Gold to rise soon

Gold prices closed the week below $1,300 an ounce for the first time this year, after posting the largest weekly decline since December 2017. The biggest drop was on Tuesday when the precious metal plunged more than 2%.

Following a strong sell-off last Tuesday, Gold closed below a multi-month trading range that it had been contained within since January of this year, indicating that bears have won control at least temporarily. Because of this shift in price action dynamics in Gold, we are now watching upside moves / strength for potential sell signals at resistance levels to get short, as we believe there’s potential for more downside in the coming days

The downside was carried forward to the present week. Gold prices edged down on Monday as the dollar rose and demand for safe-haven assets eased after U.S. Treasury Secretary Steven Mnuchin said a trade war between China and the United States was “on hold”.

Spot gold was down 0.2 percent at $1,289 per ounce during early trading hours on Monday.
The dollar rose versus the yen and hit a five month-high against a basket of currencies on Monday, after Mnuchin’s comments downplaying a trade dispute with China, boosting risk sentiment amid hopes for an easing of trade tensions between the world’s two biggest economies.

A stronger dollar makes dollar-denominated gold more expensive for holders using other currencies. Furthermore, rising U.S. interest rates and the expectation that U.S. Federal Reserve will raise rates again next month, limits investor demand in non-yielding bullion.

Adding fuel to fire we saw, Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.1 percent to 855.28 tonnes on Friday.

After slumping over the past few months, some think that rally in gold prices will soon be over. Prices have fallen more than 5% since their April high and on Tuesday slipped below a key level $1,300 for the first time this year. Markets have been positioning for rising interest rates, which tend to move opposite of gold prices with regard to the opportunity cost of non-interest bearing assets.
But our analysts believe that this downfall won’t last long and there are reasons, more than one, which supports the fact the gold prices will rise in the short term-

European Crisis- Signs of turmoil in Europe may help revive haven demand for gold. In Italy, bonds and stocks plunged Friday, as the Five Star Movement and the League reached a coalition agreement to govern the country, outlining proposals that may pressure public finances.

It seems that debt crisis in Italy would have a far bigger impact than one in Greece.

Demand for gold from China - Chinese jewellery sellers are working to attract a prosperous, more sophisticated, younger generation of customers by expanding and diversifying its selection. Following a slow retail year for jewellery in 2017, China is looking forward to strong sales in 2018. Withdrawals at the Shanghai Gold Exchange have been above average at 170 tons monthly. April’s demand for gold was up 28 percent from 2017.

With political tensions between the U.S. and China escalating, Chinese investors are turning to gold bullion as an economic hedge. First quarter 2018 saw the demand for gold at 78 tons.

In addition to jewellery, the Chinese government has been actively increasing its gold supplies for the past decade, along with its ally, Russia. This move is believed to precede China’s plan for a gold-backed Yuan, which could significantly devalue the U.S. dollar and could replace the dollar as the global reserve currency of choice. If this happens, the price of gold is expected to rise to new, unprecedented heights, along with a political power shift from the West to the East.

Gold has always been in demand for its intrinsic value. If current trends continue and the demand for gold accelerates at its current rate, the price of gold will skyrocket.

The dollar -The "trade-weighted" gold price, a measure of the value of gold based on major currency movements, suggests that dollar strength explains much of the recent weakness in gold prices.
And though the euro has fallen nearly 5% against the dollar over the past three months, the two currencies may switch places soon which could further provide some support to the price of the yellow metal.

Demand for inflation hedges - Both inflation and expectations for rising prices have been steadily rising this year - personal-consumption expenditures hit the Federal Reserve's target of 2% in March. And while the central bank is on track to raise rates at least three more times this year, inflation jitters could still drive investors to the ultimate safe haven asset that is gold.

This, in turn, could feed through into higher demand for inflation hedges, like gold which means a rise in gold prices too.

Investors this week will be keeping a close eye on the minutes of May’s Federal Reserve meeting, to be released Wednesday, along with preliminary purchasing manager indexes in the euro zone. Geopolitics remains in focus as South Korea’s president visits Washington to discuss North Korea and Brexit negotiations resume in Brussels.

As dollar strengthens, the yellow metal weakens

Spot gold was up 0.1 percent at $1,318.52 past week, not far from a low of $1,315.06 hit in the previous session, it’s weakest since March 21.

The metal was on track to finish the week down more than 1 percent for its second consecutive weekly decline and the biggest weekly drop in four.

The strength of the U.S. dollar - combined with the weakness of the euro zone currency after (ECB chief) Mario Draghi’s speech - is pushing down the yellow metal.

The dollar hit a 3-1/2-month high against a basket of currencies on higher U.S. yields while the euro was hampered by a dovish tone from the European Central Bank. On Wednesday the benchmark 10-year Treasury yield reached its highest since January 2014 at 3.035 percent. A rise in U.S. bond yields pressures gold by reducing the attractiveness of non-yielding bullion, which is priced in dollars.

Thursday’s trading started on a weak footing, but most of the metals ended the day in positive territory, which suggested dip buying and support are features of the market. Precious metals prices were little changed on Thursday morning, with gold and silver prices off by 0.1% – with the former at $1,316.54 per oz. Meanwhile, the platinum group metals were both up by 0.1%.

Gold continued losing ground through the early NA session and is currently placed at fresh 6-week lows, around the $1312-11 region.

After Friday's corrective bounce, resurgent US Dollar demand was seen as one of the key factors weighing heavily on dollar-denominated commodities - like gold at the start of a new trading week.  Gold prices retraced upward in what looked like a correction after higher and sent the yellow metal to a one-month low.

Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off. This rise in the dollar seems to be weighing on gold and is likely to be a headwind for metals’ prices generally.

Recent increases in geopolitical tensions and rising commodity prices, especially oil, seem to have spurred inflationary concerns that have led to stronger bond yields and in turn that has lifted the US dollar, with the dollar index at 90.97. This has broken above the previous peak at 90.94 from March 01.

At their summit on Friday, North Korean leader Kim Jong Un  and South Korean President Moon Jae-in declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the "denuclearisation" of the Korean peninsula.           

North Korean leader Kim Jong Un and South Korean President Moon Jae-in on Friday declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the “denuclearisation” of the Korean peninsula.

The signs of detente in the North Korean conflict are ... contributing to the lack of solid demand for gold as a safe haven at present

Further as tensions o the Korean peninsula eased, the European shares rose after a positive session among Asian stocks overnight. The dollar index rose 0.2 percent on Monday, 30th April, holding just below its strongest since mid-January.

Gold fell at the start of this week, pulling back towards last week's more than one-month low as easing tensions on the Korean peninsula boosted appetite for assets seen as higher risk, such as stocks, and lifted the dollar.
   
The metal slid 1 percent last week on the back of a stronger dollar and a rise in Treasury yields to above 3 percent, which weighed on interest in non-interest bearing assets. On Thursday, it hit its lowest since March 21 at $1,315.06 an ounce.

That has left it on track to end April down 0.5 percent, erasing all the previous month's gains.
Spot gold was down 0.4 percent at $1,316.15 an ounce during trading hours.
   
Meanwhile, the Fed’s favoured PCE inflation gauge is expected to put core price growth at a 13-month high of 1.9 percent.

The latter would put the Fed within a hair of at least ostensibly meeting its dual objectives. Policymakers aim for inflation of 2 percent to be sustained in the medium term – abating the significance of a single month’s reading – but another sign of steady progress may reinforce the case for tightening.

Gold may return to suspicion, if this materializes as the prospect of higher rates sustains the US Dollar, undercutting demand for non-interest-bearing and anti-fiat assets.

   

Has the golden streak ended

Gold was seen under pressure since the middle of last week and has continued this sentiment for the current week now, testing vital support ratios near the 1330.00 U.S Dollars per ounce level. The precious metal stumbled as the Dollar gained in forex against the other major currencies.

Gold prices fell $4.02 an ounce last Thursday, ending a four-day streak of gains, as geopolitical tensions eased and the dollar strengthened on the back of solid U.S. economic data. Gold failed to test the resistance at $1354 and was unable to break through it .As a result, prices broke below $1347.

In economic news, the Labor Department reported that the number of first-time applicants for jobless benefits fell last week for the third time in four weeks and the Federal Reserve Bank of Philadelphia said the index measuring manufacturing activity in the region climbed to 23.2 from 22.3 the prior month.

This strong news supported the US dollar which in turn created a downward pressure on the yellow metal. 

Also pressuring bullion, a U.S. central banker said the Federal Reserve should keep raising interest rates this year and next to keep the economy from overheating and financial stability risks from rising. Higher rates dent the appeal of non-interest yielding bullion while lifting the dollar, in which it is priced

U.S. interest rates futures fell on Friday as traders bet on a greater likelihood the Federal Reserve would raise key short-term borrowing costs three more times in 2018 in the wake of data that showed steady U.S. economic growth.               

Spot gold lost 0.6 percent at $1,336.96 per ounce by and was headed for a weekly decline of nearly 1 percent.

What’s funny is that over the past fortnight the main reason that pushed gold prices high the same reason was responsible for its downward movement last week, thanks to the easing out of geopolitical worries. Investors were less jittery about geopolitical tensions that had supported gold prices earlier in the week, notably Syria and North Korea.

U.S. President Donald Trump said on Sunday the North Korean nuclear crisis was a long way from being resolved, striking a cautious note a day after the North's pledge to end its nuclear tests raised hopes before planned summits with South Korea and the United States.             

Though the geopolitical crisis are still high, but it looks like their severity has declined over past few days and hence gold prices are lying lull.

Gold is often used as safe haven in times of uncertainty and any easing out of such situations will surely pull down gold further.

Gold prices eased on Friday and were on track to end the week lower as the dollar advanced on expectations of higher U.S. interest rates and market players grew a bit less worried about global political and security risks.

This negative sentiment has been forwarded in the current week too. Gold prices slipped to their lowest level in nearly two weeks on Monday as the dollar remained supported on the back of rising U.S. Treasury yields. 
 
Spot gold was down 0.1 percent at $1,333.20 per ounce during Mondays trading hours, after earlier touching its lowest since April 10 at $1,331.70. The dollar index, which measures the greenback against a basket of currencies, was up about 0.1 percent at 90.392.
           
Gold, however, does continue to show important support around 1323.00 U.S Dollars per ounce and if the commodity declines further, traders might look for reversals. But patience will be an important piece of the puzzle for market participants.

The chief investment strategist said that gold is an excellent asset to invest in this year, as it guards against sudden shocks and rising volatility, especially in light of all the trade-war fears rocking the markets. Folts added that his preference is gold-backed ETFs.

Investors have also been picking up on geopolitical risks and buying gold ETFs as security. Bloomberg reported last week that the popularity of gold-backed ETFs was at its highest level since 2013.

Get ready to see Gold on a roller coaster ride

While in the domestic markets we saw jewellers preparing in full swing for Akshaya Tritiya, in the global markets we saw gold moving in full swing.

Jewellers are expecting 15-20 per cent increase in sales this Akshaya Tritiya, mainly on the back of positive market sentiment, stable prices and ongoing wedding season.

Apart from the auspicious occasion of Akshaya Tritiya the wedding season is also lined up for the month of April, May and June, which has raised the demand for gold further. As buyers expect further rise in gold prices, they have started making their purchases to avoid any further price rise.

Overall there is a positive sentiment in the market so a sales growth of 15-20 % is expected this Akshaya Tritiya.

Globally so far, gold has risen more than 3 percent this year, marked by international tensions and volatility in equities, but has yet to emerge from a tight trading range in the face of an expectation for rising U.S. interest rates.

Prices for gold this week rose to their highest levels since Jan. 25, as escalating tensions in Syria, U.S. sanctions on Russia and the U.S.-China trade stand-off weighed on global equities and the U.S. dollar index.

Gold's safe haven status was tested this week as Donald Trump's economic war threatened to turn into a shooting war, with a number of global spots getting hotter. Precious metal moved from a close of $1325.69 an ounce on April 5 to $1337.90 on April 12, dipping on Thursday after reaching a high of $1364.50 during Wednesday morning trading – the highest it's been since Feb. 14
So far, Gold has also outperformed all other precious metals this year.

The headlines this week have been full of escalations of continuing and new conflicts around the world. Here is a rundown-

Trade Wars- Countries over the world are now dependent on each other for exports and imports.
Many major American companies that are household names such as Starbucks (SBUX), Boeing (BA) and Apple (AAPL) rely on their exports (and imports) from China for a sizable portion of their overall sales and profits.

But the escalating trade war between China and US could hurt the revenues of these companies as each country is retaliating with its own harsh measures.

But there are news revolving in the markets that has China just recently launched a new $1.6 billion initiative called “Made in China 2025.”

This initiative would focus on an increase in research and development spending thus making China more self dependent which will further help companies to rely less on international technology and equipment. The more China buys internally, the less it will buy American products or need to export to the U.S.

That means it could shift its trade focus away from the U.S., while purchasing fewer American goods. All of that could hurt manufacturers in both countries and increase volatility into the share prices of companies involved.

Geopolitical- There is rising tensions on the geopolitical front as US is expected to attack Syria any moment now in response to the chemical attack against civilians last week. But Russia has warned that in this course if Russian military personnel are harmed in any manner then US should be ready to face “grave consequences"

Now that President Trump has John Bolton as his National Security Adviser, the geopolitical spot has increased even further. On Feb. 28, Bolton published an op-ed in the Wall Street Journal supporting a preemptive nuclear strike against North Korea.

On Wednesday Trump cranked up the threats, tweeting “Get ready Russia, because [missiles] will be coming, nice and new and 'smart'!” which caused the spike in the gold price. Later he appeared to open a window to a more peaceful solution, tweeting that “it could be soon or not so soon at all,” causing gold to lose its earlier momentum.

That gives us an insight into what policy recommendations President Trump might be provided with now.

Even the perceived threat of diplomatic fallout and rumors of a military response can elevate volatility. War games between the U.S. and North Korea would be expected recoil — and that would mean uncertainty over China’s response.

That would give greater rise to volatile conditions in trade, regional security and stability on the Peninsula. By isolating China — North Korea’s top economic partner and military alley — tensions would only escalate.

Needless to say, any armed conflict between two nuclear powers carries great potential risk. One single incident could trigger an escalating spiral.

US Political Risk- November will also bring along a lot of volatility and uncertainty as midterm elections are going to be held.

The U.S would be caught up in more political instability that will harm market stability which further raises concerns that markets are being left uncertain and pondering to guess what happens next?

The world has become a much more dangerous place in the last few weeks. Between competing naval exercises in the South China Sea, a chemical weapons attack in Syria, US and European sanctions on Russia, a likely showdown over the Iran nuclear deal, and a host of other (i.e. India v Pakistan) conflicts not even mentioned here, investors have reason to turn to safe-haven assets – and gold has benefited.

Threats of war are always factored into the safe-haven value of gold on any given day, but we may be witnessing a sea-change where it is difficult to imagine a return to any sense of normalcy anytime soon – especially given Trump's determination to put America's interests first despite ruffling a lot of feathers with both allies and adversaries.

Given these hotspots for the next three months or even further, we expect gold to move on a rollercoaster ride.

Sentiment Shift In The Market

Past week, we saw investors moving away from gold as sentiments shifted to bearish. A strong US economy and a strengthening dollar led to this shift. Investors were confident that the U.S economy is relatively strong and this made the stock markets go wild. Moreover Gold failed to attract investors fleeing from the biggest selloff in six years in global equities as U.S. Treasury yields rose to four-year highs.

Last Thursday, bullion was headed for a 1 percent weekly decline as it fell to a one-month low of $1,306.81 over expectations of a rate hike soon in 2018.

Investor’s expectations of rate hike were driven high by the following factors-
• unexpectedly low U.S. unemployment figures
• Signals from the U.S. Federal Reserve,
• and other data showing the country’s economy


As we all know that higher interest rates make gold less attractive to investors as a safe haven because it does not pay interest. Instead this time, investors treated the dollar as a safe haven.

A stronger dollar makes dollar-denominated bullion more expensive for users of other currencies.

The global market selloff, sparked by last Friday’s jump in Treasury yields, and bets that the United States could see at least three interest rate hikes in 2018 due to improving U.S. fundamentals have propelled the U.S. dollar in recent days

Gold prices made little headway Friday, seemingly digesting losses suffered earlier in the week. But at the start of the week, yellow metal got a bit of a boost, thanks to a weaker US dollar.

Gold prices rose on Monday, 12th Feb, as the dollar slipped, but gains are expected to be capped ahead of inflation data from the United States this week that could mean U.S. interest rates increase more quickly than expected.

The dollar slipped against a basket of six major currencies as a bounce in equity markets ended a strong run for the greenback, used by investors as a safe place to park assets in times of financial market volatility.

Spot gold was up 0.4 percent at $1,321.16 an ounce at 0940 GMT. It has fallen more than 3 percent since hitting a 17-month peak at $1,366.07 in January. U.S. gold futures rose 0.6 percent to $1,323.20 an ounce.

Worries about inflation in the United States surfaced after data this month showed jobs growth surged and wages rose, bolstering expectations that the U.S. labour market would hit full employment this year.

But investors still feel that the dollar will strengthen once the infrastructure spending plan will be unveiled by President Donald Trump.

If the markets are amply convinced that the scheme will deliver a potent boost US economic growth and push inflation upward, that is likely to inspire bets on a steeper Fed rate hike cycle. This will probably revive the greenback’s recovery, tarnishing the appeal of anti-fiat assets epitomized by gold.

Whatever the reasons for the shift change in market sentiment, from macro factors to algorithmic trading, these abrupt index plunges and the rise in volatility have spooked investors across the globe and have led to panic selling and active profit-taking. With a low volatility environment less certain than before, market consensus on ever-increasing stock prices may be beginning to unravel.

Where is Gold Heading To

AN upbeat U.S data and a strong dollar played key roles to pull down gold prices during the week. A lot was expected to happen over the number of data releases-

US employment report, ahead of that there is
• Data on Spanish unemployment,
• UK construction PMI
• EU PPI
• Italian CPI
• US data on factory orders
• University of Michigan consumer sentiment
• Inflation expectation.

Of these, markets remained focussed on U.S nonfarm payrolls data and gold seemed to be behaving reacting to this influential factor

An expectation of strong economic number coming in from US strengthened the dollar. Spot gold was down 0.3 percent at $1,345.22 an ounce as the dollar ticked up against the euro ahead of hotly anticipated U.S. non-farm payrolls data, which would further give fresh clues on the outlook for U.S. interest rates.

Stronger than expected numbers could shore up expectations for the Federal Reserve to press ahead with interest rates hikes this year thus increasing the opportunity cost of holding non-yielding bullion

The dollar rose 0.2 percent against the single currency in early trade, though it remained on track for a seventh straight weekly loss. Its early signs of strength pressured gold, which is priced in the U.S. unit. Once data was out, gold didn’t show that great reverse effect as expected.

 Gold ended the week little changed, after rising in six out of the last seven weeks and hitting its highest in 17 months last week at $1,366.07.

 Data released was as follows -   

• Nonfarm payrolls and unemployment rate- non-farm payrolls grew by 200,000 in January and the unemployment rate was 4.1 percent, while wages saw their biggest jump since the end of the Great Recession, the Bureau of Labour Statistics said in a closely watched report Friday.

• Hourly Earnings- More importantly, average hourly earnings increased 2.9 percent on an annualized basis, the best gain since the early days of the recovery in 2009. In addition to the solid payroll growth, average hourly earnings were up 0.3 percent for the month, matching estimates and reflecting an annualized gain of 2.9 percent. That was the best since mid-2009 as the two-year economic slump was coming to a close. However, the average work week fell two-tenths to 34.3 hours.

Within the jobs report, Wall Street and policymakers are watching wage numbers closely. While job gains have been solid and consistent, salary growth has been elusive. This report could change the narrative and might push the Fed to get more aggressive with interest rate hikes.

The Fed held interest rates unchanged after its latest policy meeting this week but raised its inflation outlook and flagged "further gradual" rate increases.           
 
During the December meeting, the Federal Reserve said that it expects that economic conditions “warrant gradual increases,” in the federal funds rate, and added that inflation declined in 2017 and was running below 2%.

Should the Federal Reserve reaffirm expectations for three rates hikes, bond yields could surge.
Some market participants warned, however, that the yellow metal may face a period of weakness as physical gold demand is expected to decline as seasonality is starting to fade ahead of the Chinese New Year.

With many other asset classes already at record price levels, there is a risk of corrections either while geopolitical developments unfold or as inflation and interest rates rise to the extent that investors take profits. Investors may well see gold as offering a relatively cheap safe haven while corrections unfold in other markets

Now gold has already broken above its 2017 high of $1357, as we had expected, before retreating over the past few days. It has now taken out some short-term support levels in the process, but the key support levels such as $1335 and $1325 are still intact, so the long-term technical bullish outlook remains in place for the time being. If we are going to see new highs for the year in the coming days, then gold will have to break back above those short-term broken levels, which are now acting as resistance. Among these, $1344/45 is an interesting level to watch today. If there’s acceptance above it then don’t be surprised to see gold go back above $1357 – the 2017 high – soon. And if gold were to get back to these levels then it would increase the probability of it reaching for liquidity that is resting above the 2016 high of $1375 next. On the flip side, if $1335 gives way first, then one will have to consider the bearish argument, more so if it also goes below $1325.

$1375 an ounce - A Crucial Mark for gold

This past week will be remembered for the cracks it revealed in the global monetary and trade building. At the Davos conference, the expression became unusually vociferous and purposeful with accusations and threats flying in all directions. Contradictory statements being mocked at and investment opportunities being knocked at.

The one thing the brewing currency and trade wars are likely to inspire among the local populace is strong gold and silver demand in both its physical and paper forms. Speculators will be looking to capitalize on currency and market instability while private and institutional investors are likely to step up their hedging strategies.

The inverse relationship between the dollar and gold has gathered strength both from the administration’s protectionist policies and the massive increase in deficit spending projected to result from recent changes to U.S. tax law. Equities remain strong, but the dollar has fallen, as might be expected, and gold prices have benefited with the drop in the U.S. dollar.

The price of gold rose 13% last year, about half as much as the Dow Jones Industrial Average and less than half as much as the Nasdaq Composite. On Thursday it reached a 12-month peak at over $1,362 an ounce, following what have now been characterized as misconstrued comments by U.S. Treasury Secretary Steven Mnuchin on the Trump administration’s view that a weak dollar is a positive for U.S. exports.

With potentially conflicting comments, the weakness of otherwise of The U.S. dollar from U.S. Treasury Secretary Steve Mnuchin and President Trump, the gold market didn’t know which way to run. 

In morning trade on Thursday, gold jumped to its best level since August 2016 touching a high of $1,365.40 an ounce after comments from US Treasury Secretary Steven Mnuchin at the World Economic Forum in Davos Switzerland sent the dollar lower.

Mnuchin had to backtrack, but not particularly convincingly, on his weaker dollar being beneficial to the U.S. economy statement lest he be accused of talking the dollar down in conflict with U.S. assurances that it would not do so. 

The dollar was on track for its biggest weekly decline since May. President Donald Trump’s comments on Thursday that he wanted a “strong dollar” failed to lend much support, a day after Treasury Secretary Steven Mnuchin said a weaker greenback would help short-term U.S. trade balances.

President Trump’s Davos statement suggested he was in favour of a stronger dollar, contrary to his earlier position on the currency, and following this the dollar rose, and gold fell on Thursday.
The metal reversed course in the afternoon after US President Donald Trump told CNBC that Mnuchin’s comments had been misinterpreted:

“The dollar is going to get stronger and stronger and ultimately I want to see a strong dollar,” Trump said.

Gold prices rose on Friday, after falling from 1-1/2-year highs in the previous session, as the dollar remained weak despite U.S. President Donald Trump backing a stronger currency.
Spot gold had climbed 0.6 percent to $1,355.16 per ounce during Friday trading hours.

 The US dollar reverted to lower levels in Friday afternoon trade in the U.S. and gold rose back above $1,350 before activity in the futures markets and gentle dollar support brought gold back to heel and the yellow metal ended the week a fraction under the key $1,350 level.

Gold and the US dollar usually move in opposite directions and the greenback has declined sharply against major currencies since Trump's inauguration. The euro has gained 15% against the US currency, the British pound more than 13% and the Canadian dollar nearly 8% in little over a year.

Gold has gained more than $100 an ounce since mid-December. Large-scale speculators increase their exposure to gold on derivatives markets by doubling net long positions – bets that gold will be more expensive in future – in the space of three weeks to the equivalent of 20m ounces.
Retail and institutional investment in gold-backed exchange traded funds (ETFs) also continues to grow.

According to data compiled by Bloomberg ETF vaults now hold around 2,250 tonnes, the most since May 2013, as investors piled in ahead of a US government shutdown.
         
The break above $1,330 has given fuel to gold's rally and the first target of this movement could be seen at $1,375 and if it crosses this mark then the rally could continue with targets at $1,390 and potentially at $1,415.

To an impartial (relatively) external observer of the market, the gold price did appear to be trying to rebound back above $1,350 but kept being knocked back again.  Whether it can build sufficient momentum to breach the $1,350 level permanently remains to be seen, but one suspects it will do so barring any major adverse news or data.

Concerning issue for Gold

The positive effects of a year end are seen hovering around the yellow metal at the beginning of 2018 too. Gold held a strong finishing in 2017, up by 13.5 percent according to World Gold Council.  Gold’s annual gain was the largest since 2010, outperforming all major asset classes other than stocks.

Contributing to this gain was a
• Weaker U.S. dollar
• Stock indices hitting new highs
• And geopolitical instability

All of these combined created an atmosphere of geopolitical and economic uncertainty, thus benefiting gold.

The uncertainties haven’t seemed to calm down, and hence gold continues its rally in the first month of the year. Gold continued to gain some positive traction through the early European session and was seen hovering around 4-month tops touched last week.

The US Dollar sank to fresh three-year lows, below the 90.00 round figure mark and was seen benefiting dollar-denominated commodities - like gold.

Meanwhile in the U.S. some risk-aversion trade has eventually provided an additional boost to the precious metal's safe-haven appeal.

With the USD still struggling to gain any respite, the commodity seems all set to build on its bullish momentum and head back towards testing September 2017 highs

While we see gold touching monthly highs, we shouldn’t forget a concerning issues- What if markets collapse? Well, then  it  could suffer collateral damage as institutions and funds struggle for liquidity and have to sell good assets to stay afloat.

A similar situation had surfaced in 2008 when the stock market collapsed, but gold comparatively has recovered faster than equities and since then went to be its strongest bull market ever with prices rising to new heights of over $1900 an ounce

Now that god prices have reached $1350 an ounce, whether it stabilises there, rallies or gets pulled back--- depends on the U.S. dollar and Whether the U.S. market will allow it to stay there.

Many competitors for gold in 2018

Gold began 2018 on a firm note on Tuesday after prices hit their highest in more than three months, supported by technical factors after breaking above $1,300 an ounce last week.

Spot gold rose 13 percent last year to mark its best annual performance since 2010. A wilting U.S. dollar, political tensions and receding concern over the impact of U.S. interest rate hikes fed the rally.
The greenback, in which gold is priced, had its worst performance since 2003 last year, damaged by tensions over North Korea, questions over Russian involvement in U.S. President Donald Trump’s election campaign, and persistently low U.S. inflation.

 The dollar’s drop to three-month lows versus a basket of currencies on Friday lifted gold to its highest since mid October. In the last couple of weeks, trade has been relatively thin, yields have been under pressure and the dollar as well, so gold has profited from that.

Preceding real yields, dollar is the most important driver for gold. And it was the dollar’s weakness, which even a Fed rate hike was unable to pull down gold prices. Even though the rates are hiking, the dollar I not benefiting from it.

On the other hand, Gold has clearly benefited from lower U.S. yields and a much weaker U.S. dollar into the year-end. Gold has risen more than $70 from nearly five-month lows hit in mid-December.
More than half of the $70 rally came in the last week, during the holiday period.

However, on Wednesday there was a slight halt to this rally as we saw the dollar strengthening over the release minutes of the FOMC meeting (that was geld on Dec 12-13)

The Fed’s minutes acknowledged the U.S. labor market’s solid gains and the expansion in economic activity, even as they affirmed policymakers’ worries about persistently low inflation. That suggested the central bank will continue to pursue a gradual approach in raising rates but could pick up the pace if inflation accelerates.

Fed officials also discussed the possibility that the Trump administration’s tax cuts or easy financial conditions could cause inflation pressures to rise, leading to some dollar-buying, analysts said
The dollar rallied on Wednesday on upbeat U.S. manufacturing and construction data and after minutes from the Federal Reserve’s last policy meeting showed the central bank remained on track to raise interest rates several times this year.

Snapping a three-week losing streak, the dollar hit session highs against the euro and yen after the minutes from the Fed’s Dec. 12-13 meeting. The dollar index posted its largest daily gain in more than two weeks.

Gold eased from an earlier 3-1/2 month high on Wednesday and was on track for its first day of losses in nearly three weeks as a firmer dollar pressured assets priced in the U.S. currency.

Currently, gold seems to rise steadily in 2018. There are many important competitors for gold that will surely play a significant role in its price movements-
• Equities- The biggest competition for gold in the New Year will be equities, but if gold prices continue to hover over $1,300 then investors would surely be interested in diversifying their portfolio towards the yellow metal.
• Bond yields- Another important factor for gold next year will be bond yields, but noting that he sees limited impact in the long-term.
• Inflation- With inflation expected to rise, that investors need to be more clear as to real interest rates will push higher or remain at current low levels.

Looking ahead, it is difficult to determine if gold will hold these holiday gains when traders come back in full force in the New Year.

Some clear drivers for Gold

A lack of clear drivers has kept gold prices between $1,265 and $1,300 an ounce throughout November, its narrowest monthly range in 12 years. Despite the volatility overnight, it was another subdued session across the precious complex in Asia, with gold struggling above $1,285 an ounce consistently.

The dollar was firm after Wednesday’s uplift on third-quarter U.S. economic growth revised upwards to 3.3 percent, making dollar-priced gold costlier for non-U.S. investors.

Global equities were on course to finish November with a 13th consecutive monthly gain, though a dive in U.S. tech stocks left investors wondering whether the longest global equity bull run in living memory might be starting to splutter.

Also denting investor optimism and signalling underlying support for gold going forward, investors were growing wary about the staggered progress of U.S. tax reform legislation.

Gold drew a certain degree of support in early Asian-Pacific trading from the most recent North Korean missile test, even though the yellow metal did not charge ahead on the latest geopolitical threat, said MKS (Switzerland) S.A.

North Korea said it now has a missile capable of striking the U.S. Wednesday's Asian session adhered to the recent range-bound status quo, however, afternoon headlines out of North Korea did give price action a modest boost.

The latest advances in missile technology in North Korea should provide an underlying bid tone for bullion, with the threat of a potential strike on the U.S. mainland increasing (albeit largely theoretical).

In recent times, such geopolitical tensions have resulted in only short-term price buoyancy and without further headlines to drive interest; participants will turn focus to the upcoming U.S.

Gold prices were down on Wednesday over a statement released by US Federal Reserve chair woman Janet Yellen that economic growth was broad based. This seemed to have convinced investors that rates would go higher soon.

This sentiment was further backed by a strong US economic data which strengthened the dollar further. In response the dollar pushed to a one week high of 93.44 late on Wednesday which further weakened the demand for the yellow metal.  Indeed, spot gold prices fell to $1281.75 per ounce on Wednesday, the lowest since November 23.

How ever amidst geopolitical tension, gold once again regained its safe have status. Reports that North Korea had fired a missile last week, lent support to gold and it moved slightly up in early trading on Thursday. Gold prices have been up and down due to a battle between the positive outlook on a US interest rate and concerns over North Korea firing a missile again.

By Thursday, gold prices were strengthened over a weak US dollar. Moreover, Gold was seen spiking as stocks and the dollar sank after headline reports from ABC that Michael Flynn promised "full cooperation to the Mueller team" and is prepared to testify that as a candidate, Donald Trump "directed him to make contact with the Russians."

Gold and U.S. Treasury prices have rallied to their session highs in late-morning action Friday, with T-Bonds and T-Notes futures posting strong gains, on news reports that former Trump  Administration national security adviser Michael Flynn is set to cooperate with the special prosecutor overseeing the probe of Russian tampering with the U.S. presidential election.

Traders were extrapolating this news to potentially mean that President Trump may be in very serious trouble, if he did indeed collaborate with the Russians on the U.S. election tampering. The U.S. stock market quickly sold off on this news, which also helped to lift safe-haven gold.

A follow-through USD weakness, coupled with a notable slowdown in China's manufacturing activity, as reported by a private survey, was seen lending some additional support to the precious metal.

Despite the supporting factors, resilient US bond yields continued exerting some downward pressure and kept a lid on any meaningful up-move for the yellow metal

Gold caught between Rally and Rebounce

Gold headed for a weekly decline as we saw prices dropping over strengthening U.S dollar.

Gold prices nudged lower on Thursday, with investors taking profits after gains of nearly 1 percent in the previous session on weaker U.S. economic data and concerns among some Federal Reserve policymakers over lower inflation.

Gold had surged higher on Wednesday, buoyed by the US Federal Reserve’s (Fed) concerns about persistent low inflation which saw the dollar slide.

The dollar suffered its biggest drop in five months on Wednesday after minutes from the U.S. Federal Reserve's showed"many participants" were concerned inflation would stay below the bank's 2 percent target for longer than expected.     

The greenback was still nursing losses on Thursday,supporting dollar-priced gold by making it cheaper for non-U.S.investors.

Spot gold was 0.1 percent lower at $1,290.82 perounce by 1313 GMT on Thursday. Gold still needs that one boost to achieve a support price of $1325 an ounce.

Trading was lighter than usual on Thursday, with Japanese financial markets shut for a public holiday while U.S. markets would be closed for the Thanksgiving holiday.

In wider markets, Chinese stocks suffered their biggest fall in almost two years, weighing on global equities, denting risk appetite and providing underlying support for gold, seen as a safe haven asset.           

With Chinese stocks down, low yielding currencies such asthe Japanese yen and the Swiss franc remained firmly supportedagainst the dollar.

Earlier in the week, Fed Chair Janet Yellen stuck by herprediction that U.S. inflation would soon rebound, but offeredan unusually strong caveat that she was "very uncertain" aboutthis and open to the possibility that prices could remain lowfor years to come.

After nearly a decade of pumping up the US and global markets, Janet Yellen and team are now starting to show some concern for financial market prices. The FOMC is concerned that they are getting out of hand and are a danger to the US economy.

The minutes of the Fed’s October meeting show that the committee is largely optimistic about the US economy:

“In their discussion of the economic situation and the outlook, meeting participants agreed that information received since the FOMC met in September indicated that the labor market had continued to strengthen and that economic activity had been rising at a solid rate despite hurricane-related disruptions.”

Currently the yellow metal is caught in the middle strong influential factors leaving markets perplexed over a rally or rebound in its movements.

Gold, silver and platinum prices have found bases and look set to remain range bound for now. The lack of any immediate geopolitical tension over North Korea has reduced the need for haven demand. With equities still generally upbeat, the opportunity cost of holding bullion is high, but the fact precious metals prices are not trending lower given the strength in equities is noteworthy. The weaker dollar should help underpin firmer precious metals prices.

Financial history revels that majorly investors would see to traditional financial systems to gain complete benefit of uncertainties. That would show through in traditional assets like shares and fixed income with benefit shifting to those markets that are not perceived to depend on the sanctity of governments and corporations that are prone to excess and can readily find their correlation surge ‘to one’ in the event of heavy market movement.

 This talking point seems to be born out of the skepticism that has arisen through the excessive stimulus and maintenance of extremely low interest rates by the world’s largest central banks.

Gold would also be sympathetic to such a view as the historic, accessible and regulated alternative asset. I think the lack of relationship is due to the premise of the theme rather than a systemic change in Gold’s nature. Either way, we will see this contrast resolved in the weeks ahead.

Rally vs Regression for Gold

It was a decent week for gold as it was up 0.6 per cent on Friday posting a second straight weekly gain.

Gold rose on Friday as the dollar softened on uncertainty about the progress of what would be the biggest overhaul of U.S. taxes since the 1980s.

The U.S. House of Representatives approved on Thursday a package of tax cuts, while a Senate panel advanced its version of the legislation that has President Donald Trump’s backing. The dollar weakened against a basket of six major currencies and was set for its biggest weekly loss in more than a month.

An exhaustion of the equity market is proving to be supportive for gold in the near future.
Though the week ended on a positive note, Monday blues were creating its effect on gold.Gold drifted lower through the early European session on Monday and eroded part of Friday's strong up-move to one-month tops.

Gold eased on Monday due to a stronger U.S. dollar, but remained near a one-month high hit in the previous session on uncertainty over progress on a potential overhaul of the U.S. tax code.

Currently trading around the $1290 region, testing session lows, a modest pickup in the US Dollar demand seems to have prompted some profit-taking off dollar-denominated commodities - like gold.

However,following factors we seen triggering a fresh wave of risk aversion trade in the market-
Breakdown in German coalition talks- The dollar index, which tracks the greenback against a basket of six rival currencies, gained 0.2 percent as the euro faltered after German Chancellor Angela Merkel’s efforts to form a three-way coalition government failed, raising concerns over political uncertainty in the euro zone’s largest economy.

Sliding US Treasury bond yields- The latest US political jitter from subpoenas on Trump campaign staff and skepticism over the passage of a historic US tax cut legislation might continue to lend support and help limit deeper losses, at least for the time being.

These factors combined have underpinned the precious metal's safe-haven appeal.

Currently gold is once again been pulled between bullish and bearish markets.A little bit of momentum is sneaking in this market and, a little bit of volatility is slinking up in other financial markets.

If we see the ear market for gold , we can support a price drop keeping in mind the US interest rates, higher US interest rates with the target range for the Fed Fund rate likely to be moved up by 0.25% to 1.25%-1.50% at the next Federal Reserve meeting on December 13.  US interest rates are also expected to be hiked another three times next year, adding more downside pressure on gold.

On the other hand, a strong bull market is supported by the fact that Gold is starting to regain its safe-haven shine as political upheaval increases and investors become more risk-averse. Venezuela is on the verge of default after missing payments on sovereign debt and bonds issued by the state-owned oil firm PDVSA, while Zimbabwe is gripped by yet another political crisis after President Robert Mugabe was placed under military custody while the army took control of the streets of Harare.

And in a sign that investors are starting to pare back on risk, investors are shunning high-yield bonds.

In absence of any major market moving economic releases, investors would keep a close eye on the US tax reform developments. Meanwhile, broader market risk sentiment and the USD price dynamics would remain key determinants of the commodity's movement at the start of a new trading week.

Gold Expected to Drift Lower by Year End

Firstly, wishing everyone a very Happy Diwali and a Prosperous year ahead.

And indeed it was a Happy Diwali for domestic jewellers, as the slump in gold demand had finally gained momentum this October.

Demand for gold jumped in India this week on account of Dhanteras and Diwali, but high prices took some sheen off the yellow metal's lure during the key festival period this year.

Demand in the world's second largest gold consumer generally rises during the final quarter as the country welcome the festive and wedding seasons, where buying bullion is considered auspicious and propitious.

Though a lull was witnessed in gold demand during Dussehra, it significantly improved during Dhanteras and Diwali.

Gold prices spurted by Rs 290 to 3-week high of Rs 31,000 per 10 grams on the eve of Diwali at the bullion market on increased buying by local jewellers to meet festive demand.

Demand was expected to be even better, if global prices had shown similar movements. However in Asia and other international markets, gold prices were seen falling down.

CHINA - Elsewhere in Asia, there was a slight uptick in demand for physical gold, with benchmark spot gold rates headed for a weekly decline after touching a one-week low of $1,276.22 an ounce on Thursday, pressured by a firmer dollar.

However, investors remained cautious, awaiting direction on economic policy and market reforms during the 19th Communist Party Congress in China which kicked off on Wednesday and were also focused on the upcoming elections in Japan.

In top consumer China, premiums charged ranged between $8 and $12 per ounce over the benchmark this week, compared with $9-$14 a week earlier

JAPAN - Gold hit its lowest in more than two weeks on Monday as expectations that Japan’s ultra-loose monetary policy would stay in place after Shinzo Abe’s election victory at the weekend lifted the dollar to a three-month high versus the yen.

Japanese Prime Minister Abe’s win also fed into positive sentiment in equity markets that were buoyed last week by fresh optimism about tax cuts in the United States, curbing interest in gold as an alternative asset.

U.S. DOLLAR & U.S. ECONOMY- Gold prices touched the lowest in more than one week on Thursday, as the dollar stood firm on rising U.S. Treasury yields, with investors focusing on who would replace Janet Yellen as the next chair of the Federal Reserve.

Financial markets are now awaiting guidance on who will succeed Federal Reserve chair Janet Yellen, whose term expires in February.

U.S. President Donald Trump is considering nominating Fed Governor Jerome Powell and Stanford University economist John Taylor for the central bank’s top two jobs. Powell is considered less hawkish than Taylor, who is seen advocating higher interest rates.

Moreover, the economy expanded at a modest to moderate pace in September through early October, despite the impact of hurricanes on some regions, the Fed said its latest snapshot of the U.S. economy thus hinting markets that the US economy is doing well which will further create a downward pressure on gold.

The dollar had already posted its biggest one-day gain in a month on Friday after the U.S. Senate approved a budget blueprint for the 2018 financial year, allowing Republicans to pursue a tax-cut package without Democratic support.

The dollar hit its highest in about two weeks versus the yen, supported by this week's rise in U.S. bond yields, with U.S. President Donald Trump set to make a decision in the "coming days" on Yellen, who is also one of the five candidates being considered for the job.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold by increasing the opportunity cost of holding non-yielding bullion.

Tensions on the Korean peninsula, however, continue to weigh upon gold and the metal could drift down towards the $1,250 level by early December weighed down by the prospect of a further increase to U.S. interest rates in December.

Gold Prices May Surge

Gold was once again seeing pulled and pushed by various factors doing rounds in the market. Where one side gold was seen consolidating by a strong dollar price on Wednesday, on the other hand on Friday it once again picked momentum over the North Korean crisis.

Gold prices fell for the fourth consecutive week with the precious metal down nearly 0.5% to trade at 1271 ahead of the New York close on Friday. The losses come amid what seems to be an unstoppable rally in broader risk assets with the major U.S. equity indices up more than 1% on the week.

A surprise U.S. Non-Farm Payroll report on Friday showed the economy shedding some 33K jobs last month, missing expectations for a gain of 80K. However, a closer look at the data revealed underlying strength in the labor markets with labor force participation rising to its highest level since March of 2014 at 63.1%. Wage growth figures were also stronger-than-expected with average hourly earnings posting a 2.9%  gain – up from a previous upwardly revised 2.7% . With the recent barrage of hurricanes largely accounting for the weak headline figure, the broader labor market outlook remains firm and keeps the FOMC on target for a December rate hike.

The dollar earlier rose to a more than two-month high against the yen and seven-week high against the euro as wage data from the September labour market report was seen as a sign of potentially improving inflation.

The greenback jumped as high as 113.43 yen, the highest level since July 14, before dropping to 112.71. The euro fell to $1.1670, the lowest level since Aug. 17, before rising back to $1.1726.
The U.S. dollar tumbled on Friday on a report that North Korea is preparing to test a long-range missile, overturning earlier gains after the government’s jobs report for September showed an unexpected rise in wages.

RIA news agency cited a Russian lawmaker’s making comments on the missile test, which North Korea believes can reach the U.S. West Coast.

Amidst these tumbling and rising influencers, gold prices are expectedto surge not only in the international but also domestic market given the upcoming and biggest festival for gold in India.
A few reasons why weexpected gold prices to shoot are:

10 reasons why gold will surge:

1. Gold will follow inflation which will increase strongly eventually leading to hyperinflation.
2. Real interest rates will be negative which favours gold. This was the case in the 1970s when gold rose from $35 to $850 despite rates in the mid-teens.
3. China’s accumulation of gold on a massive scale and potentially introducing a gold for oil payment system
4. Inflation will increase institutional gold buying substantially. Gold is today 0.4% of global financial assets. An increase to 1% or 1 1/2% would make the gold price go up manifold.
5. With relatively low global demand today, annual goldmine production of 3,000 tonnes is easily absorbed. With falling production, the coming upturn in demand can only be met by much higher prices.
6. Demand for gold will rise in the domestic market during Dhanteras and Diwali. After Akshaya Tritiya, gold sales are seen to be highest on Dhanteras and this rising demand might push gold prices further. 

September proves to be the worst month of 2017 for gold so far

September was an action-packed month, with North Korean rockets and a succession of monster hurricanes all coming at the markets almost at the same time. Not forgetting the comments coming out from the Federal Reserve that contributed to thefrenzy by giving a clear signal of a December rate hike. In the process, it perhaps single-handedly helped the dollar index recover from a three-year low hit earlier in the month.

Amid a resurgent dollar, the month of September proved to be worst for gold since November 2016. However, as geopolitical tensions soar, with the standoff between the U.S. and North Korea probably topping the list, demand for precious metals surged with Gold ETF holdings rising most since Feb 2017.

Last week, gold prices ended lower on Friday as weak U.S. consumer spending and inflation data did little to alter expectations for a third interest rate increase by the Federal Reserve this year.
The dollar has risen in recent weeks as investors grow more optimistic about the prospect for U.S. rate hikes and tax cuts that some expect to boost the U.S. economy.

Data on Friday showed that
• U.S. consumer spending barely rose in August.
• Inflation also remained sluggish with the core personal consumption expenditures price index rising 1.3% year-on-year, slowing from 1.4% in July.
• The core personal consumption expenditures price index is the Fed’s preferred inflation measure and has a 2% target.

The data did little to temper rate hike bets after Yellen indicated earlier in the week that the central bank was sticking to plans for a third rate hike this year and three in 2018.

The metal recorded its biggest monthly decline so far this year in September, despite netting a quarterly rise of nearly 3 percent partly due to geopolitical tensions including North Korea’s missile tests.

The U.S. currency recorded its best week of the year on Friday, despite benign inflation data for August, as expectations that the Fed would raise interest rates again in December loomed large after Fed Chair Janet Yellen said the central bank planned to stay on its current rate hike path.
Higher interest rates tend to boost the dollar and push bond yields up, weighing on greenback-denominated gold

The dollar’s rise paused on September 28 and 29, but was seen gaining momentum on Monday morning.

Gold slipped to its lowest in nearly seven weeks early on Monday, 2nd October as the U.S. dollar rose and equities gained, while growing expectations for a Federal Reserve interest rate hike in December also added to pressure.

Spot gold was down 0.3 percent at $1,274.90 an ounce by 0353 GMT, after earlier touching its lowest since mid-August at $1,273.55.

Gold prices fell in Asia on Monday as the dollar gained and the euro dropped as investors mulled the implications of the disputed referendum on Catalonia independence in Spain on the euro zone and a sentiment survey out of Japan in a thin trading day with China's markets shut for the week and holidays regionally expected to see thin flows.

Elsewhere,The Bank of Japan released its Tankan survey for the third quarter with investors focused on the large manufacturer’s index as it rose to 22, compared with an expected reading of 18.

This week, comments by Fed Chair Janet Yellen will be closely watched for further hints on the timing of the next rate hike along with Friday’s U.S. jobs report. Market watchers will be looking ahead to remarks by European Central Bank President Mario Draghi on Wednesday.

Gold, silver and platinum prices continue to correct and the stronger dollar and lull in tensions over North Korea, seem to be weighing on prices. We would let the corrections run their course, but the North Korean situation is likely to escalate again at some stage, so the next rally in gold prices may not be that far away.

Stronger dollar pulls down gold prices

But the metal still recorded its second consecutive weekly decline after the Federal Reserve on Wednesday reiterated that it expects to deliver another rise in interest rates by the end of the year.

Prices for the yellow metal dropped about 1.7 percentlast week, posting their second consecutive weekly decline.

Gold futures witnessed nominal gains, with heightened tension pegged to North Korea credited with providing a modicum of support to the haven.

Late Thursday, North Korean officials threatened to test a hydrogen bomb over the Pacific Ocean, escalating tensions in the Korean Peninsula. North Korea’s leader Kim Jong Un criticized President Donald Trump for remarks made during the U.S. leaders U.N. speech Tuesday, in which he threatened to “totally destroy” Pyongyang if provoked.

Gold prices would have crashed to $1,265.60 if North Korean risk didn’t resurface and would have taken prices back to levels last seen more than a month ago.

But the Fed, which indicated Wednesday that it still plans to raise rates once more by the end of the year, was the reason why gold prices fell.

The central bank also announced that a plan to unwind its more than $4 trillion balance sheet would commence in October. Both policy measures can have the effect of tightening monetary policy and raise rates. Higher rates in turn can make gold, which doesn’t bear a yield, less attractive compared with assets with rising yields.

Gold opened lower in early Asian tradin as weekend uncertainty passed without incident. Merkel’s win in the German federal elections and a quiet news weekend on the North Korean front, saw the US dollar opening stronger and gold’s weekend safe-haven premium eroded from Friday

The spot gold price fell during Asian morning trading hours on Monday September 25, as the dollar strengthened and a quiet weekend on the North Korean front saw a further deterioration in any risk-off sentiment.

Gold prices dropped on Monday, andhovered around one-month lows hit last week, weighed down by afirm U.S. dollar and as concerns over the Korean crisis easedover the weekend.

Merkel's win in the German federal elections and a quietnews weekend on the North Korean front, saw the U.S. dollaropening stronger and gold's weekend safe-haven premium erodedfrom Friday.

The euro slipped on Monday after German Chancellor AngelaMerkel won a fourth term in a weekend election, but facedleading a much less stable coalition in a fractured parliamentas support for the far-right party surged.                    

Last week, the Fed announced it would begin trimming down its $4.5 trillion in assets and signalled it will likely raise rates again this year. With the market increasingly expecting another US rates rise by year-end, this should continue to lend support to the dollar tis pushing down gold prices further.

Markets seem difficult to trade

After weeks of relative stagnation, gold traders were suddenly awoken to a rise in trade volume and price volatility. In a span of one minute, gold futures contracts equaling more than 2 million ounces traded -- about 20 minutes before Federal Reserve Chair Janet Yellen was to address a gathering of policy makers in Jackson Hole, Wyoming.

The occurrence shook the market after a measure of 60-day volatility on the metal touched the lowest since 2005.

 Gold had been lying stable amid political disharmony in Washington, worries about rising U.S. interest rates and escalating geopolitical tensions between the U.S. and North Korea.

Investors were not expecting Yellen to make a policy statement anyway, but some market participants were hoping for some signal on the Fed's planned balance sheet reduction, if not on the outlook for U.S. interest rate hikes.

Yellen’s speech, which lacked clear rate cues, did little to calm the price swings and damped expectations of a rate hike this year.

Federal Reserve Bank of Dallas President Robert Kaplan helped fuel the sharp move before Yellen’s speech Friday by saying the central bank can afford to be patient on raising interest rates even while noting it should shrink the balance sheet soon.

These comments were dovish and pushed gold prices higher. But then when Yellen didn’t mention monetary policy, things started to stabilize again.

The dollar fell to a three-week low against the euro and a one-week trough versus the yen on Friday after Federal Reserve Chair Janet Yellen made no reference to U.S. monetary policy in her speech at the annual central bank research conference in Jackson Hole, Wyoming.

Instead, Yellen focused on U.S. regulations, saying those put in place after the 2007-2009 crises had strengthened the financial system without impeding economic growth, and any future changes should remain modest.

Dollar had weakened because Yellen "didn't say anything positive for the U.S."

The dollar has been trading higher for most of the week after sharp losses in recent months.

The dollar fell to a one-week low of 109.23 yen after Yellen's speech. It was last down 0.2 percent at 109.33.

The euro, meanwhile, hit a three-week high against the dollar and was last up 0.6 percent at $1.1862.
Focus now shifts to the coming week wherein a few interesting events are lined up.
The yellow metal may remain range-bound in the $1,290s ahead of the U.S. Labor Day holiday on September 4th.

Labor Day can mark a variation point in various economic parameters, including the gold price.  There are also U.S. Fed and ECB policy meetings that will be held in the second half of September and the U.S. FOMC one in particular will be viewed with particular interest vis-à-vis gold given observers will be looking for clues on the likely date for the next interest rate rise decision and/or Fed balance sheet reductions.  The U.S. economy is not showing positive developments as well as forecast by the Fed so there are some who believe any rate increase will now likely be put off until next year.

The period that lies between the Labour Day and The FOMC meeting will be crucial for gold as the markets reactions all depend on this interim period.

Market reaction after Labor Day, and before the FOMC meeting will probably see gold react positively or negatively to economic data (fact or supposition)  coming out in the interim, which may hold gold back from bursting through $1,300, which it would likely do if the FOMC looks like delaying any interest rate rise decision beyond the calendar year end.  An indication that the Fed will indeed continue its tightening programme in December may pull down the gold price , but perhaps not affect its on-going progress in the medium term.

Similarly the ECB policy meeting in Frankfurt, which comes just after the FOMC meeting, will also be followed with strong interest, but may not see any further tightening while the Euro remains at current levels against the dollar.

We still see gold rising through $1,300 and perhaps hitting $1,350 by the year-end, but sometimes Q4 can prove to be a weak period for precious metals, so we are not wholly confident on this prediction.  Currently markets seem difficult to trade!

Fundamentals for Gold are strong

As we have noticed in the past months, it was mainly the dollar and Fed actions that were influencing gold prices. But last week geopolitical tensions were fueling gold prices.

Gold was on the move in the past week after a display of threat of the military force by the U.S. and North Korea pushed the safe-haven metal back onto investors' radar.

President Trump said on Tuesday that threats by the Hermit Kingdom would be met by "fire and fury," which was followed up a day later by a North Korea threat to bomb the U.S. territory of Guam.
The yellow metal climbed to $1,285/oz as tensions rose this week, the best level in about two months, driving year-to-date gains to around 11.5%.

Gold has always been considered as a safe haven asset in times of uncertainty. The current rally in gold prices is because of the rise in safe haven demand for gold.

President Donald Trump intensified up his orotundity toward North Korea and its leader on Thursday, warning Pyongyang against attacking Guam or U.S. allies after it disclosed plans to fire missiles over Japan to land near the U.S. Pacific territory.             

Gold prices rose early Wednesday amid rising tensions between the United States and North Korea after the North responded to warnings from U.S.

President Donald Trump with a threat to strike the U.S.territory of Guam.   

Though prices rose on Wednesday and Thursday, by the end of the week, prices more or less stabilized. 

Gold prices held steady after touching their highest in more than two months on Friday, as rising tensions between the United States and North Korea triggered safe-haven buying.

Geopolitical risks can boost demand for assets considered safe-haven investments, such as gold. Although more hostile magniloquence between the U.S. and North officials would temporarily boost gold prices, we see outright military action as unlikely and upward pressure on gold prices stemming from the confrontation as limited.

Meanwhile, a lower-than-expected rise in U.S. consumer prices in July suggesting benign inflation could persuade a cautious Federal Reserve to delay raising interest rates until December.                

Gold is seen being stable over easing out of the geopolitical tensions. But still, a minor escalation over the tensions can once again trigger gold prices. Hence the situation currently is quite unpredictable. 

On the other hand, The Fed expects "very weak" U.S. inflation to rebound thanks to a slide in the dollar and to a labour market that keeps getting hotter, one of the Fed's most influential officials said in comments that reinforce its gradual policy-tightening plan

Gold edged down from two-monthhighs on Monday, 14th August, , as the dollar inched up from last week's lowsand investors kept a close watch on any developments on tensionsover the Korean peninsula.

Summing it up we can say that though the threats from the Koreans have lowered, the fundamentals for gold still seem to be strong.

Bullish trends for Gold

Gold prices were holding well up during the past week breaking the long term downward trend that started off in 2011.  A weaker dollar and lower treasury yields has been supporting gold prices lately.
Gold steadied on Thursday after nearing a seven-week high in the previous session as investors awaited U.S. jobs data for further clues on the outlook for interest rate rises.Spot gold was 0.1 percent higher at $1,267.30 per ounce.

Gold rallied through most of July as the dollar fell on reduced expectations for a third U.S. rate rise this year. Inflation has been contained even though the labor market appears to be in its best shape in many years and despite double-digit U.S. earnings growth in the second quarter.

Reduced rate rise expectations tend to weaken the dollar, making dollar-priced gold cheaper for non-U.S. investors.

But by the end of the last week, gold prices were slightly bullish after the release of U.S labor report.
The latest non-farms payroll report on the US employment market was published, showing the economy added 209,000 jobs last month and that unemployment was low at 4.3 per cent, its lowest since March 2011.

This smashed economist estimates that 183,000 new jobs would be added. In response the dollar has popped higher, says Reuters.

The dollar is inversely correlated to the gold price, which is often held as a hedge as the global benchmark reserve currency.

Stronger economic data also raises the prospect of the Federal Reserve voting for a third rate rise this year in either September or December (rate rises tend to hurt non-income yielding assets like gold).
In the two hours after the report came out the gold price slumped by around $13, or one per cent, to $1,255 an ounce.

Gold's recent trend has been largely defined by the fortunes of the dollar, which is good news for gold bugs as the greenback was languishing near 15-month lows earlier this week.

The safe haven metal dropped from $1268 as the July non-farm payrolls figure came-in at 209K, beating the estimated figure of 180K. The jobless rate dropped to 4.3%, while the June trade deficit narrowed more than expected. Wage growth rose to 0.3% as expected.

Now the influential factor for gold remains that whether the dollar continues to strengthen or it may go weaker, which is likely to mean the US Federal Reserve has to remain less than hawkish. Apart from these financial drivers, any pick up in geopolitical issues could also fuel the rally.

Gold likely to be embraced as a Safe Haven

Gold prices have been steadily on decline since early June when the metal traded just shy of $1,300 an ounce.

This week too gold ended on a negative note even though the week began with a different picture.
Gold prices were lying stable at $1,225.24 per oz on Wednesday morning after a prices rise on Tuesday, closing up 0.2%.

However on Friday, gold dipped $5.60 to $1219.10 in Asia before it bounced back to $1227.00 just after morning’s jobs data was released, but it then fell to a new session low of $1207.30 in late morning New York trade and ended with a loss of 1%.  

Spot gold was down 0.7 percent to $1,215.81 per ounce by 1336 GMT, after touching an intraday low of $1,214.40, the weakest since May 9. It has dropped about 2 percent this week and is set for its biggest weekly fall since the week of May 5.

Gold hit a two-month low on Friday after stronger than expected United States jobs data increased the likelihood of another U.S. interest rate increase.

U.S. hiring picked up in June while wage gains disappointed yet again, a mix that may continue to be a puzzle for the economy and policy makers, Labor Department figures showed Friday.

While payroll gains were broad-based and boosted by the biggest jump in government jobs in almost a year, wages were below forecasts, even with the jobless rate close to the lowest since 2001.

It is quite evident from the unrelenatble hiring in June that thelabout market is resiliebt and may lead to a stronger acceleration in wages. At the same time, the month’s data could also reflect a new graduating class and the summer’s seasonal workers joining the labor force -- some likely welcomed by employers who are struggling to find workers.

The data suggested that the job market is attracting people off the sidelines, as the size of the labor force and number of unemployed people increased, indicating more people are actively looking for work. The number of people who went from out of the labor force to employed rose to 4.7 million, the highest in data going back to 1990.

While wage growth is running below the peak of previous expansions, the figures may be depressed by weak.

U.S. non-farm payrolls jumped by 222,000 jobs last month, the Labor Department said on Friday, beating expectations of a 179,000 gain.          

The data brought negative news for gold traders as there isn’t really anything in this number which is going to put the brakes on an interest rate hike.

Nevertheless, the report marks a relatively strong finish for the labor market in the second quarter that should support continued gains in consumer spending in the coming months. Federal Reserve policy makers raised interest rates last month and reiterated plans to start reducing their balance sheet and increase borrowing costs once more this year.

Recent selling has placed enormous pressure as prices broke through critical support levels.  Much of that selling was a result of a shift in market sentiment as the Federal Reserve and the European Central Bank relaxed their respective multiyear quantitative easing programs.

However, markets remain constructive for gold.The bigger picture for gold is encouraging. Despite the U.S. tightening cycle and VIX bear market, gold has recovered. It appears to be looking ahead to a beneficial endgame.

Gold certainly has a way of getting investors’ hopes up. Most recently, it neared $1,300 per ounce in early June, prompting optimism among bulls about a meaningful breakout to come. Alas, gold prices failed to push through that level, and now sit around the $1,250 mark. There are, of course, bullish and bearish arguments to be made but, on balance, gold is currently facing serious headwinds. That’s not to say, however, that there isn’t a long-term bullish case for gold. There is, but it may take years to play out. Simply put, the world is awash in too much debt, be it household, corporate or government.

According to an October 2016 report by the International Monetary Fund, gross global debt (excluding that of the financial sector) stood at $152 trillion, representing an all-time high 225% of world GDP. This overhang risks prolonged economic stagnation, if not a worse outcome. At some point, central banks will be forced to engineer higher inflation rates to lessen the burden of all this debt. Realizing this, investors can be expected to embrace gold as the ultimate safe haven.