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

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.
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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.

Wednesday, 6 September 2017

Bullish sentiments for gold

Gold for the week ended with a good sign, as it posted gains in the Friday session, continuing the upward movement we saw on Thursday.

In the North American session, gold was seen trading at $1323.74, up 0.18% on the day. This rise was seen post the release of the labor report told prices have enjoyed a strong week, gaining 1.9%.
The metal showed some strong gains earlier on Friday, as the metal touched a daily high of $1329.05, its highest level since November 2016. These gains were triggered by the disappointing non farm payrolls and wage growth reports for August, both of which missed their estimates.

On the release front, US job numbers were unexpectedly soft. Non farm payrolls slowed to 156 thousand, well below the estimate of 180 thousand. Wage growth also disappointed, as Average Hourly Earnings posted a small gain of 0.1%, shy of the estimate of 0.2%.


Although the US labor market remains tight, investors are fretting about the lack of wage growth, which has contributed to the low inflation which continues to hamper the US economy.

The Federal Reserve will also be perturbed by small wage growth, as a December rate hike is very much in doubt due to inflation levels which obstinately remain well below the Fed's inflation target of 2.0%. Currently, the likelihood of a December rate hike stands at just 36%

Gold is traditionally considered a safe-haven asset, and often benefits when investors get jittery and lose their risk appetite. Such was the case last week, as renewed tensions between the US and North Korea early in the week propelled the metal above the symbolic $1300 level.

On Tuesday, North Korea fired a missile over Japanese territory, drawing sharp condemnations from Japan and the US, with President Trump declaring that "all options remain on the table"

In times of uncertainty or crisis, investors typically take refuge in “safe” options like the Swiss franc, gold or the US dollar, but under President Donald Trump the greenback has lost its lustre, especially to the euro.

Although, tensions have since eased somewhat, if North Korea decides to fire another missile towards Japan or the US military base on Guam, gold prices will likely move higher. As well, as the markets digest the disappointing job numbers, we could see risk appetite continue to wane early next week, which could extend the current gold rally.

The reaction to the lackluster U.S. Non-Farm Payrolls (NFP) report suggests gold will continue to exhibit a bullish behavior ahead of the Federal Open Market Committee (FOMC) interest rate decision on September 20 as mixed data prints coming out of the economy sap bets for another rate-hike in 2017. Even though ‘the Committee expects to begin implementing its balance sheet normalization program relatively soon,’ the fresh forecasts from Chair Janet Yellen and Co. may ultimately heighten the appeal of gold if central bank officials attempt to buy more time and project a more shallow path for the Fed Funds rate.

In turn, U.S. Treasury Yields may stay depressed throughout the remainder of the year, and the precious metal may continue to retrace the decline from 2016 amid the shift in trader behaviour.
Weak U.S. economic data has effectively removed the Fed’s prospective rate rise scenario from the gold price equation – at least for a couple of months although may have an impact in November as speculation will reign over whether the Fed will implement another small rise in December, or kick the can down the road again.  The U.S. dollar is looking weak and a weak dollar tends to see the dollar gold price rise. And it is the dollar gold price which the market judges to be the most important indicator, even though the gold price in other currencies, like the euro or the yen, should perhaps be more relevant.

The seemingly increasing threat of war between North Korea and the USA, will likely give the gold price a huge boost in the days and months ahead with safe haven demand escalating worldwide – and particularly in Asia and the U.S. itself.

Thursday, 10 August 2017

Bullish trends for Gold

Gold prices were holding well up during the past week breaking the long term downward trend that started off in 2011.  A weaker dollar and lower treasury yields has been supporting gold prices lately.
Gold steadied on Thursday after nearing a seven-week high in the previous session as investors awaited U.S. jobs data for further clues on the outlook for interest rate rises.Spot gold was 0.1 percent higher at $1,267.30 per ounce.



Gold rallied through most of July as the dollar fell on reduced expectations for a third U.S. rate rise this year. Inflation has been contained even though the labor market appears to be in its best shape in many years and despite double-digit U.S. earnings growth in the second quarter.

Reduced rate rise expectations tend to weaken the dollar, making dollar-priced gold cheaper for non-U.S. investors.

But by the end of the last week, gold prices were slightly bullish after the release of U.S labor report.
The latest non-farms payroll report on the US employment market was published, showing the economy added 209,000 jobs last month and that unemployment was low at 4.3 per cent, its lowest since March 2011.

This smashed economist estimates that 183,000 new jobs would be added. In response the dollar has popped higher, says Reuters.

The dollar is inversely correlated to the gold price, which is often held as a hedge as the global benchmark reserve currency.

Stronger economic data also raises the prospect of the Federal Reserve voting for a third rate rise this year in either September or December (rate rises tend to hurt non-income yielding assets like gold).
In the two hours after the report came out the gold price slumped by around $13, or one per cent, to $1,255 an ounce.

Gold's recent trend has been largely defined by the fortunes of the dollar, which is good news for gold bugs as the greenback was languishing near 15-month lows earlier this week.

The safe haven metal dropped from $1268 as the July non-farm payrolls figure came-in at 209K, beating the estimated figure of 180K. The jobless rate dropped to 4.3%, while the June trade deficit narrowed more than expected. Wage growth rose to 0.3% as expected.

Now the influential factor for gold remains that whether the dollar continues to strengthen or it may go weaker, which is likely to mean the US Federal Reserve has to remain less than hawkish. Apart from these financial drivers, any pick up in geopolitical issues could also fuel the rally.

Monday, 7 August 2017

Gold loses its shine ahead of jobs data

Gold drifted away from its seven week high hit earlier this week.  Gold futures settled lower on Wednesday—kicking their typically inverse relationship to a weaker dollar—as sentiment remained cautious following a recent rally on top of expectations that the Federal Reserve could further tighten interest rates going forward.


Gold prices on Thursday lowered, as the dollar firmed on expectations that the U.S. Federal Reserve could trim its bond holdings in September.

As markets await the data to be released on Friday, a snapshot of the examination of the jobs marketsrevealedthat private-sector hiring remained strong in July as employers added 178,000 jobs, slightly more than expected.

In the Friday report, the U.S. is expected to have added 180,000 jobs last month, keeping unemployment near a 16-year low of 4.4%, according to a Market Watch survey. The pace of hiring in the U.S. has already slowed sharply since hitting a post-recession peak of 250,000 a month in 2015, but continues to churn ahead, so far showing few red flags for wage-induced inflation.

The U.S. economy will likely be strong enough for the Fed to trim its bond holdings in September.
Gold and the U.S. currency unit typically move inversely as a cheaper dollar is beneficial to gold investors using another currency. Both markets are affected by interest-rate policy as higher rates support the dollar but also dull the appeal of non-yielding gold in favour of interest-bearing assets.

Thursday, 20 July 2017

Gold Dips expected to remain Supported




Gold and other metals had a firm start for the week which continued over Tuesday. Gold and the other precious metals were firmer on Tuesday morning, with prices up an average of 0.4% while gold prices were up 0.3% at $1,237.35 per oz. This was seen as an after effect of a strong performance on Monday when the complex closed up an average of 0.8%.

Gold was more or less stable on Wednesday as it opened at 1241.75/1242.75 per ounce. Post which it rose to a high of 1243.50/1244.50 before retreating to a low of 1239.00/1240.00 as the dollar pared early losses and the euro fell back from yesterday’s 14-month high.

Gold prices are gaining from the weak dollar prices and lower bond yields which help in reducing the opportunity cost of holding gold thus pushing its prices higher.  Prices have firmed up in recent days, this despite geopolitical concerns being light but the weaker dollar and a less hawkish US Federal Reserve seem to be underpinning price rises.

But at the same time, buoyant equities are also a headwind for gold and the lull in geopolitical tensions is not getting any good for gold. So the expectations of a steep rise in gold prices aren’t strong currently.

All in all, we are not expecting much from the precious metals camp in the short term, but we expect dips to remain supported.

Tuesday, 11 July 2017

Gold likely to be embraced as a Safe Haven

Gold prices have been steadily on decline since early June when the metal traded just shy of $1,300 an ounce.

This week too gold ended on a negative note even though the week began with a different picture.
Gold prices were lying stable at $1,225.24 per oz on Wednesday morning after a prices rise on Tuesday, closing up 0.2%.

However on Friday, gold dipped $5.60 to $1219.10 in Asia before it bounced back to $1227.00 just after morning’s jobs data was released, but it then fell to a new session low of $1207.30 in late morning New York trade and ended with a loss of 1%.  

Spot gold was down 0.7 percent to $1,215.81 per ounce by 1336 GMT, after touching an intraday low of $1,214.40, the weakest since May 9. It has dropped about 2 percent this week and is set for its biggest weekly fall since the week of May 5.



Gold hit a two-month low on Friday after stronger than expected United States jobs data increased the likelihood of another U.S. interest rate increase.

U.S. hiring picked up in June while wage gains disappointed yet again, a mix that may continue to be a puzzle for the economy and policy makers, Labor Department figures showed Friday.

While payroll gains were broad-based and boosted by the biggest jump in government jobs in almost a year, wages were below forecasts, even with the jobless rate close to the lowest since 2001.

It is quite evident from the unrelenatble hiring in June that thelabout market is resiliebt and may lead to a stronger acceleration in wages. At the same time, the month’s data could also reflect a new graduating class and the summer’s seasonal workers joining the labor force -- some likely welcomed by employers who are struggling to find workers.

The data suggested that the job market is attracting people off the sidelines, as the size of the labor force and number of unemployed people increased, indicating more people are actively looking for work. The number of people who went from out of the labor force to employed rose to 4.7 million, the highest in data going back to 1990.

While wage growth is running below the peak of previous expansions, the figures may be depressed by weak.

U.S. non-farm payrolls jumped by 222,000 jobs last month, the Labor Department said on Friday, beating expectations of a 179,000 gain.          

The data brought negative news for gold traders as there isn’t really anything in this number which is going to put the brakes on an interest rate hike.

Nevertheless, the report marks a relatively strong finish for the labor market in the second quarter that should support continued gains in consumer spending in the coming months. Federal Reserve policy makers raised interest rates last month and reiterated plans to start reducing their balance sheet and increase borrowing costs once more this year.

Recent selling has placed enormous pressure as prices broke through critical support levels.  Much of that selling was a result of a shift in market sentiment as the Federal Reserve and the European Central Bank relaxed their respective multiyear quantitative easing programs.

However, markets remain constructive for gold.The bigger picture for gold is encouraging. Despite the U.S. tightening cycle and VIX bear market, gold has recovered. It appears to be looking ahead to a beneficial endgame.

Gold certainly has a way of getting investors’ hopes up. Most recently, it neared $1,300 per ounce in early June, prompting optimism among bulls about a meaningful breakout to come. Alas, gold prices failed to push through that level, and now sit around the $1,250 mark. There are, of course, bullish and bearish arguments to be made but, on balance, gold is currently facing serious headwinds. That’s not to say, however, that there isn’t a long-term bullish case for gold. There is, but it may take years to play out. Simply put, the world is awash in too much debt, be it household, corporate or government.

According to an October 2016 report by the International Monetary Fund, gross global debt (excluding that of the financial sector) stood at $152 trillion, representing an all-time high 225% of world GDP. This overhang risks prolonged economic stagnation, if not a worse outcome. At some point, central banks will be forced to engineer higher inflation rates to lessen the burden of all this debt. Realizing this, investors can be expected to embrace gold as the ultimate safe haven.

Wednesday, 31 May 2017

GOLD EXPECTED TO SHINE IN THE SECOND HALF OF 2017

It was strong opening for gold this week as gold neared its highest in a month on Monday amongst holiday thinned trade. A soft dollar and a pullback in equities helped this rise in gold prices.

Gold hit its highest level since May 1 on Friday at$1,269.50 an ounce, as nervousness over U.S. President Donald Trump's negotiations with other world leaders at the G7 summit prompted investors to buy bullion as an alternative to nominally higher-risk assets such as shares.



Spot gold settled at $1,266.67 an ounce, little changed from $1,266.66 late on Friday.
Though there is not much rise expected in gold prices, but the news from G7 meeting pushed gold prices up.

Under pressure from the G7, Trump on Saturday backed a pledge to fight protectionism but refused to endorse a global accord on climate change, saying he needed more time to decide.

Apart from this, market players await next month’s FOMC meeting to get clearer picture on the U.S. Federal Reserve's stance on interest rate increases.Gold is highly sensitive to rising U.S. rates, which
Increase the opportunity cost of holding non-yielding bullion, While boosting the dollar, in which it is priced.

Meanwhile this week, market participants will stay focused on the labor market report in the US slated to release during the week. If the data turn out to be positive, there is probably nothing to prevent the (Fed) implementing its next rate hike in mid-June.

The latest FOMC minutes suggest that the Fed may start decreasing its balance sheet later this year.
It is true that the first two rounds of quantitative easing were positive for the gold market. However, the third one was a disaster for the yellow metal, as the confidence in the U.S. economy came back and the safe-haven demand for gold declined. Therefore, the impact of the unwinding of the Fed’s balance sheet on the gold market is not easy to determine – a lot will depend on the broad macroeconomic picture.

On the one hand, the Fed’s shrinking balance sheet would imply rising long-term real interest rates, which would be negative for gold prices. On the other hand, there may be some turmoil in the financial markets, which would support the gold market. Moreover, it may be the case that the U.S. dollar rally which started in 2014 was caused by the rising expectations about the Fed’s upcoming tightening.

If this is true and investors really bought the rumor and sell the fact, then the greenback may start depreciating, which would likely send the price of gold higher. Gold’s response to the current Fed’s tightening cycle suggests that it is not impossible scenario. However, the whole process is likely to be conducted in a very conservative and cautious way to minimize market volatility and disruption. Hence, investors should not bet on doom scenarios and expect that the price of gold will necessarily skyrocket.

Though gold was not preferred in an investor’s portfolio during 2016, it gold regained investor confidence during 2017, as doubts about the Trump’s administration’s ability to see through their policy agenda and political difficulties have emerged. Moreover, there has also been a number of geopolitical events such as European elections – the results in France and Netherlands have somewhat assuaged financial markets – and the flash point in the Korean peninsula.”

These geopolitical tensions and uncertainties have influenced gold prices.

The spot price of gold jumped nearly 2% on the 17th of May, the most significant daily increase since the Brexit vote on May 2016. Political developments will be closely watched by the market, and could be a potential driver of additional uplift in gold prices going forward.

Comments by St. Louis Fed President, James Bullard, that inflation remains subdued, and the Fed’s interest rate expectations might be too aggressive, have also been supportive of gold.

Gold is expected to hover around USD 1250 an ounce and is further expected to range between USD $1245 to USD $1300 over 2017-18.

Monday, 27 March 2017

Short Term seems positive for Gold

Gold rose by 15 dollars last week from $1229 to $1244 having hit a high of $1252 and a low of $1227. Silver rose by 41 cents from $17.36 to $17.77 having reached a high of $17.78 and a low of $17.33. The dollar index stands at 99.62 that’s down 0.68 on the week. Gold prices moved higher as the Euro gained traction and the dollar edged lower following stronger than expected German PMI data. Analysts believe that gold has further to rise but will be seesawing between $1230- $1260 before perhaps it breaks out up to $1280 levels.

Silver markets were also positive last week and is attempting to reach $18 level. Similar to gold we see a see saw effect between the price range of $17 where there is significant support and the $18 level where there is resistance. As I have mentioned in my previous blogs that political uncertainty could have a greater effect on prices primarily because of their effect on the value of the dollar which actually fell a little during the week. Also a fall in the Dow enabled funds to be moved out of equities and back into gold, though to be fair this transference was relatively small.


Gold prices finished higher on Friday to log a second weekly gain in a row as demand for assets perceived as risky waned and the U.S. dollar touched its lowest level in about seven weeks.
Traders also eyed developments tied to a Republican-backed U.S. health-care bill, which could have wide-ranging influence in financial markets.

The main focus globally was on a vote by the U.S. House of Representatives on a bill to abolish the Affordable Care Act, also known as Obamacare.  The vote was expected late Thursday, but was postponed by the Republicans when there were serious doubts the Republicans had the votes to strike down Obamacare. After negotiations between the Trump administration and members of the House Thursday, President Trump took a hard line and declared the vote should take place Friday, or he would move on to other matters and leave Obamacare in place. There is no clear consensus in the marketplace on the outcome of this key vote, which could move markets in its immediate aftermath.
A “no” vote on the House bill would likely favour the gold market bulls, as it could put downside pressure on the U.S. stock market.

Gold could back off and The U.S dollar is expected to strengthen and bonds yields should rise if the health care bill gets passed. The main reason being that the markets will see it as one hurdle out of the way for finally moving onto tax reform and other fiscal stimulus measures.

But if it happens otherwise and if the bill doesn’t get passed then gold is quote likely to rise.
On Friday, St. Louis Fed President James Bullard said U.S. labour market improvement is slowing down. U.S. data on core durable goods has shown that the economy is strong, but this is not something which is going to excite the Fed that much.

The U.S. data released was as follows

  • The Department of Commerce said new order of durable goods increased by $3.9 billion or 1.7% to $235.4 billion last month, following January’s revised 2.3% increase. According to consensus forecasts, economists were expecting to see a 1.1% rise.
  • Stripping out the volatile transportation sector, new orders of core durable goods rose 0.4%, in February, following January’s revised increase to 0.2%. Economists were expecting to see an increase of 0.5%.


The political uncertainties over in Europe around French elections and Brexit are going to provide a lot of tailwinds for the gold rally .

Analysts believe that the short term outlook for gold is positive as it will rise and shine amidst all the volatility and uncertainty prevailing. The coming week, US durable goods orders and housing sales will be announced. Globally reports on Japanese trade and UK inflation could also influence the currency markets and so it is possible that the dollar may lose a little ground against the Sterling and the Euro as it did last week. So this week we are positive for gold and silver while the limits mentioned are tested. What also needs to be focused is the divergence between the Fed’s growth forecast of 2% and President Trumps envisaged plans for a 4% economy growth rate. Time will tell which of the two proves to be more accurate.

Tuesday, 14 March 2017

The sentiments for Gold are bullish

Gold prices have fallen 5.3% from the end of February high and they have almost given back 50% of the December to February gains

Gold prices slipped towards week low on Thursday as investors awaited the employment report due on Friday, a factor that would unofficially strengthen the interest rate hike in the FOMC meet next week.


Gold’s latest pull down followed the release of better-than-expected US private jobs data midweek, boosting the dollar ahead of the release of official monthly payrolls figures on Friday.


  • Private employment, which excludes government agencies, rose by 227,000 after a 221,000 increase the prior month. It was the biggest gain since July. Construction jobs, which can fluctuate depending on the weather, rose by 58,000, the strongest in almost a decade, and followed a 40,000 increase in January. Manufacturing payrolls gained 28,000, matching the most since August 2013. Meanwhile, retail positions fell by 26,000, the most in four years.
  • The ECB held its benchmark refinancing rate at 0% and left the pace of its bond purchases unchanged on March 9th, as widely expected. Both the deposit rate and the lending rate were also left steady at 0.4% and 0.25%, respectively.
  • The number of Americans filing for unemployment benefits went up by 20000 to 243000 in the week ended March 4th 2017, slightly above expectations of 235000.
  • 2008 Nonfarm business sector labor productivity in the United States increased at a seasonally adjusted annual rate of 1.3 percent during the fourth quarter of 2016, following a downwardly revised 3.3 percent rise in the previous period and below market expectations of a 1.5 percent gain.


While unseasonably warm weather may have boosted the payrolls count, the data represent President Donald Trump’s first full month in office and overlap with a surge in economic buoyancy following his election victory. The figures also corroborate recent comments by Federal Reserve officials that flagged a likely interest-rate increase this month.

Bullion’s being pulled back down toward $1,200 an ounce in the worst losing run since October as positive US economic data underpinned expectations that interest rates could probably be raised several times this year, starting with a hike next week.

After raising rates just a single time in 2015 and also in 2016, the pace may quicken this year. The so-called dot plot from Fed policy makers shows an expectation for three increases this year, and last Friday, Yellen dropped hints the bank might end up having to hike them more than planned in 2017.

After Wednesday’s upbeat private payrolls data, markets were pointing towards more than 90 % chances of rate hike in March meeting; gold prices are likely to face the weakness amidst the strength in the dollar. Separately, the weaker CPI released from China is also likely to put pressure on gold, given the fact that gold is considered as a hedge against inflation.

Gold prices slipped on Friday, building on a loss for the week as better-than-expected U.S. employment data backs the likelihood that the Federal Reserve will decide to boost interest rates at its meeting next week.

Higher interest rates lift the appeal of holding dollars. That also means that a stronger dollar cuts the worth of holding non-yielding gold that’s priced in this denomination.

We see this sell-off as tied into the increased chance of a US rate rise next week. Looking further out, sentiments for the yellow metal are bullish.


Wednesday, 1 March 2017

Effect of Presidential Election and BREXIT on Bullion Market

So Far, bullion has witnessed a 9.6 percent rise in prices mainly due to the prevailing political uncertainty over Trump’s unorthodoxy, European elections and Brexit ruffle confidence.
The yellow metal reached near a four month high last week amid intensified political uncertainty in the U.S. and the EU.

All precious metals have made gains, gold, silver, platinum and palladium, as both the euro and the dollar weakened over the week. Let's take a look as to what factors contributed to the rise and how far an important role will they play in the near future.

US uncertainty- Gold prices have hit a four month high to reaching their highest level since Donald Trump won the election.


The metal is considered as a safe haven asset for money and values rise when markets are in turmoil or in times of uncertainty. This sentiment has raised the demand for gold especially from investors thus pushing  its prices higher.

As markets await a major speech by US president Donald Trump, we saw equates retreating and dollar hesitating thus strengthening gold prices and shaking off most of the losses incurred following the surprise election result, as markets continue to unwind Trump trade.

Fed Rate Hike- Last Wednesday's release of minutes from the last FOMC meeting on January 31 – February 1 struck a slightly more hawkish tone as Fed members discussed the appropriateness of another rate hike 'fairly soon.' concerns over the risks and uncertainties surrounding the Trump Administration's fiscal stimulus plans as well as a strengthening US dollar tempered that hawkish stance. In the end, markets were once again left with continued ambiguity regarding the pace of monetary policy tightening in the coming months. Indeed, the Fed Fund futures market still saw a low percentage probability of a March rate hike – in the high-teens to low-20's – a day after release of the FOMC minutes. This sustained policy uncertainty helped weigh on the dollar while boosting the price of gold further. Reduced expectations of a US rate hike in March following the release of the minutes from the US Federal Reserve's last meeting are also helping gold.

EU elections- Despite the virtually relentless rally in US and global equity markets, geopolitical risks continued to abound, particularly in Europe. Article 50, which officially begins the process of separation between the UK and European Union ('Brexit'), is slated to be triggered no later than in March. A former European Commission official has recently stated that the triggering of Article 50 could lead to a 'complete breakdown' of UK/EU relations.

Additionally, France's far-right, anti-EU presidential candidate, Marine Le Pen, is leading in polls for the first round of the upcoming French elections. Although she is not currently favored to win against frontrunner Emmanuel Macron, any surprise victory by the populist/nationalist Le Pen will undoubtedly lead to serious questions about the future of the EU.

Geopolitical worries and political concerns in the EU continue which is leading a flight to safety bid in gold futures market and gold exchange traded funds (ETFs) and demand for safe haven gold bullion.

Dollar- The dollar looks vulnerable due to the uncertainty about US President Donald Trump and the new U.S. administration's policies. Overnight Trump attacked China and accused the Chinese of being ‘grand champions’ of currency manipulation.

This alone is quite bullish for gold. It does not create confidence about trade relations between the world's two biggest economies and it suggests that we may be about to embark on the next phase of the global currency wars.

The US president is to deliver his first speech to US Congress next week, after US Secretary of the Treasury Steven Mnuchin on Thursday said the impact of fiscal stimulus this year on the economy might be limited.

Amid these uncertainties in Europe as well as those in the US under the Trump Administration's still-hazy policy trajectory and the Fed's murky monetary policy, gold has continued to extend its sharp uptrend that began after price bottomed out around the $1125 support area in late December.

Tuesday, 7 February 2017

Push vs Pull for GOLD

Last week, gold clocked its largest weekly gain in some seven months. The move came higher as investors flocked to gold, which is often viewed as a safe-haven investment in times of uncertainty.
Last Thursday, markets kept a close watch in the Jobs report that was due on Friday. Apart from the Job report there were many other highlighted events in the week-

Jobs Data- U.S. job growth surged more than expected in January as construction firms and retailers ramped up hiring, but wages barely rose, handing the administration under President Donald Trump, both a head start and a challenge as it seeks to boost the economy.


This report pushed gold prices higher and the sentiments have been continued for this week too.
The gold price climbed on Monday to its highest in nearly three months with investor interest in bullion improving thanks to a subdued dollar and political worries about the US and Europe.
Spot gold was up 0.6% at $1,226.91 during trading hours, having earlier touched $1,230.14, a level last reached on November 17.

Political Uncertainty- Majorly, the current uncertainty prevailing in the US is being driven further by President Donald Trump’s policies, the most controversial of which is a temporary ban on immigrants from seven Muslim countries.

Moreover, Data on Friday showed U.S. wage growth slowed, reducing the odds of Federal Reserve rate increases this year and sending bullion to the biggest weekly gain since June. Uncertainty about Trump’s fiscal-stimulus policies and his administration’s spats with traditional allies helped push hedge funds’ bullish bets on gold to the most in almost two months.

Dollar - The dollar’s value against a basket of currencies has fallen nearly 4% since January 3. That was partly on expectations that the US central bank will wait to see what happens on the political and economic fronts after Friday’s monthly jobs report showed that wages barely rose. "Gold’s solid showing so far this year ... is mostly attributable to a weaker dollar and last week’s standoffish Federal Reserve statement with regard to when it would next move on rates. Trump has also criticized the strength of the dollar, which has pushed the greenback lower. A weaker dollar is good for gold as gold is denominated in U.S. dollars.

French politics - Elections in the Netherlands, France and Germany this year are also adding to jitters. Apart from the Trump presidency euphoria, investors are also watching French politics, where conservative presidential candidate Francois Fillon on Monday vowed to fight on for the presidency despite a damaging scandal involving taxpayer-funded payments to his wife for work which a newspaper alleges she did not do. French pollster Opinion way published a survey on Monday that showed independent Emannual Macron resoundingly winning a presidential election runoff against far-right leader Marine LePen.

Interest rate hike - The Fed raised rates for only the second time since the financial crisis in December and most Fed policymakers agree with Harker that three more rate hikes this year would be appropriate. Wall Street banks and interest-rate futures traders are betting the Fed will only lift borrowing costs twice this year, starting in June.

Currently there is basket of positive and negative factors that might respectively push or pull gold prices further. Of course the positive factors for gold could indeed be overturned by a significant improvement In US employment statistics, or advances in GDP, thus strengthening the Fed’s hand, but if the dollar continues to fall (President Trump appears to think it is too high) and real interest rates remain negative, gold could yet have a good way to run this year, particularly given the global geopolitical uncertainties noted above.