GOLD TO REACT TO FOMC

- By Mr. Prithviraj Kothari, MD, RSBL

 

Gold has been trying to find itself. It was at its peak in 2011-12, touching a lavish bull level of $1900. But in the last one year, gold prices have been falling, hovering around $1000 these days.

The ones who were bullish for gold are now speechless. Some supporters of gold have even lost faith in it. 

Though gold has been just above they key areas of $1150, there more downside risk for the yellow metals as the dollar continues to strengthen ahead of the Fed’s policy-setting committee meeting on March 17-18.

The dollar hit its highest in nearly 12 years on Friday and is widely expected to reach parity with the euro, due to the gap between U.S. and European interest rates.
Ahead of an expectation of an interest rate hike, a stronger dollar has been clouding over the positive outlook for gold.

A stronger than expected U.S Jobs report last week had raised expectations that the Fed would hike interest rates soon. Since then gold has taken a beating.

Gold was consecutively down since 8 days, falling more than 1 per cent on Wednesday. Gold has been strongly influenced by a robust dollar and expectations of higher U.S. interest rates.
The metal was headed for its sixth weekly loss in the past seven, down 1 percent so far and having hit its lowest in more than three months at $1,147.10 on Wednesday.

Following these negative sentiment, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.28 percent on Thursday to 750.95 tonnes, the lowest since January. It had been three weeks since the fund saw any inflows.

Moreover, cutting the appetite for gold was last week's stronger than expected U.S. non-farm payrolls data that renewed expectations the Federal Reserve would begin to increase U.S. interest rates in mid-year.

A strengthening dollar makes dollar denominated assets like gold more expensive for holders of other currencies thus making gold unattractive.

After breaking a nine day lowering streak, gold prices managed to stay positively stable on Friday, Spot gold was up 0.1 percent at $1,154.35 an ounce during the day.

*Source-www.kitco.com

Analysts have noted that gold and silver have struggled all week as investor and traders piled in the U.S. dollar, driving it to a 12-year high. They add that the trend does not look like it will end soon.
The key event for financial markets next week will be the Federal Open Market Committee meeting, which will release its monetary policy statement Wednesday.

In the week, market player will be closely keeping a watch on the Federal Reserve as analysts are expecting gold to suffer on the back of a stronger U.S. dollar as the central bank prepares for an eventual rate hike.

However, the eventual rise in interest rates will cap any rally in gold next week.
Although the FOMC meeting will garner most of the market’s attention, other economic reports that could be market moving include regional manufacturing to be released Monday and Thursday as well as some housing data at the start of the week.

TRADE RANGE 

METAL	INTERNATIONAL	DOMESTIC
GOLD	1130$-1200$ an ounce	Rs.25,500- Rs.26,500 per 10gm
SILVER	15.23$- 17.00 $ an ounce	Rs.34,000- Rs.37,000 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 -

Topic- " An Upbeat Dollar Beats Up Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/03/an-upbeat-dollar-beats-up-gold.html

ALL NOTIONS TO SEE GOLD AT $800 DESTROYED!!!

                                                                                                             - By Mr. Prithviraj Kothari, MD, RSBL

A few weeks earlier, we saw a lot of noise in the market…but this time it seems that someone left the loudspeakers on!

Well, oil and SNB played the game here.Precious metals showed great volatility- all thanks to the fluctuating oil prices.

Crude oil was highly volatile after a report from Paris based energy agency IEA depicted a likely reduction in Non-OPEC output for 2015 by 350,000 BPD. 

Moreover, gold and silver prices soared in Euro terms after the SNB moves and now many market players are beginning to wonder if a loss of confidence after the Swiss fiasco has started a run on gold? 

Bullion traders said sentiment turned better after gold rallied to the highest since September in global markets as the dollar weakened after Switzerland decoupled its currency to the euro and lowered the deposit rate.

Gold had closed at 1276.50 following a brief intraday break above 1280, its highest level since September 2014. We look to the September 2nd open of 1286 as the next important level of
Resistance, followed by 1300 and 1320. Momentum indicators are increasingly bullish.

Gold regained its safe-haven mantle following a shocking and unforeseen decision by the Swiss Central Bank (SNB) to scrap its cap on the franc’s exchange rate against the euro.


After the SNB- Swiss National Bank dropped the bombshell on the markets Thursday morning, the prices of the precious metals had gone in one direction… UP.  In just two days, the price of gold was up $40 and silver $1.10.

Post this action, gold rose more than 2 percent to a 4 month high in Thursday. This was a result of the move by Switzerland to abandon its three-year cap on the franc sent global shares and bond yields into turmoil. 

Following the Swiss National Bank’s unprecedented move to abandon the franc’s peg to the euro, the country’s currency had appreciated sharply against the U.S. dollar. The surge in the Swiss franc…means it is now the most overvalued of all the developed market (DM) currencies in terms of the deviation of the real effective exchange rate from its 10-year average

The SNB has been under growing pressure to revisit the peg as speculation grows that the European Central Bank could introduce outright money-printing as early as next week, which could see the euro zone flooded with liquidity.
It looks as is the SNB decision has finally destroyed the notion of $800 gold ever again.

Furthermore, a Labor Department report released on Thursday showed that Jobless claims climbed by 19,000 to 316,000 in the week ended Jan. 10, the most since early September, from a revised 297,000 in the prior period.

Adding to it, the gold price climbed on Friday after a lackluster US inflation report had participants readjusting their timetable for the next Federal Reserve rate increase.

In data, the US consumer price index fell 0.4 percent last month, the biggest drop since December 2008, after sliding 0.3 percent in November. It also undershot the -0.3 percent forecast.

This goes directly against the Federals Reserve’s mandate to achieve inflation of around two percent as the reports imply a deflationary trend. Which further means that the fed may probably delay its rate increase as it would want to know that inflation is on track to hit this level before acting?
Additionally, deciding not to reduce stimulus in 2015 would also be consistent with a goal-oriented approach to the employment mandate.
Additionally, Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 717.15 tons on Friday from 707.59 tons from its previous close on Thursday.

Fall in equities and worries over Euro area political and debt issues might continue to help Bullion complex as a whole and mainly the yellow metal.
Next week we could see further volatility as the ECB are set to meet and it is widely expected they will announced a broad-based government bond purchases.
We stay with our moderate positive bias in Gold and advice buying on small dips.




- Previous blog - "Lot of Things To Smile About For Precious Metals"

http://riddisiddhibullionsltd.blogspot.in/2015/01/lots-ofthings-to-smile-about-for.html

LOTS OFTHINGS TO SMILE ABOUT FOR PRECIOUS METALS

                                                                                                      - By Mr. Prithviraj Kothari, MD, RSBL

Though we did see some trading in precious metals on Jan 1st and 2nd, it was the week from 5th-9th Jan that was actually considered the first volatile trading week of 2015.

The main news doing the rounds for the week was from US- minutes of the recent FOMC meeting and the non-farms payroll report.

Apart from the macro reports there were the following financial reports that were out in the week.

• US non-manufacturing PMI, factory orders and trade balance monthly reports.
• Europe, MPC rate
• The EU flash CPI
• Unemployment report,
• GB’s manufacturing PMI
• Germany retail sales
• The French trade balance.
• In China, CPI and trade balance
• And several economic reports from Canada and Australia.

But of all the above mentioned reports, the most influential for gold was the unemployment report.


Gold was seen to have a positive start for the week as it firmed above $1200 an ounce on Tuesday hitting a near three-week high, as tumbling global equities and concerns over Greece's future in the euro zone prompted investors to seek safety in the metal.

The uncertainty behind the euro zone is once again tempting investors to run after gold as a safe haven asset. This risk off sentiment in the markets may help bullion be stable at its recent upswing.

Adding to this we also saw that holding in the world’s largest gold-backed exchange traded fund- the SPDR Gold trust, rose 0.25 per cent to 710.81 tonnes on Monday, though still near a six-year low. But this rise did reflect improving investor sentiments towards gold.

Bullion traded in a ranged manner for most part of the week while volatility was high on Friday. The Greenback jumped on likely positive economic reports from the US coming week whereas speculation increased that Fed might talk about raising interest rates as also anticipated from its monetary policy minutes report due next week and likely putting weight on Bullion.

We have always seen that precious metal markets and the equities markets are inversely related. This week too, we saw precious metals rising while equity market and commodity bellwethers including copper and oil hit fresh multi-year lows. After a disappointing end to 2014 gold is beginning to build a base above $1,200 an ounce – the metal advanced 1.2% to $1,223 an ounce in late trade Friday, the highest since December 11.

Gold's gains since hitting four-year lows early November now top 7% and is made more remarkable by the fact that the advance has come despite a rampant dollar which hit a 12-year high against major currencies yesterday and a Friday jobs report that confirmed that the US economic recovery remains on track.

Though the market players were a lot dependent on the non-farm payrolls report, it did not show much after effect on gold.

The gold price wobbled briefly but was ultimately unaffected by a non-farm payrolls report that, while mostly positive, was not potent enough to shift the Federal Reserve’s rate-rise timeline.

Total non-farm payroll employment rose by 252,000 in December, which beat the 241,000 forecast, while the unemployment rate declined to 5.6 percent, the US Bureau of Labor Statistics reported today.

Additionally, the change in total non-farm payroll employment for October was revised to 261,000 from 243,000 and the change for November was revised to 353,000 from 321,000.
The forthcoming labor reports are expected to create added significance as there are expectations that the Federal Reserve in on the verge of raising interest rates. The current market consensus is that rates will rise in mid-2015 although this is a moving target that will be dictated by jobs and inflation data.

As said earlier, too gold is one such commodity which takes price direction from macro developments rather than its own demand-supply wherein we feel downside risks for the commodity may stay in the near future



- Previous blog - "An Impressive start For Gold In 2015 But A Dull End"
http://riddisiddhibullionsltd.blogspot.in/2015/01/an-impressive-start-for-gold-in-2105.html

TOO MUCH NOISE IN THE MARKET

 By Mr. Prithviraj Kothari, MD, RSBL

By the time you read my next article we will be in the next year. So let’s have a brief outlook on how 2014 was for gold.

But before we begin an in-depth analysis of the same let’s have a quick glance through the soft quite week that passed. A week that was a continuous tussle between Bulls and Bears where $1200 was a new price target for Gold.

Markets were generally quiet overnight on this Christmas Eve day. U.S. markets closed early and many traders and investors had checked out for the week, if not for the rest of the year. Due to thin trading volumes gold did not show much volatility in the market. It gained one percent on Friday as the dollar slipped against a second straight weekly drop, underscoring the bearishness in the market.

Spot gold was up one percent and was seen trading at $1,194.05 thus moving away from a three week low of $1170.17 that it hit earlier in the week. Though gold gained on Friday, the week ended on a low note for gold. Gold declined after data released from U.S. showed that that economy grew in the third quarter at its quickest pace in 11 years. Moreover, other data released showed that initial claims for state unemployment benefits dropped for the fourth straight week.

SPDR Gold Trust, the world's largest gold - backed exchange - traded fund, said its holdings fell 0.08% to 712.30 tonnes on Friday - a fresh six-year low.

Not only for the week, even for the year Bullion has declined 0.6 percent as prospects for higher U.S. borrowing costs, accelerating economic growth and a plunge in crude-oil prices crimped investor demand for the metal. 

Some of the key influential factors for gold throughout the year 2014 have been - (chronologically)

• Tapering of the QE3
• Crimean Vote
• Geo political tensions in Ukraine (Iraq, Syria, Israel)
• Historic win of Mr. Narendra Modi
• Middle East Tensions
• ECB’s aggressive monetary stimulus package
• THE BANK ESPIRITO SANTO crisis
• Uncertainty over interest rates hike by the Federal reserve
• Strengthening US Dollar
• Slowdown of the Chinese Economy
• Swiss Referendum

Simultaneously we also need to have a look at what would turn the tables for gold in 2015.

The US economy: The US economy progress is measured in areas such as retail sales, industrial production, housing starts, payroll numbers and the broadest measure of unemployment. If the economy deteriorates then there are renewed expectations that the Federal Reserve may accommodate the financial system, particularly the banking system, and the combination of those factors could trigger a massive decline in the U.S. dollar. As a result of that, we will see spikes in commodity prices, such as crude oil, gold and silver.

Dollar: The number one thing for gold is the dollar, particularly in the near term. The dollar has to turn. Several Fed officials are now expressing concern about the strength of the dollar. If we see several weak economic reports in the next few months, the Fed is going to make noises about continuing to ease. That would push the dollar down and push up the price of gold.

Chinese economy: Gold may advance amid speculation that China, the world’s biggest consumer, will take more measures to bolster the economy, boosting demand for the precious metal as a store of value.

Russian and European Economies: Russia’s economy has been struggling with high inflation, crushing economic sanctions and weak oil prices.

Europe is still feeling some of the effects of its financial crisis as economic growth remains anemic and the central bank fights deflation. This uncertainty could create another crisis in emerging markets, and gold would benefit as a safe-haven investment.

Fed’s interest rate hike: If they make an outright comment that they're going to raise rates on a specific date, I think that could have a pretty serious hit to the equity markets.

Equities market: With equity markets back at record highs, that it also wouldn’t take much of a global crisis to spook investors, driving them back into gold markets.

Demand Supply: Any significant drop in gold prices will cause some supply disruptions, creating a floor for the market. Another benefit for the gold market should also come from gold-backed exchange-traded funds, which has seen lower redemptions throughout 2014


What we notice here is that the factors are similar to that of 2014 but will work in favour of gold. When the year is about to end, whoever I meet keeps asking for only thing- my outlook for gold for the coming year.

Well to begin with I would first like to share with you the various predictions that I have got from different people.
Some are really optimistic for the gold market for 2015 compared to other analysts as they think that the yellow metal could end next year around $1,250 while some feel that it will be well stuck at around $1200.

Some feel that gold prices will fall to $1,100 or even $1,080 an ounce as the U.S. dollar continues to dominate the marketplace and investors adjust to normalized U.S. interest rates.

   
There’s a lot of noise in this market right now, and this noise is causing volatility in the metals that a rude rumour is coming when the Fed, instead of raising rates, launches a QE4 to keep the economy from slipping back into a recession.

Investors shouldn’t rule out gold’s appeal as a safe-haven investment as a lot of uncertainty still remains in the marketplace. In fact safe-haven demand could help the gold market in early 2015.

TRADE RANGE FOR 2015:

METAL	INTERNATIONAL PRICE	DOMESTIC PRICE
GOLD	$1130- $1350  an ounce	Rs.24,000- Rs.32,000  per 10 gm
SILVER	$14.50- $24.00  an ounce	Rs. 32,000- Rs.60,000  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 - "Fed's "considerable time" creates "considerable impact" on gold"
http://riddisiddhibullionsltd.blogspot.in/2014/12/feds-considerable-time-creates.html

IS GOLD BEING COMPLETELY CONTROLLED BY THE DOLLAR?

by Mr. Prithviraj Kothari, MD, RSBL

Gold is being pressurised on multiple fronts-

• Equities
• U.S Dollar
• Chinese Demand for Gold
• European Union
• Japanese Bank

The equities markets is yet another reason that continues to pressurise gold. The stock market continues to look poised for another run higher into new high territory.  

Moreover investors have been more confident about the equities market as compared to gold and this has prolonged the ongoing lack of interest in gold and precious metals.

Apart from equities, The US dollar index too has been mounting pressure on gold. 

Dollar is at multi-year highs and does not appear headed for a reversal anytime soon. Ongoing deflationary pressures in the Euro zone along with economic struggles in Japan could potentially keep the greenback well-supported for some time. 

Gold has been dancing to the tunes of the U.S dollar and there is a big expectation that the U.S. economy will continue to grow and that will further boost the dollar. The notion of higher rates and economic strength is driving the dollar higher and gold lower. 

Surge in the dollar, in which gold is priced, has knocked the metal in recent days through key chart support at $1,180 an ounce -- the lowest level hit during last year's 28 percent plunge -- and $1,155 to its lowest since early 2010 at $1,137.40.

Initially $1150 was considered a good support level for gold but now that gold has crossed this level too,  technical analysts have said a test of the $1,000 level could be on the cards after a break of support at $1,155, a retracement level of its rally to record highs in 2011.

Moreover, robust demand for gold from China has been raising concerns amongst analysts and investors. It has been marked that China, the leading gold consumer of the world, usually buy lot of jewellery, bars and coins at dips. 

Chinese gold buyers, who in the past often took advantage of falling prices as a cheap way of buying into the yellow precious metal, are still biding their time. But this year demand from this country has also been low.

On Wednesday, gold touched the lowest since April 23, 2010. Gold sank about 2 percent on Wednesday to its lowest since mid-2010, potentially opening the way for a fall to $1,000 as a surging U.S. dollar weakened the investment case for non-yielding bullion.

Moreover,  the divergence between the U.S. and economies including the European Union and Japan is driving gains for the dollar. 

Gold futures fell, capping the longest slump since May 2013, as the dollar rally eroded the appeal of the precious metal as an alternative investment.

Gold prices ended the U.S. day session narrowly mixed Thursday and not far above this week’s 4.5-year lows. Trading was quieter ahead of Friday morning’s important U.S. jobs report.  Once the report was out and the key indicators were not as per expectations , precious metals rebounded. The spot gold price was last $8 higher at $1147.90/ $1,1468 an ounce in Thursdays close after spiking up to $15850 with the dollar last at 1.2374 against the euro.

The metal has lost around $100 an ounce over the past week, regenerating memories of a stunning two-day drop in 2013 that started a huge wave of divestment and an annual drop in gold prices after 12 consecutive years. 

Silver was down 3.6 percent at $15.43 , paring losses after hitting $15.13, its lowest since mid-2010.

On Thursday, spot gold prices gained after the US jobs data was out. Spot gold was $8 higher at $1147.90/1148.60 per ounce. The US jobs data stated that the US added just 214,000 jobs in October. This was down from 248,000 in September and also below the predicted 235,000. This gave some support to gold that been witnessing a tumble since quite some time now.

Next week brings more attention to euro zone and Chinese economic data, and the results may serve to underscore the monetary policy divergence between the U.S. and the rest of the world.

The would result in strengthening of the dollar thus further putting pressure on gold which would act completely opposite to gold price movements on Friday.

Moreover, several European countries will release their first third-quarter gross domestic product data, and China will release reports on industrial production growth, producer price index and export data.

Even as China Japan and the Euro zone shows that their economy has been growing as much slow pace and they need easy monetary policies, next week there will more outlook on policy divergence with the Federal Reserve needing to decide on the interest rate hike which many analysts believe wont come in March

While the longer-term trend remains down, gold will likely not go straight down. A short covering and/or relief rally will likely be soon in the coming weeks and gold could possibly test the breakdown level of $1183 before potentially heading lower again.

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 -

"Fed Sets The Rules For Gold"

http://riddisiddhibullionsltd.blogspot.in/2014/11/fed-sets-rules-for-gold.html

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