BAD NEWS PROVES TO BE GOOD FOR GOLD

                                                       - by Mr. Prithviraj Kothari

I was awaiting this...gold bouncing back from its lows last week. As expected, gold crossed the $1300 mark on Friday.

Bad news turned out to be the good news last week for gold. A higher unemployment rate and worse than expected job creation is the bad news that has proved good for gold.
Throughout the week gold was lying low, but on Friday post the release of the US jobs report, gold managed to cross $1300. (future delivery)

The US jobs report were not as strong as expected. Though they were decent, but the market came off with a strong belief that the Federal reserve won't become any more aggressive in scaling back its accommodative monetary policy.

Now let's see what exactly the jobs report was all about.

Labor Department data showed private employers boosted hiring to 192,000 jobs in March, just a shade below analysts' average estimate of 195,000 net new jobs. The government reported that nonfarm payrolls rose by 192,000 in March, when expectations had been for 195,000 to 200,000. Job gains for the prior two months were revised higher by a combined 37,000. However the US jobless rate remained unchanged from February at 6.7 percent as the number of unemployed held steady at 10.5 million.

Before the jobs report was out, Analysts believed that that positive jobs data means the US Federal Reserve will likely continue cutting each month the amount of monetary stimulus it injects into the economy. But that did not happen. Markets now expect the Fed to begin raising its ultra-low interest rates in the middle of next year.

The jobs data prompted some short covering along with fresh buying, as (traders) were looking for a little better report than they got. Some traders were buying to offset, or cover, positions in which they had previously sold.

Yellow metal finds its support in the simmering geo political tensions in Ukraine and the reduced curiosity about the Fed's tapering.

Earlier in the week, Fed Chair Janet Yellen provided a relatively dismal outlook of the labour market and said she and other committee members believe “extraordinary commitment is still needed and will be for some time.”

Prices for the yellow metal also got a boost from sustained consolidation in the stock market and it saw a little extra benefit due to the fact that it was a bit oversold after a few weeks where gold was lying low.

In the Asian markets, precious metals fetched a premium in Shanghai's trade as compared to London for the first time since March. This saw demand rising from top buyer China, on Wednesday.

Prices for 99.99 percent purity gold on the Shanghai Gold Exchange hit a premium of about $1 an ounce to spot prices in London before paring gains. Shanghai prices had traded at a discount of between $8-$10 to London gold since March. Before this week, the last time they were at premium to London was in January, when Shanghai prices fetched a premium of about $20 or more an ounce on ramped up demand for gold before the Chinese New Year holidays.

Amongst other precious metals, platinum rose to $1432 an ounce, a rise of one per cent and palladium gained 1.2 per cent an ounce on continued worries over supply constraint and positive US car sales.

As the Anglo American Platinum said that it has sent out force majeure motives on its supple, which underscored the impact of a near 10-week old workers strike on the leading platinum producer. It's been 10 weeks since the AMCU members have been on strike at the platinum mines. there are 70.000 members of the AMCU that have been in strike. These 70,000 workers account for more than 70 per cent of the platinum production. the AMCU has been on strike since 23rd Jan, at the Impala, Anglo American Platinum  ltd. and Lonmin Plc. Due to disruptions in operations the companies have lost more than 10.3 billion rand in revenue and workers 4.6 billion rand in earnings. This has resulted in pushing the platinum prices higher.

On the other hand, gold, in the coming week, is expected to range between $1277 and $1230 an ounce in the international markets and Rs.28,000- Rs. 30,000 on the domestic markets.

While silver is expected to range between $19.20 to $20.55 and Rs 42,000 to Rs. 46,000 per kg in the international and domestic markets respectively.

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 -
"Is it the right time to buy gold, silver platinum?"
http://www.riddisiddhibullionsltd.blogspot.in/2014/03/is-it-right-time-to-buy-gold-silver.html

Is it the right time to buy Gold, Silver & Platinum?

No doubt this had to be the blog for the week. Precious metal prices have been rocketing down for the entire week.

Let’s first focus on the reasons for the price fall:

1.    FED’s QE3 is being unwound at a steady pace. Tracking the improving US economic conditions, FED might even increase the pace of tapering.  QE was responsible to set record highs for gold and the same is the reason for its downfall in 2013.

2.    Ukraine turmoil had given the much necessary support to safe haven buying assets like Gold where the prices were on an upward spiral. As the turmoil continues to unwind itself and most of the news being discounted by the market participants, the support is slowly fading away.

3.    Physical demand is a concern. Bloomberg had reported that Iraq had increased their Gold reserves by a massive 36 tons in March and IMF data showed that Turkey was back increasing their Gold reserves by 9.3 tons in February. Hong Kong Trade Statistics showed a strong month of Chinese Gold imports for February, which were a net of 109.2 tons, which was 30% more than January and 80% more than the previous year. When I had seen these stats, I did feel that the physical demand is holding strong to support the Gold price fall. But frankly, Turkey or Iraq aren’t the main supporters for Gold. Undoubtedly it has been the show of Asian countries and majorly China. Now to track Chinese physical demand, I take support of SGE premiums. When the prices fall, SGE premium is the first one to go up, while that has not been the case lately. SGE premiums have been locked in a negative territory or hardly minutely up despite Gold price fall from $1390 to $1290 in a span of 2 weeks or so. Due to this I feel that once March data is released, it is likely to show a decline in imports relative to February numbers as SGE premiums were in positive range for most of the time in Feb.  With SGE premiums mostly in negative to hardly anything, it would have been less attractive to import metal. Even the But as the economic uncertainties increasingly looming over Chinese banking sector through shadow banking issues, I feel their physical purchases would dampen a bit.

4.    On the domestic front, Gold and Silver prices are dropping faster than its dollar denominated counterparts. Rupee has appreciated considerably when compared to dollar over the past few weeks. This has led to downfall in gold prices. Indian government and RBI had to take tough decisions over the past year and now the results are paying off. With the CAD in control, Indian economy is looking to improve from here on. Due to which investors are regaining their faith in India and investments are gradually increasing.

5.    Silver prices are more or less dragged along with Gold prices. With regards to platinum, the AMCU does not seem to be willing to accept less than double salaries, as it announced it would give Platinum producers one year extra time to adjust the wages and would only then return to work

My take on Gold prices in dollar terms will be in the range of $1180-$1400 i.e. INR 26500 to INR 32500. I feel this is the range that the investor should keep in mind while buying Gold.

My take on Silver prices in dollar terms will be in the range of $18.50-$23.50 i.e. INR 41000 to INR 47000. I feel this is the range that the investor should keep in mind while buying Silver.

Like others I do feel that if overall the economy improves than the downward journey for precious metals will continue. But like others, I feel the below given reasons will always play a crucial role in providing returns to the investors who trust on Gold and other precious metals.

1.    With the upcoming elections in India and CAD in control, I do expect that the new government will surely take some steps to boost the R&D for mining Gold in India as well as provide some relaxations in Gold import policies. If that happens, Asian demand will get a boost from India. But government policies will play a key role as they know the best when it is about deciding the best for Indian economy.

2.    As the prices head lower, I am sure that the physical demand will improve drastically world over and not only China because everyone knows that Gold is the only asset that can be taken into account during any economic turmoil.

3.    Gold will always play an important role in geopolitical conflict situations and economic uncertainties.

4.    As the prices continue to spiral down, mining industry will face hurdles to operate in low margin or no margin environments. If that is taken into consideration, I feel that their operational costs will rise more than the income they generate from mining creating the necessary closure of mines as it will be difficult to stay in business in such conditions.

5.    Silver and Platinum continue their downfall as they are more or less dragged along with gold prices. But as the economy improves their use in industries across the world will continue to rise and in turn increase their demand and prices.

6.    The bubbles created by money printing and market manipulation - not just in the U.S., but the entire world has never been universally unbacked, nor government intervention so widespread. This has not been seen over the years and the stimulus programmes have led to gigantic balance sheets of central of banks of the world under the word: “Economic Development”

Gold has always stood by one and all when it comes to economic uncertainties. But with Central banks and governments trying their best to revive their economies, Gold is loosing its investment appeal to some extent, as investors look for short term benefits.

I feel buying physical Gold, Silver and Platinum should be on cost averaging basis. It has been a successful strategy since the bull year began, though it would be a bit strange for the investors who started investing in the last couple of years.  I am sure Gold or for that matter any precious metal investments would always give best returns if considered as long term investment options and something that you can bank on in financial instabilities.

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 - "GOLD GOES ON A BUMPY RIDE"
http://riddisiddhibullionsltd.blogspot.in/2014/03/gold-goes-on-bumpy-ride.html

GOLD TRAPPED?

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold was choppy this week. It was seen moving sideways just before the payrolls data was released. Investors believed that a weak figure would mean that the economy is still fragile and this would underpin gold prices.

Geopolitical tensions in Ukraine have underpin gold prices this week. Spot gold is at $1,350/oz, down 40 cents from its previous close. Spot gold prices rose 1.2% overnight after U.S. President Barack Obama said that Crimea's referendum on seceding from Ukraine to join Russia is illegal and added that the U.S. and European Union are united against Russia's intervention in Ukraine. In case the situation worsened then gold prices are expected to rise.

But the actual scenario was completely opposite.

Gold plunged nearly 1 per cent after US data showed that job growth picked up pace sharply, thus ruling out fears of an economic slowdown. This in turn would meant that the Federal  Reserve would continue to taper its monetary stimulus.

Gold  closed 1% lower on Friday, suffering from their biggest one-day point and percentage loss in more than a week, after a closely-watched jobs report signalled stronger-than-expected employment trends, dulling the metal’s investment appeal.

The Labour Department said that the employers had added 1,75,000 jobs to their payrolls compared to 1,29,000 in January. The unemployment rate, rose to 6.7 percent from a five year low if 6.6 per cent as Americans flooded into the market to search for work. However, many believe that this data could not be valid up to a certain point because of the extreme weather conditions that prevailed last month.

Spot gold fell as much as 1.5 per cent to a low of 1329.35 an ounce and was last seen trading at 1338.09

An optimistic economic data creates such a sentiment in the market that people believe that holding safe haven assets in your portfolio is no longer feasible.

Compared to December and January, February's report was much positive than expected.

While some investors said the January and December reports were distorted by severe winter weather, others worried the weakness was indicative of a broader economic slowdown and would force the Federal Reserve to sustain its stimulus efforts for longer than previously thought. Instead, February's data showed improvement even though winter storms continued to pummel much of the Northeast U.S.

In the short term, what holds more importance than US data is that what happens in Ukraine. On Friday, President Vladimir Putin rebuffed a warning from US President Barack Obama over Moscow's military intervention in Crimea, saying that Russia could not ignore calls for help from Russian speakers in Ukraine.

The other factor that pushed gold prices down, was the data released from China. Data released over the weekend showed that Chinese exports collapsed 18.1% in February from a year earlier, disappointing expectations for a 6.8% increase. Imports rose 10.1%, compared to forecasts for an 8% increase. The significant decline in China’s exports led to a deficit of $22.98 billion last month, compared to a surplus of $31.86 billion in January. Analysts had expected a surplus of $14.5 billion in February.

A separate report showed that consumer price inflation in China rose 2% in February from a year earlier, in line with expectations, while producer price inflation declined 2%, compared to forecasts for a 1.9% drop. The downbeat data highlighted concerns about slowing growth in the world's biggest consumer of the industrial metal. I do feel that there are high chances that the numbers were distorted due to New year holidays observed by Chinese. Recovery should be on its way but we will have to wait for the next set of numbers for more clarity. 

Platinum was seen up for a consecutive week. It gained 2.6 percent, trading at $1477.2 while  silver fell 2.9 percent to $20.82    

In the week ahead, investors will be anticipating what will be closely-watched data on retail sales and consumer sentiment for further indications of the strength of the economy and the future course of monetary policy.

Gold prices are set to rise next week as the yellow metal's trend is expected to remain upward.

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 -

"2014- An Interesting Start Up For Gold"

http://www.riddisiddhibullionsltd.blogspot.in/2014/03/2014-interesting-start-up-for-gold.html

THE CHANGING CHINA

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Amidst all the chaos that has happening at the Global level, I feel we should just relax a bit and understand what gold is really up to. At the current levels, it would be tough to make any short term predictions from Gold or Silver price levels. But lets take a recap and try to work out something...

The yellow metal price by the end of 31st Dec, 2013 ended a 12 year rally which saw trading below $1200.This decline was driven by low interest rates and certain steps taken by the global central banks to foster the world economy. 

But in 2014, gold showed a remarkable re-bounce and touched 1327$ an ounce this week. On Tuesday, gold reached 1332.10, its highest since October. Last week gold gained four percent and this week it followed suit. Thursday too saw gold moving up as dollar gave up gains. By Friday, gold was seen gaining for a third consecutive week on uncertainty over the stimulus measures. 

Gold rallied to a three and half month high earlier this week after reports stated that US economic indicators were disappointing. A report showed that existing US home sales fell more than expected to an 18 month low in January. This sparked speculation that the Federal  Reserve might slow the tapering of its bond purchases.

Expectations that US Federal Reserve would maintain the pace of a withdrawal of monetary stimulus may diminish gold's investment appeal as a hedge against inflation. 

Apart from the FED's QE3 uncertainty, there are various factors that influence gold prices. The general global investment factors, or monetary policy or economic strength. The move to raise the US debt ceiling limit to unspecified limit until next year March will surely support Gold prices.  But lately, the most important factor has been the Chinese demand for gold. This has held up gold prices strongly. The Chinese demand for gold has helped in boosting gold prices at a time when the Fed's monetary stimulus measures have been driving down the prices and the global economy is showing signs of recovery.

Till last year, India was considered the largest consumer of gold worldwide. But according to the World Gold Council, in 2013, China overtook India as the largest buyer of gold. In fact China imported 1066 metric tonnes of gold as the demand for gold bars, coins and jewellery soared 32 per cent to a record high.

*

2014, has just begun and China has already imported exorbitant quantity of gold. This year, the World Gold Council expects China to remain the world’s largest consumer of physical gold. While down slightly from last year’s record level, the research body projects China will still gobble up a robust 1,000 tonnes to 1,100 tonnes of gold in 2014. 

Till 2002, Beijing had barred its citizens from owning gold bars and coins. Even though gold appreciated for a long time in china, the citizens were not able to use it to that extent. but once the government lifted restrictions on gold ownership the Chinese rushed to buy gold and this gave a boost to gold prices.

Moreover, as an economy china has witnessed speedy development. This has also resulted in higher spending power as incomes have risen. Generally, people buy gold as one of the safest forms of investment and also include gold in their portfolios. And given that till 2012, gold has given the best returns in its asset class it's obvious that people are tempted to own it.

The same has happened in China. Though gold dropped almost 25 per cent last year, demand for it from China did not drop and this kept the gold prices moving.

Meanwhile in India, duty on gold that had been levied to rectify the current account deficit has been the major factor for a decline in demand as the precious metal is being sold at very high premiums making the yellow metal even more dearer. The interim budget did not have any changes with regards to Gold import policy or import duty cuts. Gold premium over international price jumped USD 30 on that day.

According to Bloomberg, Silver had its longest daily straight gain since more than 40 years on 18th Feb, after moving higher for 11 consecutive days from 19.08 on 3rd Feb to close at 21.83 on 18th Feb.

Seeing strong physical demand from China and US disappointing economic data, I do feel that Gold price should hover between $1307 to $1360 in the international market whereas in the Indian markets it is expected to be between Rs.30,000 to Rs.31,500. Respectively silver is expected to range between $21.05 and $23.10 and Rs.46,500 and Rs. 48,500.

*goldsilverworlds.com

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 - "Let's Get Gold"
http://riddisiddhibullionsltd.blogspot.in/2014/02/lets-get-gold.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

THE YELLOW METAL IS ALL GOING GREEN

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

In 2008, when the financial crisis rattled economies, investors inevitably resorted to the perceived safety of gold - and its price escalated from $800 to $1900 an ounce. This, in turn, accelerated the exploration for yet more gold. And gold became the most sought after metal. But in 2013, gold plunged 28 percent, the most since 1981, amid a U.S. equity rally to a record and speculation that the Federal Reserve will scale back monetary stimulus.

There were quite a many investors who abandoned gold and wrote it off. They declared that gold was ready for a bear market and that it has lost all its glitter. But the ones who are still loyal to gold hold a strong belief that gold will shoot up this year and perform well. I think gold is all set to prove this true.

This month, gold has jumped 5.2 percent. The losses in equities market has once again shifted focus from financial markets to bullions. This week gold saw a 5 per cent gain- thanks to equities. 

A global fight from emerging markets and declines in equities increased gold status as a safe haven asset and it rose to a two month high on Friday.

Fluctuations in the currency markets led by  plummeting Argentina peso and Turkish Lira prompted investors to buy gold.

This was not the sole reason behind the yellow metal prices going green.

- The options market expires next Tuesday, on 28th January. Buying sentiment behind this expiry has pushed gold prices higher.

- Also, the market has seen a big inflow for the so-called gold spider ETF. Recent inflows are also encouraging. Gold ETFs on Friday scored their biggest daily inflow since October 2012.

- The Chinese lunar new year is also playing its part for physical metal demand, as customers are rushing in to grab the metal at a cheaper price. The Lunar Year holiday will start next Friday (31st January) but gold dealers in China have made their purchases well in advance. Increasing demand for coins, bars and jewellery has pushed up gold prices.

- There are talks in the market that the government may relax certain import restrictions. Gold shot up and after murmurings that the punitive taxes on gold in India may be reduced. Congress party chief Sonia Gandhi has asked the government to review tough import restrictions on gold, which include a record 10% import duty.This will result in higher demand for gold and may push prices further.

- Also we see many investors shuffling their portfolios in January after what they have witnessed the year before. In Jan 2014 we saw that the equity market has not given satisfactory returns hence many investors are again allocating major chunk to gold and other precious metals.

- The world has a picture that banks have been selling off gold. But what came as a shock to the market that Germany failed to get its gold back. On January 16, 2013 Germany’s central bank, the Bundesbank, said it will ship back home all 374 tonnes it had stored with the Banque de France in Paris, as well as 300 tonnes held in Manhattan by the US Federal Reserve, by 2020. the Germans have managed to bring home a paltry 37 tonnes of gold.

And a mere 5 tonnes of that came from the US, the rest from Paris. The Fed holds 45% of the total 3,396 tonnes German gold. Now what conspiracy lies behind this pull back is certainly unclear.

Meanwhile, A quiet Monday, following Martin Luther King day in the US saw most interest in Platinum trading, which was driven to a high of 1473 USD per ounce by the AMCU calling also for strikes at Impala. - First day of the week. A strike at South African platinum mines paralyzed the world’s three biggest producers of the metal for a second day as talks to resolve the dispute over pay broke up until Jan. 27. Nearly 70,000 employees downed tools at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc mines, where 70% of global platinum is produced. Hence, Platinum is 6% higher this month. 

While the yellow metal may take a back seat to other asset classes this year, but strong physical demand will sustain elevated average price this year. 

But investors have to be “cautious and quick” in taking profits because if the FED announces further tapering of its bond-buying program at its meeting next week, the dollar could soar, which could be a bearish sign for gold.

Nonetheless, momentum is still pointing up for now.

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 -

"Up Down- Gold Price trend Unclear"

http://www.riddisiddhibullionsltd.blogspot.in/2014/01/up-down-up-gold-prices-trend-unclear.html

UP DOWN UP- GOLD PRICE TREND UNCLEAR

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

So far...so good...it has been a decent start for gold. In the first fortnight of 2014, gold scaled up by 3.7 per cent. As we all know that 2013 has been one of the worst performing years for gold and it was down almost 28 per cent. It even ended a 12 year bull run for gold. All this may sound very repetitive as I have mentioned this time and again in all my articles lately.

But this has cropped up again as at this point where some believe that gold is making a comeback it is very important to know that is actually where gold is headed. 

Throughout the week, there were not one but many factors that played a pivotal role for gold's price movement:

• Strengthening of US dollar
• Federal Budget Balance
• Beige book
• Fed Chairman Ben Bernanke’s speech.
• Core CPI m/m
• Building permits
• German Buba President Weidmann’s speech

The recent disappointment in non-farm payroll report may have lowered the chances of FOMC reducing its stimulus program in the near future. But that does not mean that we can expect Gold to begin a new rally? There are various reasons for it. One of the major concerns is the demand for leading precious metals’ ETF including iShares Gold Trust (IAU) and SPDR Gold (GLD) continued to diminish. During January, SPDR Gold’s holdings declined by 1%. 

But the upper trend did continue during the start of this week too. Gold rose to its highest level in a month on Tuesday at $1,255.00 an ounce due to a drop in equities and uncertainty over the U.S. growth outlook after a disappointing jobs report last week.  But later in the day, gold lowered. It fell nearly 1 per cent as a rally in U.S. equities that was sparked by encouraging December retail sales data dampened buying sentiment among bullion investors. 

On Wednesday too, gold fell as the dollar rallied over producer prices data released in US. It showed that the price has risen sharply in December, even though there were few signs of sustained price pressures.

Supporting investor appetite for riskier assets like equities, the Federal Reserve said in its Beige Book published late on Wednesday; the U.S. economy continued to grow at a moderate pace from late November to the end of 2013, with some regions of the country expecting a pick-up in growth.

Thursday followed suit, as a developing global economy bettered the market scenario for equities and gold lost its appeal as an alternative investment and made it vulnerable to further losses.

Gold rallied towards the $1,255 level but it failed to go through it because there is no investor interest, and there may be a push towards the $1,210/$1,200 area.

Gold now relies on macroeconomic events that are coming up for the month of Jan:

1) The FOMC meeting: 

The next meeting of the Fed's FOMC (Federal Open Market Committee) is on Jan. 28-29, while the next major U.S. data figure is the U.S. weekly jobless claims report, scheduled for release

2) Physical Demand from China:

In China, the biggest physical market for gold, demand has picked up since the beginning of the month in the build-up to the Lunar New Year, when the metal is bought for good fortune and given as gift. 

China has become the third-largest holder of gold, according to a Bloomberg Industries report. Gold holdings were nearly 2,710 metric tons, compared with the last reported holdings of 1,054 tons in April 2009, according to the report. Italy’s holdings are 2,451.8 tons, and France owns 2,435.4 tons, according to the World Gold Council data. The US is the biggest holder with 8,133.5 tons. The PBOC reported in April 2009 that its official gold reserves stood at 1,054 tons – and it has not reported any increase in official gold reserves since that announcement nearly five years ago,

China will continue to add its official gold holdings in a bid to raise the status of its currency, the Yuan and strengthen it.

So now all eyes on the upcoming FOMC meeting and wait for the best to happen

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 -

"Gold rolling around payroll"

http://riddisiddhibullionsltd.blogspot.in/2014/01/gold-rolling-around-pay-roll.html

2013-2014 Gold view by Prithviraj Kothari - ET now (+playlist)

PRECIOUS SWEET REVENGE- WHATS NEXT??

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

In the first trading week of 2014, gold was seen taking revenge to all those investors who shifted from gold to equities and other assets in 2013. Many claimed that gold has lost its glitter and is no more a return generating asset. By its performance in the first week of 2014, gold put a lock to many peaking mouths. In fact other precious metals like silver and platinum followed suit , with platinum touching a six-week high and palladium climbing to a three-week high, heading for its biggest weekly gain since October.

But then again debaters said that gold has shown similar trend in 2013. Recalling gold in 2013 at this time of the year, I remember that gold moved sharply in Jan but then plunged terribly throughout the year. On 2nd Jan, 2013, gold opened at $1664. Then in Feb it was seen trading at $1660 while in March it was $1570. It was consistently seen moving down throughout the year. It crashed drastically in June and touched the 1182 mark on the last day of the year. All the hype and hoopla created by gold in the beginning of 2013, seemed to have vanished gradually by the end of 2013.  

Quantitative easing has always been a positive factor for gold as it held down interest rates and stoking inflation fear. But then on the other side, as labour reports and other data showed that the US economy is improving, it initiated scaling back of the stimulus programme. This is stinging into gold’s glitter.

Many investors lost faith in gold as in bullion-backed exchange-traded products shrank for the first time since the first fund was introduced in 2003. Heavy outflows from gold-exchange traded funds also reflected investors' diminishing interest. Holdings on SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell three tonnes to their lowest since January 2009 at 801.2 tonnes.  

Since October 2013, gold has been performing poorly. As it entered 2014, gold was seen to be in its best performance since October, as it rose to a two week high on Friday. This upsurge was supported by Chinese demand for gold.  Chinese demand is likely to stay strong in the build up to the Lunar New Year on Jan 31st, when gold is traditionally given as a gift.

Based on published data, Chinese physical gold imports will end 2013 at more than double 2012's record levels, at roughly 1,000 tonnes (below data is through October); and who knows how much more demand the unpublished data would uncover?

For gold, the major costs of mining - i.e., mining and reserve replacement - is at least $1,500/oz., per this quote from Gold Fields' CEO, Nick Holland (Gold Fields is the world's fourth largest gold producer). As for silver, St. Angelo proved prices must be above $25/oz. to enable the mining industry to produce positive cash flow. Now as per the current price levels, I fear if the mines can operate, forget making money out of it. 

Expectations that U.S. economy will improve and the rest of the world's growth will stabilise in 2014 have further undermined the case for holding bullion, as investors look to put their money in riskier assets such as equities.

The US Fed has to be very cautious while scaling back its stimulus program as the much claimed recovery is still happening at a slow pace and can take a halt at any point of time.

There is not much evidence that the global economy is improving. A tapering of QE can have negative effects on all the important stock market which is generally considered as an indicator of growth, development and progress

Things do seem to be improving in the Euro zone too.

All these aspects compel us to think that gold & other bullion metals could have a bearish price impact, technically. But fundamentally, supports do remain strong. 

Well it's too early to comment given the fact that there are a lot of important events coming up for precious metals in the months to come. My take would be a Gold’s price to 30% while Silver price rise to 40%.

Gold in the coming week is expected to trade between $1185 to $1252 an ounce in the international market and Rs.29,000 to Rs. 31,000 per 10 gram in the domestic markets

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 -

"2013's Last blog"

http://www.riddisiddhibullionsltd.blogspot.in/2013/12/2013s-last-blog.html

GOLD-PAST PERFORMANCE, PRESENT PRICES & POTENTIAL PREDICTIONS

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold acted like a new born baby this year. It showed new movements and new trends which were quite difficult to understand, analyze and justify. But this baby though adopted by many was also abandoned by a handful chunk of people.

Gold that has always stood proud in its category, for the first time in 13 years, it gave negative returns. Moreover, it’s headed for an annual drop of 25 percent. Gold has been in a significant bear market since reaching a record high at $1,910 an ounce in 2011. On April 15, the gold price plunged about 9%—the biggest one-day loss ever for the yellow metal.  In its collapse gold bullion lost $705 an ounce or 37% of its value to the recent low at $1,195. Some say the no. '13’ as considered unlucky by many; has proved to be inauspicious for gold too.  

The international markets witnessed the following highlights in the year 2013 that were responsible for volatile movement of bullion prices.

• Cyprus Bailout
• Syrian Conflict 
• Statement by FED that it may taper its bond buying program by late 2013
• US government shutdown
• US debt ceiling being raised

Throughout the 1st quarter gold was seen in a range of 1554$ an ounce to 1695$ an ounce. Though gold declined to $1554 in February it managed to cross the 1600 mark in March - Thanks to Cyprus. The Cyprus crisis had offered gold a helping hand, after investors had been pulling out of the precious metal 

On the other hand, the Indian government hiked duty on gold to 6 per cent from 4 per cent to rectify the current account deficit on January 21, 2013. Gold also saw a booster coming in from US lawmakers that were successful in averting the fiscal cliff at the 12th hour, this too pushed up gold prices.

On Friday, 12th April, Gold witnessed a record drop and for the first time in history it crashed 80 dollars in a single trading day this reaching $1484. Panic selling had triggered this downfall.

Some 158,200 taels of gold bullion (roughly six tonnes) were sold in six auctions held by the State Bank of Vietnam. There was news that as soon as the international markets opened, Merryl Lynch sold 4 million ounces of gold.

Heavy ETF selling was also seen in the markets.Gold dropped further trading at 1385$ at one point of time.Till mid June gold managed to be above the $1400 mark but news about the recovery of the US economy dropped gold prices and it was seen trading at around 1385$.

During mid July the FOMC minutes reviewed that many Fed governors would like to see more signs of improvement in jobs before agreeing to taper.

What came as a turning point for gold was the civil war at Syria. Gold prices rallied above $1430. Meanwhile, in South Africa the National Union of Mineworkers (NUM) has given 48 hours' notice of a strike at South Africa's gold producers. This too affected gold prices.

While in the domestic market, the Indian rupee slipped for the third consecutive day in a row on Wednesday to close at a fresh record low of 68.80 per dollar, as uncertainty over a possible US-led military strike against Syria knocked down Asian equity markets and currencies. This was the biggest ever single day fall for the currency since 1995. But then in September, stepped in Mr. Raghuram Rajan- he was then considered the savior of the depreciating rupee.

The FOMC meet began on 18th September and was over by the 19th. All expectations, rumors, speculations and predictions were finally put to a halt. 

Just when India marked the onset of its festive season, the US was heading for a partial shutdown. Though the partial shutdown did not create much impact on gold prices globally, this shutdown along with the debt ceiling will surely have a major impact on bullion prices worldwide. As shutdown entered its second week, there prevailed a lot of uncertainty in the markets.

Finally, in the first week of November, just after Halloween, the Fed stated that it would not taper its bind buying right away as it needs concrete evidence over US economy's growth. Though this should have pushed up the gold prices, completely opposite happened. Gold was down 6.1% in November, the worst performance since June when prices touched a 34-month low of 1180.5$

U.S. Senate leaders finally announce a deal to end a political crisis that had partially shut down the federal government and brought the world's biggest economy close to a debt default that could have threatened global financial calamity. The deal, however, offered only a temporary fix and does not resolve the fundamental issues of spending and deficits.

But what came in as a silver lining in the dark clouds for gold was the demand for gold from China. It finally overtook India as the largest consumer for gold as it imported 131 tonnes of gold in October through Hong Kong.

It is rather the month of December that was considered a deciding factor for gold's fate as the most awaited and much discussed FED meeting concluded on 18th. It is in this meeting that the Fed was supposed to give a final decision as to when the tapering would begin for the final time in 2013. Though many investors believed that tapering would take place in early 2014, The Fed had a surprise package for all. It probably accommodated a bit everyone for Christmas, by announcing a somehow symbolic $10 billion taper to start in January, target to end QE around the end of 2014, but on the other hand promising to keep low rates for a well past time until the unemployment rate would drop below 6.5%. Gold quickly fell to 1215.80, while the S&P 500 rallied close to the all-time high. Gold in the Indian market dropped Rs.1000 per 10 gram late in the evening. The total Gold ETF holdings are currently 57.41 Moz compared to 86.62 Moz at the start of 2013. Total gold ETF holdings are now back at the lowest level since Novemeber, 2013. 

The tapering news got along with it a firm belief that the Global economic scenario is improving and we will near the end of recession soon.

Conclusion

Gold has lost its appeal as a safe haven asset. But yes, the market is still divided into two segments. Some who have abandoned gold like the net outflows of ETFs while others who have adopted it with the belief that gold prices will rise and the metal will always serve with a safe haven appeal like the central banks of the world. 

I feel, Gold should not be always thought as a short term profit making option, rather it should be thought in terms of grams that would safeguard your future. I always remember my great grandfather saying "don't buy gold to make profits...buy gold because its eternal....it's pure wealth and its enduring and come what may-  GOLD WILL ALWAYS STAND BY YOUR SIDE:- This feeling has sunk in so well not only with me but I guess with entire India.

And that's the reason that gold has always been the favorite metal for Indians.

PREDICTIONS 2014

By now everyone would believe hat 2013 has been one of the worst years for gold.

If we take a look at gold's performance over the past decades we see that gold has given highest returns compared to any other asset in its class. I would advise investors, to have patience and just follow one mantra "Buy on Dips"

It's quite difficult to predict gold prices. A trade range can though be noted down. There are a lot of factors that are involved in the making and breaking of gold prices. These factors influence the price of gold and gold is directly or indirectly dependent on them. What we assume that in case there is another eruption of a financial crisis or any new geo political crisis, gold prices may break new highs and continue to rise strongly as a result of the supposed function of gold as a safe haven.

Following will be the key factors that will be responsible for the movement of gold prices in 2014.

• US Debt ceiling
• QE tapering
• Demand for gold from China
• Union Budget 2014 (for the domestic market)
• Finance ministry directives (for the domestic market)
• Mining companies 
• Interest rates
• US economic data

Gold is still at the mercy of the dollar. What this means is as volatile as it is with the Fed’s back-and-forth on the possible taper, gold will continue to play off what the dollar does into 2014.

The average base price for gold in 2014 is expected to be 1375$ an ounce. In the domestic market gold is expected to move in a range of Rs.25,000 - Rs.33,000 per 10 gram and the average base price for the same is expected to be around Rs.28,000. 

The average base price for Silver is expected to be around $25.00. The average base price for silver is the domestic market would be somewhere around Rs.45,000 per kg and the trade range for silver is expected to be Rs.37,000- Rs.55,000 per kg.

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 -

"As the year ends does the bull market for gold end too?"

http://www.riddisiddhibullionsltd.blogspot.in/2013/12/as-year-ends-does-bull-market-for-gold.html

AS THE YEAR ENDS DOES THE BULL MARKET FOR GOLD END TOO?

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

For so many years, gold has given gains and has also been the highest return generating asset in its class. But this trend seems to come to an end now where majority of the market believes that gold is now set to enter the bear market after 13 long years.

Varied reasons are responsible for this sentiments- 

A loose monetary policy, continued fear of a further and worse economic crisis due to weak global economic growth prospers and continuous prediction of impending inflation and devaluation of fiat currencies, these are the major reasons apart from the minute ones responsible for creating  belief in the market that the upswing for gold has come to an end.

Bullion surged 70 percent from the end of 2008 through June 2011 as the Fed bought debt and kept interest rates near zero percent to boost economic growth amid the most-severe global recession since World War II.

Interest rates have been kept low by the fed's massive bond buying programme and this has always supported bullion.

But now there is uncertainty over the market that the Fed may soon start tapering its bond buying programme either in march or may be soon in December. This picture will get clear in the coming Fed Meeting to be held on 17-18 December.

Spot gold hit a three week high on Tuesday trading at $1260.24 during the day, It rose as much as 1.6 per cent. This rise was seen gaining momentum, after the market's recent short-covering rally while investors and analysts speculated over the timing of U.S. monetary stimulus reduction

Just after a gain of two days, gold slipped on Wednesday as short-sellers rushed to cover bets on sharp price falls, as a tentative U.S. budget deal returned the focus to prospects for the Federal Reserve to curb monetary stimulus.

As soon as the US retail sales data was out on Thursday, gold fell 2 per cent. The data boosted the dollar and fueled expectations that the Fed could reduce its bond buying programme in somewhere in December itself.

The US data released in Thursday, showed that retail sales had climbed 0.7 per cent. Many traders and analysts in the market are living with the belief that the Fed may start scaling back its bond purchases at the forthcoming meeting to be held on Dec 17-18. This decision would be based on positive economic data coming in from the US on employment, housing, construction, manufacturing and services sector. Another factor that prompts  the Fed to taper QE is the recent budget agreements that shows hope of a shutdown being overcome.

Though gold rose one per cent on Friday after a two day plunge. the marketers still believe that gold is subject to further downfall in the coming week as we witness one of the most important meetings of the Fed. This shall hopefully be a fate deciding factor for the bullion market.

Apart from the retail sales data, some important news came in from the SPDR Gold Trust- the biggest golf ETF. It states that the holding in the SPDR gold trust had fallen the most in nearly two months in Thursday. The limited inflows has restricted an upward movement in gold prices.

But in the Asian markets gold was seen selling at high premiums. Premiums on the Shanghai Gold Exchange for 99.99 percent purity gold picked up to $10 an ounce from $7 in the previous session.

In a sign of the toll that labour unrest in South Africa is taking on mining companies, North am Platinum said on Friday it expected to lose 500 million rand ($48 million) this year due to a strike by more than 7,000 employees and that talks to end the walk-out would resume only next year.

Moreover, there were reports out that North Korea is selling huge quantity of gold to China because of a possible economic crisis in the country. If at all this news its true and it will be a significant driving point for precious metals.

The trade range for gold is $1210- $1270 an ounce in the international markets and Rs.29000 to Rs.31,000  per 10 gram the domestic markets



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 -
"Frenzy Friday"
http://www.riddisiddhibullionsltd.blogspot.in/2013/12/frenzy-friday.html