Pages

RSBL Gold Silver Bars/Coins

Showing posts with label European Central Bank. Show all posts
Showing posts with label European Central Bank. Show all posts

Monday, 30 October 2017

Rally expected in gold in near future

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

Friday, 6 October 2017

September proves to be the worst month of 2017 for gold so far

September was an action-packed month, with North Korean rockets and a succession of monster hurricanes all coming at the markets almost at the same time. Not forgetting the comments coming out from the Federal Reserve that contributed to thefrenzy by giving a clear signal of a December rate hike. In the process, it perhaps single-handedly helped the dollar index recover from a three-year low hit earlier in the month.

Amid a resurgent dollar, the month of September proved to be worst for gold since November 2016. However, as geopolitical tensions soar, with the standoff between the U.S. and North Korea probably topping the list, demand for precious metals surged with Gold ETF holdings rising most since Feb 2017.



Last week, gold prices ended lower on Friday as weak U.S. consumer spending and inflation data did little to alter expectations for a third interest rate increase by the Federal Reserve this year.
The dollar has risen in recent weeks as investors grow more optimistic about the prospect for U.S. rate hikes and tax cuts that some expect to boost the U.S. economy.

Data on Friday showed that
U.S. consumer spending barely rose in August.
Inflation also remained sluggish with the core personal consumption expenditures price index rising 1.3% year-on-year, slowing from 1.4% in July.
The core personal consumption expenditures price index is the Fed’s preferred inflation measure and has a 2% target.

The data did little to temper rate hike bets after Yellen indicated earlier in the week that the central bank was sticking to plans for a third rate hike this year and three in 2018.

The metal recorded its biggest monthly decline so far this year in September, despite netting a quarterly rise of nearly 3 percent partly due to geopolitical tensions including North Korea’s missile tests.

The U.S. currency recorded its best week of the year on Friday, despite benign inflation data for August, as expectations that the Fed would raise interest rates again in December loomed large after Fed Chair Janet Yellen said the central bank planned to stay on its current rate hike path.
Higher interest rates tend to boost the dollar and push bond yields up, weighing on greenback-denominated gold

The dollar’s rise paused on September 28 and 29, but was seen gaining momentum on Monday morning.

Gold slipped to its lowest in nearly seven weeks early on Monday, 2nd October as the U.S. dollar rose and equities gained, while growing expectations for a Federal Reserve interest rate hike in December also added to pressure.

Spot gold was down 0.3 percent at $1,274.90 an ounce by 0353 GMT, after earlier touching its lowest since mid-August at $1,273.55.

Gold prices fell in Asia on Monday as the dollar gained and the euro dropped as investors mulled the implications of the disputed referendum on Catalonia independence in Spain on the euro zone and a sentiment survey out of Japan in a thin trading day with China's markets shut for the week and holidays regionally expected to see thin flows.

Elsewhere,The Bank of Japan released its Tankan survey for the third quarter with investors focused on the large manufacturer’s index as it rose to 22, compared with an expected reading of 18.

This week, comments by Fed Chair Janet Yellen will be closely watched for further hints on the timing of the next rate hike along with Friday’s U.S. jobs report. Market watchers will be looking ahead to remarks by European Central Bank President Mario Draghi on Wednesday.

Gold, silver and platinum prices continue to correct and the stronger dollar and lull in tensions over North Korea, seem to be weighing on prices. We would let the corrections run their course, but the North Korean situation is likely to escalate again at some stage, so the next rally in gold prices may not be that far away.

Saturday, 9 September 2017

Gold steady ahead of Sept. FOMC Meet

After rising for 3 days, gold prices weakened globally and on the domestic front too on weak global cues and easing demand by local jewellers.

Trump reached a surprise deal with Democrats on Wednesday to raise the short-term US debt ceiling, reducing concerns over a potential government shutdown and denting safe-haven demand.


President Donald Trump on Wednesday warned that the US would no longer tolerate North Korea's actions but said the use of military force against Pyongyang will not be his "first choice".

Gold stabilised early on Thursday, sustained by a weaker dollar and enduring concerns over North Korea, as markets awaited the outcome of a European Central Bank (ECB) policy meeting.

Spot gold was little changed at $1,334.06 per ounce during Thursdays trading hours, after easing 0.3 per cent in the previous session.

The dollar edged down against the yen on Wednesday, pushed back toward a recent 4-1/2-month low by the simmering tensions over North Korea and by comments from a Federal Reserve official about subdued US inflation.

Following suit, the dollar remained submissive on Thursday and the euro stood firm ahead of the ECB meeting where President Mario Draghi is expected to start laying the groundwork to withdraw monetary stimulus.

Currently, the escalating geopolitical tensions are bringing a rally in gold prices and the chances of the unrest rising further are high. If North Korea does another missile test, it will trigger risk-off trade thus proving to be of further help to gold.

The market is likely to continue focusing on geopolitical tensions, but it will start to shift focus to the Federal Reserve meeting in September, looking for details on reducing the balance sheet.

The two-day Federal Open Market Committee meeting (FOMC) is due to begin on Sept. 19 and the US central bank is widely expected to leave rates unchanged.

This could create some plunging pressure on gold starting next week and a rebound in the dollar for a short term.

Monday, 19 September 2016

BULLISH SENTIMENTS FOR GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL







Recently gold has been struggling to climb up due to the recurrent changes in the expectations of an interest rate hike. There is quite a possibility that market players are paying too much heed to the whole interest rate scenario and in turn missing on the bigger picture.
Nonetheless, Gold continues to work lower alongside the rest of precious metals – a resilient dollar and rising US real rates have prompted traders to unwind their long positioning. Investors have become increasingly edgy ahead of the conclusion of the Fed and the BoJ meetings

The spot gold price inched lower during Asian trading hours on Friday amid Mid-Autumn festival holidays in the region.
Spot gold was last at $1,314.66-1,315.00 per ounce, down $1.17 from Thursday’s close.
The spot gold price had tumbled to a week’s low of $1,307.75 on Thursday on selling pressures following a brief spike to $1,328.10 sparked by weak US retail sales data.
In data released Thursday-

  • US retail sales in August undershot at -0.3 percent
  • Core retail sales in August undershot at -0.1 percent.
  • Industrial production month-over-month in August also disappointed at -0.4 percent
  • The US PPI in August was unchanged; a 0.1-percent gain from the previous month has been expected.
  • The core PPI – excluding food and energy costs – was in line at 0.1 percent.
  • The Empire State manufacturing stood at -2.0 missed the expected -0.9
  • The Philly Fed manufacturing index at 12.8 beat the predicted 1.1.
  • Capacity utilization rate in August stood at 75.5 percent, a touch below the 75.8 percent
  • Weekly unemployment claims for September 1-8 in at 260,000 were just below the forecast 262,000 and, more importantly, the psychological 300,000 mark.
  • Lastly, the current account balance in June was in line with consensus at -$120 billion. Business inventories month-over-month was unchanged in July, missing the 0.1 percent forecast.




There was disappointment in the markets when the data was released that showed signs of a softening US economy,.aThe US economy has recently shown signs of softening – data including retail sales, its PPI and industrial production have undershot.
While disappointing numbers have lowered the likelihood of an imminent Fed rate increase - for September was just 12 percent, November was 19.3 percent and December was 46.2 percent. Earlier this week, majority had expected a rate hike in December.

With such soft data coming in from the US, expectations have largely diminished towards the Fed doing anything in September and the market is drifting back towards the view they might do nothing for quite a while.

Some even feel that markets are overeating to a potential rate hike and giving too much attention to it, thus ignoring other crucial factors that have the potential to influence gold prices.
The market is once again divided between the supported of bulls and bears for gold. The ones that are bullish are not worried about gold’s recent downtrend. What is the most important factor for investors is that the gains seen so far are sustainable and that gold has more or less stabilised before it takes that long jump to rally.
They believe Fresh disappointing US data has reinforced our view that the Fed should remain on hold in September, resulting in renewed weakness in the dollar and US real rates and prompting fresh buying in gold.
Moreover, demand for gold from China and India is expected to rise over the months to come which will further boost gold prices higher. The market is  moving towards to a festive season and this period of the year has generally seen demand for gold rising and this rise in demand will make up for the weakness gold has faced over 2016.

Given that gold is heavily influenced by fluctuations in the dollar and US real rates, we are not surprised by the metal continuing to weaken. But the bullish supporters for gold also believe that this weakness is temporary and is currently driven by a stronger dollar and higher US real rates
Our big-picture outlook remains bullish but more profit-taking could easily be triggered if the price action disappoints, as it may be starting to do.




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 STABILISES: RSBL"
 http://riddisiddhibullionsltd.blogspot.in/2016/09/gold-stabilises.html

Thursday, 15 September 2016

GOLD STABILISES: RSBL

By Mr. Prithviraj Kothari, MD, RSBL










Though gold slipped consecutively for 3 days, past week ended on a positive note and stayed on track for a second successive weekly gain driven by diminishing expectations of a looming hike in U.S. interest rates.
The metal was up 0.7 percent during the week, holding on to nearly half the sharp gains it made on last Tuesday after a weak U.S. data instigated talks that the Federal Reserve will hold off raising rates at its September policy meeting.
Spot gold was down 0.25 percent at $1,334.60 an ounce at 1152 GMT on 9th September, while it peaked $1,352.65 an ounce after rallying 1.8 percent on Tuesday.

Reasons being the same- Fed Hike, US data, US dollar and ECB. These factors have been repeatedly influencing gold prices since quite some time. Yes I know that we have discussed these points time and again, and we all know that they  keep influencing gold prices but thee way and the extent to which they influence does change every week and hence we once again throw light on this week’s gold’s behaviour-

ECB- On Thursday, the European Central Bank (ECB) decided to maintain its current bond-buying programme and kept interest rates unchanged, surprising investors who had expected another round of quantitative easing in the wake of the UK’s vote to leave the single market.

The ECB’s unexpected stance led to a broad-based selloff in the commodities sector, while also fuelling a dollar rally – last trading at 95.45 on the dollar index, the highest point in a week.
Analysts and traders believe that The ECB’s decision would also increase the likelihood of the US Federal Reserve implementing a rate hike before the year end.

Global Data- Meanwhile in a slow data day, US wholesale inventories for July were unchanged, missing expectations of a 0.1 percent rise.
Overnight, China’s August CPI came in at 1.3 percent, below July’s reading of 1.8 percent and market forecast of 1.7 percent.
The Chinese August PPI fell 0.8 percent, improving from a drop of 1.7 percent in July and better than consensus of a one-percent drop. August, however, marked the 54th straight month of decline.
Weak global data pushed gold prices high over the week.


US Dollar- Prices have largely moved in concert with the dollar – against a basket of currencies it recently hit a multi-week low and was last trading at 94.56.  But investment demand in gold and its potential upside remain capped
The combative rhetoric – along with employment claims coming in better-than-expected at 259,000 – led to a minor dollar revival earlier during US trading hours.

Gold has rebounded strongly but have seem too stabilised between $1,355 and $1,375.25 and analysts believe to remain more or less in this trading range. But with the dollar looking weaker, we would not be surprised if gold prices work higher. The rest of the precious metals would follow suit.
Fed Hike- Richmond Fed President Jeffery Lacker said on Wednesday the case for a September hike was going to be “strong” and echoed his colleague Esther George who said that she too saw the US labour market approaching full employment.
Market participants currently see a 21 percent change of a US rate hike in September, with majority expecting it to happen in December, according to the CME FedWatch Tool.
Gold prices will trend higher still in near term, largely driven by lower Fed tightening expectations.  Gold prices are expected to boost further, given that the Fed is unlikely to move in September and the current probability of a September move is likely to ease further.


The Federal Reserve will meet on September 20-21 and again on November 1-2 before the country goes to the polls on November 8. Given the looming presidential election and the forecast-missing jobs report for August, the US central bank is widely expected to hold off on raising rates until next year at the earliest despite increasing hawkish rhetoric from FOMC members.


Federal Reserve Bank of Boston President Eric Rosengren, who shifted his stand in recent months in favour of monetary tightening, warned Friday that waiting too long to raise interest rates risks overheating the economy. Higher rates make bullion less competitive against interest-bearing assets. The comments come a day after the European Central Bank played down the prospect of an increase in asset purchases.

In the two-week run-up to the Fed’s next policy meeting, additional US economic data releases will further inform the market’s view of rate hike probabilities. At the current time, the greater likelihood is that there will be no September rate hike. If this continues to be the case, gold could potentially break out above the noted downtrend line and $1350 resistance level. In this event, the next major upside targets are at the mentioned $1375 high, followed by the key $1425 resistance objective.




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:
"BULLION MARKET HIGHLIGHTS- DECEMBER 2015- AUGUST 2016: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/09/bullion-market-highlights-december-2015.html


Thursday, 1 September 2016

BULLION MARKET HIGHLIGHTS- DECEMBER 2015- AUGUST 2016: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL


AS 2015 came to a close, most traders expected that 2016 would be a year subjugated by a series of Fed rate hikes.
 
That belief strengthened in late-December 2015 after the Fed delivered on its promise – and raised interest rates for the first time in almost a decade.
 
In a widely telegraphed publication called the "Dots Plot", the Fed signalled that it would continue to normalize its monetary policy, and raise interest rates by a total of +1% through 2016 to a target of 1.375%, a "gradual" pace and in line with earlier forecasts.

Though gold was expected to be bearish on 2016, it showed upward prices movements and The World Gold Council attributed this rally to three principal factors:
  • the widening landscape of negative interest rates in Japan and Europe;
  • the devaluation of China's Yuan; and
  • The realization that the Fed was bluffing on hiking the Fed funds rate, and wouldn't dare take any action that could knock the stock market lower ahead of the upcoming November elections in the US for Congress and the Presidency. 


While we are a few months away from the year end I would like to throw light on a few key highlights that influenced the bullion markets worldwide.

Fed Hike- on 4 January 2016, San Francisco Fed chief John Williams said he saw a steady campaign of interest rate rises. "There are still pretty significant headwinds" facing the US economy from weak overseas economies, the strong Dollar and housing related issues, Mr.Williams told reporters.
 
 
On 6 January, Fed deputy Stanley Fischer warned the markets could expect three to four increases in the Fed funds rate this year. Speaking on CNBC television Fischer warned:
"If asset prices across the economy – that is, taking all financial markets into account – are thought to be extremely high, raising the interest rate may be the suitable step."
Based on expectations of 4-Fed rate hikes to 1.375% by year's end, gold initially declined in the month of December to a six year low at $1054 per ounce. Most analysts expected the downfall to continue through 2016, but they were proved wrong.
 The price of gold suddenly surged 16% higher in the first quarter alone. Giving gold one of its strongest quarterly performance in nearly three decades.

SPDR- The world's largest gold-backed exchange-traded fund, SPDR Gold Shares (NYSEArca:GLD), surged in its holdings to the most in six years, jumping to 983 tonnes, and global gold holdings in ETFs topped 2,000 metric tonnes for the first time since June 2013 following the Brexit fallout, when gold buying sparked even more gold buying.
 
BOE-  On June 30th, Bank of England chief Mark Carney said the economic risks from Brexit had started to crystallize, and he hinted at a resumption of QE, lifting gold to its biggest one-day surge in years after Britons shocked markets by voting to leave the European Union, driving investors toward safe-haven assets such as bullion.  Gold soared as much as 8 percent to its highest in more than two years in the week ending 28th June, 2016 after the UK referendum results, sending investors rushing for protection. Gold prices surged to its highest level in more than two years, at $1,359 since March 17, 2014, sending shock waves across markets.

BOS- by June 2016, all of Switzerland's government debt, including its 30-year bonds, started trading at negative yields.
 
In all, a record US$11.7 trillion of global sovereign debt has dipped to sub-zero yield territory. This has only strengthened the rally in gold, and about $13-14 billion of money has made its way into gold exchange-traded funds (ETFs) as asset managers moved from fixed income into gold earlier this year.
 
Gold climbed to a two-year high at $1371 per ounce in July, convincing UBS Group to predict that gold is probably at the beginning of its next bull run

BOJ- gold's spectacular rally found a stiff roadblock at the $1370 per ounce area when Japanese government bonds suddenly began to fall sharply into their worst sell-off in 13 years. On August 2nd the Bank of Japan shocked the markets and rattled gold traders by keeping its bond purchases steady, defying expectations it would buy even more.
 
 
Gold traders became even more nervous after the BoJ said it would re-evaluate its Negative Interest Rate and QQE policies in September. Some investors see the policy review as a tacit admission by the central bank that after more than three years of massive money printing, the BoJ could be ready to start tapering the pace of the QQE liquidity injections.
 
   
Since the $10.4 trillion bond market in Tokyo is at the core of the negative interest rate world, if the BoJ begins to allow Japanese bond yields to climb by tapering its QE scheme, it could continue to rattle the price of gold – at least on a short-term basis.

BoJ policy makers ordered staff to make a "comprehensive assessment" on the impact of its easing program and negative interest-rate policy ahead of the next policy-setting meeting on 20-21 September. Some traders suspect the review is aimed specifically at assessing the effectiveness of negative rates, potentially giving policy makers scope to declare the exercise unsuccessful.

So for the month to come, BoJ will surely have something crucial for gold in store.


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:

"Higher Gold Prices For The Domestic Market: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/08/higher-gold-prices-for-domestic-market.html