Iraq to Ukraine - Safe haven boost!

- by Mr. Prithviraj Kothari, MD, RSBL

All that was written about Gold about the next downfall, proved incorrect till date. Safe haven buying returned lying a Torpedo which took out all the possible resistance levels. Silver proved that it is always the best ally of Gold and moved at a much faster pace than Gold.

Gold saw a very good recovery internationally and in the domestic markets last week. The main reason behind this upward movement of gold and silver prices was the ongoing Geo political crisis in Iraq and Ukraine. Gold has always been considered as a safe haven assets in times of crisis. Moreover, the equities market have been trading near record levels and have reached a saturation point. 

On Tuesday, we saw the economic data coming in from US. Though the crisis in the Middle East was escalating, the attention was towards the two day policy meeting of the Fed where it was expected to further taper US bond purchases. Gold edged lower on Tuesday, backing away from the previous session's three-week highs as a stronger dollar and possible thawing of Middle East-West tensions quelled appetite for safe-haven assets. Consumer prices reading were high which further raised the belief that the Federal Reserve was headed for more monetary tightening and it so did by announcing a further $ 10 billion reduction in QE3 programme.

There was no rush to hedge in the precious metal either after weaker U.S. home construction numbers for May indicated a softer economy in general. The Fed cut its U.S. growth forecast for 2014 from 2.9 percent to a range of between 2.1 percent and 2.3 percent, but it also expressed confidence that the U.S. economic recovery was on track.

As the Federal Reserve showed lack of commitment to lift interest rates and as the tensions in the Middle East continued to escalate, we saw gold surging over 3 per cent on Thursday. This gain has been its best in the past eight months.

Bullion hit its highest level in more than two months. Silver jumped as much as 5 percent, while platinum and palladium also climbed as new hurdles emerged to settling South Africa's mining strike.  

Gold edged lower on Friday as investors took profits after it posted its biggest daily rise in nine months, but was still set for its biggest weekly gain in four months due to conflict in Iraq and a softer dollar after the Federal Reserve's comments. 

As we all know, The key factor that has driven gold prices high is the current Middle East crisis and the Ukraine crises. Militants have routed Baghdad's army and seized the north of the country in the past week, threatening to dismember Iraq and unleash all-out sectarian warfare with no regard for national borders. U.S. and Iranian officials discussed the crisis in Iraq on the sidelines of separate negotiations about the Iranian nuclear programme in Vienna. The news says US President is sending as many as 300 US military advisers to assist the Iraqi Army. 

Fighting flared between Ukraine and pro-Moscow separatist forces, further straining a unilateral ceasefire declared by Ukraine as Russian president Vladimir Putin pressed Kiev to talk to the rebels. When gold is driven by geopolitical news, there's a tendency that this has to keep getting worse for gold to improve.

Moreover there are few data releases from US which the market players believe will be positive and prompt the USD to appreciate. Looking at the above scenario we might see gold prices may though initially rise which eventually likely to turn down. 

There is a possibility that the euro currency may also continue to depreciate which basically ECB wants so as to manage inflation and economic growth in the country. So any further decline in the euro currency might prompt USD to advance and by which may cap gold’s upmove.

These sorts of news are enough to shudder the market up and down. On a technical note, earlier I felt that the resistance near $1285 breaching which it might fuel to $1300 mark. Now the same levels would act as key support regions in short-term. 

Gold has gained momentum much more than expected and may not rise substantially in the coming week as the overall trend remains down till the world economies are improving due to unprecedented stimulus packages offered by central banks across the work to support their currencies. 

To top that I also feel that gold prices in the domestic market will get further support out of a minor depreciation of the rupee. hence I think buying on dips would be advised.

Gold is expected to range between $1277 - $1340 in the international market and Rs.27,500 - Rs.29,500 in the domestic market.

While silver is expected to range between $20.00 - $21.30 and Rs.43,500- Rs.47,000 in the international and domestic markets respectively.

  

- Previous blog -

"Safe Haven Buying Returns- Gold in Picture"

http://riddisiddhibullionsltd.blogspot.in/2014/06/safe-haven-buying-returns-gold-in.html

Safe haven buying returns: Gold in picture!

          - by Mr. Prithviraj Kothari, MD, RSBL

As the week ended, Gold once again became the centre of attraction in the commodities market.  

Bullion metals rallied on Thursday. Gold was at a three week high on Thursday, sustained by safe haven buying following outbreak of violence in Iraq and disappointing economic news out of the US. Last month it was Ukraine, this month it’s Iraq.

Iraq was once again the topic of discussion as civil war has broken out in that country amid escalating violence. Crude oil prices were sharply higher on Thursday, mostly on the Iraq news. The bigger worry is that the violence in Iraq could spread to other Arab countries. Insurgents linked to al-Qaeda seized northern cities of Mosul and Tikrit on Wednesday. Post this, gold and silver prices shot up due to their safe-haven appeal. The U.S. said that it is working with Iraq's leaders on a coordinated response to regain lost territory and would provide additional assistance to Baghdad. 

Along with this crisis, came in a report from the US that was not as per expectations. US unemployment claims and retail sales came in below expectations, giving investors an excuse to sell equities with sentiment relatively risk averse were also friendly for the gold market.

Claims increased by 4,000 to 317,000. That was roughly in-line with the consensus estimate, which was pegged at 315,000. Total retail sales for May increased 0.3%. Excluding autos, they were up 0.1%. Those results were below the consensus estimates, which called for increases of 0.7% and 0.4%, respectively. Separately, April business inventories rose 0.6%, while the consensus expected an uptick of 0.4%. This followed the prior month's unrevised increase of 0.4%. In other overnight news, industrial production in the European Union rose 0.8% in April from March and was up 1.4% year-on-year. The increase was a bit larger than forecast.

India's monsoon season is off to a slow start, and this could have implications for gold should it continue. A lack of rainfall would have a detrimental effect upon the wealth of Indian farmers, which in turn could inhibit the ability to buy gold in one of the world’s key gold consuming nation

In 2013, gold has entered the bear market after a long period of time. This tremendous dip in prices, led to a huge demand for gold in Asia. in April 2013 Asian demand came in, in tremendous force and drained the gold market of all of that tonnage from U.S. sellers of gold taking out a total from the developed world, over the entire year of 2013 around 1,188 tonnes of gold, refining it to 1 Kg bars in Switzerland before shipping it into Asian markets, particularly that of China. The gold price was halted in its fall at $1,280 making a double bottom at that price later in the year.

Now we see more than one reason for gold prices to move even further-

1. Demand for gold from China remains robust with an annualized +2100 tonnes (approx.) set to being withdrawn from the Shanghai Gold Exchange in 2014. While this is less than the amount seen on 2013 it is sufficient to buoy the gold price at current levels
2. The pricing power of the U.S. gold market that came with the 1,280 tonnes of gold has been used up. With the U.S. accounting for only 7.35% of global gold demand, the U.S. markets would have to rely on the influence of the derivatives market of COMEX.
3. Gold is currently trading at $1280 and on the lower side it has a good support at $1210. So gold is more vulnerable to shoot up from here,
4. Indian demand could reignite on the easing of gold import restrictions that severely curtailed Indian gold demand since August last year. The new ruling party is expected to review these restrictions in the budget in the next week or so.
5. Geo-political tensions will play a key role as they have been doing over the years.

As Gold inches up, so will the Silver do! But Silver from a fundamental perspective of it being used in Industries will give it a boost as the economy shows sign of improvement. Moreover with the depreciation of rupee, Gold is expected to move upto the levels of USD 1300 and in India terms INR 28500 to 29000. 

Finally, one of the most awaited Headline: Platinum strike deal reached ‘in principle’. An agreement in principle has been reached between platinum producers and trade union AMCU, the companies said on Thursday. “AMCU will be discussing these in principle undertakings with its members to seek a mandate to accept the offers which, if given, will bring to an end the 21-week-long strike,” the platinum producers’ spokeswoman Charmane Russell said in a statement. Platinum lost 40 USD and traded down to a low of 1436.

USD may be under some downside pressure ahead of the US CPI also due tomorrow. The marquee event of the week has to be the FOMC decision due on Wednesday where the Fed is expected to leave its tapering course intact which will bring down the monthly asset purchase to $35 billion with the end date still likely to be October according to Fed Fisher. Traders will keep a close eye on the updated economic forecast which may be a tad more upbeat than previously which will help to give the USD a prop. Fed Chief Yellen's conference will also be closely eyed.

I expect gold to be in the range of $1265- $1305 and INR 26,800 – INR 28,500 in the international and domestic markets respectively.

On the other hand silver is expected to move in the range of $18.75- $20.10 and INR 40,100 - INR 45,000 in the international and domestic markets respectively.

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

- Previous blog -

"GLOBAL MANTRA- "JUST WAIT AND WATCH!"

http://www.riddisiddhibullionsltd.blogspot.in/2014/06/global-mantra-just-wait-and-watch.html

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.

- Previous blog -

"Gold Investors be Cautious"

-http://www.riddisiddhibullionsltd.blogspot.in/2014/05/gold-investors-be-cautious-mr.html

UKRAINE REIGNS OVER GOLD PRICES!!

                                    - By Mr. Prithviraj Kothari, MD,RSBL

Gold has been showing quite interesting movements lately. 

Last week, gold was lying at a three month low of $1,270 an ounce post the economic recovery and reduced safe haven appeal. This negative sentiment continued this week as Gold rose slightly but remained below $1,300 an ounce on Tuesday as the market focused on the U.S. Federal Reserve's policy meeting and expectations for strong U.S. data, with prices underpinned by uncertainty over Ukraine. The Fed did give a positive and upbeat assessment of the U.S economy and announced another cut in its massive bond buying program.

Following the previous 3 tapers, The US Central Back reduced its monthly asset buying to $45 billion for the fourth time on 30th April. This $10 billion cut has compelled the market players to believe that further reductions in measured steps are likely.

Positive economic growth was visible from the reports released during the week.  Gold further dropped post the release of the payrolls data, which showed that U.S. employers boosted payroll in April by the most in two years. Moreover unemployment rate stands at 6.3% which is much lower as compared to 6.7% last month.

This downtrend was further supported, as outflows from the world biggest  bullion fund resumed after a one and a half week halt. Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, fell 0.3 percent to 785.55 metric tons during the week, the lowest level since January 2009, according to data on its website. Outflows totalled 25.1 tons last month, more than offsetting combined gains of 19.9 tons in February and March

Spot gold fell 0.2 percent to $1,289.10 on Thursday, after losing 0.4 percent on Wednesday. Trading was thin as several Asian markets, including China, Hong Kong and Singapore, were closed for the Labour Day holiday.

However, traders remained cautious in expectation of further developments in the Ukrainian crisis and Friday changed the world scenario for gold as increased geo political tensions gave the yellow metal that much needed push. Demand for gold stepped up as the flaring of Ukraine's violence started making markets nervous and pushes the international price of the Gold above $1300.

Ukraine sent armoured vehicles and artillery to retake Slovyansk, a stronghold for pro-separatist forces, defying President Vladimir Putin’s demand to pull back troops with Russia’s army massed across the border. 

Acting President Oleksandr said that  many pro-Russia rebels had been killed, injured and arrested in the eastern city of Slovyansk. In a statement, he said the operation in the rebel-held city was not going as quickly as hoped. Separatists shot down two Ukrainian army helicopters, killing a pilot and a serviceman and further injuring seven.

The UN Security Council met in emergency session at Russia's request. In fact, catastrophic consequences have been signalled by Moscow's ambassador if Kiev's military operation in eastern Ukraine were not stopped.

Investors have now put the Ukraine issue above everything. As the week began gold was seen moving down post the Fed tapering, but rising geopolitical tensions and heavy short-covering helped bullion reverse an initial sharp sell-off. 

2014, witnessed 8.4 percent gain in bullion amidst signs of faltering U.S. economic growth and mounting political crisis in Eastern Europe. Any elevation in the ongoing crisis will give a further push to gold.

After nearly three months of continued strikes over wages, Platinum mines in South Africa are still far away from solution. This is significantly increasing the buying interest and pushing prices to new levels.

What to expect next week:
1. ISM non-manufacturing PMI on Monday
2. Fed's Yellen testify to Join Economic Committee on Wednesday
3. ECB press conference on Thursday. 

The trade range for gold and silver is expected to be as follows-

In the international markets gold and silver are expected to range between $1277 - $1320 and $18.15 - $21.00 respectively. While in the domestic markets gold and silver are expected to move in the range of INR 29,000 - INR 30,500 and INR 41,000 - INR 44,000 respectively.

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

- Previous article- "Gold Gains Momentum, Investors Gain Confidence!"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/gold-gains-momentum-investors-gain.html

Gold Gains Momentum, Investors Gain Confidence!

- By Mr. Prithviraj Kothari, MD, RSBL

While gold gained momentum, investors gained confidence in gold. Gold spurred the longest price rally in six months. Initially gold was on low, but prices got pushed higher by the end of the week.

On Monday, gold fell to nearly a three week low as we witnessed outflows from the worlds biggest bullion backed Exchange Traded Fund (ETF). Moreover, a lack of a further increase in geopolitical tension also prompted selling in gold. Last week, the fund's outflows totalled 9.3 tonnes, erasing all the gains made in the year.  

Gold fell to its lowest since mid-February on Tuesday after U.S. housing data beat expectations, boosting confidence in the U.S. economic recovery and lifting stock markets, which hurt gold's appeal as an alternative investment. 

On Wednesday, gold had firmed its position above a two and a half month low of $1,268.24 due to firmer equities and a weaker technical picture that had triggered strong selling,

However, the tables turned on Thursday as rising geopolitical tensions and options related buying helped gold in moving in the opposite direction and reverse the early sharp losses

Bullion prices mounted after Ukrainian forces killed up to five pro-Moscow rebels as they closed in on the separatists' military stronghold in the east. 

In March, bullion Prices reached a 6 month high after Russia took over Crimea. But then it fell almost 9 percent on signs that peace would return. But once again Hostilities this week are bringing back the gold bulls. Tensions between Moscow and Western powers over Ukraine are lending gold support, but it remains in a somewhat fragile situation as interest from long-term investors is still absent.

Though on the basis of the economic indicators of the US economy, there were signs of recovery, the conflict between Russia and Ukraine spurred traders to unwind bets on a drop. The metal has risen 8.2 percent in 2014 even though economic recovery has pushed the Federal Reserve to reduce its monetary easing. This tapering was responsible behind the 28 per cent drop in gold in 2013 because if the Fed would scale back its bond purchase then gold would lose its appeal of being an inflation hedge tool.

Apart from the Ukraine crisis, another big news that made rounds in the market was that major international banks were jettisoning their commodities business.*

Around 20 US based investors have filed antitrust claims against major leading banks over the past two months.  These investors have accused Barclay, Deutsche Bank, HSBC, Bank of Nova Scotia and Societe Generale of colluding to manipulate the gold price.

The court cases are complicating negotiations that Deutsche Bank had started with potential buyers after it announced in January that it was putting its seat at the fix up for sale, a source with knowledge of the matter said. In case any such decision is taking of discontinuing the commodity trading wings business then this will definitely calm down the price volatility of bullion prices.

Another fact the will play a major role in determining the gold prices is the worldwide demand from gold. CHINA- Chinese demand for gold is set to increase from the current level of 1,132 tonnes a year to 1,350 by 2017, cementing its place as the world’s largest gold market. According to report published by the World Gold Council, entitled:  ‘China’s gold market: progress and prospects’, private demand for gold in China will see sustained growth over the next four years.

China does not report any trade numbers. The only source of procuring these gold export numbers to China is through Hong Kong as its the prime medium of gold for China. But now that China has allowed Gold imports via Beijing, it may threaten Hong Kong’s export numbers to mainland.

INDIA- Physical demand in India over the next week is expected to rise as the country welcomes the auspicious occasion of Akshaya Tritiya on may 2. This could result in a slight pickup in gold demand , but with the heavy tariffs placed on gold, there are questions on how much buying will actually occur.

UK- Demand for gold from UK is tend to augment as investors are saving up for retirement with the U.K.’s Financial Conduct Authority considering adding bullion to its list of “standard assets. Last year, the FCA was replaced by The Financial Services Authority to oversee market regulation. They published a consultation paper with the list in 2012, asking whether other types of investment should be added. Various forms like Cash, bonds and exchange-traded commodities were included but  physical gold was not. There are expectations that gold may be added to the list by June. If any such possibility materializes then demand for gold from UK will definitely rise as gold is on the radar of more mainstream investors. 

Next week is full of revelation for gold as the market moving and price deterring event will unwrap for gold. With a Federal Reserve monetary policy meeting and April non-farm payrolls data set for release; additionally, any change in the standoff between Russia and Ukraine has the ability to move markets.

Moreover, The Federal Open Market Committee meets Tuesday and Wednesday, and economists said they expect the Fed to announce another $10 billion-a-month cut in its quantitative easing program, and on Friday the Labor Department is scheduled to release its April non-farm payrolls data.

Gold traders will have to be nimble next week as these headline-making events could cause volatile market action. Because of the uncertainty over the Ukraine situation, several gold-market players believe that gold prices will once again move upwards.

*source- http://in.reuters.com/

- Previous blog - "Gold Prices Off Route"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/gold-prices-of-route.html

Gold prices off the Route?

                                        - by Mr. Prithviraj Kothari, MD, RSBL

Gold prices have been battered over the week. Starting with a high of $1330 to a low of $1282 and giving a close of $1294 has brought Gold prices back to its major support $1280. ($1280 acts as a strong support for Gold, below which Gold prices could attain new lows).

The week started on a stronger footing carrying the upward trend of the last week.  Gold prices gained to a three week high on Monday on renewed concerns over the escalation of hostilities in Ukraine that prompted its safe haven appeal. Geo political tensions escalated as violence between pro-Russian separatists and Ukrainian government forces grew. Moreover gold prices were further supported over the news that a Russian fighter aircraft made repeated cross range passes near a US ship in the Black Sea. Apart from this SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings rose 1.80 tonnes to 806.22 tonnes the first inflow since March 24 acted as a positive factor.

But the upward trend was short lived. $1330 proved to be a crucial stage which wasn’t broken and Gold prices plummeted. US economic indicators showed positive signs starting with US retail sales. According to Bloomberg survey, U.S. retail sales probably accelerated in March, boosted by car purchases that indicate demand is recovering from a winter-led slowdown earlier this year.

Other factors that added to Gold and Silver price fall were:

U.S industrial production-
         Above expectations March industrial production data hinted that the US economy was starting to emerge from a weather-induced slowdown suffered over the initial stages of calendar 2014. Adding weight to this belief was the uplift seen in capacity utilization levels over the month.

EU industrial production-
        Euro zone industrial output edged higher in February, official data showed Monday, in line with recent data showing a very modest economic recovery in the single currency bloc.

U.S CPI, U.S housing starts and building permits-
        U.S. Consumer Prices rose slightly higher while the U.S. housing starts rose 2.8% in March to a seasonally adjusted annual pace of 946,000, fueled by growth in single-family homes, the Commerce Department said Wednesday. Starts for February were revised higher to a pace of 920,000 from an initially reported 907,000.

Philly Fed index-
         A reading of manufacturing sentiment in the Philadelphia region improved in April, according to data released Thursday. The Philadelphia Fed’s manufacturing index rose to a reading of 16.6 in April from 9.0 in March, stronger than a Market Watch-compiled economist forecast of 10.0.

Overall, Gold dropped nearly 1.85% this week.

Though the various reports released from US did show signs of a recovering economy, Federal Reserve Chairwoman, Janet Yellen restated that she expected interest rates to remain very low until the recovery is on a more secure footing and the American economy is more fully involving available workers and other resources. The Obama administration told asset managers last week that it was planning additional sanctions against Russia over the conflict in Ukraine. Some of the supporting factors that lead Gold prices recover from its support level of $1280.

Looking at the current market conditions, I feel that western countries are reducing their holding on every rally while the same is being absorbed by the physical demand on Asia. It’s a see saw battle where one reduces and one increases. Geopolitical tensions will act as a strong support for Bullion metal prices apart from the physical demand.

The labour dispute which broke out in January that shut most of the platinum mines in South Africa is extending the longest shortfall in global production since 2005. The strike by more than 70,000 South African workers will continue as long as companies refuse to improve wage offers, Joseph Mathunjwa, president of the Association of Mineworkers and Construction Union, said April 15. The workers want basic monthly pay boosted to 12,500 rand over four years, which the producers say they can’t afford after production costs jumped 18 percent annually in the last five years, as wage and electricity costs rose. Many laborers live in shacks made of iron sheeting. They share toilets, don’t always have water or power, and many spend much of their income servicing debt. The country has a 24 percent unemployment rate.

While the Gold and Silver precious metals group is being thrashed, their counterparts, Platinum and Palladium are looking strong. The biggest producer of these metals i.e. Russia is having tensions with Ukraine while the second biggest producer i.e. South Africa has union problem. Due to these issues, I feel Platinum will look forward to extend its lead over these metals.

My trading range for the upcoming week for Gold in international prices is around $1270 to $1330 and for Silver $19.30 to $20.20. While in Indian rupees, Gold prices will range from INR 27900 to INR 29200 and for Silver the trading range will be INR 41,500 to 44,500.

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

- Previous article- "OUR LOVE FOR GOLD"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/our-love-for-gold.html

(Source: http://www.bloomberg.com/news/2014-04-17/platinum-strike-widens-output-deficit-seen-lasting-years.html)