BULLS AND BEARS TO CLASH

                                              By Mr. Prithviraj Kothari, MD, RSBL

 

Over the past year and to be precise, lately, there has been a strong belief in the market that the U.S. is on it way of raising its rates. While evidence of continued improvement in the US economy is not gold-friendly and ultimately acts as an obstacle for the price rise in yellow metal.

Let’s have a quick glance to the important highlights during the last week:

Non farm payrolls data: 
       The most awaited or rather the most influential factor this week was the jobs report. The US created 280,000 new jobs in May, significantly above analysts’ estimates of 222,000 and the highest climb in jobs figures seen in months. US indicators have increased in importance at the moment as the Federal Reserve specifically identified US jobs data as one of the key factors on its decision when to raise interest rates from near zero.
      The unemployment rate was essentially unchanged at 5.5 percent. Private sector job growth has increased 63 straight months, a US record.

EUROZONE:
      In the Eurozone, French trade balance in April was a negative three billion, above forecasts of four billion, while German factory orders month-over-month in April was up 1.4 percent, beating consensus of 0.6 percent. With investor sentiment for gold so weak gold prices may well continue lower, but we do feel this is leading to a better buying opportunity and given developments in Greece and with potential for corrections in other asset classes, it may not be too long before the markets start looking for a safe-haven again.

DOLLAR:
    The dollar jumped to a 13-year high against the yen and gained against most major currencies, cutting the appeal of precious metals as alternative assets. The expectation of an interest rate hike has benefited the dollar and it has enjoyed a dramatic and sustained rally. 

GREECE: 
      Meanwhile in Greece, the country delayed a 300-million-euro repayment to the IMF until the end of June and bundling all the payments together, increasing the risk of a Greek exit from the bloc. 
      Prime Minister Alexis Tsipras reportedly rejected proposals put together by its lenders, arguing that any deal to unlock crucial bailout funds must be based on his own side’s conditions. But the two sides remain “very close” to agreeing a deal, after creditors supposedly proposed lower primary surplus goals.


Geopolitical Tension:
       Ukrainian troops and pro-Russian separatists on Wednesday fought their first serious battles in months and Ukraine's defense minister said an attempt by rebels to take the eastern town of Maryinka had been thwarted.

Post the US job data release, gold prices tumbled as the economy showed strong signs of recovery after a lackluster first quarter. Investors have been barring gold on signs that the economy has grown enough adhesion to damp the need for haven assets, encouraging worry that better progress will push policy makers to raise rates. 

It’s not possible to give a clarity to what exactly the price of gold is going to be tomorrow. Nor it is easy to take a buy call in Silver as the metal continues to follow gold with the risk to the downside. There are many factors that support and upper drive and a contrary lower drive for gold prices.

First, we think about international geopolitical tensions. Second, the uncertainty coming from Greece is still lingering in the minds of traders and captains of industry. Third, strategic or policy-related bullion purchases by central banks remain significantly high: After eight quarters of capital outflows from the ETF industry, the first quarter of 2015 saw a rebound in gold purchases.

However, two factors might hamper the bullion’s technical ascent, reducing the precious metal’s value over time. The first element comes from long-term charts: Gold is still in a long-term bearish trend, which has caused the precious metal to drop 30% in value from the peak reached during the summer of 2011. Second obstacle to higher gold prices: the strong US dollar and the historically negative correlation between the American currency and the yellow metal. To add Hedge funds and money managers cut net long positions in gold and silver during the week ended June 2, U.S. Commodity Futures Trading Commission data showed on Friday.

A stimulating clash awaits for bulls and bears in the coming months! But, as usual, the final word rests with the markets.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1151 - $1191 an ounce	Rs.25,700 - Rs.27,300 per 10g
SILVER	$15.70 - $17.00 an ounce	Rs.36,500 - Rs.39,500 per kg

The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

"Calmness before the big move in Gold and Silver"

http://riddisiddhibullionsltd.blogspot.in/2015/06/calmness-before-big-move-in-gold-and.html

DENOMINATING DOLLAR

by Mr. Prithviraj Kothari, MD, RSBL

Over the fortnight gold has witnessed a severe decline in prices. The first week kicked off with a plunge in gold prices and the same continued this week too. Historically September month has been the best performing month for gold, however this year it kicked off on a negative role as we saw that gold prices have declined by 3%. On Friday, a low of $1225.90 was set when lower than expected Chinese industrial production for the month of August was released. A strengthening US dollar and the expected change to the FOMC's policy have played an important role in this decline in gold prices. Gold has been destabilized by the lethal combination of a stronger US dollar and a supple equities. Adding to it is the lack of inflation in the major economies. 

Let's have a look at major factors which could continue to play negative on gold:

Euro tumbled to multi year lows last week after ECB slashed interest rate by 0.1% across the board as inflation and growth remained a concern.

The surging US dollar has been acting as a bearish factor for the precious metals. The dollar index was at a 14 month high on Friday and was steadily on track to post its ninth consecutive week of gains. A strong US data and a fall in Euro has strengthened the dollar even further and raised expectations that the US Federal Reserve would soon raise interest rates.

On the geopolitics front, U.S. President Obama said Wednesday evening that the U.S. military will use more air strikes against the ISIS terrorists, but will put no troops on the ground in the Middle East. That news was not unexpected and had little markets impact. The Russia- Ukraine cease fire was holding up and the Ukrainian President on Wednesday quoted that most Russian troops have pulled away from the Russia- Ukraine border. 

With geopolitical concerns seems to be easing out, there seems to be little support for gold.

Moreover, Investment demand in Gold has been showing no improvement.  Weak investor sentiment was reflected in the SPDR Gold trust that saw holdings drop 0.32 tonnes to 788.40 tonnes on Friday. Hedge funds and money managers cut bullish futures and option bets in Gold to their lowest in nearly three months, the Commodity Futures Commission said on Friday.

The demand for gold globally has not picked that well this year. Asian countries aren't witnessing the same patterns of buying when the rate was the same in the previous years. Moreover in the past, such price falls would have attracted bargain hunters. Not now.

The 11-year rally in gold prices created a perception that they will only go up. This price fall has broken that conviction, Now people are diversifying their Investments. This trend will increase in the coming years but expectations of a tightening in super-loose U.S. monetary policy would weigh on gold.

Although, gold prices have been declining since last year, the metal does remain an attractive investment in China. Demand for gold in China will grow steadily as the middle class expands and the Yuan is further internationalized which will require an increase in gold reserves.

Looking ahead, the near term outlook for Gold and silver looks towards downside in international dollar terms. This is the direct impact of improving US economy and looming interest rate rises which will continue to discourage investor buying and in fact lead to selling. I do feel that slowly and steadily the rates will be hiked depending on the economy's growth. This will provide the breather for both the metals.


Traders and investors are already looking ahead to next week, and a more robust batch of economic data points, highlighted by the meeting of the U.S. Federal Reserve’s Open Market Committee (FOMC). Its one of the most important meeting where it would debate on  potential overhaul of its guidance on interest rates and would decide on how QE3 can be exited. Next week is also the much-anticipated referendum on Scotland’s independence from the U.K

TRADE RANGE:

METAL	INTERNATIONAL price	DOMESTIC price
GOLD	$1202 - $1252.70  an ounce	Rs.26,200 - Rs.27,500  per 10 gm
SILVER	$18.20 - $19.70  an ounce	Rs.39,500- Rs.43,500  per kg

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 - "A Booster Month For Gold"

http://riddisiddhibullionsltd.blogspot.in/2014/09/a-booster-month-for-gold.html

A BOOSTER MONTH FOR GOLD?

by Mr. Prithviraj Kothari, MD, RSBL

Gold has established a support level at $1275 since March and prices have risen post this level. 

But, during the second half of March gold fell heavily from resistance around $1400 back down to a several week low near support at $1275.

As 2014 began, gold moved very well for the initial months towards a six month high near $1400 and has now plunged to levels closer to $1300.

As news of the escalating tensions in Middle East and Ukraine gained momentum, gold gained 5.4 per cent year due to rise in demand for this safe haven asset.

After hovering at around $1290 gold has plunged sharply over the last week and has broken through the support at $1275. 

It rallied a day ago however ran into further resistance at $1275 before falling lower to a four month low around $1258.  

Though gold has always been the markets favourite metal during uncertainties, but this time bullion investors continue to worry over strong U.S. economic data and its impact on the dollar.

This week we saw gold falling to its lowest level in three months, on Friday before it recovered modestly.

On Tuesday, Gold witnessed its greatest drop this week as the market broke through recent support at the $1,270 area.

Gold was  unable to capitalize on the news of the ECB’s interest rate cut and QE program as the euro weakness offset any support gold would have received from the new liquidity programs.

AS tensions lingered over Ukraine and a weak dollar forced bargain hunting, we saw gold prices rising on Wednesday after prices earlier fell to a two and a half month low.

The yellow metal was under pressure after the Russian President drew plans for a ceasefire but then regained its prices when the Ukraine prime minister later dismissed Russia's proposal.

The metal is under pressure as the euro languished near a 14-month low versus the dollar on Friday, struggling to regain its footing after the European Central Bank delivered a fresh round of stimulus and promised even more if needed.

Gold was standing firm above the $1270 level in Thursday as it was impacted by a weaker Euro and surging equities after the European Central Bank cut interest rates to record lows which was counteracted by lower than expected U.S. jobs data. 

The main refinancing rate was cut to 0.05 per cent from 0,,15 per cent and the ECB lowered the rate on bank overnight deposits to -0.20 percent. 

But what surprised the market was Fridays U.S. jobs data that gave gold a push thus helping it to return to modest levels overnight. 

The U.S. Labor Department said the economy created 142,000 jobs in August, far below expectations for a figure of over 200,000. The unemployment rate fell to 6.1%, a six-year low. The average pace of job creation this year is 215,000, up from 194,000 in 2014. 

Gold rose from an 11-week low, after U.S. employers added the fewest jobs this year, adding some pressure on the Federal Reserve to maintain lower interest rates.

Initially data reports had stated the US economy was back on the path of recovery but Fridays number were a bit disappointing .

A stronger greenback is a setback for dollar denominated gold as it makes the yellow metal more expensive for users of other currencies.

 Gold traders are likely to keep an eye on currency moves next week after the euro fell to a 14-month low versus the dollar Thursday, following the surprising move by the European Central Bank to cut interest rates and embark on a quantitative easing program.

Traders will also extend a warm welcome to the month of September as it has historically been the best performing month for gold giving an average return of 2.16 per cent since 1969.

A spike in retail demand in India is another reason for the typical bump.

We hope this month the be a booster for gold.

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

- Previous blog -

"Bull v/s Bear"

http://riddisiddhibullionsltd.blogspot.in/2014/08/bull-vs-bear.html

BULL V/S BEAR

by Mr. Prithviraj Kothari, MD, RSBL

Over the past few days gold has been playing touch and go with $1300 mark. It has enjoyed a recovery as it moved strongly higher off the $1275 level. In the past week, gold was seen falling sharply at the key level of $1275. In fact, before plunging, gold touched the resistance around $1313. 

The market is now divided into bull versus bear market. There are some who are positive about gold and believe that gold prices will move higher while some believe that it will further enter the bear market. 

Lets justify their views-

BULLISH SENTIMENTS~

Uncertain global environment:

Escalating tensions in eastern Ukraine fuelled safe-haven demand for gold on Thursday, offsetting upbeat U.S. data that would have otherwise pushed the precious metal lower.

The tensions between Russia and Ukraine and militant activity in Iraq are keeping gold from falling back. Certainly people are concerned about the military situation in Ukraine, Syria, and Iraq. There were news that more than 100 Russian soldiers were killed in eastern Ukraine in a single battle this month while helping pro-Russian separatists fight Ukrainian troops.

Rising demand for physical gold:

Moreover, we have seen over the past years that September is one of the best months for gold in terms of physical demand. Over the last 20 years, the yellow metal has seen an average gain of 3% in September.

In India, August marks the onset of the festive season and people buy heavily as September sets in. August 29th has marked the beginning of the festive season with Ganesh Chaturthi and will go on till Diwali. Ahead of this expected demand Indian jewellers and dealers will be stocking up in the coming weeks, so it should affect prices

Along with this, we all see the wedding season setting in and no other metal can replace gold in the so called big fat Indian weddings. Be it jewellery, gifts or any other investment purpose, gold has always been India's first choice. 

Moreover demand from rural areas is also expected to rise as India witnessed a much better monsoon than expected. The majority of India's gold demand comes from rural areas, so the monsoon weighs heavily on purchases.

BEARISH SENTIMENTS~

Strengthening Dollar:

Gold has been pulled the winding down of the US QE program and a probability of rates hike. Probability that the Fed may increase its Fed- Funds rate by mid 2015 will effectively reduce gold price in dollar terms.

US economic development:

This week, important data coming in from US has clearly shown signs of a gradually strengthening economy. The U.S. gross domestic product grew at a revised annualized rate of 4.2% in the second quarter of this year. 

The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending Aug. 22 declined by 1,000 to 298,000 from the previous week’s revised total of 299,000.

A separate report showed that U.S. pending home sales increased by 3.3% last month, beating expectations for a 0.5% rise. June’s figure was revised to a 1.3% drop from a previously estimated decline of 1.1%

As we all know, any positive data coming in from US has a negative effect in gold prices as gold is pressured by the idea that if the U.S. economy has sustained improvement then the Federal Reserve will start to raise rates, once it ends its quantitative easing program.

Geo-political tensions:

Further there were news that Geo-political tensions seem to have eased out and hence, we saw gold losing its safe haven status and gold prices slipped back below $1300.

Import restrictions:

The lack of any movement to change Indian import restrictions under the new government has also been a disappointment for the gold bulls.

As we see that the market has been divided into two segments: "the bulls and the bears" and as we go through this transition we can expect to see assets outperforming expectations. The market can’t help but exceed expectations since the investors' expectations are so low at this point.

We now see what the market has been awaiting for:

Dates	Data expected
1st September:	The August China NBS manufacturing PMI index and the Euro zone final manufacturing PMI
2nd September:	The U.S. August ISM manufacturing index
3rd September:	The preliminary Q2 GDP of the Euro zone
4th September:	The Bank of England and the ECB interest rates decisions and announcements on 4 September
5th September:	U.S. August non-farm payrolls and the unemployment rate

 

The market will be watching the outcomes of Thursday’s European Central Bank meeting and Friday’s U.S. August nonfarm payrolls report for gold direction. Economists are looking for ECB to take some sort of action, with a cut to interest rates likely.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1273- $1307 an ounce	Rs. 27,500- Rs. 28,500 per 10 gram
SILVER	$19.15- $19.85 an ounce	Rs. 41,500- Rs. 43,500 per kg

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 - "Uncertainty over Interest Rate Hike!!!"

http://riddisiddhibullionsltd.blogspot.in/2014/08/uncertainty-over-interest-rate-hike.html

UNCERTAINTY OVER INTEREST RATE HIKE !!!

by Mr. Prithviraj Kothari, MD, RSBL

From December 2008, to September 2011, Bullion futures more than doubled to a life time high of $1,923.70 an ounce. Gold prices sky rocketed as the Fed purchased debt and cut rates to an all-time low to spur economic growth. 

This year, gold bounced once again after its downfall in 2013. 

The metal rose 6.1 percent this year , partly as unrest in Ukraine and the Middle East increased haven demand.

This week investors eagerly waited for the minutes of the FOMC meeting that were to be released n Wednesday and the Jackson Hole Economic Symposium on Thursday and Friday that was expected to bring in some volatility in the market.  Apart from this many economic reports were slated to release-

• CPI
• Housing figures 
• Philly fed index from the U.S
• BOE rate decision and CPI from Great Britain
• Japan’s trade balance
• China's manufacturing PMI
• Retail sales and CPI from Canada.

Let's have a look at the data released from these reports

• U.S. home resale's raced to a 10-month high in July 
• Six straight months of payroll growth over 200,000 jobs per month — the first time that’s happened since before the Great Recession in 2007!  
• There were signs of a strengthening economy as the  number of Americans filing new claims for jobless benefits fell last week
• On Thursday, data released showed that the Business growth in China and across Europe slowed this month
• But U.S. activity picked up speed, leaving a mixed picture of global economic growth.  

This week , gold was mainly hovering around the interest rate news. The entire investment market- be it stock, bond, currency or commodities, is presently pre occupied with the only one question- When will the first interest rate increase happen? 

A positive economic growth from the US economy and an expectation for an early rate hike is expected to pull prices down.

Many researchers are expecting that the forecasting the U.S. central bank to raise rates in mid-2015 but some economists believe that it may happen much earlier.

A slowing world economy on one hand and a strengthening US economy on the other, is giving mixed reactions from the market. Uncertainty prevails and investor anxiety is on the rise. This means there will be higher movement for gold and silver.

It all depends on whether each new piece of economic data is inflationary or deflationary in nature

Though the market has been linked to rising interest rates, some say that it won't have a less negative impact on gold moving forward.

In fact now all eyes are headed towards inflation - a major driver for gold prices.

There is still some uncertainty over inflation because of the unprecedented steps the Fed has taken. Inflation along with rising interest rates will have an impact on gold. 

There are various key influential factors that will provide good support to gold -

• Rising interest rates could halt the free-flow of capital into the record-breaking equity markets and compel investors to take a more self-protective position. 
• A decline in supply  from mining and recycling sector on one hand and rising demand on the other will  raise a spark in gold prices. Also supportive for the gold market is an expected decline in supply, both from mining and recycling.

On Thursday, gold posted its steepest decline in over a month as investors left the market ahead of Friday's speech by Federal Reserve Chairwoman Janet Yellen . Gold fell to a two month low this week after the minutes of the Feds last meeting were released and it showed signs that policy makers may raise interest rates earliest than expected.  But Fed Chairman Janet Yellen also stated in a conference in Jackson Hole, Wyoming that “underutilization of labour resources still remains significant.

The debate now is about "when" to raise the interest rates. Any hike in these rates would diminish the sentiment to own gold. Gold produces no income and struggles to compete with interest-bearing investments such as Treasury bonds and bank deposits, whose yields will rise once market interest rates turn up. At the same time, signs that crisis in Ukraine and the Middle East are having a limited impact on global growth also have reduced demand for gold as a haven.

The Pentagon on Friday condemned the movement of a Russian convoy into eastern Ukraine, calling it a violation of Ukraine's sovereignty and demanding that it be withdrawn and failure of which would result in additional costs and isolation.

The world economy  is being pulled by the tug-of-war being held between the forces of inflation and deflation

In any case, all eyes are headed towards the FOMC meeting in September, which will also have a press conference and could be the one, in which FOMC chairman Yellen offers some more information regarding the next rate hike. The current estimates range mostly between the end of the first quarter of 2015 and the end of the second quarter.

TRADE RANGE-

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1264- $1297 an ounce	Rs. 27,800- Rs. 28,500 per 10 gram
SILVER	$19.00- $19.75 an ounce	Rs. 41,500- Rs. 43,000 per kg

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 -

"The Sentiments Are Bearish For Gold"

http://www.riddisiddhibullionsltd.blogspot.in/2014/08/the-sentiments-are-bearish-for-gold.html