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Showing posts with label 2019. Show all posts
Showing posts with label 2019. Show all posts

Thursday, 2 May 2019

A very important week for gold


Although the gold market has struggled to attract the attention of general investors, the precious metal might not be as unloved as one would think.
The metal posted its biggest daily percentage gain in seven weeks on Friday after the dollar fell against a basket of currencies, as investors overlooked the strong economic growth in the United States to focus on the pain points.

Gold prices were mostly unchanged on Monday, trading near the more-than one week high touched in the previous session, on bets that the U.S. Federal Reserve might cut interest rate this year after a recent data showed inflationary weakness. Spot gold mildly eased by 0.1 percent to $1,284.31 per ounce at 0626 GMT, having hit its highest since April 16 at $1,288.59 in the previous session.


The main reason for rally in gold prices, were the important data numbers released from the US over the past few days.

Data showed that U.S. first quarter growth of 3.2 percent was only motivated by the short term stimuli of a dwindling trade deficit and the largest accumulation of unsold merchandise since 2015 which may later weigh on the country’s economic picture.
Core personal consumption expenditure price index figure, the Fed’s preferred metric of inflation, increased at only a 1.3 percent rate versus 1.8 percent in the prior quarter.
About a third of economists polled by Reuters on April 25, already expect one real rate cut by 2020
Lower interest rates in the U.S. put pressure on the dollar and bond yields, making greenback-denominated gold less expensive for holders of other currencies. It also increases the appeal of non-yielding assets such as bullion.


Apart from the data released, we now look forward to the series of events that are lined up. It’s going to be a very busy week ahead with the calendar packed full of market data and events across the globe.
From Monday 29th April to Friday 3rd May a host of data releases await the markets

USD Employment Cost Index
USD Chicago Purchasing Manager
USD Pending Home Sales
USD Consumer Confidence Index
USD Pending Home Sales
EUR ECB Vice President Guindos Speaks in London
USD ISM Manufacturing
USD ISM Employment
USD Continuing Claims
USD Non Farm Productivity
EUR Euro Zone Producer Price Index
EUR Euro-Zone Producer Price Index
EUR Euro-Zone Consumer Price Index Core
EUR Euro-Zone Consumer Price Index Estimate


Japan will be closed celebrating ‘Golden Week’ thinning liquidity in Asian hours, leaving markets vulnerable to ‘spike’ moves.

 In such conditions, gold would normally grab a bid but with the US dollar continuing to weigh on the precious metal, a neutral stance looks justified.
But all this doesn’t end here. These were the main data releases/events. A look at the calendar shows that there are a 28 ‘high importance’ data releases and events, all of which could change the risk landscape. A few highlights include, the latest interest rate decisions from the Bank of England and the Federal Reserve, the monthly US Labour report and various GDP and inflation releases across the Euro-Zone. Now we need to see how positively it affects the yellow metal or plays a spoiler instead.



Monday, 29 April 2019

Gold Not Concerned about a rising dollar

Spot gold fell for a second straight month in March even after the Federal Reserve said it would pause on interest rate hikes for the rest of the year, which lead to a surge in equities instead.  The global spot gold prices were trading slightly higher at $1,274.20 an ounce, while silver was trading up at $14.93 an ounce in New York.

Meanwhile on Wednesday, in the domestic market, gold prices were down by Rs. 50 to Rs.3270 per 10 gm in the capital over weak demand from the jewellers.


It’s proving increasingly difficult for Gold bulls to prove their case under present market conditions, thanks to a broadly stronger Dollar, equity markets hanging on to most of their year-to-date gains and cautious optimism over US-China trade talks.
However, dark clouds still linger over the global economy, and data points that signal a turn for the worse for the worldwide context could spark a massive rebound for Gold back towards the $1,300 handle. The ongoing geopolitical crisis, trade wars, dovish Fed comments will add up to the rally in gold prices.

Gold prices are expected to remain higher by 3.2 per cent this year on account of strong demand and an extended pause in interest rate hikes by the US Federal Reserve, World Bank Commodity Outlook for April 2019 said. The yellow metal rates surged in the first quarter by 6.1 per cent after hitting a downward path in September last year. The rise may be attributed to the support offered by robust demand and decline in the real interest rates, the report said.

We can’t ignore the constant buying by central banks. The  share of gold holdings have been increased by the central banks of the emerging markets such as China, India, Russia and Turkey so as to diversify their asset base, the World Bank report said. The investors have increased their net long positions in the gold-backed exchange traded funds, this has lead to an increase in demand and furthermore an increase in the prices of the yellow metal.

The Dollar’s year-to-date climb has kept Gold rooted near its lowest level in 2019, below the psychologically-important $1,280 level, as markets keep an eye on the $1,265 support line.
Still, the longer term outlook is more bullish as central bank purchases should be supportive of prices, with inflows running as high as last year, and a rally of $1,450 an ounce over 12 months awaits.


Wednesday, 24 April 2019

Gold is here to stay

Gold was set for a decline last week over strong economic growth numbers. Last week, gold fell ahead of first-quarter earnings season as the dollar gained while the precious metal slumped to its lowest level of the month. Gold fell 1.23 percent at the close of Thursday’s trading session to settle at a price of $1.295.15. Nonetheless, analysts maintain that this is only a temporary setback.

Although equities are doing their part to weigh on gold in the near-term, it is just part of the story. Relative and resilient strength in the U.S. dollar is another factor weighing on the precious metal.

Gold was pulled down over strong economic numbers coming in from the Chinese economy-

China’s economy expanded more than expected in the first quarter of 2019
While industrial output and retail sales for March were also better than expected.
Trade and credit data that came out last Friday also exceeded forecasts

Strong numbers coming in from China, imply that a global slowdown has been diminished to quite some extent. Furthermore, according to the minutes published at its last Federal Open Market Committee meeting, the Federal Reserve did leave open the possibility of possible rate hikes this year if the economic data suggests warranting such a move. This, of course, wouldn’t bode well for gold.
The minutes confirmed that if the economic data continue to support the economy, a rate hike could be on the table at the back end of this year. Luckily for the dollar bears, this wasn’t the majority view, at least, not for the time being.

Does this mean the gold will soon lose its sheen?

Well, gold is being supported by ongoing geopolitical issues (U.S.-China trade war and Brexit, among others), concerns around slowing global economic growth and recession fears, and a more dovish U.S. Federal Reserve (no rate hikes in 2019).
Though many investors are shunning gold and shifting focus to equities, there is a set of market analysts that still believe that gold needs to be added in ones portfolio as its gives an insurance cover.

A crisis is expected and it’s soon we realise that one needs to protect his/her finances in times of crisis. And which metal can best prove to be a safe haven asset other than gold?
Gold had faced a similar situation in 2011. Gold was widely ignored since 2011 as an asset class for institutional portfolios. In 2018, bullish sentiment for gold was at a multi year low. Not many people were interested in owning gold.

But then investors realised that they need to own gold in order to protect themselves in times of crisis.

Given the current situation and what is expected in the near future, we can say that gold is here to stay. Even though equities are rising, the momentum won’t sustain in the long run. Fed is not expected to hike rates in 2019. Less hikes and a rate cut would translate to dollar weakness–an open path for strength in gold. Other headwinds include increasing concerns of slowing global economic growth, which could spur a move to safe havens like gold.

And hence this is a very good time for people to get a little bit more defensive and use gold to reserve the wealth they have made in equities.

Monday, 15 April 2019

Gold vs Stocks

Past 3 to 4 years haven’t been that exciting for gold. In fact gold has surfaced to the current $1300 an ounce, a level that was previously seen 6 years ago. Gold has been trading in a tight range for quite some time.

Gold is an investment that people prefer when the times are uncertain. It’s not a type of investment that can be left to itself. There are times that are just right to enter the market. People buy at dips and try to make the most of every opportunity to buy gold. Physical gold also has a very high liquidity which again increases its appeal as an investment asset.

Today we are in a position where gold is liked more as a hedge tool, an asset that gives you protection against uncertainties. And this characteristic of gold helps in keeping its prices high when there is a global crisis. In fact many are even switching over from equities to gold.


Though the first half of 2018 was dull for gold, it did gain momentum in the second half. 2018 on a weekly chart produced 2 clear trends, and some pretty nice ones at that. We started the year flat, and then had a bear trend from May to October, then a nice rally taking it up. If we’re just holding gold all this time, this really won’t matter, but gold still moves and we can’t call it a complete dog over all this time, even though it’s been one from a longer-term perspective.

This year too, till date gold is up 2% and is expected to rise further given the factors that will influence the yellow metal and create bullish sentiments in the market.

Since the high of February, with each lasting a week or two, gold is producing some pretty well-defined moves, including the current upward one.

But just by seeing the current trends it won’t be possible to exactly predict a future upward movement. We need to consider the past too. We at least need to preface this by mentioning the current bull move with gold, and you won’t really discover that by just looking at its year to date, you have to go back to the beginning of the current move in October. It’s not that we can go back in time and buy some then, but if we’re looking to predict a future up move, we need to at least account for how much we’ve moved up thus far.

The number in play here is $1184 an ounce, the low last October 1. This is also around the time where the stock market started to sink, and when money started to flow out of the stock market more, with some making its way into gold.

We’ve been able to sustain a move of 10% through the subsequent stock market rally, so while the bearish turn with stocks may have given us a push forward, the better performance of gold involved more than this, perhaps our looking to recapture the amount that the market oversold it by earlier in the year.

This is what makes us say that gold is expected to rise further. For 6 years now, gold has been unable to move up much past where it is now. This doesn’t mean that it won’t happen. A weak US economy, Fed policies, US China trade war, Brexit, piling gold reserves, bearish stock markets  are some of the many key influencers that will cause a wave in the market and bring about a rally in gold price.

Tuesday, 9 April 2019

Fed Continues to be a key driver for gold and dollar

Gold has been going strong since the mark of 2019. As we completed a quarter of the current year, gold continues to show the same sentiments as the second quarter began.  Gold prices rose to a more-than-one-week peak on Monday as the dollar slipped after data showed U.S. wage growth slowed last month, while investors awaited minutes of the U.S. Federal Reserve’s March meeting later this week.
Spot gold gained 0.4 percent to $1,296.87 per ounce by 0746 GMT, after touching its highest since March 29 at $1,297.86 earlier in the week.


Let’s have a look at each factor individually : 

Data - Soft data coming in from the US strengthened the yellow metal. Though the non-farm payrolls data was better than expected, the manufacturing jobs fell which is a bad signal for the sector and doesn’t show a very bright picture of the economic outlook. Marginally better Purchasing Managers’ Index (PMI) reading out of China over the weekend, along with the never-ending optimism about a trade deal, were touted as the reasons. Cyclical outperformed and the yield curve steepened, suggesting that recession fears sparked by the prior week’s inversion were overblown. A slightly better PMI in the US added to this better mood. Contrasting with the stronger soft data were weak retail sales in the US and evidence that inventory continues to build in the channel. Auto and home sales also remain fairly weak. Friday’s labor report was definitely good news and much better than last month. However, some of the leading data from that report, like temporary hiring, continued to soften and bear watching.

DOLLAR - The dollar was down 0.1 percent against key rivals as U.S. Treasury yields extended their decline after the U.S. jobs report signalled a slowdown in wage growth even as employment accelerated from a 17-month low in March. The dollar was also weighed down by softening bond yields. The greenback was 0.3 percent lower at 111.385 yen after briefly popping up to a three-week high of 111.825 on Friday following the U.S. jobs report.

CHINESE GOLD RESERVES - According to the latest Chinese reserve data, the country's gold reserves rose to 60.62 million ounces in March from 60.26 million a month earlier, according to data on its website. This was the fourth consecutive month of gold increases: last month’s inflow was 11.2 tons, following the addition of 9.95 tons in February, 11.8 tons in January and 9.95 tons in December. The recent buying spree resumed after a 25 month hiatus, as China stopped reporting gold purchases in October 2016. This trend broke in December, when Beijing announced it had once again started accumulating gold

RUSSIAN GOLD RESERVES -  The world's isn't sitting on its hands, as governments worldwide added a whopping 651.5 tons of bullion in 2018, the second-highest total on record, according to the World Gold Council, and nobody more so than Russia which quadrupled its reserves within the span of a decade amid President Vladimir Putin’s quest to break the country’s reliance on the U.S. dollar. The one country that has decided it will no longer be part of the USD monetary sphere of influence is Russia, which has been dumping dollars and buying gold at the fastest pace in decades.


Summing up the previous week and why gold rose or dollar fell, we can say - Disappointing European manufacturing data in combination with a more “dovish” Fed led the 10-year treasury yield to fall the most in two years and U.S. investment grade bonds to rise the most in four years. The Federal Reserve left interest rates unchanged, while signalling no rate hikes for the balance of 2019, acknowledging global uncertainty and muted inflation pressures. Markets responded favourably at first, with both bonds and equities rallying on the news, but the markets gave back these gains as the focus turned to what the Fed’s pause might mean about the underlying health of the economy. The Fed will likely continue to be a key driver of equity markets as officials negotiate the balance between rates, inflation and a healthy but slower-growing economy

Thursday, 17 January 2019

Gold gaining popularity

Gold ended 2018 on a high note, beating global equities and commodities for the fourth quarter. Gold is a highly liquid asset and hence investors are majorly diversifying their portfolio towards gold as it proves to be a hedge tool and a safe haven asset in times of uncertainties.

There is quite some scope for the yellow metal and commodities in general in 2019 because investors believe that the current rate hike cycle has peaked and the U.S. dollar looks to be in retreat, having lost about 1.7 percent over the past month.



After four rate hikes in 2018, the Federal Reserve pausing interest rates in 2019 could also result in a weaker dollar and stronger demand for gold.

Gold is currently trading at $1,290 and moved in the high and low range of $1,295 and $1,287 on Tuesday. But this pullback is expected to be short lived as China is stepping up monetary and fiscal stimulus efforts to support its sagging economy. The People's Bank of China (PBOC) injected a record CNY 560 billion via reverse repo operations earlier today. Further, China is reportedly planning large scale tax cuts to boost spending.

History shows that monetary and fiscal stimulus has a positive impact on gold. Further, current unrest and political uncertainty in the UK could boost demand for the yellow metal.

Though strong U.S. dollar might have thwarted gold, but global growth concerns and other broad market worries could give the precious metal a boost.
Currently the markets are uncertain, economic numbers are dipping and stock markets are volatile.  All these clubbed together are bound to give a push to the precious metals as investors look up to them as safe haven assets. 

Tuesday, 15 January 2019

Is 2019 the year for Gold

2018 has a highly volatile and fluctuating year for gold as it faces many headwinds. A strong dollar, rate hikes by the US Federal Reserve (the Fed) coupled with accommodative policy from other central banks and a US economy buoyed by tax cuts, fuelled positive investor sentiment and pushed US stock prices higher through the start of October.

However, as geopolitical and macroeconomic risks increased, emerging market stocks pulled back and developed market stocks eventually followed.


As 2019 begun, have seen a sharp deterioration in risk sentiment following soft macroeconomic data in December and renewed concerns about the future direction of growth, particularly the risk of U.S. growth catching down towards weaker economies. December was a volatile month which generated a safe haven appeal for the yellow metal.

Lately gold has outperformed other assets in its class. Risk assets took a big hit in 2018, with the stock market suffering the worst in December but gold fared much better as it grew around 4 percent.

If we see the demand graph for gold for the next 6 to 8 months, we expect it to rise as it will benefit from the interplay of market risk and economic growth, with key dynamics, such as financial market instability, monetary policy, the dollar and structural economic reforms.

Rising geopolitical tensions- A fragile political alliance in Spain along with fending off secessionism, an instable monetary union in Italy, and internal turmoil in Europe and lastly social unrest in France- all of these clubbed together gave a very instable global picture. This growing uncertainty and the expansion of protectionist economic policies are making gold an increasingly attractive hedge tool.

Slow economic growth- Weak economic numbers coming from the US has spooked the markets. The U.S. manufacturing PMI (Purchasing Managers Index) hit a 15-month low in the same month. Manufacturers' confidence in business also slipped to the lowest level in nearly two years. This in turn affects the rate hike frequency thus influencing gold prices.

Federal Reserve’s monetary policy- The Fed had been tightening monetary policy aggressively. But on Jan. 4 Fed Chairman Jerome Powell signalled Wall Street that policymakers will be patient with policy moves and are attuned to the messages coming from markets. While gold may face headwinds from higher interest rates and dollar strength but currently the effect of the same seems to be limited on gold as the Feds stance is neutral. Any delay in rate hike will push gold prices higher.

Demand for gold as a hedge tool- Globally, there were net positive flows into gold-backed exchange-traded funds in 2018. However, North American funds suffered significant outflows in the second and third quarters, with this trend only reversing in the fourth quarter as risks began to intensify. But in 2019, global investors are expected to favour gold as an effective diversifier and hedge against systemic risk on multiple global metrics

Central Bank Buying- In addition, central banks continue to buy gold to diversify their foreign reserves and counterbalance fiat currency risk, particularly as emerging market central banks tend to have high allocations of US treasuries. Higher demand once again means higher prices for gold.

Time and again it is proved that gold has delivered returns and has performed better than other assets in its class. Moreover, its liquidity and risk adjusted returns makes it an investors favourite and hence its looks more relevant this year.



Friday, 4 January 2019

Gold expected to outperform in 2019

Bullion hit a six-month high, nearing US$1,300 an ounce over the following concerns-

  • Report showing a contraction in China manufacturing sent global stocks tumbling on 3rd January, 2019. 
  • Concern over chains economic outlook
  • Sinking factory gauges in Italy and Poland
  • Wobbly U.S stock market
  • Weaker economic data coming out of the European Union



Volatile stock markets, dollar swings and a global trade war sent gold on quite a market ride in 2018, from a high of $1366 an ounce in January 2018 to $1159 in August. Some were disappointed as they couldn’t make much of the dips or failed to enter the market at the right time.

Gold prices are still stuck in a trading range that it hasn’t broken away from over a couple of years. But analysts believe that this is the time to enter the market and change your strategies. It probably to best time own gold as 2019 brings some positive price rise in the yellow metal; Equity markets will expect high levels of volatility and its wild fluctuation towards the end of 2018 speaks all for it. Moreover the US government is sitting over huge debts and there are grave concerns that the economy will over heat. Moreover the Fed policy makers have been sending mixed messages as to how many times they will increase the rates in 2019. Keeping this in mind, it seems that it’s the perfect scenario for investors to seek safety in gold as it is expected to be the best performing asset in its class in 2019.

Wednesday, 2 January 2019

Gold looks moderately bullish in 2019

To recap, gold prices have held pretty firm in 2018. Trading just 5% lower versus the Dollar, gold has now risen back to last New Year's Eve for Euro and UK investors.

Gold futures on Monday closed out New Year's Eve with a loss for the session and year, but garnered some upward momentum as stock-market carnage reignited haven-related demand and as the dollar weakened somewhat. Weakness in equities over the past three months has given bullion some support, as has a weakening dollar over the past month. A weaker buck can provide support for commodities priced in the unit, as it makes it cheaper to users of other currencies.


Gold was expected to drop with the stock market, but instead it rose. It was expected that gold will behave the way it did in 2008. But there are big differences between now and 2008, it still looked likely that gold would get dragged down with the stock market when it dropped hard due to a flight into cash driving the dollar up but so far at least, this has not happened.

The biggest difference between now and 2008 is that back then money flooded into the dollar in order to buy Treasuries, but this time round that does not appear to be happening, and it is not hard to see why. Those who have been paying attention will know that other major powers like China and Russia have been preparing to dump the dollar for a long time now, by buying gold as fast as the West will sell it to them, devising their own payments systems to replace the SWIFT system and making bilateral trade agreements, etc. They also know that unless they have the military power to defend themselves, they would at some point be subject to military aggression by the U.S. if they try to cease using the dollar, hence their major effort to beef up their defensive capabilities.

Thus, what we are seeing is an intensifying buyers strike with respect to Treasuries that will continue to hike interest rates until the economy implodes, a process which has already started.

Thus, the fact that the dollar failed to rally either on the severe drop in the stock market of recent weeks or on the latest rate hike is viewed as an ominous development, both for the dollar itself and for the economy. This is what gold is picking up on and is the reason why it is has started to move ahead over the past couple of weeks.

Gold over the medium term looks moderately bullish over the following influences-
The rising frequency of US equity market draw down's
The gradual unwind of QE
Higher overall macro market volatility
Elevated geopolitical risks should all continue to favor gold buying on the dips.

Currently, the biggest threat to the gold market remains the U.S. dollar. However, the greenback could less of a factor to the precious metals market if equity markets continue to push lower.

Though gold isn't guaranteed to rise in price but global issues might spark trouble for investors. So in order to maintain a balance, owning a little physical bullion, stored securely and ready to sell the moment you need looks like a wise decision, given the fact the 2019 has come into view and a lot of ups and downs are expected to shake the market.

Monday, 25 June 2018

Gold expected to be markets favorite soon

Last week we saw divergence in U.S and European Monetary policies. European politics too witnessed similar events. This affected gold prices and it hit a six month low as the dollar hit an 11 month high.

Gold prices are down for the second consecutive week with the precious metal off more than 0.70% to trade at 1269 ahead of the New York close on Friday.

The Federal Reserve hiked U.S. interest rates again this month, while the European Central Bank said its benchmark rates would not rise until after the summer of 2019.


Rate hike strengthened the US dollar while. Gold is trading at a six-month low in the global market.
The decline came in alongside losses in global equity markets this week as mounting geo-political tensions regarding a looming trade war continue to weigh on risk appetite.

TRADE WAR - The intensification of rhetoric between China and the U.S. has continued to weigh on market sentiment as investors weigh the impact of an all-out trade war between the world’s largest economies. While these concerns would typically be supportive for the yellow metal, expectations for higher rates and persistent strength in the US Dollar have kept prices under pressure with gold breaking to fresh yearly lows this week.

US Data - things have been quiet on the data front but look for that to change next week with U.S. Durable Goods Orders and the third and final read on 1Q GDP on tap. Highlighting the economic docket will be the May read on Core PCE (personal consumption expenditure) on Friday. Consensus estimates are calling for an uptick in the Fed’s preferred inflationary gauge to 1.9% y/y. A strong print here would likely see traders continue to price in a fourth rate-hike from the central bank this year- a scenario that would weigh on gold prices.

Gold prices edged up on Friday from six-month lows as the dollar slipped, but the modest nature of the recovery suggested speculators might still be poised to punish the metal further.

Gold tumbled last Friday after repeatedly failing to surmount the $1,300 level as speculators rushed to liquidate long positions and others put on bearish positions.

The dollar pulled back from an 11-month peak against a basket of major currencies on Friday, as the euro strengthened after a survey showed euro zone private business growth recovered in June. A weaker greenback makes dollar-denominated gold cheaper for holders of other currencies.
Now a matter of concern is that even though the dollar weakened, gold did not react much to it. Now we need to keep an eye on the movement of the yellow metal as too many powerful forces are expected to drive gold prices higher.

Geopolitical fear is the major force that is expected to exert its pressure on gold.  The crises in Syria, Iran, the South China Sea, and Venezuela are not going away. Despite Trump’s summit with Kim Jong Un, don’t expect the North Korean nuclear issue is over.

The headlines may fade in any given week, but geopolitical shocks will return when least expected and send gold soaring in a flight to safety.

Moving on to Italy. Italy’s debt to GDP ratio is amongst the highest in the world.  As the new government in Italy seeks to stimulate growth through increased borrowing, gold’s attractiveness as an asset which is not replicable and is no one’s liability will become more apparent.

Gold is the most forward - looking of any major market. It may be the case that the gold market sees the Fed is tightening into weakness and will eventually over-tighten and cause a recession.

At that point, the Fed will pivot back to easing through forward guidance. That will result in more inflation and a weaker dollar, which is the perfect environment for gold.

Meanwhile, there are numerous risks such as international trade conflicts, political crises, the dispute over Iran sanctions and high-priced stock markets that could be ripe for corrections.