GOLD- BUY AND HOLD: RSBL

 by Mr. Prithviraj Kothari, MD, RSBL

Bullion has rallied 26 percent in 2016, recovering from three years of losses, as low or negative interest rates have strengthened demand. Political uncertainty has also played a part, with the U.K.’s vote to quit the European Union spurring haven demand. Forecasters including Singapore-based DBS Group Holdings Ltd. have said that the U.S. contest may buttress prices amid concern about the possible implications of a Trump presidency.

Gold may be in for a bumpy ride in the final quarter as Republican candidate Donald Trump now has a 40 percent chance of winning the presidential election and investors will be preparing for the possibility of higher U.S. interest rates, according to Citigroup Inc. A probable victory of Donald Trump increases the chances of a single U.S. hike by the end of 2016.

But if it happens otherwise, then gold prices are likely to steady during 25-29 September after the US Federal Reserve decided to leave interest rates unchanged, according to analysts. 

Bullion has been provoked from inertia after Fed rate concerns had helped wipe out gains for the quarter.

There is once again an inflow of capital in the market as low borrowing costs in the U.S. and economic stimulus by central banks from Japan to Europe drive demand for the precious metal as a store of value.

Over the previous week, gold achieved the best performance since July 2016 with a 2.4% rise, while the US dollar index recoded the worst performance, reaching 95.472 against a basket of currencies.

The precious metal is heading for the biggest weekly advance since July after U.S. central bankers opted to leave interest rates unchanged while reining in their outlook for future increases.

Gold prices edged lower on Friday, but notched the strongest weekly advance in almost two months after the Federal Reserve held off on raising interest rates and scaled back the number of rate hikes it expects next year.

This has once again pushed gold prices upwards and traders are no into the buy-and-hold mode for gold.

The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.

Meanwhile, investors will be focusing on a series of important events lined up this week that play a pivotal role in influencing gold prices.

• A pair of speeches from European Central Bank President Mario Draghi is to testify before the Committee on Economic and Monetary Affairs of European Parliament, in Brussels.
• For fresh hints on whether the ECB will step up monetary stimulus in the coming months to boost inflation and prop up the economy.
• Speech by Bank of Japan Governor Haruhiko Kuroda will be eyed in wake of last week's decision by the BOJ to modify its policy framework
• Focus will also be maintained on the first U.S. presidential debate on Monday between Democratic nominee Hillary Clinton and Republican hopeful Donald Trump
• Other speeches to be given by

                -Swiss National Bank Chairman Thomas Jordan

                -Bank of Canada Governor Stephen Poloz

                -Federal Reserve Vice Chair Stanley Fischer

                -BoJ Governor Haruhiko Kuroda is to speak in Tokyo.

• U.S. is to release data on new home sales, private sector data on consumer confidence, publish data on durable goods orders, to publish final figures on second quarter growth
• Fed Chair Janet Yellen is scheduled to testify before the House Financial Services Committee on regulation and supervision, while St. Louis Fed chief James Bullard is to speak in St. Louis.
• The Bank of Japan's big policy review is likely to see more QE and negative rates in the long run.
• Germany is to publish preliminary inflation data and a report on unemployment change.
• Japan is to release data on inflation and household spending.
• China is to publish its Caixin manufacturing index.
• Germany is to release data on retail sales.
• The U.K. is to report on the current account and publish revised data on second quarter growth.
• The euro zone is to release preliminary data on consumer inflation.
• Canada is to publish data on economic growth.
• The U.S. is to round up the week with data on personal income and spending, a report on business activity in the Chicago region and revised data on consumer sentiment.

Now  that series of events are scheduled for the week we expects markets player to be alert and markets to be volatile.

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:
"BULLISH SENTIMENTS FOR GOLD: RSBL
http://riddisiddhibullionsltd.blogspot.in/2016/09/bullish-sentiments-for-gold-rsbl.html
 

GOLD STABILISES: RSBL

By Mr. Prithviraj Kothari, MD, RSBL

Though gold slipped consecutively for 3 days, past week ended on a positive note and stayed on track for a second successive weekly gain driven by diminishing expectations of a looming hike in U.S. interest rates.

The metal was up 0.7 percent during the week, holding on to nearly half the sharp gains it made on last Tuesday after a weak U.S. data instigated talks that the Federal Reserve will hold off raising rates at its September policy meeting.

Spot gold was down 0.25 percent at $1,334.60 an ounce at 1152 GMT on 9th September, while it peaked $1,352.65 an ounce after rallying 1.8 percent on Tuesday.

Reasons being the same- Fed Hike, US data, US dollar and ECB. These factors have been repeatedly influencing gold prices since quite some time. Yes I know that we have discussed these points time and again, and we all know that they  keep influencing gold prices but thee way and the extent to which they influence does change every week and hence we once again throw light on this week’s gold’s behaviour-

ECB- On Thursday, the European Central Bank (ECB) decided to maintain its current bond-buying programme and kept interest rates unchanged, surprising investors who had expected another round of quantitative easing in the wake of the UK’s vote to leave the single market.

The ECB’s unexpected stance led to a broad-based selloff in the commodities sector, while also fuelling a dollar rally – last trading at 95.45 on the dollar index, the highest point in a week.

Analysts and traders believe that The ECB’s decision would also increase the likelihood of the US Federal Reserve implementing a rate hike before the year end.

Global Data- Meanwhile in a slow data day, US wholesale inventories for July were unchanged, missing expectations of a 0.1 percent rise.

Overnight, China’s August CPI came in at 1.3 percent, below July’s reading of 1.8 percent and market forecast of 1.7 percent.

The Chinese August PPI fell 0.8 percent, improving from a drop of 1.7 percent in July and better than consensus of a one-percent drop. August, however, marked the 54th straight month of decline.

Weak global data pushed gold prices high over the week.

US Dollar- Prices have largely moved in concert with the dollar – against a basket of currencies it recently hit a multi-week low and was last trading at 94.56.  But investment demand in gold and its potential upside remain capped

The combative rhetoric – along with employment claims coming in better-than-expected at 259,000 – led to a minor dollar revival earlier during US trading hours.

Gold has rebounded strongly but have seem too stabilised between $1,355 and $1,375.25 and analysts believe to remain more or less in this trading range. But with the dollar looking weaker, we would not be surprised if gold prices work higher. The rest of the precious metals would follow suit.

Fed Hike- Richmond Fed President Jeffery Lacker said on Wednesday the case for a September hike was going to be “strong” and echoed his colleague Esther George who said that she too saw the US labour market approaching full employment.

Market participants currently see a 21 percent change of a US rate hike in September, with majority expecting it to happen in December, according to the CME FedWatch Tool.

Gold prices will trend higher still in near term, largely driven by lower Fed tightening expectations.  Gold prices are expected to boost further, given that the Fed is unlikely to move in September and the current probability of a September move is likely to ease further.

The Federal Reserve will meet on September 20-21 and again on November 1-2 before the country goes to the polls on November 8. Given the looming presidential election and the forecast-missing jobs report for August, the US central bank is widely expected to hold off on raising rates until next year at the earliest despite increasing hawkish rhetoric from FOMC members.

Federal Reserve Bank of Boston President Eric Rosengren, who shifted his stand in recent months in favour of monetary tightening, warned Friday that waiting too long to raise interest rates risks overheating the economy. Higher rates make bullion less competitive against interest-bearing assets. The comments come a day after the European Central Bank played down the prospect of an increase in asset purchases.

In the two-week run-up to the Fed’s next policy meeting, additional US economic data releases will further inform the market’s view of rate hike probabilities. At the current time, the greater likelihood is that there will be no September rate hike. If this continues to be the case, gold could potentially break out above the noted downtrend line and $1350 resistance level. In this event, the next major upside targets are at the mentioned $1375 high, followed by the key $1425 resistance objective.

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:
"BULLION MARKET HIGHLIGHTS- DECEMBER 2015- AUGUST 2016: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/09/bullion-market-highlights-december-2015.html

Indian Gold Bullion Market- Issues, Challenges, Opportunities and the Way Forward: RSBL

                                                    - Mr. Prithviraj Kothari, MD RSBL

Do have a look at the video to know more on:

    Indian Gold Bullion Market- Issues, Challenges, Opportunities and the Way Forward

                                              https://youtu.be/EjkHGg0NJR4 

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:

Gold and Silver prices on RISE: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/08/gold-and-silver-prices-on-rise-rsbl.html

Indian Gold Bullion Market- Issues, Challenges, Opportunities and the Way Forward: RSBL

                                                    - Mr. Prithviraj Kothari, MD RSBL

Do have a look at the video to know more on:

    Indian Gold Bullion Market- Issues, Challenges, Opportunities and the Way Forward

                                              https://youtu.be/EjkHGg0NJR4 

Thank You!

You may follow me on:

• Facebook: https://www.facebook.com/prithviraj.kothari
• Twitter: https://twitter.com/prithvirajrsbl
• Website: http://www.rsbl.co.in/
• YouTube: https://www.youtube.com/user/PrithvirajKothari
• Google+: http://www.google.com/+PrithvirajKothari

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 and Silver prices on RISE: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/08/gold-and-silver-prices-on-rise-rsbl.html

Gold and Silver prices on RISE: RSBL

                                                                                      - Mr. Prithviraj Kothari, MD RSBL

Precious metals price rise is eminent and it ended the week on a positive note post poor US data released. The negative data sent the dollar tumbling, stimulating a good recovery for the yellow metal and its white counterparts.

Data released from the US was as follows:

• GDP data out of the U.S. disappointed on Friday, growing at a seasonally and inflation adjusted +1.2% during Q2 (exp: +2.5%) as business inventories contracted for the first time since Q3 2011
• The University of Michigan’s consumer sentiment index dropped to 90.0 in July (exp: 90.2) from 93.5 in June as both current and future conditions declined.
• The poor data countered the Fed’s statement that the US economy is stable and the near-term outlook is positive. Even though the unemployment rate is around five percent, the policy-board has been ineffective at spurring inflation or consistent wage growth. All eyes were on this meeting as something crucial was expected to happen regarding the interest rate hike. But negative data has postponed this hike and this gave gold the push. 

Apart from the US there was news that came in from other economies which affected the gold price: 

U.S Dollar:

Major downturn in the dollar created by the release of second quarter US GDP where it plummeted to 95.38 around the lowest mark since mid-June, before staging a modest uptick to 95.60.

Japan:

Host of new data releases and a Bank of Japan decision to inject further stimulus, markets were directionless this week with volatility and volumes continuing to drift lower. The Bank of Japan (BoJ) decided to adopt a minor adjustment to the existing monetary policy by increasing its purchases of exchange-traded stock funds to 6 trillion yen and expanded its dollar lending programme to $24 billion but kept its policy rate unchanged at -0.1 percent while maintaining the pace of government bond purchases.

The BOJ certainly doubled purchases of exchange-traded funds (ETFs) and said it will “conduct a thorough assessment of the effects of negative interest rates and its massive asset-buying program in September.”

The bank was considering a $265 billion package, part of which would target low-income citizens in another attempt to boost inflation and weak wage growth.

This can be understood as- either the central bank may feel that Japan’s economic growth needs very, very extensive stimulation and they have yet to formulate an appropriate plan or it can be interested that they want to see how the chips fall in eight weeks and move cautiously from there.

India:

Coming to the domestic markets- India being one of the largest consumers of gold, but currently the demand for gold isn’t intense. Frankly speaking, very few people want to invest in gold at this price. Buyers, it seems, feel that the current price is not sustainable and hence, they wait for a correction. Gold price in India is governed by two major factors: global economic conditions and the movement of rupee against the dollar. Both factors have contributed to the current price rise. While global economic conditions continue to pose a greater risk by the day following fluctuating recovery trend in the United States, Britain’s exit from the European Union (BREXIT) and other geopolitical tensions. On the other hand, Indian rupee has depreciated against the greenback despite reports of good inflow of dollars.

Since BREXIT, spot gold price jumped rapidly but, stayed elevated. Also, rainy season is considered as a lean period for gold purchase due to the lack of festivals, weddings or any other occasions during this season. Also, consumers have faced two subsequent years of deficient monsoon rainfalls. Although, the current year has seen normal rainfalls yet its distribution continues to remain uneven. Also, the crucial rainfall month – August – is yet to come. So, let’s keep our fingers crossed for the Kharif sowing and harvesting this year. In case of normal monsoon and its even distribution, Kharif crop would bring some cheers for farmers with higher output which would translate proportionate increase in gold demand.

In India, therefore, standard gold is available at Rs. 31,300 per 10 grams approx. Gold price may touch $1400 in near future in the international markets which will translate in rupee term at Rs. 32,500 per 10 grams. While the uptrend continues there could be some profit booking.

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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:

Consolidation phase for Gold and Silver Prices: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/07/consolidation-phase-for-gold-and-silver.html

Photo courtesy: Google 

Consolidation phase for Gold and Silver Prices: RSBL

                                                                           - Mr. Prithviraj Kothari, MD RSBL

BREXIT, FED, Dollar and many other key influential factors have proved to be beneficial for Gold and Silver prices in 2016. Last week too we saw many such factors influencing bullion prices but in the downward side. Let’s take a close look on the key highlights:

• The S&P (US Stock exchange) posted a fresh all-time closing high and the major U.S. stock averages 2,163.24 locked in a fourth successive winning week following the Brexit vote.
• At the weekends G20 summit in China, the world's biggest economies noted they will work to support global growth and share the benefits of trade, in a meeting dominated by the impact of Britain's exit from Europe and fears of rising protectionism. Philip Hammond, Britain's new finance minister, said the uncertainty about Brexit would begin to abate once Britain laid out a vision for a future relationship with Europe, which could become clearer later this year.
• On Thursday, 21^st July , in Frankfurt, the European Central Bank (ECB) and President Mario Draghi decided to leave rates unchanged after the Brexit-induced market shockwaves have faded somewhat. Draghi and his fellow central bankers gave no indication that the current 1.7 trillion-euro quantitative-easing plan needed to be increased following the UK vote to leave the single market. The council doesn’t meet again till September, but investors aren’t anticipating any adjustment to the bond-buying programme in the near-term thus leaving the door open to more policy stimulus, highlighting "great" uncertainty and abundant risks to the economic outlook.

Though bullion has benefited from the loose policy decisions coming in from central banks of Europe and Japan, but on the other side the dollar has gained on strong U.S. data, boosting bets the Fed will raise U.S. rates by year-end.

Globally, gold nearly fell to $1,312 and silver to USD 19.46. Traders attributed the fall in gold prices to a weak global trend where the precious metal headed for its first back-to-back weekly decline since May as gains in equities and the dollar ate into demand for the metal as a storage value. Few other important indicators that contributed to the downfall:

• Data released from the U.S. showed that U.S home resale’s hit their highest in nearly 9 and a half years in June as low interest rates lured first-time buyers into the market and the number of Americans filing for unemployment benefits fell last week, underscoring the economy's strength.     
• Adding to the down trend in prices were the figures released by SPDR. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.22 percent to 963.14 tonnes on Thursday.

I do feel that the Price action will likely be skewed to the downside and expect to test the post-Brexit low around USD $1,305 and below this USD $1,300 should global equities continue their upward trajectory.

The Jackson Hole Symposium Aug. 25-27, where Yellen is scheduled to speak is where we will most likely get more relevant information about coming Fed policy and the next direction.

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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:

Gold prices to go up: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/07/gold-prices-to-go-up-rsbl.html

Photo courtesy: Google