Pages

RSBL Gold Silver Bars/Coins

Showing posts with label Gold. Show all posts
Showing posts with label Gold. Show all posts

Thursday, 21 June 2018

Trade war fails to weaken the dollar

Gold prices have not managed to stay above the $1300 level- it could be due to a strong dollar or maybe profit taking or even price manipulation. Currently, out of all, gold prices seemed to have been highly influenced by a strengthening dollar.

Gold prices fell to new 2018 lows against a rising Dollar on Tuesday in London, hitting $1274 per ounce as President Trump threatened to hit back at China's retaliation over last week's new US trade tariffs with extra charges on another $200bn of Chinese imports.


Accused of "blackmail" by Beijing, Trump says these extra 10% tariffs will only come into force if China “refuses to change its practices."

This news gave a boost to gold in the Asian markets.

However the metal failed to extend further as offers [to sell around] $1283 restricted top-side gains.

Gold remains bearishly offered, and it’s all about the dollar strength as the greenback rockets higher on EM commodity and the China meltdown. And at least for the time being the markets have utterly forsaken the idea that the US trade war escalation could become ultimately detrimental for the dollar.

Now currently the matter of concern is that why is the dollar showing sign of strength despite an apparently escalating trade war which is unlikely to do anyone any good?

At the moment the dollar strength is two-fold. Key currencies like the Euro, the British pound, the Canadian and Australian dollars and the Chinese Yuan are being driven downwards (hence the dollar appears to be rising), but also money will be flowing into the dollar as perhaps more of a safe haven in times of an ensuing global financial crisis than gold and other precious metals.  We think that this will only be in the short term and we need to wait for some concrete events that will bring in volatility in the markets.

Monday, 18 June 2018

No major catalysts for gold

Gold prices were hit strongly towards the end of the week. By mid Friday, gold was down -1.89% so far on the day and -2.35% from the high set just ahead of Thursday’s ECB rate decision.

While Gold prices held support fairly well through the Fed’s rate hike on Wednesday, the ECB meeting the following morning produced considerable US Dollar strength as the ECB announced stimulus-taper in a very dovish manner.

Gold prices drifted down on Friday on profit-taking after the dollar hit a seven-month peak and the metal failed to find support despite fresh trade skirmishes between the United States and China.


US-China trade "has been very unfair, for a very long time," said President Donald Trump, raising import tariffs to 25% on 1,100 different aerospace, robotics and auto-industry goods and spurring analyst and newspaper claims of a full-blown 'trade war'.

Gold priced in Dollars headed for a weekly loss of $9 per ounce while silver trimmed its gain from last Friday's finish to 1.0%.

Gold briefly touched a one-month peak on Thursday after the European Central Bank said it would hold off on interest rate hikes. But an accompanying surge in the dollar knocked it back.

The dollar has been witnessing some great strengthening powers and that was largely held on to last week.

While the yellow metal is stuck in a range on either side of $1,300 with no major catalyst to break out on either side."

Spot gold was down 0.7 percent at $1,292.51 per ounce at 1300 GMT, after reaching its highest since May 15 at $1,309.30 an ounce on Thursday

Gold deepened losses after President Donald Trump on Friday announced that the United States will implement a 25 percent tariff on $50 billion of goods from China and Beijing quickly said it would hit back with its own tariffs.

Analysts had expected gold to be bolstered by the prospects of a trade war.

The International Monetary Fund said on Thursday that Trump's new tariffs threatened to undermine the global trading system, would prompt retaliation by other countries and damaged the U.S. economy.

Global and U.S. equities failed to revisit their record highs despite some strong first-quarter profit reports, stoking fears of a correction.


On the other hand, as rate expectations out of Europe fell, the Dollar ran-higher and this provided a bit of pressure to Gold prices through the latter-portion of Thursday’s trade. It was shortly after the US open this morning that the selling really got underway, however, and Gold fell down to a fresh 2018 low, finding a bit of support just north of $1,275.

The US Dollar put in a considerable move of strength on the back of that ECB rate decision, and prices ran all the way up to the October, 2017 high before starting to pull back ahead of this week’s close.

This week’s economic calendar is noticeably light on US data, and the more interesting items are coming from rate decisions in Switzerland and the UK on Thursday of this week; so this appears to be an opportune time to evaluate the continuation potential of USD strength, and whether or not we can perch up to fresh 11-month highs.

This is relevant to Gold prices as the two themes appear to be connected, even if the timing is a bit off. The heavy selling in Gold took place on Friday after the US opened for the day, and the Dollar had already started to pullback from resistance. So, while it appears that there is some obvious connection here, there may be another factor at work as Gold prices displayed a delayed reaction to a rather sizable move of US Dollar strength.

Thursday, 14 June 2018

Fed Rate Hike Fails to Dampen Gold Prices

After two days of meetings regarding monetary policy, the US Federal Reserve officially announced the second interest rate hike of the year on Wednesday, June 13.

The Fed lifted the target federal funds rate by 25 basis points, from 1.75 to 2 percent, but the increase had little impact on gold, which remained just below the psychological barrier of US$1,300 per ounce
The US Federal Reserve raised interest rates on Wednesday, and signaled two additional hikes by the end of this year, compared to one previously. Expectations of further US interest rate increases lowers demand for the non-interest-paying asset. Gold as expected to drop post a rate hike, but nothing like that happened.

Gold prices were higher on Thursday, rising above the $1,300 level as the dollar lost the momentum from a decision by the U.S. Federal Reserve to raise interest rates.
Gold prices jumped to $1,303.2 from below the $1,300 level overnight after the Fed’s rate hike decision hit the markets. The prices have held on well above the $1,300 level since then.


Gold prices are denominated in U.S. dollars, so the movement of the U.S. dollar index impacts the gold price. On Thursday, the U.S. dollar index that measures the greenback’s strength against a basket of six major currencies was down 0.03% to 93.53, giving up gains despite a promising outlook for the U.S. economy.

This no reaction movement in gold prices was because a lot of safe-haven demand is expected to take place. The trade war drama is not going to end anytime soon, it is probably going to be exasperated over the next month or so as the geopolitical uncertainties have not been resolved yet.

Rounding out the Fed’s meeting comes the knowledge that the central bank expects US GDP to grow by 2.8 percent in 2018, with economic activity projected to expand by 2.4 percent in 2019. Overall, the economy is expected to grow 2 percent in 2020. The median average of the central bank’s updated forecasts rose from March’s projection to 2.8 percent.

In addition to Wednesday’s interest rate hike, the markets are also reacting to the Fed’s guidance regarding future interest rates. Reports that US President Donald Trump will meet with his top trade advisers on Thursday to decide whether to activate threatened tariffs limited gold’s losses.

Reports that President Trump was preparing to put tariffs on billions of dollars of Chinese goods as soon as Friday raised concerns in the market that economic growth would be impacted. This saw some safe-haven buying emerge and saw gold prices not dropping cosiderbly in spite of a rate hike.


Tuesday, 12 June 2018

Gold witnessing the silence before the storm

Gold prices have continued trading in a quiet manner, unable to break the narrow range that has been established in recent weeks.

Recently prices have remained stuck- between $1282 and $1307 – for three weeks now, as risk-off developments that would typically raise demand for the precious metal were counterbalanced by a strengthening dollar. Gold – which is priced in dollars – tends to weaken when the US currency appreciates, as it becomes more expensive for investors using foreign currencies to buy it.

There seems to be a determined effort to prevent the gold price from moving back above US$1,300 with the movement in the U.S. dollar up or down – which usually has an almost instantaneous effect on the price of the yellow metal

 There are too many debatable geopolitical issues about to happen, any one of which could trigger a substantial gold price rally

NORTH KOREA- The summit between US and North Korea is back on the agenda for next week, and although it may only produce symbolical results, that still bodes well for market sentiment in the sense that the risk of military confrontation is decreasing.

If this happens, we still can’t see the U.S. nuking North Korea, nor the latter attacking U.S. Territories or its allies.  The potential fallout is too extreme.  Nor do we think the U.S., for all its military might, would contemplate a ground war.  The North Korean army is too strong and the potential for unacceptable losses on the American side is too high.  So yet another contentious impasse will likely result but with a return to the escalation in tensions which could be the trigger to set the gold price alight.

But even if Presidents Trump and Kim Jong Un do reach some kind of verbal agreement there are plenty of other imminent flashpoints out there. 

ITALY- In politics, Italy grabbed the spotlight for a few days, but that storm seems to have passed for now. Markets calmed down after the nation finally formed a government, avoiding the scenario of early elections, something that was being framed as an implicit referendum on the euro, with investor anxiety around that prospect sending shock waves across risk assets globally. 

RUSSIA- Russia which may well have a military armoury to match, or even exceed, that of the U.S. has remained aloof from what might be seen as military provocation by the U.S. and its allies.  To perhaps calm things down a little may have prompted President Trump’s call, for Russia to be re-admitted to the global summit meetings – returning the G7 to a G8, although this was rejected by the other G7 members, but could yet be seen as a preliminary move to try and ease tensions.

If this happens, we still can’t see the U.S. nuking North Korea, nor the latter attacking U.S. Territories or its allies.  The potential fallout is too extreme.  Nor do we think the U.S., for all its military might, would contemplate a ground war.  The North Korean army is too strong and the potential for unacceptable losses on the American side is too high.  So yet another contentious impasse will likely result but with a return to the escalation in tensions which could be the trigger to set the gold price alight.

But even if Presidents Trump and Kim Jong Un do reach some kind of verbal agreement there are plenty of other imminent flashpoints out there. 

CHINA- Looking at recent developments, the global trade outlook has grown even more uncertain, and the situation looks likely to deteriorate further before it improves. Whereas things were looking rosy a couple of weeks ago, with the US and China citing progress in talks and Treasury Secretary Mnuchin saying “we are putting the trade war on hold”, the White House soon ‘ruined the party’ by announcing it is considering $50bn worth of tariffs on Chinese goods. The US will announce on June 15 which products will be targeted. Unless the US backs off by then, China is likely to strike back with its own measures in tit-for-tat fashion, reigniting concerns that this could spiral into an actual trade war and potentially triggering another round of risk aversion.

Given signals of a weaker US dollar, U.S. debt, and positive physical demand, it’s only a matter of time until gold breaks above $1,300 an ounce and climbs to $1,400 and gold, which is traditionally viewed as a safe-haven asset in times of economic weakness, should gain its shine again as the current economic cycle reaches its late stages and with expectations that the equity bull market is coming to an end.

While the geopolitical arena seems to be posing less of a risk for markets, developments around global trade have not been as encouraging, leaving investors with little motivation to alter their exposure to havens like gold. That might change soon though, depending on how the US-North Korea summit and the upcoming Fed meeting play out, alongside whether the White House will finally impose another round of tariffs on China.

Whether gold has been weak because of a stronger dollar, a seeming easing of immediate geopolitical tensions, U.S. Fed interest rate moves, seeming strength in the U.S. economy, or due to continuing moves to suppress the price by the powers that be as some would have it, the bears are currently taking advantage, but this could turn around quickly should any of the stronger potential geopolitical issues blow up in our face.

Monday, 4 June 2018

Gold - A hedge tool against market risks

Last week gold witnessed a lot of volatility in the market but not much uptrend. It repeatedly failed to penetrate the resistance level of $1302 an ounce. And by the end of the week gold was expected to take a huge leap provided the US nonfarm payrolls data would have been way beyond expectations.
But nothing like that happened. In fact gold dampened post the data release.

Gold settled back below $1,300 an ounce on Friday, as upbeat monthly U.S. employment data buoyed the dollar and suggested that the Federal Reserve remains on track to raise interest rates later this month and later this year.


Relative calm also returned to Italian politics, a move also seen helping to pave the way for U.S. action on rates.

Data released on Friday showed that
the U.S. created 223,000 new jobs in May,
Unemployment was down to an 18-year low of 3.8%.
Institute for Supply Management’s manufacturing index rose to 58.7%, up 1.4 percentage points from April and a two-month high.

Gold was pressured downwards due to
Great job numbers
lower unemployment rate
increased labor participation rate
ISM


This data can further help and support Fed officials to hike the interest rates again in June and further keep them on a gradual hiking place.

Rising real interest rates impact the opportunity costs of holding gold because the metal provides no yield, and entice investors to rotate into riskier assets like stocks. Higher rates may also boost the value of the dollar which usually moves in the opposite direction of the gold price.

Market players had expected European geopolitical tensions to influence gold prices and pull it across the $1300 mark, but it seems that gold will be having a tough time to scale that point.
Apart from the US data and other issues, gold is also being influenced by other global issues.
There is currently a wave of populism riding in Italy that is sure to bring more volatility to the markets, and with financial unrest comes a surge in gold.

Italy is experiencing a contagion problem around the build-up of debt that originated with the 2010 debt crisis.

In 2010, the concern was that most of the bad loans in Italy and Spain were owned by French and German banks, and the E.U. since then has escalated by 300% owning these bad performing loans," he said.

Mounting non-performing loans mean that credit default swaps may rise, and banks may opt to buy gold bullion as a hedge against market risks.

History says that trying to trade gold bullion as a political or short-term ‘safe haven’ is unlikely to pay. Smarter traders have in fact gone the other way over recent months, selling when the headlines screamed crisis and buying back when prices then eased. Or take the long view, and use gold to balance the risk of extended falls in the stock market.

It isn’t guaranteed to work. But that is how things have tended to play out for the ‘safe haven’ metal.

Monday, 28 May 2018

Gold might rally soon

Gold has performed quite well over past few years.  In late 2015 it touched $1,050 an ounce, it had a nice progression into 2016 and 2017. Here we are in 2018, and the gold price has been up above $1,300 through most of the year, and it looks like it’s very well supported, for varied reasons.

There are many factors that are influencing or rather supporting gold at this point of time.

Gold has actually been in a rather tight trading range, trading from the upper $1,200s to $1,300 an ounce to $1,370 an ounce, probably because there’s the view in the marketplace that there’s other opportunities, whether it’s in other equities or perhaps small-cap stocks, biotech, cannabis stocks or cryptocurrency-type stocks. And yet gold is doing what it’s supposed to do, it’s providing a hedge to monetary policy. Year-to-date, the dollar has been quite weak, and gold has actually done quite well.
Gold has been rising along with inflation, oil prices and commodity prices. Gold market is actually “rather constructive” right now due to a number of factors, including the amount of credit that’s being created and the recent US tax bill.



 I think it’s had a number of attempts to break through that $1,365 or $1,370 mark and it might break through this level in 2018. There are definitely many aspects that are building whether it’s the deficits or the geopolitical environment. Gold was very responsive in March over the Syrian attacks and with the North Korean developments, but due to certain political uncertainties in the US, it was actually difficult to understand US’s political agenda which has kept the gold prices underpinned.

Until then, gold seems to have carried the green territory forward in the past week too. Gold prices posted the largest one-day gain in six weeks as global risk aversion sent capital flows rushing to the safety of Treasury bonds. That pushed yields lower and bolstered the relative appeal of non-interest-bearing alternatives epitomized by the yellow metal.

Gold prices surged on Thursday, propelled above $1,300 per ounce as the U.S. dollar weakened, after U.S. President Donald Trump called off a summit with North Korea, stoking political tensions. Trump cancelled the meeting with Kim Jong Un, planned for June 12, even after North Korea followed through on a pledge to blow up tunnels at its nuclear test site. The cancellation prompted investors to seek a safe store of value. Rising demand for the yellow metal pushed its prices higher.           
Spot gold gained 0.9 percent at $1,305.18 per ounce during Thursdays trading hours. Gold got momentum on news the North Korea meeting was cancelled but Before the North Korea news, spot gold was slightly firmer but had been losing ground for weeks, shedding 5 percent since touching $1,365.23 on April 11, the highest in nearly three months.

Currently, it’s a bit difficult to find any factor that would go against gold and influence its prices downward. The glittering metals safe haven appeal also glittered after the U.S.launched a national security investigation into car and truck imports that could lead to new tariffs similar to those it imposed on steel and aluminium.           
 
Furthermore, Turkey has been in the spotlight and the lira weakened more than 2 percent, the day after a huge emergency interest rate hike intended to stem its slide.       
  
Gold was also buoyed by a weaker dollar, which slipped to a near two-week low against the Japanese yen, and lower U.S. Treasury yields. Adding to the rally, we saw the minutes of the Fed meeting that were les hawkish on interest rates.

And if these reasons aren’t enough, the bullishness is also related to the fact that US' expansionary phase is in the late cycle.

Gold has historically rallied even after business cycle starts to turn. And also rallied even if the US economy starts to fall into recession and currently Dollar strength looks as f it will fade away soon.
We might also see the European and Japanese market strengthening which might further weaken the dollar and create an inverse relation with the yellow metal this creating a rally in gold prices once again.

The markets’ mood soured as President Trump called for a similar probe into auto imports that preceded the recent steel and aluminium tariff hike. Canada is a major importer of motor vehicles into the US, so the move casts a cloud over NAFTA renegotiation efforts. He then cancelled a June summit with North Korea’s Kim Jong-un, ominously hinting that the US military is prepared to take whatever action necessary.

The gold price may not be as high as some investors want it to be, but according to Doug Groh, portfolio manager at Tocqueville Asset Management, the yellow metal is performing just as it should be.

“Gold is doing what it’s supposed to do, it’s providing a hedge to monetary policy,” he said at the sidelines of the recent Mines and Money conference in New York.

Groh emphasized that it’s important for investors to remember that gold is “not necessarily supposed to [put on] a performance in a portfolio … it’s a sense of security and store of value.” He added, “Gold offers an alternative in a portfolio in that it’s not correlated to other assets.”

Monday, 21 May 2018

Gold to rise soon

Gold prices closed the week below $1,300 an ounce for the first time this year, after posting the largest weekly decline since December 2017. The biggest drop was on Tuesday when the precious metal plunged more than 2%.

Following a strong sell-off last Tuesday, Gold closed below a multi-month trading range that it had been contained within since January of this year, indicating that bears have won control at least temporarily. Because of this shift in price action dynamics in Gold, we are now watching upside moves / strength for potential sell signals at resistance levels to get short, as we believe there’s potential for more downside in the coming days

The downside was carried forward to the present week. Gold prices edged down on Monday as the dollar rose and demand for safe-haven assets eased after U.S. Treasury Secretary Steven Mnuchin said a trade war between China and the United States was “on hold”.


Spot gold was down 0.2 percent at $1,289 per ounce during early trading hours on Monday.
The dollar rose versus the yen and hit a five month-high against a basket of currencies on Monday, after Mnuchin’s comments downplaying a trade dispute with China, boosting risk sentiment amid hopes for an easing of trade tensions between the world’s two biggest economies.

A stronger dollar makes dollar-denominated gold more expensive for holders using other currencies. Furthermore, rising U.S. interest rates and the expectation that U.S. Federal Reserve will raise rates again next month, limits investor demand in non-yielding bullion.

Adding fuel to fire we saw, Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.1 percent to 855.28 tonnes on Friday.

After slumping over the past few months, some think that rally in gold prices will soon be over. Prices have fallen more than 5% since their April high and on Tuesday slipped below a key level $1,300 for the first time this year. Markets have been positioning for rising interest rates, which tend to move opposite of gold prices with regard to the opportunity cost of non-interest bearing assets.
But our analysts believe that this downfall won’t last long and there are reasons, more than one, which supports the fact the gold prices will rise in the short term-

European Crisis- Signs of turmoil in Europe may help revive haven demand for gold. In Italy, bonds and stocks plunged Friday, as the Five Star Movement and the League reached a coalition agreement to govern the country, outlining proposals that may pressure public finances.

It seems that debt crisis in Italy would have a far bigger impact than one in Greece.

Demand for gold from China - Chinese jewellery sellers are working to attract a prosperous, more sophisticated, younger generation of customers by expanding and diversifying its selection. Following a slow retail year for jewellery in 2017, China is looking forward to strong sales in 2018. Withdrawals at the Shanghai Gold Exchange have been above average at 170 tons monthly. April’s demand for gold was up 28 percent from 2017.

With political tensions between the U.S. and China escalating, Chinese investors are turning to gold bullion as an economic hedge. First quarter 2018 saw the demand for gold at 78 tons.

In addition to jewellery, the Chinese government has been actively increasing its gold supplies for the past decade, along with its ally, Russia. This move is believed to precede China’s plan for a gold-backed Yuan, which could significantly devalue the U.S. dollar and could replace the dollar as the global reserve currency of choice. If this happens, the price of gold is expected to rise to new, unprecedented heights, along with a political power shift from the West to the East.

Gold has always been in demand for its intrinsic value. If current trends continue and the demand for gold accelerates at its current rate, the price of gold will skyrocket.

The dollar -The "trade-weighted" gold price, a measure of the value of gold based on major currency movements, suggests that dollar strength explains much of the recent weakness in gold prices.
And though the euro has fallen nearly 5% against the dollar over the past three months, the two currencies may switch places soon which could further provide some support to the price of the yellow metal.

Demand for inflation hedges - Both inflation and expectations for rising prices have been steadily rising this year - personal-consumption expenditures hit the Federal Reserve's target of 2% in March. And while the central bank is on track to raise rates at least three more times this year, inflation jitters could still drive investors to the ultimate safe haven asset that is gold.

This, in turn, could feed through into higher demand for inflation hedges, like gold which means a rise in gold prices too.

Investors this week will be keeping a close eye on the minutes of May’s Federal Reserve meeting, to be released Wednesday, along with preliminary purchasing manager indexes in the euro zone. Geopolitics remains in focus as South Korea’s president visits Washington to discuss North Korea and Brexit negotiations resume in Brussels.

Monday, 14 May 2018

Reserve Bank of India adds 2.5 tonnes of gold to forex reserves in Q4

This was the first instance of gold being added to the forex reserves since 2009

The Reserve Bank of India (RBI) has added 2.5 tonnes of gold to foreign exchange reserves for the quarter ended March 2018 in two tranches.

This is the first such addition after 2009, when the central bank bought 200 tonnes of the yellow metal from the International Monetary Fund (IMF) at $1,032 per tonne. According to IMF data (updated till March 2018), India’s gold holding in forex reserves rose to 560.3 tonnes by the end of March 2018. The RBI did not respond to email queries till the time of going to press.“The addition looks like a pilot purchase. The net impact is that reserves are up marginally. This is not significant and does not imply strategic addition, unless we see a creeping acquisition trend,” a source said. “This was a decision taken by the government before the Budget presentation. But due to the sensitivity of the issue, it was not announced,” another source added. Globally, central banks, including in Russia and Turkey, add gold to forex reserves to hedge against the dollar. The Turkish central bank announced a policy in May 2017, replacing the dollar as a prominent asset in its foreign exchange reserves. Turkey’s commercial banks also hold huge gold deposits.



These are placed with the central bank under the reserve option mechanism. The country is the 11th largest gold-holding country in forex reserves at 595.5 tonnes. Russia has been buying over 200 tonnes of gold per year since the last three years to add to its forex reserves and reduce dollar dependence. Its reserves are bigger than China’s, making them the sixth largest in the world. Russia and China buy most of their gold locally since they are prominent gold miners.

According to sources, India could add gold mobilised by the Gold Monetising Scheme to its forex reserves. The RBI was likely to have purchased gold in March from two London-based banks, they added. Gold buying by central banks has been on the rise in the last few years, with 350 to 400 tonnes of gold being bought annually. China buys gold locally, but announces with a lag. However, according to GFMS Thomson Reuters, China will buy gold this year to add to its reserves after two years.


Source : http://www.business-standard.com/article/finance/reserve-bank-of-india-adds-another-3-1-tons-of-gold-to-forex-reserves-118051000349_1.html

Tuesday, 1 May 2018

As dollar strengthens, the yellow metal weakens

Spot gold was up 0.1 percent at $1,318.52 past week, not far from a low of $1,315.06 hit in the previous session, it’s weakest since March 21.

The metal was on track to finish the week down more than 1 percent for its second consecutive weekly decline and the biggest weekly drop in four.

The strength of the U.S. dollar - combined with the weakness of the euro zone currency after (ECB chief) Mario Draghi’s speech - is pushing down the yellow metal.


The dollar hit a 3-1/2-month high against a basket of currencies on higher U.S. yields while the euro was hampered by a dovish tone from the European Central Bank. On Wednesday the benchmark 10-year Treasury yield reached its highest since January 2014 at 3.035 percent. A rise in U.S. bond yields pressures gold by reducing the attractiveness of non-yielding bullion, which is priced in dollars.

Thursday’s trading started on a weak footing, but most of the metals ended the day in positive territory, which suggested dip buying and support are features of the market. Precious metals prices were little changed on Thursday morning, with gold and silver prices off by 0.1% – with the former at $1,316.54 per oz. Meanwhile, the platinum group metals were both up by 0.1%.

Gold continued losing ground through the early NA session and is currently placed at fresh 6-week lows, around the $1312-11 region.

After Friday's corrective bounce, resurgent US Dollar demand was seen as one of the key factors weighing heavily on dollar-denominated commodities - like gold at the start of a new trading week.  Gold prices retraced upward in what looked like a correction after higher and sent the yellow metal to a one-month low.

Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off. This rise in the dollar seems to be weighing on gold and is likely to be a headwind for metals’ prices generally.

Recent increases in geopolitical tensions and rising commodity prices, especially oil, seem to have spurred inflationary concerns that have led to stronger bond yields and in turn that has lifted the US dollar, with the dollar index at 90.97. This has broken above the previous peak at 90.94 from March 01.

At their summit on Friday, North Korean leader Kim Jong Un  and South Korean President Moon Jae-in declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the "denuclearisation" of the Korean peninsula.           

North Korean leader Kim Jong Un and South Korean President Moon Jae-in on Friday declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the “denuclearisation” of the Korean peninsula.

The signs of detente in the North Korean conflict are ... contributing to the lack of solid demand for gold as a safe haven at present

Further as tensions o the Korean peninsula eased, the European shares rose after a positive session among Asian stocks overnight. The dollar index rose 0.2 percent on Monday, 30th April, holding just below its strongest since mid-January.

Gold fell at the start of this week, pulling back towards last week's more than one-month low as easing tensions on the Korean peninsula boosted appetite for assets seen as higher risk, such as stocks, and lifted the dollar.
   
The metal slid 1 percent last week on the back of a stronger dollar and a rise in Treasury yields to above 3 percent, which weighed on interest in non-interest bearing assets. On Thursday, it hit its lowest since March 21 at $1,315.06 an ounce.

That has left it on track to end April down 0.5 percent, erasing all the previous month's gains.
Spot gold was down 0.4 percent at $1,316.15 an ounce during trading hours.
   
Meanwhile, the Fed’s favoured PCE inflation gauge is expected to put core price growth at a 13-month high of 1.9 percent.

The latter would put the Fed within a hair of at least ostensibly meeting its dual objectives. Policymakers aim for inflation of 2 percent to be sustained in the medium term – abating the significance of a single month’s reading – but another sign of steady progress may reinforce the case for tightening.

Gold may return to suspicion, if this materializes as the prospect of higher rates sustains the US Dollar, undercutting demand for non-interest-bearing and anti-fiat assets.

   

Tuesday, 24 April 2018

Has the golden streak ended

Gold was seen under pressure since the middle of last week and has continued this sentiment for the current week now, testing vital support ratios near the 1330.00 U.S Dollars per ounce level. The precious metal stumbled as the Dollar gained in forex against the other major currencies.

Gold prices fell $4.02 an ounce last Thursday, ending a four-day streak of gains, as geopolitical tensions eased and the dollar strengthened on the back of solid U.S. economic data. Gold failed to test the resistance at $1354 and was unable to break through it .As a result, prices broke below $1347.

In economic news, the Labor Department reported that the number of first-time applicants for jobless benefits fell last week for the third time in four weeks and the Federal Reserve Bank of Philadelphia said the index measuring manufacturing activity in the region climbed to 23.2 from 22.3 the prior month.



This strong news supported the US dollar which in turn created a downward pressure on the yellow metal. 

Also pressuring bullion, a U.S. central banker said the Federal Reserve should keep raising interest rates this year and next to keep the economy from overheating and financial stability risks from rising. Higher rates dent the appeal of non-interest yielding bullion while lifting the dollar, in which it is priced

U.S. interest rates futures fell on Friday as traders bet on a greater likelihood the Federal Reserve would raise key short-term borrowing costs three more times in 2018 in the wake of data that showed steady U.S. economic growth.               

Spot gold lost 0.6 percent at $1,336.96 per ounce by and was headed for a weekly decline of nearly 1 percent.

What’s funny is that over the past fortnight the main reason that pushed gold prices high the same reason was responsible for its downward movement last week, thanks to the easing out of geopolitical worries. Investors were less jittery about geopolitical tensions that had supported gold prices earlier in the week, notably Syria and North Korea.

U.S. President Donald Trump said on Sunday the North Korean nuclear crisis was a long way from being resolved, striking a cautious note a day after the North's pledge to end its nuclear tests raised hopes before planned summits with South Korea and the United States.             

Though the geopolitical crisis are still high, but it looks like their severity has declined over past few days and hence gold prices are lying lull.

Gold is often used as safe haven in times of uncertainty and any easing out of such situations will surely pull down gold further.

Gold prices eased on Friday and were on track to end the week lower as the dollar advanced on expectations of higher U.S. interest rates and market players grew a bit less worried about global political and security risks.

This negative sentiment has been forwarded in the current week too. Gold prices slipped to their lowest level in nearly two weeks on Monday as the dollar remained supported on the back of rising U.S. Treasury yields. 
 
Spot gold was down 0.1 percent at $1,333.20 per ounce during Mondays trading hours, after earlier touching its lowest since April 10 at $1,331.70. The dollar index, which measures the greenback against a basket of currencies, was up about 0.1 percent at 90.392.
           
Gold, however, does continue to show important support around 1323.00 U.S Dollars per ounce and if the commodity declines further, traders might look for reversals. But patience will be an important piece of the puzzle for market participants.

The chief investment strategist said that gold is an excellent asset to invest in this year, as it guards against sudden shocks and rising volatility, especially in light of all the trade-war fears rocking the markets. Folts added that his preference is gold-backed ETFs.

Investors have also been picking up on geopolitical risks and buying gold ETFs as security. Bloomberg reported last week that the popularity of gold-backed ETFs was at its highest level since 2013.

Monday, 16 April 2018

Get ready to see Gold on a roller coaster ride

While in the domestic markets we saw jewellers preparing in full swing for Akshaya Tritiya, in the global markets we saw gold moving in full swing.

Jewellers are expecting 15-20 per cent increase in sales this Akshaya Tritiya, mainly on the back of positive market sentiment, stable prices and ongoing wedding season.

Apart from the auspicious occasion of Akshaya Tritiya the wedding season is also lined up for the month of April, May and June, which has raised the demand for gold further. As buyers expect further rise in gold prices, they have started making their purchases to avoid any further price rise.


Overall there is a positive sentiment in the market so a sales growth of 15-20 % is expected this Akshaya Tritiya.

Globally so far, gold has risen more than 3 percent this year, marked by international tensions and volatility in equities, but has yet to emerge from a tight trading range in the face of an expectation for rising U.S. interest rates.

Prices for gold this week rose to their highest levels since Jan. 25, as escalating tensions in Syria, U.S. sanctions on Russia and the U.S.-China trade stand-off weighed on global equities and the U.S. dollar index.

Gold's safe haven status was tested this week as Donald Trump's economic war threatened to turn into a shooting war, with a number of global spots getting hotter. Precious metal moved from a close of $1325.69 an ounce on April 5 to $1337.90 on April 12, dipping on Thursday after reaching a high of $1364.50 during Wednesday morning trading – the highest it's been since Feb. 14
So far, Gold has also outperformed all other precious metals this year.

The headlines this week have been full of escalations of continuing and new conflicts around the world. Here is a rundown-

Trade Wars- Countries over the world are now dependent on each other for exports and imports.
Many major American companies that are household names such as Starbucks (SBUX), Boeing (BA) and Apple (AAPL) rely on their exports (and imports) from China for a sizable portion of their overall sales and profits.

But the escalating trade war between China and US could hurt the revenues of these companies as each country is retaliating with its own harsh measures.

But there are news revolving in the markets that has China just recently launched a new $1.6 billion initiative called “Made in China 2025.”

This initiative would focus on an increase in research and development spending thus making China more self dependent which will further help companies to rely less on international technology and equipment. The more China buys internally, the less it will buy American products or need to export to the U.S.

That means it could shift its trade focus away from the U.S., while purchasing fewer American goods. All of that could hurt manufacturers in both countries and increase volatility into the share prices of companies involved.

Geopolitical- There is rising tensions on the geopolitical front as US is expected to attack Syria any moment now in response to the chemical attack against civilians last week. But Russia has warned that in this course if Russian military personnel are harmed in any manner then US should be ready to face “grave consequences"

Now that President Trump has John Bolton as his National Security Adviser, the geopolitical spot has increased even further. On Feb. 28, Bolton published an op-ed in the Wall Street Journal supporting a preemptive nuclear strike against North Korea.

On Wednesday Trump cranked up the threats, tweeting “Get ready Russia, because [missiles] will be coming, nice and new and 'smart'!” which caused the spike in the gold price. Later he appeared to open a window to a more peaceful solution, tweeting that “it could be soon or not so soon at all,” causing gold to lose its earlier momentum.

That gives us an insight into what policy recommendations President Trump might be provided with now.

Even the perceived threat of diplomatic fallout and rumors of a military response can elevate volatility. War games between the U.S. and North Korea would be expected recoil — and that would mean uncertainty over China’s response.

That would give greater rise to volatile conditions in trade, regional security and stability on the Peninsula. By isolating China — North Korea’s top economic partner and military alley — tensions would only escalate.

Needless to say, any armed conflict between two nuclear powers carries great potential risk. One single incident could trigger an escalating spiral.

US Political Risk- November will also bring along a lot of volatility and uncertainty as midterm elections are going to be held.

The U.S would be caught up in more political instability that will harm market stability which further raises concerns that markets are being left uncertain and pondering to guess what happens next?

The world has become a much more dangerous place in the last few weeks. Between competing naval exercises in the South China Sea, a chemical weapons attack in Syria, US and European sanctions on Russia, a likely showdown over the Iran nuclear deal, and a host of other (i.e. India v Pakistan) conflicts not even mentioned here, investors have reason to turn to safe-haven assets – and gold has benefited.

Threats of war are always factored into the safe-haven value of gold on any given day, but we may be witnessing a sea-change where it is difficult to imagine a return to any sense of normalcy anytime soon – especially given Trump's determination to put America's interests first despite ruffling a lot of feathers with both allies and adversaries.

Given these hotspots for the next three months or even further, we expect gold to move on a rollercoaster ride.


Tuesday, 10 April 2018

Gold expected to rise moderately

While gold has primarily been stuck within the US$1,310 to $1,350 range this year, it managed to rise 3.61 percent during Q1 2018.

The yellow metal gained some first-hand experience in market volatility during the period, as inflation gave it boosts while US Federal Reserve interest rate hikes brought pressure down
On the other hand, United states willingness to resolve an escalating trade fight with China, pulled back gold prices from one week highs reached in the earlier trading sessions.


The United States voiced willingness on Wednesday to talk with China after Beijing retaliated against proposed U.S. tariffs on $50 billion in Chinese goods by targeting key American imports.
As investors pulled out of gold, Asian equities rebounded from two-month lows with investors hoping a full-blown trade war between the world’s two biggest economies can be averted.

Spot gold was down 0.3 percent at $1,329.11 per ounce by 0409 GMT, after touching a one-week high of $1,348.06 on Wednesday.

But what looked like an eased out situation, became a bit tense after economic numbers came in from U.S. Gold prices rose on Friday, as Wall Street stocks tumbled and the dollar fell as rhetoric from U.S. President Donald Trump and Chinese officials fed worries about a possible trade war, and after U.S. jobs data came in weaker than expected.

U.S. stocks fell, with the Dow down more than 450 points, after Trump on Thursday threatened to slap $100 billion more in tariffs on Chinese imports, and Beijing pledged a “fierce counter strike”.
Falling stock prices dragged the dollar against the yen and the euro. Also pressuring the U.S. currency was data showing the U.S. economy in March created the fewest jobs in six months, which might prompt the Federal Reserve to go more slowly on plans to raise interest rates.

An intense trade war between US and China kept gold exposed to fluctuations. And hence the market is paying very much attention to the dollar and bond market in terms of what the Fed is going to do.
While any escalation in geopolitical tensions will raise the demand for the yellow metal, we already see an increase in the demand from the Indian markets.  Though demand for gold in whole of Asia was muted, there is a slight pick-up in buying in India ahead of the wedding season and a key festival.

This month Indians will be celebrating the annual festival of Akshaya Tritiya, when buying gold is considered auspicious.

Moving back to global worries, gold in the near term is exacted to raise moderately – Reasons being

  • A weakening US dollar: A tightening monetary policy in Euro zone will result in the US dollars downtrend. And changed in the US fiscal policy will also have negative effect on US dollar, thus proving to be positive for gold.  The US dollar’s downtrend will resume later in the year. “One key reason behind this is the impending tightening of monetary policy in the Euro zone, given that the euro accounts for nearly 60% of the dollar index,” the report states. It also mentions changes to US fiscal policy, which could have a ripple effect on the US dollar yield curve.
  • Volatility in equity markets. - The markets are too optimistic and bullish for equities and this over confident attitude could backfire, resulting in spiking gold prices.

These not so extreme, but moderately influential factors might spike gold prices in the near term but not to a great extent.

Monday, 2 April 2018

A bad week but a good quarter for gold

It wasn’t a much pleasant week for gold as it posted its biggest one-day percentage fall in nearly 9 months.

On Wednesday, the yellow metal suffered its biggest one-day loss since February to settle at a one-week low, reacting to a firmer dollar as it deepened a pullback from the more than one-month highs seen earlier in the past week.

Though there was a moderate weakness seen in the US dollar, the yellow metal didn’t much benefit from it. Gold continued to remain under some selling pressure consecutively on Wednesday and failed to employ any positive movements.




Wednesdays’ fall saw gold retreating around 2.5% from near 6 week tops that it touched on Tuesday. Gold posted its biggest one-day percentage fall in nearly nine months on Wednesday after robust U.S. data lifted the dollar, which steadied at those strong levels on Thursday.
   
Gold prices are currently flat after a big move down on Wednesday. The culprit for the move in gold appears to be recent strength in the US dollar. As gold is traded against US dollars, a stronger currency pushes down the precious metal in relative terms.

Even the ongoing slide in the US Treasury bond yields did little to lend any support and stall the non-yielding yellow metal's downfall to over one-week lows.

On the other hand, the European equity markets created bullish sentiments for gold. Furthermore, gold prices held largely steady on Thursday, as tensions over North Korea and global trade eased.
 
North Korea's leader Kim Jong Un pledged his commitment to denuclearisation and meet U.S. officials, China said on Wednesday after his meeting with President Xi Jinping, who promised China would uphold friendship with its isolated neighbour.

Gold prices slipped on Thursday as the U.S. dollar held its strong gains from the previous session, but simmering tensions over Russia and a potential trade war offered underlying support.

Moscow threatened to retaliate after the United States and other Western countries expelled more than 100 Russian diplomats over the poisoning of Russian former double agent Sergei Skripal and his daughter in England with a military-grade nerve toxin.
                         
Though gold had a bad week, but for the quarter gold fared well. Often seen as an alternative investment at times of political and financial uncertainty, gold was on track for a third straight quarter of gains, up 1.7 percent as of Thursday as United States precious metals markets were closed on Friday for the Good Friday holiday.

While spot bullion was little changed at $1,325.17 an ounce on Thursday, the metal was up 1.7 percent this quarter, following a 1.8 percent gain in the final three months of last year. The rise comes even as the Federal Reserve has been pulling the trigger consistently on U.S. interest rates and despite Wednesday falling by the most since July.

Gold’s haven qualities have come back in focus this year as a series of events were witnessed-

  • President Donald Trump’s administration picked a series of trade fights with friends and foes escalating global tensions.
  • Investors worry about equity market wobbles that started on Wall Street and echoed around the world. 
  • Geopolitical tensions with North Korea 
  • Trump’s pick of John Bolton as his new national security adviser spurred speculation of a potentially harder line against Iran


As these series of events will increase safe haven buying in gold, what raises concerns is whether this rising demand will be met. Furthermore growing geopolitical risks could concerns of supply-side issues in the oil market.

Wednesday, 21 March 2018

Gold - An Investor's Favorite

It seems that after years of under performance gold is here once again to glitter. In one sense, gold is doing what it’s supposed to do. Widely regarded as a safe haven, gold is counted on to provide stability during times of stress. By holding firm as other asset classes were thumped, gold successfully fulfilled that role.

Regardless, ETF Securities’ Gold says that it’s not the short-term movements in gold that matter; the yellow metal really shines as a safe haven during prolonged market downturns.

Gold prices have been trading in the range of $1,100-$1,400 an ounce since 2013, after hitting the levels of more than $1,800 in 2011.  On Thursday, international spot gold was at $1,319.13. Going forward, the macro theme of higher inflation and interest rates is expected to continue and that would provide underlying support for gold.


Gold prices ended Friday at their lowest level in just over two weeks, generally tethered to the dollar this week yet supported by persistent global political and trade tensions given the metal’s haven-asset status.

However, Friday’s “trading action indicates that the impact of political turmoil is fleeting and that investors’ primary focus remains on the economy and monetary policy,”
There are many influential factors that create bullish sentiments for the yellow metal in the near term. Let’s have a look at them.

Gold ETF’s- If we look at investment flows so far this year, for the first time in many years, money is flowing into broad based commodities indices. The ETF [Exchange Traded funds] comes with the whole specter, that indicates the diversification aspects as they move from potentially higher inflation or interest rates scenario and this money is going into precious metals through ETF.

The increased allocation that we have witnessed over the past few years in ETFs as a safe haven or diversifies has been increasing and that will further support gold prices.

Rate Hike - Higher inflation and interest rates have been always supportive of the yellow metal, which is often seen as a hedge against any increase in the consumer price index. Rate hikes has been the best buying opportunity for gold during the past 2 years, since the present cycle has been ongoing. So long as we don’t see any accelerated cycle of rate hikes in the US, gold is going to perform reasonably well. We are buying gold as a hedge against inflation, geopolitical uncertainty, against worries about stocks markets, and all these drivers are still there,” Hansen said.

Economic Data - The market has been confined in a relatively tight range and so, gold market-timers looking for a buy signal need a clearer bearish sign. U.S. economic data Friday, ahead of next week’s Federal Reserve decision on monetary policy, showed February housing starts were down 7%, while industrial production for the same month jumped 1.1%. Consumer sentiment in March hit 14-year high. If the US overheats, and that would lead to worries about disinflation or deflation, we would see a bigger correction in stock markets, and that would have a positive impact on gold.

Demand from India and China - Gold’s qualities make it one of the most coveted metals in the world and a popular gift in the form of jewelry. From the beginning of the Indian wedding season in September until Chinese New Year in February, the price of gold tends to rise due to higher demand from the two biggest consumers of gold, China and India.

Global economic conditions - current economic conditions make an even greater case for gold. The stock market is still on a historic bull run, and the tax reform bill is helping ratchet up share prices. It’s important to remember that the precious metal has historically shared a low-to-negative correlation with equities. For the past 30 years, the average correlation between the LBMA gold price and the S&P 500 Index has been negative 0.06.

US political issues - Traders in the financial market have been weighing the potential for more turmoil in the Trump administration. Media reports said the president was planning to sack his national security adviser H.R. Mc Master, which would be the second high-profile firing from the White House this week. Secretary of State Rex Tillerson was fired on Tuesday and replaced with Central Intelligence Agency Director Mike Pompeo.

Trade war - While personnel issues unfold, concerns over a possible trade war between the U.S. and key trading partners were still weighing on investor’s minds as well, analysts said. The White House said on Wednesday it will seek to trim the U.S.’s trade deficit with China by $100 billion, using tariffs. The European Union, meanwhile, was working to get the bloc exempt from the tariffs.

Since markets strongly believe that gold is here to stay, it has once again become an essential part of an investor’s portfolio due to its history as a protector against inflation.

Gold has also performed competitively against many asset classes over the past few decades. This makes the metal, we believe, an appealing diversifier in the event of a correction in the capital markets.

Thursday, 15 March 2018

Economic & Political Uncertainty key drivers for gold

Gold has now recovered from being negative to close higher on three occasions in as many days since Friday. The yellow metal’s has performed well since Friday’s jobs report was released. The precious metal has been supported above all by the dollar, which has remained under pressure. The greenback was unable to benefit meaningfully from Friday’s jobs report, which showed strong gains in non-farm employment and weak wage growth in February. On Tuesday, economic and political pressures were hitting dollar thus resulting in a weak performance.

The dollar has also been damaged by ongoing political concerns at the White House, which also had allusions for the stock markets as it elevated investor ambiguity.  Donald Trumps’ stand on international political issues mainly The Iran Nuclear deal and the North Korean regime changes are not seen with much respect globally.



Moreover, the appointment of Pompeo will be yet another supporter of Trump’s protectionist trade policies, which is what the stock markets worried about on Tuesday.

The highly anticipated Consumer Price Index measure of inflation for February failed to better expectations and after Friday’s weakness in wage growth, it underscored expectations that prices are not as hot as had been expected, decreasing the odds of aggressive rate hiking from the Federal Reserve. However, the Fed is highly likely – almost certain – to raise interest rates by 25 basis points next week

But it is not only about the current rate hike- what matters is the FOMC’s outlook for interest rates further into 2018 and beyond, which will be the main focal point for the markets. If recent data, including Tuesday’s relatively moderate inflation numbers, have helped to weaken policymakers’ urgency for higher interest rates then this could put further downward pressure on the dollar and support buck-denominated gold.

However, if the Fed turns out to be more in favour of higher interest rates, perhaps because of expectations that high levels of employment may lead to higher wages and therefore higher inflation in the future, then this could be the trigger for a dollar rally, and a gold sell-off.
Over the next few days, the $1300 per ounce mark will be tested for the yellow metal and in case gold prices recover again after the Fed meeting then markets remain bullish for gold.




Monday, 12 March 2018

A turbulent week for gold

It was certainly a turbulent week for the yellow metal, as the combination of political uncertainty and U.S. rate hike expectations attracted both buyers and sellers. Though there was lot of volatility in the market, the precious metals continued to hold a well-defined range after turning sharply from key support last week and prices struggled to hold on to the early March gains.

On Friday, gold managed to pare some of its early losses to fresh weekly lows but held in negative territory through the mid-European session.



Gold prices extended losses into a third session on Friday as the dollar strengthened against the yen on hopes of easing tensions between the United States and North Korea and ahead of U.S. non-farm payroll data later in the day.

U.S. President Donald Trump said on Thursday he was prepared to meet North Korean leader Kim Jong Un for the first U.S.-North Korea summit, marking a potentially dramatic breakthrough in nuclear tensions with Pyongyang.

A combination of diverging factors has failed to provide any meaningful drive and has led to subdued/range-bound price action. The rampant watchful sentiment around European equity markets was seen lending some support to the precious metal's safe-haven appeal and helped bounce off lows.

However, a follow-through US Dollar buying interest, supported by a goodish pickup in the US Treasury bond yields might continue to keep a lid on any further meaningful up-move for dollar-denominated commodities - like gold.

Investors were glued to the keenly watched US monthly jobs report, which was expected to influence Fed rate hike expectations and eventually provide some fresh impetus for the non-yielding yellow metal's near-term trajectory.

Once data was released there was lot of upheaval in the market.

  • A strong jobs report on Friday offered some support to gold prices with U.S. Non-Farm Payrolls (NFP) topping expectations with a print of 313K for the month of February.
  • A strong read on labour force participation also highlighted underlying strength in the employment sector with a print of 63% (highest since September). 
  • Despite the job gains however, wage growth remained sluggish a downward revision to last month’s average hourly earnings accompanied by a miss in February at just 2.6% y/y (previously 2.8% y/y). 


The release is unlikely to alter the Federal Reserve’s expectations for three rate-hikes this year with gold finding solace into the close of the week.

Gold prices ended higher Friday, erasing their loss for the week, as monthly data revealed a strong rise in U.S. jobs, but disappointing growth in wages.

The U.S. dollar weakened in the wake of the employment data. Gold and the greenback often move inversely as a weaker dollar can raise the appeal for investors using other currencies to buy the precious metal.

The latest snapshot of the U.S. labour market showed strong job growth and a higher participation rate, with the nation adding 313,000 new jobs in February. But the 12-month increase in pay slipped to 2.6% from a revised 2.8% in January.

The jobs numbers initially sent gold lower, but also the wage growth data was not too robust at 2.6% and this has allowed traders to buy the dip and/or keep their long positions heading into the weekend.

Markets had braced for a stronger wages reading after an inflation scare within this report a month earlier helped sink stocks. Rising inflation could add pressure on the Fed to speed up its rate rises, which could strangle the stock market. Gold, in turn, although impacted negatively by higher interest rates, could attract hedging demand against too-hot inflation.

Overall, however, the jobs report kept the Federal Reserve on track with interest-rate hikes this year.
The U.S. dollar had tumbled to 16-month lows against the safe-haven yen late last week as fears of a trade war rattled markets after Trump announced his plan for imposing tariffs on imported steel and aluminium.  This being said, the markets seem to be bearish for gold at the present moment
   
One could make the argument that if nothing changed in the world, but simply the free market was able to determine the gold price, that it would be well north of $1900 per ounce. Now factor in what is going on in the world, just how fragile the dollar-based economic system is at this point, and the likelihood of more quantitative easing, and owning gold makes more sense than ever.


Tuesday, 6 March 2018

Tug of War for Gold


Till date, 2018 has been quite an interesting year for global financial markets. While the year started with the untying of the crypt currencies market, with the main assets falling by more than 50% and creating a huge wave of uncertainty across all asset class.

Following that, global financial markets started to fall, proving that the markets could drop even further

And when that was not enough, Trump flustered the financial markets by talking about tariffs to the Steel and Aluminium imports in a bid to protect local companies.



The Trump administration said that the tariffs would protect U.S. industry, but the dollar and Wall Street shares slumped as the plan sparked fears of a trade war and worries about its potentially negative impact on the world's largest economy.
 
This will definitely open doors to a new trade war across the globe. As past events have shown, trade wars are never beneficial to any country.

An announcement by President Donald Trump regarding intentions to levy steep tariffs on imported steel and aluminium sparked a substantial sell-off in broader equity markets with traders finding relief in perceived safety of Gold.

The move fuels concerns that retaliation from competing countries could instigate a global trade war.

Meanwhile, Federal Reserve Chairman Jerome Powell said on Thursday there was no evidence the U.S. economy is overheating, and labour markets may still have room to improve as the central bank sticks with a gradual pace of rate hikes.           

These consecutive evens have lead to a rise in the demand for the safe haven asset, thus pushing its prices high . Gold finally broke out of its Asian/early European session consolidation phase and spiked to fresh session tops in the last hour of the trading session on Friday.

A fresh wave of US Dollar selling interest, triggered by the US President Donald Trump's tweet on trade war, provided some lift to dollar-denominated commodities - like gold.

Adding to this, global risk aversion trade, as depicted by a sea of red across European equity markets, was further seen underpinning demand for traditional safe-haven assets and remained supportive of the precious metal's uptick.

Further, a goodish pickup in the US Treasury bond yields, amid growing speculations about faster Fed monetary policy tightening cycle, continued capping any strong gains for the non-yielding yellow metal.

This year, gold has traded within a narrow range. It has had a high of $1,365 and a low of $1300.  At the current price of $1307, gold has had a 50% retrenchment from its peak price of $1365. Ultimately, a combination of global risks and increased inflation may push the price higher.

After a busy week of economic data and hawkish commentary from Powell, there were only two reports on Friday. Revised University of Michigan Consumer Sentiment came in at 99.7, beating the 99.4 estimate, but coming in under the previous 99.9. Revised University of Michigan Inflation Expectations came in unchanged at 2.7%.

The focus now shifts to key central bank rate decisions next week from the RBA, BoC, BoJ and ECB with the release of the February U.S. Non-Farm Payroll figures (NFP) highlighting the economic docket.

 For gold, the importance will remain on the wage growth numbers coming Friday as the inflation outlook remains central focus for the Federal Reserve. As it stands, market participants are factoring three rate hikes this year, (starting with this month) and if the inflation picture improve expectations for higher rates may weigh on demand for gold which does not pay a dividend.

It is this pull and push war between interest rate expectations and the perceived threat of inflation / geological risk that has fueled four swings of more than 4% on either side over the past two months.
 The precious metals market would continue looking out for interest rates along with the dollar's movement. A stronger dollar and higher interest rates reduce demand for non-interest bearing gold as the metal becomes more expensive for holders of other currencies.
 
It would now be interesting to see if bulls are able to maintain their upper hand or the uptick is being sold into amid absent market moving economic releases from the US.
   

Monday, 26 February 2018

Surprises in store for the market

Over the past 20 years, gold has outperformed alternative and traditional assets, such as developed market stocks, hedge funds, developed markets debt, global real estate investments and the broader commodities complex. It has always been a reliable asset in times of crisis and uncertainties- be it global, economic or political.

Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield. Interest rates remain low in many developed markets and some emerging markets have been rapidly lowering borrowing costs since last year.



Gold’s price is in a strong uptrend over a year old, high in its young bull market.  Gold isn’t far from breaking out to its best levels since September 2013, a really big deal.  The stock markets even finally sold off after years of unnatural calm.  Yet traders are still down on gold. The reason being various pull and push factors that are influencing gold prices and capping it from rising.

We have seen that perception and action go hand in hand. In the bullion markets too prices movements drives psychology.  When something’s price is rising, suddenly everyone wants to have that and this excitement makes the market bullish. Market players increasingly buy to ride that upside momentum, amplifying it.  Of course the opposite is true when a price is falling, which breeds bearishness and capital flight.  Given gold’s great technical picture today, investors and speculators alike should be growing enthusiastic about its upside potential as there are more push factors for gold rather than pull.

Volatility has jumped across financial markets this month as investors worry about the pace of U.S. rates hikes in the wake of data showing a rise in inflation.

GOLD PRICES struggled to recover from yesterday's sharp drop against the rallying US Dollar in London on Wednesday, halving last week's 2.2% gain as world stock markets fell, bond prices steadied and commodities edged higher.

Spot prices have shed 1.4 percent this week, their biggest weekly decline since early December, after failing to sustain a brief push back above $1,360 an ounce last Friday, the 16th.

Spot gold slipped, erasing earlier gains, as Federal Reserve meeting minutes showed increasing confidence in the strength of the U.S. economy, curbing demand for the metal as a haven.

Louis Fed President James Bullard on Thursday tried to tamp down expectations of four rate hikes in 2018. Three increases are widely anticipated

Fed officials “anticipated that the rate of economic growth in 2018 would exceed their estimates of its sustainable longer-run pace and that labour market conditions would strengthen further,” according to minutes of their Jan. 30-31 meeting released on Wednesday. This resulted in the strengthening of the U.S dollar as it headed for a fourth straight gain, and Treasury yields pushed higher.

Immediately after the minutes were released, gold prices rose while dollar slipped as investors assessed comments that officials remain concerned with the pace of inflation. The metal has fluctuated this month as traders look for clues on the pace of monetary tightening, which curbs the appeal of non-interest-bearing assets such as bullion.

With unemployment already the lowest since 2000, the Fed’s view entails that greater growth would risk overheating the economy and potentially warrant a faster pace of interest-rate increases, thereby blunting the effect of the tax changes. Lawmakers could potentially question Fed Chairman Jerome Powell on these issues when he testifies before Congress next week in his first hearings as central bank chief. With Yellen out of the picture and Powell taking over, we await a lot to happen in the market soon.





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

Monday, 19 February 2018

Bullions Attracts Investors

Dollar remained weak in spite of a strong economic data and gold was once again in demand acting a hedge tool against inflationary pressure.

Gold prices edged higher on Friday, heading for their biggest weekly percentage gain in nearly two years, buoyed by a weaker U.S. dollar and as investors looked to hedge against inflation.

After April 29, 2016, we saw gold rising more than 3 percent in a week. Spot gold was up 0.4 percent at $1,358.40 an ounce on Friday, after touching a three-week high of $1,360.
   
There was high demand for gold ahead of the Chinese New year. This rise demand along with a weak dollar pushed gold prices higher.

The dollar slipped to a three-year low against a basket of currencies on Friday, and was headed for its biggest weekly loss

in two years, as bearish factors offset support the U.S. currency could take from rising Treasury yields.



The important data released was     
U.S. producer prices accelerated in January,
There were strong gains in the cost of gasoline and healthcare.
The Labour Department said its producer price index for final demand rose 0.4 percent last month after being unchanged in December.
The Labour Department said initial claims for state unemployment benefits increased by 7,000 to a
Seasonally adjusted 230,000 for the week ended Feb. 10.

Gold continues to carry its shine in the second month of the year. The spill over effect continued for gold in Feb as we saw the yellow metal gaining positive traction for the fifth consecutive session on Friday and moved within striking distance of multi-month tops, set in January.

Over the last couple of weeks, we have seen a lot of things happening globally. And the moist important was the stock market pullback that the world markets witnessed a couple of weeks back. This volatility kept investors focused on rising bond yields (inflation) and potential interest rate hikes.

There is a lot of uncertainty and volatility prevailing in the markets and one sectors that totally benefits with such a crisis is the commodities sectors, precisely bullions
And that the reason investors tend to divert their portfolio into safe havens- bonds and gold

 The yield on the 10-year US Treasury bill hit 2.88% and gold resisted its usual trend of moving inversely with the dollar by gaining six tenths of a percent to $1,345 an ounce.
Currently, after viewing the various markets, investors feel that the safes place to park your funds is the commodities markets. There are many reason that justify this thought-

Inflation
The higher the rate of inflation, or expectation of inflation, the more yields rise, because bond investors demand higher yields to be compensated for inflation risk.

Commodities can be the beneficiary of higher bond yields especially if long-term interest rates rise.


Weak US dollar 
Commodities are priced in US dollars, so there is a strong correlation between the strength of the dollar and commodities. A weak dollar plus a basket of currencies being strengthened on the other side, is making gold more attractive,

The USD has dropped in relation to other competing currencies, such as the euro, the pound and the yen. Rising inflation is also diminishing the value of the dollar is diminished. Moreover, uncertainty about US trade relationships has also weighed on the greenback.


Rising Demand but shortage in supply
Most of the gold market is driven by investment, but there are some interesting things happening that makes this a very good time to consider an investment in gold or gold stocks.

Simply put, the world is running out of gold, especially the stuff that’s high grade and easy to find, and this makes me bullish on the precious metal - irrespective of all the familiar demand factors like safe haven, inflation hedge and store of value.

Till 2014, commodities were not considered to be a real fund puller. Many kept away from the bullions as there were other options, like rising equities where investors ploughed their money. But now , that the precious metals are giving incredible returns and also proving to be safe haven assets, its time that investors start re thinking of parking their funds into this sectors that continues to gather momentum in 2018.