Dont take off your eyes from gold

 Since the beginning of 2021, gold has witnessed a 5 % drop till date. It has been a rough path for gold as investors rotate out of the safe haven trade into riskier assets. The gold market continues to struggle as investors focus on the potential for tighter monetary policy and transitory higher inflation pressures.

Top gold dealers in India confirmed that the gold markets have been challenging to trade recently due to a stronger dollar. It was the strong USD that was clipping gold's wings. But before that, the USD index slipped fin 93.2 to 92.7 and 10y gained firm 1.15% to 1.29% amid US economic growth, uncertainty on Delta variant and inflation. Benchmark U.S. Treasury yields continued their bounce from five-month lows, further pressuring the bullion

Gold was subdued in volatile trade on Tuesday as the dollar strengthened, curbing inflows into the safe-haven metal despite some concerns over a surge in COVID-19 cases.

Gold prices hit a one-week low on Wednesday, though they’re up almost 2% in July. Gold price is pressurizing the lows, flirting with $1800 amid a renewed risk-on wave that has gripped the Asian market, as traders shrug off COVID worries for now.

Gold was down on Thursday morning in Asia, remaining close to a one-week low. Yellow metal once again lost its shine ass dollar strengthened, risk appetite increased as concern over surging COVID-19 cases subsided

Gold prices extended slide to their lowest in nearly two weeks on Thursday on the back of a rebound in stocks and firmer U.S. dollar, while investors looked to the European Central Bank for their stance on policy.

Spot gold fell 0.5% to $1,794.58 per ounce during Thursdays trading hours.

On the other hand, Dow regained the entire losses of Monday’s crash. Asian markets were seen rejoicing this recovery and India followed suit. Amid all the chaos and uncertainty, the focus will now shift to the upcoming FED meeting to be held this Wednesday... Powell’s new views on Wednesday will be of paramount importance, unlikely to do a tapering and boost for gold. As mentioned the heightened inflation and feared to be signs of stagflation, is a booster for gold since no one will focus on Dow then. So $1792-$1795 is still an immediate support from where there should be a recovery to $1810-$1815 possible while protective stop is at $1787-$1785.

But rising inflation could be setting gold up for a rebound.  We actually do see inflation tick up here; you can expect that gold will kick in.

A surge in coronavirus cases in the United States and other countries however spurred some safe-haven buying of bullion in recent sessions, with gold rebounding as much as 1.7% from Monday’s one-week low.

A lot of people in the gold market have taken their eyes off the ball this year, but if we get more bad news on the COVID front and equities weaken, you could get just that flight- to-safety buy in a market that can wake up pretty quick. RSBL analysts were of the opinion that world economies were moving towards recovery, trillions of dollars in U.S. fiscal spending, and the increasing demand for many metals as part of the global energy transition, should support commodities in the longer term, contributing to higher inflation expectations. In addition, ongoing monetary stimulus, alongside expected fiscal stimulus, adds conviction to the "here-for-longer" inflation case. While there are plenty of long-term fundamental factors that support gold prices, dollar and inflation continue to remain the most influential ones.

Gold expected to reach new highs

In many of my previous blogs, I have mentioned as to how some macroeconomic factors will play a significant role in influencing gold prices. One of the main factors were inflation. And finally this key driver has brought in the much awaited rally in gold prices. 

Gold rallied more than 1% on the day as Federal Reserve Chair Jerome Powell said he hears America's inflation worries "loud and clear" while still viewing these price spikes as temporary.

RSBL analysts confirmed that gold notched a three week high on Wednesday following Powell’s comments. He said that inflation by all measures is running higher than expected. In fact, Chairman Powell, on Wednesday, acknowledged that inflation is above what the Federal Reserve is hoping to see. However, he tempered that statement by saying that this level of inflation will "moderate."

To be precise, speaking before the house financial services panel, Chairman Powell said, "Inflation has increased notably and will likely remain elevated in coming months before moderating."

The Fed has retained the stand that it will continue its current interest rate policy and monthly asset purchases until there was "substantial" progress towards its goal of full employment and stable long-run 2% inflation.

Prithviraj Kothari of RSBL stated that the monetary policy of the Federal Reserve prior to the pandemic and following recession was to keep inflation at a 2% target. However, the Fed has decided to let inflation run hot so that they can put their emphasis on maximum employment. The current inflation rate stands at 5.4%- the highest-level inflation has been at since the 2008 recession and largest increase since November 1991.

According to some market analysts, gold is seeing some renewed buying interest as Powell's comments appear to have a dovish tilt to them.

There was some havoc in the market as inflation gripped the US markets. Initial reaction from the Fed was a cool one. A denial mode continued, except he added that the policy changed will immediately come into effect if they feel that inflation is beyond control. So the imminent action will follow soon maybe taking few more weeks to taper. 

Meanwhile on Thursday, the Chinese GDP (2nd quarter) grew 7.9% and its industrial output grew 8.3%. 

While in the U.S PPI inflation stood at 1.0%- twice the expectation of 0.5%. USD index slipped to 92.4 and 10y yields more vigorously at 1.33%. 

What does all this mean to gold investors?-   the Federal Reserve is likely to continue their current mandate letting inflation continue to run hot until they see substantial progress towards full employment. With the inflation rate already at record highs similar to those seen in 2008, if, in fact, they do not raise rates in attempts to curtail rising inflation, we could see those numbers actually move higher. Not forgetting the fact that equities, which are an alternate to gold, do not qualify as inflation hedge.

Hence once again investors will move focus to gold which has time and again proven to be an inflation hedge tool.

And we all know what happens once demand rises. The yellow metal is expected to reach $2000 mark – a new target set by many investors in the markets.

Gold Cannot Be Written Off So Easily

 Gold has been on a tough ride since the start of the year 2020. To be more precise, since August 2020, when it pulled below its record highs of $2000 and later wandered there for a while before entering a significantly negative zone.

The main reason for its fall was the launch of vaccines worldwide over signaling global recovery. There was a point when gold raked. At one point, the price of gold hit a near 11-month bottom at under $1,674.

Similarly, the month of June 2021 was not that great for the yellow metal as well. The previous three weeks were woeful for gold as it cascaded from five-month highs of just over $1,919 to a seven-week low of just above 1,761 at one point. That was a loss mourned by the top gold dealers in India of almost $160 or more than 8% in just four weeks! And indeed, with all the FedSpeak and weaker economic data throughout the week, Gold - the recent decline for which was well overdone - finally found some footing, and the yellow metal soared a little high.

Gold finally clinched on Friday for its first weekly gain in four days and since its unceremonious fall from $1,900 levels. But the difference was hardly something for the yellow metal to boast about.

Gold was again up on Monday morning in Asia as investors digested the mixed signals from the U.S. Federal Reserves on monetary policy tightening after the release of tame inflation data. The main question about the temporary nature of the current inflation rate caused the yellow metal to close higher on the day and on the week, which is the first occurrence of a higher weekly close for gold in four weeks.

We saw a recovery in gold, over surging covid-19 cases across large parts of Asia. On one hand, this recovery weighed in negatively on the investors' sentiments and a relatively stable dollar on the other.

Viral cases were seen in Australia, Malaysia and probable a new variant or turd wave was expected in India. The delta strain has exploded high and hence, new restrictions and lockdowns are being expected in some parts of the world.

In addition, Indonesia is a key emerging market that is fighting hard to tame the growing viral cases while a lockdown in Malaysia is set to be pushed forward, further triggering gold bugs to hold support around the $1,780 per ounce price levels for the near term.

Inflation - Investors also continued to digest inflation data released by the U.S. during the previous week. The core personal consumption expenditures index grew a smaller-than-expected 0.5% month-on-month in May while growing 3.4% year-on-year. Gold prices rose as much as 0.8% after the release of the data, the central bank’s preferred inflation measure.

Consequently, gold bugs are rallying over monetary and fiscal stimulus support globally in response to the world’s most destructive pandemic, thereby boosting the bullion asset’s value despite an uneven pace of recovery between regions.

Gold will likely continue to stabilize going forward as most Fed Chair Powell’s policymakers agree with him that inflation will be transitory.

Investors should think about the long term and pay truly little attention to what is happening in the short term. Looking at the near-term data, gold prices might plunge a little bit more. However, the lower the price of the precious yellow metal drops, the better a buying opportunity it becomes. Moreover, we cannot ignore the gold buying spree undertaken by the central banks. The central banks and the big buyers remain in the market. The day when central banks will say that they hate gold and start offloading from their reserves will be the day that the gold investors and gold dealers in India will need to get worried.

Key Drivers For Gold

 Last week was terrible for gold and gold dealers in India as it witnessed a 6.04% dip. This decline followed the comments released by the Fed. Fed’s hawkish stance spurred a new wave of concerns about tapering. However, prices stabilized at around $1,770 on Monday as the US Dollar dropped slightly from its two-month high. Some investors may take this opportunity to buy the dips, but uncertainties surrounding the Fed’s next interest rate move may continue to weigh on the prices.

The spot price of gold on RiddiSiddhi Bullions Limited reached $1,787.80 (£1,286) per ounce early on Tuesday morning, up 0.3% from where it rested at the close of play on Monday. Gold steadied after posting the biggest weekly loss in 15 months as the Federal Reserve’s hawkish shift damped reflation bets. Gold is attempting a bounce from two-month lows amid falling yields, although a broadly firmer US dollar is likely to limit the rebound.

Gold bears once again became active in the market but couldn’t sustain for long. Following were the key drivers for the yellow metal -

• Inflation - Fed President Bullard said he sees inflation running at 3% this year and 2.5% in 2022, which would meet our new framework where we said we are going to allow inflation to run above the target for some time. From there, we could bring inflation down to 2% over the subsequent horizon. This suggests that conditions may be maturing by the end of 2022 for the Fed to consider tightening, which is much earlier than the market had anticipated.

• Rate Hike - Inflation risks may warrant the US central bank beginning to raise interest rates next year, St. Louis Fed President James Bullard said Friday. His comments came after last week’s Fed meeting where officials signalled monetary policy tightening could start earlier than expected. Chair Jerome Powell further added that the Fed would initiate a discussion about scaling back bond purchases used to support financial markets and the economy during the pandemic. The June FOMC meeting forecasts signalled that two rate hikes are likely by the end of 2023 as economic recovery father’s strength and inflationary pressures intensify. The decision hinted that the Fed would raise interest rates and begin asset tapering earlier than expected.

• Treasury Yield - The benchmark of a 10-year US Treasury Yield fell to its lowest level since Mar 3, 2021. A flattening US Treasury yield curve also seemingly reflects markets attempting to price in the possibility of a 2022 rate hike.

• Dollar - Ultra-low interest rate environment and central banks quantitative easing since the Covid-19 pandemic has been riding gold and a tailwind. Hence, it may be more vulnerable to a pullback when the reverse begins. Although the retreat in the dollar alleviated the sell-off in gold, the near-term momentum may still be tilted to the downside as tapering fears weigh.

It’s clear that the economy is improving rapidly, and the medium-term outlook is very good. But the data and conditions have not progressed enough for the Federal Open Market Committee to shift its monetary policy stance of strong support for the economic recovery. And hence people are using the correction to buy gold from RiddiSiddhi Bullions Limited - the biggest bullion dealers in India, at these price levels; there is value to hold positions in gold, especially for the long run.

Dollar Went Up The Hill And Gold Came Tumbling After

Gold headed towards its biggest decline in five months this week post the FOMC meeting. The FOMC stated that it would speed up its expected pace of policy tightening.

Since the yellow metal is extremely sensitive and influenced by the dollar and interest rate, such a volatile movement was quite obvious. Due to this characteristic, gold suffered a downfall as the dollar and US real yields both reached two-month highs. The central bank kept its interest rates and monthly bond purchases unchanged, as widely expected and concluded the meeting. The Fed on Wednesday signalled it would be considering whether to taper its asset purchase programme meeting by meeting and brought forward projections for the first post-pandemic interest rate hikes into 2023.

Following hawkish comments from Fed officials, the dollar jumped to a two-month high and was on track for its best week in nearly nine months. On the other hand, gold prices fell below $1800 an ounce on Thursday in London, disconcerting the largest bullion dealers in India. The yellow metal witnessed its 7th worst-ever trading day after the US Federal Reserve spooked the bond, equity and commodity markets by signalling an earlier rise in interest rates than previously forecast, leading in turn to expectations that its QE bond-buying will start to 'taper' sooner than later.

This uncertainty (especially in the forex markets) has led to a steep fall in gold and gold coin prices in Mumbai. The Federal Reserve has disrupted the summer torpor that the markets had settled into by signalling on Wednesday that two rate hikes could be in the cards by the end of 2023, a year earlier than expected. Though gold is considered as a hedge against inflation, higher interest rates will reduce its appeal as they translate into a higher opportunity cost of holding the metal.

The haven appeal of gold took a beating earlier this week on the release of the FOMC statement which indicated interest among a majority of committee members to expect rate hikes to begin as soon as 2023, amid a rapid economic recovery underway. This helped the US dollar, as well as bond yields, climb higher, further exerting pressure on the yellow metal, weakening interest in it among investors.

Just when people were about to write off gold, it managed to rise on Friday. At the time of writing, gold is trading at a little above $1,785. There is no doubt that the strengthening of the dollar will be challenging for gold, but looking at the other macro factors, we feel that gold and gold coins in Mumbai should be able to withstand rising yields as long as it is driven by rising inflation expectations. That was, however, not what we saw yesterday, so once again the million-dollar question is whether inflation will be a passing phenomenon or longer-lasting.

Despite the current high-growth, inflationary environment, the proposed Fed rate hikes are not expected to set in for at least another 18 months. So after a little bit more weakness here, gold prices will regroup and push higher.

Global commodity markets look set to undergo a major change in tone over the coming quarter as the rampant gains that have characterized the pandemic era give way to a more muted performance. Looking ahead, continued dollar strength will pose a challenge while gold should be able to withstand rising yields as long as it is driven by rising inflation expectations.

For now, the market including the largest bullion dealers in India trusts the judgement of the Federal Reserve and until data potentially proves them wrong, gold and with that also silver may face another challenging period.

Gold Will Be Watched Closely

Gold has had a great run of late, encompassing a 14.7% rise across just 60 trading days (from 1673 on Mar 8 to 1919 on June 1) which is an annualized pace of 61.8%. Last week gold and gold coin prices were seen hovering around $1900 an ounce. A lot of activity was seen happening which led to this price movement -

• The debate around price pressures,
• Speculation over whether the Federal Reserve will start talks on the idea of tapering its massive bond-buying program, 
• Thursday’s U.S. consumer-price index report numbers.

Data coming in from the US created a significant impact on the markets. On Friday, gold rose 1.1% as a Labour Department report showed the following key numbers -

• Some 599k jobs were added last month, compared to a 650k baseline forecast. 
• The unemployment rate fell to 5.8% from 6.1% in the prior month, hitting the pandemic-era low.
• The labour participation rate was little changed. 

However, this rally was short-lived as Yellen's comments dampened the rise. Bullion ticked lower after Yellen said on Sunday that President Joe Biden should push forward with his $4 trillion spending plans even if they trigger inflation that persists into next year, adding a “slightly higher” interest rate environment would be a “plus.”

Gold prices pulled back slightly following Yellen’s comment about inflation and interest rates. As a result, the 10-year Treasury yield rebounded, reflecting reflation hopes. Real yields edged higher, denting the appeal of gold as the opportunity cost of holding is increased.

Looking back at Friday’s close, a slight miss on May’s nonfarm payrolls data cooled fears about the Fed tapering stimulus and sent bullion prices 1% higher, keeping bullion dealers in India on their toes. Gold declined as investors weighed comments by Treasury Secretary Janet Yellen on interest rates against U.S. jobs data which missed expectations.

Piling on record historical global debts and holding rates down at 5,000-year lows are likely to stoke inflation like we haven't seen for a long time. Gold and RSBL gold coins have been sensing this since 2000 but have kicked into high gear once again since late 2019. You've no doubt seen and felt the increase in the prices of food and pretty much every other consumable. The Fed says the recent bump in inflation is transitory, but the action in precious metals says otherwise. It's why gold prices are up 42% in just the last two years. Sustained high inflation, coupled with low nominal interest rates, creates an environment of extended negative real interest rates. And that is when gold thrives, making bullion dealers in India happy.

Investors and bullion dealers in India will be closely watching commentary by the U.S. central bank as inflation ticks higher and policymakers move closer to paring the huge asset acquisition that saved the economy from the turmoil caused by the pandemic. The monetary support has driven the Fed’s balance sheet to a record, while muscular fiscal spending has enhanced government debt. Both may pose a concluding risk to the dollar’s value, potentially buffing the appeal of alternatives and probably pushing gold to new highs. 

Crucial Week For Gold Ahead

 Last week gold closed above $1900 an ounce for the first time since the start of 2021. This could once again mark the onset of bullish sentiments for the yellow metal. Spot Gold kept firm tone and consolidated under new nearly three-month high ($1912) on Monday, supported by weak dollar while growing inflationary pressures lift gold’s appeal as the metal is used as a hedge against inflation. Moving further, gold and gold coin prices in Mumbai scaled a near five-month high on Tuesday. This rally was driven by -

Weaker Dollar - The dollar index was down 0.2% against its rivals, making gold and gold coins in Mumbai less expensive for other currency holders. The U.S. unit registered its second consecutive monthly loss. Broad US dollar weakness became the main catalysts to help the gold post the biggest run-up in 11 months. The US dollar index (DXY) remained on the back foot as hopes of further stimulus and steady vaccinations in the West, recent in Asia as well, improved risk appetite for the metal.

Stimulus - The other supportive factor for the yellow metal is the monetary policy as it remains firmly stable, refusing to start changing the policy in response to rising inflation, arguing that the latest increase in consumer prices is transitory. Having proposed a $6.0 trillion budget, US President Joe Biden stretched talks over his $1.7 trillion infrastructure spending to June even as tax hikes become the key hurdle for the much-awaited stimulus.

Growing Inflationary Pressures - Last week, data showed U.S. consumer prices surged in April, with a measure of underlying inflation blowing past the Federal Reserve’s 2% target. The constant subdued tone around the US dollar, in retort to Fed’s policy expectations, continued to underpin gold price, as per the gold dealers in India. While investors awaited more U.S. data to gauge the extent of global economic recovery, Federal Reserve officials have repeatedly maintained they expect any rise in inflation to be short-lived, and said monetary stimulus would stay in place for some time.

Rising Demand - China’s factory activity expanded at the fastest pace this year in May as domestic and export demand picked up, though sharp rises in raw material prices and strains in supply chains crimped some companies’ production. Rising demand has resulted in pushing gold prices higher.

The true test for gold will be after the next couple of months of hot inflation reports and if we have some surprising better-than-expected nonfarm-payrolls reports.

Friday’s US Nonfarm Payrolls (NFP) will become important catalyst to watch for gold traders as markets for consolidation in the previous month’s disappointment. Should the headline US jobs figures print upbeat figures, traders may have an additional reason to expect the Fed action during the upcoming Federal Open Market Committee (FOMC), which in turn may underpin the US dollar and drag the gold and gold coin prices in India. But weak Nonfarm payrolls number this Friday may jolt gold prices toward the $1975 level.

Investors eagerly await Friday’s US Nonfarm Payrolls data for fresh hints on the economic recovery, which would likely affect the Fed’s policy outlook and in turn gold price. In the near-term, if gold can breach the $1,922 per ounce mark, it can open the room for further upside potential.

Crypto- Is It A Bubble Trouble

 Gold prices edged higher during Monday’s Asia-Pacific trade, reaching a four-month high of $1,887 before pulling back slightly. Stronger-than-expected US manufacturing and service PMI data released on Friday boosted the inflation outlook and thus bolstered the appeal of precious metals perceived as an inflation-hedge.

Factors that played a key role in influencing gold prices are very much active in these markets. These factors greatly affect Treasury yields and in turn, the treasury yields affect bullish or bearish sentiment in RSBL gold.

Dollar Weakness - Since the end of March, the greenback, seen as a safe-haven trade, has retreated steadily with optimism about the recovery. But lately, that move down seems to have slowed down as traders begin to anticipate higher U.S. interest rates coming when the U.S. Federal Reserve reacts to signs of increasing inflation. Any important data becomes important for the US Treasury yields that recently weighed on the US dollar and helped the RSBL gold buyers. As a result, Monday’s downbeat figures of the US Chicago Fed National Activity Index backed a corrective pullback of gold.

The US rates fell and dragged the greenback lower after Fed policymaker’s statements. The Fed’s conciliatory remarks boosted the Wall Street indices and capped gold’s upside, as markets once again believed the Fed could maintain lower rates for longer. However, amid a lack of notable US economic news and holiday-thinned trading conditions, gold price stuck to its recent trading range between $1870-$1890, keeping bullion dealers of India at bay.

Inflation - Recently the U.S. Labor Department showed that the consumer price index jumped to 4.2% in April. It is up 2.6% from the numbers revealed in March. Gold steadied near the highest level in over four months as investors weighed comments by Federal Reserve officials who sought to soothe concerns about inflation.

Governor Lael Brainard, Atlanta Fed President Raphael Bostic and St. Louis’s James Bullard said they would not be surprised to see bottlenecks and supply shortages push prices up in coming months as the pandemic subsides and the pent-up demand would be unleashed, but much of those price gains should prove temporary.

Gold is close to erasing this year’s decline as investors turn more bullish on the precious metal, with holdings in bullion-backed exchange-traded funds on an uptrend. While market-based measures of inflation expectations have dipped, traders remain cautious about price pressures as well as flare-ups in Covid-19 cases in some parts of the world.

Bitcoin - We have always seen bitcoin as a reason behind gold’s bearish behaviour. But this time the scenario was completely different. Bitcoin is up nearly 30% for the year but has fallen by almost half from its April record peak of $64,895. The volatility has undermined the case for its mainstream acceptance.

The catalyst for Sunday’s slump was that cryptocurrency “miners,” who mint cryptocurrencies by using powerful computers to solve complex math puzzles, were halting Chinese operations in the face of increasing scrutiny from authorities.

Extreme volatility in the Bitcoin-led cryptocurrencies encouraged traders to look again at gold as capital flows sought safety and stability. Investors weighed uncertainties and risks in trading the digital tokens amid doubts surrounding Main Street adoption and regulatory headwinds. Gold coins in India offer an alternative to cryptocurrencies for investors who are looking for assets that are non-fiat and therefore cannot be diluted by central bank easing.

Looking ahead, this Friday’s US core PCE inflation data will be closely monitored by traders for clues about rising prices levels and their ramifications for the economy as well as the Fed. Core PCE data is a key inflation gauge that the Federal Reserve uses to determine monetary policy. A higher-than-expected print may intensify inflation fears and drive market volatility.

It should also be noted that the Fed speak, coronavirus (COVID-19) updates and US Treasury yield moves will also be important for near term gold prices forecast. Overall, gold remains on the bull’s radar amid inflation fears.

Go For Gold

 As the week opened, Gold was seen climbing to 3 months highs at $1855 as real interest rates on US debt fell to 3-month lows amid a rush to re-impose Covid lockdowns in Asia, where the latest Chinese economic data came in weaker than the analysts' forecast. Spot gold rose as much as 0.2% to $1,870.73 an ounce, the highest since Feb 1 during Monday's trading sessions. 

The spread of the coronavirus was also dragged in some markets, with Singapore reporting the highest number of local infections in months and Taiwan also witnessing a spike in cases.

Gold and gold coins in Mumbai rose to the highest in more than three months as concerns over the pace of a global recovery crept back in following a flare-up in coronavirus cases in parts of Asia.

The second wave of this pandemic has hit India drastically. Families are being wiped out, restrictions have increased and the growth rate has fallen. In fact, it seems that not all the ones, who are affected, are being reported and the ground situation is even worse. 

Furthermore, gold dealers in India are getting a boost from a more downbeat U.S. economic data outlook, which might push gold to $1900 levels. The $1,900 level has been dodging gold since the beginning of January when the precious metal initially began its downtrend, which only ended last month after gold seemed to have found a bottom just above the $1,680 an ounce level. And right now is the time when markets digest several misses on the data front. Market consensus is also likely to downgrade its expectations.

We have always seen an inverse relationship between gold and economic data. Gold and RSBL coins tends to outperform when economic data is weakening and underperform when the economic prospects improve. Economic data expectations are often adaptive, falling sharply following a negative shock such as COVID shutdowns and the accompanying weak data. As the data starts to follow a downward trajectory again and the market enters the corrective part of the data cycle, yields are held down and the USD come under pressure. Low real yields should send gold higher again. All of this could help push gold even higher.

Going forward, investors and bullion dealers in India should keep a close eye on gold's relationship with the U.S. macroeconomic data that have been disappointing recently, especially when it came to the U.S. latest employment and retail numbers.

Investors remain concerned that a sign of rising inflation will force the U.S. Federal Reserve to hike interest rates earlier than expected. However, Fed President Robert Kaplan said on Monday that he doesn’t see inflation becoming a problem anytime soon and reiterated that he didn’t expect a hike in the interest rate until 2022. However, he also urged the Fed to start normalizing policy.

Gold has been in the negative for some time now; however, the recent price rise has put the gold pack into the green and helped it erase this year’s decline. We see several reasons that will bring about a rally in gold -

ETF - ETF investors are starting to swing into net buyers again, after the recent consolidation, and it makes sense for the metals to play catch up to the recent moves higher in other commodities. Investor sentiment has boosted with inflows into bullion-backed exchange-traded funds.

Consumer prices - Further expectations increase in consumer prices as they start to bolster demand for gold as a hedge.

Inflation - The precious metal is a traditional hedge against inflation, which is back with a vengeance. Inflation fears are finally translating into higher precious metals prices.

Pandemic - A lot of uncertainty with Covid-19 strains and mutations in the Asia-Pacific region will lead to safe-haven buying increasing gold prices.

Equities - The gold price usually climbs when stock markets crash. The S&P 500 index of top US stocks blasted through 4,000 for the first time at the start of April, but now looks overvalued as jobs growth disappoints and higher inflation threatens.

Investors, gold dealers and bullion dealers in India now await minutes of the Fed's latest meeting, due on Wednesday, for further clues to the movement of the central bank’s monetary policy. Investors will turn to the minutes from the Federal Reserve’s April meeting due Wednesday for potential clues to officials’ views on the recovery and how they define “transitory” when it comes to inflation. Fed Vice Chair Richard Clarida said Monday that the weaker-than-expected U.S. jobs report for April showed the economy had not yet reached the threshold to warrant scaling back the central bank’s massive bond purchases. Meanwhile, Fed Bank of Dallas President Robert Kaplan said supply and demand imbalances and base effects will contribute to elevated inflation this year, but he expects price pressures to ease in 2022.

While the week is expected to be relatively quiet for economic data, investors will be anxious to see minutes on Wednesday from the Federal Reserve's policy meeting last month, which could shed more light on the policymakers' outlook on an economic rebound.

Important Data Expected To Bring Volatility

After a record-breaking rally last year, gold has lost momentum amid optimism over economies reopening and vaccine rollouts, with the advancing dollar and rising bond yields denting demand for bullion.

 

Rising bond yields and upbeat risk appetite is denting the safe-haven metal. Gold fell more than 1% on Thursday as U.S. Treasury yields gained on upbeat U.S. economic data. Benchmark 10-year note yields rose to more than a two-week high during the session on U.S. President Joe Biden's proposal of trillions of dollars in new spending and data showing U.S. economic growth accelerated in the first quarter. Higher yields increase the opportunity cost for holding non-yielding bullion. 

The move higher in yields (and a corresponding strengthening of the US Dollar) brought pressure to the gold chart, and precious metals’ spot prices fell steadily throughout Tuesday’s session and into the Asian and European sessions. The pattern repeated in the morning hours of Thursday’s session, thanks to another boost to (possible) inflation expectations when the first pass at calculating growth in the US economy for Q1 of 2021 returned a very strong year-over-year increase (as expected) and the 4-week average of new jobless claims continued to fall towards 600K. After rebounding from Thursday morning’s steep losses, gold stabilized and looked strong on Friday, consolidating near $1770/oz. 

 

In the days to come, markets will be flooded with key economic numbers coming in from the US and a lot of volatility is expected owing to these numbers. All eyes will be on the slate of what looks to be very strong macroeconomic data, including manufacturing and employment reports.

• the ISM manufacturing
• Payroll numbers are quite important. 
• factory orders
• ADP nonfarm employment
• ISM non-manufacturing PMI
• jobless claims

Key U.S. data will be running hot, and gold will be closely following the market's inflation expectations as commodities continue to surge. Generally speaking, any surprise to the upside will get inflation expectations higher. That could drive real rates lower, which would be a good catalyst for gold and gold coins from RSBL.

On the other hand, we are seeing a rise in gold and RSBL coins appetite from the world’s 2 biggest consumers of gold- India and China. In India, prices are down more than 15% from a record high in August, according to the largest bullion dealers in India. Purchases in the world’s second-biggest consumer jumped 37% in the January to March period to 140 tons after slumping to the lowest in more than two decades last year, according to the World Gold Council. A combination of softening gold prices, a sharp pick-up in economic activity and the return of social activities such as weddings supported higher consumption, it said

 

China too saw a steep rise in demand for the yellow metal. The release of a spike in demand has become a feature of the gold market with first-quarter sales of jewellery to Chinese women at their highest since 2015. China’s gold jewellery consumption in the first quarter stood at 119.1 tons, the highest quarterly level in seven years, according to the World Gold Council’s latest survey released on Thursday.

 

The three main reasons behind this rising demand for jewellery were- 

• The improving economic conditions
• A slightly lower gold price and 
• A sales spree related to holidays

While on one side we see the supply-demand equation, on the other side there is inflation and important US data. For now, the gold market is ignoring its perfect storm of low-interest rates, more government spending, and rising inflation expectations. However, next week could test the Federal Reserve's policy stance that it is too early to start tapering.

Before gold can move above $1,800 constantly, the market will need to be certain that the U.S. will see persistent inflation, not just momentary. Plus, other parts of the world should begin to recover according to the RiddiSiddhi Bullions.

Analysts are warning investors that if gold can't go up in this current environment, then look for lower prices. However, many analysts say that a retest of recent support could attract new buying momentum to the marketplace.

Crucial Week for Gold

Gold prices held steady on Monday morning as markets, in general, seem to be in an optimistic holding pattern ahead of another big week of earnings reports, this time accompanied by some key macroeconomic inputs. Gold picked up roughly $5/oz after the global markets reopened on Sunday evening, and stabilised during Monday's trading sessions.

Gold prices have been supported by the recent demand from India (according to the bullion dealers in India) and China, regardless of how weak the U.S. dollar and the retreating Treasury yield is.

The Chinese demand for gold and gold RSBL coins at current levels is no doubt helping support prices, with the PBOC stepping up quotas for gold imports. The local premium above spot still remains at around $7 to $9 an ounce, which could be impacting local availability of gold and gold RSBL coins in Australia, as much of what is produced today may well be heading into that market. Since February 2020 the country has averaged around $600 million a month worth of imports, or circa 10 tonnes, so the new 150 tonnes green light is a significant volume of gold to hit the hungry Chinese market in the months to come.

India’s demand for gold and gold RSBL coins also remains very strong at the current price with record-breaking imports in March of 160 tonnes. Gold shipments from Switzerland to India and China rose last month, indicating renewed buying by the top consumers after a year on the sidelines.

The second wave has been pushing economies back to sluggish growth and stricter lockdowns. Any hindrance in growth will lead to a weaker US dollar and stronger yellow metal. The bullion is stabilizing near an eight-week high as bond yields trend lower, lifting the appeal of the non-interest bearing precious metal.

Increasing covid-19 cases in some parts of the world have raised concerns over the pace of global growth, although stimulus measures remain in place. If the economic situation worsens again, the Fed might be forced to pump more money into the system, altering the hawkish outlook. In that case, gold and gold RSBL coins would most likely breach the current record highs above 2,000 USD.

However, there are bearish sentiments also that prevail in the market over the following - 

• The view that any spike in inflation is likely to be transitory and that the Fed will keep interest rates lower for a longer period extended some support to the dollar-denominated commodity and helped limit any deeper losses, rather assisted to regain some positive traction on the first day of a new trading week. That said, the upside is likely to remain capped as investors might prefer to wait on the sidelines ahead of the latest FOMC monetary policy update, scheduled to be announced on Wednesday.
• All the money printing and inflation are probably priced in, as evident from gold’s rise from 1,400 to 2,000 USD, with investors now being forward-looking and gold dealers in India waiting on that. They see one more year of ultra-loose monetary policy, and then the Fed will need to start hiking rates and taper the QE. Both hawkish actions could come even sooner than 2022.

Should this outlook stay in place, the upside for gold is probably limited.

Moving on to this week, it is going to be an important week for gold with key data to be watched over the coming days -

1. FOMC Meet - The main economic event of the week will be the Federal Reserve’s Open Market Committee (FOMC) meeting that will commence on Tuesday morning and will end on Wednesday afternoon with a statement and press conference from Fed Chair Powell. While there is no expected change in the U.S. monetary policy, the marketplace will closely scrutinize the Fed’s inflation outlook and any comments on the future path of monetary policy. Wednesday’s FOMC meeting and press conference will be followed by a first read on Q1 economic growth on Thursday morning and then the Fed’s report on consumer price inflation.
2. Capital gain taxes - President Biden will address a joint session of Congress where he is expected to lay out the Administration’s plan for an increase to capital gains taxes for the wealthiest Americans. We’ll be watching to see if the formal announcement will stumble the markets similar to what happened last week.

Important data to watch out for-

• EDT/GDP Growth
• Initial jobless claims
• PCE Price Index

With such a crucial week ahead, investors will all be glued to all the important numbers coming in. And on the other hand, the top gold dealers in India and largest bullion dealers in India will wait for investors to make their decisions and pounce on them. Wait and watch is all that we can say.

China On A Gold Buying Spree

 All over the world, economies are improving and stimulus measure is helping to get things back on the growth track. But all this is not as easy as it seems. The main reason behind this recovery is fiscal stimulus. Any dort of stimulus brings along certain pressures - concerned balance site and budget deficit. This further leads to inflation, in fact, currently, we are expecting the nation to create pressure on the U.S. dollar which will further release bullish sentiments for the precious metal.

Although gold prices have struggled in the last seven months, the precious metal still plays an important role in a portfolio. Gold remains to be an attractive safe-haven asset as real interest rates remain near historically low levels.

The precious metal and RSBL coins were seen heading to their second consecutive week of gains after a positive start to Q2 amid a weaker U.S. dollar and retreating U.S. 10-year Treasury yield.

It would be sensible for investors to take some defensives positions in their portfolio because of current valuations. The U.S. economy is expected to see strong economic growth this year. So, fundamentally, equity markets have room to go higher and hence there should be a balanced portfolio allocation.

The growth that we are seeing in equities is being supported by stimulus, earnings and by the recovery of global economies. But this growth won’t come alone, it will definitely bring some volatility along with it. But this volatile situation would be a great opportunity to park investment into portfolio risk hedges like commodities. Some players believe that it is just the right time to jump into the market and make the most of this opportunity and reach out to the top gold dealers in India and the largest bullion dealers in India. 

While talking about portfolio allocation, there is this huge superpower that aims to pile up reserves to the best possible strength. China has cleared the way for a massive surge of gold and gold coin imports into the country. An exclusive report from Reuters suggested about 150 tonnes of gold (worth $8.5 billion at current prices) is likely to be shipped into China following the green light from Beijing. This information was revealed by four different sources that China has permitted domestic and international banks to import large amounts of gold into the country.

China is in the race to build up its reserves. In fact, analysts say that tonnes of gold in China still stands unreported. Of the official numbers, it is believed that in 2019, China's gold imports ran at about $3.5 billion a month, or roughly 75 tonnes.

The report quoting two people said the gold would be shipped in April and the other two said it would arrive over April and May. China brings in the bulk of its gold from South Africa, Switzerland, and Australia. China has, on average, imported gold worth about $600 million a month, or roughly 10 tonnes. The move, cited by the news agency, is "potentially helping to support global gold prices after months of declines."

China is the world's biggest gold consumer, gobbling up hundreds of tonnes of the precious metal worth tens of billions of dollars each year, but its imports plunged as the coronavirus spread and local demand dried up. The main reason behind this purchase is to revive the dampened gold market.

A fair recovery in gold demand this year will require a generally much higher level of gold import. Next week also marks the Federal Reserve media blackout period ahead of its monetary policy announcement on April 28. ING said that no additional Fed speakers could mean a weaker U.S. dollar, which is beneficial for gold. A quieter week for U.S. data and the Fed in the blackout period could favour a continuation of benign market trends and a slightly weaker US and stronger yellow metal. On one hand, we have gradual growth, speedy jab drives and on the other hand, we see a second Covid wave engulfing the world.

Too much happening globally. In this current environment, with so many unknown factors impacting investment strategies, it is advisable for investors to remain actively involved with their portfolios and remain calm and balanced.

Investors Pull Out From Gold And Pool In Other Assets

 Compared to last year, the first quarter wasn’t that interesting for gold. However, the yellow metal showed a decent start to the second quarter. Gold prices were seen moving up around  1.5% last week. It ended close to the $1760 an ounce, we closed for the week. As the week opened, Gold prices fell on Monday, weighed down by firmer U.S. Treasury yields and dollar after better than expected U.S. economic data lifted prospects for higher inflation. Spot gold fell 0.2% to $1,739.20 per ounce.

Stronger than expected data suggests that inflation (will be) picking up faster than expected in months to come, which is leading to a rise in real yields, exerting pressure on gold. If we do get flaming inflation readings next week, it could be a catalyst for higher Treasury yields, which would be bad for gold. But once we pass that event and if gold would still near $1,750, that would be a green light for prices to rise higher. There could be more upside potential for gold after the CPI data.

The gold dealers in India remain optimistic as the gold prices might have already hit their bottom in the first quarter of this year. In that case, we can expect a favourable environment for gold to rose. The Fed removed the big risk as far as yields surging. This will act in favour of the yellow metal. And even though we might not see the August record highs, gold could make a move towards $2,000 again.

We have a line up of data releases this week, which might catch investors attention-

• CPI
• U.S. jobless claims
• Retail sales
• NY Empire State manufacturing index
• Philadelphia Fed manufacturing index
• Industrial production

Other supportive drivers for gold are- 

Stronger physical demand - Since the onset of the pandemic, gold has also seen an uptrend. A few minor drops were witnessed, but overall it has been a green zone gold. High demands amongst the Chinese and Indian coupled with renewed interest from central banks have all delivered sufficient support for the yellow metal.

Piling gold reserves by central banks - With 2021, the gold dealers in India and largest bullion dealers in India expect that the new year will bring a global economic rebound, "The possibility of capital inflows into emerging markets and the low interest-rate environment may lead to central banks adding gold for diversification purposes The breadth of central banks purchasing gold could potentially rise substantially considering the massive increase in sovereign debt and the rapid pace of money supply growth in reserve currency countries. A sustained rise in official interest could provide further support for the yellow metal.

Furthermore, domestically, the top gold dealers in India are expecting that Gold and Silver could become expensive from the current levels on two counts. With the international prices going up, the resurgence of the Coronavirus Pandemic could drift investments towards this haven, resulting in the increasing demand for gold.

However, we still find some players in the market who are pulling out from gold and pooling into equities, cryptos and other asset forms. But as many say that crypto is a bubble and if this bubble pops then it will be a huge and significant game changer for gold. But to be sure, this is technically not possible. All we can say is that if at all the bubble bursts then $2250 an ounce for gold will be a cakewalk.

Gold Loses Shine But Later Gains Lustre

 Gold was seen gearing up for another leg to the upside, as the bulls extended the recovery from three-week troughs of $1677.

Bullion has clawed back some ground after dropping last week to near the lowest level since June, with recent movements largely being dictated by the direction of bond yields

The weakness in the US dollar and Treasury yields continued to lend support. However; traders believe that the improved market mood on the economic optimism plays could likely play a spoilsport.

Gold steadied as investors weighed signs of an economic rebound amid better-than-expected U.S. jobs data against the implications of President Joe Biden’s spending plans.

U.S. employers added the most jobs in seven months with improvement across most industries in March, as more vaccinations and fewer business restrictions supercharged the labour market recovery.

The U.S. economy created the most jobs in seven months in March as more Americans got vaccinated and the government doled out additional pandemic relief money.

• Nonfarm payrolls increased by 916,000 last month
• February employment was revised up to a 468,000

Following these data numbers, gold dealers in India witnessed the first quarterly drop in the price of gold since 2018. A growing economic recovery and rising bond yields created bearish sentiments for the yellow metal.

We’ve already seen a $1.9 trillion helicopter money drop this year, and the Biden administration appears just to be getting started.

The latest reading of the government’s CPI (Consumer Price Index) continues to suggest that inflation so far remains low. Even if we do experience high inflation, government officials continue to assure, it will be transitory. Despite these weak guarantees, the financial establishment is starting to sound the alarm.

U.S. President Joe Biden's announcement of a long-awaited $2 trillion-plus job plan last week has raised some concerns over inflation.

The ongoing threat of inflation – and actual inflation – will result in more buying of gold, silver, and other hard assets. Especially since Fed Chief Jerome Powell has said that the central bank would be happy to allow inflation to persist for a while before taking any action.

This means that the central bankers will not hike interest rates or pull back bond purchases to slow things down. And when government-reported inflation rises well above 2%, while interest rates remain at lower levels, the resulting negative real interest rates will support gold prices.

This inflationary scare comes at a time when the government is allowing running free massive stimulus measures to bail out states, businesses, and consumers – all in the name of combating the pandemic.

During these times, some investors view gold as a hedge against inflation and hence the drop was not much lived.

Gold once again gained momentum as this week opened, over the following reasons – 

Yields- The benchmark 10-year US Treasury yields have slid below 1.7% after rising to the highest level seen in 14 months over the past few sessions. This has also turned the dollar bearish, sending it to an almost two week low against most of its major rivals. While lower bond yields decrease the opportunity cost of bullion and make it more appealing as an investment, a weaker dollar drives up purchases of gold and gold coins in Mumbai by holders of other currencies, helping push up its demand as a result.

Corporate taxes- The yellow metal is also trading bullish on the rising prospects for higher corporate taxes in the US after President Biden stood by this proposal as a way to pay for the recently announced $2 trillion infrastructure plan. Additionally, the precious metal’s safe-haven appeal also enjoyed support from recent comments from Cleveland Fed President Loretta Mester on the central bank’s plans to remain dovish to boost economic growth further.

Meanwhile, traders are also watching the progress of debate over Biden’s $2.25 trillion infrastructure proposal, as Republicans expressed guarded support for a more limited plan. Any progress in these talks will directly affect gold and gold coins in India. Whether on the upside or downside- we need to wait and watch!

Covid has become avid

Recently we have seen gold coming under pressure. Even officials from the US government and central bank anticipate the economy to post a swift recovery, boosted by strong COVID-19 vaccine rollout programs and multiple rounds of fiscal stimulus. 

Top gold dealers all over India agree that there is optimism in the markets about improved economic outlook. This positivity is further supported by an improvement in consumer spending, which in turn would hike up inflation – one of the main reasons that have been strengthening US Treasury yields.

On March 29, gold and silver plunged again amid strength in the dollar index. Both the precious metals settled on a weaker note in the international markets. Gold made a swift move to $1744 from its base of $1728 last week on Thursday evening but later the pressure of rising USD Index towards 93 killed all the gains. Now the 10y and 30y finds key barrier of 1.65 and 2.40 respectively.

The dollar index gained again and traded at four and a half months highs and inched closer towards the 93-mark, pushing the yellow metal lower. Strength in the dollar index triggered selling in both the precious metals.

Gold extended its biggest fall in more than three weeks as President Joe Biden prepared to unveil big spending plans after announcing major progress on rolling out vaccines. Biden said 90% of U.S. adults will be eligible for Covid-19 vaccines by April 19, boosting risk appetites even as they linger around new strains of the virus. The president will also this week unveil major plans to reboot the U.S. economy and boost employment.

Analysts at RiddiSiddhi Bullions Limited suggested that gold is heading for its first quarterly decline since 2018 as a budding global recovery reduces the safe-haven’s appeal. A stronger-than-expected dollar and increasing bond rates have also pulled bullion down from its record high in August last year.

In a speech on Wednesday, Biden is expected to focus on infrastructure as his administration aims to reshape the post-pandemic U.S. economy and government

The US also recorded a jobless claims figure of 684,000 for the week before last – the first reading below 700,000 since the pandemic sparked mass layoffs last year. This further boosted the dollar in one of its better recent weeks.

In another busy week for FX markets, the US dollar benefitted from its ‘safe haven’ status amid crises in Turkey and on the Suez Canal.

Last week started with news that Turkey’s President Recap Erdogan had sacked the country’s Central Bank governor Naci Agdal for raising interest rates to check inflation and to support the Turkish lira. He was the third Central Bank chief to be sacked since 2019.

The removal of Agdal from office led to “risk-off” dollar buying as the value of the lira against the dollar fell by approximately 12%.

Furthermore, the MV Ever Given has caught up attention all over in the media – a 400-metre, 200,000-tonne cargo ship that got stuck across the Suez Canal. 

With roughly 250 ships stacked on either side of the blockage and a reported $15bn worth of goods on board, there were worries that disrupted trade flows could disrupt international recoveries from the Covid-19 pandemic.

Analysts have also forecast further bearishness in sight for the precious metal on the back of rising hopes for global economic recovery. However, gold prices are likely to enjoy some support from the latest wave of the pandemic that has sent parts of Europe back into lockdown mode even as emerging markets like Brazil and India are also reporting a spike in fresh infections confirmed a spokesperson from RSBL.

Experts say the yellow metal could remain volatile amid strength in the dollar index and a rise in the US bond yields could weigh on the precious metal

The monthly U.S. non-farm payrolls report will be closely watched at the end of this week, with Federal Reserve policymakers so far citing slack in the labor market for their continued lower-for-longer stance on interest rates.

“In a week when the market is feeling so optimistic about the forthcoming payrolls release, it seems very likely that the greenback will find strong support.

Further strength in the dollar index could push gold prices below $1,700 per troy ounce this week. We expect precious metals to remain volatile this week.

Important week for gold

Lately we have seen both gold and silver under bearish pressure. On one hand we saw gold reaching its lifetime high of $2075 in 2020, we even saw the yellow metal crashing to as low as $200 in the first quarter of 2021.

Market analysts and technicians have been consumed as they analyse the multiple factors that had created bearish pressure on both gold and silver pricing. Of all these factors, there are two connected factors that seem to have the greatest impact on creating negative market sentiment towards gold and silver. They are –

• Dollar strength 
• US government bonds and yields

A strengthening dollar is a direct result of rising yields and hence both remain interconnected.

There are signs that gold has found a bottom after a streak of weekly losses, according to analysts. Now, the focus is shifting to the Federal Reserve's rate announcement on Wednesday. All eyes remained glued to the  U.S. Federal Reserve meeting, due to start later on Tuesday.

U.S. Treasury Secretary Janet Yellen said Sunday the U.S. inflation risk is small and manageable. The Federal Reserve's two-day Open Market Committee (FOMC) meeting begins Tuesday morning and ends Wednesday afternoon with a statement and new U.S. economic projections. While no change in U.S. monetary policy is expected at this week's meeting, traders will be closely scrutinizing wording on the Fed's economic growth and inflation prospects.

Analysts are not expecting any significant policy changes as markets are starting to wonder if the U.S. could see sooner-than-expected rate hikes due to strong economic growth and rising yields.

Top gold dealers in India, investors and traders are generally more focused on better global economic growth prospects and the pandemic being tamped down by rising vaccination levels, and less focused on rising government bond yields that have at times recently produced speed bumps for the stock market bulls. The benchmark 10-year U.S. Treasury note yield is presently fetching 1.613%.

Currently we see yield rising over the following reasons-

• Massive stimulus
• Fast vaccination rollouts 
• Low-interest rates

Inflation expectations have soared over the past three months, with five-year breakeven rates rising to 2.6%, the highest since 2008. U.S. 10-year Treasury yields are now trading above 1.6% and some market participants are expecting the benchmark could reach 2% before year-end.

According to the gold dealers in India, Gold has lost $200 so far this year. But now analysts believe that the selling is probably done off and Wednesday’s Fed announcement will be a key driver for the precious metals sector this week.

In such uncertain environment it’s quite natural for investors to find ways to protect themselves against inflation. But they are also very well aware that the central bank may raise interest rates to keep inflation under control. 

While gold coins in Mumbai looks like an attractive hedge against rising prices, this isn’t the case when interest rates are going up too. However, it’s the real interest rates that matter — that is, the interest rates adjusted for inflation. In other words, when inflation kicks in but central banks hold off from raising rates in response. When investors see this happening, gold coins in Mumbai will then become an attractive investment proposition.

Stimulus may lead to inflation worries

Gold has declined by around 5% over the last few months, despite expectations of inflation rising to their highest since 2008.

Gold prices pulled back on Friday as robust U.S. bond yields and a strong dollar weighed on the metal, but bullion was on course for its biggest weekly gain in four weeks. 

Benchmark U.S. Treasury yields climbed, increasing the opportunity cost of holding gold, while the dollar bounced back from a near one-week low. President Joe Biden on Thursday signed his $1.9 trillion stimulus bill into law and said he was working to speed COVID-19 vaccinations and move the country closer to normality by July 4. 

Now that President Biden’s latest stimulus package (a cool $1.9 trillion) has been approved, inflation worries are on the rise. With the money supply enormously increasing and the oil price mounting, it’s pointing to an inflationary situation. While financial markets don’t like inflation, safe-haven assets such as gold tend to prosper.

The Americans have welcomed the stimulus program, but as we know any such package always creates government debt. This is a long-term problem that’s only getting worse but it’s also rapidly devaluing the dollar believes all the top gold dealers of India.

Analysts at RSBL believe that while the vaccine rollout is reassuring, the road to normality is going to come at a significant cost. Along with direct checks to members of the public, this massive stimulus package includes provisions for employment. It also includes a financial injection into state and local governments along with schools. This is all meant to help get the economy reopened and life back on track.

Investors are now awaiting the U.S. Federal Reserve meeting next week for direction on its monetary policy. Meanwhile, once can consider to buy April gold future at dips of $1703 and average at $1969 target $1723 and $1738 extension $1746.

All 3 sentiments exisit for gold- bearish bulish and neutral

 Gold prices continued to stay under pressure and recently reached at $1679, the lowest level since early June, affecting the gold dealers in India. It then bounced modestly to the upside but remained under pressure about to pots the eight daily losses out of the last ten trading days.

In an environment of rising U.S. yields, growth recovery, vaccine rollouts, and investors getting more optimistic on growth prospects; hence demand for safe havens is expected to struggle.

Gold slumped last week, hurt by the rising Treasury yield environment. The rising Treasury yield, driven by strong economic data and an appetite for taking on risk, has sent the demand for gold falling continuously.

Higher US yields and a stronger greenback continues to be the key factor keeping gold on a negative bias. Not even risk appetite in the US has helped the yellow metal. 

U.S. 10-year Treasury yields edged lower, raising the appeal of holding gold. A steady rise in bond yields makes holding gold less attractive as investors typically tend to gravitate toward assets that generate steady income in the form of interest or dividend.

It was a combination of U.S. dollar strength and market participants bidding the precious yellow metal lower that resulted in gold’s considerable decline

Two sessions and DOW gained nearly +1000 points on US Covid package but the NASDAQ slipped by 3% and most bond yields did not show huge positive traction. 

Gold stayed below $1700 since Mondays opening and testing crucial support bands of $1680-1685. As said this and around $1678, all are significant support bands and on a pull back before Wednesdays’ report- CPI, Block buster data. It can be $1705-$1715 again. 

Gold ETF holdings have now fallen three months in the last four and this trend is set to continue if yields continue inching higher.

On Monday, the yellow metal dropped to the fresh low since June 2020 amid the US dollar rally and strong Treasury yields defying commodity bulls. However, the bears seem to have stopped for a breather while waiting for the US House session on Tuesday.

The price of gold coins in Mumbai rose on Tuesday, as a pullback in U.S. Treasury yields added some lustre to the metal after it hit a nine-month low in the previous session.

Spot gold rose 0.7% to $1,692.21 per ounce during early trading hours in Tuesday. Prices had fallen more than 1% on Monday to $1,676.10, their lowest since June 5.

Gold picked up bids near $1,683, up 0.20% intraday, during early Tuesday. The yellow metal recently benefited from the recent halt in bond rout while also ignoring the US dollar’s sustained rally.

Rising bond yields have taken a significant bite out of the gold dealers in India this year, but investors shouldn't fear increasing nominal yields as real interest rates will remain negative for the foreseeable future.

We continue to remain optimistic on gold coins as the price is supported by long-term fundamentals, including rising debt levels and extremely accommodative monetary policy.

Additionally, issues concerning the vaccinations and economic recovery should also be observed as fears of the coronavirus (COVID-19) variants battle unlock efforts in the West.

Markets may have turned bearish for gold in the short term and neutral in the long term, we still see gold as investors favourite. 

Uncertainity Prevails

 Gold prices began rallying in 2019 and reached an all-time high of US$2,000 an ounce in mid-2020. Since then, the yellow metal has consolidated around US$1,800 an ounce.  Before the consolidation, gold was declared as one the best performing assets of 2020. It surpassed the S&P 500, global treasuries, international and emerging market stocks, as well as commodities and oil.

Gold began the year with disdainful expectations on the back of a record high and its biggest annual gain in a decade. Instead, the precious metal is off to its worst start in 30 years.

Gold had a strong start to the year, moving to its monthly high of $1,959 per ounce on 6 January at the same time the U.S. dollar index (DXY)1 made fresh three-year lows. However, gold quickly reversed course as it became clear the democrats had won a runoff election in Georgia, which, with the help of a democratic vice president, gave them control of the Senate. With this crucial victory, the markets quickly embarked on a “reflation trade”, betting that the democrats would pass trillions of dollars of additional spending on pandemic relief, infrastructure and green initiatives. Interest rates spiked higher, taking ten-year treasuries to a ten-month high of 1.18% on 12 January. The rise in rates bolstered the U.S. dollar, driving the DXY to its monthly high on 18 January, while gold fell to its monthly low of $1,804.

February witnessed similar behaviour for the yellow metal. Spot prices touched a seven-month low on Friday, extending a fall and penetrating through a support level that analysts say could signify further losses. 

Gold gained in 2020 mainly over the following-

• pandemic-induced haven buying
• low interest rates 
• stimulus spending

However, this year gold is suddenly facing a series of unexpected and uncertain hindrances. Mainly-

• resilience in the dollar 
• a rally in U.S. Treasury yields 
• Global  economic recovery from the pandemic 

With rates going higher and inflation expectations peeking out, we’re seeing a lot of profit-taking in gold and people are going from gold into other investment options confirms analysts from RSBL.

However, RiddiSiddhi Bullions Limited is confidents and still believe prospects for rsbl gold coins and bullions to make a comeback, betting that the inability of governments and central banks to normalize stimulus policy will see it climb again. Currently the Federal Reserve has kept additional stimulus and interest rates on hold.  So, some analysts still believe that the metal continues to remain an investors favourite for the time being. 

The outlook for gold is challenging as yields rise and a general risk-on tone across markets impacts safe haven demand. The surprising resilience of the USD is at the core of this drop in investor appetite, and profit taking has emerged following gold’s strong start to the year. 

While gold is seen as an inflation hedge, higher inflation expectations have pushed yields up, increasing the opportunity cost of holding non-yielding bullion.

Gold should still benefit from continued loose monetary policy and low real interest rates this year. 

The recent rise in yields suggests that some investors are starting to anticipate a tightening of policy sooner than anticipated to accommodate a potential rise in inflation.

There is a cycle that finds correlation between a series of events. Let’s have a look. With central bank support removed, bonds usually fall in price which sends yields higher. This can also spill over into stock markets as higher interest rates means more debt servicing for firms, causing traders to reassess the investing environment.

As we know that uncertainties are bound to continue in the economic environment, we would not advice reducing your gold exposure. In fact, any form of uncertainty promotes bullish sentiment thus compelling investors to own gold and add resilience to their portfolio.

Gold continues to look attractive

When gold rallied, majority of the market layers jumped into the bull’s band wagon. Now that gold is showing bearish sentiments, analysts and traders have revised their forecasts for gold, but nonetheless still expect prices to recover from current levels. There are some who even believe that gold will reach new highs this year. 

Gold has benefited from action by central banks to slash interest rates and pump cash into the economy, which raises the threat of inflation and reduces returns on bonds, a competing asset class. But while global economic recovery may weaken the dollar, helping gold by making it cheaper for buyers outside the United States, it also is likely to raise bond yields, making gold less attractive confirms top gold dealer RiddiSiddhi Bullions Limited.

Gold has always been perceived as a safe place to store wealth, as a hedge tool and as a safe haven asset, owing to this gold was seen touching record highs of $2072.50 as the world was hit by the pandemic.

But as news of successful vaccine rollout was out, gold prices started dipping. A vision of positive and gradual economic growth, compelled investors to diversify their money into others assets likes equities that generally shoot up over economic growth and boom.

Lately also gold was significantly influenced by the price movements of other asset forms.

Benchmark U.S. Treasury yields rose to their highest levels since March on Friday, while inflation expectations edged up to a six-year high.

Higher inflation boosts gold but also lifts Treasury yields, which in turn increases the opportunity cost of holding bullion.

The week opened with dampened trades due to the holiday After Presidents Day Holiday on Monday, in the US, the Dow Futures indicated +244points gain, on sizeable stimulus with senate hope.

China is closed due to the Lunar New Year break. The Chinese Holiday will be in progress for another two more days and hence data inflow will be low.  But US retail sales data for Feb and PPI will be key at 7.00 pm IST. Gold trying to take out $1815-1820 barrier and, in the meanwhile, silver moved to $28 which is eluding since last week. US markets on life highs and ending the run up on Covid relief funds coming from Biden’s admin. 

U.S. President Joe Biden pushed for the first major legislative achievement of his term on Friday, turning to a bipartisan group of local officials for help on his $1.9 trillion coronavirus relief plan.

U.S. Treasury Secretary Janet Yellen on Friday urged G7 finance leaders to “go big” with additional fiscal stimulus to recover from the COVID-19 pandemic.

Physical gold demand eased last week in India as volatility in domestic prices put off buyers, while interest for silver remained strong in Singapore and Japan.

Retail Sales data will likely be our biggest data point, and focus will be on the discussion of minutes from the most recent FOMC meeting, released on Wednesday. The lack of scheduled data doesn’t presuppose a calm market, of course. Presuming the second impeachment trial of Donald Trump is wrapped up (or close to it) by Tuesday, all eyes and effort will be on the efforts to pass the Biden administrations COVID-19 rescue package.

We expect gold to perform well in 2021, although at a slightly more subdued rate compared to 2020.