GOLD LOSES DIRECTION: RSBL

By Mr. Prithviraj Kothari, MS RSBL

Amidst continued uncertainty regarding the Fed’s monetary policy, gold has off late, lost direction. 

It was moving in the positive territory. But on Friday, but gold erased intra-day gains, closing down on the day and lower on the week. The yellow metal yielded to pressure from a strong rally in the U.S. dollar.

The dollar gained ground, especially versus the Euro, following this week's European Central Bank meeting that hinted at further monetary easing this year. The dollar also garnered additional strength in the wake of interest rate cuts by the People's Bank of China (PBOC) on Friday. 

Some market analysts feel that the overnight monetary policy action by the Chinese central bank has created some mixed sentiments in the market. Moreover, before China’s announcement, the European Central Bank (ECB) announced that it is leaving the door open for more quantitative easing measures or even pushing the deposit rate deeper into negative territory in December.

Gold was a little changed on Thursday afternoon in London after the ECB decided to leave the rates unchanged.

The spot gold price was last seen trading in the range of $1,162.8 to $1,172.0.

Adding to the sentiments, was data indicators coming in from US: 

•  US weekly unemployment claims rose by 3,000, to 259,000 in the week ending October 17, 2015. However, they were below the forecast of 265,000 and under the psychologically important 300,000 mark.

• The House Price Index (HPI) for August came lower than expected at 0.3 percent as did CB leading index at -0.2 percent.

•  Existing home sales were better than expected at 5.55 million.

Now that we have some crucial data coming in next week, not only from the US but other leading and developing economies as well, some analysts feel the Federal Reserve is losing its dominance in the marketplace.

Gold traders are bracing for a heavy slate of U.S. economic releases next week, along with key central bank meetings from the U.S. Federal Reserve and the Bank of Japan. The focus could be on BoJ that meets next week and there is a growing expectation that it will announce new easing measures, which are expected to remain steady.

Moreover, the central bank is also slated to release its Outlook Report with forecasts for inflation and the GDP. 

Meanwhile in the domestic market, we saw a sluggish demand for gold. Following the nine-day Hindu festival of Navratri, India celebrated Dussehra on Thursday where demand for gold usually rises as people consider it auspicious to buy gold on this day.

But, a slow and easing demand for gold further declined the prices even though globally gold prices were rising.

The fourth quarter is typically a strong period for gold purchases in India, the world’s second biggest bullion consumer, due to festivals and weddings.

Demand from rural areas has been hit particularly hard, as farmers suffer from the first back-to-back drought in India in three decades.

Two-thirds of gold demand in India comes from farmers and residents of small villages who see jewellery as way to store wealth. But lower-than-normal monsoon rainfall this year due to El Nino weather pattern has eroded rural incomes.

One of the most awaited meetings of the Fed, due on October 27-28, could turn out to be a non-event for gold traders as markets speculate a delay in interest rate hike. The Fed's statement will be released on Wednesday and there is no press conference associated with this meeting. 

Apart from the Fed policy, traders are also monitoring the U.S. debt-ceiling situation. The U.S. federal government is moving closer to the deadline where it needs to raise the nation's $18.1 trillion borrowing limit.

The important reports coming in next week are:

·         Monday: Home Sales

·         Tuesday: Durable goods and consumer confidence

·         Thursday: Third quarter GDP and pending homes sales

·         Friday: The core PCE index on Friday. 

Next week's main event:

These events may provide clues of economic strength and inflation that could support potential for a Fed rate hike in December. 

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-
"Data- Dependent Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/data-dependent-gold.html
 

GOLD DIRECTIONLESS: RSBL

By Mr. Prithviraj Kothari, MD, RSBL

 

The world economies are tumbling. Greece is trying to get more days…Chinese economy is foundering and there us downside pressure on the US markets too. A collapsing economy directly means that the money flocks to gold. But the markets have something else to say.

The precious-metals sector is enduring losses for the third straight week. Gold has also rallied yet remains dangerously close to making a new weekly low for the bear market.
The metals opened lower on Monday in the shadow of the Greek ‘no’ vote but ended the day mixed with average losses of one percent.

Precious metals closed down 0.7 percent on Monday, with gold holding value at $1,169.20 while on Wednesday, gold was last up $4.60 closed at $1162/ 1162.80 an ounce.
Precious metals prices moved away from recent lows in trading on Thursday morning after Fed minutes failed to provide a clearer picture on when the normalization of US monetary policy might begin.

There is more than one factor that is collectively responsible for the movement in gold prices. Let’s take a detailed look at them.

Greece- In Greece, negotiations will continue over the weekend after Prime Minister Alexis Tsipras presented a proposal that accepts many of initial cuts introduced at a June 26 meeting.
Investors seem to believe this latest chapter in the multi-year negotiations process will end in Greece remaining in the Eurozone – the euro was last up 0.8 percent to 1.1130 against the dollar.

The uncertainty over Greek debt crisis boosted the dollar, dampening demand for the precious metal as an alternative investment.
A $60 billion bailout plan is headed to the Greek parliament. It includes most of the austerity measures Europe has insisted upon and the gross dollar amount of the bailout is slightly higher. We shall see next week what happens and how it affects markets.


FOMC and Interest Rate Hike- “Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy,” Yellen said in her speech in Cleveland.

“But I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step,” she added.

US, Federal Reserve Chairwoman Janet Yellen predicted the timeframe for the initial interest rate hike, but also provided a hedge regarding the importance on inflation.
Friday, Yellen said, in a speech at an event in Cleveland, that she still expects interest rates to rise later this year but also acknowledged factors that continue to hold back the U.S. economy, including potential foreign threats.

China- GOLD BULLION prices rose Thursday against all major currencies, recovering all but $1 of the week's earlier $20 drop per ounce against the US Dollar as world stock markets gained following a hard bounce in China's main equity indices.

With trading still halted in around half the shares listed on the Shanghai and Shenzhen stock markets, the CSI300 index of the biggest companies closed 6.7% higher after the last 3 week's near one-third collapse.

No one knows where is gold is heading. Presently there is no call for safe haven investments beyond the solid currencies, namely the dollar, yen and Swiss franc.
Global market tensions may ease out next week with Greece expected to find some resolution to its ongoing credit crisis and Chinese leaders expected to keep a tight grip on equity markets to prevent another major market selloff.

Despite the negative weekly close, optimism is creeping back into the gold market. After five consecutive weekly bearish outlooks, retail investors have finally turned bullish, while market professionals remain mixed.

Nobody would want to buy in an extremely uncertain market. Investors would buy or sell gold once they get a clear signal and know what is happening with the Federal Reserve. The uncertainty in Greece and China is creating a lot of uncertainty and fear because nobody knows what the Fed is going to do.

Apart from the Global markets, there are others things that need to be watched by the investors next week. It’s a big week for US markets economic data.
 

• Markets will receive retail sales data for June
• Regional manufacturing data for July
• Consumer inflation data at the end of the week

However, the highlight will be Fed Chair Janet Yellen’s semi-annual testimony before Congress. She will testify before the house Financial Services Committee Wednesday and the Senate Banking Committee on Thursday.
Market participants are expected to go through her indication extremely careful to find any hints on when the central bank will pull the trigger on an interest rate hike.


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 -"Will Gold Create The Safe Haven Magic"

http://riddisiddhibullionsltd.blogspot.in/2015/07/will-gold-create-safe-haven-magic.html

RSBL: A VOLATILE WEEK WAITS FOR GOLD

                                                                  - By Mr. Prithviraj Kothari, MD, RSBL

The week was interesting for gold especially for gold traders and investors, as they enjoyed the doubts surrounding the dramatic and volatile moves which later kept the market wondering whether the yellow metal will be bullish or bounce back from its high prices.

Last Monday’s price action promised much, promptly reversing the previous Friday’s losses and surging back above the resistance level at $1190 per ounce to close at $1203.20 per ounce. This bullish sentiment continued into Tuesday, albeit on dropping volume with the price action just managing to breach the resistance at $1210 per ounce, thereby giving longer term investors hope this could be the start of some sort of retrieval.

However, Wednesday’s price action was unable to follow through, before Thursday’s dramatic move when the gold bears once again took control, sending gold prices hitting through the $1190 per ounce support region, accompanied by high volume and validating the move lower.

Friday’s price action followed through with further selling, but on lower volume as the platform of support in the $1174 per ounce region was duly tested before gold closed the week at $1174.50 per ounce. Spot gold was last at $1,171.70/1,172.60 per ounce, down $11.50 on the previous session’s close and around intraday lows – it struck its cheapest since March 20 at $1,170.20 earlier. 

The precious metals’ moves may have been worsened as parts of China, India and parts of Europe were absent for May Day holidays.

But there is a bullish sentiment for gold in the market. SPDR Gold trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.32 percent to 741.75 tonnes on Friday.

Currently, Equities seem to be in a bubble zone and are prone to devaluation. In such case there is a chance that both Wall Street and world stock markets will tumble down especially when there is clarity on signs that the Fed is beginning to tighten-up its current zero interest-rate policy – and this could be the spark that triggers a resumption of the long-term bull market in gold.  

Factors that support this bullish sentiments are-

• Persian Gulf Crisis
• Russian- Ukraine escalating tensions in Europe
• Greece default
• Increase in demand for gold as a safe haven appeal keeping in mind the above mentioned points

Thus yet another volatile week waits for gold as investors and traders prepare for April’s employment report on Friday. Volatility will be an important factor for the gold market next week and the ones that will be actively creating volatile situations are:
 

Employment Report: Currently there are expectations in the market that the U.S may have created 210,000 jobs in April. If it so happens then gold prices are expected to remain near the bottom end of their current range and if employment comes in above 200,000 then prices could fall below current support.

Other Data: Although the biggest data report will come at the end of the week, ahead of the employment report, markets will receive ISM non-manufacturing data on Tuesday and private company employment data from ADP Wednesday.

Britain: Apart from the key economic indicators coming in from U.S, there are chances that Britain’s federal elections on May 7 could have an impact on gold markets is the results show a majority for Conservatives, who have said that if they win they will hold an referendum on its membership to the European Union by 2017. Analysts have noted that a Britain’s exit from the EU could pose a threat to the euro, which would create safe-haven demand for gold prices. Currently polls show a close race between Britain’s federal parties.

Reassessment of economic prospects – and revised financial-market expectations of Fed policy – sometime in the next few months could support a spring-summer recovery in the price of gold, lifting the yellow metal up and out of its recent trading range.

  
Until that happens, gold prices will likely remain “range-bound” in the short term, perhaps through midyear or longer, trading mostly between a floor price of $1,175 and a ceiling around $1,225.  

As these boundaries are approached or briefly broached, technical traders will continue to step in as buyers or sellers, respectively, keeping the yellow metal’s price relatively stable within this range.  

Despite some disagreement among the voting members of the Fed’s FOMC policy-setting committee, the Fed will likely honor its pledge not to begin easing up on interest rates until the economy shows clear signs of a continuing and sustainable expansion. 

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1163-$1207 an ounce	Rs.26,500- Rs.27,300 per 10g
SILVER	$15.73-$16.48 an ounce	Rs.35,000- 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 -

"RSBL: Friendly News ....But Gold Fails To Ignite"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-friendly-newsbut-gold-fails-to.html

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

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