Renewed confidence in Gold and Silver: RSBL

                                                               By Mr. Prithviraj Kothari, MD, RSBL

 

Gold prices rallied this week but gave up all gains established post ECB. Still the closing was in a positive trend.

The precious metals remain upbeat with average gains of 0.4 percent with gold prices last at $1,275.10, having set a fresh high at 1,282.90, the highest since February last year.

Gold Price rise

The Yellow metal hit a 13-month high in the wake of the European Central Bank (ECB) decision to lower deposit rates and sink another 80 billion euros per month into the economic region. President Mario Draghi said the new efforts will run until March 2017, but stated that he did not anticipate any further rate cuts.

In data, US weekly unemployment claims between February 27 and March 5 came in at 259,000, under the forecast of 272,000 and below the psychological 300,000 mark. This strong US employment report had driven optimism that the US economy and also the world economy may not be that weak as feared following which expectations on the demand viewpoint have been adjusted aloft.

The focus now shifts to Tuesday’s Federal Open Market Committee (FOMC) meeting 15- 16 March for fresh stance on the interest rates in the US, which is world’s largest economy. The meeting will be followed by a summary of economic projections from individual Fed members, as well as a press conference by Chair Janet Yellen. The policy-board has faced severe instability, but recent employment figures show the American economy is still recovering at a healthy pace.

On the domestic front, gold prices are expected to rise further followed by a weakening dollar. The other precious metals also seem to be facing resistance at these levels, although they also do seem to be attracting more investor interest now, which suggests dips will be supported. 

Key economic data watch out for in the coming week:

·         Tuesday - Retail sales, producer prices and the New York Fed Empire State manufacturing survey

·         Wednesday - consumer price index, housing starts and industrial production

·         Thursday - Jobless claims and the Philadelphia Fed manufacturing survey

There are several central banks meeting this week i.e. Bank of Japan, Bank of England and Swiss National bank whose rate related decisions could bring up some volatility in the markets.

Simultaneously, traders will be keeping an eye on is the conclusion of National People’s Congress in China and will be watching for any statements about fiscal stimulus or monetary easing.

My Sentiment for gold prices is positive and if it crosses $1280 an ounce then gold is expected to reach the next technical resistance levels of $1310 an ounce. As it failed to cross $1280 convincingly, I do feel that there could be a short term pull back in prices but Gold’s price of $1300 won’t be a surprise. Silver too has shown a good support around $15.50. In rupee terms, I feel Gold prices would be in the range of INR 28,000 to INR 31,000 while Silver would be in the range of INR 36,000 to INR 41,500.

Silver Price rise

Thank You!

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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 -
"Post-Budget 2016: Views of RSBL - Mr. Prithviraj Kothari"
http://riddisiddhibullionsltd.blogspot.in/2016/03/post-budget-2016-views-of-rsbl-mr.html

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Post-Budget 2016: Views of RSBL - Mr. Prithviraj Kothari

                                                          By Mr. Prithviraj Kothari, MD, RSBL

           Over all it was an average budget for the bullion industry as not much modifications were made as far the polices and regimes are concerned. We expected an implementation of GST for all round growth of our economy including supply chain, sourcing and distribution decisions, inventory cost, cash flows, pricing policy, accounting system and transactions management but nothing came up on that front.

             There were no changes in CTT (Commodity transaction tax) too.

     Bullion dealers and jewellery manufacturers have sent several representations to the government for reduction in import duty from the existing 10% to 2% to provide a fillip to the domestic jewellery sector. But nothing has taken place on that front too.
 
             On the contrary, an excise of one percent has been levied which will prove to be major setback for the officially organized sector of the bullion industry.

            Over all it was a neutral budget with no major developments for the bullion industry. On a scale of 1 to 10 I would rate this budget as 6.

Thank you!


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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 -
"Pre-Budget 2016: Views of RSBL - Mr. Prithviraj Kothari & Importance of GST for Bullion Sector"
http://riddisiddhibullionsltd.blogspot.in/2016/02/pre-budget-2016-views-of-rsbl-mr.html

Photo courtesy: http://www.financialexpress.com/photos/budget-gallery/217311/budget-2016-live-income-tax-highlights-expectations-arun-jaitley-speech-service-tax-gst-bill-union-budget-news/

Pre-Budget 2016: Views of RSBL - Mr. Prithviraj Kothari & Importance of GST for Bullion Sector

                                                                                                                    By Mr. Prithviraj Kothari, MD, RSBL

The transcript of the video is as follows:

Anchor: How significant is goods and services tax (GST) for bullion industry?

Mr. Kothari:  Implementation of GST should be expedited for all round growth of our economy including supply chain, sourcing and distribution decisions, inventory cost, cash flows, pricing policy, accounting system and transactions management. The government should levy on bullion flat GST which would replace most indirect taxes like small local taxes, LBT, octroi etc currently in place. Not only that, there will be an ease in documentation too. 

Anchor: Government of India has focused reducing import of gold. Has time come to focus on gold mining in India?

Mr. Kothari: India is rich in mineral resources. But, because of poor research and development (R&D), gold mining has been at bay. Despite huge resources, total production from domestic mines constitutes between 1-3 tonnes out of India’s estimated consumption of 1000 tonnes. On the other hand, China boosted its gold refining business after allow single-window clearance along with fiscal and infrastructure incentives which has put the industry on fast track. China reported total gold production at 451.8 tonnes in 2014, up by 5-52 per cent from the previous year, and become the largest gold producer in the world eighth year consecutively. India needs to focus on R&D in an effective way to reduce dependence on import and therefore, foreign direct investment (FDI) in R&D should be expedited. Moreover there are lot of issues with mining like the local MLA issue, local population of a particular area concerns etc. Due to these issues, mining has lot of limitations.

Anchor: With such issues, mining will remain just a dream for India.

Mr. Kothari: See, today somebody invests and starts mining and then people come forward with a stay on it. So who will invest money in India? The government should provide single window, frame only one policy that clearing, environment, all will be issued by the central government. State government will have no say. The emerging revenue issues should be decided state versus centre.

Anchor: Despite repeated request, the government has not yet reduced import duty on gold. Do you expect the same in the upcoming budget?

Mr. Kothari:  Bullion dealers and jewellery manufacturers have sent several representations to the government for reduction in import duty from the existing 10% to 2% to provide a fillip to the domestic jewellery sector. Domestic jewellery buyers stayed away from fresh purchase since long amid expectations of cut in import duty.

Anchor: You have said earlier something that commodity exchanges are the best tools for hedging the price risk? Is the current system of trade sufficient or the government should do something else?

Mr. Kothari:   See, in the last conference we held, our Shaktikant Dasji had said that there should be a bullion bank. Indian Bullion Jewellers Association, I and others together worked out on the concept and have tied-up with BSE to establish an Exchange and Bullion Bank, subject to RBI clarification. So, if these things happen, the disparity the people have in the market today will reduce very much. According to me, if the bullion bank is there, the prevalent difference of parity and disparity (will be reduced to great extent). Sometimes, the premium becomes 13 Dollars, 20 Dollars, 30 Dollars and sometimes even minus 30 Dollars. So, during the minus period we cannot re-export them. So, in my opinion, the government should open a bullion bank here wherein if you deposit gold, you will also get benefit over that and (if) you want to re-export that, you can re-export through the Re-export Bank. Thus, to great extent, there would be support to the economy and in a way, the economy will boom.

Anchor: Take intercepts from your last interview, you had stated that Gold Bond and Monetization scheme are very good initiatives from the government. But the stats portray a different picture. What the government should adopt to make it more successful?

Mr. Kothari:  See, the initiatives by the government are very good. Until today, no government has taken such initiatives. One problem that is hindering its success is the gold deposit scheme. Today gold is lying in every household. If you ask them its sources it is very difficult for them to provide as it could be lying for ten years, twenty years, thirty years, forty years, since their grandparents time. Thus the government should do something like, you may say, a concession should be given up to 500 grams of deposit. Second emerging issue is that there of the jewellery. When the jewellery is melted there is a loss in the elements. Some steps would have to be taken to take into account the loss issue. With respect to the sovereign bond scheme, liquidity in the market is tight. Otherwise, the scheme is very good wherein 2.75% interest is also available. But with it, currently the market conditions aren’t favoring it. For example, the prevailing price was 27,000 and price of that sovereign bond was 26,000, even in that some 2700 plus crores rupees came. Thus, with this it is clearly visible that there is very much liquidity crisis in the market.

Anchor: To sum it up, any additional points to expect from the government with respect to BUDGET 2016?

Mr. Kothari: I hope that the ban on gold trading levied by the government on SEZ (Special Economic Zone) should be lifted. It would boost the exports in a major way. I hope that bullion bank and bullion exchange only for gold wherein the government itself would borrow from and lend into.

Anchor: Thank you so much Sir for your time. If you could throw some light on the Trade range; for Gold price during the Budget week and thereafter?

Mr. Kothari: With the geopolitical tensions and the economies faltering, I do see a good support for the Gold prices for a while. USD 1070 should act as a strong support while USD 1300 should act as a strong resistance. In rupee terms INR 25,500 to INR 33000 should be a trade range to look for in Gold prices.

Thank you!

You may follow me on:
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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 FOR GOLD: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/02/bull-vs-bear-for-gold-rsbl.html

GOLD GLITTERS ALL THE WAY: RSBL

By Mr. Prithviraj Kothari, MD, RSBL 

As I mentioned last week in my blog that gold is regaining its safe haven appeal, this week we saw this sentiment strengthening further.

Gold was like literally all over the world this week as we saw the yellow metal gaining its safe haven appeal in its true sense after a long wait. Sentiment in the gold market remained sturdy after prices hit a one-year high in a figurative move.

This was the third consecutive week that gold witnessed positive gains, with increasing more than 5.3%- the biggest weekly percentage gain since late October 2011.

Analysts have noted that the yellow metal’s push back above $1,200 an ounce generated a lot of focus and positive sentiment among appalling investors looking for a safe-haven.

Many analysts are bullish on gold, expecting sentiment to continue to grow as prices have broken through key technical barriers, culminating in a weekly high at $1,263.90 an ounce.

Spot gold was last at $1,240.50/1,241.20 per ounce, having rallied around 22 percent since the start of the year.

The gold price rallied to a high on Thursday of $1,263.30 per ounce, up five percent and it’s strongest since February 6 last year when it peaked at $1,268.90.

Since this rally came in suddenly, there were many investors that missed on to bank on the gains. The speed of the rally and its strength suggest many would-be investors have been chasing prices, having not been able to take advantage earlier in the rally – they had lost faith in gold as a safe-haven given the four-year bear market.

This volatility was influenced by more than one factor. It was a combined effort of the following-

Dollar- Sentiment towards gold has changed dramatically, and gold has even moved up on some days in the face of a dollar rally. With a change in sentiment, those underweight or waiting on the sidelines started buying gold which furtherer fuelled gold prices.

The precious metal benefitted from a softer dollar, which had failed to attract safe-haven demand despite the global instability – the currency was last trading at a four-month low at $1.1349 against the euro.

A softer dollar is making gold more affordable for holders of other currencies – it has fallen around four percent this month, having already rallied strongly over the past 14 months – the dollar index climbed to 100.50 in December from around 70 in January last year and was last at 95.58.

Fed- As part of a two-day congressional hearing, Federal Reserve Chairwoman Janet Yellen attempted to reassure markets that US growth was steady and the labor market was improving.

Yellen and her fellow colleagues are being criticized for exacerbating the instability after raising rates in December – rates were static around 0 percent since December 2008.

And the US Federal Reserve, having raised rates in December for the first time in nine years, has not ruled out a push into negative territory. The chances of further rises this year have receded significantly, according to market consensus.

Because gold has no yield, it loses some of its luster when interest rates are rising. But negative interest rates negate this disadvantage while highlighting economic weakness against which gold is historically seen as a hedge and preferred as one of the safest modes of investments compared to its counterpart.

China- since the Chinese markets remained closed for the Lunar Celebration, there was nil reaction from that side and hence gold prices shot up one side.

With China absent from the market for its New Year holidays this week, the market now waits to see the reaction of Chinese investors upon their return on Monday, particularly as the US will be absent on this day for Presidents day.

All eyes will be glued to the return of the Chinese markets as investors are eager to see what they actually bring to the surface post this week’s volatile developments.

Equity- The gold price benefited from the meltdown in equity markets, as the yellow metal continued to hold around one-year highs. Weak equity markets have spooked investors and they promptly dumped risky assets and rushed to gold, which is seen as a safe-haven.

Other Economies-

Uncertainty about global growth and a mass sell-off in global equity markets unsettled investors, burnishing gold’s safe-haven qualities, while Japan, Switzerland, Sweden and Denmark have adopted negative interest rates.

European Central Bank (ECB) president Mario Draghi is expected to follow suit at the bank’s March meeting, citing inconsistent growth concerns and non-existent price increases.

Since the decision, Japan lowered deposit rates into negative territory and European Central Bank President Mario Draghi is expected to implement the same policy as soon as March.

Both economic regions are struggling with poor economic growth and non-existent inflation despite billions in easy money and years of near-zero interest rates.

Negative interest rates are generally good for gold as the improbability and agony linked with negative rates tends to surge interest in gold, but the more distinct shift of monetary policy in this direction by central banks is encouraging even greater flows into bullion.

Although it is a shortened week with markets closed Monday for Presidents Day, the U.S. economic calendar will be busy with the release of regional manufacturing reports, housing sector data, and the release of the Consumer Price Index for January.

While analysts are positive on the gold market, they are not ruling out some weakness at the start of the week.

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 Regaining Its Safe Haven Appeal: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2016/02/gold-regaining-its-safe-haven-appeal.html 

Mr. PRITHVIRAJ KOTHARI (MD, RSBL) MAKES GOLD PRICE PREDICTION FOR THE YEAR 2016

(Brief details are given below. For full detail, view the embedded You Tube video) 

Link to the video: https://youtu.be/0vUYZf9M1RQ

QUESTION 1: After 2 consecutive years of negative returns, what is your Gold Price Forecast for 2016?

Prithviraj Kothari: I do agree that since couple of years there is a downward trajectory with respect to Gold prices, since it had been increasing for almost 11 odd years. But according to me a range of $1050 - $1070 an oz is the cost to the mines to procure Gold. Looking at that figure, I find it difficult for the price to go below this range. I see an increase to the extent of 7% to 8% compared to last year in the year 2016.

QUESTION 2: How will it translate in the Rupee term?

Prithviraj Kothari: In rupee term, gold price may hover between Rs 24,000 and Rs 30,000 per 10 grams.

QUESTION 3: What impact do you envisage on gold following the US Fed’s interest rate hike?

Prithviraj Kothari: A 25 bps interest rate hike after a decade in 2015 followed by four such hikes in 2016 by the US Fed has already been factored in with the price of Gold. If you see the price of Gold eventually appreciated when the rate hike took place. A bottom line could be $1000 to $1050 at the most in the line with the mining costs.

QUESTION 4: What impact do you see of high import duty on gold import into India?

Prithviraj Kothari: Indian population is around 125 crore with consumption less than 1gram, bringing import figure to 850-900 tons. With present import duty of 10%, it has created big gap between International price and Indian price. This import duty almost comes to INR 250,000 per kilo. Usually, import of gold has been in the range of 800 to 900 tons per year. Last year gold smuggling was around 200 tons. The increased price gap may give rise to increase in gold malpractices.

QUESTION 5: Do you see any impact of Government related Gold schemes? Would they be beneficial?

Prithviraj Kothari: I am positive with government efforts & schemes. Gold Monetization and Gold Sovereign Bond schemes are good. Gold Monetization scheme will be worthwhile, if it can draw 1000 tons or even 500 tons of gold from temples, public etc. will also have impact on international price. It should happen gradually.

QUESTION 6: India’s gold import has been diverted towards Dore. Would it really help gold jewellery industry at large?

Prithviraj Kothari: It depends on import. Dore import is processed in limited refineries to manufacture pure gold. These refineries import Dore at $2 lower. Those jewelers will be benefited by $3 to 4, who make ornaments by buying gold from refineries.

QUESTION 7: What is your final take on ending of 2015 and 2016 soon to begin?

Prithviraj Kothari: 2016 will be good for the trade. It may create bullion history and it may be ‘Golden Period’ for all traders.

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