DEBT CEILING OR DEATH CEILING FOR GOLD?

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold prices seemed to be in a wavy mood all this week. With prices gaining momentum on Tuesday and Wednesday and then falling back on Thursday and picking up on Friday again.

Let's take a look at the weekly movement of gold prices.

Monday- On Monday, gold and silver slightly declined. Their decline coincided with the downfall of other commodities such as crude oil. In the forex market, leading risk related currencies such as the Euro and Aussie dollar depreciated against the USD. 

Tuesday- Gold went to test the downside and dropped to 1305.50 when aggressive selling hit the market in the afternoon. A lower US September consumer confidence number seemed to provide the needed support, and by the end of the day, Gold shorts got squeezed out when it recovered all the way up to 1328 again.

Wednesday- On Wednesday there was uncertainty in the market on the issue whether the US lawmakers would be able to agree to a spending bill before next Tuesday to avert a government shutdown. Focus again shifted to gold as it witnessed safe haven buying. According to US Treasury Secretary Lew the Government will be out of money on 17th October and won’t be able to meet all of its financial obligations. Gold reacted with a move higher to a high of 1338.20

Thursday- Gold fell on Thursday as a rise in the dollar and mixed US economic indicators prompted investors to take profits after gains in the previous session. In US economic data on Thursday, contracts to buy previously owned home fell for a third straight month in August, while fewer Americans filed new claims for jobless benefits last week. Spot gold was down 0.8 percent at $1322.40 an ounce

Meanwhile, Republicans in the US House of Representatives refused to give in to President Barack Obama's demands for straightforward bills to keep the government running beyond Sept. 30 and to increase the government's borrowing authority to avoid default. 

Friday- Gold prices gained more than one percent on Friday as the trading hours closed. Prices rose over expectations ahead of a weekend that could yield a decision on whether the US government shuts down next week.

Gold jumped more than 1 percent on Friday as wrangling over the U.S. budget and jitters over the outlook for Federal Reserve policy stoked buying interest, with buying accelerating sharply on a break of a key chart level.

New York Fed President William Dudley said on Monday that the U.S. central bank could still reduce its support for the economy later this year, while St. Louis Fed President James Bullard said on Friday that stimulus could be scaled back in October, depending on economic data. Comments from a Federal Reserve official that suggested a bond-buying taper could be pushed out to next year helped spur the precious metal upward.

It was this month of the year, in 2011 that gold reached its life time high of 1920$ when the first US debt ceiling crisis surfaced. The crisis was resolved at the last minute. A similar crisis creates waves (though minute) in the market where investors wait and watch the US economic data reports and key figures that determine whether the US Federal Reserve could begin reducing its bond purchases this year.

The metal also received a boost from the International Monetary Fund, which reported that central banks continued to increase gold reserve. The data showed an increase of 12.7 tons in Russia’s Gold Reserves, Turkey adding 23.3 tons, Kazakhstan 2.5 tons and also Ukraine, as well as Azerbaijan were among two tons of buying. On the sell side stood Canada, Mexico and the Czech Republic with marginal amounts of a few hundred kilos in total.

Still, the price of bullion has fallen about 20 percent this year, after 12 years of gains.

Moves by India to cut gold imports as it wrestles with its ballooning current account deficit have been keeping buyers at bay. 

The US debt ceiling debate is heating up, but while a temporary Government shutdown cannot be ruled out, no one really expects the US to default, but finally increase the limit again.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.


- Previous blog -
"Final surprise or more to go!!"
http://www.riddisiddhibullionsltd.blogspot.in/2013/09/final-surprise-or-more-to-go.html

FINAL SURPRISE OR MORE TO GO!!

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

So finally.....the much awaited and the most discussed meeting was held this week. The FOMC meet began on 18th September and was over by the 19th. All expectations, rumours, speculations and predictions were finally put to a halt.

Everything was going red for the yellow metal until Wednesday. On Wednesday gold jumped 4.1 per cent (the highest in 15 months) when the Fed made a statement that they would need more evidence and clear signs of US recovery before curbing its $85 billion-a-month of bond buying. No taper! The Fed topped the surprise no-tap vote, by delinking tapering to any “magical number”

Gold hovered near one week highs and was on track for its biggest weekly gain on five weeks after the US Federal Reserve postponed the tapering of its stimulus measures that have long been a supporter for bullion.

Bullion rose 70 percent from December 2008 to June 2011 as the U.S. central bank pumped more than $2 trillion into the financial system by buying debt, increasing concern about currency debasement. Bernanke said there is no fixed schedule for tapering and a statement from the Fed signalled interest rates will stay near zero as long as unemployment remains above 6.5 percent and inflation forecasts don’t exceed 2.5 percent.

Gold slid on Thursday and more so on Friday after positive data release from the US. Spot gold prices were last at $1,352.45/1,353.20 per ounce, down $15.10 or 1.1 percent on the Thursday’s close. Spot Bullion prices for gold fell $25 on Friday morning from Thursday's 7-session high, trading at $1350 per ounce as concerns grew that next month's US "debt limit" deadline could spark panic in financial markets. In the other precious metals, silver prices at $22.53/22.59 per ounce were down sharply on Thursday’s close of $23.12, while platinum prices fell $14 to $1,448/1,453.

Initial jobless claims for the week ending September 14 increased 15,000 to 309,000 but were well below the expected 330,000 and the Philadelphia Fed business outlook index rose to 22.3 in September, much better than the forecast of 10.3 and Augusts' reading of 9.3. Reports released showed sales of previously owned U.S. homes unexpectedly rose in August to the highest in more than six years and manufacturing in the Philadelphia region expanded in September at the fastest pace since March 2011. Apart from the encouraging data, Gold sank more on later part of Friday after Federal Reserve Bank of St. Louis President James Bullard said that the US central bank may move next month to taper its QE and reduce stimulus pending which has acted a booster for precious metals over the years. He simply put it in this way, “Market overeacted with taper expectations”

The next big event is the appointment of a new Fed Chairman. Any tapering that is expected to happen in October will be dependent on data released from the US and speculative interest may remain soft as investors prefer to wait and watch before jumping into the markets.

On the domestic front, the government on Tuesday raised the import duty of Gold Jewellery to 15% from 10% earlier, introducing a 5% tariff differential with raw gold. The move, which underlined the government’s persistent efforts to dampen the demand for Gold imports and stabilize the rupee, will also give some comfort to domestic jewellery industry with a decisive export orientation. The Finance ministry’s decision followed RBI’s tightening norms for Gold Loan non-banking financial companies (NBFCs). 

Usually artisans manufacture gold jewellery factoring in local demand and the process of manufacturing does take time. This move if not had implemented, the absence of duty differential between the imports of plain Gold and jewellery, bulk buyers who didn’t want to wait for purchases started importing. This affected the livelihood of artisans who were dependent on jewellery making.

India's gold shipments came to a virtual halt after the Reserve Bank of India (RBI) told importers on July 22 that a fifth of their purchases would have to be turned around for export and that 80 percent would be available for domestic use. Clearing the air on gold import norms, a government official today said more than 20 per cent of the imported metal can be exported back, a clarification that is likely to help release inbound shipments held up at the customs. 

Domestic jewellers can now breathe a sigh of relief with this clarification, as demand is expected to pick up in the coming months with the arrival of the wedding and festival season, traditional times to give gold. And this year's good monsoon will boost incomes of farmers, who often use gold as an investment.

As far as the trade range for gold is concerned  it is expected to hover between $1270-$1370 and Rs.28,500- Rs.31,000 in the international and domestic markets respectively.

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

- Previous blog -
"Are they really precious?"
http://www.riddisiddhibullionsltd.blogspot.in/2013/09/are-they-really-precious.html

LORD GANESHA ACCESSORIES

Ganesh Chaturti is one of the most widely celebrated festivals in India and brings about prosperity and a spirit of happiness amongst people. RSBL's Sparsh constantly aims at bringing about innovation into its products and offerings. 

Our unique gold plated collection of semi-precious stones studded Ganesha accessories made of silver truly signifies this and reflects the love, affection and devotion of people towards Lord Ganesha. 

INVITATION FOR TIMES GLAMOUR EXHIBITION 2013 BY RSBL DIA JEWELS

WILL GOLD CROSS THE $1400 MARK

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Is something wrong with market? Yes that's exactly what traders and investors were discussing. Gold has just touched $1400 which was once seen an untrue level after the fall. Will it be able to cross it and reach new highs is what the below given factors can forecast.

The main highlight for this week was the depreciating rupee. Initially the markets expected rupee to return from the level of 62. Then they claimed 64. But the rupee made new low of 65 against the dollar. Now it is expected to depreciate further to 70. However, by Friday evening rupee returned to the levels of 63.90

The economy is facing a slump. Inflation is at a high, growth has hampered and equities have shattered.

Although the government has been trying its level best to intervene at all critical levels and control the rupee, nothing seems to be helping.

This drop in the rupee pushed gold and silver upwards.

Strong US Dollar and rise in treasury yields were seen pressuring the commodity movement to certain extent. In the United States, ten-year treasury yields climbed to 2.92%, the highest since July 2011 after FOMC minutes were failed to give any further details on tapering monetary stimulus. Investors hope that the Central Bank may start tapering its monetary stimulus later this year.

Gold prices in the global market edged up on Friday after weekly US unemployment claims recorded an upward movement. However, concerns over the withdrawal of US monetary stimulus were seen pressuring the yellow metal prices to certain extent.

Gold jumped to a 11-week high, topping $1,400 an ounce in spot trading, as sales of new U.S. homes fell more than forecast, boosting speculation that the Federal Reserve will maintain economic stimulus. Sales of newly built homes in July plunged more than 13 percent, the most in more than three years, government data showed today. The 394,000 annualised pace compared with a drop to 487,000 forecast by analysts in a Bloomberg survey. Fed policy makers said they are “broadly comfortable” in scaling back debt purchase if the economy strengthens.

By Friday evening gold was seen trading at 1397$ up by 21$ and silver was up by 95 cents, trading at 24.07$

In the physical markets, renewed labour unrest in South Africa sent platinum and palladium higher on Thursday, and this too, provided an element of support to both gold and silver.

By Friday evening, in the domestic markets too we saw gold and silver rocketing. Gold climbed by INR 750 trading approximately at INR 31,900 per 10 gram and silver was up INR 2200 reaching a high of INR 53,400 per kg.

The fact that gold managed to reverse its losses and close modestly higher on the day was quite impressive and likely had something to do with the fact that better-than-expected Chinese data which suggests that the economy is stabilizing, potentially a positive in terms of future Chinese gold demand

Another report that caught attention was the World old Council's gold consumer demand report. The impressive thing to note was that Gold consumer demand rose by more than half in the second quarter of this year thanks to strong demand in China and India, the World Gold Council (WGC) said.

In India, the Gold Trade holds steady in spite of the government imposing import tax hikes on gold in an attempt to reduce the country’s current account deficit. In fact, according to the WGC, gold jewellery, bar and coin demand in India alone was 70 percent stronger in the second quarter of 2013 compared to the same quarter last year.

Consumer demand in China continued to show strong growth, totalling 276t in the second quarter, a rise of 87% compared to the same quarter last year, as investors used the lower gold price to buy in advance of expected future price rises. Jewellery demand in the quarter was 153t, up 54% on the same quarter last year, while bar and coin investment was 123t, up 157% on Q2 2012.

Recent falls in the gold price have boosted demand significantly – it rose 53 percent in the April-June period from the same three months of last year, the WGC said in a report on Thursday.

Looking at the good monsoons of India and the festive season closing by, the domestic prices for precious metals need to be watched closely. Whether supply will be able to meet the demand will be the question that every Indian attached to precious metals will be having in their mind. 

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

- Previous blog -

"Precious Metals on the Run"

http://riddisiddhibullionsltd.blogspot.in/2013/08/precious-metals-on-run.html

WAVES OF DISAPPOINTMENT FOR THE MARKET

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

As we discussed last week that this week had a bundle of surprises for gold of which the US employment data was the biggest surprise. There were mixed sentiments in the market post the data release. Investors believed that the jobless claims would be much high compared to June.

Moreover Fed Chairman Bernanke's statement over the stimulus plan created even further confusion.

There was mystification in the market as the jobless claims were 326,000, below the forecast of 346,000 while the private sector ADP change in non- farm payroll came in at 200,000 well above the forecast 179,000.

A weaker-than-expected U.S. July jobs report and a fall in the dollar helped gold rebound from a drop of more than $25 an ounce during Friday’s session, but prices still marked the first weekly loss in four week.

Gold initially fell to a two week low at $1280 an ounce as encouraging US gross domestic product and factory activity data earlier in the week reduced the metal's appeal as an investment hedge.

It jumped about  2 percent from its session low after government data showed U.S. employers slowed their pace of hiring in July but the jobless rate fell anyway, easing fears that the U.S. central bank might imminently reduce its $85 billion monthly bond buy back stimulus.

Gold’s hard times have come from the view that easy money, which has weighed on the dollar and lifted gold in recent years, is going bye-bye sooner or later.

US jobs data is vital to the gold market after the US Federal Open Market Committee indicated that quantitative easing may continue until the unemployment rate falls to 6.5 percent. The Fed remains committed to purchasing $85 billion in new debt per month in an open-ended programme (QE3). Accommodative measures from the US central bank are supportive of commodity prices because extra liquidity tends to debase the dollar and create future inflationary risk.

I am optimistic over the long-term time frame. Targeting inflation, the Federal Reserve's inability to taper, and underlying problems in Europe will make sure precious metals will outperform down the stretch. The nonfarm payrolls data usually brings volatility to gold, but the metals just haven't had enough upside momentum to constitute a breakout, so till that time it will be wait and watch.

In other gold market news, China’s thirst for physical metal remains strong. Imports from Hong Kong at 105 tonnes in June were down slightly from 114 tonnes in May but this was still the fourth-biggest month on record, according to Macquarie, citing Hong Kong export data. Apparent demand from China at 835 tonnes is up more than 50 percent on last year, the broker estimates.

However demand from India has not picked up pace as there are no clarification over the RBI policies for gold and the government is trying to curb g0ld imports to rectify the CAD.

As far as the international markets are concerned, it’s going to be a light week for U.S. economic news, but globally, next week will include a few more central bank meetings including the Reserve Bank of Australia, which is expected to cut rates. The Bank of Japan is also meeting, but is not expected to make changes to monetary policy.  Chinese data slated for release include industrial production, retail sales, export data and inflation report.

Gold support is at $1,280 and $1,260. Resistance is at $1,320 and $1,340. Silver support is at $19.20 and $19.05, resistance is at $20.20 and $20.40.

In the domestic market gold is expected to move in the range of Rs.26,000 to Rs. 29,500 in the coming week.

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

- Previous blog -

"Bundle of surprises for gold"

http://riddisiddhibullionsltd.blogspot.in/2013/07/bundle-of-surprises-for-gold.html

INDIA'S FIRST EVER GOLD PLATED BIKE LAUNCHED BY RSBL DIA JEWELS!

Presenting to you India's first ever gold plated bike.

This bike is India's first fully Gold Plated bike and decorated aesthetically with diamonds. The gorgeous Huma Qureshi herself was present at the inaugration and unleashed the bike.

This bike is available for display at the Times Glamour Exhibition at Hotel Shangri- La, Lower Parel,  from 26th- 28th July from 10am - 7pm ( Stall no 18.)


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

- Previous blog -
"Bundle of surprises for gold"
http://riddisiddhibullionsltd.blogspot.in/2013/07/bundle-of-surprises-for-gold.html

BUNDLE OF SURPRISES FOR GOLD!

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Currently the entire market is in a confused state of mind as far as gold is concerned.
The market has split in two parts. Some say gold will rise while the others take an opposite stand.

This week we came across some interesting figures in gold:

1. On Friday, gold was trading at $1340 - almost $160 higher than the three year low of 1179$ that it hit on June 28
2. Gold has risen consecutively for the third week until Friday and also its first three weeks rise since March.
3. On the other hand, in terms of value gold has also lost a fifth of its value as investors lost faith in gold.

Many buyers also indulged in profit-taking by cashing in from gold's Friday session high of 1340$.

Initially, Fed chairman Bernanke has stated that the Fed may scale back its $85 billion monthly bond purchases. But now there is no clarity on the timeline for this activity as he further states that scaling back of the stimulus program depends on the recovery of the US economy.

The market now digests news that Russia, Ukraine and Azerbaijan were among eight countries that increased their gold holdings in June, data from the International Monetary Fund showed, while Turkey, Germany and seven other countries shed some of their bullion.

As far as the Asian markets are considered, China's gold demand could hit a record 1,000 tonnes this year, the World Gold Council said on Thursday, which means it would overtake India as the world's biggest bullion consumer.

But investors still have a mixed basket of feelings for gold. The appetite to carry large positions overnight may decline ahead of the next crucial week of data.

The U.S. Federal Reserve will announce its policy decision on Wednesday, as will the European Central Bank and Bank of England on Thursday — and on Friday, the U.S. Labour Department will release its widely watched monthly jobs report.

Now what we have to wait and see is that whether these vital reports will pull down gold or push it up.

Demand from India has taken a setback but is now expected to rise. Monsoons play a key role for demand coming in from rural areas. Also August marks the onset of the festive and marriage season. But since the government has taken measures to curb imports, in spite of physical demand there isn’t much gold available in the market to meet the demand. 

Gold support is at $1,321 and $1,307. Resistance is at $1,340 and $1,355. Silver support is at $20.78 and $19.40, resistance is at $20.70 and $20.90.


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

- Previous blog -
  "Gold Has Found A Support"
 http://riddisiddhibullionsltd.blogspot.in/2013/07/gold-has-found-support.html

INVITATION FOR TIMES GLAMOUR EXHIBITION BY RSBL DIA JEWELS

GOLD HAS FOUND A SUPPORT!!!

                                 - Mr. Prithviraj Kothari (MD, RSBL:RiddiSiddhi Bullions Ltd.)

I am sure every single reader who follows Bullion market will agree when I say; this week belonged to Ben Bernanke’s statements. Bullion has slipped more than 22% this year on the Fed's hints that its monthly bond-buying program may end altogether by mid-2014.

Fed Chairman Ben Bernanke eased some market nerves by telling the U.S. Congress this week that the central bank's plans to scale back asset purchases later this year were not set in stone and depended on the strength of the economy.

He further stated that the U.S. central bank still expects to start scaling back bond purchases later in the year, but left open the option of changing that plan if needed. These statements were enough to support bullion prices and gold gained strength, even when the data flowing out of US has been considerably positive for the growth of economy. In July, jobless claims sharply fell by 24k thus reaching 334k. The US Philly Fed Index rose again from 12.5 in June to 19.8 in July. 

The recovery of the US economy is bound to pull down demand for gold and silver as safe haven investment option, which will then affect its prices.

I have a different perspective for the Gold price. Because of the lower gold prices now prevailing, which make many operating gold mines and projects uneconomic, we are already seeing fallout among producers with cutbacks, shutdowns and postponements.  As a result global gold production is likely to decline until there is a major pickup in the metal price.  

The lower price also discourages scrap sales which have thus been diminishing too.  Meanwhile the huge demand for physical gold seems to be continuing a pace. Russia has been the biggest gold buyer in the official sector in the past decade. A shift by central banks from major sellers of bullion to net buyers has been a major support to the gold market in recent years.

Gold took a stab at the $1,300/oz level earlier in the week, although it encountered strong resistance on approach of this level and has since sunk back lower. Gold has been receiving strong support in recent weeks from physical buying (especially from Chinese buyers); however, this physical buying is waning, and becomes especially thin on approach of $1,300/oz.

Physical demand for gold from the top consumer India remains dull due to stiff measures taken by the RBI to curb imports with a view to tackle the widening current account deficit. End of peak marriage season and weak domestic currency is also restricting buyers to be active but enduring good monsoon may provide firm support to prices later. 

According to the Indian Meteorological Department, the present state of the monsoon was 16% above a 50-year average during the June 1- July 16 period. A good monsoon brings strong harvests and given the fact that 70% of India’s Gold demand is from rural areas, should keep imports on a firm note going into year end.

Market participants were now awaiting a G20 meeting in Moscow over the weekend, which will likely focus on recent financial market volatility. Attention will then turn towards a series of crucial U.S. economic data, which analysts said will give more clues about the timing of the Fed's stimulus tapering.

Many traders and investors in Europe and North America are gearing up for their summer holidays, which could made for generally quieter, summer doldrums-type trading conditions until after the U.S. Labour Day holiday in early September.

Gold support is at $1,274 and $1,265. Resistance is at $1,305 and $1,320. Silver support is at $19.20 and $19.05, resistance is at $19.70 and $20.20. Platinum support is at $1,405 and $1,390. Resistance is at $1,418 and $1,437

In the domestic market the trade range for gold for the coming is between Rs. 26,000 to Rs. 28000 per 10 gram and for silver between Rs. 39000 to Rs. 40000 per kg.

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

~ Previous Blog: 
"Hold on to your Gold" 
 http://www.riddisiddhibullionsltd.blogspot.in/2013/07/hold-on-to-your-gold.html

HOLD ON TO YOUR GOLD!

-  Mr. Prithviraj Kothari (MD, RSBL:RiddiSiddhi Bullions Ltd.)

Gold in the spot market was up 4.8% for the week, thus stating its biggest weekly gain since October 2011. Gold rose by 2.62% to $1280.1 on Thursday and silver also increased by 4.13% to $19.95.

The markets were moved by the U.S Fed's speech on 10th July, Bernanke spoke after the markets closed on Wednesday. He said that the US economy desires a highly accommodative monetary policy for the likely future. He also suggested that the tapering of the QE3 programme does not means that monetary policy would be tightened or the interest rates would be raised.

The FOMC minutes reviewed that many Fed governors would like to see more signs of improvement in jobs before agreeing to tapering. Both risky assets and gold reacted positively to the dovish comments by the Fed. The most recent weekly jobless claims in the U.S. unexpectedly rose by 16,000 to 360,000. 

On Friday, among other precious metals, silver fell 1.1% to $19.87 an ounce. Platinum inched down 0.1% to $1,402.99 an ounce, while palladium gained 0.1% to $716.97 an ounce. Gold pared losses after government data showed that U.S. producer prices rose more than expected in June, increasing gold's inflation-hedge appeal. 

Gold supply remains tight with current market prices now below the highest cost of production. Miners are writing down asset values and cutting back on costs. As prices move lower, it will come to a point where supply and demand economics take over.

Gold's reaction was limited after Cypriot President Nicos Anastasiades said he hoped there would never be a need for the island to sell its gold reserves, an assessment stipulated in an international bailout for Cyprus.

Meantime in India – the world's heaviest gold-buying nation – the government's new campaign against household gold demand was challenged today by the jewellery industry, as well as market analysts. A number of jewellery units and workers have been idled due to the severe shortage of gold in the wake of several restrictions on the yellow metal’s import.

Imports in April and May together were a little over 300 tonnes. This fell to 38 tonnes in June. Excess imports in May gave some initial relief but that cushion is long gone.

Starting off next week, we have Chinese Q2:13 GDP data out early Monday. This number is generally not as important for precious metals as it is for other commodities. However, given that it is well known that Asian physical buying (particularly from China) has provided a crucial crutch for gold amid Fed tapering concerns, we could see a more marked reaction from precious metals than is usually the case. There is considerable risk that this number will disappoint (Bloomberg consensus: 7.6% y/y), although this time the market might not react as violently as it did in April — the market might be buoyed to some extent by hopes of stimulus, after Chinese Premier Li stated earlier this week that economic growth and employment must stay above a certain floor.

I expect gold prices to finish 2013 at around USD1,300/oz and rise mildly in 2014 and 2015. In the long term, uncertainty will continue to plague global markets as the international financial system adapts to a changing world economy. Gold will continue to play an important portfolio role for investors

"The primary purpose of this blog by Prithviraj Kothari - MD, RSBL(RiddiSiddhi Bullions Ltd.) is to educate the masses of the current happenings in the Bullion world."
-Previous Blog-
"Dollar Drags Down Gold" : 
 http://riddisiddhibullionsltd.blogspot.in/2013/07/dollar-drags-down-gold.html

FED'S POLICY STATMENTS – Predictable I feel?

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Why did the financial world react in this manic-depressive way to a statement that was bland and predictable? Why do investors keep gambling vast sums of money in speculations on changes in monetary policy when Bernanke has tried to make crystal clear that significant changes are unlikely, at least until the end of the year? I think no one would have any clue with respect to these questions.

As always the effect on Gold is felt in a big way. Gold fell for a third straight session on Thursday after U.S. Federal Reserve Chairman Ben Bernanke hinted at reducing an $85 billion bond-buying programme, which has increased the precious metal’s appeal as a hedge against inflation. While Bernanke said the central bank needs to see further progress in the U.S. economy before the Fed scales back monetary stimulus, he also added that a decision to adjust it could come in the “next few meetings” if the economy looked set to maintain momentum. Down nearly 20 percent this year, gold could come under more selling pressure as investors increasingly price in a stimulus cut ahead of the Fed’s next policy meeting on June 18-19.

But Gold markets did manage to regain some composure yesterday. We saw a steady climb towards the $1,400/oz level until the US market opened. Some profit-taking took the US market lower, although a recovery soon took the price to a relatively stable trading range, just above $1,390/oz. The stability continued during Asian trading, with the price remaining in a very tight band of around $1,390/oz to $1,395/oz.

As pointed out earlier, I do feel that more upside for gold is in the offing. Even taking a slowing of Fed quantitative easing into account, we still feel that the environment remains supportive of a higher gold price—global liquidity should continue to grow, although maybe at a slower pace, and real long-term interest rates across the globe look set to remain low for some time still. Nevertheless, I cannot discount the investor apathy towards the metal and acknowledge that it will take some doing to restore confidence. Consequently, while I do still foresee upside for gold, these gains will most likely be hard won. The first challenge will be to push strongly past the $1,400/oz hurdle.

Physical demand remains strong in the major Gold consuming countries, where China has seen a daily increase in physical trading volumes. How tight the physical market still is, is reflected in the premium of 50 USD still paid today in Shanghai over the international price. Premiums in India started to cool off, as the weaker Rupee drove local Gold prices up and some Gold has restarted to be imported into the country, however rather sluggishly. Top gold buyer India, which had seen gold imports jump 138 percent in April, is facing a slowdown as the peak wedding season comes to an end and its central bank imposes new rules to reduce a deficit. 

There is no doubt gold is still one of the attractive assets at present as economic uncertainty is not over across the developed world. Federal Reserve has created money, but that money has not been circulated into economy as banks are still tentative to flood the market with easy money. Economists are apprehensive that when this money will be circulated, inflation may trigger in a big way. But that theory will be tested when the actual event happens.

The Fed will probably want to see six months of strong employment and at least two quarters of 3 percent gross domestic product growth before it seriously considers tightening. In the meantime, big market reactions to comments from the Fed chairman, like those Wednesday, will mostly be reversed – expensively for those investors who replace analysis with wishful thinking.

In short, there are still reasons to buy gold; there are reasons to hold gold; there are reasons not to go aggressive in investment. So, my gold may remain in a range ($1325-1550/oz) till September (German Election may be the next trigger).

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

- Previous blog -
  "Is gold losing its safe haven appeal" 
http://riddisiddhibullionsltd.blogspot.in/2013/05/is-gold-losing-its-safe-haven-appeal.html