come there are loyal investors who have still not lost faith in gold. 

A risk of deflation could push gold prices higher in 2014. Although perceived by many as a negative for gold such worries could exacerbate the debt problems of weaker euro zone economies and force the European Central Bank to loosen monetary policy further, boosting gold prices.

Another supporting factor for gold could be the Fed's continued asset purchase program. Although the central bank has announced a small taper, it will still be pumping large amounts of stimulus into the economy, which should be supportive for gold. 

Most importantly China’s support will always be crucial to Gold. Frankly, Gold is carrying along with it a big burden of uncertainty in 2014.

As the economy improves, Silver and Platinum demand will surely rise faster as compared to Gold. With the current policies by the central banks across the world, these precious metals are to be watched out for the year 2014. 

Apparently, the poor performance in 2013 has left the precious metals looking less attractive compared to other assets, including equities. But, Gold should and always be considered as a safe haven asset. Being in this industry for so many years, I would always recommend some part of portfolio allocation towards Gold and other precious metals.

The trade range for gold is expcted to be around Rs. 29,000- Rs. 30,000 per 10 gram in the domestic market.

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- Past Performance, Present Prices & Potential Predictions"
http://www.riddisiddhibullionsltd.blogspot.in/2013/12/gold-past-performance-present-prices.html

GOLD-PAST PERFORMANCE, PRESENT PRICES & POTENTIAL PREDICTIONS

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

Gold acted like a new born baby this year. It showed new movements and new trends which were quite difficult to understand, analyze and justify. But this baby though adopted by many was also abandoned by a handful chunk of people.

Gold that has always stood proud in its category, for the first time in 13 years, it gave negative returns. Moreover, it’s headed for an annual drop of 25 percent. Gold has been in a significant bear market since reaching a record high at $1,910 an ounce in 2011. On April 15, the gold price plunged about 9%—the biggest one-day loss ever for the yellow metal.  In its collapse gold bullion lost $705 an ounce or 37% of its value to the recent low at $1,195. Some say the no. '13’ as considered unlucky by many; has proved to be inauspicious for gold too.  

The international markets witnessed the following highlights in the year 2013 that were responsible for volatile movement of bullion prices.

• Cyprus Bailout
• Syrian Conflict 
• Statement by FED that it may taper its bond buying program by late 2013
• US government shutdown
• US debt ceiling being raised

Throughout the 1st quarter gold was seen in a range of 1554$ an ounce to 1695$ an ounce. Though gold declined to $1554 in February it managed to cross the 1600 mark in March - Thanks to Cyprus. The Cyprus crisis had offered gold a helping hand, after investors had been pulling out of the precious metal 

On the other hand, the Indian government hiked duty on gold to 6 per cent from 4 per cent to rectify the current account deficit on January 21, 2013. Gold also saw a booster coming in from US lawmakers that were successful in averting the fiscal cliff at the 12th hour, this too pushed up gold prices.

On Friday, 12th April, Gold witnessed a record drop and for the first time in history it crashed 80 dollars in a single trading day this reaching $1484. Panic selling had triggered this downfall.

Some 158,200 taels of gold bullion (roughly six tonnes) were sold in six auctions held by the State Bank of Vietnam. There was news that as soon as the international markets opened, Merryl Lynch sold 4 million ounces of gold.

Heavy ETF selling was also seen in the markets.Gold dropped further trading at 1385$ at one point of time.Till mid June gold managed to be above the $1400 mark but news about the recovery of the US economy dropped gold prices and it was seen trading at around 1385$.

During mid July the FOMC minutes reviewed that many Fed governors would like to see more signs of improvement in jobs before agreeing to taper.

What came as a turning point for gold was the civil war at Syria. Gold prices rallied above $1430. Meanwhile, in South Africa the National Union of Mineworkers (NUM) has given 48 hours' notice of a strike at South Africa's gold producers. This too affected gold prices.

While in the domestic market, the Indian rupee slipped for the third consecutive day in a row on Wednesday to close at a fresh record low of 68.80 per dollar, as uncertainty over a possible US-led military strike against Syria knocked down Asian equity markets and currencies. This was the biggest ever single day fall for the currency since 1995. But then in September, stepped in Mr. Raghuram Rajan- he was then considered the savior of the depreciating rupee.

The FOMC meet began on 18th September and was over by the 19th. All expectations, rumors, speculations and predictions were finally put to a halt. 

Just when India marked the onset of its festive season, the US was heading for a partial shutdown. Though the partial shutdown did not create much impact on gold prices globally, this shutdown along with the debt ceiling will surely have a major impact on bullion prices worldwide. As shutdown entered its second week, there prevailed a lot of uncertainty in the markets.

Finally, in the first week of November, just after Halloween, the Fed stated that it would not taper its bind buying right away as it needs concrete evidence over US economy's growth. Though this should have pushed up the gold prices, completely opposite happened. Gold was down 6.1% in November, the worst performance since June when prices touched a 34-month low of 1180.5$

U.S. Senate leaders finally announce a deal to end a political crisis that had partially shut down the federal government and brought the world's biggest economy close to a debt default that could have threatened global financial calamity. The deal, however, offered only a temporary fix and does not resolve the fundamental issues of spending and deficits.

But what came in as a silver lining in the dark clouds for gold was the demand for gold from China. It finally overtook India as the largest consumer for gold as it imported 131 tonnes of gold in October through Hong Kong.

It is rather the month of December that was considered a deciding factor for gold's fate as the most awaited and much discussed FED meeting concluded on 18th. It is in this meeting that the Fed was supposed to give a final decision as to when the tapering would begin for the final time in 2013. Though many investors believed that tapering would take place in early 2014, The Fed had a surprise package for all. It probably accommodated a bit everyone for Christmas, by announcing a somehow symbolic $10 billion taper to start in January, target to end QE around the end of 2014, but on the other hand promising to keep low rates for a well past time until the unemployment rate would drop below 6.5%. Gold quickly fell to 1215.80, while the S&P 500 rallied close to the all-time high. Gold in the Indian market dropped Rs.1000 per 10 gram late in the evening. The total Gold ETF holdings are currently 57.41 Moz compared to 86.62 Moz at the start of 2013. Total gold ETF holdings are now back at the lowest level since Novemeber, 2013. 

The tapering news got along with it a firm belief that the Global economic scenario is improving and we will near the end of recession soon.

Conclusion

Gold has lost its appeal as a safe haven asset. But yes, the market is still divided into two segments. Some who have abandoned gold like the net outflows of ETFs while others who have adopted it with the belief that gold prices will rise and the metal will always serve with a safe haven appeal like the central banks of the world. 

I feel, Gold should not be always thought as a short term profit making option, rather it should be thought in terms of grams that would safeguard your future. I always remember my great grandfather saying "don't buy gold to make profits...buy gold because its eternal....it's pure wealth and its enduring and come what may-  GOLD WILL ALWAYS STAND BY YOUR SIDE:- This feeling has sunk in so well not only with me but I guess with entire India.

And that's the reason that gold has always been the favorite metal for Indians.

PREDICTIONS 2014

By now everyone would believe hat 2013 has been one of the worst years for gold.

If we take a look at gold's performance over the past decades we see that gold has given highest returns compared to any other asset in its class. I would advise investors, to have patience and just follow one mantra "Buy on Dips"

It's quite difficult to predict gold prices. A trade range can though be noted down. There are a lot of factors that are involved in the making and breaking of gold prices. These factors influence the price of gold and gold is directly or indirectly dependent on them. What we assume that in case there is another eruption of a financial crisis or any new geo political crisis, gold prices may break new highs and continue to rise strongly as a result of the supposed function of gold as a safe haven.

Following will be the key factors that will be responsible for the movement of gold prices in 2014.

• US Debt ceiling
• QE tapering
• Demand for gold from China
• Union Budget 2014 (for the domestic market)
• Finance ministry directives (for the domestic market)
• Mining companies 
• Interest rates
• US economic data

Gold is still at the mercy of the dollar. What this means is as volatile as it is with the Fed’s back-and-forth on the possible taper, gold will continue to play off what the dollar does into 2014.

The average base price for gold in 2014 is expected to be 1375$ an ounce. In the domestic market gold is expected to move in a range of Rs.25,000 - Rs.33,000 per 10 gram and the average base price for the same is expected to be around Rs.28,000. 

The average base price for Silver is expected to be around $25.00. The average base price for silver is the domestic market would be somewhere around Rs.45,000 per kg and the trade range for silver is expected to be Rs.37,000- Rs.55,000 per kg.

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 -

"As the year ends does the bull market for gold end too?"

http://www.riddisiddhibullionsltd.blogspot.in/2013/12/as-year-ends-does-bull-market-for-gold.html