GOLD FAILS TO ATTRACT SAFE HAVEN BUYING: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

The week began with a lot of geo political uncertainty and these rising tensions were expected to ignite gold prices.

But geopolitical tensions  took more of a backseat, with the minutes from the FOMC’s latest policy meeting set to be scrutinized later in the week for clues on the timing of a rate rises in the US.

The gold price had risen to a one-week high on Monday following Friday’s terrorist attacks in Paris, which fuelled safe-haven demand.

On Friday, 13 November, a coordinated terrorist plot in Paris led to over 100 deaths and hundreds injured. The Islamic State boasted and claimed responsibility for the deadly attack, which follows recent attacks by the organization in Lebanon and a suspected bombing of a Russian airliner.

French President Francis Hollande responded by launching a massive airstrike on the ISIS stronghold of Raqqa in Syria.

In tumultuous periods, gold harvests safe-haven appeal as investors seek physical assets like gold versus other investments like bonds or equities. 

However, Gold failed to attract safe-haven buying as a strong dollar offset geopolitical concerns. The dollar placed a cap on the market as it traded at a 7-month high.

Gold received only a small safe-haven lift from the terrorist attacks over the weekend in Paris and Beirut. It rose to $1,097 on Monday but those gains faded away as a strengthening dollar ended the rally. The dollar remained well-supported by broad expectations that the first US interest rate hike in nearly a decade could likely be initiated by the US Federal Reserve in December.

Gold prices dropped to a 5.5-year low on Tuesday, pressured in part by rallying U.S. and world stock markets early this week. 

U.S. economic data released Tuesday was a mixed bag thus leaving the markets confused.

• A heavy data day, US consumer price index month-over-month for October rose  0.2percent, in-line with expectations.
• The core CPI also increased 0.2 percent.
• The capacity utilization rate at 77.5 percent was as forecast.
• US industrial production over the same period dipped 0.2 percent, below the forecast 0.1 percent.
• The NAHB housing market index for November was 62, just missing the estimate of 64.
• The spot gold price was last at $1,081/1,081.30 per ounce, down $2.40 on Monday’s close.

While in the US, market players still expect the Federal Reserve to raise rates for the first time in nearly a decade at the mid-December Federal Open Market Committee (FOMC); Fed chairwoman Janet Yellen has argued for an increase in the Federal Funds rate before the end of the year, citing worries of prolonged periods of cheap capital and its long-term effects on the economy.

On Wednesday, investors’ focus shifted to the minutes from the FOMC’s October policy meeting.

Spot gold was last at $1,075.1/1,075.4 per ounce, up $3.50 on the Wednesday closing level.

Seventy percent of market participants believed the Fed will raise rates next month, according to the CME Group Fed Watch.

The minutes released showed that most members of the Federal Open Market Committee at the October meeting said the conditions for a rate rise could be met by December. A minority, however, said the data may not support a hike and suggested the Fed may need to add monetary stimulus if the economy unexpectedly slows.

The release of the minutes from the October FOMC meeting suggested that  it “could well be” time to raise short-term interest rates at the December policy meeting and as a result the committee chose to alter the wording of their policy statement to ensure their options were open for a move next month.

Gold prices climbed on Thursday morning in London as the dollar fell back even though a majority of US Federal Reserve members believe a December rate hike is becoming more appropriate.

Gold prices climbed on Friday morning in London, boosted by short-covering and fresh buying despite the October FOMC minutes suggesting the Fed will lift interest rates from December. But later in the day gold prices declined.

With the US essentially closed for half the week for Thanksgiving, it’s a quieter week for news and gold may continue to consolidate. All the potentially market impacting fundamental news is packed into Tuesday and Wednesday morning. The key report is U.S. GDP which could potentially impact gold through the U.S. dollar as it could impact speculation on a FOMC rate hike next month.

INTEREST RATE HIKE TO HAPPEN SOON?: RSBL

By Mr. Prithviraj Kothari, MD,RSBL

The downtrend in gold continues, with the metal charting its seventh straight session loss and expectations for the same trend continue for the coming week.

The gold price was steady on Friday morning, making time ahead of the much-awaited US non-farm payrolls data, set for release later in the day.

Gold was confined to a narrow trading range, before the release of the monthly US jobs report.

Once the report was out, gold prices plummeted as the market continued its recent downtrend.

Gold fell below $1,100 on Friday after US jobs data surprised with the upside, raising the chance that the Federal Reserve will increase interest rates by the end of the year.

Spot gold was last at $1,087.40/1,087.60 per ounce, down $17 on Thursday’s close. At its intraday low of $1,085.40, it was at its cheapest since August 7.

After the U.S. labor market revealed its fastest pace of job gains this year, gold, on Friday, witnessed its lowest level since early August.

Treasuries tumbled and the dollar strengthened, as the report alleviated concerns of a hiring slowdown after weaker payroll advances cooled in August and September. Such improvement means a go-ahead signal for the Fed officials, who last month held out the possibility of a December rate increase.

Since this report was considered as one of the key influential factors for a rate hike, let’s have a detailed look at the highlights:

•  The US economy added 271,000 jobs in October, while the unemployment rate fell to 5.0 percent
• The government revised the September jobs gain down to 137,000 from the previously reported 142,000
• The August gain was revised up to 153,000 from 136,000. Over the prior 12 months, employment growth had averaged 230,000 per month
•   Meanwhile, the unemployment rate dipped to a seven-year low of 5.0% in October, from the 5.1% level of the previous month
• Consensus expectations compiled by various news organizations called for non-farm payrolls to rise by between 177,000 and 190,000 in October, while the unemployment rate was expected to hold at 5.1%.
• In October, average hourly earnings for all employees on private non-farm payrolls rose by 9 cents to $25.20. The average workweek for all employees on private nonfarm payrolls remained at 34.5 hours in October.
• The Labor Department said job gains occurred in professional and business services, health care, retail trade, food services and drinking places, and construction sectors.
• Employment in professional and business services increased by 78,000 in October, while healthcare added 45,000 jobs and retail trade added 44,000.
• Employment in mining continued to trend downwards in October with a 5,000 decline. The industry has shed 109,000 jobs since reaching a recent employment peak in December 2014, the government said
• The civilian labor force participation rate was unchanged at 62.4% in October, following a decline of 0.2 percentage point in September, the Labor Department said. The number of persons employed part-time for economic reasons (sometimes referred to as involuntary part-time workers) edged down by 269,000 to 5.8 million in October, the government added.
• In additional data from this morning, average hourly earnings month-over-month rose 0.4 percent, above consensus at 0.2 percent.

The 271,000 gain in payrolls was the biggest this year and exceeded all estimates in a Bloomberg survey of economists, a Labor Department report showed Friday.

The key highlight of the report was the non-farm payrolls number. It jumped 271,000 in October, far more than the 183,000 consensus expectations and was a clear negative for gold prices.

A better-than-expected payroll and hourly earnings number caused the dollar index to spike, which further pushed the gold prices down.

The surprisingly strong U.S. payrolls has had a big impact on FOMC rate hike expectations, sparking a new rally phase for the U.S. dollar against many currencies, including gold.

The marketplace deemed the report as positive and has prompted strong selling in the gold market, as investors do not see a 2015 rate hike as far-fetched.  

Federal Reserve chairwoman Janet Yellen has stated that 4.9 percent is the Fed’s estimation for full employment and reiterated before the report that she would prefer to raise rates by December.

Earlier this week, Yellen said a December rate hike was a “live possibility” and the policy-board would raise the federal funds rate if the data was sufficient.

This has intensified the speculation for a December rate rise and has pressured gold prices lower, with the shift in safe-haven buying probably adding further downside.

The Fed hasn’t lifted interest rates since 2006, but dovish members see low inflation as sufficient reasoning to hold-off until 2016.

Traders watch the monthly U.S. jobs report most closely as they try to gauge whether the Federal Open Market Committee might hike U.S. interest rates yet this year. One more jobs report, for November, is scheduled for release before policy-makers meet again in mid-December, which will once again be a crucial factor for raising interest rates in 2015.

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 -
" Sovereign Gold Bonds Scheme by India & FED Rate Hike - Timing Matters: RSBL!"
http://riddisiddhibullionsltd.blogspot.in/2015/10/sovereign-gold-bonds-scheme-by-india_31.html

NO HELP FOR GOLD:RSBL

-By Mr. Prithviraj Kothari, MD, RSBL

Firstly,I would apologise to all my readers for not drafting a blog for last week. 

I would like to present you an in depth analysis of this weeks gold movement.

It all began on a positive note for gold. The yellow metal entered the positive territory on the first day of the week and investors once again gained confidence of gold being a safe haven asset. But as we moved further, it once again lost its glitter. Gold prices fell by the end of the week and there were a varied reasons responsible for this fall.

Gold was marginally higher on the first morning of the week but remained rooted within a narrow range. Gold was vulnerable to a fresh wave of selling from funds poised to increase bearish bets.

In Shanghai, poor PMI dampened the sentiment and this decline in Asian markets boosted gold’s safe haven appeal as gold continued its gradual positive trend in European trading and was up around $6 an ounce to $1,141- around two per cent off a recent high reached a little over a week ago.

Gold has been struggling to gain from equities volatility in recent weeks, but it reverted to its inverse correlation with wider markets on Wednesday as spot prices recorded the sharpest fall in a week.

Gold found "no help" on Thursday as a spate of economic data from Europe and the US reduced inflation expectations. This sent the dollar higher, weighing down on the value of a precious metal that is often treated as a proxy currency and typically moves in the opposite direction to the greenback.

Gold fell 1 percent on Thursday as the dollar jumped versus the euro after the European Central Bank (ECB) cut inflation forecasts, while a U.S. jobs report that could provide clues on the timing of a Federal Reserve rate rise remained in focus.

The ECB left interest rates unchanged at record lows as expected, but lowered its forecasts for inflation and economic growth, citing a slowdown in emerging markets and weaker oil prices.

As a traditional hedge against inflation, gold suffered from the downward revision.

Spot gold had hit its lowest in a week during trading sessions on Thursday after comments from the ECB president Mario Draghi boosted the dollar against the Euro.

The president warned of negative inflation in the months to come, while noting that the Euro zone recovery has been weaker than expected.

The central bank left its benchmark interest rate at 0.05 per cent, a move that was widely expected whit Euro zone inflation currently at 0.1 percent.

By Friday afternoon, gold slipped about 0.4 percent in Europe following the release of a mixed US labor report.

The spot gold price was last at $1,120- $1,120.5 per ounce- almost down $4.70 from Thursday’s close. The US nonfarm payroll employment increased by 173,000 in August- below the forecast of 215,000 but on the contrary the unemployment rate fell to 5.1 per cent from 5.2 per cent in the prior month.

While average hourly earnings rose eight cents to $25.09 following a six cent gain in July- the hourly earnings rose 2.2 percent over the year.

Gold that was trading in a narrow range but on a positive side- immediately moved to the negative territory after the release of the report.

Though the reports were conflicting in nature- overall it did support the fact the interest rate hike may happen in September itself.

Reasons to justify this was a strengthening dollar and a strengthening gold, both of which happened after the data release. Their usual inverse relationship trend as broken which reflected some speculation surrounding a September interest rate hike.

The jobs report has taken on greater importance ahead of the September FOMC meet. The Fed is deciding whether to raise the Federal Interest rate for the first time since 2006.

After from the Euro zone and the US, In India a less than optimal monsoon will surely affect the demand for gold which may pull down gold prices further.

On the other hand demand for gold from China too seems to be weak. Chinese markets will be closed until Monday after the September 3-5 celebrations to mark the allied victory over Japan in the World War 2. The two day holiday in China also had some bearing on gold.

Currently we don’t see any help for gold from any of the world economies.

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 -

"Optimism For Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/08/optimism-for-gold-rsbl.html

GOLD TO BE PRESSURED DOWNWARDS: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

The bull market for gold is entering its seventh year. For the past seven months the market has traded roughly sideways.  Collapsing energy prices and a rising dollar have held back earnings and revenue growth. 

In the past, the demand for gold from China had been a motivating factor behind the rising prices for gold. But now, questions regarding the pace of global economic growth have moved to the forefront recently by price declines in the Chinese stock market, oil, commodities and high-yield debt in the past three months.

 

Such a slow pace of economic growth continues to create a deteriorating investment scene. Commodities and oil are key drivers of global economic growth, and falling prices do not usually portend rising demand. 

Gold has been trading in successively smaller weekly ranges for the past 2 weeks. This week we closed lower at 1095 with a very small range, and it appears that the bottom of the bearish trend.

 

Spot gold, which hit a session low of $1,082.76 an ounce immediately after the U.S. jobs report, managed to rebound 0.5 percent to $1,095.26 . It had fallen to $1,077 on July 24; it’s weakest since February 2010.

Though we saw some buying momentum in gold as the week ended, some market players state that since prices aren’t able to break the $1100 mark, gold does not bode well for a sustained rally.

Surprisingly, $1,100 appears to be the barrier that we just can’t seem to break. Although there are expectations that the market might trade in a tight range next week, gold remains an unwanted asset as the expectations remain that the Federal Reserve will raise interest rates in September.

After rising on Friday, following the U.S. Department of Labor’s employment report for July, the U.S. dollar weakened as afternoon trading wore on. It was a neutral report- not too close and not too far from expectations. Therefore, markets are finding it difficult to analyze and find a meaning in it. 

Economists have noted that July’s nonfarm payrolls report helped to rejuvenate those expectations. Although job gains of 215,000 were below expectations, it stills a “solid” report.

Consensus forecasts ahead of the report were expecting that the U.S. economy created 223,000 jobs. The unemployment rate remained unchanged at 5.3% last month, in line with economist expectations.

The consensus was for 223,000 jobs and July came in at 215,000. However, upward revisions to the previous months’ employment data plus a gain in average hourly earnings and hours worked were both viewed positively by market participants, and as a stronger signal the Fed could raise rates in September. 

The U.S. labor market lost momentum in July, coming in under expectations for the second consecutive month, according to the latest employment data from the Labor Department; however, the numbers still showed jobs gains of more than 200,000.

Friday, the Bureau of Labor Statistics said 215,000 jobs were created in July, down from June's revised number of 232,000; June’s initial report pegged the growth at 223,000 jobs. May's employment data was also revised higher to 260,000 from the previous report of 254,000.

Although the data was slightly weaker than expected, gold prices sold off in initial reaction to the news, dropping almost $10 and falling to a session low of $1,081.40 an ounce. 

Other highlights of the report were-

• The participation rate was also unchanged at 62.6% in July.
• Wage growth continues to expand at a steady pace, increasing 0.2% in July, compared with a 0.2% rise in June.
• The report noted that average hourly earnings rose five cents last month to $24.99. On an annual basis wages have increased by 2.1%.
•  Employees also saw an increase in the work week; the report said that the average workweek rose by 0.1 hour to 34.6 hours.

Although it appears that some of the immediate selling pressure has been alleviated, there is still strong negative sentiment in the marketplace. Retail investors continue to expect to see lower prices in the near-term and market professionals have once again turned bearish on gold.

The first data point that could have potential to move the gold price next week comes Thursday with the release of U.S. advance retail sales for July. The market ends the week with some inflation data with the release of the U.S. Producer Price Index for July.

Despite the negative sentiment, there is still market professional who see some hope for the yellow metal as technical momentum indicators continue to highlight an oversold marketplace.

However, gold is still fundamentally in the doldrums from the bullish point of view. Long term, gold will be pressured downward. 

Markets don’t expect to see another sharp selloff until Aug. 19, when the Federal Reserve will release the minutes of its July meeting. Markets will then expect a clearer picture of an interest rate hike in September.

Till then gold is expected to trade sideways until some solid crucial news is reported.

Markets could be stuck in a range next week in light volume as markets will be deeper into the summer holiday season.

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 -
"Rate Hike Creating Pressure On Gold"
http://riddisiddhibullionsltd.blogspot.in/2015/08/rate-hike-creating-pressure-on-goldrsbl.html