THIS TIME ITS CHINA V/S U.S.: RSBL

By Mr. Prithviraj Kothari, MD, RSBL

It was China v/s U.S or rather to be precise it was the devaluations of the Yuan v/s the positive economic numbers from U.S.

While one was trying to give the much needed push to gold prices, the other, on the contrary was pulling gold prices down.

Till the middle of the week, gold prices moved upwards and the market was just about to its faith in it. But once the US numbers were out, gold was once again losing its sheen.

Gold got the much needed lift when China roiled global markets by devaluing its currency. Till then gold was travelling on a mostly lower route since mid-June. By the end of the week, however, it appeared the situation was stabilizing, with Chinese authorities on Thursday saying there was no reason for the Yuan to fall further.

In the initial part of the week, Gold prices boosted and the metal regained its safe haven status as news out of China proves to be favorable for gold. The People’s Bank of China surprised markets on Tuesday when it devalued the Yuan against the U.S. dollar for three consecutive days, tumbling the currency by about 3%. 

Gold prices lacked direction on Friday as the People’s Bank of China (PBoC) increased the value of the Yuan while boosting its gold holdings.

The Chinese government released gold holding figures for the second time in recent weeks. The PBoC announced that it bought 19 tonnes of gold last month when prices were at five year lows and Total holdings were at 1,677 tonnes at the end of July, a one percent bump from the previous month.

The gold price continued to slide lower on Thursday afternoon after the dollar strengthened following upbeat US data, and as concerns over China’s economy eased.

Spot gold was last at $1,116/1,116.4 per ounce, down $8.20 on the previous close. Trade has ranged from $1,113.7 to $ 1126.8 so far.

The important numbers coming from the US were as follows-

• PPI month-over-month in July was at 0.2 percent, above the 0.1 percent mark, while Core PPI in July rose 0.3 percent, besting the forecast of 0.1 percent.

• The capacity utilization rate in July was at 78 percent, matching predictions, with industrial production month-over-month in July jumped 0.6 percent, above the consensus of 0.3 percent.

• Preliminary University of Michigan Consumer sentiment in August was 92.9, just off the 93.5 forecast. Preliminary University of Michigan inflation expectations in August were at 2.8 percent, equaling the previous reading.

• The Dow Jones industrial average and S&P were each up 0.3 percent, while the dollar was 0.3 percent stronger at $1.1120 against the euro.

• Core retail sales month-over-month in July was in-line with forecasts at 0.4 percent, while retail sales month-on-month in July matched the consensus at 0.6 percent.

• US weekly unemployment claims were 274,000, near the prediction of 272,000 and the previous reading of 270,000.

The timing of the first rate rise by the Federal Open Market Committee (FOMC) is becoming increasingly important to investors. The FOMC meeting is just over a month away and debate is ongoing whether the Fed should maintain near zero interest rates or raise rates by 25 basis points.

The two main highlights for the coming week are China and the FOMC. While everyone will be on a lookout for any further price-supportive developments out of China or if instead the Federal Open Market Committee says anything to rain on the yellow metal’s parade.

Currently China is proving to be one of the most influential factors for gold prices because the devaluation of their currency sparked interest in gold as a safe haven again and China has reignited the buying in gold.

If the Chinese markets remain more or less stabilized then focus will be shifted on expectations for the FOMC, which holds a policy meeting next month. The Federal funds futures have oscillated lately between factoring in a greater- or smaller-than-50% chance of a tightening in September.

The biggest factor will be Wednesday’s Fed meeting minutes as the minutes are from the July 28-29 meeting, after which there was no news conference.

The picture is expected to get clear on how the Fed is thinking about a potential September rate rise. 

An aggressive sentiment coming out of these minutes will probable pull down gold prices but on the other hand dovish minutes could offer some support

Additionally, traders will keep close tabs on U.S. economic data-

• Monday- The New York Federal Reserve’s Empire State manufacturing

• Tuesday- Housing

• Wednesday- Consumer inflation

• Thursday- jobless claims, the Philadelphia Fed’s business survey and sales of existing homes

 
The focus continues to be on what the Fed is going to do at its September meeting. It’s going to be the fundamental factor across the board as far as commodity markets are concerned, particularly gold.

Apart from this meeting, traders and analysts will also keep a watch on any comments coming out of the European Central Bank, in case policy-makers should hint at increased bond buying known as quantitative easing. Further QE could provide further support to gold prices. 

Given this picture, as of now majority of the market players expect gold prices to fare better in the week to come.

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Gold To Be Pressured Downwards: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/08/gold-to-be-pressured-downwards-rsbl.html

RATE HIKE CREATING PRESSURE ON GOLD:RSBL

By Mr. Prithviraj Kothari, MD, RSBL

Firstly, I would like to express my sincere condolences on the death of our former President Mr. A P J Abdul Kamal. As we all know him better as the missile man of India, his loss means a lot for our country.

Moving on to his week’s bullion market. Well there was lots of hustle bustle in the market as there was no clue over the prevailing volatility in gold.

Gold was probably in the worst macro position it could be in: you have low inflation, high accommodation across the globe, US investment growth and the possibility of further increases in the US dollar.

Currently it seems like gold has been divorced by the market.

Bullion was set to end July with its biggest monthly decline in more than two years after a deep rout last week shook investor confidence further and drove prices to a 5-1/2 year low of $1,077 on July 24. The metal has lost 7.4 percent so far for the month, its steepest decline since June 2013.

Bullion is set for a 7.4 per cent plunge this month, the most since June 2013, after tumbling to the lowest level since 2010 last week. The metal fell as much as 1.1 per cent to $1,084.51 an ounce on Thursday, and was at $1,085.51 at 2:24 p.m. in Singapore, according to Bloomberg generic pricing.

The main culprit for this week’s volatility was the US economic data which in turn influenced the Fed's decision of an increase in interest rates which in turn fluctuated the dollar prices.

Gold and dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Gold was headed for its largest monthly decline in two years as the Fed moved closer to boosting US interest rates for the first time since 2006.

While there were no clear signals from the Fed as to when exactly would the rate hike come in, they did describe job gains as solid amid an improving economy, according to a statement Wednesday.

Post the statement released by the Federal Reserve- now markets expect the hike to come in soon – probably this September.

Fed policy makers expressed satisfaction with progress toward full employment and used one word -- “some” -- to describe the additional gains it wants before raising rates.

Increasing rates reduce the allure of gold as the metal doesn’t pay interest or give returns like other assets such as equities and bonds. Investors have cut their holdings in exchange-traded funds backed with bullion by 3.6 per cent this month, the most since December 2013.

Report released by the US department of labor showed the employment cost index rising 0.2 percent, which is the smallest increase in 33 years.

Gold is an asset that pays no interest or coupon and the rate hike is certainly putting pressure on prices.

Gold slipped on Friday and was on course for a sixth straight weekly fall, its longest retreat in 16 years, after upbeat U.S. economic data encouraged bets on the Federal Reserve raising interest rates in September.

Data on Thursday showed the U.S. economy grew 2.3 percent in the second quarter, while first-quarter gross domestic product was revised to show growth of 0.6 percent instead of a contraction.

That reinforced expectations the Federal Reserve is on track to raise interest rates, possibly at its next meeting in September. Higher interest rates would increase the opportunity cost of holding non-yielding bullion.

The data followed the Fed’s policy meeting earlier this week at which policymakers concluded that the world’s largest economy is “expanding moderately”.

But once again, apart from the employment data there were other key economic numbers that came in and influenced gold prices in the opposite direction. Gold prices were trading in positive territory on Friday after mixed US data weighed on the dollar.

Prices fluctuated heavily throughout the week as a combination of a Federal Open Market Committee (FOMC) meeting and US GDP figures drew investors from the sidelines.

ETF- outflows of gold from ETFs are capping any real recovery in the metal’s price. Holdings in funds tracked by Fast Markets have decreased for 14 consecutive sessions and are now at their lowest since February 2009 at 1,537 tonnes.

PMI- Chicago PMI in July was 54.7, exceeding the forecast of 50.7 and the first expansion reading since April of this year.

Consumer Sentiment- University of Michigan consumer sentiment in July was 93.1, below predictions of 94.2

ECI- Thought the weekly unemployment claims were much lower than expectations, a simultaneous wage growth was nowhere to be seen. Employment Cost Index showed a 0.2 percent increase, below the 0.6 forecast and yet another example of persistently low wages.

Eurozone - German retail sales fell short at -2.3 percent as did French consumer spending at 0.4 percent and the Italian unemployment rate at 12.7 percent. Eurozone core consumer inflation however at one percent was better than the forecasted 0.8 percent while the flash estimate at 0.2 percent was as expected.

Traders said sentiment bolstered as the precious metals rose in global markets after a report showed wages and salaries in the US rose in the second quarter at the slowest pace on record, weakening the case for the Federal Reserve to raise interest rates.

The next important data release is U.S. non-farm payroll figures, due on Aug. 7 which will once again play a key role in influencing gold prices.

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 -
"Disappointing Week For Gold:RSBL"
 http://riddisiddhibullionsltd.blogspot.in/2015/07/disappointing-week-for-gold-rsbl.html

IT'S A GREECE GAME FOR GOLD:RSBL

                                                         By Mr. Prithviraj Kothari, MD, RSBL

A very boring week for Gold and rest of the precious metals complex. An extremely tight price range trading showing no clear indication for the next move in price. The $1200 level remains significant for Gold while for Silver it is $16.20, where it continues to place selling pressure.

During the last week it rallied well to move from a two month low near $1160 back up to above $1190 again before easing back to the $1180 level. The key $1170 level has consistently provided solid support and has held it up now for a couple of months.

Somehow the important data released from the US:

• US unemployment claims were in line with forecasts at 271,000.
• US GDP released on Wednesday showed that the retraction in Q1 was just -0.2% better than the expectation of -0.7%, increasing the necessary confidence in US economy growth.
• University of Michigan Consumer sentiment was 96.1, besting forecasts of 94.6, while inflation was rose 2.7 percent.
• Personal spending month-over-month in May was up 0.9 percent, above forecasts of 0.7 percent.

While recent positive US economic data strengthened the dollar and led to speculation over interest rate hike this year, the Greece negotiations have gone haywire.

Talks between Athens and its creditors have failed completely. Still there have been some signs of hope being shown by either parties. But if I understand, tomorrow being Greece's payment date to IMF, I feel they would default. Euro-zone rejected Greek's request for a one month extension to its bailout creating a non-payment type of scenario.

Greek prime minister Alexis Tsiparis called a referendum on July 5 for the Greek bill to approve the bailout demands. Like expected, Greece announced capital controls and will keep its banks closed on Monday until further notice. I feel it is the darkest hour in Greek's economy. 

Even when I see the potential Grexit, there are more chances that gold will be on a bearish side for the week to come particularly if Thursday’s nonfarm payrolls report shows the labor market is gaining strength. Positive data will provide the Fed the reason they need to raise interest rates in September.

So now it all depends on the Greece Game and the important US data.

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 -

"An Important Week For Gold: RSBL:

http://riddisiddhibullionsltd.blogspot.in/2015/06/an-important-week-for-gold-rsbl.html

Gold prices Fall after hitting key resistance! - RSBL

                                                               - Mr. Prithviraj Kothari, MD - RSBL

Another buying opportunity or it is a one such half hearted rally? A question that is pushing investors away from the precious metals complex. I would do my best to give you an idea by starting a gist of things that took place over the week.

The above picture depicts the Gold price range for the entire week (Picture taken from RSBL SPOT terminal). The week started off from where it closed, at a doorstep of the key resistance level US$1238. In almost all my previous blogs have emphasized on this particular level, that if broken, we can expect some change in trend. But it didn't. Gold continues to oscillate around USD $1200 with initial support sitting around this level.

Last week did show us, some spectacular movement in Silver where it broke key levels to enter in the range of US$17. Like Gold it did take a beating and US$17 does act as a short term base for the Silver metal. (image taken from RSBL SPOT terminal).


Key levels do make a lot of difference when the metal prices try to change a trend. But what caused this sudden drop:

1. U.S. housing starts jumped to their highest level in nearly 7 and a half years in April and building permits soared, providing hopeful signs for US economy gaining grounds over a dismal first quarter.

2. U.S. CPI data for April showed a +0.1% increase (expected: 0.1%) to mark the third monthly increase. The core CPI too read 0.3% (expected 0.2%), the largest increase since 3-4 years.

3. One of the most prominent news coming out of the week was from Federal Reserve Chair Janet Yellen. While speaking at the Greater Providence Chamber of Commerce on Friday, she addressed, ".... If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the Federal Funds target rate." A step to increase the rate hike is inversely proportional to gold price rise.


That goes without saying that U.S. data is highly influential for movements in precious metal complex prices as the other data that could have given a better support, weren't that influential:

1.  According to the latest CFTC data, hedge funds and money managers have hiked their net long silver stance to a near 10 month high and boosted their bullish gold bets to its biggest since March (+123k contracts, +77k prior week) for the week up to May 19.

2.  Greece cannot make debt repayments to the International Monetary Fund (IMF) next month unless it achieves a deal with creditors, its interior minister said on Sunday, the most explicit remarks yet from Athens about the likelihood of default if talks fail. European leaders told Greece on Friday to return to the negotiating table for "intensive work" to wrap up a reform agreement before cash runs out, sidestepping Athens' demand for a comprehensive, long-term solution to its troubles.

3. Iraqi forces recaptured territory from advancing Islamic State militants near the recently-fallen city of Ramadion Sunday, while in Syria the government said the Islamists had killed hundreds of people since capturing the town of Palmyra.

4. Russia's gold reserves rose to 40.1 million troy ounces as of May 1 compared with 39.8 million ounces a month earlier, the central bank said on Wednesday.

On the domestic front,  India could allow individuals deposit a minimum of 30 grams of gold with banks in return for interest payments to help monetize large quantities of the metal lying with households, a step that is aimed at cutting expensive imports. India released a draft documents of gold monetization plan on Tuesday.


Looking at the price jump from Silver, it does look a strong price comeback for me. I have always asked my readers to be invested in Silver. A metal that has multiple functionality.

With the FED meeting round the corner at Greek debt payment on June 5th, a lot more lies for the price movements in precious metals. Still the range play continues and strong conviction from Bears and Bulls is lacking.

It was a memorial day in US and spring bank holiday in UK, due to which price movements were muted yesterday.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1194 - $1238 an ounce	Rs.26,700 - Rs.28, 500 per 10g
SILVER	$16.70 - $18.00 an ounce	Rs.38,500 - Rs.42,000 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: GOLD CONTINUES TO RISE!
http://riddisiddhibullionsltd.blogspot.in/2015/05/rsbl-gold-continues-to-rise_17.html

RSBL: GOLD BELOW PEOPLE'S RADAR

                                                                                   -By Mr. Prithviraj Kothari, MD, RSBL

Currently, the gold markets seems to be more like a see saw as it remains directionless amid mixed economic data.

Gold got a little lift from its downward trend.  Prices gained 1% for the week as a whole, after revisions to US payrolls data, from March and February, sparked speculation that the Fed could refrain from hiking rates in the immediate future.

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, which have been near zero since December 2008.

Gold remained quite stable and was fairly unchanged on Friday afternoon trading sessions after a lukewarm US jobs report failed to answer many of the questions surrounding the US economy.
The spot gold price of $1,185.00/1,185.80 per ounce was up $1.40 on the previous session’s close. It peaked at $1,193.80 shortly after the release of the US jobs report.

Let’s have a look at the data released during the week-

Employment Data- The US economy created 223,000 jobs in April, which was essentially in line with the 228,000 forecast, while the unemployment rate dropped to 5.4 percent from 5.5 percent in March. Average hourly earnings increased 0.1 percent, slightly below the 0.2 percent expected.
But payroll employment for February was revised from 264,000 to 266,000, and the change for March was revised from 126,000 to 85,000. With these revisions, employment gains in February and March combined were 39,000 lower than previously reported.
The report said that the unemployment rate remained unchanged at 5.4%. The participation rate was also little changed at 62.8% last month.

Since April 2014, the participation rate has remained within a narrow range of 62.7 percent to 62.9 percent. Wage growth saw a smaller than expected rise last month, increasing by three cents or 0.1% to $24.87.  Over the past 12 months, average hourly earnings have increased by 2.2 percent.
The average workweek remained unchanged at 34.5 hours. The weak wage growth was also “disappointing” and could keep the Federal Reserve postpone an eventual rate hike. A trend of firmer wage growth needs to be seen before “before Fed officials are ‘reasonably confident’ that inflation is on the path back to their target.



China- the Chinese trade surplus at $34.1 billion in March was up from $3.1 billion in February but below the expected $34.5 billion. As well, exports and imports both fell further than expected.

German- German industrial production disappointed at -0.5 percent as did the German trade balance at 19.3 billion euros. But Italian industrial production at 0.4 percent was better than expected.
ADP- In another precursor to today’s data, the ADP figure on Wednesday at 169,000 was below the forecast 199,000. A higher number today, however, could underpin a surge in the dollar and ultimately dampen any near-term prospects for gold – particularly while many investors are building the case for a delay to any interest-rate rises.


Dollar- The complex shrugged off a stronger dollar, which at 1.1200 against the euro this morning was building on gains of 0.66 percent on Thursday after US weekly jobless claims at 265,000 were better than the forecast 277,000.

Most financial markets were looking a little stretched, which could create volatility, ultimately supporting gold prices.
If the Federal Reserve is not that confident of a positive economic growth then it is quote expected that the first interest rate hike would be further postponed, which would further benefit gold.

Any negative data coming from US could drive up gold prices above $1200 an ounce.


In the week to come there are two major economic reports that ill have analysts glued to it.
1)    April Retail sales report to be released in Wednesday
2)    Regional manufacturing data for May to be released on Friday from New York

The retails sales reports is expected to rise 0.3% in April. Forecasts for the Empire State survey, show economists expect the index to rise to 5.2 this month, after falling to negative 1.2 in April.

If any of the reports come out negative then it would have a major impact on Fed rate hike expectations.
A weak retail sales number for April still isn’t going to stop the Fed from hiking in September.
Gold has fallen below people’s expectations and it will take something significant to get it back their trust. Until something unexpected happens, eventual rate hikes will continue to overhang the gold market.

Although gold is expected to remain range-bound next week, some analysts do see some positives that could help prices hover above the $1,200 an ounce level.
With little economic data to provide any solid direction for gold, some analysts are looking at outside markets for some guidance.

Apart from the two major US data reports analysts will be tracking the following-
⦁    Bank of England's (BoE) interest rate decision
⦁    GDP data from the UK, Germany and from the Eurozone

Any unexpected geopolitical event like The Greek crisis, for instance, could prop up prices if Athens and EU officials fail to reach a deal needed to release bailout money to the cash-strapped nation.

Analysts are unsure as to how gold prices will move next week and expect bullion to take its cues from the financial markets, where any sign of volatility could help boost the metal's safe-haven status.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1178- $1220 an ounce	Rs.26,500- Rs.27,500 per 10g
SILVER	$16.00- $17.20	Rs.36,000- Rs.39,500 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 -

"A Volatile Week Waits For Gold"

riddisiddhibullionsltd.blogspot.in/2015/05/rsbl-volatile-week-waits-for-gold.html