PLAYING GAMES WITH GOLD?

                                                          By Mr. Prithviraj Kothari, MD, RSBL

A truncated week due to Good Friday was not so good for US with significantly weaker Non Farm payrolls report. Moreover many trading centers remain closed for Easter Monday. Anyways, let’s hit back to the Gold price rise over the week and some more understanding on US economic indicators that hit the market.

The first weak data coming from US on Tuesday was the contraction in Chicago PMI for second month in succession. Following February's five year low of 45.8, analysts were again disappointed as March's print came in well below expectations at 46.3 (exp: 51.7). The March figures takes the quarterly average to 50.5 over Q1 2015, the lowest quarterly result since Q3 2009 and markedly down on the 61.3 we saw in Q4 2014

On Wednesday, Gold prices were again tested at US$1180 – 81 support. For the third time this support has withstood the selling. But the ADP data from US that came in early took the precious metals complex to nearly day’s high in no time. Gold had a super boost of US$9 to US$1194 in no time and the way was just up after that by reaching an intra-day peak of US$1208. According to the ADP, U.S. private employers added the smallest number of workers in more than a year during March. Private payrolls rose +189k (+225k expected) according to their employment report.

U.S. national factory activity hit a near 2 year low in March according to the Institute for Supply Management (ISM). The ISM's manufacturing PMI index fell for a fifth consecutive month to 51.5 in March (52.5 expected) from 52.9 in February and declining each month since hitting 57.9 in October. The ISM pointed to various factors including the weather, higher health-care costs and the stronger dollar as reasons for the slowdown. 

Then came in the 2 conflicting reports:

On Thursday, US unemployment claims dropped 20,000 to 268,000 in the week ended March 28, the lowest reading since January 24 and much better than the 286,000 forecast.

On Friday, United States employers added the fewest number of jobs in more than a year during March with non-farm payrolls increasing a mere +126k (+245k expected), less than half February's pace and the smallest increase since the polar vortex of December 2013. While the unemployment rate was unchanged at 5.5 percent, the U.S. Bureau of Labor Statistics reported today that ended 12 straight months of job gains above 200,000, the longest streak since 1994.

The main reasons for the negative labor report were:

1.    Poor Weather- Poor weather conditions during the winters created a sort of slag in the labor market

2.    Stronger Dollar- strong dollar created a great impact on the employment numbers

3.    Energy sector- This sector has been having a considerable impact on the employment numbers, this sector witnessed a decline of 11000 employment numbers in March. The industry has lost 30,000 jobs thus far in 2015, after adding 41,000 jobs in 2014. The employment declines in the first quarter of 2015, as well as the gains in 2014, were concentrated in support activities for mining, which includes support for oil and gas extraction.

The dollar tumbled as much as 1 percent against the euro after the significantly weaker-than-expected report, while U.S. Treasuries rose, with benchmark 10-year yields hitting nearly two-month lows.

Undoubtedly, this does act as a super boost for Gold and other precious metals as the negative data does have a chance to delay the Fed’s decision to opt for the first increase in U.S. interest rates in nearly a decade, which is expected later this year. Gold tends to suffer when rates rise, as that increases the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which the metal is priced.

On the domestic front, gold has also found support from strong physical demand from India, currently the world’s biggest gold consuming country with gold imports touching to 70 tonnes in the month of March, putting total imports in the fiscal year that has just ended at 638 tonnes.

Platinum has been a real lager in the whole precious metals group by being down just over 5%. Silver too had been heavily sold in 2014 but having a good push up by nearly 3%.

The reports that were released on Friday will show its effects and reflections on Monday as international open for trade. I am sure that there would be a price push to US$ 1220 (Approximately) testing its key resistance.

Note: A break above US$1238 would surely give a fresh bullish interest. Until then, traders would wait for FED’s decision on FED rate hike barring the price moves depending on the economic indicators.

TRADE RANGE:

METAL	INTERNATIONAL price	DOMESTIC price
GOLD	1184$- 1223$ an ounce	Rs.26,500- Rs.28,000 per 10gm
SILVER	16.50$- 18.00$ an ounce	Rs.37,000- Rs.40,000 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 -

"RSBL: Yemen's Push While Fed's Caution"

http://riddisiddhibullionsltd.blogspot.in/2015/03/fed-takes-gradual-and-cautious-route.html

RSBL: Yemen's push while Fed's Caution

                                                                By Mr. Prithviraj Kothari,MD,RSBL

We have seen quite interesting movements in gold over the past fortnight. In fact the price of gold has been on a rally over the last one week, rising from well below $1150 to the current level of about $1205. Based on recent trend, the price of the yellow metal is currently testing a major resistance zone of $1200 to $1220.

Undoubtedly, Yemen's turbulence had to play a major part in this up-move. Gold was rocketed towards a break out of USD $1220 that acts to be its key resistance. Silver did follow Gold up-move and touched a high of USD $17.41. Initial air strikes by Saudi Arabia caused a spike in oil prices and other commodities edged higher.

The current volatility in gold has been mainly due the recent comment by Fed Chair Janet Yellen that the policy makers won’t be rushing on rate hike. The Fed has kept its benchmark rate at a record low near zero for more than six years.

Some of the important statements released by Federal Reserve Chair Janet Yellen were-

• She said Friday that continued improvement in the U.S. economy means an increase in the Fed's key interest rate could come later this year but at the same time she stated that any rate increases would happen gradually.
• Yellen said Japan's experience over the past 20 years argues for a cautious approach.
• She stated that main reason for this gradualist approach is that the risk of raising them quickly is much higher than doing so gradually. Tightening the loan rates could stall the economy. Which will again have its own side effects.
• Both Yellen and Fischer stressed the Fed's expectation that rate hikes would be gradual and that the Fed's action would depend on how the economy performs in coming months.

Next week markets continue to look volatile for gold as the market will react to data in anticipation of potential Federal Reserve rate hikes and Saudi strikes in Yemen. 

Gold prices have a more bearish outlook. Reasons being:

• The U.S economic data have so far continued to impress and another positive commentary would subsequently end the recent rally in the price of gold. A stronger than expected US PMI data and some hawkish comments from Feds Lockhart did take some shine out of the rally. Even the unemployment claims filed by US citizens have fell more than expectations creating a sign of stonf fundamental growth.
• Weakening demand for gold from China and India poses several challenges for the yellow metal to reach its January highs. China's gold imports from Hong Kong fell to their lowest in six months in february, data showed on Thursday. Whereas the sudden jump in prices have dampened demand in Indian markets.
• SPDR Gold trust has continued to see outflow in-spite of the ongoing rally, where it reported that the holdings fell by nearly 6 tonnes to 737.24 tonnes on Thursday, the lowest since January.

If anything, the recent rally is a magnificent reward to gold bulls, especially considering the overall market bias, and hence some would be looking to cash in at the current level which would again put more pressure on the price. This would shift focus from gold to US equities and the USD thus pressuring gold prices to fall further.

But the ones who believe that the market is bullish for gold have their own justifications. They believe that a long with uncertainty in the Middle East, Greece’s negotiations could also create a safe-haven bid for gold next week.

The bottom line is that the recent rally in the price of gold lacks enough catalysts to sustain it towards levels seen in late January. In fact, based on recent events, a lot more could count against a continuous rally thereby signaling an end to the current run.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1185-$1230 an ounce	Rs.26,000- Rs.27,500 per 10gm
SILVER	$16.40-$18.00 an ounce	Rs.37,600- Rs.40,000 per kg

 

INVESTMENT MANTRA: 
Buy on corrections and keep investing systematically every month. You may take the services of Bullion India for Systematic investment plan.

I feel that Silver will surpass Gold in the future. The price range between INR 33000 to INR 40000 does serve as a strong appetite for Silver consumption.

“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 -
"An Action Packed Week For Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/03/an-action-packed-week-for-gold.html

AN ACTION PACKED WEEK FOR GOLD

                                                                                                             -By Mr. Prithviraj Kothari, MD, RSBL

Yes Indeed…It seems like a miracle. It’s so surprising to see what a difference a few days can make as the gold market sees renewed optimism, ending the week solidly positive on the back of a weaker U.S. dollar and lower U.S. treasury yields.

Gold prices hit two-week highs on Friday and were poised for their biggest weekly jump since mid-January, after the U.S. Federal Reserve's cautious note on interest rates arrested a dollar rally and sparked broad-based buying of commodities.
Though the week began with a rough patch for gold by the end of the week it was a completely different scenario for gold.
On Tuesday, Gold fell to a four month low of $1,142.92 an ounce. Market players had expected gold prices to drop further amid the dollar's surge and speculation about when the Federal Reserve will begin raising interest rates.  

With positive economic indicators, the US dollar gets stronger. The interest rate hike expectation had further strengthened the dollar which meant that the future for gold is not good.


Following these sentiments the precious metal traded at $1,148.60 Wednesday morning and plummeted 12 percent in the last eight weeks.

Gold prices were seen heading towards a consecutive loss in the past seven sessions as a robust dollar and expectations of higher U.S. interest rates curbed appetite for the metal.
But Wednesday FOMC meet was a game changer for gold. Following  the Federal Open Market committee (FOMC) meeting on Wednesday, The Federal Reserve Chair Janet Yellen made it clear (again) those interest rates would not be raised until inflation gains more steam. With current inflation rates negative for the first time since 2009, and with the U.S. dollar index at an 11-year high, we can probably expect near-record-low interest rates for some time longer.

Post this news, gold prices sparked immediately rising nearly 2 percent, from $1,151 to $1,172. That’s the largest one-day move we’ve seen from the yellow metal in at least two months.

At the highest peak of the week, Spot gold was up 1.2 percent at $1,184.55 an ounce by 1:55 p.m. EDT (1755 GMT) after hitting $1,187.80

Wednesday’s FOMC policy meeting caused a stir in the gold market, which is now looking like it may close off the week on a positive note.


The U.S. currency fell as much as 1.8 percent against a basket of major currencies on Friday, after the Fed downgraded its growth and inflation projections earlier in the week, signaling it is in no rush to push borrowing costs to more normal levels.

Apart from the main game changer for the week, we saw following significant activities in the market.

• Post-Fed, the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, saw its first inflows since Feb. 20, also boosting sentiment. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.24 percent to 749.77 tonnes on Wednesday - the first inflow since Feb. 20.
• In the physical markets, Chinese buying was steady, with premiums on the Shanghai Gold Exchange staying at a robust $6-$7 an ounce on Friday. Sustained physical buying could further support prices.
• Gold climbed on the heels of a softening U.S. dollar and focus in Europe turning back from its political problems to the [European Central Bank] stimulus rollout.
• Demand for gold from India picker up ahead of the auspicious occasion of Gudi Padwa.

Though there is not much data set to be released next week, analysts are expecting gold to continue to take its cue from the U.S. dollar. Most commodity analysts see room for the yellow metal to move higher as investors take some of their U.S. dollar profits off the table.

A significant number coming in for the week will be the housing date- release for existing and new home sales number.

Next week, financial markets will receive more housing data with the release of existing and new home sales numbers.

Apart from the key US indicators, one more thing that needs consideration is Greece. Investors need to keep a watch on what is happening in Greece as funding talks are expected to resume again. Greece is once again pushing back against austerity measures, but with no new funding deal, there is a chance they would default on their debt and be forced out of the Eurozone.

Any breakdown in funding talks next week is going to be positive for gold, as a safe-haven asset.
Though no major game changers are in queue for gold, the yellow metal will be taking cues from the above mentioned data.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1163- $1205 an ounce	Rs.25,700- Rs.27,000 per 10gm
SILVER	$16.15- $18.00 an ounce	Rs.36,000- Rs. 40,000 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 -
"Gold To React To FOMC"

http://riddisiddhibullionsltd.blogspot.in/2015/03/gold-to-react-to-fomc.html