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

Sunday 25 October 2015

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
 




Saturday 10 October 2015

AMBIGUITY FOR GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL






As we all know, lately gold has been majorly influenced by any data released from the Fed regarding its interest rate.

Gold prices dropped in Asia on Thursday as China markets returned from holidays and investors stake positions ahead of Fed minutes later in the day.

Trading activity had become more muted as the September Federal Open Market Committee (FOMC) meeting minutes approached.

Investors awaited the release of the minutes from the Fed's September meeting on Thursday for further hints on whether the U.S. central bank could raise short-term interest rates before the end of the year.

A combination of a weakening US economy and sowing down Chinese one, led to a delay in the rate hike expectation.
Now majority of the market players believe that rate hike won’t come in before March 2016.

Gold prices climbed on Friday morning after the release of minutes of the Federal Reserve’s September meeting raised speculation that the US central bank could wait until next year before tightening monetary policy.
Spot gold was last at $1,154/1,154.40 per ounce, up $14.40 on Thursday’s close. Trade has ranged from $1,139.50 to $1,154.60 so far.

The shifting expectations are helping to weaken the U.S. dollar and in turn boosting gold prices. Early in Friday’s session, December gold futures ended up hitting their highest prices since late August and are preparing to end with gains of almost 2% for the week. As of 12:40 p.m. EDT, December gold last traded at $1,158.70 an ounce.


One of the main reasons, apart from soft data, that has delayed the rate hike is the limo inflation in the US. It has prevented the central bank for raising rates from near-zero levels, where they have been since December 2008. 

The FOMC decision not raise the federal funds rate has led a majority of market participants to look at 2016 for a normalization of US monetary policy.
To state the exact month would be quite difficult but it could be around March or June 2016.

The Fed has been locked in an intense debate over the timing of a rate hike with sagging inflation impeding a launch-off.
Interest rates have been at near-zero levels since December 2008 and haven’t increased since 2006.


The other data released along were-

  • Weekly unemployment claims came in at 263,000, besting the forecast by 9,000 and under the psychological 300,000 mark.
  • September import prices month-over-month fell 0.1 percent, beating the forecast of -0.5 percent
  • Wholesale inventories month-over-month were in-line with projections at 0.1 percent 


The FOMC minutes elaborated on its concerns about global markets, particularly the Chinese slowdown.
The September minutes released by the FOMC Thursday evening suggested that policymakers are unlikely to rush to tighten rates amid concerns over a China-led global economic slowdown.

The minutes stated that although US economic data releases generally met market expectations, domestic financial conditions tightened modestly as concerns about prospects for global economic growth, centered on China, prompted an increase in financial market volatility and a deterioration in risk sentiment during the intermeeting period.

Chinese markets reopened after a prolonged holiday as US trading session was the final one before a holiday weekend.

The minutes further stated that although US economic data releases generally met market expectations, domestic financial conditions tightened modestly as concerns about prospects for global economic growth, centered on China, prompted an increase in financial market volatility and a deterioration in risk sentiment during the intermeeting period.

Weak data sees gold prices to be in the positive territory. Moreover, in the Indian markets we see demand for gold to move high as the markets welcome one of  the main gold buying festivals- Dussehra and Diwali.
On the contrary gold prices could move lower next week term as markets have priced in renewed geopolitical turmoil in the Middle East.

Most analysts, though, are bullish on gold as the market is seeing a technical shift. Many expect to see prices retest the August highs at $1,170 an ounce and the 200-day moving average at $1,178.20 an ounce.

Though gold prices are likely to move higher, a stronger equity market could take some momentum away from gold.

When the Fed does start raising rates, something it has not done in nine years, it will eventually mean higher rates for consumer and business borrowers. But Fed officials, including Chair Janet Yellen, have stressed that the rate increases will likely be very gradual, meaning that rates would still remain near historic lows for a while.






Sunday 6 September 2015

NO HELP FOR GOLD:RSBL

-By Mr. Prithviraj Kothari, MD, RSBL


Firstly,I would apologise to all my readers for not drafting a blog for last week. 

I would like to present you an in depth analysis of this weeks gold movement.

It all began on a positive note for gold. The yellow metal entered the positive territory on the first day of the week and investors once again gained confidence of gold being a safe haven asset. But as we moved further, it once again lost its glitter. Gold prices fell by the end of the week and there were a varied reasons responsible for this fall.

Gold was marginally higher on the first morning of the week but remained rooted within a narrow range. Gold was vulnerable to a fresh wave of selling from funds poised to increase bearish bets.

In Shanghai, poor PMI dampened the sentiment and this decline in Asian markets boosted gold’s safe haven appeal as gold continued its gradual positive trend in European trading and was up around $6 an ounce to $1,141- around two per cent off a recent high reached a little over a week ago.

Gold has been struggling to gain from equities volatility in recent weeks, but it reverted to its inverse correlation with wider markets on Wednesday as spot prices recorded the sharpest fall in a week.

Gold found "no help" on Thursday as a spate of economic data from Europe and the US reduced inflation expectations. This sent the dollar higher, weighing down on the value of a precious metal that is often treated as a proxy currency and typically moves in the opposite direction to the greenback.

Gold fell 1 percent on Thursday as the dollar jumped versus the euro after the European Central Bank (ECB) cut inflation forecasts, while a U.S. jobs report that could provide clues on the timing of a Federal Reserve rate rise remained in focus.

The ECB left interest rates unchanged at record lows as expected, but lowered its forecasts for inflation and economic growth, citing a slowdown in emerging markets and weaker oil prices.

As a traditional hedge against inflation, gold suffered from the downward revision.

Spot gold had hit its lowest in a week during trading sessions on Thursday after comments from the ECB president Mario Draghi boosted the dollar against the Euro.

The president warned of negative inflation in the months to come, while noting that the Euro zone recovery has been weaker than expected.

The central bank left its benchmark interest rate at 0.05 per cent, a move that was widely expected whit Euro zone inflation currently at 0.1 percent.

By Friday afternoon, gold slipped about 0.4 percent in Europe following the release of a mixed US labor report.

The spot gold price was last at $1,120- $1,120.5 per ounce- almost down $4.70 from Thursday’s close. The US nonfarm payroll employment increased by 173,000 in August- below the forecast of 215,000 but on the contrary the unemployment rate fell to 5.1 per cent from 5.2 per cent in the prior month.

While average hourly earnings rose eight cents to $25.09 following a six cent gain in July- the hourly earnings rose 2.2 percent over the year.
Gold that was trading in a narrow range but on a positive side- immediately moved to the negative territory after the release of the report.

Though the reports were conflicting in nature- overall it did support the fact the interest rate hike may happen in September itself.
Reasons to justify this was a strengthening dollar and a strengthening gold, both of which happened after the data release. Their usual inverse relationship trend as broken which reflected some speculation surrounding a September interest rate hike.

The jobs report has taken on greater importance ahead of the September FOMC meet. The Fed is deciding whether to raise the Federal Interest rate for the first time since 2006.

After from the Euro zone and the US, In India a less than optimal monsoon will surely affect the demand for gold which may pull down gold prices further.

On the other hand demand for gold from China too seems to be weak. Chinese markets will be closed until Monday after the September 3-5 celebrations to mark the allied victory over Japan in the World War 2. The two day holiday in China also had some bearing on gold.

Currently we don’t see any help for gold from any of the world economies.


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 -
"Optimism For Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/08/optimism-for-gold-rsbl.html

Sunday 9 August 2015

GOLD TO BE PRESSURED DOWNWARDS: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL




The bull market for gold is entering its seventh year. For the past seven months the market has traded roughly sideways.  Collapsing energy prices and a rising dollar have held back earnings and revenue growth. 
In the past, the demand for gold from China had been a motivating factor behind the rising prices for gold. But now, questions regarding the pace of global economic growth have moved to the forefront recently by price declines in the Chinese stock market, oil, commodities and high-yield debt in the past three months.
 
Such a slow pace of economic growth continues to create a deteriorating investment scene. Commodities and oil are key drivers of global economic growth, and falling prices do not usually portend rising demand. 
Gold has been trading in successively smaller weekly ranges for the past 2 weeks. This week we closed lower at 1095 with a very small range, and it appears that the bottom of the bearish trend.
 
Spot gold, which hit a session low of $1,082.76 an ounce immediately after the U.S. jobs report, managed to rebound 0.5 percent to $1,095.26 . It had fallen to $1,077 on July 24; it’s weakest since February 2010.

Though we saw some buying momentum in gold as the week ended, some market players state that since prices aren’t able to break the $1100 mark, gold does not bode well for a sustained rally.
Surprisingly, $1,100 appears to be the barrier that we just can’t seem to break. Although there are expectations that the market might trade in a tight range next week, gold remains an unwanted asset as the expectations remain that the Federal Reserve will raise interest rates in September.

After rising on Friday, following the U.S. Department of Labor’s employment report for July, the U.S. dollar weakened as afternoon trading wore on. It was a neutral report- not too close and not too far from expectations. Therefore, markets are finding it difficult to analyze and find a meaning in it. 

Economists have noted that July’s nonfarm payrolls report helped to rejuvenate those expectations. Although job gains of 215,000 were below expectations, it stills a “solid” report.
Consensus forecasts ahead of the report were expecting that the U.S. economy created 223,000 jobs. The unemployment rate remained unchanged at 5.3% last month, in line with economist expectations.

The consensus was for 223,000 jobs and July came in at 215,000. However, upward revisions to the previous months’ employment data plus a gain in average hourly earnings and hours worked were both viewed positively by market participants, and as a stronger signal the Fed could raise rates in September. 

The U.S. labor market lost momentum in July, coming in under expectations for the second consecutive month, according to the latest employment data from the Labor Department; however, the numbers still showed jobs gains of more than 200,000.

Friday, the Bureau of Labor Statistics said 215,000 jobs were created in July, down from June's revised number of 232,000; June’s initial report pegged the growth at 223,000 jobs. May's employment data was also revised higher to 260,000 from the previous report of 254,000.
Although the data was slightly weaker than expected, gold prices sold off in initial reaction to the news, dropping almost $10 and falling to a session low of $1,081.40 an ounce. 

Other highlights of the report were-


  • The participation rate was also unchanged at 62.6% in July.
  • Wage growth continues to expand at a steady pace, increasing 0.2% in July, compared with a 0.2% rise in June.
  • The report noted that average hourly earnings rose five cents last month to $24.99. On an annual basis wages have increased by 2.1%.
  •  Employees also saw an increase in the work week; the report said that the average workweek rose by 0.1 hour to 34.6 hours.
Although it appears that some of the immediate selling pressure has been alleviated, there is still strong negative sentiment in the marketplace. Retail investors continue to expect to see lower prices in the near-term and market professionals have once again turned bearish on gold.

The first data point that could have potential to move the gold price next week comes Thursday with the release of U.S. advance retail sales for July. The market ends the week with some inflation data with the release of the U.S. Producer Price Index for July.
Despite the negative sentiment, there is still market professional who see some hope for the yellow metal as technical momentum indicators continue to highlight an oversold marketplace.

However, gold is still fundamentally in the doldrums from the bullish point of view. Long term, gold will be pressured downward. 

Markets don’t expect to see another sharp selloff until Aug. 19, when the Federal Reserve will release the minutes of its July meeting. Markets will then expect a clearer picture of an interest rate hike in September.

Till then gold is expected to trade sideways until some solid crucial news is reported.
Markets could be stuck in a range next week in light volume as markets will be deeper into the summer holiday season.


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 -
"Rate Hike Creating Pressure On Gold"
http://riddisiddhibullionsltd.blogspot.in/2015/08/rate-hike-creating-pressure-on-goldrsbl.html