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Showing posts with label euro. Show all posts
Showing posts with label euro. Show all posts

Tuesday, 7 November 2017

Winter demand good for gold but prices likely to fall

Gold prices were hovering near multi-week highs for most investors outside the US Dollar and Euro on Thursday, as the Bank of England followed the Federal Reserve's widely expected "no change" decision by raising UK rates off an all-time record low as analysts and traders had forecast.
However in Friday, Spot gold was down 0.2 percent at $1,267.01 per Ounce and touched a one-week low of $1,265.16 over positive economic data and central bank decisions.



The past week was a significant week for central banks. The Bank of England raised interest rates for the first time in ten years, the Federal Reserve indicated that a December rate hike may happen and President Trump named Powell as his choice for leader of the Federal Reserve.

But still uncertainty prevails as there is no surety that how economies will manage when the central bank support is withdrawn. Moreover none of the financial centers have managed to meet inflation targets which they were all so vocal about.

Adding to the uncertainty is the issue that three of the world’s four most important central bank chiefs are nearing the end of their terms and may be well replaced. The rally in the gold price and fall in the dollar is just the first indication with how markets feel about such changes.

Gold held steady on Monday, but hovered near a one-week low hit in the previous session, as largely upbeat U.S. economic data reinforced the prospects of another rate hike by the Federal Reserve next month.

U.S. jobs growth accelerated in October, although wage growth was tepid, adding to the Fed’s assessment last week that “the labor market has continued to strengthen”, with the sluggish wage data doing little to change expectations.

JP Morgan Chase & Co on Friday raised its forecast on the number of U.S. interest rate increases by the Federal Reserve next year to four from three as the October payrolls data reinforced the view of a tightening domestic labor market.

Markets are increasingly confident the Fed will hike interest rates in December, which has weighed on the precious metals complex,

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

The Federal Reserve looks likely to raise interest rates, and that should bring up the value of the US dollar in general. If that’s the case, then gold could roll over a bit. Ultimately, this is a market that will continue to be just as mixed up as many others are right now, as we do not know with any type of certainty that the Federal Reserve is going to do one thing or the other.

Analysts said the yellow metal could also find support after U.S. President Donald Trump, who kicked off a 12-day Asia trip, looked to present a united front with Japan against North Korea.
Moreoverdemand for gold is likely to rise not only in the domestic market butinternationally too.
While we see the onset of the wedding season in India, normally winter is also a good time for gold globally with men buying their significant others jewellery for Christmas and lots of New Year’s Day marriage proposals

This rise in demand is expected tousher in renewed interest for bullion in coming week.

Monday, 27 March 2017

Short Term seems positive for Gold

Gold rose by 15 dollars last week from $1229 to $1244 having hit a high of $1252 and a low of $1227. Silver rose by 41 cents from $17.36 to $17.77 having reached a high of $17.78 and a low of $17.33. The dollar index stands at 99.62 that’s down 0.68 on the week. Gold prices moved higher as the Euro gained traction and the dollar edged lower following stronger than expected German PMI data. Analysts believe that gold has further to rise but will be seesawing between $1230- $1260 before perhaps it breaks out up to $1280 levels.

Silver markets were also positive last week and is attempting to reach $18 level. Similar to gold we see a see saw effect between the price range of $17 where there is significant support and the $18 level where there is resistance. As I have mentioned in my previous blogs that political uncertainty could have a greater effect on prices primarily because of their effect on the value of the dollar which actually fell a little during the week. Also a fall in the Dow enabled funds to be moved out of equities and back into gold, though to be fair this transference was relatively small.


Gold prices finished higher on Friday to log a second weekly gain in a row as demand for assets perceived as risky waned and the U.S. dollar touched its lowest level in about seven weeks.
Traders also eyed developments tied to a Republican-backed U.S. health-care bill, which could have wide-ranging influence in financial markets.

The main focus globally was on a vote by the U.S. House of Representatives on a bill to abolish the Affordable Care Act, also known as Obamacare.  The vote was expected late Thursday, but was postponed by the Republicans when there were serious doubts the Republicans had the votes to strike down Obamacare. After negotiations between the Trump administration and members of the House Thursday, President Trump took a hard line and declared the vote should take place Friday, or he would move on to other matters and leave Obamacare in place. There is no clear consensus in the marketplace on the outcome of this key vote, which could move markets in its immediate aftermath.
A “no” vote on the House bill would likely favour the gold market bulls, as it could put downside pressure on the U.S. stock market.

Gold could back off and The U.S dollar is expected to strengthen and bonds yields should rise if the health care bill gets passed. The main reason being that the markets will see it as one hurdle out of the way for finally moving onto tax reform and other fiscal stimulus measures.

But if it happens otherwise and if the bill doesn’t get passed then gold is quote likely to rise.
On Friday, St. Louis Fed President James Bullard said U.S. labour market improvement is slowing down. U.S. data on core durable goods has shown that the economy is strong, but this is not something which is going to excite the Fed that much.

The U.S. data released was as follows

  • The Department of Commerce said new order of durable goods increased by $3.9 billion or 1.7% to $235.4 billion last month, following January’s revised 2.3% increase. According to consensus forecasts, economists were expecting to see a 1.1% rise.
  • Stripping out the volatile transportation sector, new orders of core durable goods rose 0.4%, in February, following January’s revised increase to 0.2%. Economists were expecting to see an increase of 0.5%.


The political uncertainties over in Europe around French elections and Brexit are going to provide a lot of tailwinds for the gold rally .

Analysts believe that the short term outlook for gold is positive as it will rise and shine amidst all the volatility and uncertainty prevailing. The coming week, US durable goods orders and housing sales will be announced. Globally reports on Japanese trade and UK inflation could also influence the currency markets and so it is possible that the dollar may lose a little ground against the Sterling and the Euro as it did last week. So this week we are positive for gold and silver while the limits mentioned are tested. What also needs to be focused is the divergence between the Fed’s growth forecast of 2% and President Trumps envisaged plans for a 4% economy growth rate. Time will tell which of the two proves to be more accurate.

Tuesday, 28 June 2016

UK Departs, GOLD prices shine: RSBL


                                                              - Prithviraj Kothari, MD RSBL




The most talked about and the most awaited trend changer of the year after the FED rate hike is finally out: UK has exited EURO after 43 years and BREXIT has been implemented. UK themselves have got divided during the results of the referendum where England and Wales voting strongly for leave, while Scotland and Northern Ireland backed staying in the EU. 

Undoubtedly, along with me almost everyone was caught by surprise. There were possibilities but a result like this is a bit hard to digest. Simply because it creates fractions in Euro group where countries like France, Netherlands could also take up a similar decision. It sent shock waves across the financial markets, with all the risky asset classes such as equities heavily down and safe-haven vehicles such as government bonds, gold and silver steeply higher. The volatility, uncertainty, fluctuation went beyond expectations. Gold saw investor favour resume on safe-haven Brexit buying. Let’s pick each market individually and see the effect Brexit had them.

GOLD:
Gold soared as much as 8 percent to its highest in more than two years on Friday after the UK referendum results, sending investors rushing for protection. Gold prices surged to its highest level in more than two years, at $1,359 since March 17, 2014, sending shock waves across markets. Gold is currently trading around $1316 a $40 lower from the high.

Major Indices:
All the major indices across the world were nearly 3% down while European indices fell to the tune of 5%. The indices have shown some resilience as the news item fades, but the uncertainty in the markets have reached to unprecedented level, calling in government, state heads to provide clarity on the future map ahead.

India:
Even before the final numbers were out, India’s benchmark Sensex index opened over 700 points or 2.85% lower in the early trading hours When the trading ended for the day at 3:30 PM, the Sensex closed at 605 points lower, marking a decent recovery. Though BREXIT pushed Indian equity prices down, the governments has been very confident in their message and do not see a much long term impact on the Indian economy.

Currency - Pound versus others:
The British pound fell more than 10% against the US dollar, lowest since the 1980s. In morning trade, the rupee fell to 68.22 a dollar, the lowest level since March 1. Weaker pound will reduce burden on children studying in UK but it might get partially offset by a rise in cost of living. The dollar index shot higher on safe-haven buying, last at 96.10, the euro had dropped to 1.0912, the Aussie dollar had fallen to 0.7335, but the yen has had a massive rally to 99. In emerging market currencies, the Yuan has fallen to 6.6295 and most others had a knee-jerk reaction to the downside as the dollar has strengthened and as risk-off has hit the markets.

ETF:
ETF investors are expected to boost their physical holdings following the vote. According to market estimates, they have just accumulated 7.3 tonnes of gold so far this week after buying 25 tonnes in the previous week.

For investors:
      Do not lay your investments in one asset class only. Returns on Gold have surpassed most of the indices returns in the current year. A whopping $100 movement and thereafter settling at around $1330, showcases the metal's safe haven appeal strength.

Investors currently see gold as a currency – it is rising alongside other safe-haven currencies such as the dollar and the yen. Gold’s upside potential will be dependent on the degree of uncertainty and instability stemming from the Brexit as well as the ability of central banks to provide a co-ordinated solution to calm the storm in the financial markets.

Gold set a fresh 2016 high although the rally was quicker and stronger than expected given that the UK would remain in the EU. Brexit helped it to be a white Friday for gold after the vote against markets expectation of it turning to be a black one. Gold has done what’s its best at- acting as a safe haven for its investor, giving protection against uncertainties and volatility.  Such environment is expected to persist for a few days until the central banks provide a co-ordinated package of measures to calm the financial markets, in turn triggering some profit-taking in gold.

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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Photo courtesy: https://twitter.com/trade_24

Monday, 7 December 2015

GOLD BOUNCES BACK: RSBL

 By Mr. Prithviraj Kothari,MD, RSBL






Christmas seems to have come in early for gold as it finished the week on a strong note, ending a six-week losing streak and bouncing off a fresh 5 and-a-half year low.
After hitting a 5.5-year low earlier this week, Gold prices prepared to end Friday's session on a very upbeat note, with the metal up 2% during the day.

The magic move happened despite a relatively in-line November jobs report that all strengthened the expectations that the Federal Reserve will raise rates after its monetary policy meeting December 16.

Gold’s rally started in earnest Friday, following the release of November’s nonfarm payrolls report, which was relatively in line with expectations.

Because expectations of a rate hike are close to fully priced into the markets, many investors and traders are starting to doubt whether the U.S. dollar can move higher under current market conditions, prompting them to take profits in their long U.S. dollar positions.
Good news for gold also came in when the Euro rebounded over the announcement of a minimum cut in its deposit rate over the disappointing market by the European Central. The central bank eased its monetary policy, dropping its deposit rate to negative 0.30% from negative 0.20% on Thursday.

The rebound in the euro, following the ECB’s monetary easing that was less than expected, pushed the dollar index down to 97.59, last at 98.30 and that seems to be helping to underpin the metals.

Markets eagerly awaited the US employment report that is likely to be the next directional influence on the dollar and markets generally. 

The gold prices recovered after falling to fresh five-and-a-half year lows during Thursday morning trading after Asian participants reacted to the strong US job data from the previous session.  
Spot gold was indicated $1,053.20/1,053.50 per ounce, down $0.80 from Wednesday and off its session low of $1,046.40, its lowest since February 2010 – market participants largely expect the US FOMC to increase interest rates this month. 

The Bureau of Labor Statistics, on Friday,  said 211,000 jobs were created in November, down from October’s upwardly revised number of 298,000; September's employment report was also revised higher to 145,000, from the previous report of 137,000. The report noted that 35,000 more jobs were added in the previous two months as a result of the revisions.
According to consensus estimates, economists were expecting to see job gains of 200,000.
Over the past 3 months, job gains have averaged 218,000 per month. As expected the unemployment rate held steady at 5.0% last month; at the same time the participation rate was little changed at 62.5%.

As anticipated the U.S. labor market cooled off a little in November after seeing immense gains in the previous month; however, the job growth still managed to slightly beat outlooks, according to the latest employment data from the Labor Department.

It was one of last few data releases before the Federal Reserve meets in two weeks to decide whether to raise interest rates and these reports will play a significant role for the same.

This raises expectation that the Fed has a go ahead signal to increase interest rates on December 16 as long as other things remain steady globally over the next few weeks.

Yellen has been adamant about raising rates before the year concludes, citing concerns over an expedited tightening cycle if the policy-board waits until 2016.

With another two weeks to go before the Federal Open Market Committee meets to discuss raising rates for the first time since 2006 the market remains focused on the expected positive impact such a move might have on the dollar together with the subsequent negative gold impact. Taking a look at the past four rate hikes we actually find that instead of rising, the dollar has weakened in the weeks and months following the first announcement. 

While this time round may be different considering the expected diverging trajectories of the ECB and FOMC it nevertheless raises the risk of a correction both on dollar longs and gold shorts. Not least considering the big jump in positioning seen in both markets during November.  

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 -
"Critical Week For Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/11/critical-week-for-gold-rsbl.html 


Sunday, 7 December 2014

APPETITE FOR GOLD DECLINED

 -By Mr. Prithviraj Kothari, MD, RSBL



In the past few weeks we have seen volatility in gold but then it has settled back on the lower trading range. With fall in gold holdings in the SDPR gold trust we have seen investors interest weakening in the yellow metal. Apart from the SDPR, the dollar has also played a crucial role in influencing gold prices and it will continue to do so in the coming months.

Although, US economy is on a mend, the actions taken by central banks (Euro-zone and Japan) to prop up its economies will likely result in to weakening of their respective currencies and strength in the dollar in turn prices heading lower.

Moreover, the decision coming in from the Swiss referendum not to boost its gold reserves, at the same time falling oil prices and diminishing investment actions are also signifying that the market has temporarily disowned gold and has been replaced by more interest generating assets in its class.

Earlier in the week economists admitted there was some downside risk to the employment forecast following Wednesday’s private sector payrolls data, compiled by payrolls processor ADP. The report was weaker than expected as corporations and businesses created 208,000 jobs last month. The unemployment rate for November was 5.8%, unchanged from October’s reading of 5.8%; economists were expecting an unchanged reading. The report also said that the labor force participation rate was unchanged at 62.8%. Last month we saw a very strong labor market as the reports released by the US labor department states a significantly higher-than-expected nonfarm payrolls report for November.

On Friday, the Bureau of Labor Statistics said 321,000 jobs were created in November, up from October’s revised level of 243000; October’s initial report said 214,000 jobs were created. September's employment report was also revised higher to 271,000 from the original report of 256,000 jobs. This was the biggest jump in employment since January 2012. The report noted that the 12 month average for employment was 224,000.

There was a huge growth witnessed in the jobs in November which was led by gains in professional and business services, retail trade, health care, and manufacturing.

Even though the jobs report was extremely impressive, gold did not extend sharp losses after its release. The previous two jobs reports saw upward revisions in employment gains, and wages also rose. The job gains in 2014 are the fastest rate since 1999

Gold prices dropped under $1,200 following a blowout November nonfarm payrolls report. It instantly fell by 10$ as there were further expectations that the Fed will start talking about the Fed funds going higher than expected. Such news is not motivating for the commodities markets and it further expected that gold prices will weaken.

Simultaneously we saw the US dollar rising on this news. The dollar index rose above 89 for the first time since March 2009. The dollar advanced to the highest since 2009 against a basket of currencies, cutting the appeal of bullion as an alternative asset. Dollar is trading currently at $ 1.228 against euro. Euro is slacking after the ECB left the interest rates unchanged.

The strong labor report further signifies the fact the Federal Reserve may soon hike rates and this could happen as early as next spring.

The only issue that could be of concern would be the wage growth reports as it was not seen to be that strong and could keep the Federal Reserve apart from pulling the trigger on interest rate hikes.

Before hiking the rates the Fed would want to see some further improvement in the wage growth which could practically happen if the current momentum in hiring is maintained and the underemployment rate continues to fall.

The labor markets have been improving rapidly over the past few months. The issue of concern now is the Fed’s reaction to its mid-December meeting. But if we see the global scenario gold prices in the international markets is expected to trade lower as a hangover of the recent run of losses.

In the near past, we have the dollar being the key influential factor for the weakened in the yellow metal and it is expected to continue to do so in the near future to.



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 - "Too Many Economies Putting Pressure On Gold"
http://riddisiddhibullionsltd.blogspot.in/2014/11/too-many-economies-putting-pressure-on.html