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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

The Most Awaited Fed Meet Of The Year Keeps Markets Alert

Gold had rebounded somewhat last week although it remained below its psychologically important level of $1,200 per oz, suggesting that sentiment has not materially improved.

Gold came off its earlier lows but remained weak during Friday morning trading on December 2 – the near-certainty of a US interest-rate rise this month and an exodus of ETF investors put downward pressure on the market.

The spot gold price was seen trading at $1,176.45/1,176.65 per oz, up $3.35 on Thursday’s close. The metal fell on Thursday to its cheapest since February this year at $1,160.80 per oz.

Market was mainly focused on the US jobs reports, numbers of which would be an important deciding factor for the rate hike. The report was expected to show that 177,000 new non-farming jobs were added in November and unemployment rate forecasted at 4.9%.
Once the number Swere out gold came under pressure. Let’s have a look at the important data released-

• On Thursday, US final manufacturing PMI in November bested economic consensus at 54.1 – 53.9 was called for. 

• ISM manufacturing prices and PMI for November both topped projections at 54.5 and 53.2, respectively.

• October construction spending, however, came in at 0.5% month-on-month, a touch below the 0.6% prediction, while weekly unemployment claims were at 268,000 last week, which was above consensus of 252,000.

• On Friday non-farm payroll numbers showed that the USA added 178,000 jobs in November, against earlier expectations of around 165,000 and from October’s figure of just 161,000. In addition, unemployment dropped to 4.6% and wages climbed by 2.5%.

The recent spate of positive data is expected to produce higher rates when the US Federal Open Market Committee (FOMC) meets on December 13-14 – market participants see a 95% chance of a rate hike during the meeting, according to the CME FedWatch Tool.

The Asian physical market has picked up a little thanks to favorable seasonality and a fall in domestic prices. This should limit the downward pressure on international gold prices

This week, gold looks a little stronger because macro drivers have become slightly more favorable for precious metals from a weaker dollar and lower US real rates.
The gold price glided lower during Monday December 5 trading as its earlier push higher failed to hold and it slipped into negative territory.

The yellow metal had found support from its safe haven status after Italian Prime Minister Matteo Renzi was defeated in Sunday’s referendum.

The US Federal Open Market Committee (FOMC) will meet on December 14 – many participants expect an interest-rate rise to be announced, particularly after a run of positive data from the USA.

As of now, gold remains vulnerable ahead of the Fed meeting on December 13-14. Any stronger-than-expected US data is likely to raise the probability that the Fed lifts rates soon, pushing the dollar and US real rates higher, and in turn exerting downward pressure on the gold price.

Gold and Silver prices on RISE: RSBL

                                                                                      - Mr. Prithviraj Kothari, MD RSBL

Precious metals price rise is eminent and it ended the week on a positive note post poor US data released. The negative data sent the dollar tumbling, stimulating a good recovery for the yellow metal and its white counterparts.

Data released from the US was as follows:

• GDP data out of the U.S. disappointed on Friday, growing at a seasonally and inflation adjusted +1.2% during Q2 (exp: +2.5%) as business inventories contracted for the first time since Q3 2011
• The University of Michigan’s consumer sentiment index dropped to 90.0 in July (exp: 90.2) from 93.5 in June as both current and future conditions declined.
• The poor data countered the Fed’s statement that the US economy is stable and the near-term outlook is positive. Even though the unemployment rate is around five percent, the policy-board has been ineffective at spurring inflation or consistent wage growth. All eyes were on this meeting as something crucial was expected to happen regarding the interest rate hike. But negative data has postponed this hike and this gave gold the push. 

Apart from the US there was news that came in from other economies which affected the gold price: 

U.S Dollar:

Major downturn in the dollar created by the release of second quarter US GDP where it plummeted to 95.38 around the lowest mark since mid-June, before staging a modest uptick to 95.60.

Japan:

Host of new data releases and a Bank of Japan decision to inject further stimulus, markets were directionless this week with volatility and volumes continuing to drift lower. The Bank of Japan (BoJ) decided to adopt a minor adjustment to the existing monetary policy by increasing its purchases of exchange-traded stock funds to 6 trillion yen and expanded its dollar lending programme to $24 billion but kept its policy rate unchanged at -0.1 percent while maintaining the pace of government bond purchases.

The BOJ certainly doubled purchases of exchange-traded funds (ETFs) and said it will “conduct a thorough assessment of the effects of negative interest rates and its massive asset-buying program in September.”

The bank was considering a $265 billion package, part of which would target low-income citizens in another attempt to boost inflation and weak wage growth.

This can be understood as- either the central bank may feel that Japan’s economic growth needs very, very extensive stimulation and they have yet to formulate an appropriate plan or it can be interested that they want to see how the chips fall in eight weeks and move cautiously from there.

India:

Coming to the domestic markets- India being one of the largest consumers of gold, but currently the demand for gold isn’t intense. Frankly speaking, very few people want to invest in gold at this price. Buyers, it seems, feel that the current price is not sustainable and hence, they wait for a correction. Gold price in India is governed by two major factors: global economic conditions and the movement of rupee against the dollar. Both factors have contributed to the current price rise. While global economic conditions continue to pose a greater risk by the day following fluctuating recovery trend in the United States, Britain’s exit from the European Union (BREXIT) and other geopolitical tensions. On the other hand, Indian rupee has depreciated against the greenback despite reports of good inflow of dollars.

Since BREXIT, spot gold price jumped rapidly but, stayed elevated. Also, rainy season is considered as a lean period for gold purchase due to the lack of festivals, weddings or any other occasions during this season. Also, consumers have faced two subsequent years of deficient monsoon rainfalls. Although, the current year has seen normal rainfalls yet its distribution continues to remain uneven. Also, the crucial rainfall month – August – is yet to come. So, let’s keep our fingers crossed for the Kharif sowing and harvesting this year. In case of normal monsoon and its even distribution, Kharif crop would bring some cheers for farmers with higher output which would translate proportionate increase in gold demand.

In India, therefore, standard gold is available at Rs. 31,300 per 10 grams approx. Gold price may touch $1400 in near future in the international markets which will translate in rupee term at Rs. 32,500 per 10 grams. While the uptrend continues there could be some profit booking.

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Consolidation phase for Gold and Silver Prices: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/07/consolidation-phase-for-gold-and-silver.html

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Consolidation phase for Gold and Silver Prices: RSBL

                                                                           - Mr. Prithviraj Kothari, MD RSBL

BREXIT, FED, Dollar and many other key influential factors have proved to be beneficial for Gold and Silver prices in 2016. Last week too we saw many such factors influencing bullion prices but in the downward side. Let’s take a close look on the key highlights:

• The S&P (US Stock exchange) posted a fresh all-time closing high and the major U.S. stock averages 2,163.24 locked in a fourth successive winning week following the Brexit vote.
• At the weekends G20 summit in China, the world's biggest economies noted they will work to support global growth and share the benefits of trade, in a meeting dominated by the impact of Britain's exit from Europe and fears of rising protectionism. Philip Hammond, Britain's new finance minister, said the uncertainty about Brexit would begin to abate once Britain laid out a vision for a future relationship with Europe, which could become clearer later this year.
• On Thursday, 21^st July , in Frankfurt, the European Central Bank (ECB) and President Mario Draghi decided to leave rates unchanged after the Brexit-induced market shockwaves have faded somewhat. Draghi and his fellow central bankers gave no indication that the current 1.7 trillion-euro quantitative-easing plan needed to be increased following the UK vote to leave the single market. The council doesn’t meet again till September, but investors aren’t anticipating any adjustment to the bond-buying programme in the near-term thus leaving the door open to more policy stimulus, highlighting "great" uncertainty and abundant risks to the economic outlook.

Though bullion has benefited from the loose policy decisions coming in from central banks of Europe and Japan, but on the other side the dollar has gained on strong U.S. data, boosting bets the Fed will raise U.S. rates by year-end.

Globally, gold nearly fell to $1,312 and silver to USD 19.46. Traders attributed the fall in gold prices to a weak global trend where the precious metal headed for its first back-to-back weekly decline since May as gains in equities and the dollar ate into demand for the metal as a storage value. Few other important indicators that contributed to the downfall:

• Data released from the U.S. showed that U.S home resale’s hit their highest in nearly 9 and a half years in June as low interest rates lured first-time buyers into the market and the number of Americans filing for unemployment benefits fell last week, underscoring the economy's strength.     
• Adding to the down trend in prices were the figures released by SPDR. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.22 percent to 963.14 tonnes on Thursday.

I do feel that the Price action will likely be skewed to the downside and expect to test the post-Brexit low around USD $1,305 and below this USD $1,300 should global equities continue their upward trajectory.

The Jackson Hole Symposium Aug. 25-27, where Yellen is scheduled to speak is where we will most likely get more relevant information about coming Fed policy and the next direction.

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Gold prices to go up: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/07/gold-prices-to-go-up-rsbl.html

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Gold prices to go up: RSBL

                                                                 - Mr. Prithviraj Kothari, MD RSBL

While financial uncertainties were influencing gold prices, we have lately seen geo political uncertainties giving the yellow metal's safe haven appeal a further support if not permanent a temporary one.  The failed military coup in Turkey did manage to shake the markets.

Spot gold prices turned higher, reversing earlier losses in late trade on Friday in New York after Turkish Prime Minister Binali Yildirim said a group within the country's military has attempted to overthrow the government. For several hours overnight on Friday violence shook Turkey's two main cities, as the armed faction which tried to seize power blocked a bridge in Istanbul and strafed the headquarters of Turkish intelligence and parliament in Ankara. But the coup attempt crumbled as Erdogan rushed back to Istanbul from a Mediterranean holiday and urged people to take to the streets to support his government against plotters he accused of trying to kill him. The government declared the situation under control, saying 2,839 people had been rounded up, from foot soldiers to senior officers, including those who formed "the backbone" of the rebellion.

Earlier on Thursday, spot gold price crashed down to a two-week low of $1,320.45 after the Bank of England’s (BOE), contrary to expectations, kept interest rates unchanged in its Thursday meeting. In a somewhat surprising move, the Bank of England (BoE) decided to keep rates steady despite fear over the health of the UK economy following the Brexit vote.

Holdings in Global Gold ETF’s rose on Friday but lost about 10 tons in total over the week to 2002 tons, which was the biggest decline since March/April this year.

Gold continues to trade range bound between USD $1,320 - $1,340, however participants are still looking to play on the long side and we are likely to see moves lower well supported.

I largely see the spot gold price supported at the $1,300 level due to a post-Brexit global economic uncertainty and possibly lower US interest rates and given this critical situation at Turkey, precious metals prices are expected to move higher as they have always been influenced by geopolitical uncertainties.

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

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Bullish direction of Gold and Silver prices: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/07/bullish-direction-of-gold-and-silver.html

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Bullish direction of Gold and Silver prices: RSBL

                                                                       - Mr. Prithviraj Kothari, MD RSBL

Gold has once again proved its worth and claims to be the best performing asset of 2016, emerging from a three-year bear market. The yellow metal has gained almost 26% since 1 January, the best half-year performance since 1980, Bloomberg data showed. Silver, following gold, rose 30% in the first six months, leaving other assets such as the US and German bonds, Japanese yen and the US dollar far behind.

The flight to safe haven assets triggered by global political and economic uncertainty has made bullion the year’s most preferred investment, with gold and silver beating other asset classes by a mile.

The past four sessions following the Brexit vote saw gold prices spike about 6%, while silver advanced about 5%. Gold has definitely benefited from the Brexit incident, but there have been reasons more than one that this yellow metal has once again has got into limelight.

Global economic uncertainty, slower growth in China, accommodative monetary policy of the major central banks and weakness in dollar earlier this year had prompted investments into safe haven assets like gold and silver.

Global Uncertainty:

The market continues to benefit from safe-haven investment flows in the wake of the UK vote to exit the EU, which has led to heightened uncertainty over global economic prospects and increased risk aversion.

Dollar:

Strength in the US dollar was the major contributor to weakness in gold and commodity prices for the past few years. However, increasing uncertainty about economic and political developments, low-to-negative interest rate environment as well as doubts over global economic recovery post the collapse of Lehman Brothers in 2008 have led to demand for precious metals, analysts said.

China:

Economic slowdown of the Chinese economy has raised questions over the global growth and development. These concerns have put an upward pressure on gold. 

Monetary Policy:

The current economic backdrop, along with fading prospects of an interest rate hike by the US Fed at least till December validates further march of bullion on the upwards trajectory over medium-term.

Contradicting these prospects, the Jobs report released pulled gold prices down but not significantly. The report stated that in June, 287,000 Americans entered the labour market, far exceeding expectations of 174,000 while average hourly earnings period ticked up 0.1 percent, below the forecast 0.2 percent.

Still, the unemployment rate rose to 4.9 percent from 4.8 percent after the May figure was revised down to 11,000 jobs from what was already a multi-year low of 38,000. The June employment figure had gained greater significance following the disappointing May report, which suggested the US recovery was beginning to slow after seven years of expansion.

It was a session marked by extreme volatility on Friday with gold experiencing a $35 range and silver $1.00, with NFP's driving price action. The prices send a solid signal for the Gold price to move beyond $1400 in short to medium term.

Further supporting gold was the Chinese gold reserves figures. It stated that China's gold reserves stood at 58.62 million fine troy ounces at the end of June, up from 58.14 million at the end of May, the central bank said on Thursday. Such a stock up already appears to be in motion for the gold stocks.

Given these supporting factors for safe haven metals, investors have engaged themselves into purchases of gold and silver and this is further giving and upward thrust to precious metals.

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

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Sharp increase in Silver prices: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/07/sharp-increase-in-silver-prices-rsbl.html

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UK Departs, GOLD prices shine: RSBL

                                                              - Prithviraj Kothari, MD RSBL

The most talked about and the most awaited trend changer of the year after the FED rate hike is finally out: UK has exited EURO after 43 years and BREXIT has been implemented. UK themselves have got divided during the results of the referendum where England and Wales voting strongly for leave, while Scotland and Northern Ireland backed staying in the EU. 

Undoubtedly, along with me almost everyone was caught by surprise. There were possibilities but a result like this is a bit hard to digest. Simply because it creates fractions in Euro group where countries like France, Netherlands could also take up a similar decision. It sent shock waves across the financial markets, with all the risky asset classes such as equities heavily down and safe-haven vehicles such as government bonds, gold and silver steeply higher. The volatility, uncertainty, fluctuation went beyond expectations. Gold saw investor favour resume on safe-haven Brexit buying. Let’s pick each market individually and see the effect Brexit had them.

GOLD:

Gold soared as much as 8 percent to its highest in more than two years on Friday after the UK referendum results, sending investors rushing for protection. Gold prices surged to its highest level in more than two years, at $1,359 since March 17, 2014, sending shock waves across markets. Gold is currently trading around $1316 a $40 lower from the high.

Major Indices:

All the major indices across the world were nearly 3% down while European indices fell to the tune of 5%. The indices have shown some resilience as the news item fades, but the uncertainty in the markets have reached to unprecedented level, calling in government, state heads to provide clarity on the future map ahead.

India:

Even before the final numbers were out, India’s benchmark Sensex index opened over 700 points or 2.85% lower in the early trading hours When the trading ended for the day at 3:30 PM, the Sensex closed at 605 points lower, marking a decent recovery. Though BREXIT pushed Indian equity prices down, the governments has been very confident in their message and do not see a much long term impact on the Indian economy.

Currency - Pound versus others:

The British pound fell more than 10% against the US dollar, lowest since the 1980s. In morning trade, the rupee fell to 68.22 a dollar, the lowest level since March 1. Weaker pound will reduce burden on children studying in UK but it might get partially offset by a rise in cost of living. The dollar index shot higher on safe-haven buying, last at 96.10, the euro had dropped to 1.0912, the Aussie dollar had fallen to 0.7335, but the yen has had a massive rally to 99. In emerging market currencies, the Yuan has fallen to 6.6295 and most others had a knee-jerk reaction to the downside as the dollar has strengthened and as risk-off has hit the markets.

ETF:

ETF investors are expected to boost their physical holdings following the vote. According to market estimates, they have just accumulated 7.3 tonnes of gold so far this week after buying 25 tonnes in the previous week.

For investors:

      Do not lay your investments in one asset class only. Returns on Gold have surpassed most of the indices returns in the current year. A whopping $100 movement and thereafter settling at around $1330, showcases the metal's safe haven appeal strength.

Investors currently see gold as a currency – it is rising alongside other safe-haven currencies such as the dollar and the yen. Gold’s upside potential will be dependent on the degree of uncertainty and instability stemming from the Brexit as well as the ability of central banks to provide a co-ordinated solution to calm the storm in the financial markets.

Gold set a fresh 2016 high although the rally was quicker and stronger than expected given that the UK would remain in the EU. Brexit helped it to be a white Friday for gold after the vote against markets expectation of it turning to be a black one. Gold has done what’s its best at- acting as a safe haven for its investor, giving protection against uncertainties and volatility.  Such environment is expected to persist for a few days until the central banks provide a co-ordinated package of measures to calm the financial markets, in turn triggering some profit-taking in gold.

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

Previous blog:

BREXIT – Unity of Europe challenged: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/06/brexit-unity-of-europe-challenged-rsbl.html

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