INTERESTING TIMES TO COME

by Mr. Prithviraj Kothari, MD, RSBL

Last year was catastrophic for gold as it performed terribly and ended the year at around $1200, almost 28 per cent down. However, in 2014 we saw a decent act from gold as it reached $1380 in March before falling back to $1240 and then, moving up to $1340. Since then gold has been hovering around $1295, approximately 8 percent up. This highlights a good progress for gold but if we compare it to its life time high of $1900 (In September 2011), it's still 32 per cent down from its peak.

Currently, gold looks weak.

• The ongoing political tensions in Ukraine, Iraq, Israel and Syria have been weighed down 
• No major economic reforms announced by the Government of India for Bullion industry
• Chinese demand for gold has slowed down
• sales out of the gold ETFs seem to have reversed to become net purchases (just) so far this year, 
• The Fed has expressed a comfort in the economic growth and a positive recovery.

The market had been awaiting the end of the U.S. Federal Reserve's two-day policy meeting on Wednesday to see if the central bank will raise interest rates faster than expected.These sentiments created nervousness in the market and gold fell on Tuesday. On Wednesday too, gold fell after the Federal Reserve announced a sixth $10 billion cut to its bond-purchases program amid signs that the U.S. economic recovery is gaining traction.

The monthly bond buying programme has been tapered to $25 billion, which if followed will put an end to the purchase program in October.

The Federal Reserve on Wednesday reaffirmed it was in no rush to raise interest rates, even as it upgraded its assessment of the U.S. economy and expressed some comfort that inflation was moving up toward its target. After a two-day meeting, Fed policymakers took note of both faster economic growth and a decline in the unemployment rate, but expressed concern about remaining slack in the labour market

Gross domestic product in the second quarter rose at a 4 percent annualized rate, compared with a revised 2.1 percent drop in the first quarter.

Though, amidst the Middle East and Ukraine tensions, gold has climbed up, but the positive growth reports released on Wednesday, subdued this rise in prices. Now any further disturbing news coming in would push gold prices high as once again the market would run behind this safe haven asset.

The dollar weakened versus major rivals in the wake of the data. Commodities priced in dollars are sensitive to movements in the currency. A stronger dollar can weigh on gold by making it more expensive to users of other currencies, while a weaker dollar can lift the commodity.

Till Thursday gold was down, but on Friday, gold prices spiked, recovering almost half of the weeks 1.8% loss and was seen trading at $1295 an ounce post the US  nonfarm payrolls jobs data release for July, was weaker than expected. This data dampened talks of an early interest rate rise by the Fed and this increased gold's appeal.

The Labor Department said nonfarm payrolls increased 209,000 last month, below economists' expectation of a 233,000 job gain. Unemployment rate also rose to 6.2 percent from 6.1 percent as more people entered the labour market. 

Portugal will spend 4.9 Billion Euros ($6.58 Billion) to rescue its largest listed bank, Banco Espirito Santo, testing the Euro's resilience to another banking crisis.

There isn't much US data this week except the US Non-Manufacturing ISM and the ECB rate decision that could keep the market alive.

Moreover there is a positive outlook for the month as demand from Asia particularly India will pick up as India witnesses the onset of its festive season beginning with Rakshabandhan.

The month of August will be an interesting one as it will give us an indication of which way this market is going. Should it fall significantly then we could be in for a re-test of the June 2013 lows of $1180/oz. 

The presence of tapering and the expectation of interest rate increases cast a dark shadow over the precious metals  making it difficult to predict  just where the momentum for higher prices will come from.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1275- $1314 an ounce	Rs.27,500- Rs.28,500 per 10 gm
SILVER	$20.15- $21.00 an ounce	Rs.42,000- Rs.45,500 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 -

"Escalating Tensions....Escalating Prices"

http://riddisiddhibullionsltd.blogspot.in/2014/07/escalating-tensionsescalating-prices.html

ESCALATING TENSIONS.....ESCALATING PRICES!!!!

by Mr. Prithviraj Kothari, MD, RSBL

In the past week gold and silver dropped drastically. Even the ongoing tensions in Russia and Israel could not provide support to gold. US laying sanctions along with European counter parts on Russia hasn't proven that effective till now whereas the cease fire process between Israel and Hamas group has gone for a toss.

It is very difficult to list "a" particular reason for fall in gold prices. Rise and decline are both influenced by a variety of factors. 

CHINA: 

China has been one of the key drivers of gold in recent years, but now there is word that China may be increasingly less important to the gold story.

While the U.S. economy recovers, China’s demand for gold plummeted in the first six months of 2014. This helped to allow gold to fall back under the $1,300 per ounce mark on Thursday, after having been up more than 8% so far in 2014. Demand in China for gold was down by a whopping 62% for gold bars, and gold coin demand was also down by a sharp 44%.

China announced gold consumption figures for the first half of 2014. The China Gold Association announced that they fell to 569.45 tons as demand for gold bars declined 62 % to 105.58 tons, the world’s largest consumer said. Gold coins and other uses of gold dropped 44 % to 10.95 tons, while use in jewellery rose 11 % to 426.17 tons and industrial use climbed 11 % to 26.75 tons.

Last year was a record and China and the nation’s consumers are focusing on other internal and external issues rather than gold. Still, this drop in demand is much more than many industry observers might have assumed.

US ECONOMY:
After China it was key US economic indicators that continued to pressurize gold.

The number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years last week, suggesting the labour market recovery was gaining traction. The belief that the US economy is on the path of recovery pulled gold prices down. 

Geo-political tensions: 
Escalating geopolitical tensions have induced support to Gold prices. 

The U.S. stated late Thursday that Russian troops or pro-Russia rebels are shooting artillery shells at Ukraine targets from within Russia’s border. Russian President Vladimir is facing more pressure to expedite the investigation into the crash of a Malaysian passenger on July 17 in Ukraine.

Meantime, the Israel-Hamas fighting continued to be intense. Gaza authorities said Israeli forces shelled a shelter at a U.N.-run school on Thursday, killing at least 15 people. Fighting this month in Gaza has killed more than 800 Palestinians and 35 Israelis. 

Ukraine and Russia traded accusations of cross-border shelling as tensions between the ex-Soviet neighbors intensified. 

The growing tensions and havoc on Eastern Europe and the Middle East this week has boosted demand for safe haven assets liked Gold. 

Spot gold was up 0.7 percent at 1,301.81 an ounce, after losing nearly 1 percent on Thursday, when it hit its lowest since June 19 at $1,287.46. Gold rose on Friday, re-bouncing from the previous session's drop to a one-month low, as heightened tensions between Russia and the West over Ukraine and situation of Gaza not getting better prompted speculators to buy back their bearish bets ahead of the weekend.

RUSSIA AND TURKEY:  
Gold holdings in Russia's and Turkeys bullion reserves increased in June as both countries lifted their reserves.

Russia, the world's fifth-largest bullion holder after the United States, Germany, Italy and France, increased its gold holdings by 16.8 tonnes to 1,094.8 tonnes in June, the IMF's International Financial Statistics report showed.

Turkey, the world's 12th-largest nation in terms of gold ownership, raised its precious metal by 9.9 tonnes to 512.9 tonnes for the month. It counts gold held on deposit with it by commercial banks as part of the central bank's bullion holdings.

THE BANK ESPIRITO SANTO- This crisis has been contagious for the world. When the world of electronic finance catches the flu, the true nature is all systems fail. One of Portugal's largest banks, Espirito Santo, sent waves through the financial system when we learned they would default on a payment. And they have been fighting against bankruptcy ever since.

Next week, will be a week to watch. 

• Comex expiry for Gold contracts on 28th July.
• 2nd Quarter Advance GDP release on Wednesday morning
• Wednesday afternoon we will hear the results of a two day FOMC meeting. 
• The Non-Farm Payrolls Report for July on Friday August 1. 
• The Chicago PMI, Michigan Sentiment, and the ISM Index
• Geo political tensions.

Lots more in the basket and lots of surprises for precious metals. These factors will surely influence gold prices...what we need to see is HOW?

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1292-$1334 an ounce	Rs.27,700-Rs.28,700 per 10 gram
SILVER	$20.15- $21.50 an ounce	Rs.43,600-Rs.46,000 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 and Silver On A  Swing"
http://www.riddisiddhibullionsltd.blogspot.in/2014/07/gold-and-silver-on-swing.html

GOLD AND SILVER ON A SWING

by Mr. Prithviraj Kothari, MD, RSBL

Last year investors sent bullion tumbling by the most in three decades which they kept dumping the metal recently.  But gold has once again become a valuable commodity. Demand for gold is increasing and prices are defying bearish forecasts.

Gold has proved that the bearish sentiment in the market was indeed just a thought and gold's performance this year has proved it. 

US economy is on the path of recovery and it is clearly visible from the recent government data that was released. Prices are speculated to retreat by the end of the year and inflation concerns along with pockets of unrest are sending investors into gold as a safe haven.

Violence spread in the Ukraine and Iraq and the Fed's reservations that it will keep interest rates near record lowed has kept gold prices high.

The gold and silver market heated up last week after they didn’t do much in the previous week. The minutes of the FOMC meeting may have partly contributed to the rally of precious metals by the end of last week: The minutes revealed the FOMC may keep the interest rates for a long time until the inflation start to pick up towards the Fed’s target of 2%. This dovish tone may have sparked another rally of gold and silver. 

During last week, the price of gold increased by 1.27%; the average price reached $1,326.88/t. oz which was 0.21% above last week’s average. 

The FOMC dovish policy is getting gold and silver back and is boosting up their prices too.

Moreover, if the Chinese economy doesn't show much progress, it will play a secondary role in impacting the bullion market. But on the other hand if the US economy moves on the path of recovery then it will pull up equities and curb down the rally of gold and silver.

Short term concerns over inflation and the ongoing geopolitical turmoil in many parts of the world has been the main reason behind pushing gold prices high. 

Gold was once again on the see saw this week. As the week began, gold fell sharply. On Monday, gold witnessed on profit taking after reaching the highest level since March in the previous week and ahead of Federal Reserve Chair Janet Yellen’s congressional testimony. 

There was a rally in gold prices on Thursday, over the tragic plane crash incident and a pickup in hostilities in the Israeli-Hamas conflict.

On Thursday, The Malaysian Airlines Boeing 777 flying from Amsterdam to Kuala Lumpur was "blown out of the sky", by a ground launched missile killing nearly 300 people aboard and sharply raising the stakes in a conflict between Kiev and pro-Moscow rebels that has set Russia and the West at daggers drawn.

The blame game , cranked up global pressure which created a way for a local conflict.

Ukraine's state security chief accused two Russian military intelligence officers of involvement with pro-Russian rebels in the downing of a Malaysian airliner on Thursday, releasing chilling testimony of what he called an "inhuman crime."

This incident kept gold over $1300. Gold for August delivery, the most actively traded contract, jumped $7.50 or 0.6 percent to close at $1,309.40 an ounce on the Comex division of the New York Mercantile Exchange on Friday. Gold for August delivery scaled an intraday high of $1,325.50 and a low of $1,305.00 an ounce.

But by Friday, gold pulled back from the knee-jerk reaction. The safe-haven benefits for gold faded on Friday, with the precious metal dropping in electronic trading, as a lack of physical follow-through made that upward move unsustainable.

Moreover, SPDR Gold Trust, the world's largest gold backed exchange traded fund, said its holdings fell 2.69 tonnes to 803.34 tonnes on Thursday.

But the yellow metal is still down nearly 2 per cent for the week, following a six week winning line over fears as Portugal financial crisis faded and investors worry about a sooner than expected hike in US interest rates

Even if U.S. rates don’t change before the second quarter of next year, the upside potential for gold over the medium term will remain capped and we may see some price pressure in the back of speculative selling, 

Next week’s economic reports are fairly light, with consumer price index data and existing home sales due out Tuesday, new home sales on Thursday and durable goods orders on Friday.

Still, gold markets will continue to watch geopolitical events, especially ahead of the weekend, which could produce more headlines out of Russia and Ukraine over the downed jet and the Middle East, where Israel has launched a ground offensive in Gaza.

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1292-$1328 per ounce	Rs.27,500-Rs.29,000 per 10 gram
SILVER	$20.45-$21.70 per ounce	Rs.44,000-Rs. 47,000 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 -
"Precious Metals.....Indeed Precious"
http://www.riddisiddhibullionsltd.blogspot.in/2014/07/precious-metalsindeed-precious.html

PRECIOUS METALS....INDEED PRECIOUS!!!

by Mr. Prithviraj Kothari, MD, RSBL

Ever since I have started my blog, you must have noticed that I first analyse the international markets and then the domestic markets. But since this week was an important and crucial week for gold in Indian market, as it was the newly formed government's first budget since election, I would like to glance through the domestic markets first.

The previous government had over the past two years raised the import tax on gold to 10% from 2% and mandated that 20% of imports had to be re-exported to stem a slide in the value of the rupee and narrow the current-account deficit. There were widespread expectations that some reduction in the import duty would be announced in the Budget. Traders expected at least a 2-4 per cent cut of import tax on gold. Also, some relaxation in the 80:20 scheme that was imposed by the Reserve BANK of India (RBI) last year, was expected.

But traders were left astonished as India's new government left import taxes on gold unchanged in its annual budget. Premium on gold had disappeared in the last two weeks on expectations that the government would relax restrictions on imports as India's current-account deficit more than halved to $32 billion last fiscal year.

After Finance Minister Arun Jaitley concluded his budget speech on Thursday, gold in India climbed $30 above the international price of $1329.50 an ounce. Indian gold futures jumped 2% on Thursday, widening the premium over global prices which had narrowed on the duty cut expectation.

Simultaneously, we saw gold prices zooming in the international markets too. Factors for the same were:

EU Data:  Gold rallied on sliding European equities and a weak euro zone industrial output data. Given the recent weak economic data coming out of the European Union, traders will be closely watching European bond yields, for clues on European investor confidence. The European Union sovereign debt crisis is not that far removed from the market place. 

Chinese Data: Chinese trade data was much below expectations. China’s exports grew by 7.2%, year-on-year, in June, which was below market expectations of a 10% rise

Portugal trouble: There were reports that a major bank or banks in Portugal are in trouble. Europe's stock markets suffered heavy falls on Thursday as troubles at Portugal's largest listed lender, Banco Espirito Santo (BES), sparked fears of a possible return to the dark days of the euro zone debt crisis. Banco Espirito Santo SA sought to calm investors after a parent company missed payment on short-term notes. 

Middle East tensions: Middle East tensions escalated as Israel this week launched a military offensive on the Gaza strip. Heavy fighting too was reported overnight. This once again focused traders attention on the Middle East. At least 78 Palestinians, most of them civilians, have been killed. This situation is a potential time bomb that could further incite unrest in other parts of the Middle East.

Ukraine's fight back: Ukrainian forces regained more ground but sustained further casualties on Thursday in clashes with separatists, while two Western allies urged Russia's Vladimir Putin to exert more pressure on the rebels to find a negotiated end to the conflict. Russia threatened Ukraine on Sunday with "irreversible consequences" after a man was killed by a shell fired across the border from Ukraine, an incident Moscow described in warlike terms as aggression that must be met with a response.

FOMC Meet: The market place has pretty much digested Wednesday afternoon’s FOMC minutes from June. They further stated that the Fed is on track and to end its monthly bond-buying program (quantitative easing) in October. Further there was no specific sign as to when the U.S central bank will start to raise interest rates but there were definitely expectations in the market that it won't take place this year and this sentiment was further reinforced by Wednesdays latest FOMC minutes.

After analyst downgrades of gold that we've all heard over the last year, money is now pouring into the metal at the slightest bit of unease.

The value of the gold funds rose by $5 billion this year as prices rallied 10 percent. The metal has rebounded from last year’s 28 percent plunge that was triggered by muted inflation and as investors shunned the metal in favour of equities. The Hedge funds and money managers increased their bullish bets on Gold by 7,344 lots to 14,272, the highest since March, in the week to July 8. In Silver, they raised their bullish bets by 7,819 contracts to 44,517, a peak since December, according to the data from the Commodity Futures Trading Commission on Friday.

For now, Gold’s performance has proven the bears wrong so far this year. The bulls are being rewarded.

Following the market consensus that had recently emerged, LBMA announce that CME group and Thomson Reuters have been selected to provide the solution for the London Silver Price Mechanism.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1324-$1367  per ounce	Rs.28,000-Rs.29,000 per 10gm
SILVER	$20.90- $22.00  per ounce	Rs.45,500- Rs.47,500 per kg

- Previous blog -

"Geopolitical Cover for GOLD"

Link it to: http://www.riddisiddhibullionsltd.blogspot.in/2014/07/geopolitical-cover-for-gold.html