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Showing posts with label FOMC. Show all posts
Showing posts with label FOMC. Show all posts

Thursday, 22 February 2018

Gold being bought on dips

Last week saw gold record its sharpest weekly gain in more than a year, as it fed off the dollar’s slump. As the week began, gold fell modestly on Monday in electronic trade, though in thinner action, as many traders took the day off for the Presidents Day holiday.

Gold prices were hit on Tuesday, with the commodity booking its sharpest daily decline in more than a year, against a backdrop of a strengthening dollar and stabilizing equities.


Gold seemed struggling to gain any grip and remained within striking distance of one-week lows. A strong follow-through US Dollar buying interest, further supported by a positive tone surrounding the US Treasury bond yields, continued to dampen demand for dollar-denominated commodities - like gold.

The precious metal dropped to an intraday low level of $1325 but further losses remained limited in wake of reviving safe-haven demand on the back of a sharp turnaround in European equity markets.

Precious metals lost ground as the dollar sprung higher following last week’s sharp decline, which has mostly extended a protracted downtrend for the commodity-pegged currency. A weaker dollar can boost commodities priced in dollars, because it makes them cheaper to buy for holders of other currencies.

Another turn-around in the dollar has weighed on gold, especially as it happened when gold prices were once again challenging recent highs.

The rebound, however, lacked any strong certainty amid expectations for a faster Fed monetary policy tightening cycle. Hence, the key focus would remain on the highly anticipated FOMC meeting minutes, which would help determine the next leg of a directional move for the non-yielding yellow metal.

Even though gold lost its lustre, market players saw this dip as a good buying opportunity. Exchange-traded funds increased holdings of gold and silver this week, reports Commerzbank.  Investors appear to be viewing the price slide as a buying prospect, as gold ETFs saw inflows of 2.7 tonnes

Thursday, 4 January 2018

Many competitors for gold in 2018

Gold began 2018 on a firm note on Tuesday after prices hit their highest in more than three months, supported by technical factors after breaking above $1,300 an ounce last week.

Spot gold rose 13 percent last year to mark its best annual performance since 2010. A wilting U.S. dollar, political tensions and receding concern over the impact of U.S. interest rate hikes fed the rally.
The greenback, in which gold is priced, had its worst performance since 2003 last year, damaged by tensions over North Korea, questions over Russian involvement in U.S. President Donald Trump’s election campaign, and persistently low U.S. inflation.


 The dollar’s drop to three-month lows versus a basket of currencies on Friday lifted gold to its highest since mid October. In the last couple of weeks, trade has been relatively thin, yields have been under pressure and the dollar as well, so gold has profited from that.

Preceding real yields, dollar is the most important driver for gold. And it was the dollar’s weakness, which even a Fed rate hike was unable to pull down gold prices. Even though the rates are hiking, the dollar I not benefiting from it.

On the other hand, Gold has clearly benefited from lower U.S. yields and a much weaker U.S. dollar into the year-end. Gold has risen more than $70 from nearly five-month lows hit in mid-December.
More than half of the $70 rally came in the last week, during the holiday period.

However, on Wednesday there was a slight halt to this rally as we saw the dollar strengthening over the release minutes of the FOMC meeting (that was geld on Dec 12-13)

The Fed’s minutes acknowledged the U.S. labor market’s solid gains and the expansion in economic activity, even as they affirmed policymakers’ worries about persistently low inflation. That suggested the central bank will continue to pursue a gradual approach in raising rates but could pick up the pace if inflation accelerates.

Fed officials also discussed the possibility that the Trump administration’s tax cuts or easy financial conditions could cause inflation pressures to rise, leading to some dollar-buying, analysts said
The dollar rallied on Wednesday on upbeat U.S. manufacturing and construction data and after minutes from the Federal Reserve’s last policy meeting showed the central bank remained on track to raise interest rates several times this year.

Snapping a three-week losing streak, the dollar hit session highs against the euro and yen after the minutes from the Fed’s Dec. 12-13 meeting. The dollar index posted its largest daily gain in more than two weeks.

Gold eased from an earlier 3-1/2 month high on Wednesday and was on track for its first day of losses in nearly three weeks as a firmer dollar pressured assets priced in the U.S. currency.

Currently, gold seems to rise steadily in 2018. There are many important competitors for gold that will surely play a significant role in its price movements-
Equities- The biggest competition for gold in the New Year will be equities, but if gold prices continue to hover over $1,300 then investors would surely be interested in diversifying their portfolio towards the yellow metal.
Bond yields- Another important factor for gold next year will be bond yields, but noting that he sees limited impact in the long-term.
Inflation- With inflation expected to rise, that investors need to be more clear as to real interest rates will push higher or remain at current low levels.

Looking ahead, it is difficult to determine if gold will hold these holiday gains when traders come back in full force in the New Year.

Monday, 18 December 2017

Fed Hike fails to cap gold


Spot gold headed for the biggest gain in three weeks after Federal Reserve officials stuck with a projection for three interest-rate increases in the coming year, easing concerns that speeding up economic growth would spur an even faster pace of monetary tightening.

Gold prices rose on Wednesday, extending gains to 1 per cent as the dollar fell after the US Federal Reserve raised interest rates as expected but left its outlook unchanged for coming years.
The spot gold price rallied to US$1,256.87 after the Fed raised its benchmark interest rates by 25 basis points, or a quarter of a percentage point.

Gold prices on Friday held onto gains made after this week’s interest rate rise by the U.S. Federal Reserve and were set for their first weekly rise in four weeks.


The U.S. Federal Reserve decided to increase the U.S. interest rate by 25 basis point on its latest Federal Open Market Committee (FOMC) meeting held on 12th and 13th December.

By a 7-2 vote, the Fed on Wednesday raised the benchmark lending rate by a quarter percentage point, its third hike this year. In a statement following a two-day meeting, the Federal Open Market Committee omitted prior language saying it expected the labor market would strengthen further.

This move was highly anticipated by the market and hence was being priced against gold well ahead of the meeting. However, despite the action being against the attractiveness of gold as an investment, gold prices  closed on a higher note on December 13th.

Generally, a rate hike pulls down gold prices. But contradictory situation was witnessed on Wednesday, where gold prices remained high even after a rate hike.

 “Gold moved up in its initial reaction because Fed is dovish in terms of a rate hike vision for 2018, and it sees only three rate hikes, not four.

This vision weakened the US dollar which gave the required push to gold prices.

The U.S Dollar Index (DXY) measures the value of the dollar against a basket of six major foreign currencies. The index fell roughly by .6% during the Fed's announcement on the 13th, which was otherwise gaining momentum ahead of the meeting. Although, an interest rate hike should have ideally strengthened the position of the dollar, the Fed's decision negatively impacted the currency as the meeting kept its projection for interest rate hikes for 2018 unchanged.

 This was despite the fact that the Fed sees a consistent recovery in the U.S. economy in the upcoming year. The Fed expects 3 additional rate increases in 2018 and another 2 in 2019, in line with its September projections. However, GDP growth expectation was increased by .4% higher than its previous estimate of 2.1%, mainly due to the impact of the implementation of the U.S. tax reform
GOLD BARS rose above 1-week highs against most major currencies in London trade Friday, extending their recovery from this week's multi-month lows as world stock markets slipped for a second day from new all-time highs.

The dollar was on the defensive on Friday after wrangling over a bill to change the US tax code dented confidence, while the euro sagged after the European Central Bank signaled it would maintain stimulus for as long as needed

As the Fed and ECB reverse sharply from their unprecedented easing of recent years to unprecedented tightening in the coming years, these record-high, euphoric, bubble-valued stock markets are in serious trouble.  As they roll over and sell off, investors will rush to prudently diversify their stock-heavy portfolios with counter-moving gold.  There’s nothing more bullish for gold investment demand than weakening stocks.

So contrary to recent weeks’ and months’ erroneous view that Fed rate hikes are bearish for gold, history proves just the opposite is true.  Gold has thrived in the 11 modern Fed-rate-hike cycles before todays, and it has powered higher on balance in this 12th one.  While you wouldn’t know it after this past year’s extreme Trumphoria rally, Fed rate hikes are actually bearish for stocks and thus quite bullish for gold.


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.

Monday, 9 October 2017

Gold Prices May Surge

Gold was once again seeing pulled and pushed by various factors doing rounds in the market. Where one side gold was seen consolidating by a strong dollar price on Wednesday, on the other hand on Friday it once again picked momentum over the North Korean crisis.

Gold prices fell for the fourth consecutive week with the precious metal down nearly 0.5% to trade at 1271 ahead of the New York close on Friday. The losses come amid what seems to be an unstoppable rally in broader risk assets with the major U.S. equity indices up more than 1% on the week.



A surprise U.S. Non-Farm Payroll report on Friday showed the economy shedding some 33K jobs last month, missing expectations for a gain of 80K. However, a closer look at the data revealed underlying strength in the labor markets with labor force participation rising to its highest level since March of 2014 at 63.1%. Wage growth figures were also stronger-than-expected with average hourly earnings posting a 2.9%  gain – up from a previous upwardly revised 2.7% . With the recent barrage of hurricanes largely accounting for the weak headline figure, the broader labor market outlook remains firm and keeps the FOMC on target for a December rate hike.

The dollar earlier rose to a more than two-month high against the yen and seven-week high against the euro as wage data from the September labour market report was seen as a sign of potentially improving inflation.

The greenback jumped as high as 113.43 yen, the highest level since July 14, before dropping to 112.71. The euro fell to $1.1670, the lowest level since Aug. 17, before rising back to $1.1726.
The U.S. dollar tumbled on Friday on a report that North Korea is preparing to test a long-range missile, overturning earlier gains after the government’s jobs report for September showed an unexpected rise in wages.

RIA news agency cited a Russian lawmaker’s making comments on the missile test, which North Korea believes can reach the U.S. West Coast.

Amidst these tumbling and rising influencers, gold prices are expectedto surge not only in the international but also domestic market given the upcoming and biggest festival for gold in India.
A few reasons why weexpected gold prices to shoot are:

10 reasons why gold will surge:

  1. Gold will follow inflation which will increase strongly eventually leading to hyperinflation.
  2. Real interest rates will be negative which favours gold. This was the case in the 1970s when gold rose from $35 to $850 despite rates in the mid-teens.
  3. China’s accumulation of gold on a massive scale and potentially introducing a gold for oil payment system
  4. Inflation will increase institutional gold buying substantially. Gold is today 0.4% of global financial assets. An increase to 1% or 1 1/2% would make the gold price go up manifold.
  5. With relatively low global demand today, annual goldmine production of 3,000 tonnes is easily absorbed. With falling production, the coming upturn in demand can only be met by much higher prices.
  6. Demand for gold will rise in the domestic market during Dhanteras and Diwali. After Akshaya Tritiya, gold sales are seen to be highest on Dhanteras and this rising demand might push gold prices further. 




Thursday, 21 September 2017

FOMC Meet breaks down gold

It is rather remarkable to think that less than a month ago, gold shot up on the back of a missile firing in North Korea and the assorted baggage that came with that. The market was scared and gold was the major beneficiary. Now here we are, with the price of gold almost fifty dollars lower, but nothing has really changed. Trump is threatening total annihilation of North Korea, to which I am sure Kim Jong Un will have something to say or do. And now in addition to that, the US President is picking another fight, this time with Iran, with inflammatory comments at the UN yesterday. It does indeed seem that the markets have very, very short memories. But among all this, this week’s focus shifted to the much awaited FOMC meet, its concluding statement and what the Fed would say about balance sheet reduction.





On Nov 25, 2008 The Fed announced it would begin buying assets for its own account to save the world. In Oct 2014, The Fed ended its QE3 buying program but continued to reinvest the proceeds to maintain its $4.4 trillion balance sheet. Today, Janet Yellen announced the balance sheet will be allowed to normalize, with reinvestment slowed/stopped starting in October.

Let take a quick look at the key highlights over the Feds statements of the meet:

  • Hurricanes are unlikely to change economy’s course medium term
  • Economic activity has risen moderately and job market has strengthened
  • Rates kept unchanged as Fed plans balance sheet runoff in October
  • Fed signals another hike in 2017 and 3 more in 2018


As expected, the Fed announced it will begin reducing bond reinvestment's, starting by $10 billion per month and growing to $50 billion.

Gold prices settled higher Wednesday but slipped in electronic trading after the U.S. Federal Reserve's decision to keep interest rates unchanged

The price of spot gold has cracked back below the $1300 on the run up in the dollar after the FOMC decision. The precious metal is trading at the lowest level since August 28th.

In electronic trading after the Fed statement, prices traded lower at $1,310.70. The central bank said it will taper its $4.5 trillion balance sheet by $10 billion per month, the first reduction in nine years. Meanwhile, the Fed's interest rate projections, known as the dot plot, suggested a rate hike in December and three more in 2018.

A spill over effect of this meeting was clearly seen on gold as it broke the important trading level of $1300.

Tuesday, 19 September 2017

Wait, Watch and Then Work

In 2016, gold was seen climbing 6% from $1050 to $1150 and another 10% gain during the first half of this year, in July and again in early August, gold prices dropped down to $1210, before rallying back up both times to $1290 and $1350 per ounce respectively. This back and forth price action has some investors worried if this is a real bull market in gold or yet another flash in the pan for the coveted yellow metal?

Reasons being more than one, Investors arereturning to gold again to prudently diversify their stock-heavy portfolios.  That’s very bullish for gold, as investment capital inflows can persist for months or even years.  This shift is most evident in the yellow metal.



There are a couple of issues pushing and pulling at the market. The reaction to the missile launch last week has been a bit negated by that better-than-expected (US) inflation number.

Spot gold slipped on Friday, shrugging off North Korea's latest missile launch over Japan, with strong US inflation data raising the spectre of another interest rate hike.

Let’s have a look as to how each factor was responsiblefor this wave like movement in gold prices.

North Korea - North Korea fired a missile on Friday that flew over Japan's northern island of Hokkaido far out into the Pacific Ocean, South Korean and Japanese officials said, further ratcheting up tensions after Pyongyang's recent test of a powerful nuclear bomb.

US Data - Geopolitical risks can boost demand for safe-haven assets such as gold and the Japanese yen. The yen slipped against the dollar on Friday, after earlier having risen on the news, with the greenback supported by strong US consumer inflation data.

Gold pared losses after data on Friday showed U.S. retail sales unexpectedly fell in August and industrial output dropped for the first time since January due to the impact of Hurricane Harvey.
Friday's numbers were in contrast to strong U.S. inflation data on Thursday which increased prospects of an interest rate hike in December.The Fed's next monetary policy meeting begins on Sept. 19 and now the marketis increasingly focusing on the Federal Reserve and its probability of another rate hike this year.

The Fed has a 2 per cent inflation target, and a series of subdued inflation readings have dampened expectations for further rate rises in the near term. Firming inflation could support the case for another rate hike. Interest rates tend to boost the dollar and push bond yields up, putting pressure on gold.

ECB - Gold fell on Friday after a European Central Bank official called for scaling back the bank's stimulus programme; although losses were capped when weaker than expected U.S. economic data raised questions about further rate hikes.

ECB board member Sabine Lautenschlaeger made the most explicit call so far from an ECB policymaker for paring the bank's 2.3 trillion euros money-printing programme.

Data showing that euro zone wages grew at their fastest rate in two years in the second quarter bolstered the case for reining in ECB stimulus.

This was rather a bad news for gold because this continues the trend of the market pricing in the normalization of monetary policy.

But he said there had already been plenty of headlines about the ECB planning an exit from its bond buying and the U.S. Federal Reserve reducing its balance sheet after its big quantitative easing programme.

Those "normalisation" actions by central banks tend to drive rates higher, push bond yields up and put pressure on gold, a non-yielding asset.

Summing it up, though the previous week saw gold moving like a see saw; the focus now shifts to the important FOMC meet due on 19th September. Wait, Watch and then Work would be the only trading tip for the time being.

Tuesday, 12 September 2017

Strong Rally in Gold Prices RSBL

We have seen gold nearing a 1 year high over the past few months. But what has supported this rally for the yellow metal? 

Lately, uncertainty in many forms has played a key role. This past week's nuclear test in North Korea shook investors, sending them fleeing to safe-haven investments such as gold. In addition, uncertainties over Congress's ability to pass corporate tax reforms, which are being counted on to boost U.S. GDP growth, have some pundits favouring gold relative to stock-based equities.
Last Friday, the spot gold price was trading at $1,352.50/1,352.90 per oz, up $5.2 from the previous trading day’s close. 

Gold prices were well-bid on Friday September 8 as weaker-than-expected US economic data and the ECB’s decision to leave interest rates unchanged, as well as continued geopolitical risks, maintained pressure on the dollar.




Let’s take c closer look at all the influences- 

US Dollar-Uncertainty and lower-than-expected inflation rates have been doing a number on the U.S. dollar. In recent weeks, the dollar hit multiyear lows against the euro and at least one-year lows against a handful of other major currencies. 

In recent months the dollar has suffered from multiple issues forcing it lower against other major currencies, including political failures, multiple climate-related disasters, geopolitical tensions and weak inflation in the US.

The latter, in particular, has made it more difficult for the Federal Reserve’s Federal Open Market Committee (FOMC) to justify hiking interest rates

The dollar index on Friday morning was down 0.08 to 91.45. Overnight US jobless claims surged to a two-year high because of Hurricane Harvey, which raised doubts over further US interest rate hikes in December.

The dollar and gold usually move in opposite directions, meaning the dollar's weakness has been a green light for gold investors.

ECB Meet- ECB policymakers indicated at their meeting overnight that the European central bank was not intending to weaken the common European currency, which is expected to support euro performance in the short-term. The ECB maintained rates and upgraded its growth forecast this year by 0.3ppt to 2.2%, but maintained its 2018-19 forecasts.

Hurricane- Meanwhile gold prices jumped today morning as an earthquake off the coast of Mexico added to the hurricane damage in the Caribbean and US east coast in driving demand for the traditional safe haven.

U.S Data- The tally was the highest level for initial claims since April 18, 2015, when it was also 298,000, the government said. 

Consensus expectations compiled by various news organizations called for initial claims to be around 241,000 to 242,000. The government left the prior week’s tally at the previously reported 236,000.
Gold prices rose after a Labor Department report Thursday showing that initial weekly U.S. jobless claims surged by 62,000 to a seasonally adjusted 298,000, with the government citing the impact of Hurricane Harvey.

Geopolitical tensions- Geopolitical risks also remain at front of mind, with the USA pushing hard for additional sanctions against North Korea. This kept safe-haven buying relatively strong 

Persistent North Korean tensions and general US dollar weakness propelled gold $15 higher to new 2017 highs overnight, touching $1,249.98 and closing just below at $1,249.50. 

Geopolitical events have boosted precious metals prices. Gold prices continue to push higher, underpinned by geopolitical concerns over North Korea. For any further escalation in the on-going tensions, gold is likely to remain in demand. 

FOMC Meet and Interest Rate Hike-A combination of stubbornly low core inflation and rising doubts about the Trump administration’s ability to pass new legislation has been underpinning the situation. 

Specifically, the failure of high asset prices and strong labour market growth to pass through into underlying inflation is bringing into question how much further the FOMC will be able to lift rates in the near term. While the healthcare bill fiasco and lack of detail around both tax reform and infrastructure spending have underlined the difficulty of turning rhetoric into reality when it comes to shifting growth onto a higher structural path. In consequence, markets have been remarkably sanguine about the FOMC’s anticipated announcement of balance sheet reduction at their September 20th meeting and are now only pricing 25% chance of another hike by year-end.

Prices are closing in on last year’s highs so some nervous profit-taking may emerge, leading to choppy trading, but the combination of North Korea, a weak dollar and low treasury yields are all supportive. Silver and platinum may well follow gold, but palladium prices that are already elevated, may struggle more.

Although this combination of factors clearly presents a constructive cyclical backdrop for gold prices, the extent of the recent rally has surpassed what can be explained by just US rates and the weak dollar. 

Wednesday, 6 September 2017

Bullish sentiments for gold

Gold for the week ended with a good sign, as it posted gains in the Friday session, continuing the upward movement we saw on Thursday.

In the North American session, gold was seen trading at $1323.74, up 0.18% on the day. This rise was seen post the release of the labor report told prices have enjoyed a strong week, gaining 1.9%.
The metal showed some strong gains earlier on Friday, as the metal touched a daily high of $1329.05, its highest level since November 2016. These gains were triggered by the disappointing non farm payrolls and wage growth reports for August, both of which missed their estimates.

On the release front, US job numbers were unexpectedly soft. Non farm payrolls slowed to 156 thousand, well below the estimate of 180 thousand. Wage growth also disappointed, as Average Hourly Earnings posted a small gain of 0.1%, shy of the estimate of 0.2%.


Although the US labor market remains tight, investors are fretting about the lack of wage growth, which has contributed to the low inflation which continues to hamper the US economy.

The Federal Reserve will also be perturbed by small wage growth, as a December rate hike is very much in doubt due to inflation levels which obstinately remain well below the Fed's inflation target of 2.0%. Currently, the likelihood of a December rate hike stands at just 36%

Gold is traditionally considered a safe-haven asset, and often benefits when investors get jittery and lose their risk appetite. Such was the case last week, as renewed tensions between the US and North Korea early in the week propelled the metal above the symbolic $1300 level.

On Tuesday, North Korea fired a missile over Japanese territory, drawing sharp condemnations from Japan and the US, with President Trump declaring that "all options remain on the table"

In times of uncertainty or crisis, investors typically take refuge in “safe” options like the Swiss franc, gold or the US dollar, but under President Donald Trump the greenback has lost its lustre, especially to the euro.

Although, tensions have since eased somewhat, if North Korea decides to fire another missile towards Japan or the US military base on Guam, gold prices will likely move higher. As well, as the markets digest the disappointing job numbers, we could see risk appetite continue to wane early next week, which could extend the current gold rally.

The reaction to the lackluster U.S. Non-Farm Payrolls (NFP) report suggests gold will continue to exhibit a bullish behavior ahead of the Federal Open Market Committee (FOMC) interest rate decision on September 20 as mixed data prints coming out of the economy sap bets for another rate-hike in 2017. Even though ‘the Committee expects to begin implementing its balance sheet normalization program relatively soon,’ the fresh forecasts from Chair Janet Yellen and Co. may ultimately heighten the appeal of gold if central bank officials attempt to buy more time and project a more shallow path for the Fed Funds rate.

In turn, U.S. Treasury Yields may stay depressed throughout the remainder of the year, and the precious metal may continue to retrace the decline from 2016 amid the shift in trader behaviour.
Weak U.S. economic data has effectively removed the Fed’s prospective rate rise scenario from the gold price equation – at least for a couple of months although may have an impact in November as speculation will reign over whether the Fed will implement another small rise in December, or kick the can down the road again.  The U.S. dollar is looking weak and a weak dollar tends to see the dollar gold price rise. And it is the dollar gold price which the market judges to be the most important indicator, even though the gold price in other currencies, like the euro or the yen, should perhaps be more relevant.

The seemingly increasing threat of war between North Korea and the USA, will likely give the gold price a huge boost in the days and months ahead with safe haven demand escalating worldwide – and particularly in Asia and the U.S. itself.

Monday, 28 August 2017

Markets seem difficult to trade

After weeks of relative stagnation, gold traders were suddenly awoken to a rise in trade volume and price volatility. In a span of one minute, gold futures contracts equaling more than 2 million ounces traded -- about 20 minutes before Federal Reserve Chair Janet Yellen was to address a gathering of policy makers in Jackson Hole, Wyoming.

The occurrence shook the market after a measure of 60-day volatility on the metal touched the lowest since 2005.

 Gold had been lying stable amid political disharmony in Washington, worries about rising U.S. interest rates and escalating geopolitical tensions between the U.S. and North Korea.

Investors were not expecting Yellen to make a policy statement anyway, but some market participants were hoping for some signal on the Fed's planned balance sheet reduction, if not on the outlook for U.S. interest rate hikes.


Yellen’s speech, which lacked clear rate cues, did little to calm the price swings and damped expectations of a rate hike this year.

Federal Reserve Bank of Dallas President Robert Kaplan helped fuel the sharp move before Yellen’s speech Friday by saying the central bank can afford to be patient on raising interest rates even while noting it should shrink the balance sheet soon.

These comments were dovish and pushed gold prices higher. But then when Yellen didn’t mention monetary policy, things started to stabilize again.

The dollar fell to a three-week low against the euro and a one-week trough versus the yen on Friday after Federal Reserve Chair Janet Yellen made no reference to U.S. monetary policy in her speech at the annual central bank research conference in Jackson Hole, Wyoming.

Instead, Yellen focused on U.S. regulations, saying those put in place after the 2007-2009 crises had strengthened the financial system without impeding economic growth, and any future changes should remain modest.

Dollar had weakened because Yellen "didn't say anything positive for the U.S."

The dollar has been trading higher for most of the week after sharp losses in recent months.

The dollar fell to a one-week low of 109.23 yen after Yellen's speech. It was last down 0.2 percent at 109.33.

The euro, meanwhile, hit a three-week high against the dollar and was last up 0.6 percent at $1.1862.
Focus now shifts to the coming week wherein a few interesting events are lined up.
The yellow metal may remain range-bound in the $1,290s ahead of the U.S. Labor Day holiday on September 4th.

Labor Day can mark a variation point in various economic parameters, including the gold price.  There are also U.S. Fed and ECB policy meetings that will be held in the second half of September and the U.S. FOMC one in particular will be viewed with particular interest vis-à-vis gold given observers will be looking for clues on the likely date for the next interest rate rise decision and/or Fed balance sheet reductions.  The U.S. economy is not showing positive developments as well as forecast by the Fed so there are some who believe any rate increase will now likely be put off until next year.

The period that lies between the Labour Day and The FOMC meeting will be crucial for gold as the markets reactions all depend on this interim period.

Market reaction after Labor Day, and before the FOMC meeting will probably see gold react positively or negatively to economic data (fact or supposition)  coming out in the interim, which may hold gold back from bursting through $1,300, which it would likely do if the FOMC looks like delaying any interest rate rise decision beyond the calendar year end.  An indication that the Fed will indeed continue its tightening programme in December may pull down the gold price , but perhaps not affect its on-going progress in the medium term.

Similarly the ECB policy meeting in Frankfurt, which comes just after the FOMC meeting, will also be followed with strong interest, but may not see any further tightening while the Euro remains at current levels against the dollar.

We still see gold rising through $1,300 and perhaps hitting $1,350 by the year-end, but sometimes Q4 can prove to be a weak period for precious metals, so we are not wholly confident on this prediction.  Currently markets seem difficult to trade!

Monday, 21 August 2017

Gold expected to cross $1375 mark

Gold prices have risen to the highest level since November last year as investors shift away from risky assets in the wake of geopolitical uncertainty.

Futures for the yellow metal rose to $1,303.90 per ounce, while spot gold remained just below $1,300 per ounce.

A market that was once worried about the nuclear war has now moved on a host of other factors that are creating concerns for various market players.

Let’s have a look at the various factors that created jitters in the market in the past week.

Barcelona Attacks - Heightened terror fears added to the risk off sentiment after at least 13 people died when a van plowed into pedestrians in Barcelona. The terror attack was a reminder of lingering geopolitical risks, with nerves still raw after last fortnight’s escalation of tensions on the Korean peninsula.

Investors fled into German and U.S. Treasury bonds and bought gold for the third day in a row, as the appeal of such top-notch assets grew further due to this deadly attack.

US Data - The global risk-off mood accelerated overnight on Trump "stability concerns", coupled with fallout from the Spain terrorist attack and lingering North Korea tensions.

Data released showed that Jobless claims for the week ending Aug. 12 came in at 232,000, versus expectations of 240,000. The Philadelphia Fed Index, gauging overall manufacturing conditions, came in at 18.9 for August, compared with consensus estimates of 18.5.

Industrial production grew 0.2% on the month in July, slipping below estimates of 0.3%.Concerns that Trump’s stimulus is in peril spiked following speculation that his top economic advisor, former Goldman COO Gary Cohn, was set to resign roiled markets on Thursday until reports that he’d opted to stay on board steadied the ship, however the weak dollar and dialling back of US Federal Reserve (Fed) monetary tightening expectations has given a modest lift to the precious metals, which stood up high.

US Dollar - The dollar was pulled lower on Wednesday as traders grappled with the prospect that the Federal Reserve might not raise interest rates again this year following the release of the Fed’s July meeting minutes.

The U.S. dollar retreated against haven currencies like the Swiss franc and the Japanese yen Thursday, following a day of negative headlines.

Earlier on Thursday, the greenback was propped up by weakness in the euro EURUSD, -0.0850% following the release of dovish minutes from the European Central Bank’s last meeting. The U.S. unit also remained stable as initial jobless claims and the Philadelphia Fed Index came in better than expected, but was weaker than the prior period, while industrial-production data missed expectations.

FED comments - The metal started its rise from $1268 on Thursday afternoon after the release of Fed minutes from the July FOMC policy meeting, according to which policymakers grew increasingly concerned about the sluggish inflation numbers. Whilst also on Thursday US President Donald Trump fell out with business leaders over his response to the recent turmoil in Charlottesville.
This followed a mixed session on Thursday in which gold strengthened a little while the rest of the complex was under downward pressure in spite of a friendlier macro backdrop (i.e. lower US real rates, equity losses) due to the release of dovish US Federal Open Market Committee minutes on Wednesday and dovish Fed speech.

Geo political uncertainty - Gold’s status as a safe-haven asset has seen investor demand surge during periods of heightened risk. In recent times, however, President Trump's combative style has seen safe-haven buying reach a sustainable high level. With tensions around North Korea and Iran rising, this is unlikely to subside any time soon.

Gold Supply - political uncertainty has been impacting investment in supply. In fact, global mine supply has fallen in 2017. According to World Bureau of Metal Statistics, gold production is down 2% y/y in the first five months of the year. Production in May alone was down 3.1% y/y. Growth in mine output is at its lowest point since the financial crisis, with risks only getting greater

Although Gold failed to break above $1300/oz today (Friday), it remains in position to do so because of its renewed strength in real terms. As long as the US$ index does not rally hard, we expect Gold to break above $1300 and reach $1375. The gold stocks as a group have been lagging recently but in the event of a Gold breakout, we foresee significant upside potential as the group could play catch up.

Wednesday, 31 May 2017

GOLD EXPECTED TO SHINE IN THE SECOND HALF OF 2017

It was strong opening for gold this week as gold neared its highest in a month on Monday amongst holiday thinned trade. A soft dollar and a pullback in equities helped this rise in gold prices.

Gold hit its highest level since May 1 on Friday at$1,269.50 an ounce, as nervousness over U.S. President Donald Trump's negotiations with other world leaders at the G7 summit prompted investors to buy bullion as an alternative to nominally higher-risk assets such as shares.



Spot gold settled at $1,266.67 an ounce, little changed from $1,266.66 late on Friday.
Though there is not much rise expected in gold prices, but the news from G7 meeting pushed gold prices up.

Under pressure from the G7, Trump on Saturday backed a pledge to fight protectionism but refused to endorse a global accord on climate change, saying he needed more time to decide.

Apart from this, market players await next month’s FOMC meeting to get clearer picture on the U.S. Federal Reserve's stance on interest rate increases.Gold is highly sensitive to rising U.S. rates, which
Increase the opportunity cost of holding non-yielding bullion, While boosting the dollar, in which it is priced.

Meanwhile this week, market participants will stay focused on the labor market report in the US slated to release during the week. If the data turn out to be positive, there is probably nothing to prevent the (Fed) implementing its next rate hike in mid-June.

The latest FOMC minutes suggest that the Fed may start decreasing its balance sheet later this year.
It is true that the first two rounds of quantitative easing were positive for the gold market. However, the third one was a disaster for the yellow metal, as the confidence in the U.S. economy came back and the safe-haven demand for gold declined. Therefore, the impact of the unwinding of the Fed’s balance sheet on the gold market is not easy to determine – a lot will depend on the broad macroeconomic picture.

On the one hand, the Fed’s shrinking balance sheet would imply rising long-term real interest rates, which would be negative for gold prices. On the other hand, there may be some turmoil in the financial markets, which would support the gold market. Moreover, it may be the case that the U.S. dollar rally which started in 2014 was caused by the rising expectations about the Fed’s upcoming tightening.

If this is true and investors really bought the rumor and sell the fact, then the greenback may start depreciating, which would likely send the price of gold higher. Gold’s response to the current Fed’s tightening cycle suggests that it is not impossible scenario. However, the whole process is likely to be conducted in a very conservative and cautious way to minimize market volatility and disruption. Hence, investors should not bet on doom scenarios and expect that the price of gold will necessarily skyrocket.

Though gold was not preferred in an investor’s portfolio during 2016, it gold regained investor confidence during 2017, as doubts about the Trump’s administration’s ability to see through their policy agenda and political difficulties have emerged. Moreover, there has also been a number of geopolitical events such as European elections – the results in France and Netherlands have somewhat assuaged financial markets – and the flash point in the Korean peninsula.”

These geopolitical tensions and uncertainties have influenced gold prices.

The spot price of gold jumped nearly 2% on the 17th of May, the most significant daily increase since the Brexit vote on May 2016. Political developments will be closely watched by the market, and could be a potential driver of additional uplift in gold prices going forward.

Comments by St. Louis Fed President, James Bullard, that inflation remains subdued, and the Fed’s interest rate expectations might be too aggressive, have also been supportive of gold.

Gold is expected to hover around USD 1250 an ounce and is further expected to range between USD $1245 to USD $1300 over 2017-18.

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.

Thursday, 29 December 2016

Gold stabilises around $1130

The Federal Open Market Committee (FOMC) on Wednesday December 14 raised interest rates to a range of 0.5-0.75% from 0.25-0.5%, which was widely anticipated and was largely priced in by commodities and equities.

Modestly analysts believe that higher interest rates in the USA are not expected to have much of an impact on metal markets unless it reaches 2%.

And while higher rates could cause issues if they are raised too quickly or too high, this is not an immediate threat.

The markets have somewhat calmed down with gold hovering near $1130 an ounce.



Gold was trading calm in London on Thursday December 22 – where prices are stuck around $1,130 per oz while many investors are side-lined as the end of the year approaches.

It’smore of a holiday mood where US and Chinese markets willremain shut for Christmas. And hence business and liquidity is expected to dry up till New Year.

The spot gold price was recently indicated at $1,130.25/1,130.45 per oz, down $0.60 on Wednesday’s close.

Later on, prices fluctuated in a nominal range following important data realised during the week.

This week’s highlights were as follows-
  • The US final third quarter GDP growth was revised upwards to 3.5% from 3.2% and
  • Core durable goods orders increased 0.5% month-on-month in November, which was better than the forecast of 0.2%.
  • Durable goods orders fell 4.6% month-on-month in November, still better than expectations of a 4.9% drop.
  • Weekly unemployment claims, however, came in at 275,000 above consensus of 255,000.
  • The November core PCE price index was flat against the forecast of 0.1%
  • Personal spending was at 0.2% below expectations of 0.4%.
  • CB leading index and personal income were both unchanged in November, and below their forecast of 0.2% and 0.3%, respectively.
  • The US government bond market strengthened slightly on Wednesday, with the 10-year US bond yield closing at 2.53%, down from a recent peak of 2.60% last week.
The latest [US] data which has both positive and negative reflects the state of the current US economy. Taking into consideration the outlook for the US economy, future US economic data should trend towards improvement. This could provide some downward pressure for gold and silver.

Recent strong US macroeconomic data and sanguinity over president-elect Donald Trump’s prospective infrastructure spending plans have raised expectations of more interest rate increases in the USA next year. This has also enhanced the US dollar and increased appeal of risk assets like equities, while decreasing the attractiveness of haven assets like gold.

However, he gold price was a touch higher on the morning of Friday December 23 in London, finding some support from bargain hunting before the year-end holidays but lacking sufficient momentum for a marked breakthrough.

The spot gold price managed slight gains during Asian trading hours on Friday December 23 following the release of a range of US data on Thursday.
The momentum for precious metals has slowed but broadermarkets remain tough and positivity for 2017 remains high,

This reflected a moderate decrease in risk appetite on the back of growing political tensions between the US and China after President-elect Trump picked Peter Navarro, a China hawk, to run the US National Trade Council.

Precious metals are expeted to shine next year . Investors may continue to remove their bullish bets to take advantage of positive global risk sentiment and lower volatility across risk asset classes. But the level of contentment in the financial markets may take some participants by surprise early next year, which may trigger a strong rebound across the complex.


Monday, 5 December 2016

The Most Awaited Fed Meet Of The Year Keeps Markets Alert

Gold had rebounded somewhat last week although it remained below its psychologically important level of $1,200 per oz, suggesting that sentiment has not materially improved.

Gold came off its earlier lows but remained weak during Friday morning trading on December 2 – the near-certainty of a US interest-rate rise this month and an exodus of ETF investors put downward pressure on the market.


The spot gold price was seen trading at $1,176.45/1,176.65 per oz, up $3.35 on Thursday’s close. The metal fell on Thursday to its cheapest since February this year at $1,160.80 per oz.

Market was mainly focused on the US jobs reports, numbers of which would be an important deciding factor for the rate hike. The report was expected to show that 177,000 new non-farming jobs were added in November and unemployment rate forecasted at 4.9%.
Once the number Swere out gold came under pressure. Let’s have a look at the important data released-

  • On Thursday, US final manufacturing PMI in November bested economic consensus at 54.1 – 53.9 was called for. 
  • ISM manufacturing prices and PMI for November both topped projections at 54.5 and 53.2, respectively.
  • October construction spending, however, came in at 0.5% month-on-month, a touch below the 0.6% prediction, while weekly unemployment claims were at 268,000 last week, which was above consensus of 252,000.
  • On Friday non-farm payroll numbers showed that the USA added 178,000 jobs in November, against earlier expectations of around 165,000 and from October’s figure of just 161,000. In addition, unemployment dropped to 4.6% and wages climbed by 2.5%.


The recent spate of positive data is expected to produce higher rates when the US Federal Open Market Committee (FOMC) meets on December 13-14 – market participants see a 95% chance of a rate hike during the meeting, according to the CME FedWatch Tool.

The Asian physical market has picked up a little thanks to favorable seasonality and a fall in domestic prices. This should limit the downward pressure on international gold prices

This week, gold looks a little stronger because macro drivers have become slightly more favorable for precious metals from a weaker dollar and lower US real rates.
The gold price glided lower during Monday December 5 trading as its earlier push higher failed to hold and it slipped into negative territory.

The yellow metal had found support from its safe haven status after Italian Prime Minister Matteo Renzi was defeated in Sunday’s referendum.

The US Federal Open Market Committee (FOMC) will meet on December 14 – many participants expect an interest-rate rise to be announced, particularly after a run of positive data from the USA.

As of now, gold remains vulnerable ahead of the Fed meeting on December 13-14. Any stronger-than-expected US data is likely to raise the probability that the Fed lifts rates soon, pushing the dollar and US real rates higher, and in turn exerting downward pressure on the gold price.

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