MARKETS REMAIN CALM AS WE ENTER 2016: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Firstly wishing you all a very happy new year. 

 

To begin with, United States, Europe, Japan and many other countries remained shut on account of New Year's Day and  hence markets were calm and serene market with volatility to its minimum.

Whatever fluctuation came in was mainly due to two reasons:

In the international market it was the data released from the US and in the domestic market it was the weakening rupee against the dollar.

Gold prices were also supported as weaker than expected economic data from United State likely to spurt safe haven demand for the yellow metal . Data released from the US was as follows-

• On Thursday, government data showed that the number ofmAmericans filing new claims for unemployment benefits rose sharply last week, a potential signal the job market was losing steam
•  Initial claims for state unemployment benefits rose 20,000 to a Seasonally adjusted 287,000 for the week ended Dec 26.
• US Chicago Purchasing Managers Index in December month fell to 42.9 compared to analysts' expectation of 49.8 and 48.7 a month ago, government data showed on Thursday.
• SPDR Gold Trust holdings dropped by 0.18% i.e. 1.19 tons to 642.37 tons on Thursday compared to 643.56 tons in previous trading day.
• After the SPDR Gold Trust reported outflows on Thursday, the harp gain in yellow metals was subdued as this outflow created a weak investment sentiment for gold on the market.

Gold prices fluctuated on Friday after the Indian rupee weakened against the dollar and on Exchange Trade Funds (ETFs) outflow, indicating subdued investment demand. Prices of the bullion were supported after the Indian rupee weakened against the dollar, denting prospects of higher imports. At 1:40PM dollar/rupee traded at Rs 66.21/$1 compared to previous close of Rs 66.15/$1.

Gold prices were also supported as weaker than expected economic data from United State likely to spurt safe haven demand for the yellow metals.

Prices of the precious metal were also supported by thin trading volumes as financial markets in United States, Europe, Japan and many other countries are shut on account of New Year's Day.

In short, Gold prices were supported by weak local currency while subdued investment demand capped the gain.


Now as we welcome 2016 with a bang we hope it has lots in store for the global economies and for the yellow metal precisely.

The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Mr. Prithviraj Kothari, (MD, RSBL), makes gold price prediction for the year 2016

http://riddisiddhibullionsltd.blogspot.in/2016/01/mr-prithviraj-kothari-md-rsbl-makes.html 

Latest Gold & Silver news + Diwali wishes from Prithviraj Kothari!

                                            https://www.youtube.com/watch?v=7l0NRhQxmFc

GOLD ONCE AGAIN SURRENDERS IN FRONT OF THE DOLLAR

by Mr. Prithviraj Kothari, MD, RSBL

Firstly, on behalf of RSBL, I would like to wish you a very Happy and Prosperous New Year. We hope that this new Hindu Year brings in optimism in your life along with the precious metals market industry, other investment assets and the world economy.

Gold prices reached to three session highs by Monday lunchtime in London. Gold prices touched $1246 an ounce which is considered to be a crucial trading range for gold. Thanks to last week stock rally, gold prices gained as European stock markets reversed half of Friday's big bounce.

Let's have a look at some market making news that happened over the week:

• The U.S. dollar is up  5 % this year against a basket of 10 leading currencies. 
• The country’s unemployment rate is at a six-year low, suggesting the world’s biggest economy will survive slowdowns in Europe and ⦁ Asia. 
• The European Central Bank plans to stimulate growth by buying asset-backed debt, aimed at boosting the ECB's own balance-sheet by €1 trillion in a bid to avoid deflation for the 18-nation currency zone through monetary stimulus.
• Economists cut estimates for Chinese growth after disappointing data on industrial profits, factory output and credit. Chinese central bank will inject short-term loans into major banks this week drove Beijing's 1-year money market rate down to 2.99% – its lowest level in 25 months .
• The global economy was further threatened over the spreading Ebola virus threatens the global economy further.

Gold prices recovered on Thursday, and was seen trading around $1232-$1233. Post the US data release, investors once again were confused between gold and equities as the dollar rose and safe haven demand for gold declined. Gold prices fell to a one-week low at $1232.55 per ounce on Friday in London as safe haven demand was eroded after a rebound in US equities and a strengthening dollar.

Even when the US economy is showing signs of strengthening, Investors have plenty to be concerned about: Russian-inspired insurrection in Ukraine, Occupy Central protests in Hong Kong, the spread of Ebola from Africa to Europe and the U.S., war in the Middle. One thing they can leave off the list: inflation.

Whereas FED shall ponder on the below 2 points:

1) QE (Quantitative Easing): The Fed has bought $3.95 trillion of securities since 2008, a program called quantitative easing, or QE. The Fed official are worried about prices remaining too low as the cash that is currently there in the financial system has raised worries about incipient inflation.

The Fed’s bond-buying program, which the central bank plans to end this month, appears to have succeeded in stimulating the economy without debasing the currency because banks are holding onto reserves instead of lending. Falling prices, or deflation, can create a vicious circle of less spending and declining wages.

2) Consumer Spending: Low wages and low spending on consumer products will also keep a lid on inflation.

This was a snapshot of the world scenario. 

But where domestic markets are concerned, this year too gold sales shot up during the 5 day festive season. Tuesday being Dhanteras, gold demand was quite high as it is considered auspicious to buy gold on this day. Gold purchases in India gathered pace since Tuesday as consumers took advantage of a year-on-year drop in the price of the metal at the most-auspicious time to buy it. The prices seem to have dropped at the right time and markets saw people rush to buy gold at dips.

Now the international and domestic markets will have their eyes glued on the Fed policy makers meet scheduled on October 28-29.

TRADE RANGE

METAL	INTERNATIONAL Gold/Silver price range	DOMESTIC  Gold/Silver price range
GOLD	$1208- $1247 an ounce	Rs. 26,750- Rs. 27,800 per 10gm
SILVER	$16.85- $17.64 an ounce	Rs. 38,000- Rs.40,000 per kg

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 - "Gold Tend to Move Side-Ways"

http://riddisiddhibullionsltd.blogspot.in/2014/10/gold-tend-to-move-side-ways.html

Pause - Gold price rally!

Gold price rally has taken a pause for the first time this year. Fed’s stimulus cut and Chinese New Year holidays have created a major impact on the yellow metal prices.  

                                     

         

Fed expectedly tapered $10 billion to $65 billion a month, second such move by central bank to cut back on the stimulus program. In a unanimous decision at the meeting the move was taken, saying labour market showed further improvement and household spending, as well as investment had advanced more quickly in recent months. What followed with this announcement was the rise of bears. Gold fell around 2 percent on Thursday, its biggest one-day drop in more than a month. Signs of faster U.S. economic growth have increased bets that the Federal Reserve would look forward to end the QE3 programme as soon as possible. Moreover when you do not have the largest physical buyer in the market, finding some support is obviously difficult. It shows how much important is Chinese demand for Gold. This was supported by sharp emerging market sell off, which had boosted gold prices earlier this week, hitting gold's safe-haven appeal.

Gold ETF flows were pretty mixed, with the SPDR GLD holdings rising 2.1 tonnes, while ZKB holdings fell 1.9 tonnes and Deutsche Bank's ETF lost 970 kilos.

I did note that U.S. economy grew by a respectable 3.2% annualized in Q4 but the reduction of China’s HSBC Final Manufacturing PMI data to 49.5 in January and Manufacturing PMI to 50.5, indicates that the global economy is still fragile. Nevertheless, as the stock prices stabilized and the emerging countries vowed to stem the currency panic, the U.S. Dollar rallied while the gold prices fell. The U.S. dollar strengthened and the S&P 500 stock market index rose more than 1 percent after data showed that robust household spending and rising exports have supported US growth.

In other precious metals, platinum fell nearly 2 percent, tracking losses in gold.  Platinum mining in South Africa, which accounts for 70 percent of global supplies of the metal, has been curbed since the Association of Mineworkers and Construction Union called its members on strike on Jan. 23 at Anglo American Platinum, Impala Platinum Holdings Ltd. (IMP) and Lonmin Plc. (LMI) The AMCU is dominant in platinum, with more than 70,000 members, and is demanding that basic wages be more than doubled to 12,500 rand a month. Talks aimed at resolving the dispute resume tomorrow, in Pretoria. While the negotiations have failed to achieve “tangible progress,” the companies and the union were pursuing a settlement, AMCU treasurer Jimmy Gama said. Even with all this, metal drew little support from the news that South Africa's AMCU union had rejected a 9 percent wage offer from leading platinum producers.

As expected the bears started to take the overhand in Silver during the same sell off. It touched a low of 19 USD levels, which had been the lower band since November. It does act as a major support for the metal.

Despite Thursday's pullback, gold was still 3 percent higher year to date. Gold has outperformed the S&P 500 by 10.2% this year. 

The Emerging market’s currency sell off that happened this week makes me think that the need for alternative currency will never diminish. With a weaker currency, Governments across the world are trying to boost their economic growth wherein lower inflation levels eventually grow when the monetary debasement continues. This leads to devaluation of local currency and in turn Gold prices shoot up in local markets as people look forward to protect their wealth in this alternative currency. This phenomenon is slowly but steadily being witnessed across various countries around the globe and specially emerging markets.

For the first week of February, we need to watch out for US ISM Manufacturing PMI on Feb 3, US ADP Non-Farm Employment Change and US ISM Non-Manufacturing PMI on Feb 5, the U.K. and the ECB monetary policy decisions on Feb. 6 as well as the January U.S. non-farm payrolls and unemployment rate on Feb. 7.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets - MD, RSBL(Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog - "THE YELLOW METAL IS ALL GOING GREEN"

http://riddisiddhibullionsltd.blogspot.in/2014/01/the-yellow-metal-is-all-going-green.html

HAPPY NEW YEAR

WISHING EVERYONE A VERY HAPPY NEW YEAR. MAY 2014 GLITTER LIKE GOLD, SHINE LIKE SILVER AND PROSPER LIKE PLATINUM FOR YOU. 

GOOD LUCK AHEAD!!!!