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Showing posts with label Bullion. Show all posts
Showing posts with label Bullion. Show all posts

Wednesday, 9 January 2019

Gold benefits from equity slide

Reserves Reserves Reserves - it was all about piling up gold in the past week. And when I Say piling I mean in huge numbers.

Peoples Bank China shocked the world when it’s released the figures of gold reserves that it sits on.  China's gold reserves had been steady at 59.240 million fine troy ounces from October 2016 to November 2018, according to data from the People’s Bank of China, and suddenly jumped to 59.560 million fine troy ounces at end-December.

The People’s Bank of China increased holdings to 59.56 million ounces by the end of December, or about 1,853 metric tons, from 59.24 million ounces previously, according to data on the central bank’s website. They had been unchanged since about 130,000 ounces were added in October 2016.
China has long been wanting to reduce its dependency on the US dollar. The ongoing trade war is threatening its economic growth.


Several large emerging economies, which today fuel most of global growth prospects, and major oil exporters, are intrigued by the idea of re-coupling gold with a multilateral currency basket to avoid excessive exposure to US dollar-denominated energy and commodity markets.

 Spot gold had its strongest month in almost two years as those fears spurred a whirlpool in equities and the dollar and boosted demand for the precious metal as a haven. And hence the world’s biggest producer and consumer boosted holdings of bullion.

But it was not an overnight thing. China has been piling reserves since quite some time. It had last released the figures in 2016 and now suddenly. And it’s not just China that has been doing this.  As Bloomberg reports, Poland and Hungary surprised the market in 2018 by adding to their gold holdings for the first time in many years.

Furthermore, there have been interesting shifts in gold reserves. While advanced economies, such as the US and Germany, still own most global gold reserves, the US has increased its gold holdings in the past decade only marginally, while Germany has been forced to cut its reserves. In contrast, China has tripled its reserves, while Russia has nearly quintupled its gold (after dumping billions of US Treasuries), despite rounds of sanctions.

Fresh comments coming in from Federal Reserve Chairman Jerome Powell on Friday, got in a fresh rally in gold prices. The statements released boosted the chances that the central bank will pause interest-rate increases. Speculation that the Federal Reserve may pause its interest rate hikes has given further strength to gold’s rally into the new year and assets in bullion-backed exchange-traded funds are at a seven-month high. Spot gold was trading 0.5 percent higher at $1,291.83 an ounce as the week ended. Strengthening of the yellow metal has further weakened the greenback.

Gold was out of favour for much of 2018 as a result of the strong dollar and interest rate increases in the US. The precious metal traded as low as $1,174 an ounce in August, despite rising geopolitical tensions.

However, sentiment began to improve towards the end of the year, as volatility increased further and US stocks suffered.

THOSE analysts who believe that fear has made a comeback argue that gold is benefiting as equities slide and investors are increasingly concerned about the economic prospects of the United States (US), China, Europe and Japan. Yet, even at $1,290, gold still remains more than 30 percent behind its all-time high of $1,898 in September 2011 amid the US debt-limit crisis.

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.

Tuesday, 11 September 2018

Time To Add Gold In Your Portfolio

Gold has fallen more than 8% this year as concern about trade disputes; currency weakness in emerging markets and rising US interest rates has strengthened the dollar, making bullion more expensive for buyers with other currencies.


TRADE DISPUTE - Gold is trading back above $1,200/oz ahead of the expected announcement from the White House that China is about to get hit by additional tariffs on goods valued at up to $200 billion. The latest US trade balance for July showed the US in the red by $50.1 billion while the trade deficit with China rose to a fresh record of $36.8 billion.

Investors have been waiting for a fresh round to be fired in the Sino-U.S. trade war after a public comment period for proposed U.S. tariffs on a list of $200 billion worth of Chinese imports, which includes some consumer products, ended late last week.

With his domestic agenda being challenged by the upcoming midterm elections, less-than-flattering comments from White House insiders, and the ongoing Mueller investigation, President Trump is unlikely to step back from his fight with the Chinese.

The prospect of an escalated trade war continues to make matters worse for emerging market bonds, stocks and currencies.

The trade war and its effect on the USD/CNY exchange rate remains the primary determinant of Gold prices in dollar terms. Until either the trade war ends or the dollar falls, either of its own accord or due to a Fed reversal in policy, USD/CNY is likely to go higher and gold lower.

The escalating trade war crisis continued to spill its effect on gold in the past week too. Gold prices rose on Friday due to a lower dollar and jitters about an escalation in the U.S.-China trade dispute after fresh threats by President Donald Trump, although bullion is still heading for its fifth straight monthly decline.

Spot gold was up 0.6 percent at $1,206.19 an ounce during Fridays trading hours- a gain of 4 percent from the 19-month low of $1,159.96 hit on Aug. 16.



CURRENCY WEAKNESS - Lately positive U.S. economic numbers have been showing signs of a strengthening U.S economy. This has further strengthened the dollar against major basket of currencies. In India too rupee was at a record low of 72.17, sliding by 44 paise against the US dollar on rising demand from US dollars by bankers and importers.

Like the trade war, the dollar prices continued to show its effect on gold this week too.
The dollar traded higher against a basket of currencies on Monday amid fears of a potentially major escalation in the China-U.S. trade conflict, while Sweden's crown rose following the previous day's election.

U.S. President Donald Trump warned on Friday that he was ready to slap tariffs on virtually all Chinese imports into the United States, threatening duties on another $267 billion of goods in addition to the $200 billion already facing the risk of duties.

The index also found support after data showed U.S. jobs growth accelerated in August and wages notched their largest annual increase in more than nine years, boosting the prospect of faster interest rate rises by the Federal Reserve.

Non-Farm payrolls led to some modest downward pressure on gold. Furthermore, though the dollar will continue to weigh on gold, and as long as the dollar is strong, gold will remain constrained.

RISING INTEREST RATES - Gold prices held steady during Asian trade on Tuesday as investors remained on the sidelines amid expectations of a U.S. interest rate hike this month and on fears of an escalation in the Sino-U.S. trade war.

Strong U.S. payrolls data last week cemented expectations that the U.S. Federal Reserve will raise interest rates in September, in what would be its third hike this year, with expectations of one rise more in December.

Higher rates increase bond yields, making the non-yielding bullion less attractive and tend to boost the dollar.

Now what’s interesting to note is that though gold is being hammered lately, financial advisors in Asia, are suggesting their clients that this is the right time to include gold in their portfolio. They have been asking them to take advantage of dips and to stockpile to protect assets against pounding equity markets.

Gold has sold off over the past few months as USD interest rates have increased, so there is more opportunity to buy. For clients who do not have an allocation of gold in their portfolios, now is the time to add gold.

Friday, 10 November 2017

Gold tracks the U.S Currency

Bullion moved up on Wednesday as geopolitical tensions between US& North Korea and in the Middle East prompted investors to flock to safer assets. Gold was positive by almost half a percent and tested high in the international markets.

Gold prices edged higher on Thursday, after marking a near three-week high in the previous session, as the dollar eased.



Spot gold rose 0.2 percent at $1,283.91 per ounce at 0844 GMT. On Wednesday, it rose 0.4 percent and touched it’s highest since Oct. 20 at $1,287.13 an ounce.

Initially what pushed gold prices were factors like geo political uncertainties and safe haven buying. But currently, the severity of these influential factors has subsided and hence gold has been probably tracking the US dollar as its driver for price movement.

The dollar slipped to a more than one-week low against the yen on Wednesday, pressured by worries over possible delays to President Donald Trump's tax reform plans.

Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the U.S. currency.

On Monday, the Federal Reserve Bank of New York confirmed that William Dudley, among the most influential monetary policymakers throughout the financial crisis and its aftermath, expects to retire by mid-2018.

That raised another question over leadership at the central bank, less than a week after Trump chose a new Fed chief.

Currently the markets are in a fix, wondering what exactly to look for while making their trade. It’s difficult for them to trade even the Fed at the moment and hence as of now all eyes will remain focussed on the tax reforms for any further movement in the precious metals market.

Monday, 30 October 2017

Rally expected in gold in near future

Gold’s rally this year came to a halt in September. And the prices continued to weaken in October mainly due to higher US nominal and US real yields. The yellow metal fell from $1357 an ounce to $1260 on 6thOctober, thus signalling markets that the rally in gold prices has almost ended.

Post the decline, gold prices in October have stabilised. During the past week, gold prices declined by mid-week and then rose again on Thursdayamid a weaker dollar and equity market sell-off, while market participants turned their attention to the European Central Bank’s (ECB) monetary policy meeting.

The spot gold price was quoted at $1,280.20-1,280.50 per oz, up $1.45 from the previous session’s close.

The decline in equities helped turn around a sell-off in the gold market, as investors pushed back into safe-haven assets. Moreover a simultaneous fall in the US dollar also pushed the demand for gold.

Even though gold prices rose on Thursday and Friday, the week ended on a negative note for gold. Gold prices were down for the second consecutive week with the precious metal off by .75% to trade at 1270 ahead of the New York close on Friday. The losses come amid continued strength in the U.S. Dollar as it gained due to a sharp sell-off in the Euro after a dovish ECB President Mario Draghi suggested that interest rates would likely remain at present levels for "an extended period of time" after the QE program ends.



The broader bid in the U.S. dollar as markets factor in a more hawkish Fed chairperson and with the Fed on track to hike the Fed funds rate by 25 bp in December also weighed on commodities in the past week.

Gold prices were under pressure and the other precious metals are following its lead – again the firmer dollar and potential for more dollar strength, while the geopolitical scene seems calm, are weighing on prices. Needless to say, North Korea also remains a potentially bullish factor.

Gold edged higher on Friday, reversing earlier losses after the Catalonian parliament’s independence declaration from Spain led investors to seek safety from political upheaval.

Catalonia’s declaration was in defiance of the Madrid government, which was preparing to impose direct rule over the region.

Bullion is often used as a safe haven in times of geopolitical and economic uncertainty, while riskier assets such as equities are generally sold off.

Though gold managed to reach a session high of$1271 per ounce, it couldn’t sustain the strengthening US dollar and hence headed for its second weekly decline.

However, markets are still bullish for gold as the yellow metal is expected to rise to $1,350 an ounce between January and March 2018, and end the year with a more positive performance, as rates are expected to average at $1,450 an ounce.

The longer-term trend in gold prices is also positive, mainly because we markets are negative on the US dollar.

Coming to this week, a decline in gold prices can be expected as gold is expected to weaken over a strong UD dollar.

Currently, all eyes fall on the Fed with the FOMC rate decision slated for Wednesday. While no change to the benchmark rate is expected, traders will be looking for any changes to the accompanying statement- specifically as it pertains to the inflationary outlook. Keep in mind markets have largely priced in a December hike with Fed Fund Futures currently showing an 87.1% probability for an increase of 25bps. However with both 3Q GDP and the Core Personal Consumption Expenditure (PCE) coming in stronger-than-expected on Friday, the question now becomes the future pace of subsequent rate-hikes.

Wednesday, 31 May 2017

GOLD EXPECTED TO SHINE IN THE SECOND HALF OF 2017

It was strong opening for gold this week as gold neared its highest in a month on Monday amongst holiday thinned trade. A soft dollar and a pullback in equities helped this rise in gold prices.

Gold hit its highest level since May 1 on Friday at$1,269.50 an ounce, as nervousness over U.S. President Donald Trump's negotiations with other world leaders at the G7 summit prompted investors to buy bullion as an alternative to nominally higher-risk assets such as shares.



Spot gold settled at $1,266.67 an ounce, little changed from $1,266.66 late on Friday.
Though there is not much rise expected in gold prices, but the news from G7 meeting pushed gold prices up.

Under pressure from the G7, Trump on Saturday backed a pledge to fight protectionism but refused to endorse a global accord on climate change, saying he needed more time to decide.

Apart from this, market players await next month’s FOMC meeting to get clearer picture on the U.S. Federal Reserve's stance on interest rate increases.Gold is highly sensitive to rising U.S. rates, which
Increase the opportunity cost of holding non-yielding bullion, While boosting the dollar, in which it is priced.

Meanwhile this week, market participants will stay focused on the labor market report in the US slated to release during the week. If the data turn out to be positive, there is probably nothing to prevent the (Fed) implementing its next rate hike in mid-June.

The latest FOMC minutes suggest that the Fed may start decreasing its balance sheet later this year.
It is true that the first two rounds of quantitative easing were positive for the gold market. However, the third one was a disaster for the yellow metal, as the confidence in the U.S. economy came back and the safe-haven demand for gold declined. Therefore, the impact of the unwinding of the Fed’s balance sheet on the gold market is not easy to determine – a lot will depend on the broad macroeconomic picture.

On the one hand, the Fed’s shrinking balance sheet would imply rising long-term real interest rates, which would be negative for gold prices. On the other hand, there may be some turmoil in the financial markets, which would support the gold market. Moreover, it may be the case that the U.S. dollar rally which started in 2014 was caused by the rising expectations about the Fed’s upcoming tightening.

If this is true and investors really bought the rumor and sell the fact, then the greenback may start depreciating, which would likely send the price of gold higher. Gold’s response to the current Fed’s tightening cycle suggests that it is not impossible scenario. However, the whole process is likely to be conducted in a very conservative and cautious way to minimize market volatility and disruption. Hence, investors should not bet on doom scenarios and expect that the price of gold will necessarily skyrocket.

Though gold was not preferred in an investor’s portfolio during 2016, it gold regained investor confidence during 2017, as doubts about the Trump’s administration’s ability to see through their policy agenda and political difficulties have emerged. Moreover, there has also been a number of geopolitical events such as European elections – the results in France and Netherlands have somewhat assuaged financial markets – and the flash point in the Korean peninsula.”

These geopolitical tensions and uncertainties have influenced gold prices.

The spot price of gold jumped nearly 2% on the 17th of May, the most significant daily increase since the Brexit vote on May 2016. Political developments will be closely watched by the market, and could be a potential driver of additional uplift in gold prices going forward.

Comments by St. Louis Fed President, James Bullard, that inflation remains subdued, and the Fed’s interest rate expectations might be too aggressive, have also been supportive of gold.

Gold is expected to hover around USD 1250 an ounce and is further expected to range between USD $1245 to USD $1300 over 2017-18.

Monday, 13 February 2017

GOLD STABILISES AMIDST UNCERTAINTIES

While when gold was just about to continue to maintain its 3 month high last week, there was a sudden pull back and gold prices moved lower by the end of the week.

Gold steadied on Friday, but remained below the week's three-month top as the U.S. dollar and Treasury yields came off their highs after the currency initially jumped on U.S. President Donald Trump's promise of a major tax announcement.


Gold was being pushed and pulled amidst various factors that played key roles in influencing gold prices-

Interest Rate - Gold slid on Thursday from a three-month high in the previous session after strong U.S. economic data pointed to a robust economy, increasing the possibility that the Federal Reserve will raise U.S. interest rates.
U.S. economic data has also strengthened talk that the Federal Reserve would press ahead with U.S. interest rate hikes sooner rather than later.
Gold is highly sensitive to rising U.S. interest rates which increases the opportunity cost of holding non-yielding bullion while boosting the dollar  in which it is priced.

Dollar and Data - U.S. economic data also underpinned the dollar. Initial jobless claims unexpectedly dropped last week to a nearly 43-year low, while inventories at wholesalers surged in December for a second straight month. U.S. import prices rose more than expected in January.
The data showing rising U.S. wholesale inventories and an unexpectedly low number of Americans filing for unemployment benefits further pushed up the dollar and U.S. bond yields.                        
A stronger dollar makes gold more expensive for holders of other currencies, while higher yields increase the opportunity cost of holding non-yielding bullion. Higher interest rates would lift yields further.
           
Tax Announcement - Donald Trump plans to announce the most ambitious tax reform plan since the Reagan era in the next few weeks, the White House said.
On Thursday, sending stock prices and the dollar higher on hopes leading to a cut in corporate tax rates.

French Elections - Investors are concerned about the strong showing in the French presidential race of far-right candidate Marine Le Pen, who has promised to take France out of the euro zone and to hold a referendum on European Union membership.

Gold held near 3-month highs on Thursday as political risks from elections in Europe and worries over U.S. President Donald Trump's policies buoyed safe haven demand for the bullion.

While gold was stabilised by Friday. It was still amongst the favourites for investors. Many of them are being bullish for gold – Reasons being :

  • Controversy over U.S. President Donald Trump's temporary travel ban on people from seven Muslim-majority countries has recently boosted gold as a safe-haven asset.
  • Further geo-political uncertainties, increasing hostilities in the Ukraine, Greek bailouts, French elections, Iran-U.S. sabre-rattling have supported gold prices and drawn interest from investors who seek support in safe haven assets.
  • Investors' bullish stance on gold is reinforced by an increase in net longs by speculators and a rise in holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. (SPDR holdings rose 0.68 percent to 832.58 tonnes on Wednesday from Tuesday, rising for a sixth straight session.)

Increasing uncertainties has increased the demand for gold as a hedge. Amidst all this, gold prices are expected to rise till Mid Feb. Once January CPI data is released, it will give an idea about the possibility of a rate hike in March which will then be a deciding factor in the movement of gold prices.

Sunday, 24 April 2016

BEST QUARTER FOR BULLION SINCE THREE DECADES: RSBL

By Mr. Prithviraj Kothari, MD, RSBL


Gold, one of this year’s best performing assets, has room to extend its advance, according to top-ranked forecasters, even as the rebound shows signs of losing steam.
While we see gold being one the best performing asset in its class in 2016, we also this year to be one of the best performing years for gold in the past 3-4 years.

Bullion had its best quarter in almost three decades through March after the metal regained its haven status amid volatile financial markets, the spread of negative interest rates and as the Fed pared back expectations of further rate increases. Holdings in exchange-traded funds have climbed about 20% this year and there appears to be a return of confidence.

While gold has strengthened since the start of the week, putting an end to last week’s selling pressure, it has underperformed the rest of the precious metals as speculative positioning is overstretched on the long side

When markets are volatile and sentiments are confusing, we see more than ne factor influencing the prices. The same has happened with gold. This week there was more than one factor that as responsible for the ups and downs in gold. Let’s have look at each of these individually.

ETF- In paper holdings, gold ETF’s tracked by Fast Markets remain near their 2016 high – stood at 1,806 tonnes as of April 21. Investors poured $13.6 billion this year into exchange-traded products tracking precious metals, data compiled by Bloomberg show. That’s almost 80% of the total inflows into commodity ETFs in 2016. This gave a boost to gold prices.

ECB- On Thursday, the outcome of the European Central Bank meeting was as expected when it kept its current monetary programme unchanged.
The gold price was relatively flat during Asian trading hours on Friday after the European Central Bank (ECB) kept its monetary policy unchanged at its Thursday meeting as expected.
Spot gold was last at $1,250.00-1,250.20 per ounce on Friday, up just $0.50 from Thursday’s close.

But ECB president Mario Draghi warned that deflationary signals remained despite negative interest rates and billions of euros in asset purchases, while economic growth stays “tilted to the downside”.
In March, the central bank lowered nominal interest rates further into the zero-bound, citing concerns of deflationary pressure and a divergence between the northern and southern economies.

Dollar- Gold held its ground despite a stronger US dollar following the unexpected fall in US unemployment figures. With ECB policymakers holding interest rates unchanged, there was little to excite investors,” said ANZ Research on Friday morning.
The US dollar index had recovered to a three-day high of 94.70 on Thursday, but slipped 0.15 percent to 94.49 so far on Friday
Gold futures dipped Friday morning in the US, with a strengthened dollar and increased risk tolerance combining to weigh on prices.

US Report- in US data released Thursday, weekly unemployment claims between 7-14 April came in at 247,000 below the forecast of 265,000 and the lowest since November 1973.
The Philly Fed manufacturing index, however, was at 1.6, a stark divergence from the 8.1 estimate. The CB leading index month-over-month in March slipped to -0.2 percent, off the estimate of a 0.4 percent uptick.

Other markets- demand concerns in China and emerging markets weighed on global growth.
Earlier, Japan’s reading came in at 48, below the previous figure of 49.1, while PMIs from across the Eurozone were mixed.
Turning to International markets, Germany’s DAX and France’s CAC-40 were down 0.6 percent and 0.5 percent respectively, while the dollar strengthened 0.4 percent to $1.1253 against the euro.

While the current risk-on environment – evident in stronger equities and lower volatility – is exerting downward pressure on safe-haven demand, bullish factors like a weaker dollar and stronger oil price continue to prevail.



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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 -
"Why Gold Is Sill Cheap" 

Saturday, 30 January 2016

BEST PERFORMING MONTH FOR GOLD SINCE JAN 2015: RSBL


By Mr. Prithviraj Kothari, MD, RSBL





Recent years have seen countless claims that gold and silver prices have to head far lower, implying demand is low or supply is high.  But the actual data continues to prove this false, showing precious-metals bearishness is rooted in sentiment and not fundamentals.

Currently market sentiments for the yellow metal are bullions over the month for January as the global equities routs and a growth discomfort spurred gold prices nearly five percent – the biggest monthly gain in a year.


Gold prices headed for their best monthly rise in a year on Friday, slipping back to $1110 per ounce as world stock markets gained, but trading 4.6% higher from the start of 2016. This was gold's best monthly gain in Dollar terms since January 2015.

This year where on one side we saw the global equity markets began with a major sell off the yellow metal has given its best signal months performance since January 2015- as it rose 4.9per cent this month. Gold had hit a 12-week high of $1,128.20 during US trading on Wednesday and has since eased on profit-taking.

The gold price inched higher during Asian trading hours on Thursday supported by market uncertainties, as well as expectations of slower future Fed rate hikes.

Gold edged higher on Friday after U.S. data showed economic growth decelerated sharply in the fourth quarter and the price of the precious metal was on track for its biggest monthly rise in a year after global economic headwinds hit riskier assets.


Data released was as follows:

  • Fourth quarter advance GDP came in at 0.7 percent, missing the forecast of 0.8 percent. GDP Price Index stood at 0.8 percent versus the estimate of 1.2 percent.
  • Revised University of Michigan Consumer Sentiment was at 92.0, below the projection of 93.1, while inflation expectations rose 2.5 percent.
  • Employment Cost Index was in-line with projections at a 0.6 percent gain, while the Goods Trade Balance was at -61.5 billion, in range of the economic consensus of -60.0 billion.
  • Core durable goods in December at -1.2 percent missed the estimate of -0.1 percent durable goods orders at -5.1 percent was sharply below the forecast -0.6 percent.
  • US weekly unemployment claims at 278,000 were better than the forecast 281,000 and below the psychological 300,000 mark.
The gold rally is now battling a physical demand concern as Indian trade has lost pace and Chinese investors prepare for the aforementioned Chinese Lunar celebration.

This will further constrain the gains for gold as physical demand is likely to weaken.

While sentiment is improving across commodities the major concern now is where golf will re-bound of it will be carried along if long-term investors get favorable towards commodities.

Gold reached a 12-week high of $1,127.80 on Wednesday, after the Federal Reserve said it was closely watching the global economy and financial markets. This supported the view that U.S. policymakers may not be able to raise interest rates again as soon as March.

Currently the major deciding factor is the US tightening policy. Market players believe that even one further lifting of the fed funds target this year will come with great difficulty, and that the Fed’s own projected pace of four hikes this year is a near impossibility.

Maybe things won't be this bad next month in the wider markets, so it is possible that if ETF flows are subsiding, prices will be lower too.


But one positive lesson we can learn from this month is that gold does still have a safe-haven role and that could stand it in good stead through a testing year to come.


- Previous blog - "Markets remain calm as we enter 2016:RSBL"

http://riddisiddhibullionsltd.blogspot.in/2016/01/markets-remain-calm-as-we-enter-2016.html

Monday, 9 November 2015

INTEREST RATE HIKE TO HAPPEN SOON?: RSBL



By Mr. Prithviraj Kothari, MD,RSBL





The downtrend in gold continues, with the metal charting its seventh straight session loss and expectations for the same trend continue for the coming week.
The gold price was steady on Friday morning, making time ahead of the much-awaited US non-farm payrolls data, set for release later in the day.

Gold was confined to a narrow trading range, before the release of the monthly US jobs report.
Once the report was out, gold prices plummeted as the market continued its recent downtrend.

Gold fell below $1,100 on Friday after US jobs data surprised with the upside, raising the chance that the Federal Reserve will increase interest rates by the end of the year.
Spot gold was last at $1,087.40/1,087.60 per ounce, down $17 on Thursday’s close. At its intraday low of $1,085.40, it was at its cheapest since August 7.

After the U.S. labor market revealed its fastest pace of job gains this year, gold, on Friday, witnessed its lowest level since early August.

Treasuries tumbled and the dollar strengthened, as the report alleviated concerns of a hiring slowdown after weaker payroll advances cooled in August and September. Such improvement means a go-ahead signal for the Fed officials, who last month held out the possibility of a December rate increase.

Since this report was considered as one of the key influential factors for a rate hike, let’s have a detailed look at the highlights:

  •  The US economy added 271,000 jobs in October, while the unemployment rate fell to 5.0 percent
  • The government revised the September jobs gain down to 137,000 from the previously reported 142,000
  • The August gain was revised up to 153,000 from 136,000. Over the prior 12 months, employment growth had averaged 230,000 per month
  •   Meanwhile, the unemployment rate dipped to a seven-year low of 5.0% in October, from the 5.1% level of the previous month
  • Consensus expectations compiled by various news organizations called for non-farm payrolls to rise by between 177,000 and 190,000 in October, while the unemployment rate was expected to hold at 5.1%.
  • In October, average hourly earnings for all employees on private non-farm payrolls rose by 9 cents to $25.20. The average workweek for all employees on private nonfarm payrolls remained at 34.5 hours in October.
  • The Labor Department said job gains occurred in professional and business services, health care, retail trade, food services and drinking places, and construction sectors.
  • Employment in professional and business services increased by 78,000 in October, while healthcare added 45,000 jobs and retail trade added 44,000.
  • Employment in mining continued to trend downwards in October with a 5,000 decline. The industry has shed 109,000 jobs since reaching a recent employment peak in December 2014, the government said
  • The civilian labor force participation rate was unchanged at 62.4% in October, following a decline of 0.2 percentage point in September, the Labor Department said. The number of persons employed part-time for economic reasons (sometimes referred to as involuntary part-time workers) edged down by 269,000 to 5.8 million in October, the government added.
  • In additional data from this morning, average hourly earnings month-over-month rose 0.4 percent, above consensus at 0.2 percent.


The 271,000 gain in payrolls was the biggest this year and exceeded all estimates in a Bloomberg survey of economists, a Labor Department report showed Friday.



The key highlight of the report was the non-farm payrolls number. It jumped 271,000 in October, far more than the 183,000 consensus expectations and was a clear negative for gold prices.
A better-than-expected payroll and hourly earnings number caused the dollar index to spike, which further pushed the gold prices down.

The surprisingly strong U.S. payrolls has had a big impact on FOMC rate hike expectations, sparking a new rally phase for the U.S. dollar against many currencies, including gold.
The marketplace deemed the report as positive and has prompted strong selling in the gold market, as investors do not see a 2015 rate hike as far-fetched.  

Federal Reserve chairwoman Janet Yellen has stated that 4.9 percent is the Fed’s estimation for full employment and reiterated before the report that she would prefer to raise rates by December.
Earlier this week, Yellen said a December rate hike was a “live possibility” and the policy-board would raise the federal funds rate if the data was sufficient.
This has intensified the speculation for a December rate rise and has pressured gold prices lower, with the shift in safe-haven buying probably adding further downside.
The Fed hasn’t lifted interest rates since 2006, but dovish members see low inflation as sufficient reasoning to hold-off until 2016.

Traders watch the monthly U.S. jobs report most closely as they try to gauge whether the Federal Open Market Committee might hike U.S. interest rates yet this year. One more jobs report, for November, is scheduled for release before policy-makers meet again in mid-December, which will once again be a crucial factor for raising interest rates in 2015.



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

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