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

Thursday, 19 July 2018

A negative environment awaits for gold

Gold prices fell Friday to their lowest settlement in nearly a year, with the precious metal failing to find safe-haven support from the U.S.-China trade dispute, as the U.S. dollar gained for the week.
old prices were muted on Friday, stuck in a tight trading range, as the dollar extended rally from the previous session when strong U.S. inflation data and trade war concerns boosted demand for the greenback.

Gold prices fell again versus a rising Dollar on Friday in London, heading for a 1.3% weekly drop at new 2018 lows beneath $1240 per ounce as the US currency pushed higher on the FX markets amid President Donald Trump's ongoing tour of Europe.

The dollar was upbeat near a 10-day peak versus a basket of currencies on Friday, supported by Treasury yields that edged higher on expectations the U.S. inflation rate will rise.     


U.S. consumer price data on Thursday showed a steady build-up of inflation that could keep the Federal Reserve on a path of gradual interest rate increases.                 

Spot gold was down 0.1 percent at $1,245.54 an ounce during Fridays trading hours. For the week, the metal was down 0.7 percent.

Lately, the dollar has been very influential and one of the most prime mover for gold prices.
A stronger dollar—which has drawn haven demand amid the clash over trade between the U.S. and China and pushed higher on rising-rate expectations—has been the most significant headwind for gold. A strengthening greenback can make commodities linked to the monetary unit, such as gold, more expensive to buyers using other currencies

Market sentiments have been largely positive on the greenback as investors turned around from the safe haven asset despite rising geopolitical risks.

Currently, there is a lot of uncertainty prevailing in the markers as far the trade was is concerned.

The United States and China could reopen talks on trade but only if Beijing is willing to make significant changes.

If this uncertainty continues and there is any sort of escalation in the crisis then we might see the yellow metal gaining its luster.

During times of uncertainty gold prices can receive a boost as the metal is widely considered a safe-haven asset but bullion has failed to benefit from recent trade disputes.
   
But this is not the end of it.  Right now even the inflation numbers are not helping gold. This is because inflation numbers support higher interest rates and this will create negative impact on gold. Gold, which is seen as a traditional hedge against price pressures, has shown little interest in the latest inflation data, which hit their highest level in six years

Furthermore, The Federal Reserve’s hawkish tightening cycle, a strong economy, and a higher U.S. dollar will steal all of the market’s attention this year as the trade war tensions pause, pressuring gold prices even further. All of these clubbed together, can create a significantly negative atmosphere for gold.

Tuesday, 10 July 2018

Gold May Regain its Safe Haven Status

In January, precious metal prices peaked. Since then they have fallen substantially by 9% (gold prices).

In recent weeks, the sell-off has accelerated. There are several reasons for this price weakness.

Trade War - a looming trade war between the US and China has weighed on prices, especially cyclical precious metals such as platinum and palladium.

US Dollar - Rising U.S. Fed rates and rising real interest rates – up 20% from the start of the year as measured by 10-year bonds — are supporting the dollar. While the dollar remains strong, gold is being depressed.
To some effect, the metals markets are experiencing the same depressing impact on prices.
 The recovery of the US dollar is negative for all precious metal prices.

Euro - a downshift in expectations about the euro zone economy has been a negative for precious metals.


Global Markets - weakness in emerging markets has lowered all precious metal prices as well. More recently the substantial fall in the Yuan has accelerated the decline in precious metal prices. Yuan weakness reflects the heightened trade tensions between the US and China and nervousness about Chinese corporate bond defaults. China is a crucial consumer of precious metals. So fears of lower Chinese demand are negative for prices.

But this may not be the end as markets believe that this downfall may continue. The US dollar is expected to strengthen further due to strong economic data and ongoing Fed Hike.

Furthermore, markets look negative for gold as the 10y US Treasury yields is expected to rise.
Gold and other precious metals are highly sensitive to these issues and hence analysts believe the gold, in the near-term, is expected to fall.

In addition, trade tensions between the US and China will probably linger on and there may be more volatility in the Chinese Yuan in the near term. These are also negatives for precious metal prices.
Finally, it is likely that concerns about Italy will return if Italy’s fiscal balance will get into focus again later in the summer. This will weigh on the euro but also on platinum prices as the euro zone is an important market for platinum

In such an environment, holding gold is seen as a cost, not an opportunity. Although market turnover has been high, the bulls have not been in evidence and prices have remained depressed.
BUT HOPE STILL PERSISTS.

Though precious metals are expected to fall, hope still prevails over the factors that support gold prices.

U.S. - By the end of the year US dollar and 10y Treasury yields are expected to peak. Which further pours in the thought that it might pull down from its peak? Lower US growth could result in a downward adjustment in demand.

Moreover, we expect the fall in the Chinese Yuan to come to an end as Chinese authorities will probably intervene to calm sentiment. We find it hard to imagine the Chinese authorities letting the Yuan drop in an uncontrolled manner. However, in the near-term, Yuan weakness may yet continue. In addition, our base case scenario is that a significant escalation of the trade conflict is averted. This should support all precious metal prices.

We expect gold prices to bottom out between USD 1,200 and 1,250 per ounce and silver prices between USD 15.2 and 15.6 per ounce. We see these levels as an opportunity to position for higher gold and silver prices next year.

If sentiments were to change and, for example, growth was to slow in the U.S. in reaction to trade concerns, then gold could make headway. But while the dollar is king, gold will remain lackluster despite rising tensions.

In the near term, we expect weakness in gold to persist, before investors flock to gold’s safe haven status in light of the ongoing trade and geo-political tensions – and the attendant negative consequences that might ensue

Tuesday, 3 July 2018

Dollar gains safe haven appeal

With the first half of 2018 now drawn to a close, much of the financial medias’ headlines and commentary relating to the gold market has been focusing on the fact that the US dollar gold price has moved lower year-to-date. Specifically, from a US dollar price of $1302.50 at close on 31 December 2017, the price of gold in US dollar terms has slipped by approximately 3.8% over the last six months to around $1252.50, a drop of US $50.

It’s been a choppy first half. After trading above $1,300 since the start of the year, prices ticked lower in mid-May and went into free fall two weeks ago, erasing the year’s gains. Investors shunned bullion and favoured the dollar and Treasuries instead as they weighed the uncertainties surrounding the impact of a U.S.- China trade war on global growth.


Gold’s losses in June, driven by an ascendant dollar, have put the precious metal on course for its biggest monthly drop since November 2016, when markets were roiled by Donald Trump’s victory in the U.S. election.

The metal dropped 3.6 percent in the month of July, while a gauge of the greenback is up for a third straight month amid escalating global trade tensions.

Investors have moved to the US dollar as a preference choice for safe haven .This has benefited the dollar and weakened gold. It has indirectly led to gold-price weakness, as the dollar and gold typically move inversely to each other. With the emergence of inflation, gold is likely to find a bottom, as the dollar’s gains weaken.

On the contrary, Suddenly, On Friday, gold finally gained support near $1245 after falling to a six month low.

Reasons being-

  1. U.S. Final GDP Disappoints – The gross domestic product was expected to grow at a pace of 2.2%, but the actual figure fell to 2%. Consequently, the weakness in the U.S. dollar underpinned gold. 
  2. EU Leaders Agreed on Conclusion – The Chairman of the talks, Donald Tusk said, “EU28 leaders have agreed on (summit) conclusions, including on migration”.
In response to this news, the investors moved their investments from Greenback to Euro. Therefore, the Euro jumped over 0.7% on Friday and dollar index fell 0.3%, causing a bullish reversal in gold.

But this week opened on a negative note for gold. Gold prices edged lower on Monday as the dollar firmed after last week’s U.S. inflation data supported the Federal Reserve’s outlook for future interest rate increases. The dollar strengthened against a basket of currencies and extended its gains against the yen to hit a fresh six-week high of 111.06 yen, supported by the relative strength of the U.S. economy and on prospects of further rate hikes from the Federal Reserve.

US dollar strengthens by any normalization of monetary policies thus weakening the yellow metal.
U.S. consumer prices accelerated in the year to May, with a measure of underlying inflation hitting the Federal Reserve’s 2 percent target for the first time in six years, data showed on Friday
The rise in price pressures will probably not shift the Fed from its stated path of gradual interest rate increases as policymakers have indicated they would not be too concerned with inflation overshooting its target.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the greenback.

Thursday, 28 June 2018

Long term looks favorable for Gold


Gold has fallen out of favour as investors prefer havens such as the dollar, Treasuries and yen amid fears that a looming trade war will damage global growth, hurt earnings and drag down stock markets and other risk assets. 

Gold has not fared well lately despite rising global trade tensions that have knocked down equities. Gold has been hurt by expectations for more Federal Reserve hikes complemented by a strengthening US dollar which further pulled down gold prices.

Many believe that gold has lost its shine. Each time it gets close to break the $1350 level, it fails and is unable to generate returns in a rising yield environment and the biggest obstacle for the yellow metal currently is the rally in US dollar .

Hence, precious metal’s “biggest disappointment” this year has been that it keeps failing to attract safe-haven inflows in a meaningful way.

Some even believe that gold has not bottomed out yet and there is further scope for a downfall as gold is oversold. With gold back to trading near six-month lows and prices struggling to catch a break during the past few weeks, analysts are saying that gold is failing to attract safe-haven interest due to a surging U.S. dollar.

However, given the recent equity-market correction and talk of a trade-driven slowdown in the global economy, it is likely that the market will start to get a lot less enthusiastic about aggressive Fed tightening and the US dollar. On the positive note, the interest-rate environment is becoming more favourable for gold, with inflation expectations rising — a good sign for the precious metal that has traditionally been viewed as an inflation hedge,

The Federal Reserve will probably raise interest rates two more times this year, and twice in 2019, while the European Central Bank will likely start tightening in September next year. That should shift the monetary policy divergence in favour of the euro relative to the dollar and be positive for gold in the greenback.

On top of that, lower gold prices might encourage more physical buying in key markets, including China and India.

So in the long term things look favourable for gold and the yellow metal might once again get into the safe haven mode.

Monday, 25 June 2018

Gold expected to be markets favorite soon

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

Thursday, 21 June 2018

Trade war fails to weaken the dollar

Gold prices have not managed to stay above the $1300 level- it could be due to a strong dollar or maybe profit taking or even price manipulation. Currently, out of all, gold prices seemed to have been highly influenced by a strengthening dollar.

Gold prices fell to new 2018 lows against a rising Dollar on Tuesday in London, hitting $1274 per ounce as President Trump threatened to hit back at China's retaliation over last week's new US trade tariffs with extra charges on another $200bn of Chinese imports.


Accused of "blackmail" by Beijing, Trump says these extra 10% tariffs will only come into force if China “refuses to change its practices."

This news gave a boost to gold in the Asian markets.

However the metal failed to extend further as offers [to sell around] $1283 restricted top-side gains.

Gold remains bearishly offered, and it’s all about the dollar strength as the greenback rockets higher on EM commodity and the China meltdown. And at least for the time being the markets have utterly forsaken the idea that the US trade war escalation could become ultimately detrimental for the dollar.

Now currently the matter of concern is that why is the dollar showing sign of strength despite an apparently escalating trade war which is unlikely to do anyone any good?

At the moment the dollar strength is two-fold. Key currencies like the Euro, the British pound, the Canadian and Australian dollars and the Chinese Yuan are being driven downwards (hence the dollar appears to be rising), but also money will be flowing into the dollar as perhaps more of a safe haven in times of an ensuing global financial crisis than gold and other precious metals.  We think that this will only be in the short term and we need to wait for some concrete events that will bring in volatility in the markets.

Monday, 18 June 2018

No major catalysts for gold

Gold prices were hit strongly towards the end of the week. By mid Friday, gold was down -1.89% so far on the day and -2.35% from the high set just ahead of Thursday’s ECB rate decision.

While Gold prices held support fairly well through the Fed’s rate hike on Wednesday, the ECB meeting the following morning produced considerable US Dollar strength as the ECB announced stimulus-taper in a very dovish manner.

Gold prices drifted down on Friday on profit-taking after the dollar hit a seven-month peak and the metal failed to find support despite fresh trade skirmishes between the United States and China.


US-China trade "has been very unfair, for a very long time," said President Donald Trump, raising import tariffs to 25% on 1,100 different aerospace, robotics and auto-industry goods and spurring analyst and newspaper claims of a full-blown 'trade war'.

Gold priced in Dollars headed for a weekly loss of $9 per ounce while silver trimmed its gain from last Friday's finish to 1.0%.

Gold briefly touched a one-month peak on Thursday after the European Central Bank said it would hold off on interest rate hikes. But an accompanying surge in the dollar knocked it back.

The dollar has been witnessing some great strengthening powers and that was largely held on to last week.

While the yellow metal is stuck in a range on either side of $1,300 with no major catalyst to break out on either side."

Spot gold was down 0.7 percent at $1,292.51 per ounce at 1300 GMT, after reaching its highest since May 15 at $1,309.30 an ounce on Thursday

Gold deepened losses after President Donald Trump on Friday announced that the United States will implement a 25 percent tariff on $50 billion of goods from China and Beijing quickly said it would hit back with its own tariffs.

Analysts had expected gold to be bolstered by the prospects of a trade war.

The International Monetary Fund said on Thursday that Trump's new tariffs threatened to undermine the global trading system, would prompt retaliation by other countries and damaged the U.S. economy.

Global and U.S. equities failed to revisit their record highs despite some strong first-quarter profit reports, stoking fears of a correction.


On the other hand, as rate expectations out of Europe fell, the Dollar ran-higher and this provided a bit of pressure to Gold prices through the latter-portion of Thursday’s trade. It was shortly after the US open this morning that the selling really got underway, however, and Gold fell down to a fresh 2018 low, finding a bit of support just north of $1,275.

The US Dollar put in a considerable move of strength on the back of that ECB rate decision, and prices ran all the way up to the October, 2017 high before starting to pull back ahead of this week’s close.

This week’s economic calendar is noticeably light on US data, and the more interesting items are coming from rate decisions in Switzerland and the UK on Thursday of this week; so this appears to be an opportune time to evaluate the continuation potential of USD strength, and whether or not we can perch up to fresh 11-month highs.

This is relevant to Gold prices as the two themes appear to be connected, even if the timing is a bit off. The heavy selling in Gold took place on Friday after the US opened for the day, and the Dollar had already started to pullback from resistance. So, while it appears that there is some obvious connection here, there may be another factor at work as Gold prices displayed a delayed reaction to a rather sizable move of US Dollar strength.

Tuesday, 12 June 2018

Gold witnessing the silence before the storm

Gold prices have continued trading in a quiet manner, unable to break the narrow range that has been established in recent weeks.

Recently prices have remained stuck- between $1282 and $1307 – for three weeks now, as risk-off developments that would typically raise demand for the precious metal were counterbalanced by a strengthening dollar. Gold – which is priced in dollars – tends to weaken when the US currency appreciates, as it becomes more expensive for investors using foreign currencies to buy it.

There seems to be a determined effort to prevent the gold price from moving back above US$1,300 with the movement in the U.S. dollar up or down – which usually has an almost instantaneous effect on the price of the yellow metal

 There are too many debatable geopolitical issues about to happen, any one of which could trigger a substantial gold price rally

NORTH KOREA- The summit between US and North Korea is back on the agenda for next week, and although it may only produce symbolical results, that still bodes well for market sentiment in the sense that the risk of military confrontation is decreasing.

If this happens, we still can’t see the U.S. nuking North Korea, nor the latter attacking U.S. Territories or its allies.  The potential fallout is too extreme.  Nor do we think the U.S., for all its military might, would contemplate a ground war.  The North Korean army is too strong and the potential for unacceptable losses on the American side is too high.  So yet another contentious impasse will likely result but with a return to the escalation in tensions which could be the trigger to set the gold price alight.

But even if Presidents Trump and Kim Jong Un do reach some kind of verbal agreement there are plenty of other imminent flashpoints out there. 

ITALY- In politics, Italy grabbed the spotlight for a few days, but that storm seems to have passed for now. Markets calmed down after the nation finally formed a government, avoiding the scenario of early elections, something that was being framed as an implicit referendum on the euro, with investor anxiety around that prospect sending shock waves across risk assets globally. 

RUSSIA- Russia which may well have a military armoury to match, or even exceed, that of the U.S. has remained aloof from what might be seen as military provocation by the U.S. and its allies.  To perhaps calm things down a little may have prompted President Trump’s call, for Russia to be re-admitted to the global summit meetings – returning the G7 to a G8, although this was rejected by the other G7 members, but could yet be seen as a preliminary move to try and ease tensions.

If this happens, we still can’t see the U.S. nuking North Korea, nor the latter attacking U.S. Territories or its allies.  The potential fallout is too extreme.  Nor do we think the U.S., for all its military might, would contemplate a ground war.  The North Korean army is too strong and the potential for unacceptable losses on the American side is too high.  So yet another contentious impasse will likely result but with a return to the escalation in tensions which could be the trigger to set the gold price alight.

But even if Presidents Trump and Kim Jong Un do reach some kind of verbal agreement there are plenty of other imminent flashpoints out there. 

CHINA- Looking at recent developments, the global trade outlook has grown even more uncertain, and the situation looks likely to deteriorate further before it improves. Whereas things were looking rosy a couple of weeks ago, with the US and China citing progress in talks and Treasury Secretary Mnuchin saying “we are putting the trade war on hold”, the White House soon ‘ruined the party’ by announcing it is considering $50bn worth of tariffs on Chinese goods. The US will announce on June 15 which products will be targeted. Unless the US backs off by then, China is likely to strike back with its own measures in tit-for-tat fashion, reigniting concerns that this could spiral into an actual trade war and potentially triggering another round of risk aversion.

Given signals of a weaker US dollar, U.S. debt, and positive physical demand, it’s only a matter of time until gold breaks above $1,300 an ounce and climbs to $1,400 and gold, which is traditionally viewed as a safe-haven asset in times of economic weakness, should gain its shine again as the current economic cycle reaches its late stages and with expectations that the equity bull market is coming to an end.

While the geopolitical arena seems to be posing less of a risk for markets, developments around global trade have not been as encouraging, leaving investors with little motivation to alter their exposure to havens like gold. That might change soon though, depending on how the US-North Korea summit and the upcoming Fed meeting play out, alongside whether the White House will finally impose another round of tariffs on China.

Whether gold has been weak because of a stronger dollar, a seeming easing of immediate geopolitical tensions, U.S. Fed interest rate moves, seeming strength in the U.S. economy, or due to continuing moves to suppress the price by the powers that be as some would have it, the bears are currently taking advantage, but this could turn around quickly should any of the stronger potential geopolitical issues blow up in our face.

Monday, 21 May 2018

Gold to rise soon

Gold prices closed the week below $1,300 an ounce for the first time this year, after posting the largest weekly decline since December 2017. The biggest drop was on Tuesday when the precious metal plunged more than 2%.

Following a strong sell-off last Tuesday, Gold closed below a multi-month trading range that it had been contained within since January of this year, indicating that bears have won control at least temporarily. Because of this shift in price action dynamics in Gold, we are now watching upside moves / strength for potential sell signals at resistance levels to get short, as we believe there’s potential for more downside in the coming days

The downside was carried forward to the present week. Gold prices edged down on Monday as the dollar rose and demand for safe-haven assets eased after U.S. Treasury Secretary Steven Mnuchin said a trade war between China and the United States was “on hold”.


Spot gold was down 0.2 percent at $1,289 per ounce during early trading hours on Monday.
The dollar rose versus the yen and hit a five month-high against a basket of currencies on Monday, after Mnuchin’s comments downplaying a trade dispute with China, boosting risk sentiment amid hopes for an easing of trade tensions between the world’s two biggest economies.

A stronger dollar makes dollar-denominated gold more expensive for holders using other currencies. Furthermore, rising U.S. interest rates and the expectation that U.S. Federal Reserve will raise rates again next month, limits investor demand in non-yielding bullion.

Adding fuel to fire we saw, Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.1 percent to 855.28 tonnes on Friday.

After slumping over the past few months, some think that rally in gold prices will soon be over. Prices have fallen more than 5% since their April high and on Tuesday slipped below a key level $1,300 for the first time this year. Markets have been positioning for rising interest rates, which tend to move opposite of gold prices with regard to the opportunity cost of non-interest bearing assets.
But our analysts believe that this downfall won’t last long and there are reasons, more than one, which supports the fact the gold prices will rise in the short term-

European Crisis- Signs of turmoil in Europe may help revive haven demand for gold. In Italy, bonds and stocks plunged Friday, as the Five Star Movement and the League reached a coalition agreement to govern the country, outlining proposals that may pressure public finances.

It seems that debt crisis in Italy would have a far bigger impact than one in Greece.

Demand for gold from China - Chinese jewellery sellers are working to attract a prosperous, more sophisticated, younger generation of customers by expanding and diversifying its selection. Following a slow retail year for jewellery in 2017, China is looking forward to strong sales in 2018. Withdrawals at the Shanghai Gold Exchange have been above average at 170 tons monthly. April’s demand for gold was up 28 percent from 2017.

With political tensions between the U.S. and China escalating, Chinese investors are turning to gold bullion as an economic hedge. First quarter 2018 saw the demand for gold at 78 tons.

In addition to jewellery, the Chinese government has been actively increasing its gold supplies for the past decade, along with its ally, Russia. This move is believed to precede China’s plan for a gold-backed Yuan, which could significantly devalue the U.S. dollar and could replace the dollar as the global reserve currency of choice. If this happens, the price of gold is expected to rise to new, unprecedented heights, along with a political power shift from the West to the East.

Gold has always been in demand for its intrinsic value. If current trends continue and the demand for gold accelerates at its current rate, the price of gold will skyrocket.

The dollar -The "trade-weighted" gold price, a measure of the value of gold based on major currency movements, suggests that dollar strength explains much of the recent weakness in gold prices.
And though the euro has fallen nearly 5% against the dollar over the past three months, the two currencies may switch places soon which could further provide some support to the price of the yellow metal.

Demand for inflation hedges - Both inflation and expectations for rising prices have been steadily rising this year - personal-consumption expenditures hit the Federal Reserve's target of 2% in March. And while the central bank is on track to raise rates at least three more times this year, inflation jitters could still drive investors to the ultimate safe haven asset that is gold.

This, in turn, could feed through into higher demand for inflation hedges, like gold which means a rise in gold prices too.

Investors this week will be keeping a close eye on the minutes of May’s Federal Reserve meeting, to be released Wednesday, along with preliminary purchasing manager indexes in the euro zone. Geopolitics remains in focus as South Korea’s president visits Washington to discuss North Korea and Brexit negotiations resume in Brussels.

Monday, 16 April 2018

Get ready to see Gold on a roller coaster ride

While in the domestic markets we saw jewellers preparing in full swing for Akshaya Tritiya, in the global markets we saw gold moving in full swing.

Jewellers are expecting 15-20 per cent increase in sales this Akshaya Tritiya, mainly on the back of positive market sentiment, stable prices and ongoing wedding season.

Apart from the auspicious occasion of Akshaya Tritiya the wedding season is also lined up for the month of April, May and June, which has raised the demand for gold further. As buyers expect further rise in gold prices, they have started making their purchases to avoid any further price rise.


Overall there is a positive sentiment in the market so a sales growth of 15-20 % is expected this Akshaya Tritiya.

Globally so far, gold has risen more than 3 percent this year, marked by international tensions and volatility in equities, but has yet to emerge from a tight trading range in the face of an expectation for rising U.S. interest rates.

Prices for gold this week rose to their highest levels since Jan. 25, as escalating tensions in Syria, U.S. sanctions on Russia and the U.S.-China trade stand-off weighed on global equities and the U.S. dollar index.

Gold's safe haven status was tested this week as Donald Trump's economic war threatened to turn into a shooting war, with a number of global spots getting hotter. Precious metal moved from a close of $1325.69 an ounce on April 5 to $1337.90 on April 12, dipping on Thursday after reaching a high of $1364.50 during Wednesday morning trading – the highest it's been since Feb. 14
So far, Gold has also outperformed all other precious metals this year.

The headlines this week have been full of escalations of continuing and new conflicts around the world. Here is a rundown-

Trade Wars- Countries over the world are now dependent on each other for exports and imports.
Many major American companies that are household names such as Starbucks (SBUX), Boeing (BA) and Apple (AAPL) rely on their exports (and imports) from China for a sizable portion of their overall sales and profits.

But the escalating trade war between China and US could hurt the revenues of these companies as each country is retaliating with its own harsh measures.

But there are news revolving in the markets that has China just recently launched a new $1.6 billion initiative called “Made in China 2025.”

This initiative would focus on an increase in research and development spending thus making China more self dependent which will further help companies to rely less on international technology and equipment. The more China buys internally, the less it will buy American products or need to export to the U.S.

That means it could shift its trade focus away from the U.S., while purchasing fewer American goods. All of that could hurt manufacturers in both countries and increase volatility into the share prices of companies involved.

Geopolitical- There is rising tensions on the geopolitical front as US is expected to attack Syria any moment now in response to the chemical attack against civilians last week. But Russia has warned that in this course if Russian military personnel are harmed in any manner then US should be ready to face “grave consequences"

Now that President Trump has John Bolton as his National Security Adviser, the geopolitical spot has increased even further. On Feb. 28, Bolton published an op-ed in the Wall Street Journal supporting a preemptive nuclear strike against North Korea.

On Wednesday Trump cranked up the threats, tweeting “Get ready Russia, because [missiles] will be coming, nice and new and 'smart'!” which caused the spike in the gold price. Later he appeared to open a window to a more peaceful solution, tweeting that “it could be soon or not so soon at all,” causing gold to lose its earlier momentum.

That gives us an insight into what policy recommendations President Trump might be provided with now.

Even the perceived threat of diplomatic fallout and rumors of a military response can elevate volatility. War games between the U.S. and North Korea would be expected recoil — and that would mean uncertainty over China’s response.

That would give greater rise to volatile conditions in trade, regional security and stability on the Peninsula. By isolating China — North Korea’s top economic partner and military alley — tensions would only escalate.

Needless to say, any armed conflict between two nuclear powers carries great potential risk. One single incident could trigger an escalating spiral.

US Political Risk- November will also bring along a lot of volatility and uncertainty as midterm elections are going to be held.

The U.S would be caught up in more political instability that will harm market stability which further raises concerns that markets are being left uncertain and pondering to guess what happens next?

The world has become a much more dangerous place in the last few weeks. Between competing naval exercises in the South China Sea, a chemical weapons attack in Syria, US and European sanctions on Russia, a likely showdown over the Iran nuclear deal, and a host of other (i.e. India v Pakistan) conflicts not even mentioned here, investors have reason to turn to safe-haven assets – and gold has benefited.

Threats of war are always factored into the safe-haven value of gold on any given day, but we may be witnessing a sea-change where it is difficult to imagine a return to any sense of normalcy anytime soon – especially given Trump's determination to put America's interests first despite ruffling a lot of feathers with both allies and adversaries.

Given these hotspots for the next three months or even further, we expect gold to move on a rollercoaster ride.


Tuesday, 10 April 2018

Gold expected to rise moderately

While gold has primarily been stuck within the US$1,310 to $1,350 range this year, it managed to rise 3.61 percent during Q1 2018.

The yellow metal gained some first-hand experience in market volatility during the period, as inflation gave it boosts while US Federal Reserve interest rate hikes brought pressure down
On the other hand, United states willingness to resolve an escalating trade fight with China, pulled back gold prices from one week highs reached in the earlier trading sessions.


The United States voiced willingness on Wednesday to talk with China after Beijing retaliated against proposed U.S. tariffs on $50 billion in Chinese goods by targeting key American imports.
As investors pulled out of gold, Asian equities rebounded from two-month lows with investors hoping a full-blown trade war between the world’s two biggest economies can be averted.

Spot gold was down 0.3 percent at $1,329.11 per ounce by 0409 GMT, after touching a one-week high of $1,348.06 on Wednesday.

But what looked like an eased out situation, became a bit tense after economic numbers came in from U.S. Gold prices rose on Friday, as Wall Street stocks tumbled and the dollar fell as rhetoric from U.S. President Donald Trump and Chinese officials fed worries about a possible trade war, and after U.S. jobs data came in weaker than expected.

U.S. stocks fell, with the Dow down more than 450 points, after Trump on Thursday threatened to slap $100 billion more in tariffs on Chinese imports, and Beijing pledged a “fierce counter strike”.
Falling stock prices dragged the dollar against the yen and the euro. Also pressuring the U.S. currency was data showing the U.S. economy in March created the fewest jobs in six months, which might prompt the Federal Reserve to go more slowly on plans to raise interest rates.

An intense trade war between US and China kept gold exposed to fluctuations. And hence the market is paying very much attention to the dollar and bond market in terms of what the Fed is going to do.
While any escalation in geopolitical tensions will raise the demand for the yellow metal, we already see an increase in the demand from the Indian markets.  Though demand for gold in whole of Asia was muted, there is a slight pick-up in buying in India ahead of the wedding season and a key festival.

This month Indians will be celebrating the annual festival of Akshaya Tritiya, when buying gold is considered auspicious.

Moving back to global worries, gold in the near term is exacted to raise moderately – Reasons being

  • A weakening US dollar: A tightening monetary policy in Euro zone will result in the US dollars downtrend. And changed in the US fiscal policy will also have negative effect on US dollar, thus proving to be positive for gold.  The US dollar’s downtrend will resume later in the year. “One key reason behind this is the impending tightening of monetary policy in the Euro zone, given that the euro accounts for nearly 60% of the dollar index,” the report states. It also mentions changes to US fiscal policy, which could have a ripple effect on the US dollar yield curve.
  • Volatility in equity markets. - The markets are too optimistic and bullish for equities and this over confident attitude could backfire, resulting in spiking gold prices.

These not so extreme, but moderately influential factors might spike gold prices in the near term but not to a great extent.

Wednesday, 21 March 2018

Gold - An Investor's Favorite

It seems that after years of under performance gold is here once again to glitter. In one sense, gold is doing what it’s supposed to do. Widely regarded as a safe haven, gold is counted on to provide stability during times of stress. By holding firm as other asset classes were thumped, gold successfully fulfilled that role.

Regardless, ETF Securities’ Gold says that it’s not the short-term movements in gold that matter; the yellow metal really shines as a safe haven during prolonged market downturns.

Gold prices have been trading in the range of $1,100-$1,400 an ounce since 2013, after hitting the levels of more than $1,800 in 2011.  On Thursday, international spot gold was at $1,319.13. Going forward, the macro theme of higher inflation and interest rates is expected to continue and that would provide underlying support for gold.


Gold prices ended Friday at their lowest level in just over two weeks, generally tethered to the dollar this week yet supported by persistent global political and trade tensions given the metal’s haven-asset status.

However, Friday’s “trading action indicates that the impact of political turmoil is fleeting and that investors’ primary focus remains on the economy and monetary policy,”
There are many influential factors that create bullish sentiments for the yellow metal in the near term. Let’s have a look at them.

Gold ETF’s- If we look at investment flows so far this year, for the first time in many years, money is flowing into broad based commodities indices. The ETF [Exchange Traded funds] comes with the whole specter, that indicates the diversification aspects as they move from potentially higher inflation or interest rates scenario and this money is going into precious metals through ETF.

The increased allocation that we have witnessed over the past few years in ETFs as a safe haven or diversifies has been increasing and that will further support gold prices.

Rate Hike - Higher inflation and interest rates have been always supportive of the yellow metal, which is often seen as a hedge against any increase in the consumer price index. Rate hikes has been the best buying opportunity for gold during the past 2 years, since the present cycle has been ongoing. So long as we don’t see any accelerated cycle of rate hikes in the US, gold is going to perform reasonably well. We are buying gold as a hedge against inflation, geopolitical uncertainty, against worries about stocks markets, and all these drivers are still there,” Hansen said.

Economic Data - The market has been confined in a relatively tight range and so, gold market-timers looking for a buy signal need a clearer bearish sign. U.S. economic data Friday, ahead of next week’s Federal Reserve decision on monetary policy, showed February housing starts were down 7%, while industrial production for the same month jumped 1.1%. Consumer sentiment in March hit 14-year high. If the US overheats, and that would lead to worries about disinflation or deflation, we would see a bigger correction in stock markets, and that would have a positive impact on gold.

Demand from India and China - Gold’s qualities make it one of the most coveted metals in the world and a popular gift in the form of jewelry. From the beginning of the Indian wedding season in September until Chinese New Year in February, the price of gold tends to rise due to higher demand from the two biggest consumers of gold, China and India.

Global economic conditions - current economic conditions make an even greater case for gold. The stock market is still on a historic bull run, and the tax reform bill is helping ratchet up share prices. It’s important to remember that the precious metal has historically shared a low-to-negative correlation with equities. For the past 30 years, the average correlation between the LBMA gold price and the S&P 500 Index has been negative 0.06.

US political issues - Traders in the financial market have been weighing the potential for more turmoil in the Trump administration. Media reports said the president was planning to sack his national security adviser H.R. Mc Master, which would be the second high-profile firing from the White House this week. Secretary of State Rex Tillerson was fired on Tuesday and replaced with Central Intelligence Agency Director Mike Pompeo.

Trade war - While personnel issues unfold, concerns over a possible trade war between the U.S. and key trading partners were still weighing on investor’s minds as well, analysts said. The White House said on Wednesday it will seek to trim the U.S.’s trade deficit with China by $100 billion, using tariffs. The European Union, meanwhile, was working to get the bloc exempt from the tariffs.

Since markets strongly believe that gold is here to stay, it has once again become an essential part of an investor’s portfolio due to its history as a protector against inflation.

Gold has also performed competitively against many asset classes over the past few decades. This makes the metal, we believe, an appealing diversifier in the event of a correction in the capital markets.

Tuesday, 24 October 2017

Gold Expected to Drift Lower by Year End

Firstly, wishing everyone a very Happy Diwali and a Prosperous year ahead.

And indeed it was a Happy Diwali for domestic jewellers, as the slump in gold demand had finally gained momentum this October.

Demand for gold jumped in India this week on account of Dhanteras and Diwali, but high prices took some sheen off the yellow metal's lure during the key festival period this year.

Demand in the world's second largest gold consumer generally rises during the final quarter as the country welcome the festive and wedding seasons, where buying bullion is considered auspicious and propitious.

Though a lull was witnessed in gold demand during Dussehra, it significantly improved during Dhanteras and Diwali.


Gold prices spurted by Rs 290 to 3-week high of Rs 31,000 per 10 grams on the eve of Diwali at the bullion market on increased buying by local jewellers to meet festive demand.

Demand was expected to be even better, if global prices had shown similar movements. However in Asia and other international markets, gold prices were seen falling down.

CHINA - Elsewhere in Asia, there was a slight uptick in demand for physical gold, with benchmark spot gold rates headed for a weekly decline after touching a one-week low of $1,276.22 an ounce on Thursday, pressured by a firmer dollar.

However, investors remained cautious, awaiting direction on economic policy and market reforms during the 19th Communist Party Congress in China which kicked off on Wednesday and were also focused on the upcoming elections in Japan.

In top consumer China, premiums charged ranged between $8 and $12 per ounce over the benchmark this week, compared with $9-$14 a week earlier

JAPAN - Gold hit its lowest in more than two weeks on Monday as expectations that Japan’s ultra-loose monetary policy would stay in place after Shinzo Abe’s election victory at the weekend lifted the dollar to a three-month high versus the yen.

Japanese Prime Minister Abe’s win also fed into positive sentiment in equity markets that were buoyed last week by fresh optimism about tax cuts in the United States, curbing interest in gold as an alternative asset.

U.S. DOLLAR & U.S. ECONOMY- Gold prices touched the lowest in more than one week on Thursday, as the dollar stood firm on rising U.S. Treasury yields, with investors focusing on who would replace Janet Yellen as the next chair of the Federal Reserve.

Financial markets are now awaiting guidance on who will succeed Federal Reserve chair Janet Yellen, whose term expires in February.

U.S. President Donald Trump is considering nominating Fed Governor Jerome Powell and Stanford University economist John Taylor for the central bank’s top two jobs. Powell is considered less hawkish than Taylor, who is seen advocating higher interest rates.

Moreover, the economy expanded at a modest to moderate pace in September through early October, despite the impact of hurricanes on some regions, the Fed said its latest snapshot of the U.S. economy thus hinting markets that the US economy is doing well which will further create a downward pressure on gold.

The dollar had already posted its biggest one-day gain in a month on Friday after the U.S. Senate approved a budget blueprint for the 2018 financial year, allowing Republicans to pursue a tax-cut package without Democratic support.

The dollar hit its highest in about two weeks versus the yen, supported by this week's rise in U.S. bond yields, with U.S. President Donald Trump set to make a decision in the "coming days" on Yellen, who is also one of the five candidates being considered for the job.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold by increasing the opportunity cost of holding non-yielding bullion.

Tensions on the Korean peninsula, however, continue to weigh upon gold and the metal could drift down towards the $1,250 level by early December weighed down by the prospect of a further increase to U.S. interest rates in December.


Tuesday, 14 March 2017

The sentiments for Gold are bullish

Gold prices have fallen 5.3% from the end of February high and they have almost given back 50% of the December to February gains

Gold prices slipped towards week low on Thursday as investors awaited the employment report due on Friday, a factor that would unofficially strengthen the interest rate hike in the FOMC meet next week.


Gold’s latest pull down followed the release of better-than-expected US private jobs data midweek, boosting the dollar ahead of the release of official monthly payrolls figures on Friday.


  • Private employment, which excludes government agencies, rose by 227,000 after a 221,000 increase the prior month. It was the biggest gain since July. Construction jobs, which can fluctuate depending on the weather, rose by 58,000, the strongest in almost a decade, and followed a 40,000 increase in January. Manufacturing payrolls gained 28,000, matching the most since August 2013. Meanwhile, retail positions fell by 26,000, the most in four years.
  • The ECB held its benchmark refinancing rate at 0% and left the pace of its bond purchases unchanged on March 9th, as widely expected. Both the deposit rate and the lending rate were also left steady at 0.4% and 0.25%, respectively.
  • The number of Americans filing for unemployment benefits went up by 20000 to 243000 in the week ended March 4th 2017, slightly above expectations of 235000.
  • 2008 Nonfarm business sector labor productivity in the United States increased at a seasonally adjusted annual rate of 1.3 percent during the fourth quarter of 2016, following a downwardly revised 3.3 percent rise in the previous period and below market expectations of a 1.5 percent gain.


While unseasonably warm weather may have boosted the payrolls count, the data represent President Donald Trump’s first full month in office and overlap with a surge in economic buoyancy following his election victory. The figures also corroborate recent comments by Federal Reserve officials that flagged a likely interest-rate increase this month.

Bullion’s being pulled back down toward $1,200 an ounce in the worst losing run since October as positive US economic data underpinned expectations that interest rates could probably be raised several times this year, starting with a hike next week.

After raising rates just a single time in 2015 and also in 2016, the pace may quicken this year. The so-called dot plot from Fed policy makers shows an expectation for three increases this year, and last Friday, Yellen dropped hints the bank might end up having to hike them more than planned in 2017.

After Wednesday’s upbeat private payrolls data, markets were pointing towards more than 90 % chances of rate hike in March meeting; gold prices are likely to face the weakness amidst the strength in the dollar. Separately, the weaker CPI released from China is also likely to put pressure on gold, given the fact that gold is considered as a hedge against inflation.

Gold prices slipped on Friday, building on a loss for the week as better-than-expected U.S. employment data backs the likelihood that the Federal Reserve will decide to boost interest rates at its meeting next week.

Higher interest rates lift the appeal of holding dollars. That also means that a stronger dollar cuts the worth of holding non-yielding gold that’s priced in this denomination.

We see this sell-off as tied into the increased chance of a US rate rise next week. Looking further out, sentiments for the yellow metal are bullish.


Wednesday, 1 March 2017

Effect of Presidential Election and BREXIT on Bullion Market

So Far, bullion has witnessed a 9.6 percent rise in prices mainly due to the prevailing political uncertainty over Trump’s unorthodoxy, European elections and Brexit ruffle confidence.
The yellow metal reached near a four month high last week amid intensified political uncertainty in the U.S. and the EU.

All precious metals have made gains, gold, silver, platinum and palladium, as both the euro and the dollar weakened over the week. Let's take a look as to what factors contributed to the rise and how far an important role will they play in the near future.

US uncertainty- Gold prices have hit a four month high to reaching their highest level since Donald Trump won the election.


The metal is considered as a safe haven asset for money and values rise when markets are in turmoil or in times of uncertainty. This sentiment has raised the demand for gold especially from investors thus pushing  its prices higher.

As markets await a major speech by US president Donald Trump, we saw equates retreating and dollar hesitating thus strengthening gold prices and shaking off most of the losses incurred following the surprise election result, as markets continue to unwind Trump trade.

Fed Rate Hike- Last Wednesday's release of minutes from the last FOMC meeting on January 31 – February 1 struck a slightly more hawkish tone as Fed members discussed the appropriateness of another rate hike 'fairly soon.' concerns over the risks and uncertainties surrounding the Trump Administration's fiscal stimulus plans as well as a strengthening US dollar tempered that hawkish stance. In the end, markets were once again left with continued ambiguity regarding the pace of monetary policy tightening in the coming months. Indeed, the Fed Fund futures market still saw a low percentage probability of a March rate hike – in the high-teens to low-20's – a day after release of the FOMC minutes. This sustained policy uncertainty helped weigh on the dollar while boosting the price of gold further. Reduced expectations of a US rate hike in March following the release of the minutes from the US Federal Reserve's last meeting are also helping gold.

EU elections- Despite the virtually relentless rally in US and global equity markets, geopolitical risks continued to abound, particularly in Europe. Article 50, which officially begins the process of separation between the UK and European Union ('Brexit'), is slated to be triggered no later than in March. A former European Commission official has recently stated that the triggering of Article 50 could lead to a 'complete breakdown' of UK/EU relations.

Additionally, France's far-right, anti-EU presidential candidate, Marine Le Pen, is leading in polls for the first round of the upcoming French elections. Although she is not currently favored to win against frontrunner Emmanuel Macron, any surprise victory by the populist/nationalist Le Pen will undoubtedly lead to serious questions about the future of the EU.

Geopolitical worries and political concerns in the EU continue which is leading a flight to safety bid in gold futures market and gold exchange traded funds (ETFs) and demand for safe haven gold bullion.

Dollar- The dollar looks vulnerable due to the uncertainty about US President Donald Trump and the new U.S. administration's policies. Overnight Trump attacked China and accused the Chinese of being ‘grand champions’ of currency manipulation.

This alone is quite bullish for gold. It does not create confidence about trade relations between the world's two biggest economies and it suggests that we may be about to embark on the next phase of the global currency wars.

The US president is to deliver his first speech to US Congress next week, after US Secretary of the Treasury Steven Mnuchin on Thursday said the impact of fiscal stimulus this year on the economy might be limited.

Amid these uncertainties in Europe as well as those in the US under the Trump Administration's still-hazy policy trajectory and the Fed's murky monetary policy, gold has continued to extend its sharp uptrend that began after price bottomed out around the $1125 support area in late December.

Tuesday, 25 October 2016

AN ACTION PACKED DECEMBER: RSBL

By Mr. Prithviraj Kothari, MD, RSBL






Gold prices appear to have found a base either side of the $1,250 per ounce, basis spot, with prices now getting some lift and silver prices are well placed to challenge recent resistance $17.78 per ounce


On Friday, 21st October,  San Francisco Fed President John Williams said at a mortgage conference that "it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later." His comments followed recent hawkish talk from central bank officials including New York Fed Chief William Dudley and Fed's vice chair Stanley Fischer, which prompted investors to price in an interest rate increase this year. 


The main concern currently is the conflicting scenario between Fed officials like Fischer and Dudley who have been signalling a rate hike before the end of the year, while the ECB has arguably signalled a likely extension of its asset purchases.


The ECB kept interest rates at historic lows last Thursday, and its President Mario Draghi kept the door open for more stimuli, effectively quashing any speculation that the bank was poised to taper its 1.7 trillion euro asset-buying programme.



Being only a few days before the U.S. presidential election, many analysts are not expecting the Federal Reserve to take any concrete steps.

However, expectations for a December move jump to 75%, the highest it has been all year as we see all the action happening in December.



As we head into what has seasonally been the best time of year for the sector, here are a few possible major data release that could influenced gold prices during coming months.


November 4th: The Non-farm Payrolls Report (NFP) for October will be released on this date. The gold sector usually sells off into this report and becomes very volatile after the release as trades are set beforehand based on the expected number of jobs created. This is a highly anticipated report as the results will be heavily factored into the Fed’s decision process of whether or not to raise interest rates in December. The market is factoring in a 70% chance of a quarter point raise on December 14th as of this post.


November 8th: The US election could very well be a major promoter as during the last Presidential Debate, Donald Trump made accusations of the election possibly being rigged against him. He has also stated if defeated, he will not commit to accepting the outcome, stating “I will tell you at the time”. This is a very dangerous statement and could easily trigger violence after the outcome. Also, if victorious, the decision could very well cause a “Brexit” type response in the gold sector as Trump is the anti-establishment candidate. 


December 2nd: The release of the final NFP report before the highly anticipated last Federal Reserve Open Market Committee (FOMC) meeting of the year will be released . This could possibly be the deciding factor on whether or not Fed chairwoman Janet Yellen decides to raise rates this year.


December 14th: On this date the market will finally find out the answer to the question of, “will she, or won’t she”. If the Fed decides to raise rates at the conclusion of the December 13-14 FOMC meeting, the gold sector could initially sell off as it did last December. This could be a buying opportunity as rising rates have historically been bullish for gold as we saw back in the late 1970’s when former Fed chair Paul Volcker raised rates to over 20%. During this time gold had the largest bull market in history as it soared from $105 in September, 1976 to $850 in January, 1980. Also, in December of last year after 7 years of zero rates, the Fed finally decided to raise rates a quarter point. 



There are a lot of major U.S. reports coming and if the data is positive then there is no reason why the U.S. dollar can’t go higher and that could hurt gold. So as the world waits the month of December for its Christmas Celebration, the financial markets await the same month as a lot of action is bound to take place.









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:
"Gold Crashed But Lands Safely: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/10/gold-crashes-but-lands-safely-rsbl.html



AN ACTION PACKED DECEMBER: RSBL

By Mr. Prithviraj Kothari, MD, RSBL






Gold prices appear to have found a base either side of the $1,250 per ounce, basis spot, with prices now getting some lift and silver prices are well placed to challenge recent resistance $17.78 per ounce


On Friday, 21st October,  San Francisco Fed President John Williams said at a mortgage conference that "it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later." His comments followed recent hawkish talk from central bank officials including New York Fed Chief William Dudley and Fed's vice chair Stanley Fischer, which prompted investors to price in an interest rate increase this year. 


The main concern currently is the conflicting scenario between Fed officials like Fischer and Dudley who have been signalling a rate hike before the end of the year, while the ECB has arguably signalled a likely extension of its asset purchases.


The ECB kept interest rates at historic lows last Thursday, and its President Mario Draghi kept the door open for more stimuli, effectively quashing any speculation that the bank was poised to taper its 1.7 trillion euro asset-buying programme.



Being only a few days before the U.S. presidential election, many analysts are not expecting the Federal Reserve to take any concrete steps.

However, expectations for a December move jump to 75%, the highest it has been all year as we see all the action happening in December.



As we head into what has seasonally been the best time of year for the sector, here are a few possible major data release that could influenced gold prices during coming months.


November 4th: The Non-farm Payrolls Report (NFP) for October will be released on this date. The gold sector usually sells off into this report and becomes very volatile after the release as trades are set beforehand based on the expected number of jobs created. This is a highly anticipated report as the results will be heavily factored into the Fed’s decision process of whether or not to raise interest rates in December. The market is factoring in a 70% chance of a quarter point raise on December 14th as of this post.


November 8th: The US election could very well be a major promoter as during the last Presidential Debate, Donald Trump made accusations of the election possibly being rigged against him. He has also stated if defeated, he will not commit to accepting the outcome, stating “I will tell you at the time”. This is a very dangerous statement and could easily trigger violence after the outcome. Also, if victorious, the decision could very well cause a “Brexit” type response in the gold sector as Trump is the anti-establishment candidate. 


December 2nd: The release of the final NFP report before the highly anticipated last Federal Reserve Open Market Committee (FOMC) meeting of the year will be released . This could possibly be the deciding factor on whether or not Fed chairwoman Janet Yellen decides to raise rates this year.


December 14th: On this date the market will finally find out the answer to the question of, “will she, or won’t she”. If the Fed decides to raise rates at the conclusion of the December 13-14 FOMC meeting, the gold sector could initially sell off as it did last December. This could be a buying opportunity as rising rates have historically been bullish for gold as we saw back in the late 1970’s when former Fed chair Paul Volcker raised rates to over 20%. During this time gold had the largest bull market in history as it soared from $105 in September, 1976 to $850 in January, 1980. Also, in December of last year after 7 years of zero rates, the Fed finally decided to raise rates a quarter point. 



There are a lot of major U.S. reports coming and if the data is positive then there is no reason why the U.S. dollar can’t go higher and that could hurt gold. So as the world waits the month of December for its Christmas Celebration, the financial markets await the same month as a lot of action is bound to take place.









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:
"Gold Crashed But Lands Safely: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/10/gold-crashes-but-lands-safely-rsbl.html