Pages

RSBL Gold Silver Bars/Coins

Showing posts with label China. Show all posts
Showing posts with label China. Show all posts

Friday, 15 March 2019

Market Sentiment Bullish

Generally in my blog, I have mentioned about how gold has been behaving, or the=e weekly outlook for gold etc. But in this blog I have mainly picked 4 factors that I personally believe will influence gold prices in the near future. It has been a good year for gold so far and investors believe that gold is here to stay.



A positive sentiment in the market is supported by the following factors-

Weak US dollar - We have always seen that gold is inversely related to the dollar. This relationship has proved to be fruitful strong and table for gold over a period of time. Gold has a tendency to rally when dollar weakens. Sometimes there has been strange behavior where gold and dollar both have declined together. But the situation was different at that time. It happened in an environment when US real yields rose, which depressed gold prices, while real yields elsewhere rose more than US real yields, pushing the US dollar lower. These situations are exceptional. If the US dollar weakens or strengthens in tandem with interest rate spreads than gold prices move in the opposite direction. If the US dollar weakens because of unfavorable spread movements, but US yields still move higher, gold prices will suffer versus the US dollar because gold doesn’t pay interest.

So keeping the exceptions apart, gold prices generally move opposite to the dollar. And in the near term, since dollar is expected to weaken, gold prices are expected to move higher.

Fed -When we mention dollar, we can’t forget to make note of the Fed as time and again dovish comments from Fed have influenced the dollar and furthermore the yellow metal.  The Fed to remain on hold, and other major central bank to hike less and/or later. Less hawkish central banks are a positive development for precious metal prices in general and for gold prices in particular. Moreover we expect the 10 year US Treasury yield and US 10y real yields to decline slightly. This should support gold prices.

Chinese economy - After the US, it’s the Chinese economy that stands second in influencing the yellow metal. The developments in the Chinese Yuan reflect the expectations for the Chinese economy and the US-China trade conflict.  With trade at war, China won’t sit quiet; it may continue to take some actions to strengthen its economy.these measure along with a possible US-China trade deal will support the yuan and gold prices.
Adding to it, we have seen that lately China ah been piling up its gold reserves. China is one of the leading consumers if gold and rising demand will surely push gold prices high.

Optimist sentiment - the technical picture of gold prices still looks positive. Despite the recent sharp decline in prices, prices are still above the 200-day moving average at around USD 1,250 per ounce. We are confident that prices will stay above this level. It is possible that prices drop towards this level and test it, but this would be an opportunity to position for higher gold prices. A sudden short-term rally in the US dollar or a temporary spike in 10y US Treasury yields (not our base scenario) could trigger profit taking on existing net-long gold positions. Later in the year we expect the positive momentum to build and gold prices to rally more strongly.

Monday, 11 March 2019

Gold expected to perform well in 2019

Last fortnight gold fell near two week lows. It was heading for its biggest weekly fall in nearly four months on 28th Feb. A strengthening dollar backed by rising equities created pressure on the yellow metal. Better sentiment on the stock markets and a reluctance by the physical gold investors are weighing on its price.

The dollar favored over the Jobs data and Gross Domestic Product news. This resulted in some long liquidation. The dollar, which gained impetus from better than expected fourth quarter U.S. GDP data, hit a 10-week high against the yen.


Rallies in the dollar were taking their toll on gold much more than they were a few weeks ago which is a clear sign that sentiment towards the yellow metal has shifted.

Just when the sentiment towards the yellow metal shifted, gold prices soared in the past week.  Gold prices soared to their highest level in 10 months on Tuesday, driven by technical buying, dovish central bank commentary and continuing uncertainty as the end of the 90-day trade truce between the U.S. and China draws near.

Just when investors became pessimistic about gold, some developments in the trade war resulted in the yellow metal hovering to its 10 month high on Wednesday mainly due to Fed comments and Equities.

Fed - Looking beyond the dollar’s relationship with gold, the yellow metals prices have been boosted by Fed commentary recently. The markets in general reacted favorably to the dovish tilt adopted by the Fed following its December rate hike.

Equity - Stocks were still climbing on Tuesday with key indices like the S&P 500 and Dow Jones Industrial Average on a steady upward march since the beginning of the year. However, both indices started to struggle early Wednesday as investors awaited the latest commentary from the Federal Reserve.

Gold found further support from job numbers released in Friday.

On Friday, prices got a jolt after a report showed that US hiring last month was the weakest in more than a year. The news helped gold push back above US$1,300 an ounce amid renewed demand for a haven.

Spot gold later settled at US$1,298.30 an ounce, down 1.14 percent for the week.
Gold has been caught in a tug of war. Four straight months of price gains amid economic hand-wringing gave way to losses last month as the US dollar gained traction.

The two main factors that are expected to influence gold in the months to come-

Dollar - Despite the recent strength in the dollar, the U.S. currency is expected to weaken “noticeably.” When that finally does happen, it should boost gold prices further—if the usual negative correlation between the two assets returns. They believe “a fair amount” of the greenback’s length has been removed but still see it as “structurally overvalued.”

Central Bank buying - central banks, especially Russia and China, have boosted the share of gold in their foreign reserves. Other analysts have also pointed out this same thing recently. The World Gold Council estimated a 74% year-over-year increase in this “official sector demand” in 2018.

Short term factors like US economic numbers and long term including a more dovish U.S. Fed, U.S.-China trade war, Brexit, Italian recession, fear of global economic slowdown, equity volatility, and increased central-bank buying are expected to push gold higher and help it   perform well in 2019.


Monday, 25 February 2019

Go for Gold

Past 6 months have been really great for gold. Gold prices have surged 14% since late August, when the Nasdaq Composite Index last hit a fresh record, and stand at their highest level since last April (* source- the Journal).

Gold has been influenced lately by many factors clubbed together. All these combined, have been pushing gold prices higher despite last years Fed rate hike, so it’s clear that gold is not dependent on just one factor for its price movement. Though US plays an important role in influencing gold prices, currently there are many other factors that need to be considered where gold prices are concerned.




World economies - The recent increase in gold price is in fact a proof that the slowdown has already started. Interestingly though, the increase is not the result of investors seeking a safe haven in a year that seems financially and economically awkward. That is, there are low interest rates in developed economies, higher rates in developing and emerging ones, and hence relatively higher risks of investments. In addition to the above, an increasingly protectionist trend could undermine the flow of global trade and negatively impact countries with economies highly dependent on international trade for their diversification.

Safe haven - Gold prices have climbed as investors uncertain about global growth outlook hedge their portfolios. Amid global political and economic uncertainty, the precious metal has become a compelling choice for money managers seeking to hedge their portfolios at a time of anxiety over economic growth and trade conflicts between the U.S. and its partners.

Central bank buying - In a report by the “Financial Times”, China purchased gold in late 2018, while its last purchase was more than two years ago. Poland, which hasn’t purchased gold since 1998, has lately added to its gold reserves. According to the same report, countries through their central banks have increased their gold purchases by “almost 75 per cent” in 2018. An increase in demand leads to an increase in prices too.

China, the top gold producer and consumer, is beefing up holdings amid signs of slowing growth and uncertainty about whether the trade fight with the U.S. will get resolved.

US trade war - Though the severity of the trade war is hanging loose, but any progress in this regards immediately affects gold. Trump said on Sunday he would delay an increase in tariffs on Chinese goods that had been scheduled for later this week, citing “substantial progress” in Sino-US trade talks over the weekend, and that he and his Chinese counterpart would meet to seal a deal if progress continued. This statement weakened the dollar against the Yuan.

The offshore Yuan strengthened 0.6 per cent to 6.673 Yuan against the dollar, after hitting its highest level since mid-July, on the news that Trump might not raise tariffs on $200 billion of Chinese imports to 25 per cent from 10 per cent.

As we all know that gold and dollar are inversely related and hence any weakness in the green back pushes the metal prices up.

But what’s interesting to see that annually gold has not generated returns yet, but it still seems to be investors favorite especially when they done know where to park their cash. This favouritism comes amidst the fact there bank deposits are no longer financially viable and other assets in its class aren’t giving that safe haven appeal. 

As a result, the alternative is to go for gold and settle for capital return, an increase in gold price which needs to be high enough to exceed inflation plus profit to make purchasing and holding it worthwhile. The trend in gold price seems to be headed upwards, and it may be a good time to get in, even if the best time to get in was when it was at $1,200 an ounce level.

Gold prices, though hinting at a looming bearish correction on risk-on market sentiments, will remain firmly supported on rising economic uncertainties and heightened geopolitical risks in 2019. Therefore, in light of low interest rates and a lack of clarity with regard to the world’s economic prospects, the gold price is expected to continue climbing. As it does, it may not stop at the $2,000 per ounce level realized two years post the 2008 financial crisis, but possibly higher.

A similar trend was witnessed post the increase in 1971, except that in every cycle, previous records for the highest gold price reached are usually broken. Not only that, the time elapsed between one cycle and the next is getting shorter.



Monday, 18 February 2019

Gold preserves your wealth

In 2018, gold fought against significant demand for traditional stock and mutual fund investments and weathered tremendous exchange-traded-fund outflows. Gold has been under pressure from a stable and slightly appreciating U.S. dollar. Still, gold has shown incredible resilience all year – especially through the first three quarters.

It rallied at year-end, suggesting a flat or slightly positive trend year over year. Much of this is due to the increase in central bank buying from countries like Russia, China, Turkey, Kazakhstan, Poland and others. It’s all part of a larger move to reduce U.S. dollar reserves in favour of gold.




In 2019, it looked as if gold was cashing on the struggle that it faced in the previous year. Gold prices have risen more than 12% since touching more than 1-1/2-year lows in mid-August, mostly on expectations of a pause in Federal Reserve rate hikes.  Investors have shifted their sentiments from bearish to bullish for the yellow metals over more than one reason-

Data - Soft data released from important economies has created a favourable situation for gold.  Gold and the U.S. dollar, both considered as safe-haven assets these days, gained on Friday in Asia following the release of weak U.S. retail sales and China inflation data.
The precious metal attracted some safe-haven bids last week after the Commerce Department reported U.S. retail sales tumbled 1.2% in December. Economists had forecast a gain of 0.1% for the period.

In Asia, China’s January Consumer Price Index (CPI) and Producer Price Index (PPI) both missed expectations, the National Bureau of Statistics reported on Friday, furthering dampening investor sentiment.

Elsewhere, reports that China and the U.S. have not been making much progress during trade talks this week also supported the yellow metal

Volatility - First, the increased volatility in international markets due to global and economic instabilities will foment the safe haven flows that began in 2018. And gold has a historical record of being a safe haven asset in times of uncertainties thus raised demand for the yellow metal and further pushing its prices.

Fed Rates - Lower rates are disadvantageous to interest-bearing assets such as the dollar, but work in favour of commodities like gold that offer a store of value to investors.

Alternate modes of investment - Alternative assets competing for your investment dollars are not expected to perform well in the coming year. The stock market should continue its descent, either with or without a last hoorah. Interest rates should stabilize in the coming year, so term deposits will continue to generate no real return. Bonds will not be attractive compared with gold.

Central bank buying - time and again central banks have been piling their reserves to reduce their dependency in the US dollar. This once again opens a green window for gold.

Gold’s characteristics - Gold may not give you income but it definitely preserves your wealth. It’s like taking insurance for your finances. And it is expected to play this role to its best in the following months,
Finally, unlike Most investors are waiting to see whether the anticipated rise in gold prices is for real. For them, a breach to the upside of $1,350 per ounce may not be enough. Most will look for confirmation of the breakout above $1,400 an ounce.

 In each of the last three years, gold has gotten off to a strong start only to fizzle as the year moved along.  A good many investors, fund managers and analysts think that 2019 might very well be the year when gold breaks the restraints and pushes to higher ground.

Our own view is that gold is due for a rise and most portents are favourable, but the yellow metal is pretty unpredictable in its price pattern.  Overall it serves as a good wealth protector and as catastrophe insurance.  We are not of the ilk predicting a rapid rise to $10,000 - it may get there eventually but probably not in many of our lifetimes.  However there’s enough geopolitical uncertainty around to carry the price back into the $1,400s this year should some of the more worrying scenarios come about.

Wednesday, 13 February 2019

Dollar strengthens but sentiments for gold are positive

Gold started the week on its back foot, testing the $1,300 level mid week. The metal recovered sharply ending the week essentially unchanged. A key catalyst for the recovery in the USD gold price was the revelation that that Presidents Trump and Xi will not meet to resolve trade differences prior to the imposition of increased tariffs in March. U.S. President Donald Trump said last week that he had no plans to meet with Chinese President Xi Jinping before a March 1deadline to achieve a trade deal.

We continue to see the US China trade conflict, Fed and ECB actions as key drivers of equity and USD volatility, in turn driving investors to safe haven gold.




Concerns regarding the Chinese economy, weak growth and political tension in the Euro zone, Brexit and lingering global trade tensions are weighing in on market sentiment and the dollar is once more sought after as a refuge asset.

Investors strongly believe that there is much scope for gold to rise and they cite 3 main reasons for that-


  • Geopolitical Risk. The U.S. trade war with China, the humanitarian crisis in Venezuela, and Britain's planned Brexit from the European Union are three examples of this. Each raises uncertainty for investors about the future, and that tends to make them anxious. Investors are also worried about the economic impact of U.S. government shutdown when global growth is already lean.


  • High Stock Valuations. Investors are also increasingly wary of the stock market that's pricey relative to projected earnings. So, some investors are cashing in at least part of their stock holdings and sending some of the proceeds to gold funds. With stocks now showing signs of rolling over in response to trade talks concerns and a weaker growth forecast, gold should find enough support once again to prevent a serious challenge at support, currently at $1,300 an ounce, followed by $1,275


  • Dollar - Gold is being pushed around by the U.S. dollar in the near term. Traders are getting out of anything to do with Europe on concerns of weakness in the region and going for safe-haven buying into U.S. treasuries, which is pushing up the dollar. But a possible shut down and impact of the US economy on its global counterpart, might make the dollar weak thus pushing gold further. 


  • The Federal Reserve.  The Fed also seems to be at "an inflection point" when it comes to U.S. interest rates. He notes that the investment community went from expecting the Fed to boost rates multiple times this year to now perhaps making no increases in 2019. Lower interest rates tend to weaken the U.S. dollar and boost inflation risks, making gold more attractive. Gold and dollar are inversely related so whenever there is any negative effect on the dollar, gold prices tend to rise.



For gold, a lot of the recent action is largely dictated by the fact that the dollar is holding firm over the past two weeks. That has seen gold fall from resistance around $1,326 to current levels. But as long as the figure level still isn't breached, there's still favorable momentum to for gold to continue its upside run since November last year. We remain of the view that the $1,350 level is viable in the coming months, and note the $1,360 technical resistance level many market participants are watching.



Thursday, 31 January 2019

Gold looks moderately bullish

This week is all about the much awaited FOMC meet. The Federal Open Market Committee meets between Jan. 29 and Jan. 30, and Chairman Jerome Powell is widely expected to acknowledge growing risks to the U.S. economy as global momentum weakens.

Speculations prevailed in the market that the Federal Reserve will keep its interest rates unchanged during its two-day policy meet. This led to a spike in gold prices, nearing a seven month high during the day. But later gold steadied.


Gold has a tendency to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.

Currently, the European Central Bank is seeing downside risks to the economy. ECB President Mario Draghi warned last week that a dip in the euro zone’s economy could be more pronounced, comments seen as signalling a delay in the bank’s first interest rate hike.
Amongst this scenario gold is portraying a strong chance of solid upward movement.

Furthermore, the US Fed is also expected to be more accommodative. The Fed has already raised its interest rates four times last year. It has even given hints that it might life borrowing costs twice in 2019.  Analysts noted that Federal Reserve policymakers recently lowered their forecasts for 2019 from three rate increases to two. This should support gold.

This uncertainty is bringing about a rally in gold prices. Moreover, global equities, particularly Asian stocks rose higher, as Wall Street rallied after a deal was announced to reopen the U.S. government following a prolonged shutdown that had shaken investor sentiment.

There were great concerns over a slowing global economic growth and this shutdown has only increased the worries of the market. Not forgetting, the, signs of stress in corporate earnings and a still unresolved Sino-U.S. trade war.

Meanwhile we also expect a rise in demand for gold, especially in Asia. Usually gold is bought in Asian countries for weddings, occasions etc. But lately gold is being purchased for investment purposes. Investment demand for gold rises with an increase in wealth. In recent years, both China and India have rapid increase in the demand for gold, especially China. These countries have been active drivers of holding the metal in its physical form.

With regard to preservation of wealth, gold has an immensely long track record; providing a hedge against inflation, geopolitical risks, natural disasters and other crises. Currently private banks and wealth advisers might typically advise their HNW clients to hold about 3-5% gold in their investment portfolios. While an ETF provides gold exposure and is an excellent tool for short-term trading, physical gold is preferable for medium to long-term investment as it is highly liquid, lacks counterparty risk and affords investors more flexibility. Unlike property or stock funds, physical gold is a highly efficient wealth management tool for estate planning

Since gold has long been used as a safe haven asset the outlook for the yellow metal looks moderately bullish now.

The main trigger for sustained higher gold prices comes in the form of a gradual asset rotation from equities and other risky assets into bonds and safe-haven assets such as gold, as mainstream investors seek protection from market turbulences, potential recessions and growing bearish sentiment.

Moreover, the downside is somewhat limited, with current gold prices representing a floor, as bearish drivers are lacking, fundamentals are neutral and costs for the most expensive producers are close to current prices.

Thursday, 24 January 2019

Gold has not Lost its lustre yet

Gold was at a life time high of $1921 an ounce in September 2011 when the US Federal Reserve was concluding its bond buying program (QE). During that period gold was everyone’s favourite metal. But by the end of 2015, gold prices declined to $1046. Sometime around that, the Federal Reserve, led by Janet Yellen has raised its key interest rates for the first time in 7 years. That’s the reason gold plunged. But now it seems that gold is finally emerging from an 8 year bear market. And that’s the reason we feel that gold has not lost its lustre yet.


They say that gold has an inverse relation with the dollar. When the dollar is strong gold is weak and vice versa.

It seems that gold has finally made a comeback and there are many factors responsible for this -
Gold seems to be driven by the fact that the current political standoff in Washington will lead to an escalation in crisis. Further the longest government shutdown in U.S history along with a gradually growing economy and rising global debt levels will add fuel to the fire. And when geopolitical issues are mentioned we can’t ignore the fact that the trade tensions between US and China have not been resolved yet. These factors strengthen the speculation of a push in gold prices.

Even though the dollar was up during the week, markets still prefer to stay loyal to gold.

Market watchers say the dollar may also come under pressure as the U.S. government shutdown begins to weigh on domestic growth. Having said that, gold prices are bound to rise.

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. 

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.

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.

Tuesday, 18 December 2018

Series of Events await for the precious metals market

Gold has been on a five month high, where prices climbed on Monday, with declines in a leading dollar index, Treasury yields and the U.S. stock market, as well as comments from a well-known fund manager, prompting prices to settle at their highest in just over a week.

The gains in gold come ahead of key central-bank policy decisions this week and uncertainty around concrete trade developments between the U.S. and China.



There were a host of reasons responsible for this positive splurge in gold prices-

US Dollar - On Monday, the ICE U.S. Dollar Index was down 0.4% at 97.054. Gold is often sensitive to movements in the dollar. A weaker U.S. unit typically boosts demand for commodities priced in dollars as it makes them less expensive to users of other currencies.

US stock - Benchmark U.S. stock indexes, meanwhile, traded broadly lower as gold futures settled, after ending last week in a rout that pushed the Dow Jones Industrial Average back into correction territory. Stock weakness generally supports gold resulting in an upward movement.

Fed rate hike - Market expectations for 2019 Fed rate increases, once put at three to four more increases, have also begun to lessen on the back of dovish comments from Fed officials, including Chairman Jerome Powell. Fed rate-hike expectations are plummeting. Fed fund futures imply only a good 70% probability of a rate hike at the Fed’s meeting next week, with the probability of another by the end of 2019 likewise at only around 70%.

Expert advice - Double line Capital Founder Jeff Gundlach predicted the U.S. dollar would struggle in the coming new year, and that U.S. equities will enter a bear market. Post this statement; Prices for the metal got an added boost to intraday highs.

Brexit - Brexit is another geopolitical factor whose uncertainty is supportive for haven metals, though, again, the reaction has been muted so far. In the U.K., solutions to the Brexit dilemma are still hard to come by, a background story that is keeping the dollar bid, but not offering much extra boost for precious metals.

Apart from the ongoing activities there are a series of events that await the precious metals markets-

And other monetary policy updates this week, the Bank of Japan will make an announcement late Wednesday and the Bank of England meets on Thursday. The dollar has enjoyed relative strength against the yen and the pound, in part because of the interest-rate differential between the U.S. and its major economic allies. the Bank of Japan will make an announcement late Wednesday monetary policy updates this week, and the Bank of England meets on Thursday China’s Central Economic Work Conference a speech by President Xi Jinping There have been signs if panic in the market resulting in higher volatility. Riskier assets have been under pressure due to geopolitical events.
Currently the highlight is the ongoing US china trade spat and the market needs to see some real signs that point towards resolving some of their differences.


Monday, 10 December 2018

Has the scenario changed for gold

Last week, gold prices had a chance to close at their highest since the middle of July. The fundamental backdrop was a combination of declines in the US Dollar and local front-end government bond yields. Since gold is priced in USD, a weaker greenback makes the precious metal relatively more expensive. As for the latter, when bond yields decline, the non-interest bearing asset looks comparatively more appealing.

Though markets have shown a drastic behavior in the past 10 days, things still good for gold. Though gold has been down almost 4 per cent for the year till date, last week was fairly positive for the yellow metal. No doubt equities have outperformed gold so far but any rally in gold prices and any further weakness in U.S equities will see a reverse behaviour thus gold outperforming stocks in the near future.



The Fed has already appeared to express doubts on the future pace of tightening, although the markets do not anticipate it holding off on the likely 25 basis point interest rate increase at the FOMC meeting in just over one week’s time.  Although a further sharp fall in U.S. equities in the coming week might, just, cause the Committee to change its mind.  It is likely to be under pressure from President Trump to keep interest rates, and thus the dollar, down given his tariff impositions seem to be having the effect of increasing the dollar index and, ultimately, putting up the cost of manufactured goods to the U.S. consumer.

The volatility in equities and dollar was influenced buy the ongoing trade war between China and U.S which appears to have backfired rapidly on the greenback.

The arrest in Vancouver of China’s Huawei Technology’s CFO and the company founder’s daughter in Canada has potentially inflamed the trade relations again.

In the bigger picture, The Fed is in a dilemma over a few factors that don’t fall under its control but will play an important role in the growth of the US economy which will further  influence any decision related to rate hike-

Immigration - President Donald Trump's crackdown on immigration, which translates into fewer workers, especially those willing to take lower-wage jobs, and therefore higher wages

Wage- state-level minimum wage boosts that amount to government-mandated wage inflation.
Truck driver shortage- the countrywide truck driver shortage, which has become "a major reason for all sorts of companies to raise prices  in order to make their customers eat higher shipping costs
Trade war- is the United States' trade dispute with China, further escalated this week by the arrest of the CFO of Huawei, one of China's most important companies. While Trump and China's president seemed to agree to a ceasefire over the weekend, the arrest makes the odds of a good trade deal most unlikely.

All four of these ongoing issues directly affect the Fed's policy, and that's what's putting this independent entity in a bind when it comes to planning for the year ahead and maneuvering other major, economy-altering changes like the rise of workplace automation.

The Fed is simply helpless and can’t do anything about the above mentioned trends. Just in case they won’t work in its favour then rate hike might be delayed which will surely push gold prices high.

Speculators are currently neutral for gold. They don’t believe it will dip neither they have faith in its upside potential. Though markets feel that chances if it going lower are high.
But if we see the long run, gold looks attractive.

Gold prices for the year have decline but look positive in the coming two years. A lower dollar, lower US Treasury yields, a recovery of the Chinese Yuan and higher jewellery demand will result in the upward trend.


Thursday, 15 November 2018

Investors mantra - Stay Calm

Gold has lost around $30/oz. in less than one week as the US dollar charge continues. Last week’s FOMC meeting confirmed that US interest rates will continue to climb this year and next, while the Democrats’ victory in the House of Representatives is being taken as a USD positive so far, as it makes US President Trump more accountable for his actions. The precious metal was also unable to pick up a risk-off bid after US and Asian stock markets crumbled overnight on tech - mainly due to Apple - and worries that US-China trade wars may escalate.



Apart from the above mentioned acts, the way things are going- default concerns and inflation expectations are rather low by historical standards. As a result, financial markets could take a hard hit if investors ever wake up and demand a higher price for accepting credit and/or inflation risk. Such a scenario could make holding gold a particularly interesting option.

The recent weakness in gold is not over. In fact, we are worried about another leg down getting underway. While some believe that gold is moving to the bears there are some players in the market who still believe that gold prices will rally in the near future. Long term investors and speculation are making a shift from a bear to a bull market. Their belief is strongly supported by a few factors which these market players expected to occur soon-


  • First and foremost, the current gold price does not seem to be high and there is a lot of scope for recovery till it reaches its all time high
  • In a risk-on scenario, there is a good chance that the gold price will move up
  • Bargain hunting and weakness in equities, such as the sharp fall in U.S. stock market on are helping put a floor under gold during the metal’s recent slide. The fact that gold has not fallen further “is probably due to the correction on the stock markets, which has made gold attractive as an alternative investment
  • Oiling of gold reserves is a clear indicator that central banks do not want to be dollar dependent. A gold driven economy will definitely raise the demand for the yellow metal and furthermore its prices.
  • Gold is the only financial asset that’s not simultaneously somebody else’s liability. Hence the liking for this metal always remains high.
  • With uncertain world financial assets, there’s an excellent chance there’s going to be a volatile markets and hopefully a one that favors gold.


Currently we see investors acting very calm in the market. Maybe they await a strong and concrete signal from the global markets to get back into action mode.



Tuesday, 13 November 2018

December likely to be more volatile

Just when gold had become investor’s favorites, it started losing sheen. Friday, Gold closed at a one-week low amid investors shifting to riskier assets on the back of a higher dollar and the Federal Reserve's policy statement.

Gold eased to a one-week low on Thursday, as a recovery in the dollar and improved appetite for riskier assets pushed investors away from bullion.

Spot gold fell 0.13 percent to $1,224.09 per ounce, after touching its lowest since Nov. 1 at $1,219.59 Just when gold had become investor’s favorites, it started losing sheen. Friday, Gold closed at a one-week low amid investors shifting to riskier assets on the back of a higher dollar and the Federal Reserve's policy statement.

Gold eased to a one-week low on Thursday, as a recovery in the dollar and improved appetite for riskier assets pushed investors away from bullion.

Spot gold fell 0.13 percent to $1,224.09 per ounce, after touching its lowest since Nov. 1 at $1,219.59 earlier during the day.

Gold prices fell to their lowest in a week on Friday, and were set for their biggest weekly fall since August, on a firmer dollar as the U.S. Federal Reserve indicated they will continue to raise interest rates, lowering demand for bullion.

In the past fortnight we saw the dollar going week on the belief that losses for U.S. President Donald Trump's Republican Party in the midterm elections would make further fiscal stimulus measures unlikely.

But it didn’t take too long for the dollar to get back into action. The dollar has mounted a significant rally. Many reasons were cited for this bounce back-

The Fed kept interest rates steady on Thursday
It reaffirmed its monetary tightening stance.
Robust U.S. economy kept the currency underpinned
Investors positioned for a Federal Reserve interest rate rise next month
Political risks in Europe put pressure on the euro and the pound.
Fears about a no-deal Brexit gave dollar the push
Growing rift in Europe over Italy's budget
Reload of long dollar positions by investors
Vulnerability of European currencies
Weakening of the Euro over concerns about Rome's tussle with the European Commission over its 2019 budget
Weakness in Italy's banking sector
The melancholy in Europe has been good news for dollar
Easing of China-U.S. trade tensions
Weak China data
Weakening euro zone economy is expected to trigger further euro-selling pressure.


All these factors clubbed together strengthened the dollar and hence the dollar rallied to a 16-month high on Monday.

The dollar extended its recovery following a sigh of relief across markets after the U.S. midterm election results, and as investors turned their attention towards the Fed.

Gold has always been keeping a watch on the dollar and moving accordingly. Currently too it is dollar-watching and keeping an eye on the interest rate decisions. Gold has come under pressure because of a stronger dollar. Also the FOMC meeting showed no change in the interest rates. Gold might turn to the bears as any news that is positive for the U.S. dollar and the U.S economy as a whole will bring about a fall in the yellow metal and push prices down.

A lot is expected to happen by the end of year and these activities will sure create volatility on a global level. Ongoing trade disputes. Escalating Saudi- Arabian tensions and Brexit are all in line to occur. December is likely to be more volatile and hence a lot is expected to happen as we get closer to end the year.




Tuesday, 6 November 2018

Wait and watch approach

Gold was down last week till Wednesday but again gained momentum on Thursday. It saw a sharp rally from Wednesday’s bottom but pulled back once again on Friday.

In 2018, gold was highly influenced by a wide variety of factors -

  • Brexit
  • Election of U.S President Donald Trump
  • Geopolitical events
  • US China trade war
  • Global equities
  • Iranian Sanctions in Venezuela
  • Midterm elections
  • Cyber attacks
  • Collapse of peace talks with North Korea


These all have the highest likelihood of impacting markets in 2018 and 2019 and thus creating volatility which will likely bring about a rally in gold prices.

Since these series of events are either on going or about to happen, markets player are now following the wait and watch approach.

US midterm elections will definitely have a major impact on global currencies and assets across all classes. Hence investors and traders are not being much active and are waiting for something concrete to occur as Midterm elections may stimulate safe-haven buying,”

Interestingly gold has not only bounced, it has shown this behavior in spite of stability in the dollar. Gold is expected to rise further

Interestingly, gold, largely left for dead, has rallied. Not only has gold bounced, but it has done so despite a steady dollar. Which raises the question: Why is gold rallying now? Here are some potential reasons:

Steady dollar - While the DXY Index is pushing against the upper end of its five-month range, the dollar has been relatively stable since May. This is important as a rapidly strengthening dollar, as we witnessed last spring, has historically been a headwind for gold.

Inflation - Besides the dollar, the biggest challenge for gold in 2018 has been rising real rates, i.e. interest rates after inflation. Higher real rates raise the opportunity cost of an asset that produces no income. Between January and early October, real 10-year yields advanced by 50 basis points. However, since then, real rates seem to have temporarily peaked near the levels reached in 2013 and hence its stability will bring in a rise in gold prices.

Volatility - While real rates and the dollar are key fundamental drivers for gold, demand for a hedge against volatility also drives gold prices. With the exception of the brief correction in February, that attribute has not been in demand until recently. Prior to the recent swoon, U.S. equities were well on their way towards another year of double-digit gains. Unfortunately, this pleasant trajectory has been interrupted. Equity market volatility has doubled since early October. This is important, as gold has a history of performing best versus stocks when volatility is spiking.


These factors have historically proved that in such a volatile environment gold always acts as a safe haven asset and a hedge tool. Give this characteristic of gold it’s obvious that any minor crisis will also bring about a rise in the demand for the yellow metal which will further push the prices higher.

Moving to the domestic markets, sales have dampened this Diwali. Physical gold demand in India was lacklustre this week, with dealers offering discounts for the metal ahead of a traditionally busy festival week for the first time in at least three years, as high prices kept consumers away.

Prices in India, the second biggest gold consumer after China, held near 33,000 Indian rupees per 10 grams, the highest since September 2013, ahead of the Dhanteras and Diwali festivals next week, when buying gold is considered auspicious.

This Dhanteras, jewellers and bullion traders witnessed a drop in demand. Retail buyers are not interested in buying at this level. Furthermore, The Indian currency has lost more than 12 percent of its value against the U.S. dollar so far in 2018, making purchases of commodities denominated in the greenback more expensive.

Post Diwali, jewellers still have hope of a rise in the demand during the wedding season.
Like global investors and markets players, jewellers in India too are following this approach- to wait and to watch.


Tuesday, 30 October 2018

Investors stockpile gold

Gold witnessed a series of events in the past week which ultimately proved fruitful for gold. Gold was highly influenced positively by a series of following key events:



  1. Globally, equities markets plunged down sharply.
  2. Uncertainties over the results of the U.S midterm, elections. At the moment there appears to be a strong chance of the Democrats gaining a majority in the House of Representatives, but the Republicans comfortably holding on to their Senate majority. Such a scenario would probably be gold-positive in that it would lead to political gridlock.
  3. Trade war between China and US which was initiated by the implementation of tariffs on Chinese goods by the US governments
  4. Uncertainty in Europe over the fallout from a possible no-deal scenario for Brexit, 
  5. Nervousness over the forthcoming Italian budget which threatens to challenge the Euro zone hierarchy 
  6. Geopolitical fallout from the Khasoggi murder which could upset Middle Eastern alliances.


Apart from the ones mentioned above, we still expect some geopolitical difficulties to occur, which may further strengthen gold and help it in breaking its comfort zone.

Gold has been back above $1,200 an ounce for the last two weeks, helped by safe-haven buying due to weakness in global equities and geopolitical tensions. Last week, Gold rose to test monthly highs near $1,240/oz but lost strength and pulled back. The retreat from the top, continued after the ECB meeting and during the American session, amid a stronger US dollar against majors and despite an improvement in risk appetite.

When the yellow metal crossed $1200 mark, it saw many investors retuning to the market with a great interest in gold. Retail buyers have started making their purchased as they expect a further price rise. Further, the investors’ class is also taking some stock profits as Wall Street volatility increased and they’re moving some of those profits to safer or more opportune areas, including gold and silver.

It’s not only the small investor class but also major central banks that are adopting gold. Russia and China have also been trying to win support from global governments to create a new gold-backed currency, thereby removing the US dollar as the world’s reserve currency.

Gold’s impressive performance of late, coming amid USD [U.S. dollar] strength, suggests that gold finally is behaving like a safe-haven asset.  There has been a pickup in gold purchases by central banks, including Hungary, Poland, India, Turkey and Mongolia, in addition to regular gold buyers Russia and Kazakhstan. And if this continues we will soon see gold at record highs.

Monday, 22 October 2018

Gold - once disowned ; now being adopted

After tentatively stabilizing in September, the gold price staged a $50/oz, rebound in early October, setting up the potential for a further short covering rally. 

Gold traded higher on Friday and is heading for the third straight weekly increase on the back of a rise of demand due to equity market volatility and a softer dollar. The market opened the day at 1229.70/1230.70. After the open, gold prices traded between a high level of 1230.46/1231.46

The gold in euro terms was trading at a three-month high near €1,070 per troy ounce. The conflict between Italy and the EU [European Union] over the Italian draft budget for 2019 is escalating.

The EU too seems to be taking a strong line against member states (Poland and Hungary are examples) which diverge politically from the consensus policies and rules. There is perhaps a fear here that the EU might break up if too many member states fall out with the EU hierarchy, which is probably why such a hard line is being taken on Brexit. A consensus deal is in both sides’ interests, but intransigence may well win the day, with adverse economic consequences for the U.K. and the EU as a whole.


Concerns that the euro-zone crisis could flare up again should support demand for gold as a safe haven.

Lately, US have been very aggressive in its trade policies and imposition of sanctions against countries like Russia and China. Indirectly the other counties that wish to trade with these sanctions hit economies will also suffer in the long run. They too will become victims of U.S. trade sanctions and imposed tariffs.

This is the main reason that countries like Russia and China have accelerated their gold reserves. Leading countries are trying to reduce dollar dependency, thus replacing it with gold.

The Russian central bank has announced yet another increase in its gold reserves in September – this time it has added a massive 1.2 million troy ounces (37.3 tonnes) to the gold in its Forex holdings. This brings the overall total to 65.5 million ounces (2,037.3 tonnes) and means it has added just short of 200 tonnes of gold to its reserves in the first 9 months of the current year which represents an increased acceleration in its reserve increases over the prior few years

The big European holders – Italy and France – in the global gold reserve table which respectively report holdings of 2,451.8 tonnes and 2,436 tonnes.

China on the other hand has been constantly increasing its reserves but not reporting to the IMF. It’s expected to be in the sixth place, but it could be higher given that the numbers are not reported to. The current trade war between the US and China has propelled China to reduce its dependence on dollar holdings in its reserves and perhaps use that money to buy more gold, but yes, without reporting it to the IMF.

Chinese officials and academics have intimated in the past that they would like to at least reduce the dollar’s dominant position in world trade and as a global reserve currency. It is already taking measures towards this by negotiating oil and other contracts in Yuan (convertible into gold if wanted) rather than in dollars, which is another reason why it may be building its gold reserves as well.
As we have mentioned before gold may be facing short term headwinds, but longer term prospects look to be ever increasingly positive.

The sentiment shift is still subtle, but it’s both real and widespread. After a few years of being ignored and/or dismissed as basically useless and almost being disowned by investors, gold is stable again, attracting positive press and increasing accumulation by big investors.

Tuesday, 16 October 2018

Portfolio Allocation Towards Gold Increases

Lately there was a lot of discussion going around on the following issues- is it the time to buy gold? Will gold gain its safe haven appeal? Will investors continue to favour gold?

Well past few days gold gave all these answers. Since last Thursday gold has been in a positive mood, rising constantly and showing the hangover effects in the current week too.

Gold gained as global stock markets suffered from broad declines on Thursday. Major U.S. stock indexes headed lower Thursday, as well, failing to recover from Wednesday’s plunge.


Gold prices edged higher on Wednesday as some investors sought refuge in the precious metal after the global stocks tumbled and the U.S. dollar weakened. Spot gold rose 0.4 percent to $1,194.12 per ounce during late trading hours.

Continuing with the same behavior in the current week, Gold rose more than 1 percent on Monday to its highest in about 2-1/2 months as investors sought refuge in the metal after mounting tensions between Western powers and Saudi Arabia compounded jitters in global stock markets.

Spot gold was up 1 percent at $1,230.05 per ounce later in the day; having touched it’s highest since July 26 at $1,233.26.

There were varied reasons responsible behind gold gaining its glitter. Namely- 

Global Equities - Stocks on major world markets fell to a three-month low, with the benchmark S&P 500 stock index falling more than 3 percent, in its biggest one-day fall since February.  This created panic amongst investors.

Global stocks were under pressure, with European shares hitting 22-month lows on the back of a raft of factors including a U.S.-China trade dispute, rising tensions between Saudi Arabia and western powers, stalled Brexit negotiations and concerns over an economic slowdown in China.

Global Risks - the International Monetary Fund said last week that risks to the global financial system, which have risen over the past six months, could increase sharply if pressures in emerging markets escalate or global trade relations worsen.

Dollar - The U.S. dollar index retreated from a seven-week peak hit in the previous session. The dollar, a key driver for the precious metals, weakened against its currency rivals. Another haven market, however, U.S. Treasury bonds — chief among culprits influencing rickety stock trading of late — drew their own fresh demand Thursday, halting for now the rise in yields that spooked stock investors.

U.S. Stocks - Gold prices surged Thursday to the highest in more than two months, with the metal’s haven status in full force and attracting investment interest amid a sharp retreat for U.S. stocks that has infected foreign indexes

China's gold reserves - the markets were awaiting these figures post the Golden week holiday. Once the numbers were out, the market didn’t wait much to react. The official gold reserves in mainland China have grown from 1,054 tonnes in the first quarter of 2015 to 1,839 tonnes in the third quarter of 2016, to 1,843 tonnes in the second quarter of 2018. The demand for gold among Chinese consumers also rose by 5 per cent in the second quarter from a year ago to 144.9 tonnes. Demand by Indian consumers declined in the same period by 8 per cent to 147.9 tonnes.

The market for gold bars and coins has also been boosted by China and Iran, as they seek to hedge against geopolitical tensions with the United States.

We all know that the rate hike has strengthened the dollar against major basket of currencies. This fall in other currencies against the dollar has had an adverse effect on some of the Administration’s tariff impositions.  Some U.S. manufacturers are already warning that the tariffs on Chinese goods in particular will have an adverse impact on input and consumer prices. If equities are seen as likely to fall further this could see an increased move towards safe haven assets like gold and silver.

We don’t know how far gold will stay or stabilize here, but for the time being gold has definitely given us investment goals. And with the markets gold down, people have increased their allocation towards gold.


Monday, 8 October 2018

Think Positive

Whenever gold tries to move up, the market starts doubting its behaviour. The gold price did manage to end the past week above $1200 mark.

Gold prices rose on Friday following a monthly U.S. employment report falling to its lowest level in a year.



Spot gold rose 0.3 percent at $1,202.40 an ounce. It had gained 0.6 percent so far for the week, on track to mark its biggest weekly gain in six.

Data coming in from the US was responsible for this positive trend in the yellow metal-


  • Non farm payrolls rose just 134,000, well below Refinitiv estimates of 185,000 and the worst performance since September 2017 when a labor strike weighed on the numbers.
  • The unemployment rate fell two-tenths of a percentage point to 3.7 percent, the lowest since December 1969 and one-tenth of a percentage point below expectations.
  • Augusts’ initial count was revised up dramatically, from 201,000 to 270,000, while July's numbers came up as well, from 147,000 to 165,000.

  • The revisions bring the three-month average growth to 190,000 while the 12-month average gain is 201,000.


But the question once again was how far will it stay here? Will it move forward or once again it will turn down to its low of $1183?

Despite the weekly gain, gold prices have fallen more than 12 percent from a peak in April largely due to strength in the dollar, which has benefited from a vibrant U.S. economy, rising U.S. interest rates and fears of a global trade war.

The fear is that the rising dollar is going to cause a huge rout in the emerging markets and investors want to hedge that risk

Recently gold has been hovering between $1190 and $1210, not being able to cross these marks – neither upside nor downside.

The reason being- if there are 2 drivers for gold prices then on the other hand you would find 4 more factors are that ready to pull it down.
Currently some short term influencers are making it difficult for gold to amend its behaviors.

One of the strongest influencers for gold as of now is the US dollar and the US economy which are totally relative to each other.

Dollar has remained strong for quite some time. The US economy is also believed to be moving gradually on a positive growth path, which has further initiated the Fed to raise its interest rates in December. Moreover, it’s expected to bring in few more hikes in 2019 too.

What further raises interest is that the current trade war between US and Chine is acting positive for the US economy?

There has also been some settlement in terms of the rehashing of NAFTA as the USMCA (U.S., Mexico, and Canada Agreement which promises trade stability between the three North American nations, although when the small print is examined in detail it may leave the participants unhappy with the likely outcome.

Gold ETF saw huge withdrawals and equities markets displayed new records. All these clubbed together has been a big reason behind gold’s current behaviors. Even in this wary situation, some players are still holding positive sentiments for gold.

And one of the main reasons for this is central banks. Central banks across the world are hoarding gold amid growing fears about global volatility and a possible downturn for financial markets.
They have snapped up almost 275 tons of gold this year alone – 8 per cent ahead of 2017 – at a cost of more than £13 billion.

Many national banks have been returning to the market for the first time in years. India bought eight tons, its first purchase since 2009

Furthermore, if funds start moving back to the ETFs that would be a good sign that we could be at a turning point.

Gold believers have a strong faith in this safe haven asset and are waiting for it to rise in the long term as there are many positive things waiting to occur which will create a constructive impact on the yellow metal.

U.S. total debt and monthly deficit seems to be accelerating
Central bank gold buying appears to be increasing;
The dollar may be in the process of being downgraded as the world’s reserve
And precious metals demand appears to be rising in the key Asian and Middle Eastern markets

So gold is being pulled between the bears and the bulls of the short term and long term futures.

Much of the volatility will depend on the dollar and in case the dollar starts losing its global presence then gold price in the dollar terms is expected to rise,

Not forgetting the other geopolitical factors. Gold investors are very much positive for gold in the long run and believe that though it will hover around the $1200 mark for the time being, but will soon rise.

Monday, 24 September 2018

The time for Gold should come soon

Gold prices gained on Friday and were at weekly record gains, while the dollar also traded higher although it is still hovering near two-month lows.

The dollar fell to a nine-week low against a basket of major currencies on Thursday as investors shifted their focus from a trade row between China and the United States to the Federal Reserve’s monetary tightening plans.

Currency markets have become more settled since reacting strongly to new tariffs announced by Washington and Beijing on Tuesday.



The fall in dollar this week came as safe-haven demand for the U.S. currency ebbed amid continued relief that fresh U.S. and Chinese tariffs on reciprocal imports were less harsh than originally feared.

On Monday, the U.S. slapped tariffs of 10% on $200 billion in Chinese goods, before they rise to 25% by the end of 2018, rather than an outright 25%.
China retaliated by putting tariffs on $60 billion in U.S. goods. However, China will put a 10% tariff on some goods it had previously earmarked for a 20% levy.

Reports of the tariffs imposed by the U.S. and China on each other's goods being set at lower levels than expected were cited as headwind for the dollar prices, which is widely seen as safe-haven assets.
The dollar was also under pressure after a report said that the U.S. and Canada are unlikely to reach an agreement on NAFTA this week.

While trade disputes gained momentum, there was one more thing that has kept the markets on its toes. The next Fed meeting. Investors looked ahead to the next Federal Reserve policy decision to be announced on Sept. 26.

U.S. economic data has remained strong, and the dollar has tended to act as a safe-haven trade, gaining as tensions between Washington and Beijing escalate.

Markets currently expect the Fed to hike rates by a quarter of a point, while fed fund futures price in an additional increase at the end of the year at more than an 80% probability.

Looking ahead, markets would be paying close attention to next week’s Federal Reserve meeting. The U.S. central bank is widely expected to hike rates and discuss paths for future rate hikes. Higher rates dent demand for non-interest yielding gold and in turn boost the dollar in which it is priced.

The Federal Reserve is next week expected to raise benchmark borrowing costs and shed more light on its future rate path.

One more noteworthy thing that happened over the week was gold buying by Russian central bank.  As mentioned in my blogs earlier, the Russian central bank has been piling up its reserves and the latest figures released , stated that it has added a further 1 million ounces of gold (31.1 tonnes) to its reserves that month bringing the grand total to just over 2,000 tonnes as we suggested a month ago. It now has the holdings of Italy (2,451.8 tonnes) and France (2,436.0 tonnes in its sights to become the third largest national gold holder after the USA (8,133.5 tonnes) and Germany (3,369.9 tonnes) – all figures as reported to the IMF.

Russia and China are both believed to by buying gold as they feel the yellow metal will have an important role to play in the ongoing development of the global financial system. Russia and perhaps China too, are also believed to be buying gold, amongst other moves, to reduce their dollar-related forex holdings.

All these considerations suggest one thing- . Gold should shine not only due to the lower real interest rates and as an inflation-hedge, but also as a safe-haven asset hedging against the potential overshooting by the Fed.  We don’t expect any major financial crisis or that there won’t be a rate hike—what we think keeping these considerations in mind- the time for gold should come soon.