RSBL: FRIENDLY NEWS....BUT GOLD FAILS TO IGNITE

                                                        By Mr. Prithviraj Kothari, MD, RSBL

  
The week has lot of gold friendly news: but unfortunately none of it supported gold. Be it the soft US data reports or the Greece Crisis or the weakening US dollar any many other news: Gold failed to benefit from any of them.

Any news failed to ignite gold prices leaving it range bound for the week untill the later part of Friday which did some new movement but downwards.

On Friday, the price of gold was down more than 1.5%, or nearly $20 an ounce, to as low as $1,176, the lowest price for the precious metal since late March. Gold ended lower on Friday as investors were more interested in next week’s monetary policy meet of the Federal Reserve. Investors believe that this meeting would give signals on Fed’s interest rate hike plans. The yellow metal was also impacted after some upbeat manufactured durable goods data from the U.S., even as the dollar continued to fluctuate.

US Data: 
          US weekly unemployment claims increased to 295,000 in April, higher than the forecast 288,000. US new home sales for March, meanwhile, came in at an annual rate of 481,000, which was 11.4 percent below the prior month’s reading and missed the 514,000 forecast. The recent soft data from the US could delay the Federal Open Market Committee (FOMC) from raising interest rates from near-zero levels until later this year. The Fed’s next meeting takes place on April 28.

            In some upbeat economic news, new orders for U.S. manufactured durable goods increased much more than expected in March, a report from the Commerce Department showed Friday.

Fed Interest Rate Hike:
             Soft economic US data has pushed the expected dates of interest rate hike even further. The run of weak US macroeconomic data has taken a June rise in interest rates by the Federal Reserve off the table and even a change in September now looks unlikely, according to the CME Group’s Fed Watch. Interest rates have been zero since December 2008 and now the members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise interest rates with most of them believing that the hike will come sometime in September.


US Dollar: 
           Weak data on U.S. jobless claims, manufacturing and home sales have hurt the dollar this week, boosting uncertainty over whether the Federal Reserve will conduct its first U.S. rate rise in nearly a decade in June or September.

Equities: 
           Gold fell on Friday, on track for a third successive weekly loss as strength in global equities diverted interest, though uncertainty over the timing of a U.S. rate rise pegged prices in a narrow range. World stocks hit all-time highs on Friday as corporate updates in Europe and a post-dot com-boom peak for the U.S. NASDAQ stoked investor optimism.
          Gains for equities are spurring investors to shun gold, with prices posting the biggest tumble in seven weeks.

Greece: 
          Gold prices dipped below $1,180 on the London spot market and on the Chicago Mercantile Exchange on Friday afternoon after some progress was made in Greek debt talks. Gold’s credentials as a safe-haven investment appear to have taken a hit on suggestions that Greece is closer to a bailout deal after a summit of Eurozone ministers in Riga. The country is running out of money – Athens is under pressure to accelerate reforms that would secure a deal before it defaults on its debts.
           Greece ordered state entities from municipalities to a fund meant for future generations to park idle cash at the central bank in a scramble on Monday to pay the bills. With IMF loan repayments due next month, Greece has been tapping into public cash reserves in temporary transactions.

Meanwhile Eurozone ministers are attended a summit again  to discuss Greece’s possible default on its debt obligations but positive headlines have been supportive of the single currency, which possibly reduced gold’s safe-haven appeal.

In other news, Russia have increased their Gold reserves by adding nearly 30 tons in April. The brings the country's total reserve to 1238 tons. Russia have steadily invested in Gold through the last nine months of 2014, to diversify reserves and protect Ruble illiquidity.

Now the market players have turned their attention to Wednesdays Federal Open Market Committee statement. Investors was looking out for some signs of tightening of monetary policy as the FOMC decides exactly when to start normalizing. That would raise the opportunity cost of holding non-yielding bullion, while boosting the dollar.

Despite the current stickiness within the range, I do feel that a bigger move is about to come. GDP and FOMC or even the Greece could be the next big catalyst not leaving the Geo-political tensions out of the way.

Whatever be the move, yellow metal will always be known for its safe haven appeal and as the countries are adding their reserves, it clearly indicates that Gold will never be out of picture.
 

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1173- $1200 an ounce	Rs.26,500- Rs.27,500 per 10gm
SILVER	$15.40- $16.30 an ounce	Rs.35,000- Rs.37,000 per kg

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

- Previous blog -
"RSBL:A Puzzled Market For Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-puzzled-market-for-gold.html

Image source: Dreamstime.com

RSBL: A GOOD OPPORTUNITY TO BUY GOLD!!!

By Mr. Prithviraj Kothari, MD,RSBL

 

The last couple of years have been anything but normal for gold.  Back in early 2013, the Fed started augmenting its young QE3 debt-monetization campaign with aggressive jawboning.  It kept implying to stock traders that it was ready to quickly ramp up money printing if the stock markets sold off materially.  This short-circuited normal healthy sentiment re balancing sell offs, as traders feared nothing.

Thus the stock markets levitated, powered higher without normal material sell offs.  Since gold is an alternative investment that moves contrary to stock markets, this slowly strangled gold investment demand.  Investors gradually abandoned it, leaving this metal for dead.

FED's exiting the zero interest rates is a big point of debate for US economy. But frankly I do not think this is the only challenge we are talking about. To me, the unwinding of trillions of dollars used to purchase Bonds by the FED is more of a concern. Less than a year from now, FED will have take one of its biggest decisions of reinvesting $200 billion (approx) which are the proceeds from Treasury debt that is supposed to get matured in 2016. 

I did get some more idea by going through some news on the same:
 
1. If FED does not invest, it could lead to an increase in supply of security products available to the investors and put an upward pressure on yields.

2. If they plan to let it expire, it will shrink FED's balance sheet drastically leading to monetary tightening from increases in the benchmark interest rate officials envision for this year. That could mark a reversal of easing that FED achieved when it started its bond purchases programme after the recession.

For this week, Gold advanced for the first time in four days after holdings in exchange-traded products backed by bullion posted the largest increase in more than six weeks. On Thursday, gold-backed ETP holdings rose by 3.9 metric tons, the most since Feb. 23, to 1,620.1 tons, according to data compiled by Bloomberg. Holdings in the SPDR Gold Trust, the top bullion ETP, had the biggest jump in two months. This jump in holdings shows that there is some movement out of the conventional assets into gold.

CFTC data released on Friday showed that speculators sharply increased their bullish bets last week. The net weekly gain of 20,738 contracts was quite balanced from 10,312 of new longs and a 10,426 reduction of shorts. This increase brings the net position to +100,000 for the first time since March 3rd. This was also the third straight week of gains there.

But a good sign from Eurozone did come on Tuesday, where its private sector continued to improve in March with Markit's final composite PMI rising to 54.0 in March from 53.3 in February, an 11 month high.

Following suit, gold prices stabilized above $1200 on Friday although the markets watched the surging dollar. The dollar index remains strong at around its highest in three weeks – it was last at around 99.30, having earlier touched 99.69. The US currency has gained ground following the release of the mildly hawkish minutes from the March meeting of the US Federal Open Market Committee (FOMC) earlier this week.

The spot gold price was last at $1,207/1,208 per ounce, up $12.80 on Thursday’s close. Trade has ranged from $1,193 to $1,210.8. This does seem to be a pyschological boost for the boost.

To bottom it up, we saw gold getting support on Monday; post the weak jobs report that were released last Friday. Moreover, the dovish comment from New York Fed President William Dudley, gave gold the further push in prices. Furthermore, a weaker U.S. dollar provided underlying support for bullion. There may be more scope for bullion to rally.

Precious metals are highly sensitive and react instantly to the following

• Changes in monetary policy expectations,
• Fed's decisions
• Dollar prices
• Geo political crisis.

But currently what matter the most for the market watcher is - when the Federal Reserve will make its first move on rate and potential political fallout of Greece leaving the Eurozone.

Investment Tip: 
If gold breaks $1225 an ounce then it can be considered a good opportunity to buy in the market.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1188- $1224 an ounce	Rs.26,500 - Rs.28,000 per 10 gm
SILVER	$16.15- $17.30 an ounce	Rs.36,000 - Rs.38,000 per kg

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

- Previous blog -
"Playing Games With Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/04/playing-games-with-gold.html

AN ACTION PACKED WEEK FOR GOLD

                                                                                                             -By Mr. Prithviraj Kothari, MD, RSBL

Yes Indeed…It seems like a miracle. It’s so surprising to see what a difference a few days can make as the gold market sees renewed optimism, ending the week solidly positive on the back of a weaker U.S. dollar and lower U.S. treasury yields.

Gold prices hit two-week highs on Friday and were poised for their biggest weekly jump since mid-January, after the U.S. Federal Reserve's cautious note on interest rates arrested a dollar rally and sparked broad-based buying of commodities.
Though the week began with a rough patch for gold by the end of the week it was a completely different scenario for gold.
On Tuesday, Gold fell to a four month low of $1,142.92 an ounce. Market players had expected gold prices to drop further amid the dollar's surge and speculation about when the Federal Reserve will begin raising interest rates.  

With positive economic indicators, the US dollar gets stronger. The interest rate hike expectation had further strengthened the dollar which meant that the future for gold is not good.


Following these sentiments the precious metal traded at $1,148.60 Wednesday morning and plummeted 12 percent in the last eight weeks.

Gold prices were seen heading towards a consecutive loss in the past seven sessions as a robust dollar and expectations of higher U.S. interest rates curbed appetite for the metal.
But Wednesday FOMC meet was a game changer for gold. Following  the Federal Open Market committee (FOMC) meeting on Wednesday, The Federal Reserve Chair Janet Yellen made it clear (again) those interest rates would not be raised until inflation gains more steam. With current inflation rates negative for the first time since 2009, and with the U.S. dollar index at an 11-year high, we can probably expect near-record-low interest rates for some time longer.

Post this news, gold prices sparked immediately rising nearly 2 percent, from $1,151 to $1,172. That’s the largest one-day move we’ve seen from the yellow metal in at least two months.

At the highest peak of the week, Spot gold was up 1.2 percent at $1,184.55 an ounce by 1:55 p.m. EDT (1755 GMT) after hitting $1,187.80

Wednesday’s FOMC policy meeting caused a stir in the gold market, which is now looking like it may close off the week on a positive note.


The U.S. currency fell as much as 1.8 percent against a basket of major currencies on Friday, after the Fed downgraded its growth and inflation projections earlier in the week, signaling it is in no rush to push borrowing costs to more normal levels.

Apart from the main game changer for the week, we saw following significant activities in the market.

• Post-Fed, the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, saw its first inflows since Feb. 20, also boosting sentiment. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.24 percent to 749.77 tonnes on Wednesday - the first inflow since Feb. 20.
• In the physical markets, Chinese buying was steady, with premiums on the Shanghai Gold Exchange staying at a robust $6-$7 an ounce on Friday. Sustained physical buying could further support prices.
• Gold climbed on the heels of a softening U.S. dollar and focus in Europe turning back from its political problems to the [European Central Bank] stimulus rollout.
• Demand for gold from India picker up ahead of the auspicious occasion of Gudi Padwa.

Though there is not much data set to be released next week, analysts are expecting gold to continue to take its cue from the U.S. dollar. Most commodity analysts see room for the yellow metal to move higher as investors take some of their U.S. dollar profits off the table.

A significant number coming in for the week will be the housing date- release for existing and new home sales number.

Next week, financial markets will receive more housing data with the release of existing and new home sales numbers.

Apart from the key US indicators, one more thing that needs consideration is Greece. Investors need to keep a watch on what is happening in Greece as funding talks are expected to resume again. Greece is once again pushing back against austerity measures, but with no new funding deal, there is a chance they would default on their debt and be forced out of the Eurozone.

Any breakdown in funding talks next week is going to be positive for gold, as a safe-haven asset.
Though no major game changers are in queue for gold, the yellow metal will be taking cues from the above mentioned data.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1163- $1205 an ounce	Rs.25,700- Rs.27,000 per 10gm
SILVER	$16.15- $18.00 an ounce	Rs.36,000- Rs. 40,000 per kg

 

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

- Previous blog -
"Gold To React To FOMC"

http://riddisiddhibullionsltd.blogspot.in/2015/03/gold-to-react-to-fomc.html

GOLD TO REACT TO FOMC

- By Mr. Prithviraj Kothari, MD, RSBL

 

Gold has been trying to find itself. It was at its peak in 2011-12, touching a lavish bull level of $1900. But in the last one year, gold prices have been falling, hovering around $1000 these days.

The ones who were bullish for gold are now speechless. Some supporters of gold have even lost faith in it. 

Though gold has been just above they key areas of $1150, there more downside risk for the yellow metals as the dollar continues to strengthen ahead of the Fed’s policy-setting committee meeting on March 17-18.

The dollar hit its highest in nearly 12 years on Friday and is widely expected to reach parity with the euro, due to the gap between U.S. and European interest rates.
Ahead of an expectation of an interest rate hike, a stronger dollar has been clouding over the positive outlook for gold.

A stronger than expected U.S Jobs report last week had raised expectations that the Fed would hike interest rates soon. Since then gold has taken a beating.

Gold was consecutively down since 8 days, falling more than 1 per cent on Wednesday. Gold has been strongly influenced by a robust dollar and expectations of higher U.S. interest rates.
The metal was headed for its sixth weekly loss in the past seven, down 1 percent so far and having hit its lowest in more than three months at $1,147.10 on Wednesday.

Following these negative sentiment, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.28 percent on Thursday to 750.95 tonnes, the lowest since January. It had been three weeks since the fund saw any inflows.

Moreover, cutting the appetite for gold was last week's stronger than expected U.S. non-farm payrolls data that renewed expectations the Federal Reserve would begin to increase U.S. interest rates in mid-year.

A strengthening dollar makes dollar denominated assets like gold more expensive for holders of other currencies thus making gold unattractive.

After breaking a nine day lowering streak, gold prices managed to stay positively stable on Friday, Spot gold was up 0.1 percent at $1,154.35 an ounce during the day.

*Source-www.kitco.com

Analysts have noted that gold and silver have struggled all week as investor and traders piled in the U.S. dollar, driving it to a 12-year high. They add that the trend does not look like it will end soon.
The key event for financial markets next week will be the Federal Open Market Committee meeting, which will release its monetary policy statement Wednesday.

In the week, market player will be closely keeping a watch on the Federal Reserve as analysts are expecting gold to suffer on the back of a stronger U.S. dollar as the central bank prepares for an eventual rate hike.

However, the eventual rise in interest rates will cap any rally in gold next week.
Although the FOMC meeting will garner most of the market’s attention, other economic reports that could be market moving include regional manufacturing to be released Monday and Thursday as well as some housing data at the start of the week.

TRADE RANGE 

METAL	INTERNATIONAL	DOMESTIC
GOLD	1130$-1200$ an ounce	Rs.25,500- Rs.26,500 per 10gm
SILVER	15.23$- 17.00 $ an ounce	Rs.34,000- Rs.37,000 per kg

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

- Previous blog -

Topic- " An Upbeat Dollar Beats Up Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/03/an-upbeat-dollar-beats-up-gold.html