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Showing posts with label economic data. Show all posts
Showing posts with label economic data. Show all posts

Sunday 21 February 2016

BULL V/S BEAR FOR GOLD: RSBL

By Mr. Prithviraj Kothari, MD, RSBL








So far 2016 has been subjugated by the fall out in Chinese equities and the consequent short selling of other asset classes as a proxy hedge.

Gold continued to rally this week as it gained by the strengthening of the yen which suggests that there is constant safe haven buying which does not fit too well with the pick-up in equities and industrial metals this week.

Gold soared 1 percent on Wednesday, breaking a three-day losing streak to trade above the key $1,200-an-ounce level as Asian shares and the dollar slipped.

Bullion rallied to a one-year high last week after a stock market rout boosted demand for the yellow metal as a safe haven, but has since given up some gains as equities steadied. With stocks slipping again on Wednesday, gold was back in focus.

Speculation has increased in recent days that the Fed might resort to negative interest rates to stimulate the economy after Fed Chair Janet Yellen said last week it was an option that would not be taken "off the table." Lower or negative rates would boost demand for non-interest-paying gold. Concerns remain that gold could correct further as some
Analysts say gold gained too much, too quickly.

The gold price fell during Asian trading hours on Friday after rallying overnight to a week’s high of $1,240.10 per ounce. But see the yellow metal remained well-supported on global economic uncertainty. 

Spot gold was last at $1,226.70-1,227 per ounce, down $3.80 from Thursday’s close.

The gold price had rallied overnight following a pull-back in US equities and weaker oil prices. 

Recently the analysts and market players have become more alarmed about

  • The state of the global economy and
  • The risk of debt default and
  • Equity weakness
Gold’s positive and negative movements over the week were influenced by the following-

Oil Prices- Oil prices had risen more than 14 percent this week after Saudi Arabia, Russia, Venezuela and Qatar said they would freeze oil output at January levels as long as other producers also participate. Iran’s oil minister had welcomed the plan but did not commit to it.

The oil price rally also halted after Saudi Arabia’s foreign minister was reported as saying that Saudi Arabia was “not prepared” to cut production, scuttling hopes of a deal by major producers to cut output in an oversupplied market. 



Global Economic growth- Global economic growth remains friable with the Organization for Economic Cooperation and Development (OECD) cutting its global growth forecast on Thursday by 0.3 percent to three percent for 2016 as it warns of slowing economies in Brazil, Germany and the US, and exchange rate volatility in some emerging markets. 

The OECD on Thursday reports that some emerging markets are particularly vulnerable to sharp exchange-rate movements and the effects of high domestic debt.


Economic Data- Major economic data released on Thursday was mixed with a slight negative bias. China’s January PPI was -5.3 percent, a gentler decline than the forecast -5.5 percent and December’s -5.9 percent. January was the 47th straight month of decline, however. 

Weekly US unemployment claims came in at 262,000, below the forecast of 275,000 and under the psychological 300,000 mark. The Philly Fed manufacturing index for February at -2.8 was close to the -2.9 estimate. 

But the US CB leading index disappointed at -0.2 percent against a forecast of -0.1 percent Meanwhile in data, US CPI and Core CPI month-over-month in January came in unchanged and an increase of 0.3 percent respectively, both were above forecasts of a -0.1 decline and 0.2 percent gain.

Gold Demand- Physical demand slowed during the Chinese Lunar New Year, but global demand is also suffering as consumers and well-stocked jewellery manufacturers hold off while waiting for the price of gold to drop, according to multiple gold traders.

The gold price increased modestly for the third consecutive day as a safe-haven rally is being thwarted by weak physical demand.


Monetary policies- Market participants also await further monetary decisions out of the Eurozone and China, which has drawn closer scrutiny after the Japanese central bank decided to lower nominal interest rates into negative territory for the first time in history.
A lack of inflation and threats of another global recession has led central bankers to adopt looser monetary policy and aggressively combat sagging growth.


Market participants appear content to wait until monetary decisions out of the Eurozone and China become clearer.

The recent decision by the Japanese central bank to lower interest rates into negative territory has led other regions to consider the same action.
A lack of inflation and threats of another global recession are forcing central bankers to adopt looser monetary policy and aggressively combat sagging growth.

Till then we need to wait and watch and this seems to be the only mantra as the mart once again stands divided into a bear v/s bull market 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 -
" Gold Glitters All The Wayl: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/02/gold-glitters-all-way-rsbl.html



Sunday 14 February 2016

GOLD GLITTERS ALL THE WAY: RSBL


By Mr. Prithviraj Kothari, MD, RSBL 








As I mentioned last week in my blog that gold is regaining its safe haven appeal, this week we saw this sentiment strengthening further.
Gold was like literally all over the world this week as we saw the yellow metal gaining its safe haven appeal in its true sense after a long wait. Sentiment in the gold market remained sturdy after prices hit a one-year high in a figurative move.
This was the third consecutive week that gold witnessed positive gains, with increasing more than 5.3%- the biggest weekly percentage gain since late October 2011.

Analysts have noted that the yellow metal’s push back above $1,200 an ounce generated a lot of focus and positive sentiment among appalling investors looking for a safe-haven.
Many analysts are bullish on gold, expecting sentiment to continue to grow as prices have broken through key technical barriers, culminating in a weekly high at $1,263.90 an ounce.
Spot gold was last at $1,240.50/1,241.20 per ounce, having rallied around 22 percent since the start of the year.
The gold price rallied to a high on Thursday of $1,263.30 per ounce, up five percent and it’s strongest since February 6 last year when it peaked at $1,268.90.





Since this rally came in suddenly, there were many investors that missed on to bank on the gains. The speed of the rally and its strength suggest many would-be investors have been chasing prices, having not been able to take advantage earlier in the rally – they had lost faith in gold as a safe-haven given the four-year bear market.
This volatility was influenced by more than one factor. It was a combined effort of the following-
Dollar- Sentiment towards gold has changed dramatically, and gold has even moved up on some days in the face of a dollar rally. With a change in sentiment, those underweight or waiting on the sidelines started buying gold which furtherer fuelled gold prices.
The precious metal benefitted from a softer dollar, which had failed to attract safe-haven demand despite the global instability – the currency was last trading at a four-month low at $1.1349 against the euro.
A softer dollar is making gold more affordable for holders of other currencies – it has fallen around four percent this month, having already rallied strongly over the past 14 months – the dollar index climbed to 100.50 in December from around 70 in January last year and was last at 95.58.
Fed- As part of a two-day congressional hearing, Federal Reserve Chairwoman Janet Yellen attempted to reassure markets that US growth was steady and the labor market was improving.
Yellen and her fellow colleagues are being criticized for exacerbating the instability after raising rates in December – rates were static around 0 percent since December 2008.
And the US Federal Reserve, having raised rates in December for the first time in nine years, has not ruled out a push into negative territory. The chances of further rises this year have receded significantly, according to market consensus.
Because gold has no yield, it loses some of its luster when interest rates are rising. But negative interest rates negate this disadvantage while highlighting economic weakness against which gold is historically seen as a hedge and preferred as one of the safest modes of investments compared to its counterpart.

China- since the Chinese markets remained closed for the Lunar Celebration, there was nil reaction from that side and hence gold prices shot up one side.
With China absent from the market for its New Year holidays this week, the market now waits to see the reaction of Chinese investors upon their return on Monday, particularly as the US will be absent on this day for Presidents day.
All eyes will be glued to the return of the Chinese markets as investors are eager to see what they actually bring to the surface post this week’s volatile developments.

Equity- The gold price benefited from the meltdown in equity markets, as the yellow metal continued to hold around one-year highs. Weak equity markets have spooked investors and they promptly dumped risky assets and rushed to gold, which is seen as a safe-haven.

Other Economies-
Uncertainty about global growth and a mass sell-off in global equity markets unsettled investors, burnishing gold’s safe-haven qualities, while Japan, Switzerland, Sweden and Denmark have adopted negative interest rates.
European Central Bank (ECB) president Mario Draghi is expected to follow suit at the bank’s March meeting, citing inconsistent growth concerns and non-existent price increases.
Since the decision, Japan lowered deposit rates into negative territory and European Central Bank President Mario Draghi is expected to implement the same policy as soon as March.
Both economic regions are struggling with poor economic growth and non-existent inflation despite billions in easy money and years of near-zero interest rates.
Negative interest rates are generally good for gold as the improbability and agony linked with negative rates tends to surge interest in gold, but the more distinct shift of monetary policy in this direction by central banks is encouraging even greater flows into bullion.


Although it is a shortened week with markets closed Monday for Presidents Day, the U.S. economic calendar will be busy with the release of regional manufacturing reports, housing sector data, and the release of the Consumer Price Index for January.


While analysts are positive on the gold market, they are not ruling out some weakness at the start of the week.


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 -
" Gold Regaining Its Safe Haven Appeal: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/02/gold-regaining-its-safe-haven-appeal.html 


Sunday 3 January 2016

MARKETS REMAIN CALM AS WE ENTER 2016: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Firstly wishing you all a very happy new year. 



 
To begin with, United States, Europe, Japan and many other countries remained shut on account of New Year's Day and  hence markets were calm and serene market with volatility to its minimum.

Whatever fluctuation came in was mainly due to two reasons:

In the international market it was the data released from the US and in the domestic market it was the weakening rupee against the dollar.

Gold prices were also supported as weaker than expected economic data from United State likely to spurt safe haven demand for the yellow metal . Data released from the US was as follows-


  • On Thursday, government data showed that the number ofmAmericans filing new claims for unemployment benefits rose sharply last week, a potential signal the job market was losing steam
  •  Initial claims for state unemployment benefits rose 20,000 to a Seasonally adjusted 287,000 for the week ended Dec 26.
  • US Chicago Purchasing Managers Index in December month fell to 42.9 compared to analysts' expectation of 49.8 and 48.7 a month ago, government data showed on Thursday.
  • SPDR Gold Trust holdings dropped by 0.18% i.e. 1.19 tons to 642.37 tons on Thursday compared to 643.56 tons in previous trading day.
  • After the SPDR Gold Trust reported outflows on Thursday, the harp gain in yellow metals was subdued as this outflow created a weak investment sentiment for gold on the market.

Gold prices fluctuated on Friday after the Indian rupee weakened against the dollar and on Exchange Trade Funds (ETFs) outflow, indicating subdued investment demand. Prices of the bullion were supported after the Indian rupee weakened against the dollar, denting prospects of higher imports. At 1:40PM dollar/rupee traded at Rs 66.21/$1 compared to previous close of Rs 66.15/$1.



Gold prices were also supported as weaker than expected economic data from United State likely to spurt safe haven demand for the yellow metals.

Prices of the precious metal were also supported by thin trading volumes as financial markets in United States, Europe, Japan and many other countries are shut on account of New Year's Day.


In short, Gold prices were supported by weak local currency while subdued investment demand capped the gain.



Now as we welcome 2016 with a bang we hope it has lots in store for the global economies and for the yellow metal precisely.




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 -
"Mr. Prithviraj Kothari, (MD, RSBL), makes gold price prediction for the year 2016
http://riddisiddhibullionsltd.blogspot.in/2016/01/mr-prithviraj-kothari-md-rsbl-makes.html 



Saturday 26 December 2015

AWAITING A GOLDEN YEAR:RSBL

By Mr. Prithviraj Kothari, MD, RSBL




Holiday fever, kept the markets calm with very little volatility in gold prices.

After the Federal Reserve’s interest-rate rise last week, trading remains cautious while investors assess conditions in a non-zero bound environment for the first time in seven years.

Gold prices ended the U.S. day session and a holiday-shortened trading week modestly higher Thursday. Some short covering in the futures market and perceived bargain-basement buying in the cash market heading into a long weekend gave gold its lift.

There were no major international news developments Thursday and the marketplace worldwide was very subdued ahead of the Christmas holiday on Friday.

Spot gold was last at $1,073.60/1,073.90 per ounce, a $2 increase on Wednesday’s close. The yellow metal has climbed away from five-year lows from the start of the month of just $1,046.40.

The gold price was higher on Thursday morning, tracking the recovery in the oil price and a slight decline in the dollar, in thin pre-Christmas trading conditions.

Now that we have rounded up for the week, I would also like to share my view on gold outlook for 2016.

As we all have seen that after increasing consecutively for 11 years, gold started giving negative returns since 2013.  Formerly gold was seen as the highest return generating asset in its class. But now economies have changed and people have shifted to other modes of investment like equities and hence gold has lost its appeal as a safe haven asset.


Will gold bottom further? Has it reached its support level? What’s in store for gold in 2016
 Well these questions have been constantly rotating the market since the past fortnight, especially after the fed rate hike.

Everyone in the markets had hopes that the Fed will raise interest rates for the first time in a decade. The day the Fed increased its rates we saw ETF gain 18.6 tonnes for the first time in the past three years. Everyone thought that a rate hike would slosh gold prices but gold managed to stabilize at 1075$ and did not decline as expected.

Moreover, if we see from the mining aspect, the mining cost of gold is around 1000 $- 1050 $ and I don’t see gold going below that level. Now that gold has already witnessed this bottom. I think this year gold might appreciate around 7-8 per cent compared to last year.

Moving on to the Indian markets. As far as the Indian markets are concerned, the INR is gradually appreciating which is in turn affecting gold prices. If you see the international market. Gold may bottom at 1000/1050 dollar and may witness an upswing towards 1200-1300 dollars. But at the same time the rupee appreciating will bring gold in the range of Rs. 24,000- Rs.30, 000 in 2016.

The population of India is 125 crore. Every year 800-900 tonnes gold is imported whether the price is $1900 or $700. A matter of concern is the custom duty that is currently 10 percent. Due to this, there is a huge difference between off shore and domestic markets. This duty increases gold prices by Rs.2, 50,000 per kilo. 

Due to high duty the quantity of gold smuggled into the country is also rising.  Last year around 200 tonnes of gold was smuggled. And this year the figure might touch and 300 tonnes thus bringing the official import figures down to 500-600 tonnes. 

The government has been trying its best to get some viable and profitable schemes into the market like the gold monetization scheme and gold sovereign bonds. Gold sovereign bonds are not a viable option as prices are fixed at Rs.26840 and currently the prices are almost 5per cent down.

Gold monetization is a scheme where the temples are more willing to deposit gold in banks. This scheme may take time for proper implementation but once it pick up we are really positive that the idle gold lying in the temples and Indian household) almost 500-1000 tonnes) will be flushed into the market and this would really help the economy.
  
To conclude I would say that 2015 was a year with nervous sentiments. But 2016 could be the golden year literally especially the jewelers and the investors.



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 -
"Markets Remain Calm For Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/12/markets-remain-calm-for-gold-rsbl.html