GOLD FAILS TO ATTRACT SAFE HAVEN BUYING: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

The week began with a lot of geo political uncertainty and these rising tensions were expected to ignite gold prices.

But geopolitical tensions  took more of a backseat, with the minutes from the FOMC’s latest policy meeting set to be scrutinized later in the week for clues on the timing of a rate rises in the US.

The gold price had risen to a one-week high on Monday following Friday’s terrorist attacks in Paris, which fuelled safe-haven demand.

On Friday, 13 November, a coordinated terrorist plot in Paris led to over 100 deaths and hundreds injured. The Islamic State boasted and claimed responsibility for the deadly attack, which follows recent attacks by the organization in Lebanon and a suspected bombing of a Russian airliner.

French President Francis Hollande responded by launching a massive airstrike on the ISIS stronghold of Raqqa in Syria.

In tumultuous periods, gold harvests safe-haven appeal as investors seek physical assets like gold versus other investments like bonds or equities. 

However, Gold failed to attract safe-haven buying as a strong dollar offset geopolitical concerns. The dollar placed a cap on the market as it traded at a 7-month high.

Gold received only a small safe-haven lift from the terrorist attacks over the weekend in Paris and Beirut. It rose to $1,097 on Monday but those gains faded away as a strengthening dollar ended the rally. The dollar remained well-supported by broad expectations that the first US interest rate hike in nearly a decade could likely be initiated by the US Federal Reserve in December.

Gold prices dropped to a 5.5-year low on Tuesday, pressured in part by rallying U.S. and world stock markets early this week. 

U.S. economic data released Tuesday was a mixed bag thus leaving the markets confused.

• A heavy data day, US consumer price index month-over-month for October rose  0.2percent, in-line with expectations.
• The core CPI also increased 0.2 percent.
• The capacity utilization rate at 77.5 percent was as forecast.
• US industrial production over the same period dipped 0.2 percent, below the forecast 0.1 percent.
• The NAHB housing market index for November was 62, just missing the estimate of 64.
• The spot gold price was last at $1,081/1,081.30 per ounce, down $2.40 on Monday’s close.

While in the US, market players still expect the Federal Reserve to raise rates for the first time in nearly a decade at the mid-December Federal Open Market Committee (FOMC); Fed chairwoman Janet Yellen has argued for an increase in the Federal Funds rate before the end of the year, citing worries of prolonged periods of cheap capital and its long-term effects on the economy.

On Wednesday, investors’ focus shifted to the minutes from the FOMC’s October policy meeting.

Spot gold was last at $1,075.1/1,075.4 per ounce, up $3.50 on the Wednesday closing level.

Seventy percent of market participants believed the Fed will raise rates next month, according to the CME Group Fed Watch.

The minutes released showed that most members of the Federal Open Market Committee at the October meeting said the conditions for a rate rise could be met by December. A minority, however, said the data may not support a hike and suggested the Fed may need to add monetary stimulus if the economy unexpectedly slows.

The release of the minutes from the October FOMC meeting suggested that  it “could well be” time to raise short-term interest rates at the December policy meeting and as a result the committee chose to alter the wording of their policy statement to ensure their options were open for a move next month.

Gold prices climbed on Thursday morning in London as the dollar fell back even though a majority of US Federal Reserve members believe a December rate hike is becoming more appropriate.

Gold prices climbed on Friday morning in London, boosted by short-covering and fresh buying despite the October FOMC minutes suggesting the Fed will lift interest rates from December. But later in the day gold prices declined.

With the US essentially closed for half the week for Thanksgiving, it’s a quieter week for news and gold may continue to consolidate. All the potentially market impacting fundamental news is packed into Tuesday and Wednesday morning. The key report is U.S. GDP which could potentially impact gold through the U.S. dollar as it could impact speculation on a FOMC rate hike next month.

TOO MANY SURPRISES FOR GOLD IN THE WEEK TO COME

                                                                                                            - By Mr. Prithviraj Kothari, MD, RSBL

Finally, there are other drivers apart from deflation and dollar that have been influencing gold prices this week. After a long time gold has found supporting drivers such as negative interest rate and market turmoil and uncertainty.

Finally gold managed to reach a high of $1300 on Thursday and then lost a little pace and settled at $1293 on Friday.

It’s just been the third week of 2015 and gold is already 9 per cent up and because of its strong momentum, gold prices do have room to move higher and a consolidation period is expected at some time soon.


Following influential factors played a significant role for precious metals this week-

ECB- On Thursday, the ECB announced the launch of an expanded asset purchase program with combined monthly purchases of 60 billion euros or $70 billion, through end September 2016.
ECB President Mario Draghi said that this stimulus package will help in pushing inflation back towards 2 per cent during this year.
However, concerns about the global economy sustained gold's safe haven appeal, keeping prices afloat.

SPDR- Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 740.45 tons on Friday from its previous. 

US Economic Indicators- a Conference Board on Friday showed positive contributions from a majority of its components and stated that U.S economic indicators rose slightly more than anticipated in December.
This did influence gold prices but not to a great extent.

Eurozone- Eurozone private sector grew at the fastest pace in five months in January, flash survey data from Market Economics showed Friday. The composite output index rose more-than-expected to a five-month high of 52.2 in January from 51.4 in December. Economists had forecast the index to rise nominally to 51.7.

Gold prices ended modestly lower on Friday, on the above mentioned mixed global economic data with the dollar trending sharply higher even as the euro slipped significantly after the European Central Bank announced a massive, larger than expected monetary stimulus.
Gold soared to 5-month highs just above $1300 earlier in the week, but a swiftly rising dollar saddened the rally in bullion.

The coming week holds a lot of surprises for gold- Some of the noted ones are:

FED- The precious metals market will be focused on the Fed and their upcoming monetary policy statement on Wednesday. But markets believer that unlike the Bank of Canada and the European Central Bank, which both shocked markets this week, the Fed is unlikely to announce any major surprises.
The dollar is expected to be bullish as the Fed is not expected to shift their monetary policy outlook because currently the Fed remains one of the only central banks that are in any position to eventually raise rates.

Dollar- Next week, the gold market should re-establish its negative correlation with the U.S. dollar, and that steady rise in the greenback would be negative for gold.
However, the report also suggested that recent changes made to the European Central Bank's monetary policy may support precious metals prices.

Chinese Slowdown- Although China's economic slowdown can also hurt metals given the country accounts for almost half of world metal consumption,a sharp slowdown of the Chinese economy remains a low probability scenario at present.

Greece Elections- Traders are likely to turn to Sunday's election in Greece. Polls show the opposition Syriza party widening its lead to about 6% over the governing conservatives. If they get it then it raises the suspect that the Euro will likely open weaker again on Monday, helping gold in the process. The potential of more economic uncertainty and positive chart patterns provides a constructive backdrop for further gains in gold.

U.S. interest rates - "While downward pressure on precious metal prices is expected to become more pronounced when the U.S. Federal Reserve raises interest rates (expected in mid-2015), the European Central Bank's plan to purchase €60 billion of assets per month through September 2016 may put upward.

People are coming to the conclusion that while the ECB is getting more expansionary, the Fed may be forced to be less restrictive because of the headwinds to inflation from the drop in oil prices, which can trigger some delay in interest rate hikes and would be positive for gold.
To conclude, Low inflation, global risks, and firmer physical demand are all modest positives for gold and silver.

- Previous blog - "All Notions To See Gold at $800 Destroyed"

http://riddisiddhibullionsltd.blogspot.in/2015/01/all-notions-to-see-gold-at-800-destroyed.html

AN IMPRESSIVE START FOR GOLD IN 2015 BUT A DULL END

By Mr. Prithviraj Kothari, MD, RSBL

 

Every year, when we start afresh, each one has a hope- a hope that markets will do good. There was a similar feeling now as it was when 2014 began.

At the start of 2014 expectations were high that the gold market could shake off and recover from 2013’s drop, where prices ended the year in negative territory for the first time in 12 years.

However, despite strong optimism, gold once again closed the year in negative territory.
In the gold market, optimism was strong during the first half of the year. But later, the news hovering around the interest rate hike for gold pulled its prices down.

Fed’s interest rate hike played a significant role for gold in 2014. This helped drive the US dollar higher and pull down gold prices lower. 

By the end of 2014, Fed Chair Janet Yellen stated that interest rates will remain unchanged for the next two meeting. Hence analysts and economist expect that the Fed may bring in the first rate hike as early as June.

A thought some believe that interest rate hike may come in soon but there is part of the market who feel that any renewed expectation of looser U.S. monetary policy for a longer period could create some weakness in the U.S. dollar and in turn help push gold prices higher. 

Now we await next year’s crude prices and other commodities to see if inflation rears its head or if geopolitics suddenly moves gold.
This was a general scenario for 2015. Now let’s take a glance on the first trading day of 2015.
The first trading day of 2015 has been exciting for the gold market as prices have swung within a $27 dollar range during the session. Silver prices followed gold's volatility; as of 1:57 p.m. EST,
Gold closed 1.6% higher; reclaiming $1,200 after nearing $1,211 in intraday trade, as global risk-aversion and a weaker dollar boosted its safe-haven appeal.

Gold rebounded from a one-month low on Friday, as lower equities counteracted the impact of a stronger dollar and falling oil markets, but still posted its third straight weekly loss.
Spot gold fell to its lowest since Dec. 1 at $1,168.25 an ounce after the dollar strengthened, but rebounded to $1,194.10, up 0.63 percent at midday on a disappointing ISM manufacturing index report.
 

Gold added 0.2% to close above $1,186. Once again varied reasons behind this.

• Weak U.S. manufacturing data lifted demand for the metal as an alternative asset.
• The rising probability that a new Greek president, when elected, will break the terms of the ECB bailout sent yields Greek bonds and European stocks dipping as traders ran for safety in gold, silver, and the yen.
• Factory reports from Europe and China were even weaker. This added to the expectations that their respective central banks will be forced to add more stimuli.
• Gold was further supported by a falling dollar, which lifts demand for commodities denominated in it by making them less expensive to users of other currencies. 

Though we have always been discussing the precious metals market in general, this time I have also menti0oend the global economies which will down the line affect gold prices in 2015.


Chinese Economy- 

 
We all know that the Chinese economy is heading towards a slowdown. This has led to a rout in commodity prices, may continue to haunt global investors this year as well.
The country’s central bank helped the market with interest rate cuts and there is a reasonably good chance for a further cut, given that the real rate of interest is high.

US Economy

 
Like last year, this year too the interest rate move of the Federal Reserve will be a noticing factor to watch for.
The Fed believes that the risks to the outlook for economic activity and the labor market are nearly balanced and expects to remain ‘patient’ to regularize its stance of monetary policy, as per the statement published in December. 

Other Economies
The ECB will we forced to continue with its easy monetary policy as high unemployment, unutilized capacity and low inflation continue.
Apart from these, growth may inch up in Europe and Japan, but may drop in the UK.
Among the emerging markets, Russia will decelerate, while Brazil may not pick up appreciably. 

If you strongly believe that growth will improve globally his year then it could prove to be incorrect.
Thought the much-dreaded US quantitative easing (QE) concluded smoothly last year, but with Japan, Europe and China eyeing QE options, what may be in store for investors in 2015?
We need to wait and watch this for!

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1180-$1207 an ounce	Rs. 26,000- Rs.27,500 per 10gm
SILVER	$15.40- $16.30 an ounce	Rs.35,000- Rs.37,800 per kg

- Previous blog - "Too Much Noise In The Market"

http://riddisiddhibullionsltd.blogspot.in/2014/12/too-much-noise-in-market.html

IS IT A DOWNSIDE OR AN UPSIDE POTENTIAL FOR GOLD

 - Mr. Prithviraj Kothari, MD,RSBL

Overall, it was a decent week for gold. It was a swing for gold that swayed between the bullish and bearish trends. Since Nov. 7, the metal has climbed 9 percent from a four-year low.

Gold was up 2.5 percent this week after Tuesday's big rally. Falling stock markets have prompted some investors to buy the metal as an alternative asset, while a drop in the greenback made dollar-priced bullion cheaper for holders of other currencies. The spot gold price was last at $1,224.00/1,224.90 per ounce, down $1.80 on Thursday’s close. But overall it was a positive week for gold.

Some key influential factors for gold this week have been:

SPDR: An improvement in sentiment was seen in the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged higher to 725.75 tons on Friday, a nearly 5 tonnes rise last week. Since mid November its around 717 to 721 tonne range in terms of holdings.

US DATA: Gold soon touch a low on Friday to print a price of $1214 when the US consumer confidence spiked to a new post-recession high in December. The Thomson-Reuters/University of Michigan preliminary index of consumer sentiment leapt to 93.8 then the expected value of 89.5, the highest level in the past 8 years. This confidence could be attributed to the decline in fuel prices.

CHINA: China's National Bureau of Statistics report showed that industrial production to have advanced 7.2 percent in November from last year. This was the weakest growth in three months and slower than the 7.7 percent increase seen in October and 7.5 percent growth forecast by economists, which will only fuel speculation that further stimulus measures from Beijing might be needed.

EURO ZONE: data from Eurostat showed Eurozone industrial output to have edged up by a less than expected 0.1 percent October, after a revised 0.5 percent increase in the preceding month. Moreover, Fitch ratings cut its ratings on France to AA from AA+ on Friday, saying the country's revised deficit reduction target was not enough to avoid a downgrade.

DOLLAR: Gold extended gains as the dollar headed for the biggest drop in a month against a basket of 10 currencies. The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.32 on Friday, down from its previous close of 88.55 late Thursday in North American trade. 

OIL PRICES: Weakness in energy prices have weighed on gold sentiment lately, dulling the metal's appeal as a hedge against oil-led inflation. 

Overall, Safe-haven demand and short covering have been behind gold's recovery from 4-1/2-year lows hit last month. 

Silver does remain locked in the range of $17.00 - $17.35 with a break either side of this, would give some more idea on which side is the prices headed. Whereas the short term support for Gold is at USD $1215 and the resistance around $1235

With the FOMC meeting next week, and amid increased market concerns over Russia, Greece, global energy prices, Chinese economic growth etc. both gold and silver are likely to remain range bound and dominated by technical trading patterns.

Markets believe that the statement released by the FOMC all this while about “considerable time” shall be removed from their minutes now. Which means that the rate hike will happen soon which will further affect gold prices.

What needs to be watched closely this week?

• 15th - the U.S. November industrial production
• 16th - the December flash manufacturing PMI for China, the Eurozone, and the U.S. November housing starts
• 17th - the Bank of England MPC Minutes, the FOMC rate decision, the Fed’s press   conference and the U.S. November inflation
• 18th - Germany’s December IFO business climate
• 19th - the Chicago Fed’s speech 

As we approach 2015 while bidding farewell to 2014, we see three major events that will be affecting gold prices largely in the coming year:

1. FED's move towards normalizing monetary policy and raising interest rates
2. Problems in the Eurozone and the European Central Bank’s stimulus plans
3. China consumption and growth story

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 - "Appetite for Gold Declined"

http://riddisiddhibullionsltd.blogspot.in/2014/12/appetite-for-gold-declined.html