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Showing posts with label QE. Show all posts
Showing posts with label QE. Show all posts

Sunday, 9 November 2014

IS GOLD BEING COMPLETELY CONTROLLED BY THE DOLLAR?


by Mr. Prithviraj Kothari, MD, RSBL




Gold is being pressurised on multiple fronts-

  • Equities
  • U.S Dollar
  • Chinese Demand for Gold
  • European Union
  • Japanese Bank


The equities markets is yet another reason that continues to pressurise gold. The stock market continues to look poised for another run higher into new high territory.  

Moreover investors have been more confident about the equities market as compared to gold and this has prolonged the ongoing lack of interest in gold and precious metals.
Apart from equities, The US dollar index too has been mounting pressure on gold. 

Dollar is at multi-year highs and does not appear headed for a reversal anytime soon. Ongoing deflationary pressures in the Euro zone along with economic struggles in Japan could potentially keep the greenback well-supported for some time. 

Gold has been dancing to the tunes of the U.S dollar and there is a big expectation that the U.S. economy will continue to grow and that will further boost the dollar. The notion of higher rates and economic strength is driving the dollar higher and gold lower. 

Surge in the dollar, in which gold is priced, has knocked the metal in recent days through key chart support at $1,180 an ounce -- the lowest level hit during last year's 28 percent plunge -- and $1,155 to its lowest since early 2010 at $1,137.40.

Initially $1150 was considered a good support level for gold but now that gold has crossed this level too,  technical analysts have said a test of the $1,000 level could be on the cards after a break of support at $1,155, a retracement level of its rally to record highs in 2011.

Moreover, robust demand for gold from China has been raising concerns amongst analysts and investors. It has been marked that China, the leading gold consumer of the world, usually buy lot of jewellery, bars and coins at dips. 

Chinese gold buyers, who in the past often took advantage of falling prices as a cheap way of buying into the yellow precious metal, are still biding their time. But this year demand from this country has also been low.

On Wednesday, gold touched the lowest since April 23, 2010. Gold sank about 2 percent on Wednesday to its lowest since mid-2010, potentially opening the way for a fall to $1,000 as a surging U.S. dollar weakened the investment case for non-yielding bullion.

Moreover,  the divergence between the U.S. and economies including the European Union and Japan is driving gains for the dollar. 
Gold futures fell, capping the longest slump since May 2013, as the dollar rally eroded the appeal of the precious metal as an alternative investment.

Gold prices ended the U.S. day session narrowly mixed Thursday and not far above this week’s 4.5-year lows. Trading was quieter ahead of Friday morning’s important U.S. jobs report.  Once the report was out and the key indicators were not as per expectations , precious metals rebounded. The spot gold price was last $8 higher at $1147.90/ $1,1468 an ounce in Thursdays close after spiking up to $15850 with the dollar last at 1.2374 against the euro.

The metal has lost around $100 an ounce over the past week, regenerating memories of a stunning two-day drop in 2013 that started a huge wave of divestment and an annual drop in gold prices after 12 consecutive years. 

Silver was down 3.6 percent at $15.43 , paring losses after hitting $15.13, its lowest since mid-2010.
On Thursday, spot gold prices gained after the US jobs data was out. Spot gold was $8 higher at $1147.90/1148.60 per ounce. The US jobs data stated that the US added just 214,000 jobs in October. This was down from 248,000 in September and also below the predicted 235,000. This gave some support to gold that been witnessing a tumble since quite some time now.

Next week brings more attention to euro zone and Chinese economic data, and the results may serve to underscore the monetary policy divergence between the U.S. and the rest of the world.

The would result in strengthening of the dollar thus further putting pressure on gold which would act completely opposite to gold price movements on Friday.
Moreover, several European countries will release their first third-quarter gross domestic product data, and China will release reports on industrial production growth, producer price index and export data.

Even as China Japan and the Euro zone shows that their economy has been growing as much slow pace and they need easy monetary policies, next week there will more outlook on policy divergence with the Federal Reserve needing to decide on the interest rate hike which many analysts believe wont come in March

While the longer-term trend remains down, gold will likely not go straight down. A short covering and/or relief rally will likely be soon in the coming weeks and gold could possibly test the breakdown level of $1183 before potentially heading lower again.




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 -
"Fed Sets The Rules For Gold"
http://riddisiddhibullionsltd.blogspot.in/2014/11/fed-sets-rules-for-gold.html


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Sunday, 26 October 2014

GOLD ONCE AGAIN SURRENDERS IN FRONT OF THE DOLLAR


by Mr. Prithviraj Kothari, MD, RSBL




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

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

Let's have a look at some market making news that happened over the week:
  • The U.S. dollar is up  5 % this year against a basket of 10 leading currencies. 
  • The country’s unemployment rate is at a six-year low, suggesting the world’s biggest economy will survive slowdowns in Europe and ⦁ Asia. 
  • The European Central Bank plans to stimulate growth by buying asset-backed debt, aimed at boosting the ECB's own balance-sheet by €1 trillion in a bid to avoid deflation for the 18-nation currency zone through monetary stimulus.
  • Economists cut estimates for Chinese growth after disappointing data on industrial profits, factory output and credit. Chinese central bank will inject short-term loans into major banks this week drove Beijing's 1-year money market rate down to 2.99% – its lowest level in 25 months .
  • The global economy was further threatened over the spreading Ebola virus threatens the global economy further.
Gold prices recovered on Thursday, and was seen trading around $1232-$1233. Post the US data release, investors once again were confused between gold and equities as the dollar rose and safe haven demand for gold declined. Gold prices fell to a one-week low at $1232.55 per ounce on Friday in London as safe haven demand was eroded after a rebound in US equities and a strengthening dollar.

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

Whereas FED shall ponder on the below 2 points:

1) QE (Quantitative Easing): The Fed has bought $3.95 trillion of securities since 2008, a program called quantitative easing, or QE. The Fed official are worried about prices remaining too low as the cash that is currently there in the financial system has raised worries about incipient inflation.
The Fed’s bond-buying program, which the central bank plans to end this month, appears to have succeeded in stimulating the economy without debasing the currency because banks are holding onto reserves instead of lending. Falling prices, or deflation, can create a vicious circle of less spending and declining wages.

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

This was a snapshot of the world scenario. 

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

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


TRADE RANGE


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






The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.
- Previous blog - "Gold Tend to Move Side-Ways"
http://riddisiddhibullionsltd.blogspot.in/2014/10/gold-tend-to-move-side-ways.html

Sunday, 12 October 2014

IS GOLD MAKING A COMEBACK?


by Mr. Prithviraj Kothari, MD, RSBL



Gold has fallen nearly 40% from its 2011 high above $1900 to reach below $1200 at the start of the week. A resurgent dollar, coupled with positive U.S. economic data, had been driving gold's declines over the past few weeks. Investors tend to withdraw from non-interest-bearing assets to seek higher yields elsewhere when the dollar gains.

But gold picked momentum in the past seven days. We finally saw gold catching a bid on global risk aversion. It has rebounded nearly 4 percent from the 15-month low of $1,183.46 it hit on Monday on heavy selling pressure that followed a better-than-expected U.S. payrolls report last week.

There were various factors responsible for the rise in prices-
  • The end of QE
  • Geopolitical uncertainty
  • Falling global growth estimates
All these factors once again made gold a good prospect as a safe haven asset.

On the second day of the week, gold was up after the  International Monetary Fund cut its global economic growth forecasts and weak German industrial data stoked further concerns. Following this the dollar fell which further gave a push to gold prices.

Gold rose consecutively for four days marking its longest winning gain in seven months. In fact traders witnessed heavy short covering for gold rise over the Fed minutes which created uncertainty over the timing of a Fed interest rate rise.


*source- www.kitco.com

The minutes of their last policy meeting showed that they are still struggling to come to grips with the dual threats of a stronger dollar and a global slowdown and hence they were further uncertain about linking the interest rate rise to U.S economic progress. Equities further weakened on concerns over global growth mainly in China and Europe.

Gold prices bounced off 2014 lows this week after testing support around the $1,180 area, a price gold hadn’t seen since June and December 2013. Analysts said short covering, which is the buying back of previously sold positions, and the return of Chinese traders from their Golden Week holiday helped return the yellow metal above $1,200.

However, In India it's a different scenario this year. Last year the volumes were much high as people rushed to buy gold, when prices crashed. This year prices have been consistently low. Moreover, disappointing monsoons and continued import restrictions have also affected gold demand in India.

Now the market awaits movement in equities, dollar and crude oil which could have a major role in influencing gold prices. Also, gold-market watchers will keep an eye on the Indian market to gauge metal demand ahead of the Diwali holiday later this month. Apart from this, the market player will also watch the economic data that will be flowing in- China releases a slew of economic reports, while The U.S. will see inflation data with the producer price index expected to show falls in energy and food prices, reflecting the recent drop in commodity prices.

If the US equities market continue to drop then it could create a favourable position for gold but if investors flush in more money into equities keeping the "buy on dips" funda in mind then we could see the dollar rally and gold would once again be pulled back from its gains.

Current view: BUY ON DIPS

Trade Range:

METAL INTERNATIONAL
price range

DOMESTIC
price range
GOLD  $1207 - $1242
an ounce 
Rs.26,500 - Rs.28,000
per 10 gm
SILVER $16.85 - $17.85
an ounce
Rs.38,000 - Rs.40,000
per kg


The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

- Previous blog - "Gold's Future at Stake!"
http://riddisiddhibullionsltd.blogspot.in/2014/10/golds-future-at-stake.html

Sunday, 7 September 2014

A BOOSTER MONTH FOR GOLD?


by Mr. Prithviraj Kothari, MD, RSBL





Gold has established a support level at $1275 since March and prices have risen post this level. 
But, during the second half of March gold fell heavily from resistance around $1400 back down to a several week low near support at $1275.

As 2014 began, gold moved very well for the initial months towards a six month high near $1400 and has now plunged to levels closer to $1300.
As news of the escalating tensions in Middle East and Ukraine gained momentum, gold gained 5.4 per cent year due to rise in demand for this safe haven asset.
After hovering at around $1290 gold has plunged sharply over the last week and has broken through the support at $1275. 

It rallied a day ago however ran into further resistance at $1275 before falling lower to a four month low around $1258.  
Though gold has always been the markets favourite metal during uncertainties, but this time bullion investors continue to worry over strong U.S. economic data and its impact on the dollar.
This week we saw gold falling to its lowest level in three months, on Friday before it recovered modestly.

On Tuesday, Gold witnessed its greatest drop this week as the market broke through recent support at the $1,270 area.

Gold was  unable to capitalize on the news of the ECB’s interest rate cut and QE program as the euro weakness offset any support gold would have received from the new liquidity programs.

AS tensions lingered over Ukraine and a weak dollar forced bargain hunting, we saw gold prices rising on Wednesday after prices earlier fell to a two and a half month low.

The yellow metal was under pressure after the Russian President drew plans for a ceasefire but then regained its prices when the Ukraine prime minister later dismissed Russia's proposal.


The metal is under pressure as the euro languished near a 14-month low versus the dollar on Friday, struggling to regain its footing after the European Central Bank delivered a fresh round of stimulus and promised even more if needed.

Gold was standing firm above the $1270 level in Thursday as it was impacted by a weaker Euro and surging equities after the European Central Bank cut interest rates to record lows which was counteracted by lower than expected U.S. jobs data. 

The main refinancing rate was cut to 0.05 per cent from 0,,15 per cent and the ECB lowered the rate on bank overnight deposits to -0.20 percent. 

But what surprised the market was Fridays U.S. jobs data that gave gold a push thus helping it to return to modest levels overnight. 

The U.S. Labor Department said the economy created 142,000 jobs in August, far below expectations for a figure of over 200,000. The unemployment rate fell to 6.1%, a six-year low. The average pace of job creation this year is 215,000, up from 194,000 in 2014. 

Gold rose from an 11-week low, after U.S. employers added the fewest jobs this year, adding some pressure on the Federal Reserve to maintain lower interest rates.

Initially data reports had stated the US economy was back on the path of recovery but Fridays number were a bit disappointing .
A stronger greenback is a setback for dollar denominated gold as it makes the yellow metal more expensive for users of other currencies.

 Gold traders are likely to keep an eye on currency moves next week after the euro fell to a 14-month low versus the dollar Thursday, following the surprising move by the European Central Bank to cut interest rates and embark on a quantitative easing program.
Traders will also extend a warm welcome to the month of September as it has historically been the best performing month for gold giving an average return of 2.16 per cent since 1969.
A spike in retail demand in India is another reason for the typical bump.
We hope this month the be a booster for gold.



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 -
"Bull v/s Bear"
http://riddisiddhibullionsltd.blogspot.in/2014/08/bull-vs-bear.html

Sunday, 24 August 2014

UNCERTAINTY OVER INTEREST RATE HIKE !!!


by Mr. Prithviraj Kothari, MD, RSBL








From December 2008, to September 2011, Bullion futures more than doubled to a life time high of $1,923.70 an ounce. Gold prices sky rocketed as the Fed purchased debt and cut rates to an all-time low to spur economic growth. 

This year, gold bounced once again after its downfall in 2013. 

The metal rose 6.1 percent this year , partly as unrest in Ukraine and the Middle East increased haven demand.

This week investors eagerly waited for the minutes of the FOMC meeting that were to be released n Wednesday and the Jackson Hole Economic Symposium on Thursday and Friday that was expected to bring in some volatility in the market.  Apart from this many economic reports were slated to release-

  • CPI
  • Housing figures 
  • Philly fed index from the U.S
  • BOE rate decision and CPI from Great Britain
  • Japan’s trade balance
  • China's manufacturing PMI
  • Retail sales and CPI from Canada.


Let's have a look at the data released from these reports



  • U.S. home resale's raced to a 10-month high in July 
  • Six straight months of payroll growth over 200,000 jobs per month — the first time that’s happened since before the Great Recession in 2007!  
  • There were signs of a strengthening economy as the  number of Americans filing new claims for jobless benefits fell last week
  • On Thursday, data released showed that the Business growth in China and across Europe slowed this month
  • But U.S. activity picked up speed, leaving a mixed picture of global economic growth.  



This week , gold was mainly hovering around the interest rate news. The entire investment market- be it stock, bond, currency or commodities, is presently pre occupied with the only one question- When will the first interest rate increase happen? 

A positive economic growth from the US economy and an expectation for an early rate hike is expected to pull prices down.

Many researchers are expecting that the forecasting the U.S. central bank to raise rates in mid-2015 but some economists believe that it may happen much earlier.
A slowing world economy on one hand and a strengthening US economy on the other, is giving mixed reactions from the market. Uncertainty prevails and investor anxiety is on the rise. This means there will be higher movement for gold and silver.
It all depends on whether each new piece of economic data is inflationary or deflationary in nature

Though the market has been linked to rising interest rates, some say that it won't have a less negative impact on gold moving forward.

In fact now all eyes are headed towards inflation - a major driver for gold prices.

There is still some uncertainty over inflation because of the unprecedented steps the Fed has taken. Inflation along with rising interest rates will have an impact on gold. 
There are various key influential factors that will provide good support to gold -



  • Rising interest rates could halt the free-flow of capital into the record-breaking equity markets and compel investors to take a more self-protective position. 
  • A decline in supply  from mining and recycling sector on one hand and rising demand on the other will  raise a spark in gold prices. Also supportive for the gold market is an expected decline in supply, both from mining and recycling.


On Thursday, gold posted its steepest decline in over a month as investors left the market ahead of Friday's speech by Federal Reserve Chairwoman Janet Yellen . Gold fell to a two month low this week after the minutes of the Feds last meeting were released and it showed signs that policy makers may raise interest rates earliest than expected.  But Fed Chairman Janet Yellen also stated in a conference in Jackson Hole, Wyoming that “underutilization of labour resources still remains significant.

The debate now is about "when" to raise the interest rates. Any hike in these rates would diminish the sentiment to own gold. Gold produces no income and struggles to compete with interest-bearing investments such as Treasury bonds and bank deposits, whose yields will rise once market interest rates turn up. At the same time, signs that crisis in Ukraine and the Middle East are having a limited impact on global growth also have reduced demand for gold as a haven.

The Pentagon on Friday condemned the movement of a Russian convoy into eastern Ukraine, calling it a violation of Ukraine's sovereignty and demanding that it be withdrawn and failure of which would result in additional costs and isolation.

The world economy  is being pulled by the tug-of-war being held between the forces of inflation and deflation
In any case, all eyes are headed towards the FOMC meeting in September, which will also have a press conference and could be the one, in which FOMC chairman Yellen offers some more information regarding the next rate hike. The current estimates range mostly between the end of the first quarter of 2015 and the end of the second quarter.


TRADE RANGE-

METAL
INTERNATIONAL
DOMESTIC
GOLD
$1264- $1297 an ounce
Rs. 27,800- Rs. 28,500 per 10 gram
SILVER
$19.00- $19.75 an ounce
Rs. 41,500- Rs. 43,000 per kg


The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.
- Previous blog -
"The Sentiments Are Bearish For Gold"
http://www.riddisiddhibullionsltd.blogspot.in/2014/08/the-sentiments-are-bearish-for-gold.html

Monday, 18 August 2014

THE SENTIMENTS ARE BEARISH FOR GOLD


by Mr. Prithviraj Kothari, MD, RSBL





On the first day of last week, gold was down. But it changed direction by Wednesday and bounced back.

This week too there was a lot in store for gold- 

  • the GDP for leading economies including Japan, Germany, and Great Britain 
  • the U.S PPI, retail sales, industrial production JOLTS, jobless claims and consumer sentiment reports . 
  • Germany’s economic sentiment and GB’s inflation report.
  • Gold for the month of July was up by over 2 per cent mainly due to the escalating global tensions and the lower than expected US data
As the week began, gold was slightly down, retreating from a three-week high as tensions between Ukraine and Russia eased and investors turned to rising European shares and some withdrew from exchange-traded gold funds. The United States had criticized Russia's military exercises in Southern Russia as provocative step in The Ukraine Crisis. But last week, late on Friday, Russia's Defence Ministry said that it has ended these exercises. This was the main reason for pushing gold prices down. The premium that was built on gold since mid June is more vulnerable to fade as easing Geo-political tensions push gold prices down.

There is a lot of uncertainty in the market surrounding the FED's decision to raise interest rates, that now many market players aren't quite sure whether they should go back to gold particularly when other assets like equities look more attractive.

But how soon will that happen? Nobody knows... Till then Bullion investors will continue to monitor U.S. data releases as the strength of the world's largest economy dictates the pace at which the Federal Reserve tightens monetary policy.

After a few lows, gold stabilized on Tuesday as signs emerged that the stand-off between Russia and Ukraine was hurting confidence in the euro zone economy and on fears a Russian aid convoy heading to Ukraine could further stoke tensions. Concerns over the Ukraine crisis and its financial impact hit economic sentiments in Germany.

Gold is always seen as an alternative investment medium over equities and other assets.
On Wednesday, Gold was above $1300 on Wednesday as downbeat data from China keep investors cautious about gold. This along with the Ukraine crisis and a slowly recovering US economy kept gold prices firm.

Bullion was also helped by data on Thursday that showed the number of Americans filing new claims for unemployment benefits rose more than expected last week. That helped push US yields lower.  Spot gold rose 0.2 percent to $1,315.20 an ounce by 1003 GMT, 
A weak dollar and sluggish US and European data provoked investors to switch to safer investments.

Gold prices were slightly lower on Friday, paring losses on safe-haven buying as equity markets slid after Ukraine said its forces had engaged a Russian armored column on Ukrainian soil in what appeared to be a major military escalation. It was like a roller coaster ride from a near high of $1310 to $1292 and then back to $1310 and a close above $1300.

Apart from the Data reports and the crisis, it was the sluggish physical demand for gold that played a influential role. Physical demand in top consuming region Asia has been sluggish after a record year in 2013, while investors have been cutting positions in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. The fund reported a 5.36 tonne drop in its holdings last week, its largest outflow since early May.

For the time being the market seems to be bearish for gold (apart from the perceived geopolitical tensions) and I feel investors should sell on the upside.

TRADE RANGE-

METAL
INTERNATIONAL 
(Gold/Silver price)

DOMESTIC
(Gold/Silver price)
GOLD
$1281- $1320 an ounce
Rs. 27,800- Rs. 29,000 per 10 gram
SILVER
$19.15- $20.20 an ounce
Rs. 42,500- Rs.44,500 per kg


The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.
- Previous blog -
"Appetite for gold rises"
http://www.riddisiddhibullionsltd.blogspot.in/2014/08/appetite-for-gold-rises.html

Monday, 14 July 2014

PRECIOUS METALS....INDEED PRECIOUS!!!


by Mr. Prithviraj Kothari, MD, RSBL




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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TRADE RANGE:

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



- Previous blog -
"Geopolitical Cover for GOLD"

Sunday, 1 June 2014

A DREADFUL WEEK FOR GOLD

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



It's been a dreadful week for gold. The yellow metal is down almost 3%, the most in any week since late March. 

I have repeatedly been making a point that gold prices are being pulled by the bullish and bearish factors and it has been moving on a see saw as we get a positive growth report from US on one hand and escalating Ukraine crisis on the other.

Finally the strong resistance of $1280 gave up. On Wednesday, Gold prices fell to a near 4-month low as easing Ukraine crisis paved way in the market. But gold prices bounced off these levels after data showed that the U.S. economy contracted in the 1st quarter for the first time in three years. The US Commerce Department approximated that GDP dropped in the 1st quarter. Economists held severe weather conditions responsible for this. 

On the other hand, the US Labour Department report showed application for jobless benefits declined last week which reduced the safe haven appeal for Gold as the market is now moving their focus to riskier assets like equities that have given better returns than gold in the past year,

At each dip there are more people exiting the markets than entering.

In 2013, we saw gold moving in exorbitant quantities from West to East. Last year China overcame India as the world's top gold importer and gold jewellery and investment demand, rising to a record 1,065.8 tons. Most of that sold gold ended up in China and India and other growing gold consuming nations in Asia led by Vietnam and Indonesia.

But in the first quarter of 2014, that demand tanked. Mainland China's demand for gold fell 18% in the first quarter of the year as investors bought fewer bars and coins, offsetting record demand for jewellery.

India's bars and coins buying also showed a huge drop-off of 54% to 98 tonnes and with jewellery consumption also sliding overall gold demand on the subcontinent slid 26%.

One of the most important ongoing news was about the Major metal exchanges emerged as contenders in developing an alternative to the London silver price benchmark, or "fix", after the century-old system for setting the globally recognized price is disbanded in August. The major exchanges CME and LME both said on Thursday that they were working with LBMA and the precious metals industry to find an electronic-based solution.

Meanwhile, expectations remain high that a strong US economic data report might support the Fed's policy of scaling back its bullion friendly stimulus. 

The market will now be glued to the ECB meeting that will be held next week when the bank might take further steps to ease its monetary policy and enhance growth.

Gold remains 5% to the upside for 2014 but is down $120 an ounce from highs reached mid-March as the rally on the back of safe haven demand and bargain hunting loses steam.

Further for the week gold is expected to be in the range of $1238-$1273 in the international market and Rs.26,000 - Rs.27,800 in the domestic market.

While silver is expected to move in the range of $18.15 - $18.85 and Rs. 38,500- Rs.41,00 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.
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"Gold Investors be Cautious"
-http://www.riddisiddhibullionsltd.blogspot.in/2014/05/gold-investors-be-cautious-mr.html