DATA- DEPENDENT GOLD

By Mr. Prithviraj Kothari, MD, RSBL

This week gold continued to hover around the levels of $1176.75 and broadly the key trade range for the yellow metal was $1170- $1175 an ounce.

Gold reached a four-month high of $1,192 on Thursday but was unable to maintain this level, because the US dollar was driven up by higher than expected US inflation figures for September, which in turn put pressure on gold.

Fed has set inflation target for years as it’s a part of the dual-mandate along with full employment. But Inflation has failed to meet the Fed’s target.

Persistently low inflation has led some Fed members to remain dovish on the apt timing for a stabilization of US monetary policy.

At the beginning of the week, Chicago Federal Reserve president Charles Evans said earlier today that he would prefer to wait until 2016 to raise interest rates, citing inflation as a central impediment.

Moreover, Data released on Thursday showed that the US labor market is steadily recovering despite the worrisome September job’s report – weekly unemployment claims came in at 255,000, below the consensus of 269,000.

Apart from this some other important data released through the week were-

• US CPI month-over-month in September met expectations of a 0.2 percent decline

• PPI month-over-month in September dipped 0.5 percent, disappointing market expectations of a 0.2 percent drawdown

• Empire State manufacturing index for October at -11.4 was worse than the expected -7.3

• The Philly Fed manufacturing index at -4.5 missed the -1.8 forecast

• Core retail sales month-over-month in September fell 0.3 percent, below the forecast of -0.1 percent. Retail sales over the same period rose 0.1 percent, just missing the 0.2 percent consensus

•  Labor's Bureau of Labor Statistics (BLS) said its Consumer Price Index fell by 0.2% for the month of September, in line with consensus estimates. A month earlier, the reading fell by 0.1% in August. On a year over year basis, the headline reading is identical to its level 12 months ago

• Core PPI month-over-month last month stood at -0.3 percent, another figure to miss estimates, which were a 0.1 percent uptick

Though the Core CPI was moving in a positive direction from its previous levels of August still it remained under the Fed's preferred gauge of under 1.5%.

The set target for long term inflation by the Fed is likely 2% before it raises its benchmark Federal Funds Rate.

Gold prices eased in Asia on Friday on profit taking on recent gains on a soft. Outlook for U.S. interest rates. On Thursday morning, the U.S. Department of There were signals throughout the report of weakness in the energy sector, restraining inflationary pressures overall.

The spot gold price was last at $1,176/1,176.20 per ounce, down $5.90 on Thursday’s close. 

Jobs data has acquired greater significance after the US Federal Reserve made its approach to the normalization of monetary policy entirely data-dependent.

Gold drifted lower still on Friday morning in Europe after dollar continued to pare earlier losses thanks to better-than-expected US jobs data.

As dissent grows in the Federal Reserve over the appropriate measures for 2015, the dollar has deteriorated to the weakest mark since August 25.

Various Fed members are growing more vocal in their view that the US economy is not ready for a federal funds hike – in direct opposition of Chairwoman Janet Yellen.

Yellen, along with vice chair Stanley Fischer, have said recently that a normalization of US monetary is still a viable option for 2015.

However as per market analysts, the FOMC is not seen lifting rates until March at the earliest.

While the market is once again divided into bearish and bullish supporters, the yellow-metal has found support as the market’s pricing of the next US Federal Reserve rate hike is pushed out.

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-

"Ambiguity For Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/ambiguity-for-gold.html

GOLD DIRECTIONLESS: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Most of the global asset markets were quite unpredictable this week. Be it equities, precious metals, bond yields or oil- they moved up and down following last week’s FOMC meet.

Coming to gold, it neared its second weekly gain on Friday afternoon, touching $1145 per ounce but plunged back following new comments on US interest rates from Fed chair Janet Yellen.

Increased risk sentiment helped gold prices to end Friday’s session modestly lower with prices settling at $1,145.60 an ounce; however, the yellow metal has managed to end the week in positive territory, up 0.6% - its second consecutive weekly gain.

Spot gold was last at a high of $1,144.80/1,145 per ounce. Prior to a speech from Federal Reserve chair Janet Yellen in which she said the Fed has not ruled out the start of policy normalization before 2016, gold had been trading at two-month highs.

The gold price surged to its highest since August 25 during Thursday afternoon sessions as the yellow metal took advantage of a slump in the US dollar.

On Friday afternoon, gold moved back from Thursday’s gains, after the release of positive US data and talk that the country’s central bank will increase interest rates by the end of the year.

The US data released were as follows-

• Final GDP was better than expected at 3.9 percent
• Services PMI at 55.6.
• Revised UoM consumer sentiment and inflation expectation at 87.2 and 2.8 percent were little changed

A slowing global economic activity and excessively low inflation had delayed the Fed’s decision to hike interest rates. Its decision had raised concerns about the economic stability of the US, China and rest of the world and resulted in lifting of the dollar.

Aggressive comments from Yellen have provided the dollar with renewed upside momentum, depressing bullion prices through reduced safe-haven demand. 

There are expectations in the market that the FOMC is likely to raise the federal fund rates in December as they witnessed a likely upwards revision to US-second quarter GDP growth

Gold declined on Friday morning after Federal Reserve chairwoman Janet Yellen expressed optimism that the US economy would warrant an increase in interest rates before the end of this year.

She stated that it will be appropriate to raise rates in 2015. Now there are around 13 weeks let in 2015 and two more FOMC meetings are lime up in October and December each, which means there are just two opportunities left to raise interest rates.

Federal Reserve Chair Janet Yellen has spoken, and an interest rate hike remains on the table for 2015, but one trend watcher says the central bank is just talking ‘really tough.’

Moreover, Yellen noted that ‘idiosyncrasies’ like lower oil prices and weaker overseas economies have delayed the Fed from pulling the trigger. 

Yellen said FOMC officials “expect that the various headwinds to economic growth will continue to fade, thereby boosting the economy's underlying strength.”

Yellen’s bullish sentiment was buoyed through the third revision to second-quarter US GDP growth to 3.9 percent from 3.7 percent. The final GDP price index quarter-over-quarter was in line with forecasts at 2.1 percent.

Yellen and her colleagues at the Federal Open Market Committee (FOMC) have maintained interest rate at near-zero levels since December 2008.

Persistently low inflation, emerging global slowdown and an uneven recovery remain obstacles for the FOMC members to normalizing monetary policy.

Though the yellow metal is still showing encouraging signs, but in event of a rate hike, the impact on gold would be bad.

Currently old is searching for a direction as the FOMC has left the market wandering. The picture will get clearer by the end of the year or maybe early 2016.

Currently one need to follow the FOMC religiously as gold’s whereabouts depends on the Fed’s directions.

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 -

"Rate Hike Hangover Continues on Gold: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/09/rate-hike-hangover-continues-on-gold.html

UNCERTAINTIES FOR GOLD: RSBL

By Mr. Prithviraj Kothari, MD, RSBL

It was September 2011 when gold reached its peak. It’s been years since gold has been out of favor. Does it mean that it’s time again for gold to regain its sheen?

What will happen in the weeks to come is what we all are waiting for , till then lets analyze gold’s price movement- how and why?

Gold was range bound on Thursday morning after the previous session’s price slump when a rally in global equities paused.

Gold did manage to rebound after hitting a 4-week low on Wednesday but many market players still have a negative sentiment in mind for gold.

Gold traded sideways for the week ahead of the much anticipated an talked about meeting of the Federal reserve that’s due on September 16 while investors remain cautious .

The spot gold price was last at $1,107.70/1,108 per ounce, little changed from the previous close. Trade has ranged from $1,104.0 to $1,108.6 so far. Gold slumped to $1,101.5 on Wednesday, the lowest level in a month.

With so much uncertainty surrounding the Fed’s monetary policy decision next week, the near-term outlook for gold can, at best, be described as mixed.

 

Although analysts are slightly more bullish heading into next week, their enthusiasm appears to be tempered. While some analysts are optimistic on gold prices and think that the yellow metal could bounce higher if the Fed delays its rate hike; however gains could be limited as expectations will only be pushed back until December. 

Currently the market is divided into two segments-

Firstly the ones who believe that the Fed would raise rates on September 17 while the others believe the opposite.

Let’s take a brief look at both these segments-

If the Fed hikes rates at first it will be U.S. dollar positive and gold negative, but the tightening could create a selloff in equity markets and capital could start moving into gold.

If the Fed raises rates on Sept. 17 then he would expect gold to fall below support at $1,080. Traders can then lock in profits from that put. In fact this drop could bring in some strong buying momentum, for gold which could later drive gold prices higher at around $1160. 

On the other hand, that if the Fed delays its hike it will be U.S. dollar negative and gold positive in the initial reaction. However, the loose monetary policy will support equity markets and capital will flow out of gold and back into stocks. If the Fed doesn’t hike rates then gold could push up to $1,150 in initial reaction.

Currently gold is being surrounded by a lot of uncertainties.

Though the FOMC meet will be the focus of the market, one should also bear in mind the key economic data slated for release during the week-

• U.S. August retail sales
• Regional manufacturing data
• The consumer price index for August,
• Housing market data.

The Federal Open Market Committee’s two-day policy meeting begins Sept. 16 and gold investors will focus on the conclusion to see if the central bank will raise rates for the first time in nine years. The consensus seems to be that if the Fed tightens, gold will suffer.

Apart from the US markets, another notable market is that of China.

China has now stepped into the global financial market by depreciating its currency, which has sent ripples through emerging market economies and may in turn unsettle financial markets in the months ahead.

The volatility in China’s equity markets has now stabilized, reducing both the tension in markets and the need for safe havens. 
Another positive news coming for gold was from the India market where gold monetization has now been approved.

For now, The FOMC meeting on September 17 is expected to initiate a more definitive price movement, especially if the FOMC decides to increase the Federal Funds rate for the first time since 2006.

Staying positive for the yellow metal, market players are expecting prices to be around $1,200 an ounce by the last quarter of 2015, with sturdy demand coming from central bank purchases.

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 -
"No Help For Gold:RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/09/no-help-for-gold.html

NO HELP FOR GOLD:RSBL

-By Mr. Prithviraj Kothari, MD, RSBL

Firstly,I would apologise to all my readers for not drafting a blog for last week. 

I would like to present you an in depth analysis of this weeks gold movement.

It all began on a positive note for gold. The yellow metal entered the positive territory on the first day of the week and investors once again gained confidence of gold being a safe haven asset. But as we moved further, it once again lost its glitter. Gold prices fell by the end of the week and there were a varied reasons responsible for this fall.

Gold was marginally higher on the first morning of the week but remained rooted within a narrow range. Gold was vulnerable to a fresh wave of selling from funds poised to increase bearish bets.

In Shanghai, poor PMI dampened the sentiment and this decline in Asian markets boosted gold’s safe haven appeal as gold continued its gradual positive trend in European trading and was up around $6 an ounce to $1,141- around two per cent off a recent high reached a little over a week ago.

Gold has been struggling to gain from equities volatility in recent weeks, but it reverted to its inverse correlation with wider markets on Wednesday as spot prices recorded the sharpest fall in a week.

Gold found "no help" on Thursday as a spate of economic data from Europe and the US reduced inflation expectations. This sent the dollar higher, weighing down on the value of a precious metal that is often treated as a proxy currency and typically moves in the opposite direction to the greenback.

Gold fell 1 percent on Thursday as the dollar jumped versus the euro after the European Central Bank (ECB) cut inflation forecasts, while a U.S. jobs report that could provide clues on the timing of a Federal Reserve rate rise remained in focus.

The ECB left interest rates unchanged at record lows as expected, but lowered its forecasts for inflation and economic growth, citing a slowdown in emerging markets and weaker oil prices.

As a traditional hedge against inflation, gold suffered from the downward revision.

Spot gold had hit its lowest in a week during trading sessions on Thursday after comments from the ECB president Mario Draghi boosted the dollar against the Euro.

The president warned of negative inflation in the months to come, while noting that the Euro zone recovery has been weaker than expected.

The central bank left its benchmark interest rate at 0.05 per cent, a move that was widely expected whit Euro zone inflation currently at 0.1 percent.

By Friday afternoon, gold slipped about 0.4 percent in Europe following the release of a mixed US labor report.

The spot gold price was last at $1,120- $1,120.5 per ounce- almost down $4.70 from Thursday’s close. The US nonfarm payroll employment increased by 173,000 in August- below the forecast of 215,000 but on the contrary the unemployment rate fell to 5.1 per cent from 5.2 per cent in the prior month.

While average hourly earnings rose eight cents to $25.09 following a six cent gain in July- the hourly earnings rose 2.2 percent over the year.

Gold that was trading in a narrow range but on a positive side- immediately moved to the negative territory after the release of the report.

Though the reports were conflicting in nature- overall it did support the fact the interest rate hike may happen in September itself.

Reasons to justify this was a strengthening dollar and a strengthening gold, both of which happened after the data release. Their usual inverse relationship trend as broken which reflected some speculation surrounding a September interest rate hike.

The jobs report has taken on greater importance ahead of the September FOMC meet. The Fed is deciding whether to raise the Federal Interest rate for the first time since 2006.

After from the Euro zone and the US, In India a less than optimal monsoon will surely affect the demand for gold which may pull down gold prices further.

On the other hand demand for gold from China too seems to be weak. Chinese markets will be closed until Monday after the September 3-5 celebrations to mark the allied victory over Japan in the World War 2. The two day holiday in China also had some bearing on gold.

Currently we don’t see any help for gold from any of the world economies.

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 -

"Optimism For Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/08/optimism-for-gold-rsbl.html