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

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.

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.

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.

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.





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.



Thursday, 1 February 2018

Is gold no longer being affected by a Rate Hike

Fed rate hike pulls down gold prices: No more an implied reaction for the yellow metal.
Though gold prices were flat in Wednesday ahead of the Fed meet, it managed to close higher. Initially gold prices dipped slightly after the U.S. Federal Reserve said it would keep interest rates the same, but expected inflation to rise this year.

On Fed Chair Janet Yellen’s last policy meeting as head of the central bank, the Fed left interest rates unchanged. But its message on inflation signaled it was on track to raise borrowing costs in March under incoming chief Jerome Powell.


History has shown that worries over inflation results in a rise in gold prices, which is seen as a safe haven asset against rising prices. But expectations that the Fed will raise interest rates to fight inflation make gold less attractive because it does not pay interest.

Moreover, stronger dollar pressures commodities priced in the currency, making them more expensive for buyers using other currencies. And this was exactly what happened on Wednesday.
The U.S. dollar turned positive after the Fed statement thus resulting in a dip in gold prices. But the effect wasn’t that severe as there were no significant announcements apart from just a hawking tint in the statement released by the Fed.

With many other asset classes already at record price levels, there is a risk of corrections either while geopolitical developments unfold or as inflation and interest rates rise to the extent that investors take profits. Investors may well see gold as offering a relatively cheap safe haven while corrections unfold in other markets.

What the market now await is two more rate hiked in 2018 , which if executed will pull down gold prices significantly.Till then we find gold in a comfortable zone, not paying much heed or reaction to a single rate hike.

Monday, 22 January 2018

Gold - A Store of Value

Though gold headed for its first weekly drop in six week, it remained in the positive territory - thanks to U.S uncertainties, Bitcoin crisis, ECB hawkish comments to name a few.

Spot gold has declined 0.5 per cent so far this week, its worst week since early December.

Spot gold was up 0.4 per cent at $1,332 an ounce by 0659 GMT. On Thursday, it touched its weakest level since Jan. 12 at $1,323.70, having fallen from recent four-month highs.

Amid worries of a possible US government shutdown, the dollar weakened and gold strengthened with prices rising higher on Friday. Legislation to stave off an imminent federal government shutdown encountered obstacles in the US Senate late on Thursday, despite the passage of a month-long funding bill by the House of Representatives hours earlier.

Legislation to avoid a US government shutdown at midnight on Friday advanced in Congress, as the House of Representatives on Thursday night approved an extension of federal funds until February 16, although the bill faced uncertain prospects in the Senate.

The dollar has fallen since 2017 largely on expectations central banks besides the Federal Reserve are seeking to end their policy of ultra low, even negative, rates that they adopted to combat the 2008 global financial crisis and the recession that followed.

Furthermore, reacting to ECB’s hawkish language, gold prices rose during Asian morning trading hours. The yellow metal gained momentum as ECB’s December meeting minutes and soft US data weighed on the dollar.



ECB’s December minute were claimed to be hawkish due to a discussion of a gradual shift in guidance from early 2018 - much earlier than had previously discussed.

A disappointing US data lowered the dollar. The dollar index was down by 0.5% at 91.81 as of 11:57 am Shanghais time.

The December Producer price index fell 0.1% against an expected increase of 0.2%
Unemployment claims rose to 261,000 this week. Marking the fourth consecutive weekly increase and a more-than-three- month high.
.
As mentioned above, another reason that has favored the rise on gold prices is the much hyped Bitcoin. Is it a bubble or a boom? Bitcoin, the world’s most popular crypt currency, has seen a major correction, losing over 40 percent of its value in less than a month, prompting investors to dump the crypt currency in exchange for the precious metal.

As of this writing, the cryptocurrency, which skyrocketed from below $1,000 in early 2016 to the historic milestone of $20,000 in December 2017, was hovering around $11,600 per a coin, according to CoinDesk. On Wednesday, the price of Bitcoin dropped to $9,400 at one point.

Currently Bitcoin look quite uncertain. It was easy to get into it but now investors are finding it difficult to come out. AS we see that currently with Bitcoin and dollar facing a decline in vale, gold on the other hand ahs rallied 7.5% in the past month and also carries with itself a history of being a safe haven asset and a store of value.


Tuesday, 16 January 2018

2018 kicks off a good start for gold

Recent weeks have shown strong rallies for precious metals and its looks like ass id prices are now consolidating. There may be a pull back in prices over a strengthening U.S dollar, but the rebounds since mid-December show that the sentiments for precious metals, especially gold, has turned more bullish. Once again the yellow metal has found place in an investor’s kitty and these commodities are back in vogue again.

Last week we saw gold prices rising during Asian trading hours on Thursday, 11th Jan after the dollar continued to drift lower following news that Chinese officials have recommend the country slow or halt its purchase of US bonds.

The yellow metal benefited for reasons more than one over the past week and its effect continued to spread in the current week too.


  • The important data that weighed on the dollar and other global news that benefited the yellow metal-
  • The December produce price index fell 0.1% against an expected increase of 0;2%
  • Unemployment claims rose to 261,000 in the past week marking the 4th consecutive weekly increase and a more than three month high.
  • The dollar remained soft after important news was released from China regarding US bind purchase on Thursday. This kept the dollar on the defensive which ultimately benefited the yellow metal.
  • Hawkish language contained in the ECD December meeting minutes pushed gold prices further on Friday
  • What added to the rally was a soft US data that released on Friday. This weighed on the dollar and pushed gold prices higher.
  • A disappointing US data further raised negative sentiment for the dollar. The weak dollar amidst increased demand for equity market hedge has made the environment even more glitter for the shining metal.
  • Adding a touch of bullishness to gold was data from the U.S. Commodity Futures Trading Commission on Friday, which showed hedge funds and money managers raised their net long positions in COMEX gold and silver in the week to Jan. 9.
  • U.S. President Donald Trump on Friday delivered an ultimatum to European signatories of the deal to fix the “terrible flaws” in the agreement with Iran, or the United States would pull out.
  • Iran’s president said on Sunday the United States had failed to undermine a nuclear deal between Tehran and major powers, and hailed the accord as a “long-lasting victory” for Iran, state television reported



A weaker U.S. currency makes dollar-denominated assets such as gold cheaper for holders of other currencies, while higher rates could dent demand for non-interest-paying gold.
The global spill over effect was seen in the domestic markets too. In the national capital, gold of 99.9% and 99.5% purity advanced by Rs100 each to Rs30,750 and Rs30,600 per 10 grams, respectively — levels last seen on 18 November.
 Apart from positive global cues, buoyed by a slump in the dollar, sustained buying by local jewellers at the domestic spot market kept gold prices elevated

Summing it up, gold has moved up sharply in dollar terms in the past few days despite mixed economic data out of the USA. So gold investors should treat the latest rise in the gold price purely as a wealth protection exercise.  That is what gold is good at over time.  If the dollar declines further then gold will rise further, as will all the major precious metals – and most other commodities too.

Wednesday, 27 December 2017

Gold - Past performance future prediction

As the year comes to a close, let’s take a look back at the main gold trends this year, from the impact of US Federal Reserve interest rate hikes to widespread geopolitical uncertainty, how it performed and how the outlook is in 2018.

Though gold made double digit gains in some currencies, it did have a tough year. The precious metal has had some harsh criticism from the mainstream media and unfair comparisons to lubricious assets, such as bitcoin and US equities.

Few have acknowledged gold's impressive performance in the face of rising interest rates, tightening monetary policies and the ongoing equity bull market.

When we see gold’s performance over the past 12 months, I think it would be better to divide it over 4 quarters to get an enhanced understanding of gold, its performance and the reason behind its volatility.



Quarter 1- The main driving force for gold prices in this quarter was Trumps uncertainty.
Concerns about US President Donald Trump and anticipated rate hikes from the Fed caused worries, as did the Brexit process and European elections. All of those factors combined in the first three months of the year to drive the yellow metal’s price
During the first quarter, gold traded between $1,184.62 and $1,257.64.
The gold price made its eighth Q1 gain in 10 years in the first quarter of 2017, buoyed by safe-haven demand from anxious investors.
Early in 2017, GFMS noted a gradual rise in gold demand complimeeyed by a reduction in global mine output, resulting in smaller surplus in 2017. This supply demand gap further reflected a bright year for gold and gold stocks in particular in the first quarter.

Quarter 2- Herein steps the Fed, whose hawkish tone influences the market and gold prices in particular.
The gold price stalled in the second quarter of the year as concerns about geopolitical tension faded away. The Fed increased interest rates for the second time of the year in June — that hurt the yellow metal as gold is highly sensitive to rising rates.
Demand for gold dropped 14 percent year-on-year in the first half of 2017 due to a sharp fall in ETF inflows, according to the World Gold Council (WGC). Total global demand for gold reached 2,003.8 tonnes from January to June, down from 2,318.7 tonnes in the same period the year before.
The yellow metal traded between $1,218.80 and $1,293.60 during the quarter.

Quarter 3- a Series of uncertain events leading to geopolitical crisis once again put gold on the top list of safe haven assets.
The gold price gained more than 3 percent in the third quarter, even though September was one of its worst months of the year.
A weaker US dollar and geopolitical tensions between the US and North Korea supported gold over the quarter. Gains were offset by the Fed’s hawkish tone, which pointed to another interest rate hike later in the year and three more in 2018.
At the end of the quarter, most analysts agreed that worldwide political developments, as well as the US dollar, were set to be key drivers for the gold price for the rest of the year.
Gold traded between $1,212.20 and $1,348.60 during the quarter.

Quarter 4- The most awaited Fed meeting becomes the focus globally. 
The gold price remained almost neutral in the last quarter of the year, and was on track for a quarterly loss of less than 1 percent. Trump’s new Fed chair nomination and the expectation of another rate hike in December were some of the key factors driving prices during the period.
The yellow metal has been trading between $1,285.50 and $1,298 during the quarter.
So as we saw that in spite of witnessing volatilities, 2017 was a tough yet good year for gold.
Now what we need to pay heed to is that whether the above mentioned factors will continue to influence gold in 2018 or do we have many more surprise for the yellow metal in the following year-

The gold price is likely next year to continue the rise it commenced two years ago. The main contributory factors here remain the extremely

Loose monetary policy pursued by nearly all key central banks, resulting in ongoing very low to negative interest rates.

Political uncertainty is also likely to be a constant feature throughout the year. One example worth mentioning is the difficult process of forming a government in Germany, the outcome of which remains unclear. Parliamentary elections will probably be held in Italy in the spring of 2018 and could spark renewed unrest in the Euro zone

Brexit is likely to become an increasingly hot topic during the course of the year if agreement is still not reached in the negotiations between the EU and the UK and the UK’s disorderly exit from the EU becomes more likely in the spring of 2019.

 That the second year of Donald Trump’s presidency in the US will run any more smoothly in terms of domestic or foreign policy than the first one did.

The implementation of the tax reform and the possible implications for monetary policy are likely to keep the market just as much on tenterhooks as the ongoing investigations into contacts between Trump’s election campaign team and Russia.

A prediction of the future approach of the Fed towards the monetary policy gets difficult as, Trump will next year make several new appointments to the Fed’s Board of Governors.

What is more, midterm elections to the US Congress will be taking place in the autumn of 2018, which is likely to increase pressure on Trump and the Republicans to implement the tax reform. Otherwise there is a risk of the high-flying US stock markets correcting, which would benefit gold

The numerous geopolitical crises should likewise generate latent uncertainty. These include in particular the North Korea conflict, the growing tensions in the Middle East between Saudi Arabia and Iran, and the conflict between the West and Russia over Russian influence in the US elections and in Eastern Ukraine.

Admittedly, the Fed has already raised interest rates twice this year, and is likely to do so for a third time in mid-December. Our economists expect three further rate hikes next year. However, this does not necessarily preclude a rising gold price, as 2017 has shown. This is because other central banks apart from the Fed – such as the Bank of England and the Bank of Canada – have also increased interest rates in the meantime, which reduces the benefits of the rate hikes for the US dollar.

 Physical gold demand should generate somewhat more tailwind next year. It was fairly subdued in 2017. The World Gold Council (WGC) expects gold demand in India ultimately to reach a mere 650-750 tons after a strong first half of the year, putting it at a similarly low level as last year. Demand fell away when a goods and services tax was levied on gold purchases with effect from 1 July.

Gold ETFs On balance, ETF investors have hardly bought any gold at all since the end of September. By contrast, the world’s largest gold ETF – the SPDR Gold Trust that is listed in the US – recorded only minor net inflows. The numerous uncertainties and low real interest rates suggest that we will also see net inflows into gold ETFs in 2018. How pronounced these turn out to be will depend to a large extent on whether stock markets continue to fly high or whether they correct.

Numerous political uncertainty factors in Europe and the US, as well as a number of potential sources of geopolitical crisis, are likely to boost demand for gold additionally. Gold demand in Asia should have bottomed out and increase moderately in 2018. The gold price is likely to rise during the course of the year and to be trading at $1,350 per troy ounce by the end of 2018.

One risk factor for gold is the US tax reform. If this is fully implemented, the rally on the stock markets could continue, meaning that gold is in less demand accordingly.

So as we always say, gold is expected to have its share of highs and lows in 2018 and of the influencers discussed above, which happens first and how severely it happens will decide the fate of the yellow metal.

Monday, 18 December 2017

Fed Hike fails to cap gold


Spot gold headed for the biggest gain in three weeks after Federal Reserve officials stuck with a projection for three interest-rate increases in the coming year, easing concerns that speeding up economic growth would spur an even faster pace of monetary tightening.

Gold prices rose on Wednesday, extending gains to 1 per cent as the dollar fell after the US Federal Reserve raised interest rates as expected but left its outlook unchanged for coming years.
The spot gold price rallied to US$1,256.87 after the Fed raised its benchmark interest rates by 25 basis points, or a quarter of a percentage point.

Gold prices on Friday held onto gains made after this week’s interest rate rise by the U.S. Federal Reserve and were set for their first weekly rise in four weeks.


The U.S. Federal Reserve decided to increase the U.S. interest rate by 25 basis point on its latest Federal Open Market Committee (FOMC) meeting held on 12th and 13th December.

By a 7-2 vote, the Fed on Wednesday raised the benchmark lending rate by a quarter percentage point, its third hike this year. In a statement following a two-day meeting, the Federal Open Market Committee omitted prior language saying it expected the labor market would strengthen further.

This move was highly anticipated by the market and hence was being priced against gold well ahead of the meeting. However, despite the action being against the attractiveness of gold as an investment, gold prices  closed on a higher note on December 13th.

Generally, a rate hike pulls down gold prices. But contradictory situation was witnessed on Wednesday, where gold prices remained high even after a rate hike.

 “Gold moved up in its initial reaction because Fed is dovish in terms of a rate hike vision for 2018, and it sees only three rate hikes, not four.

This vision weakened the US dollar which gave the required push to gold prices.

The U.S Dollar Index (DXY) measures the value of the dollar against a basket of six major foreign currencies. The index fell roughly by .6% during the Fed's announcement on the 13th, which was otherwise gaining momentum ahead of the meeting. Although, an interest rate hike should have ideally strengthened the position of the dollar, the Fed's decision negatively impacted the currency as the meeting kept its projection for interest rate hikes for 2018 unchanged.

 This was despite the fact that the Fed sees a consistent recovery in the U.S. economy in the upcoming year. The Fed expects 3 additional rate increases in 2018 and another 2 in 2019, in line with its September projections. However, GDP growth expectation was increased by .4% higher than its previous estimate of 2.1%, mainly due to the impact of the implementation of the U.S. tax reform
GOLD BARS rose above 1-week highs against most major currencies in London trade Friday, extending their recovery from this week's multi-month lows as world stock markets slipped for a second day from new all-time highs.

The dollar was on the defensive on Friday after wrangling over a bill to change the US tax code dented confidence, while the euro sagged after the European Central Bank signaled it would maintain stimulus for as long as needed

As the Fed and ECB reverse sharply from their unprecedented easing of recent years to unprecedented tightening in the coming years, these record-high, euphoric, bubble-valued stock markets are in serious trouble.  As they roll over and sell off, investors will rush to prudently diversify their stock-heavy portfolios with counter-moving gold.  There’s nothing more bullish for gold investment demand than weakening stocks.

So contrary to recent weeks’ and months’ erroneous view that Fed rate hikes are bearish for gold, history proves just the opposite is true.  Gold has thrived in the 11 modern Fed-rate-hike cycles before todays, and it has powered higher on balance in this 12th one.  While you wouldn’t know it after this past year’s extreme Trumphoria rally, Fed rate hikes are actually bearish for stocks and thus quite bullish for gold.


Monday, 4 December 2017

Some clear drivers for Gold

A lack of clear drivers has kept gold prices between $1,265 and $1,300 an ounce throughout November, its narrowest monthly range in 12 years. Despite the volatility overnight, it was another subdued session across the precious complex in Asia, with gold struggling above $1,285 an ounce consistently.

The dollar was firm after Wednesday’s uplift on third-quarter U.S. economic growth revised upwards to 3.3 percent, making dollar-priced gold costlier for non-U.S. investors.


Global equities were on course to finish November with a 13th consecutive monthly gain, though a dive in U.S. tech stocks left investors wondering whether the longest global equity bull run in living memory might be starting to splutter.

Also denting investor optimism and signalling underlying support for gold going forward, investors were growing wary about the staggered progress of U.S. tax reform legislation.

Gold drew a certain degree of support in early Asian-Pacific trading from the most recent North Korean missile test, even though the yellow metal did not charge ahead on the latest geopolitical threat, said MKS (Switzerland) S.A.

North Korea said it now has a missile capable of striking the U.S. Wednesday's Asian session adhered to the recent range-bound status quo, however, afternoon headlines out of North Korea did give price action a modest boost.

The latest advances in missile technology in North Korea should provide an underlying bid tone for bullion, with the threat of a potential strike on the U.S. mainland increasing (albeit largely theoretical).

In recent times, such geopolitical tensions have resulted in only short-term price buoyancy and without further headlines to drive interest; participants will turn focus to the upcoming U.S.

Gold prices were down on Wednesday over a statement released by US Federal Reserve chair woman Janet Yellen that economic growth was broad based. This seemed to have convinced investors that rates would go higher soon.

This sentiment was further backed by a strong US economic data which strengthened the dollar further. In response the dollar pushed to a one week high of 93.44 late on Wednesday which further weakened the demand for the yellow metal.  Indeed, spot gold prices fell to $1281.75 per ounce on Wednesday, the lowest since November 23.

How ever amidst geopolitical tension, gold once again regained its safe have status. Reports that North Korea had fired a missile last week, lent support to gold and it moved slightly up in early trading on Thursday. Gold prices have been up and down due to a battle between the positive outlook on a US interest rate and concerns over North Korea firing a missile again.

By Thursday, gold prices were strengthened over a weak US dollar. Moreover, Gold was seen spiking as stocks and the dollar sank after headline reports from ABC that Michael Flynn promised "full cooperation to the Mueller team" and is prepared to testify that as a candidate, Donald Trump "directed him to make contact with the Russians."

Gold and U.S. Treasury prices have rallied to their session highs in late-morning action Friday, with T-Bonds and T-Notes futures posting strong gains, on news reports that former Trump  Administration national security adviser Michael Flynn is set to cooperate with the special prosecutor overseeing the probe of Russian tampering with the U.S. presidential election.

Traders were extrapolating this news to potentially mean that President Trump may be in very serious trouble, if he did indeed collaborate with the Russians on the U.S. election tampering. The U.S. stock market quickly sold off on this news, which also helped to lift safe-haven gold.

A follow-through USD weakness, coupled with a notable slowdown in China's manufacturing activity, as reported by a private survey, was seen lending some additional support to the precious metal.

Despite the supporting factors, resilient US bond yields continued exerting some downward pressure and kept a lid on any meaningful up-move for the yellow metal





Monday, 27 November 2017

Gold caught between Rally and Rebounce

Gold headed for a weekly decline as we saw prices dropping over strengthening U.S dollar.

Gold prices nudged lower on Thursday, with investors taking profits after gains of nearly 1 percent in the previous session on weaker U.S. economic data and concerns among some Federal Reserve policymakers over lower inflation.

Gold had surged higher on Wednesday, buoyed by the US Federal Reserve’s (Fed) concerns about persistent low inflation which saw the dollar slide.

The dollar suffered its biggest drop in five months on Wednesday after minutes from the U.S. Federal Reserve's showed"many participants" were concerned inflation would stay below the bank's 2 percent target for longer than expected.     


The greenback was still nursing losses on Thursday,supporting dollar-priced gold by making it cheaper for non-U.S.investors.

Spot gold was 0.1 percent lower at $1,290.82 perounce by 1313 GMT on Thursday. Gold still needs that one boost to achieve a support price of $1325 an ounce.

Trading was lighter than usual on Thursday, with Japanese financial markets shut for a public holiday while U.S. markets would be closed for the Thanksgiving holiday.

In wider markets, Chinese stocks suffered their biggest fall in almost two years, weighing on global equities, denting risk appetite and providing underlying support for gold, seen as a safe haven asset.           

With Chinese stocks down, low yielding currencies such asthe Japanese yen and the Swiss franc remained firmly supportedagainst the dollar.

Earlier in the week, Fed Chair Janet Yellen stuck by herprediction that U.S. inflation would soon rebound, but offeredan unusually strong caveat that she was "very uncertain" aboutthis and open to the possibility that prices could remain lowfor years to come.

After nearly a decade of pumping up the US and global markets, Janet Yellen and team are now starting to show some concern for financial market prices. The FOMC is concerned that they are getting out of hand and are a danger to the US economy.

The minutes of the Fed’s October meeting show that the committee is largely optimistic about the US economy:

“In their discussion of the economic situation and the outlook, meeting participants agreed that information received since the FOMC met in September indicated that the labor market had continued to strengthen and that economic activity had been rising at a solid rate despite hurricane-related disruptions.”

Currently the yellow metal is caught in the middle strong influential factors leaving markets perplexed over a rally or rebound in its movements.

Gold, silver and platinum prices have found bases and look set to remain range bound for now. The lack of any immediate geopolitical tension over North Korea has reduced the need for haven demand. With equities still generally upbeat, the opportunity cost of holding bullion is high, but the fact precious metals prices are not trending lower given the strength in equities is noteworthy. The weaker dollar should help underpin firmer precious metals prices.

Financial history revels that majorly investors would see to traditional financial systems to gain complete benefit of uncertainties. That would show through in traditional assets like shares and fixed income with benefit shifting to those markets that are not perceived to depend on the sanctity of governments and corporations that are prone to excess and can readily find their correlation surge ‘to one’ in the event of heavy market movement.

 This talking point seems to be born out of the skepticism that has arisen through the excessive stimulus and maintenance of extremely low interest rates by the world’s largest central banks.

Gold would also be sympathetic to such a view as the historic, accessible and regulated alternative asset. I think the lack of relationship is due to the premise of the theme rather than a systemic change in Gold’s nature. Either way, we will see this contrast resolved in the weeks ahead.

Friday, 10 November 2017

Gold tracks the U.S Currency

Bullion moved up on Wednesday as geopolitical tensions between US& North Korea and in the Middle East prompted investors to flock to safer assets. Gold was positive by almost half a percent and tested high in the international markets.

Gold prices edged higher on Thursday, after marking a near three-week high in the previous session, as the dollar eased.



Spot gold rose 0.2 percent at $1,283.91 per ounce at 0844 GMT. On Wednesday, it rose 0.4 percent and touched it’s highest since Oct. 20 at $1,287.13 an ounce.

Initially what pushed gold prices were factors like geo political uncertainties and safe haven buying. But currently, the severity of these influential factors has subsided and hence gold has been probably tracking the US dollar as its driver for price movement.

The dollar slipped to a more than one-week low against the yen on Wednesday, pressured by worries over possible delays to President Donald Trump's tax reform plans.

Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the U.S. currency.

On Monday, the Federal Reserve Bank of New York confirmed that William Dudley, among the most influential monetary policymakers throughout the financial crisis and its aftermath, expects to retire by mid-2018.

That raised another question over leadership at the central bank, less than a week after Trump chose a new Fed chief.

Currently the markets are in a fix, wondering what exactly to look for while making their trade. It’s difficult for them to trade even the Fed at the moment and hence as of now all eyes will remain focussed on the tax reforms for any further movement in the precious metals market.

Tuesday, 24 October 2017

Gold Expected to Drift Lower by Year End

Firstly, wishing everyone a very Happy Diwali and a Prosperous year ahead.

And indeed it was a Happy Diwali for domestic jewellers, as the slump in gold demand had finally gained momentum this October.

Demand for gold jumped in India this week on account of Dhanteras and Diwali, but high prices took some sheen off the yellow metal's lure during the key festival period this year.

Demand in the world's second largest gold consumer generally rises during the final quarter as the country welcome the festive and wedding seasons, where buying bullion is considered auspicious and propitious.

Though a lull was witnessed in gold demand during Dussehra, it significantly improved during Dhanteras and Diwali.


Gold prices spurted by Rs 290 to 3-week high of Rs 31,000 per 10 grams on the eve of Diwali at the bullion market on increased buying by local jewellers to meet festive demand.

Demand was expected to be even better, if global prices had shown similar movements. However in Asia and other international markets, gold prices were seen falling down.

CHINA - Elsewhere in Asia, there was a slight uptick in demand for physical gold, with benchmark spot gold rates headed for a weekly decline after touching a one-week low of $1,276.22 an ounce on Thursday, pressured by a firmer dollar.

However, investors remained cautious, awaiting direction on economic policy and market reforms during the 19th Communist Party Congress in China which kicked off on Wednesday and were also focused on the upcoming elections in Japan.

In top consumer China, premiums charged ranged between $8 and $12 per ounce over the benchmark this week, compared with $9-$14 a week earlier

JAPAN - Gold hit its lowest in more than two weeks on Monday as expectations that Japan’s ultra-loose monetary policy would stay in place after Shinzo Abe’s election victory at the weekend lifted the dollar to a three-month high versus the yen.

Japanese Prime Minister Abe’s win also fed into positive sentiment in equity markets that were buoyed last week by fresh optimism about tax cuts in the United States, curbing interest in gold as an alternative asset.

U.S. DOLLAR & U.S. ECONOMY- Gold prices touched the lowest in more than one week on Thursday, as the dollar stood firm on rising U.S. Treasury yields, with investors focusing on who would replace Janet Yellen as the next chair of the Federal Reserve.

Financial markets are now awaiting guidance on who will succeed Federal Reserve chair Janet Yellen, whose term expires in February.

U.S. President Donald Trump is considering nominating Fed Governor Jerome Powell and Stanford University economist John Taylor for the central bank’s top two jobs. Powell is considered less hawkish than Taylor, who is seen advocating higher interest rates.

Moreover, the economy expanded at a modest to moderate pace in September through early October, despite the impact of hurricanes on some regions, the Fed said its latest snapshot of the U.S. economy thus hinting markets that the US economy is doing well which will further create a downward pressure on gold.

The dollar had already posted its biggest one-day gain in a month on Friday after the U.S. Senate approved a budget blueprint for the 2018 financial year, allowing Republicans to pursue a tax-cut package without Democratic support.

The dollar hit its highest in about two weeks versus the yen, supported by this week's rise in U.S. bond yields, with U.S. President Donald Trump set to make a decision in the "coming days" on Yellen, who is also one of the five candidates being considered for the job.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold by increasing the opportunity cost of holding non-yielding bullion.

Tensions on the Korean peninsula, however, continue to weigh upon gold and the metal could drift down towards the $1,250 level by early December weighed down by the prospect of a further increase to U.S. interest rates in December.


Thursday, 28 September 2017

Tensions Push while Dollar Pulls Gold Prices

Gold prices have been correcting recent gains, the pullback tested the break-up level at $1,295 per oz and it gave way, which is a sign of weakness. Stints of haven buying have since given prices some lift, but the gains have not been held on to, which suggests a market that is getting tired of the on-going pomposity but lack of progress over North Korea. In addition, the stronger dollar is proving to be a negative for gold prices.



The week began on a positive note for gold as spot gold prices inched higher during Asian morning trading hours on Tuesday September 26 as investors opted for haven assets amid heightened geopolitical tensions.

North Korean accusations and the Kurdish independence referendum threatening to add even more instability to the Middle East saw investors heading for the gold safe haven trade, shrugging off a stronger US dollar in general overnight thus increasing the demand for the yellow metal.

Concerns also arose on straining relations between the USA and Iran after the latter claimed it successfully launched a missile and over oil supply disruptions after Turkey threatened to close the route for Kurdish shipments in retaliation for holding their independence vote.

However on Wednesday the markets witnessed a u turn as gold prices were pulled down over a strengthening US dollar.

The US dollar strengthened on Wednesday following hawkish comments from US Federal Open Market Committee chairwoman Janet Yellen on Tuesday.

The spot gold price remained below $1,300 per oz during Asian morning trading on Wednesday September 27 and was quoted at $1,295.00-1,295.30 per oz as of 04:33 BST, up just $0.95 on the previous session’s close.

Yellen’s speech was interpreted by markets as hawkish as she noted that it would be “imprudent” to keep monetary policy on hold until inflation reaches 2%, thus lending weight to the possibility of a December US rate increase.