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

Wednesday, 13 February 2019

Dollar strengthens but sentiments for gold are positive

Gold started the week on its back foot, testing the $1,300 level mid week. The metal recovered sharply ending the week essentially unchanged. A key catalyst for the recovery in the USD gold price was the revelation that that Presidents Trump and Xi will not meet to resolve trade differences prior to the imposition of increased tariffs in March. U.S. President Donald Trump said last week that he had no plans to meet with Chinese President Xi Jinping before a March 1deadline to achieve a trade deal.

We continue to see the US China trade conflict, Fed and ECB actions as key drivers of equity and USD volatility, in turn driving investors to safe haven gold.




Concerns regarding the Chinese economy, weak growth and political tension in the Euro zone, Brexit and lingering global trade tensions are weighing in on market sentiment and the dollar is once more sought after as a refuge asset.

Investors strongly believe that there is much scope for gold to rise and they cite 3 main reasons for that-


  • Geopolitical Risk. The U.S. trade war with China, the humanitarian crisis in Venezuela, and Britain's planned Brexit from the European Union are three examples of this. Each raises uncertainty for investors about the future, and that tends to make them anxious. Investors are also worried about the economic impact of U.S. government shutdown when global growth is already lean.


  • High Stock Valuations. Investors are also increasingly wary of the stock market that's pricey relative to projected earnings. So, some investors are cashing in at least part of their stock holdings and sending some of the proceeds to gold funds. With stocks now showing signs of rolling over in response to trade talks concerns and a weaker growth forecast, gold should find enough support once again to prevent a serious challenge at support, currently at $1,300 an ounce, followed by $1,275


  • Dollar - Gold is being pushed around by the U.S. dollar in the near term. Traders are getting out of anything to do with Europe on concerns of weakness in the region and going for safe-haven buying into U.S. treasuries, which is pushing up the dollar. But a possible shut down and impact of the US economy on its global counterpart, might make the dollar weak thus pushing gold further. 


  • The Federal Reserve.  The Fed also seems to be at "an inflection point" when it comes to U.S. interest rates. He notes that the investment community went from expecting the Fed to boost rates multiple times this year to now perhaps making no increases in 2019. Lower interest rates tend to weaken the U.S. dollar and boost inflation risks, making gold more attractive. Gold and dollar are inversely related so whenever there is any negative effect on the dollar, gold prices tend to rise.



For gold, a lot of the recent action is largely dictated by the fact that the dollar is holding firm over the past two weeks. That has seen gold fall from resistance around $1,326 to current levels. But as long as the figure level still isn't breached, there's still favorable momentum to for gold to continue its upside run since November last year. We remain of the view that the $1,350 level is viable in the coming months, and note the $1,360 technical resistance level many market participants are watching.



Thursday, 31 January 2019

Gold looks moderately bullish

This week is all about the much awaited FOMC meet. The Federal Open Market Committee meets between Jan. 29 and Jan. 30, and Chairman Jerome Powell is widely expected to acknowledge growing risks to the U.S. economy as global momentum weakens.

Speculations prevailed in the market that the Federal Reserve will keep its interest rates unchanged during its two-day policy meet. This led to a spike in gold prices, nearing a seven month high during the day. But later gold steadied.


Gold has a tendency to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.

Currently, the European Central Bank is seeing downside risks to the economy. ECB President Mario Draghi warned last week that a dip in the euro zone’s economy could be more pronounced, comments seen as signalling a delay in the bank’s first interest rate hike.
Amongst this scenario gold is portraying a strong chance of solid upward movement.

Furthermore, the US Fed is also expected to be more accommodative. The Fed has already raised its interest rates four times last year. It has even given hints that it might life borrowing costs twice in 2019.  Analysts noted that Federal Reserve policymakers recently lowered their forecasts for 2019 from three rate increases to two. This should support gold.

This uncertainty is bringing about a rally in gold prices. Moreover, global equities, particularly Asian stocks rose higher, as Wall Street rallied after a deal was announced to reopen the U.S. government following a prolonged shutdown that had shaken investor sentiment.

There were great concerns over a slowing global economic growth and this shutdown has only increased the worries of the market. Not forgetting, the, signs of stress in corporate earnings and a still unresolved Sino-U.S. trade war.

Meanwhile we also expect a rise in demand for gold, especially in Asia. Usually gold is bought in Asian countries for weddings, occasions etc. But lately gold is being purchased for investment purposes. Investment demand for gold rises with an increase in wealth. In recent years, both China and India have rapid increase in the demand for gold, especially China. These countries have been active drivers of holding the metal in its physical form.

With regard to preservation of wealth, gold has an immensely long track record; providing a hedge against inflation, geopolitical risks, natural disasters and other crises. Currently private banks and wealth advisers might typically advise their HNW clients to hold about 3-5% gold in their investment portfolios. While an ETF provides gold exposure and is an excellent tool for short-term trading, physical gold is preferable for medium to long-term investment as it is highly liquid, lacks counterparty risk and affords investors more flexibility. Unlike property or stock funds, physical gold is a highly efficient wealth management tool for estate planning

Since gold has long been used as a safe haven asset the outlook for the yellow metal looks moderately bullish now.

The main trigger for sustained higher gold prices comes in the form of a gradual asset rotation from equities and other risky assets into bonds and safe-haven assets such as gold, as mainstream investors seek protection from market turbulences, potential recessions and growing bearish sentiment.

Moreover, the downside is somewhat limited, with current gold prices representing a floor, as bearish drivers are lacking, fundamentals are neutral and costs for the most expensive producers are close to current prices.

Thursday, 24 January 2019

Gold has not Lost its lustre yet

Gold was at a life time high of $1921 an ounce in September 2011 when the US Federal Reserve was concluding its bond buying program (QE). During that period gold was everyone’s favourite metal. But by the end of 2015, gold prices declined to $1046. Sometime around that, the Federal Reserve, led by Janet Yellen has raised its key interest rates for the first time in 7 years. That’s the reason gold plunged. But now it seems that gold is finally emerging from an 8 year bear market. And that’s the reason we feel that gold has not lost its lustre yet.


They say that gold has an inverse relation with the dollar. When the dollar is strong gold is weak and vice versa.

It seems that gold has finally made a comeback and there are many factors responsible for this -
Gold seems to be driven by the fact that the current political standoff in Washington will lead to an escalation in crisis. Further the longest government shutdown in U.S history along with a gradually growing economy and rising global debt levels will add fuel to the fire. And when geopolitical issues are mentioned we can’t ignore the fact that the trade tensions between US and China have not been resolved yet. These factors strengthen the speculation of a push in gold prices.

Even though the dollar was up during the week, markets still prefer to stay loyal to gold.

Market watchers say the dollar may also come under pressure as the U.S. government shutdown begins to weigh on domestic growth. Having said that, gold prices are bound to rise.

Tuesday, 15 January 2019

Is 2019 the year for Gold

2018 has a highly volatile and fluctuating year for gold as it faces many headwinds. A strong dollar, rate hikes by the US Federal Reserve (the Fed) coupled with accommodative policy from other central banks and a US economy buoyed by tax cuts, fuelled positive investor sentiment and pushed US stock prices higher through the start of October.

However, as geopolitical and macroeconomic risks increased, emerging market stocks pulled back and developed market stocks eventually followed.


As 2019 begun, have seen a sharp deterioration in risk sentiment following soft macroeconomic data in December and renewed concerns about the future direction of growth, particularly the risk of U.S. growth catching down towards weaker economies. December was a volatile month which generated a safe haven appeal for the yellow metal.

Lately gold has outperformed other assets in its class. Risk assets took a big hit in 2018, with the stock market suffering the worst in December but gold fared much better as it grew around 4 percent.

If we see the demand graph for gold for the next 6 to 8 months, we expect it to rise as it will benefit from the interplay of market risk and economic growth, with key dynamics, such as financial market instability, monetary policy, the dollar and structural economic reforms.

Rising geopolitical tensions- A fragile political alliance in Spain along with fending off secessionism, an instable monetary union in Italy, and internal turmoil in Europe and lastly social unrest in France- all of these clubbed together gave a very instable global picture. This growing uncertainty and the expansion of protectionist economic policies are making gold an increasingly attractive hedge tool.

Slow economic growth- Weak economic numbers coming from the US has spooked the markets. The U.S. manufacturing PMI (Purchasing Managers Index) hit a 15-month low in the same month. Manufacturers' confidence in business also slipped to the lowest level in nearly two years. This in turn affects the rate hike frequency thus influencing gold prices.

Federal Reserve’s monetary policy- The Fed had been tightening monetary policy aggressively. But on Jan. 4 Fed Chairman Jerome Powell signalled Wall Street that policymakers will be patient with policy moves and are attuned to the messages coming from markets. While gold may face headwinds from higher interest rates and dollar strength but currently the effect of the same seems to be limited on gold as the Feds stance is neutral. Any delay in rate hike will push gold prices higher.

Demand for gold as a hedge tool- Globally, there were net positive flows into gold-backed exchange-traded funds in 2018. However, North American funds suffered significant outflows in the second and third quarters, with this trend only reversing in the fourth quarter as risks began to intensify. But in 2019, global investors are expected to favour gold as an effective diversifier and hedge against systemic risk on multiple global metrics

Central Bank Buying- In addition, central banks continue to buy gold to diversify their foreign reserves and counterbalance fiat currency risk, particularly as emerging market central banks tend to have high allocations of US treasuries. Higher demand once again means higher prices for gold.

Time and again it is proved that gold has delivered returns and has performed better than other assets in its class. Moreover, its liquidity and risk adjusted returns makes it an investors favourite and hence its looks more relevant this year.



Friday, 21 December 2018

From Dovish to Bullish

Gold was hovering around the $1250 and $1260 range; IT took off over $1260 over news doing round in the markets that the U.S Fed would be taking a more ‘dovish’ stance on current and future interest rate hike at the December FOMC meeting.

A “dovish hike” occurs when a central bank raises rates but hints that future such moves will be limited. But this was short lived as gold dropped $20 reaching the low of $1240 an ounce despite the belief that the Fed would be taking a more ‘dovish’ view on the forthcoming interest rate hikes.


Equities were doing well until; a statement released by Powell which ended the splurge and the major U.S indexes fell sharply on 19th December. 

Dow- closed down another 350 points
S&P- off 39 points
NASDAQ –down 147 points.

These downfalls benefited gold. Another fact that supported the precious metals were the numbers that came in from GLD, the world’s largest gold ETF. Around 8 tonnes of golf was deposited bringing the total holding to a highest level of 4 months at 771.79 tonnes.

On analysis the statement following the latest FOMC meeting, and Fed Chair Powell’s subsequent comments, were perhaps less ‘dovish’ than the markets had hoped, particularly following President Trump’s plea not to raise rates.  The Fed was pointing to two interest rate rises next year, instead of three as previously forecast, but U.S. data - and particularly equity performance, could lead to a change of plan at one of the next FOMC meetings - due on January 29-30 and March 20-21. 

 Perhaps one could expect changes in the Fed’s leadership in the New Year, or before, under pressure from President Trump if he sees the independent body as thwarting his ideas on the U.S. position on world trade.

Trade war, US equities, geopolitical crisis, Euro zone and some more factors will have a visible impact on gold. We thus await some concrete news before the markets break for a holiday mood and before the year ends.

But overall things are looking positive for gold and the other precious metals - at least for now hopefully!

Monday, 10 December 2018

Has the scenario changed for gold

Last week, gold prices had a chance to close at their highest since the middle of July. The fundamental backdrop was a combination of declines in the US Dollar and local front-end government bond yields. Since gold is priced in USD, a weaker greenback makes the precious metal relatively more expensive. As for the latter, when bond yields decline, the non-interest bearing asset looks comparatively more appealing.

Though markets have shown a drastic behavior in the past 10 days, things still good for gold. Though gold has been down almost 4 per cent for the year till date, last week was fairly positive for the yellow metal. No doubt equities have outperformed gold so far but any rally in gold prices and any further weakness in U.S equities will see a reverse behaviour thus gold outperforming stocks in the near future.



The Fed has already appeared to express doubts on the future pace of tightening, although the markets do not anticipate it holding off on the likely 25 basis point interest rate increase at the FOMC meeting in just over one week’s time.  Although a further sharp fall in U.S. equities in the coming week might, just, cause the Committee to change its mind.  It is likely to be under pressure from President Trump to keep interest rates, and thus the dollar, down given his tariff impositions seem to be having the effect of increasing the dollar index and, ultimately, putting up the cost of manufactured goods to the U.S. consumer.

The volatility in equities and dollar was influenced buy the ongoing trade war between China and U.S which appears to have backfired rapidly on the greenback.

The arrest in Vancouver of China’s Huawei Technology’s CFO and the company founder’s daughter in Canada has potentially inflamed the trade relations again.

In the bigger picture, The Fed is in a dilemma over a few factors that don’t fall under its control but will play an important role in the growth of the US economy which will further  influence any decision related to rate hike-

Immigration - President Donald Trump's crackdown on immigration, which translates into fewer workers, especially those willing to take lower-wage jobs, and therefore higher wages

Wage- state-level minimum wage boosts that amount to government-mandated wage inflation.
Truck driver shortage- the countrywide truck driver shortage, which has become "a major reason for all sorts of companies to raise prices  in order to make their customers eat higher shipping costs
Trade war- is the United States' trade dispute with China, further escalated this week by the arrest of the CFO of Huawei, one of China's most important companies. While Trump and China's president seemed to agree to a ceasefire over the weekend, the arrest makes the odds of a good trade deal most unlikely.

All four of these ongoing issues directly affect the Fed's policy, and that's what's putting this independent entity in a bind when it comes to planning for the year ahead and maneuvering other major, economy-altering changes like the rise of workplace automation.

The Fed is simply helpless and can’t do anything about the above mentioned trends. Just in case they won’t work in its favour then rate hike might be delayed which will surely push gold prices high.

Speculators are currently neutral for gold. They don’t believe it will dip neither they have faith in its upside potential. Though markets feel that chances if it going lower are high.
But if we see the long run, gold looks attractive.

Gold prices for the year have decline but look positive in the coming two years. A lower dollar, lower US Treasury yields, a recovery of the Chinese Yuan and higher jewellery demand will result in the upward trend.


Thursday, 6 December 2018

Time to buy gold will arrive soon

So far this week looks good for gold as we saw its prices edging higher in Thursday In Asia and it traded near a 5 month high amid U.S. yield curve inversion.

The yield curve inversion triggered concerns about economic growth and a dollar sell-off recently. The two-year/10-year spread was at its flattest this week in more than a decade amid a sharp fall in long-term rates. A flatter curve is seen as an indicator of a slowing economy.


Any slower pace in the economy adds to negativity in growth. This has put pressure in the dollar and further strengthened gold prices. The greenback came under pressure last week when the market took comments from Fed chairman Jerome Powell as signalling a slower pace of rate hikes. Markets still expect the Fed to move forward with a quarter-point hike this month but have interpreted cautious remarks from policymakers to mean that further tightening in 2019 will have to be re-evaluated on economic and inflation data and hence the pull in prices has not been that high.

Furthermore, uncertainty prevails in the market over the upcoming Federal Reserve policy decision, as the Dec. 18-19 meeting looms just over the horizon.

On Wednesday gold hit a high of $1243 an ounce and plunge back to $1233. Though we have gold price moving up this year but the trading range has been sideways because it doesn’t stay at the peak for a long time.

Hence it has been containing most of the price especially since the 11th of October, between 1212 and 1243.  Gold bulls will need the Fed to halt its raising interest rate programme to see a major reversal in the price of gold. Once the Federal Reserve ends the tightening cycle, the time to buy gold will be near

So we can say that if the bulls keep running for gold then it will pick momentum from ere and will be seen crossing the $1243 territory and hopefully cross the July highs of $1257 an ounce.

The coming year looks positive for gold because the dollar is expected to weaken, US treasury yield might be lower, Chinese Yuan expected to recover and demand for jewellery predicted to rise.
And if all falls in place for the bulls then one wouldn’t be wrong if he expects gold to touch the $1400 level.




Monday, 3 December 2018

Will gold witness an upward trend soon

Gold was following a wave like movement during the week as we saw it moving up till Thursday and then diving down by the end of the week.
Gold edged higher for the second consecutive session on Thursday and was placed at the top end of its weekly trading range, around the $1227-28 region during the trading hours.

Spot gold has stood strong against a weaker dollar, with the precious metal’s spot price hovering at around $1228 – one of the highest levels it has seen since 11 November where it hit $1230 per ounce.

The Fed Chair Jerome Powell's comments that rates are just below the neutral level now triggered a broad-based US Dollar weakness and prompted some short-covering trade around the dollar-denominated commodity. This weakness further strengthened the yellow metal and pushed prices higher.



The USD bearish pressure now seems to have abated, though expectations of a slowdown in interest rate hikes, reinforced by sliding US Treasury bond yields, kept pushing the non-yielding yellow metal higher through the mid-European session on Thursday.

Even the prevalent positive mood around European equity markets, which tends to undermine demand for traditional safe-haven assets, did little to prompt any fresh selling around the precious metal or stall the ongoing positive momentum.

The price of gold shot up on Thursday, following Bank of England statement (on 28th November), in which the BoE forecast the UK economy’s performance in the face of the various Brexit outcomes and warned of serious economic contraction with any ‘No Deal’ Brexit.

But post the U.S. data released on Friday, the dollar which was lying flat, gained momentum. Reports released were above expectations and this strengthened the dollar thus pushing gold prices down.

Further, Gold prices fell in the domestic markets too. Investors took this dip as an opportunity to buy. The appreciating (Indian) rupee has brought down prices. At this price level, jewellers and retail buyers are quite comfortable in making purchases.

Local gold prices were trading near their lowest in about three months as an appreciation in the rupee made overseas buying cheaper. Physical gold demand in the world’s second biggest bullion consumer India got a fillip this week from a slide in local rates due to gains in the rupee, while buying was steady in other top Asian hubs.

Though gold hasn’t shown an eye catching gain, it still holds importance in the portfolio of many. If we see closely, gold has been falling since the past seven years. It’s down by more than a third over that period. So clearly, the metal is cheap and makes itself more appealing as a safe haven asset.

The precious metal has been in free fall most of 2018, losing roughly 11% of its value since its January peak. And this year's performance is a continuation of the longer-term trend.

Gold has slowly been trending higher since August. The metal is up a little more than 3% since then. And prices appear to be hitting what analysts describe as "higher lows."

Gold prices have been falling for years. Investors recently hit their most extreme negative sentiment levels in nearly two decades. And now, the price is starting to move back up.

With investors now pricing in only one more rate hike in 2019, markets feel positive for gold and hence it has once again found acceptance in an investment portfolio. Will we see gold in an upward trend soon? Well the answer lies in 2019 as 2018 is about to end and which a holiday mood in the air markets are not expected to be much volatile in the coming days.


Wednesday, 21 November 2018

Gold remains positive but lacks direction

Gold prices were modestly high last week reacting over a mixed bag of economic reports and geopolitical events. The yellow metal has been able to furnish gains over slightly weak US dollar.

GOLD PRICES rose against a falling US Dollar on Friday, halving last week's 1.9% drop to trade back above $1220 per ounce as Western stock markets fell and crude oil rallied from this month's 17% plunge so far.

Gold prices ended higher on Thursday, shaking off pressure from a stronger dollar to hold on to a week-to-date gain as U.S. and European equities declined.

Tumbling equities market, plunging oil prices, escalating worries about stresses in the global economy, ongoing trade tensions and uncertain growth projections have created a rally in gold prices. 



Let have look at these mixed bags -

BREXIT - The issues around Brexit have invigorated a little bit of safe-haven buying in the precious metals market. In the past week, U.K. Prime Minister Theresa May had two of her cabinet members resign Thursday, including her Brexit secretary, following May’s pronouncement Wednesday that she is sticking with her controversial Brexit plan. The British pound sunk on the news of the resignations, while European bond yields rose. Talks of a no confidence vote for May were also doing the rounds. This led to some safe haven buying in gold though it did not create that much an impact on the world marketplace.

DOLLAR - while the U.S. dollar remains the strongest and most consistent factor for gold, it’s likely that correlations with other asset classes will begin to strengthen and re-emerge over the next 6-12 months and thus reassert themselves in gold’s favour. Furthermore, the marketplace took note of U.S. Federal Reserve Chairman Jerome Powell’s comments at a speech late Wednesday that the Fed is closely monitoring the modest deceleration in world economic growth. However, Powell implied that situation is not now altering the Fed’s monetary policy tenor of continuing to slowly raise U.S. interest rates. Powell added that a further U.S. stock market selloff could impact the Fed’s policy decisions. Any further weakness in the dollar due to Feds decisions will pull gold prices high.

EURO ZONE CRISIS - Crisis and uncertainty continue to prevail in Europe, where Italy is locking horns with the EU and a Brexit deal hangs in the balance, mega-economy Germany has just produced the worst growth in nearly six years. Even if Wall Street can successfully shake off noise from the Old Country, a fresh threat from falling oil prices, along with worries over trade and a Fed misstep may cast long shadows

EQUITIES - Currently equities don’t belong to anyone and it appears to be in no-man’s-land. Gold and silver are seeing a bit of support as the U.S. stock indexes have backed down and might fall further. Any stronger stock market selling pressure surfacing in the near future would likely more significantly benefit gold and silver prices.

What we see from the above explanations is that the markets are now moving focus from dollar to geopolitical events.

But one notable interesting thing we see coming in is from China. China has developed tremendously in recent years. But what’s next? Is the country entering the growth recession? And how it will affect the world and the gold market?

Indeed, at the turn of this century, China was a minor player in this market. While today it is both the world’s largest consumer and producer of gold, accounting for 23% of total gold demand and 13% of total gold supply. However, there are still opportunities for further development, as the investor base is too narrow, while the market infrastructure and regulations need to improve.

So far, the Chinese authorities have postponed the inevitable slowdown. But it will arrive one day. Given the economy’s massive leverage, the growth recession is likely to cause a financial crisis, which would hit the whole world. Gold should shine, then. The problem is that nobody knows when it will happen.

While we remain positive on gold prices going toward and into 2019, gold still seems to lack clear price directionality for the time being.

Thursday, 15 November 2018

Investors mantra - Stay Calm

Gold has lost around $30/oz. in less than one week as the US dollar charge continues. Last week’s FOMC meeting confirmed that US interest rates will continue to climb this year and next, while the Democrats’ victory in the House of Representatives is being taken as a USD positive so far, as it makes US President Trump more accountable for his actions. The precious metal was also unable to pick up a risk-off bid after US and Asian stock markets crumbled overnight on tech - mainly due to Apple - and worries that US-China trade wars may escalate.



Apart from the above mentioned acts, the way things are going- default concerns and inflation expectations are rather low by historical standards. As a result, financial markets could take a hard hit if investors ever wake up and demand a higher price for accepting credit and/or inflation risk. Such a scenario could make holding gold a particularly interesting option.

The recent weakness in gold is not over. In fact, we are worried about another leg down getting underway. While some believe that gold is moving to the bears there are some players in the market who still believe that gold prices will rally in the near future. Long term investors and speculation are making a shift from a bear to a bull market. Their belief is strongly supported by a few factors which these market players expected to occur soon-


  • First and foremost, the current gold price does not seem to be high and there is a lot of scope for recovery till it reaches its all time high
  • In a risk-on scenario, there is a good chance that the gold price will move up
  • Bargain hunting and weakness in equities, such as the sharp fall in U.S. stock market on are helping put a floor under gold during the metal’s recent slide. The fact that gold has not fallen further “is probably due to the correction on the stock markets, which has made gold attractive as an alternative investment
  • Oiling of gold reserves is a clear indicator that central banks do not want to be dollar dependent. A gold driven economy will definitely raise the demand for the yellow metal and furthermore its prices.
  • Gold is the only financial asset that’s not simultaneously somebody else’s liability. Hence the liking for this metal always remains high.
  • With uncertain world financial assets, there’s an excellent chance there’s going to be a volatile markets and hopefully a one that favors gold.


Currently we see investors acting very calm in the market. Maybe they await a strong and concrete signal from the global markets to get back into action mode.



Tuesday, 13 November 2018

December likely to be more volatile

Just when gold had become investor’s favorites, it started losing sheen. Friday, Gold closed at a one-week low amid investors shifting to riskier assets on the back of a higher dollar and the Federal Reserve's policy statement.

Gold eased to a one-week low on Thursday, as a recovery in the dollar and improved appetite for riskier assets pushed investors away from bullion.

Spot gold fell 0.13 percent to $1,224.09 per ounce, after touching its lowest since Nov. 1 at $1,219.59 Just when gold had become investor’s favorites, it started losing sheen. Friday, Gold closed at a one-week low amid investors shifting to riskier assets on the back of a higher dollar and the Federal Reserve's policy statement.

Gold eased to a one-week low on Thursday, as a recovery in the dollar and improved appetite for riskier assets pushed investors away from bullion.

Spot gold fell 0.13 percent to $1,224.09 per ounce, after touching its lowest since Nov. 1 at $1,219.59 earlier during the day.

Gold prices fell to their lowest in a week on Friday, and were set for their biggest weekly fall since August, on a firmer dollar as the U.S. Federal Reserve indicated they will continue to raise interest rates, lowering demand for bullion.

In the past fortnight we saw the dollar going week on the belief that losses for U.S. President Donald Trump's Republican Party in the midterm elections would make further fiscal stimulus measures unlikely.

But it didn’t take too long for the dollar to get back into action. The dollar has mounted a significant rally. Many reasons were cited for this bounce back-

The Fed kept interest rates steady on Thursday
It reaffirmed its monetary tightening stance.
Robust U.S. economy kept the currency underpinned
Investors positioned for a Federal Reserve interest rate rise next month
Political risks in Europe put pressure on the euro and the pound.
Fears about a no-deal Brexit gave dollar the push
Growing rift in Europe over Italy's budget
Reload of long dollar positions by investors
Vulnerability of European currencies
Weakening of the Euro over concerns about Rome's tussle with the European Commission over its 2019 budget
Weakness in Italy's banking sector
The melancholy in Europe has been good news for dollar
Easing of China-U.S. trade tensions
Weak China data
Weakening euro zone economy is expected to trigger further euro-selling pressure.


All these factors clubbed together strengthened the dollar and hence the dollar rallied to a 16-month high on Monday.

The dollar extended its recovery following a sigh of relief across markets after the U.S. midterm election results, and as investors turned their attention towards the Fed.

Gold has always been keeping a watch on the dollar and moving accordingly. Currently too it is dollar-watching and keeping an eye on the interest rate decisions. Gold has come under pressure because of a stronger dollar. Also the FOMC meeting showed no change in the interest rates. Gold might turn to the bears as any news that is positive for the U.S. dollar and the U.S economy as a whole will bring about a fall in the yellow metal and push prices down.

A lot is expected to happen by the end of year and these activities will sure create volatility on a global level. Ongoing trade disputes. Escalating Saudi- Arabian tensions and Brexit are all in line to occur. December is likely to be more volatile and hence a lot is expected to happen as we get closer to end the year.




Tuesday, 6 November 2018

Wait and watch approach

Gold was down last week till Wednesday but again gained momentum on Thursday. It saw a sharp rally from Wednesday’s bottom but pulled back once again on Friday.

In 2018, gold was highly influenced by a wide variety of factors -

  • Brexit
  • Election of U.S President Donald Trump
  • Geopolitical events
  • US China trade war
  • Global equities
  • Iranian Sanctions in Venezuela
  • Midterm elections
  • Cyber attacks
  • Collapse of peace talks with North Korea


These all have the highest likelihood of impacting markets in 2018 and 2019 and thus creating volatility which will likely bring about a rally in gold prices.

Since these series of events are either on going or about to happen, markets player are now following the wait and watch approach.

US midterm elections will definitely have a major impact on global currencies and assets across all classes. Hence investors and traders are not being much active and are waiting for something concrete to occur as Midterm elections may stimulate safe-haven buying,”

Interestingly gold has not only bounced, it has shown this behavior in spite of stability in the dollar. Gold is expected to rise further

Interestingly, gold, largely left for dead, has rallied. Not only has gold bounced, but it has done so despite a steady dollar. Which raises the question: Why is gold rallying now? Here are some potential reasons:

Steady dollar - While the DXY Index is pushing against the upper end of its five-month range, the dollar has been relatively stable since May. This is important as a rapidly strengthening dollar, as we witnessed last spring, has historically been a headwind for gold.

Inflation - Besides the dollar, the biggest challenge for gold in 2018 has been rising real rates, i.e. interest rates after inflation. Higher real rates raise the opportunity cost of an asset that produces no income. Between January and early October, real 10-year yields advanced by 50 basis points. However, since then, real rates seem to have temporarily peaked near the levels reached in 2013 and hence its stability will bring in a rise in gold prices.

Volatility - While real rates and the dollar are key fundamental drivers for gold, demand for a hedge against volatility also drives gold prices. With the exception of the brief correction in February, that attribute has not been in demand until recently. Prior to the recent swoon, U.S. equities were well on their way towards another year of double-digit gains. Unfortunately, this pleasant trajectory has been interrupted. Equity market volatility has doubled since early October. This is important, as gold has a history of performing best versus stocks when volatility is spiking.


These factors have historically proved that in such a volatile environment gold always acts as a safe haven asset and a hedge tool. Give this characteristic of gold it’s obvious that any minor crisis will also bring about a rise in the demand for the yellow metal which will further push the prices higher.

Moving to the domestic markets, sales have dampened this Diwali. Physical gold demand in India was lacklustre this week, with dealers offering discounts for the metal ahead of a traditionally busy festival week for the first time in at least three years, as high prices kept consumers away.

Prices in India, the second biggest gold consumer after China, held near 33,000 Indian rupees per 10 grams, the highest since September 2013, ahead of the Dhanteras and Diwali festivals next week, when buying gold is considered auspicious.

This Dhanteras, jewellers and bullion traders witnessed a drop in demand. Retail buyers are not interested in buying at this level. Furthermore, The Indian currency has lost more than 12 percent of its value against the U.S. dollar so far in 2018, making purchases of commodities denominated in the greenback more expensive.

Post Diwali, jewellers still have hope of a rise in the demand during the wedding season.
Like global investors and markets players, jewellers in India too are following this approach- to wait and to watch.


Friday, 26 October 2018

Gold gains acceptance

Gold has time and again proved its worth. This time gold took long to do so, but it has finally gained acceptance. Once again gold has proved that it is one of those investment assets, that is capable of reducing portfolio risk and boosting returns in times of uncertainty.


Currently, looking at the geo-political environment, the benefits of gold will stand out further mainly for 3 given reasons-


  1. Other asset classes - gold has a low and sometimes negative correlation with other asset classes. For this reason alone, many institutional investors include a modest allocation to gold in their portfolio. Today, gold’s lack of correlation with conventional assets is particularly significant because markets are increasingly inter-connected and volatility is a persistent concern. Diversification into assets such as gold is widely accepted as a smart way to lessen risk.
  2. Alternate currency- gold can act as an alternative currency. A prolonged period of monetary easing has caused a sharp increase in money supply and reduced the value of fiat currencies. Over the past decade, for example, the US dollar, euro and RMB have depreciated sharply against gold. The dollar and the euro have more or less halved in value against gold since June 2007, while the RMB has fallen by around a third. One of the main reasons of stock piling gold is that that central banks and main financial want to reduce dollar dependency and instead store gold as an alternate currency.
  3. Zero Credit risk - gold has no credit risk. It does not compose an obligation of a government so it is not a liability. As such, ownership of allocated physical gold protects investors from credit risk, providing considerable comfort during times of crisis.


Now what lies in future for gold mainly depends on the strength of the dollar. Once the impact of the President Trump-initiated tariff wars, particularly those affecting Chinese imports, starts to impact U.S. domestic prices and margins, which they undoubtedly will, this could tip the U.S. economy into recession.  Should this happen equities markets would likely start to spiral downwards, the dollar’s strength would weaken again and this could all force the Fed’s hand.  It wouldn’t want to see the blame for any downturn movement in equity prices being attributed to its interest rate policy.  But that could be a reaction too late.  Past history seems to be littered with U.S. recessions following Fed tightening patterns.  Could we see this happening again?  If so the gold price, in U.S. dollars at least, could be a major beneficiary




Monday, 22 October 2018

Gold - once disowned ; now being adopted

After tentatively stabilizing in September, the gold price staged a $50/oz, rebound in early October, setting up the potential for a further short covering rally. 

Gold traded higher on Friday and is heading for the third straight weekly increase on the back of a rise of demand due to equity market volatility and a softer dollar. The market opened the day at 1229.70/1230.70. After the open, gold prices traded between a high level of 1230.46/1231.46

The gold in euro terms was trading at a three-month high near €1,070 per troy ounce. The conflict between Italy and the EU [European Union] over the Italian draft budget for 2019 is escalating.

The EU too seems to be taking a strong line against member states (Poland and Hungary are examples) which diverge politically from the consensus policies and rules. There is perhaps a fear here that the EU might break up if too many member states fall out with the EU hierarchy, which is probably why such a hard line is being taken on Brexit. A consensus deal is in both sides’ interests, but intransigence may well win the day, with adverse economic consequences for the U.K. and the EU as a whole.


Concerns that the euro-zone crisis could flare up again should support demand for gold as a safe haven.

Lately, US have been very aggressive in its trade policies and imposition of sanctions against countries like Russia and China. Indirectly the other counties that wish to trade with these sanctions hit economies will also suffer in the long run. They too will become victims of U.S. trade sanctions and imposed tariffs.

This is the main reason that countries like Russia and China have accelerated their gold reserves. Leading countries are trying to reduce dollar dependency, thus replacing it with gold.

The Russian central bank has announced yet another increase in its gold reserves in September – this time it has added a massive 1.2 million troy ounces (37.3 tonnes) to the gold in its Forex holdings. This brings the overall total to 65.5 million ounces (2,037.3 tonnes) and means it has added just short of 200 tonnes of gold to its reserves in the first 9 months of the current year which represents an increased acceleration in its reserve increases over the prior few years

The big European holders – Italy and France – in the global gold reserve table which respectively report holdings of 2,451.8 tonnes and 2,436 tonnes.

China on the other hand has been constantly increasing its reserves but not reporting to the IMF. It’s expected to be in the sixth place, but it could be higher given that the numbers are not reported to. The current trade war between the US and China has propelled China to reduce its dependence on dollar holdings in its reserves and perhaps use that money to buy more gold, but yes, without reporting it to the IMF.

Chinese officials and academics have intimated in the past that they would like to at least reduce the dollar’s dominant position in world trade and as a global reserve currency. It is already taking measures towards this by negotiating oil and other contracts in Yuan (convertible into gold if wanted) rather than in dollars, which is another reason why it may be building its gold reserves as well.
As we have mentioned before gold may be facing short term headwinds, but longer term prospects look to be ever increasingly positive.

The sentiment shift is still subtle, but it’s both real and widespread. After a few years of being ignored and/or dismissed as basically useless and almost being disowned by investors, gold is stable again, attracting positive press and increasing accumulation by big investors.

Tuesday, 16 October 2018

Portfolio Allocation Towards Gold Increases

Lately there was a lot of discussion going around on the following issues- is it the time to buy gold? Will gold gain its safe haven appeal? Will investors continue to favour gold?

Well past few days gold gave all these answers. Since last Thursday gold has been in a positive mood, rising constantly and showing the hangover effects in the current week too.

Gold gained as global stock markets suffered from broad declines on Thursday. Major U.S. stock indexes headed lower Thursday, as well, failing to recover from Wednesday’s plunge.


Gold prices edged higher on Wednesday as some investors sought refuge in the precious metal after the global stocks tumbled and the U.S. dollar weakened. Spot gold rose 0.4 percent to $1,194.12 per ounce during late trading hours.

Continuing with the same behavior in the current week, Gold rose more than 1 percent on Monday to its highest in about 2-1/2 months as investors sought refuge in the metal after mounting tensions between Western powers and Saudi Arabia compounded jitters in global stock markets.

Spot gold was up 1 percent at $1,230.05 per ounce later in the day; having touched it’s highest since July 26 at $1,233.26.

There were varied reasons responsible behind gold gaining its glitter. Namely- 

Global Equities - Stocks on major world markets fell to a three-month low, with the benchmark S&P 500 stock index falling more than 3 percent, in its biggest one-day fall since February.  This created panic amongst investors.

Global stocks were under pressure, with European shares hitting 22-month lows on the back of a raft of factors including a U.S.-China trade dispute, rising tensions between Saudi Arabia and western powers, stalled Brexit negotiations and concerns over an economic slowdown in China.

Global Risks - the International Monetary Fund said last week that risks to the global financial system, which have risen over the past six months, could increase sharply if pressures in emerging markets escalate or global trade relations worsen.

Dollar - The U.S. dollar index retreated from a seven-week peak hit in the previous session. The dollar, a key driver for the precious metals, weakened against its currency rivals. Another haven market, however, U.S. Treasury bonds — chief among culprits influencing rickety stock trading of late — drew their own fresh demand Thursday, halting for now the rise in yields that spooked stock investors.

U.S. Stocks - Gold prices surged Thursday to the highest in more than two months, with the metal’s haven status in full force and attracting investment interest amid a sharp retreat for U.S. stocks that has infected foreign indexes

China's gold reserves - the markets were awaiting these figures post the Golden week holiday. Once the numbers were out, the market didn’t wait much to react. The official gold reserves in mainland China have grown from 1,054 tonnes in the first quarter of 2015 to 1,839 tonnes in the third quarter of 2016, to 1,843 tonnes in the second quarter of 2018. The demand for gold among Chinese consumers also rose by 5 per cent in the second quarter from a year ago to 144.9 tonnes. Demand by Indian consumers declined in the same period by 8 per cent to 147.9 tonnes.

The market for gold bars and coins has also been boosted by China and Iran, as they seek to hedge against geopolitical tensions with the United States.

We all know that the rate hike has strengthened the dollar against major basket of currencies. This fall in other currencies against the dollar has had an adverse effect on some of the Administration’s tariff impositions.  Some U.S. manufacturers are already warning that the tariffs on Chinese goods in particular will have an adverse impact on input and consumer prices. If equities are seen as likely to fall further this could see an increased move towards safe haven assets like gold and silver.

We don’t know how far gold will stay or stabilize here, but for the time being gold has definitely given us investment goals. And with the markets gold down, people have increased their allocation towards gold.


Saturday, 6 October 2018

Drivers for Gold

The past few trading days have seen the gold price hovering above and below the $1,200 mark in the light of a stronger dollar and a lack of Chinese data due to the nation’s Golden Week holiday this week.  Every time the gold price has nosed above $1,200 it has been taken down a few dollars again.
There were important key events that occurred during the week.



Let’s have a look at all that has been affecting gold - 

US Economic Data - Data on Wednesday showed that U.S. service sector activity accelerated to a 21-year high in September and another report showed that private sector hiring increased at the fastest pace in seven months in September.

US Dollar - Gold prices inched down on Thursday as the dollar strengthened on positive U.S. economic data. Rising U.S. Treasury yields were also cited as headwind for the precious metal.
The dollar hit an 11-month high against the yen and stood tall against other its peers on Thursday, boosted by a spike in Treasury yields following upbeat U.S. data and comments from Federal Reserve Chairman Jerome Powell that were seen as hawkish.

Rupee at an all time low - Rupee was at an all time low of 73.34 on Wednesday, which further spikes gold prices in spite of a global down fall. Increased buying by the world’s second-biggest gold consumer would support global prices that have traded near $1,200 an ounce since late August, but also widen India’s trade deficit and add to pressure on the Indian rupee.  Rupee is consistently falling and we don’t know how much it will fall further. It is prompting investors to hedge their risk with exposure to gold.

Domestic gold prices - Gold prices crossed the Rs 32,000 per 10-gram mark on Wednesday at the bullion market as fresh buying by local jewellers ahead of the festive season pushed up prices. Positive global cues also supported the price move. Prices of the yellow metal surged by Rs 555 to reach Rs 32,030 per 10 gram.

Demand for gold - Traders in India,  said that they are building up inventory ahead of Diwali and Dhanteras next month. Also, globally sentiments for gold improved after US and Canada reached an agreement to salvage a North American free trade deal. India’s gold imports may rise in the fourth quarter as investors seek alternatives to faltering equity markets and a plunging rupee. Traditional buying will also rise during the festival season, said several sources involved in the market.

Meanwhile we expect the gold price to continue hovering around the $1,200 mark, give or take a few dollars.  There does seem to be an appetite to take it higher, but every time it does so it seems to be knocked back.

What will probably drive gold in the following few months -
Positive or negative U.S economic data
Any news on Chinese gold demand which will surface once the Chinese Golden Week holiday ends
Euro zone trials
Italian Debt Situation
Brexit negotiations
Keeping the above events in mind, a mixed bags of reactions is expected from the markets for gold.

Friday, 28 September 2018

Investors continue to favour gold

I have been talking in a few of my previous blogs about the right time to buy gold. Should we jump into the wagon or should we wait. Every time the market feels that now we should consider gold, each time gold has been failing at proving its worth.

This week too gold showed some similar trends. The Fed on Wednesday lifted federal-funds rates for the third time this year, to a range between 2% and 2.25%, and signaled it was prepared to increase again in December


On Thursday, gold fell back below $1,190 to a six-week low. The precious metal is now on track for its sixth straight month of losses, its longest losing streak since 1989.

Spot gold has been a path to ruins on the back of the dollar's spike on market optimism over the impressive run of economic performances in the US economy, streaks ahead of its 'competitors' and the latest Durable Goods and in line GDP data gave the dollar a boost.

The release of the final U.S. gross domestic product for the second quarter “put downward pressure on the yellow metal. The pace at which the U.S economy is growing has been tagged as strong and was further validated by the comments coming in from the Federal Open Market Committee (FOMC).

The Fed balanced their hawkish statement by mentioning that the committee is a little less optimistic about the long-term future outlook and this part alone was enough to keep the dollar index in check and this was the reason that though gold slipped, the down fall wasn’t as severe as expected.

The reason why people are still favouring gold is that it hasn’t dropped that far. There are buyers for gold at $1180 also, because the bears have not moved underneath $1,150.

But does that mean a gold price rise is coming soon? Overall market watchers attending the show seem to agree that while an increase is coming it won’t necessarily be in the near term.

Monday, 24 September 2018

The time for Gold should come soon

Gold prices gained on Friday and were at weekly record gains, while the dollar also traded higher although it is still hovering near two-month lows.

The dollar fell to a nine-week low against a basket of major currencies on Thursday as investors shifted their focus from a trade row between China and the United States to the Federal Reserve’s monetary tightening plans.

Currency markets have become more settled since reacting strongly to new tariffs announced by Washington and Beijing on Tuesday.



The fall in dollar this week came as safe-haven demand for the U.S. currency ebbed amid continued relief that fresh U.S. and Chinese tariffs on reciprocal imports were less harsh than originally feared.

On Monday, the U.S. slapped tariffs of 10% on $200 billion in Chinese goods, before they rise to 25% by the end of 2018, rather than an outright 25%.
China retaliated by putting tariffs on $60 billion in U.S. goods. However, China will put a 10% tariff on some goods it had previously earmarked for a 20% levy.

Reports of the tariffs imposed by the U.S. and China on each other's goods being set at lower levels than expected were cited as headwind for the dollar prices, which is widely seen as safe-haven assets.
The dollar was also under pressure after a report said that the U.S. and Canada are unlikely to reach an agreement on NAFTA this week.

While trade disputes gained momentum, there was one more thing that has kept the markets on its toes. The next Fed meeting. Investors looked ahead to the next Federal Reserve policy decision to be announced on Sept. 26.

U.S. economic data has remained strong, and the dollar has tended to act as a safe-haven trade, gaining as tensions between Washington and Beijing escalate.

Markets currently expect the Fed to hike rates by a quarter of a point, while fed fund futures price in an additional increase at the end of the year at more than an 80% probability.

Looking ahead, markets would be paying close attention to next week’s Federal Reserve meeting. The U.S. central bank is widely expected to hike rates and discuss paths for future rate hikes. Higher rates dent demand for non-interest yielding gold and in turn boost the dollar in which it is priced.

The Federal Reserve is next week expected to raise benchmark borrowing costs and shed more light on its future rate path.

One more noteworthy thing that happened over the week was gold buying by Russian central bank.  As mentioned in my blogs earlier, the Russian central bank has been piling up its reserves and the latest figures released , stated that it has added a further 1 million ounces of gold (31.1 tonnes) to its reserves that month bringing the grand total to just over 2,000 tonnes as we suggested a month ago. It now has the holdings of Italy (2,451.8 tonnes) and France (2,436.0 tonnes in its sights to become the third largest national gold holder after the USA (8,133.5 tonnes) and Germany (3,369.9 tonnes) – all figures as reported to the IMF.

Russia and China are both believed to by buying gold as they feel the yellow metal will have an important role to play in the ongoing development of the global financial system. Russia and perhaps China too, are also believed to be buying gold, amongst other moves, to reduce their dollar-related forex holdings.

All these considerations suggest one thing- . Gold should shine not only due to the lower real interest rates and as an inflation-hedge, but also as a safe-haven asset hedging against the potential overshooting by the Fed.  We don’t expect any major financial crisis or that there won’t be a rate hike—what we think keeping these considerations in mind- the time for gold should come soon.


Tuesday, 11 September 2018

Time To Add Gold In Your Portfolio

Gold has fallen more than 8% this year as concern about trade disputes; currency weakness in emerging markets and rising US interest rates has strengthened the dollar, making bullion more expensive for buyers with other currencies.


TRADE DISPUTE - Gold is trading back above $1,200/oz ahead of the expected announcement from the White House that China is about to get hit by additional tariffs on goods valued at up to $200 billion. The latest US trade balance for July showed the US in the red by $50.1 billion while the trade deficit with China rose to a fresh record of $36.8 billion.

Investors have been waiting for a fresh round to be fired in the Sino-U.S. trade war after a public comment period for proposed U.S. tariffs on a list of $200 billion worth of Chinese imports, which includes some consumer products, ended late last week.

With his domestic agenda being challenged by the upcoming midterm elections, less-than-flattering comments from White House insiders, and the ongoing Mueller investigation, President Trump is unlikely to step back from his fight with the Chinese.

The prospect of an escalated trade war continues to make matters worse for emerging market bonds, stocks and currencies.

The trade war and its effect on the USD/CNY exchange rate remains the primary determinant of Gold prices in dollar terms. Until either the trade war ends or the dollar falls, either of its own accord or due to a Fed reversal in policy, USD/CNY is likely to go higher and gold lower.

The escalating trade war crisis continued to spill its effect on gold in the past week too. Gold prices rose on Friday due to a lower dollar and jitters about an escalation in the U.S.-China trade dispute after fresh threats by President Donald Trump, although bullion is still heading for its fifth straight monthly decline.

Spot gold was up 0.6 percent at $1,206.19 an ounce during Fridays trading hours- a gain of 4 percent from the 19-month low of $1,159.96 hit on Aug. 16.



CURRENCY WEAKNESS - Lately positive U.S. economic numbers have been showing signs of a strengthening U.S economy. This has further strengthened the dollar against major basket of currencies. In India too rupee was at a record low of 72.17, sliding by 44 paise against the US dollar on rising demand from US dollars by bankers and importers.

Like the trade war, the dollar prices continued to show its effect on gold this week too.
The dollar traded higher against a basket of currencies on Monday amid fears of a potentially major escalation in the China-U.S. trade conflict, while Sweden's crown rose following the previous day's election.

U.S. President Donald Trump warned on Friday that he was ready to slap tariffs on virtually all Chinese imports into the United States, threatening duties on another $267 billion of goods in addition to the $200 billion already facing the risk of duties.

The index also found support after data showed U.S. jobs growth accelerated in August and wages notched their largest annual increase in more than nine years, boosting the prospect of faster interest rate rises by the Federal Reserve.

Non-Farm payrolls led to some modest downward pressure on gold. Furthermore, though the dollar will continue to weigh on gold, and as long as the dollar is strong, gold will remain constrained.

RISING INTEREST RATES - Gold prices held steady during Asian trade on Tuesday as investors remained on the sidelines amid expectations of a U.S. interest rate hike this month and on fears of an escalation in the Sino-U.S. trade war.

Strong U.S. payrolls data last week cemented expectations that the U.S. Federal Reserve will raise interest rates in September, in what would be its third hike this year, with expectations of one rise more in December.

Higher rates increase bond yields, making the non-yielding bullion less attractive and tend to boost the dollar.

Now what’s interesting to note is that though gold is being hammered lately, financial advisors in Asia, are suggesting their clients that this is the right time to include gold in their portfolio. They have been asking them to take advantage of dips and to stockpile to protect assets against pounding equity markets.

Gold has sold off over the past few months as USD interest rates have increased, so there is more opportunity to buy. For clients who do not have an allocation of gold in their portfolios, now is the time to add gold.

Wednesday, 5 September 2018

Gold might increase but with a lag

The yellow metal is down about 8 percent this year amid rising U.S. interest rates, trade disputes and the Turkish currency crisis, with investors parking their money in the dollar, which is being viewed as a safe-haven asset.

Firm U.S. dollar makes gold more expensive for holders of other currencies, with safe-haven demand for gold this year overshadowed by the metal’s relationship with the greenback
Gold's weakness in the international market is primarily on account of the US Federal Reserve's hawkish stance. It has hinted at four rate hikes this year and more next year. The US Fed is also shrinking its balance sheet.


On one hand the US Fed is raising rates and on the other hand central banks are doing completely opposite. This action is strengthening the dollar and hitting on gold.
An increase in rates is expected soon because the Fed believes that the US economy is strong enough to support a hike. This belief has led to an increased pressure on gold.

Following this sentiment, Gold prices edged down on Tuesday as the dollar hit a more-than-one-week high on the back of intensifying global trade tensions and economic worries in emerging markets.
Spot gold was down 0.3 percent at $1,196.90 an ounce during Tuesdays trading hours.

Many currencies world over have suffered setbacks against a strengthening dollar.

The dollar index, which measures the greenback against a basket of currencies, hit its highest since Aug. 24 at 95.410.

Now what will hold great importance for the dollar and the gold is the US economic data. Markets are closely watching the economic number, including a manufacturing survey on Tuesday and an employment report on Friday, which could influence gold’s moves this week as investors look for clues on the pace of U.S. interest rate increases.

Meanwhile, worries over an escalation in trade conflicts between the United States and other countries have kept participants in broader markets on the edge.

The threat of trade wars has only impacted currencies as of now. Analysts are expecting gold prices to start rising with a lag.

Currently we have been witnessing global economic crisis. This is making the other currencies weak and benefiting the dollar and time and again we have seen that any rise in dollar pulls down gold prices.

But if we see the domestic market, the gold dollar relationship is behaving in a very interesting manner.

Dollar and gold have an inverse relation so when the dollar strengthens, gold prices fall.

But when the dollar strengthens the rupee weakens, and a falling rupee offsets the fall in gold prices in India. So, while the price of gold may fall 7% in dollar terms, it may drop only 5% in rupee terms.
Any economic or political crisis results in an upsurge in gold prices and similar behavior as expected over the trade crisis between US and China. But it seems that gold’s rally has been totally offset by a strengthening dollar.

Analysts believe that gold could revive if the ongoing trade dispute between the US and China flares up into a full-fledged trade war. If the US economy suffers, gold would benefit from this.
Given the risks that exist today in the global economy, gold can prove to be a useful portfolio diversification tool and can help reduce overall portfolio risk.

Global inflation, rising interest rates, tightening of monetary policies by central banks, high crude prices are all positives for gold.