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Showing posts with label U.S. Stocks. Show all posts
Showing posts with label U.S. Stocks. Show all posts

Monday, 22 December 2014

FED'S "CONSIDERABLE TIME" CREATES "CONSIDERABLE" IMPACT ON GOLD


 - By Mr. Prithviraj Kothari, MD, RSBL







Once the Federal Reserve statement was out on December 17, gold fell considerably to a two week low. 

The Fed removed the phrase ‘considerable time’ from the guidance statement and replaced it with patience, but then said patience is consistent with considerable time.
So it was rather a confusing but disappointing statement for gold. 

The Federal Reserve just came out and said that it was going to be “patient” when normalizing the monetary policy. This replacement referent to borrowing costs to remain low for a considerable time but at the same time it’s a pledge to be patient on the timing for higher rates. Rising rates and a stronger dollar can cut gold’s allure because bullion generally offers investors returns only through price gains.

As we are approaching 2015, we also are moving towards a long weekend with holiday cheers.
Just ahead of the Christmas break, the U.S. Department of Commerce will release the final estimate for fourth-quarter gross domestic product.
Said markets will receive important manufacturing data from the Institute of Supply Management, but they also said that the impact would be limited.
Over all, the markets won’t seem to having too much volatility over the next two weeks as holiday bells seem to be ringing around.

But yes, it doesn’t mean that it will be a hassle free week for gold. Gold prices could destabilize over the holidays if the Russian economy surprisingly deteriorates, or if there is more volatility in oil prices.

With everyone now focused on the holidays, most analysts are not expecting to see any major movement in the gold price in the next two weeks.
The trading week in North America will be disrupted as markets are closed on Dec. 25 for Christmas and January 1 for New Year’s Day. Analysts said that liquidity will be extremely leaving most market participants will sit on the sideline, waiting for activity to pick up in 2015.

While the market was into the Feds statement, there were rumors doing the rounds that Russia sold considerable amount of gold in November. But the Russian monetary authority made it quite clear, that at least in November, Russia not only did not sell any gold, but in fact bought another 600K ounces in the month of November.


The precious metals market is made up of various players- analysts, traders, investors, miners, customers, bankers etc. Each player has a different forecast for gold in 2015.

Market analysts state that gold seems to have stabilized at $1200 an ounce and could remain around these current levels, until at least the first or second week into the New Year.

Gold mining companies have noted that much of the gold mining industry is already under water at $1,200, let alone $1,150 or lower. Even those who have felt that using a gold price of only $1,000 to calculate whether their operations are viable or not at lower gold prices will be looking to re-assess where they stand at $900 gold.

While the traders predicted $1,100 level, or perhaps $1,050 or even lower.

Looking at these predictions do we feel that there is any hope left for the investors in the gold sectors?
Gold has already been driven downwards and has been pressurized on a number of occasions and at $1,100 gold or lower the supply gap is likely to continue to widen as scrap sales dwindle away, the lower price stimulates new purchases in the East and new mine production falls as some miners bow to the inevitable and have to shut down lossmaking operations. 

So do we feel that 2015 is going to be a better year for gold? Will gold return to its peak it had created in 2011?
Well it’s practically difficult to comment on this right now. Gold is actually seen as in short supply anyway in the West, which is why the gold believers cannot understand recent price movements which seem to fly in the face of economic supply/demand logic and a China boost could have a very rapid strong upwards effect. Western governments may be wise not to tweak the tail of the dragon as it certainly has the wherewithal to play the gold card and throw global markets into turmoil.


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 - "Is it an upside or a downside potential for gold"

http://riddisiddhibullionsltd.blogspot.in/2014/12/is-it-downside-or-upside-potential-for.html

Sunday, 16 November 2014

THE DOLLAR IS BEING WATCHED CLOSELY


by Mr. Prithviraj Kothari, MD, RSBL





Gold's long term appeal continues to remain clouded by doubt. The dollar is getting stronger and the US economy is on the forefront and traders believe that interest rates will rise faster which weighs on gold as they lift the opportunity cost of holding non-yielding assets.

Till Thursday, gold price remained in a tight trading range. Precious metals sliced back early gains on Thursday after the lower than expected jobs number were released. Unemployment claims climbed 290000 more than the estimated 282,000 and Jolts jobs opening disappointed at 4.74 million against the expected 4.81 million.

The WGC released its Gold demand Trends report for Q3 and it showed that gold demand has been lying low along with the declining demand for jeweller, falling investment demand for bars and coins and reducing central bank purchases.

For the past few days gold has been hovering around $1159.20. But lately, gold has stabilised. After hitting its weakest level of the year till date on November 7.

But on Friday gold got the big push after a sudden weakening of the US dollar . Gold surged 2.5 percent on Friday to just shy of $1,200 an ounce.

Bullion secured more that $40 to a two -week high at $1,193.34 in New York after dropping more than 1 percent in early trade to test the $1,145 level, where strong support was seen twice in the last four sessions, triggering pre-weekend short covering.

Now that the dollar has been moving back and forth and everybody is watching the dollar very closely.

The dollar lately has hit a two-year high against the euro and seven-year high against the Japanese yen, fuelled by diverging interest-rate outlooks.

There are expectations that the US monetary policy will tighten next year as it is considered to be a stronger economy than Japan or the Euro zone. Which further dictates the fact the US dollar will strengthen  as precious metals often move inversely to the U.S currency, it means that they are bound to decline. 

Gold is often bought as an alternative currency when the dollar weakens, and vice-versa, while a muscular dollar also makes all commodities more expensive in other currencies and thus can hurt demand.

Next week a number of key economic indicators are lined and all investors will be closely watching over these. 

Monday- Industrial production and the New York Federal Reserve’s Empire State manufacturing index
Tuesday-  The producer price index 
Wednesday-  Housing and the Federal Open Market Committee releases minutes of its last meeting.
Thursday-  Jobless claims, the consumer price index, existing home sales and Philadelphia Fed manufacturing survey.


Moreover on Wednesday one of the key influential factors will the upcoming US economy data which will be a deciding factor for the Fed to decide as to when it is likely to increase the interest rates.

Apart from the key economic indicators traders will also we keeping an eye on physical demand for gold and the Swiss refendrum.


Demand -China and India are the world’s two largest gold-consuming nations. The Indian wedding season will primarily witness gold buying and the Chinese too stock up the metal ahead of the country’s New Year festivities.

Swiss referendum- Swiss gold referendum is scheduled for Nov. 30. In this referendum the Swiss voters will decide whether the Swiss National Bank would have to hold at least 20% of its assets in the precious metal. This would open doors for more demand for gold as the central bank would have to accumulate much more gold, adding to the requirement side of the equation. Also, the referendum asks voters if the SNB should be banned from selling gold and whether all of its gold reserves should be held in Switzerland.

With the Dollar Index at a four-year high, the U.S. stocks reaching new highs, disinflation occurring in Europe and Asia, and commodity prices plunging, the gold prices have a hard time rallying. 


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 -
"Is Gold Being Completely Controlled By The Dollar?"
http://riddisiddhibullionsltd.blogspot.in/2014/11/is-gold-being-completely-controlled-by.html