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Showing posts with label bloomberg. Show all posts
Showing posts with label bloomberg. Show all posts

Tuesday 11 October 2016

GOLD CRASHES BUT LANDS SAFELY: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL











Gold prices have rallied 31.4 percent since the December low at $1,046.40. Safe-haven demand increased due to the following factors:
  • The US Federal Reserve proposed in December four rate increases in 2016 but at best it might deliver just one rise before the end of the year
  • Its inverse relationship with the dollar index has allowed gold to climb
  • The growing number of negative-yielding sovereign bonds has made safe-haven assets that bear no yield much more appealing
  • Pro-long utilisation of easy monetary policies by global central banks has eroded the value of paper money
  • Speculative funds as well as ETF investors have flocked into gold in search of yield
Though 2016 has been one of the best performing years for gold since 2012 the yellow metal registered its biggest daily drop in three years on last Tuesday and extended losses in the previous session after forecast-beating U.S. manufacturing data and comments from Fed officials saying there was a strong case for raising rates.

Gold fell for the eighth straight session on Thursday, slipping to a four-month low, pressured by a stronger dollar after U.S. weekly jobless claims fell and ahead of key data that could put the Federal Reserve on track to raise interest rates this year.

Gold fell for a ninth straight session on Friday on a stronger dollar ahead of key U.S. jobs data and the metal was headed for its worst weekly dip in over three years on increased expectations of a Federal Reserve rate rise by year end.
Initial claims for state unemployment benefits unexpectedly declined by 5,000 to a seasonally adjusted 249,000 for the week to Oct. 1. The U.S. dollar .DXY rose to the highest in more than two months against a basket of currencies as the data reinforced the view that the Fed would raise rates at the end of the year

This declined gold prices drastically but by the end of Friday gold futures staged a modest recovery amidst all these concerns.



Though the unemployment benefits declined, a slow growth rate was recorded for the third straight month in September. Gold prices got an initial boost from this.

In Europe, the European Central Bank (ECB) intends to push on with its aggressive stimulus policy of negative interest rates and massive bond buying until it is happy with the outlook for euro zone inflation, senior officials said. ECB Vice President Vitor Constancio said a Bloomberg report suggesting that there was already consensus among ECB rate setters to reduce the 80 billion euros ($89 billion) monthly bond purchases was mistaken.
The report aggravated a sell-off in gold on Tuesday as the yellow metal fell over three percent to its worst one-day fall since September 2013. 


In the short term, gold prices might remain under selling pressure. While the metal could consolidate lower and put the bulls to the test, it remains to be seen how long or deep the consolidation process will be. But we remain friendly towards gold – our medium-to-long-term view remains bullish and we could see the metal seeking a strong technical support to rebound into.


But there are chances that gold might trade sideways in the short term keeping in mind the following factors-
  • Strained projected longs show that this trade is very much overcrowded. With no fresh buyers, the path of least resistance is downward
  • Profit-taking could be a theme and, should panic ensue, panic selling could escalate as speculators and ETF investors are sitting on large unrealised profits
  • The bulls’ bounciness has not really been tested and a mild correction/pullback should do the overall bull structure a lot of benefit
  • Physical demand has been subdued due to high future prices – the current rally has not had the backing of strong physical up-take
  • The Fed has armed its policymakers to prepare the market with combative messages that the US economy is primed for a 25-basis-point-rate rise before the end of 2016
These put a limitation to the bullish trend for gold. Nonetheless as we approach towards the last quarter of 2016 we all hope that it ends on a similar note as its beginning.




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:
"Volatile Markets: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/10/volatile-markets-rsbl.html

Monday 11 July 2016

Bullish direction of Gold and Silver prices: RSBL

                                                                       - Mr. Prithviraj Kothari, MD RSBL


Gold has once again proved its worth and claims to be the best performing asset of 2016, emerging from a three-year bear market. The yellow metal has gained almost 26% since 1 January, the best half-year performance since 1980, Bloomberg data showed. Silver, following gold, rose 30% in the first six months, leaving other assets such as the US and German bonds, Japanese yen and the US dollar far behind.

The flight to safe haven assets triggered by global political and economic uncertainty has made bullion the year’s most preferred investment, with gold and silver beating other asset classes by a mile.

The past four sessions following the Brexit vote saw gold prices spike about 6%, while silver advanced about 5%. Gold has definitely benefited from the Brexit incident, but there have been reasons more than one that this yellow metal has once again has got into limelight.

Global economic uncertainty, slower growth in China, accommodative monetary policy of the major central banks and weakness in dollar earlier this year had prompted investments into safe haven assets like gold and silver.

Global Uncertainty:
The market continues to benefit from safe-haven investment flows in the wake of the UK vote to exit the EU, which has led to heightened uncertainty over global economic prospects and increased risk aversion.

Dollar:
Strength in the US dollar was the major contributor to weakness in gold and commodity prices for the past few years. However, increasing uncertainty about economic and political developments, low-to-negative interest rate environment as well as doubts over global economic recovery post the collapse of Lehman Brothers in 2008 have led to demand for precious metals, analysts said.

China:
Economic slowdown of the Chinese economy has raised questions over the global growth and development. These concerns have put an upward pressure on gold. 

Monetary Policy:
The current economic backdrop, along with fading prospects of an interest rate hike by the US Fed at least till December validates further march of bullion on the upwards trajectory over medium-term.

Contradicting these prospects, the Jobs report released pulled gold prices down but not significantly. The report stated that in June, 287,000 Americans entered the labour market, far exceeding expectations of 174,000 while average hourly earnings period ticked up 0.1 percent, below the forecast 0.2 percent.

Still, the unemployment rate rose to 4.9 percent from 4.8 percent after the May figure was revised down to 11,000 jobs from what was already a multi-year low of 38,000. The June employment figure had gained greater significance following the disappointing May report, which suggested the US recovery was beginning to slow after seven years of expansion.

It was a session marked by extreme volatility on Friday with gold experiencing a $35 range and silver $1.00, with NFP's driving price action. The prices send a solid signal for the Gold price to move beyond $1400 in short to medium term.

Further supporting gold was the Chinese gold reserves figures. It stated that China's gold reserves stood at 58.62 million fine troy ounces at the end of June, up from 58.14 million at the end of May, the central bank said on Thursday. Such a stock up already appears to be in motion for the gold stocks.

Given these supporting factors for safe haven metals, investors have engaged themselves into purchases of gold and silver and this is further giving and upward thrust to precious metals.

Thank You!


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

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