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Showing posts with label fed hike. Show all posts
Showing posts with label fed hike. Show all posts

Tuesday, 25 October 2016

AN ACTION PACKED DECEMBER: RSBL

By Mr. Prithviraj Kothari, MD, RSBL






Gold prices appear to have found a base either side of the $1,250 per ounce, basis spot, with prices now getting some lift and silver prices are well placed to challenge recent resistance $17.78 per ounce


On Friday, 21st October,  San Francisco Fed President John Williams said at a mortgage conference that "it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later." His comments followed recent hawkish talk from central bank officials including New York Fed Chief William Dudley and Fed's vice chair Stanley Fischer, which prompted investors to price in an interest rate increase this year. 


The main concern currently is the conflicting scenario between Fed officials like Fischer and Dudley who have been signalling a rate hike before the end of the year, while the ECB has arguably signalled a likely extension of its asset purchases.


The ECB kept interest rates at historic lows last Thursday, and its President Mario Draghi kept the door open for more stimuli, effectively quashing any speculation that the bank was poised to taper its 1.7 trillion euro asset-buying programme.



Being only a few days before the U.S. presidential election, many analysts are not expecting the Federal Reserve to take any concrete steps.

However, expectations for a December move jump to 75%, the highest it has been all year as we see all the action happening in December.



As we head into what has seasonally been the best time of year for the sector, here are a few possible major data release that could influenced gold prices during coming months.


November 4th: The Non-farm Payrolls Report (NFP) for October will be released on this date. The gold sector usually sells off into this report and becomes very volatile after the release as trades are set beforehand based on the expected number of jobs created. This is a highly anticipated report as the results will be heavily factored into the Fed’s decision process of whether or not to raise interest rates in December. The market is factoring in a 70% chance of a quarter point raise on December 14th as of this post.


November 8th: The US election could very well be a major promoter as during the last Presidential Debate, Donald Trump made accusations of the election possibly being rigged against him. He has also stated if defeated, he will not commit to accepting the outcome, stating “I will tell you at the time”. This is a very dangerous statement and could easily trigger violence after the outcome. Also, if victorious, the decision could very well cause a “Brexit” type response in the gold sector as Trump is the anti-establishment candidate. 


December 2nd: The release of the final NFP report before the highly anticipated last Federal Reserve Open Market Committee (FOMC) meeting of the year will be released . This could possibly be the deciding factor on whether or not Fed chairwoman Janet Yellen decides to raise rates this year.


December 14th: On this date the market will finally find out the answer to the question of, “will she, or won’t she”. If the Fed decides to raise rates at the conclusion of the December 13-14 FOMC meeting, the gold sector could initially sell off as it did last December. This could be a buying opportunity as rising rates have historically been bullish for gold as we saw back in the late 1970’s when former Fed chair Paul Volcker raised rates to over 20%. During this time gold had the largest bull market in history as it soared from $105 in September, 1976 to $850 in January, 1980. Also, in December of last year after 7 years of zero rates, the Fed finally decided to raise rates a quarter point. 



There are a lot of major U.S. reports coming and if the data is positive then there is no reason why the U.S. dollar can’t go higher and that could hurt gold. So as the world waits the month of December for its Christmas Celebration, the financial markets await the same month as a lot of action is bound to take place.









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 Crashed But Lands Safely: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/10/gold-crashes-but-lands-safely-rsbl.html



AN ACTION PACKED DECEMBER: RSBL

By Mr. Prithviraj Kothari, MD, RSBL






Gold prices appear to have found a base either side of the $1,250 per ounce, basis spot, with prices now getting some lift and silver prices are well placed to challenge recent resistance $17.78 per ounce


On Friday, 21st October,  San Francisco Fed President John Williams said at a mortgage conference that "it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later." His comments followed recent hawkish talk from central bank officials including New York Fed Chief William Dudley and Fed's vice chair Stanley Fischer, which prompted investors to price in an interest rate increase this year. 


The main concern currently is the conflicting scenario between Fed officials like Fischer and Dudley who have been signalling a rate hike before the end of the year, while the ECB has arguably signalled a likely extension of its asset purchases.


The ECB kept interest rates at historic lows last Thursday, and its President Mario Draghi kept the door open for more stimuli, effectively quashing any speculation that the bank was poised to taper its 1.7 trillion euro asset-buying programme.



Being only a few days before the U.S. presidential election, many analysts are not expecting the Federal Reserve to take any concrete steps.

However, expectations for a December move jump to 75%, the highest it has been all year as we see all the action happening in December.



As we head into what has seasonally been the best time of year for the sector, here are a few possible major data release that could influenced gold prices during coming months.


November 4th: The Non-farm Payrolls Report (NFP) for October will be released on this date. The gold sector usually sells off into this report and becomes very volatile after the release as trades are set beforehand based on the expected number of jobs created. This is a highly anticipated report as the results will be heavily factored into the Fed’s decision process of whether or not to raise interest rates in December. The market is factoring in a 70% chance of a quarter point raise on December 14th as of this post.


November 8th: The US election could very well be a major promoter as during the last Presidential Debate, Donald Trump made accusations of the election possibly being rigged against him. He has also stated if defeated, he will not commit to accepting the outcome, stating “I will tell you at the time”. This is a very dangerous statement and could easily trigger violence after the outcome. Also, if victorious, the decision could very well cause a “Brexit” type response in the gold sector as Trump is the anti-establishment candidate. 


December 2nd: The release of the final NFP report before the highly anticipated last Federal Reserve Open Market Committee (FOMC) meeting of the year will be released . This could possibly be the deciding factor on whether or not Fed chairwoman Janet Yellen decides to raise rates this year.


December 14th: On this date the market will finally find out the answer to the question of, “will she, or won’t she”. If the Fed decides to raise rates at the conclusion of the December 13-14 FOMC meeting, the gold sector could initially sell off as it did last December. This could be a buying opportunity as rising rates have historically been bullish for gold as we saw back in the late 1970’s when former Fed chair Paul Volcker raised rates to over 20%. During this time gold had the largest bull market in history as it soared from $105 in September, 1976 to $850 in January, 1980. Also, in December of last year after 7 years of zero rates, the Fed finally decided to raise rates a quarter point. 



There are a lot of major U.S. reports coming and if the data is positive then there is no reason why the U.S. dollar can’t go higher and that could hurt gold. So as the world waits the month of December for its Christmas Celebration, the financial markets await the same month as a lot of action is bound to take place.









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 Crashed But Lands Safely: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/10/gold-crashes-but-lands-safely-rsbl.html



Thursday, 1 September 2016

BULLION MARKET HIGHLIGHTS- DECEMBER 2015- AUGUST 2016: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL


AS 2015 came to a close, most traders expected that 2016 would be a year subjugated by a series of Fed rate hikes.
 
That belief strengthened in late-December 2015 after the Fed delivered on its promise – and raised interest rates for the first time in almost a decade.
 
In a widely telegraphed publication called the "Dots Plot", the Fed signalled that it would continue to normalize its monetary policy, and raise interest rates by a total of +1% through 2016 to a target of 1.375%, a "gradual" pace and in line with earlier forecasts.

Though gold was expected to be bearish on 2016, it showed upward prices movements and The World Gold Council attributed this rally to three principal factors:
  • the widening landscape of negative interest rates in Japan and Europe;
  • the devaluation of China's Yuan; and
  • The realization that the Fed was bluffing on hiking the Fed funds rate, and wouldn't dare take any action that could knock the stock market lower ahead of the upcoming November elections in the US for Congress and the Presidency. 


While we are a few months away from the year end I would like to throw light on a few key highlights that influenced the bullion markets worldwide.

Fed Hike- on 4 January 2016, San Francisco Fed chief John Williams said he saw a steady campaign of interest rate rises. "There are still pretty significant headwinds" facing the US economy from weak overseas economies, the strong Dollar and housing related issues, Mr.Williams told reporters.
 
 
On 6 January, Fed deputy Stanley Fischer warned the markets could expect three to four increases in the Fed funds rate this year. Speaking on CNBC television Fischer warned:
"If asset prices across the economy – that is, taking all financial markets into account – are thought to be extremely high, raising the interest rate may be the suitable step."
Based on expectations of 4-Fed rate hikes to 1.375% by year's end, gold initially declined in the month of December to a six year low at $1054 per ounce. Most analysts expected the downfall to continue through 2016, but they were proved wrong.
 The price of gold suddenly surged 16% higher in the first quarter alone. Giving gold one of its strongest quarterly performance in nearly three decades.

SPDR- The world's largest gold-backed exchange-traded fund, SPDR Gold Shares (NYSEArca:GLD), surged in its holdings to the most in six years, jumping to 983 tonnes, and global gold holdings in ETFs topped 2,000 metric tonnes for the first time since June 2013 following the Brexit fallout, when gold buying sparked even more gold buying.
 
BOE-  On June 30th, Bank of England chief Mark Carney said the economic risks from Brexit had started to crystallize, and he hinted at a resumption of QE, lifting gold to its biggest one-day surge in years after Britons shocked markets by voting to leave the European Union, driving investors toward safe-haven assets such as bullion.  Gold soared as much as 8 percent to its highest in more than two years in the week ending 28th June, 2016 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.

BOS- by June 2016, all of Switzerland's government debt, including its 30-year bonds, started trading at negative yields.
 
In all, a record US$11.7 trillion of global sovereign debt has dipped to sub-zero yield territory. This has only strengthened the rally in gold, and about $13-14 billion of money has made its way into gold exchange-traded funds (ETFs) as asset managers moved from fixed income into gold earlier this year.
 
Gold climbed to a two-year high at $1371 per ounce in July, convincing UBS Group to predict that gold is probably at the beginning of its next bull run

BOJ- gold's spectacular rally found a stiff roadblock at the $1370 per ounce area when Japanese government bonds suddenly began to fall sharply into their worst sell-off in 13 years. On August 2nd the Bank of Japan shocked the markets and rattled gold traders by keeping its bond purchases steady, defying expectations it would buy even more.
 
 
Gold traders became even more nervous after the BoJ said it would re-evaluate its Negative Interest Rate and QQE policies in September. Some investors see the policy review as a tacit admission by the central bank that after more than three years of massive money printing, the BoJ could be ready to start tapering the pace of the QQE liquidity injections.
 
   
Since the $10.4 trillion bond market in Tokyo is at the core of the negative interest rate world, if the BoJ begins to allow Japanese bond yields to climb by tapering its QE scheme, it could continue to rattle the price of gold – at least on a short-term basis.

BoJ policy makers ordered staff to make a "comprehensive assessment" on the impact of its easing program and negative interest-rate policy ahead of the next policy-setting meeting on 20-21 September. Some traders suspect the review is aimed specifically at assessing the effectiveness of negative rates, potentially giving policy makers scope to declare the exercise unsuccessful.

So for the month to come, BoJ will surely have something crucial for gold in store.


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:

"Higher Gold Prices For The Domestic Market: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/08/higher-gold-prices-for-domestic-market.html



Monday, 25 July 2016

Consolidation phase for Gold and Silver Prices: RSBL

                                                                           - Mr. Prithviraj Kothari, MD RSBL


BREXIT, FED, Dollar and many other key influential factors have proved to be beneficial for Gold and Silver prices in 2016. Last week too we saw many such factors influencing bullion prices but in the downward side. Let’s take a close look on the key highlights:

  • The S&P (US Stock exchange) posted a fresh all-time closing high and the major U.S. stock averages 2,163.24 locked in a fourth successive winning week following the Brexit vote.
  • At the weekends G20 summit in China, the world's biggest economies noted they will work to support global growth and share the benefits of trade, in a meeting dominated by the impact of Britain's exit from Europe and fears of rising protectionism. Philip Hammond, Britain's new finance minister, said the uncertainty about Brexit would begin to abate once Britain laid out a vision for a future relationship with Europe, which could become clearer later this year.
  • On Thursday, 21st July , in Frankfurt, the European Central Bank (ECB) and President Mario Draghi decided to leave rates unchanged after the Brexit-induced market shockwaves have faded somewhat. Draghi and his fellow central bankers gave no indication that the current 1.7 trillion-euro quantitative-easing plan needed to be increased following the UK vote to leave the single market. The council doesn’t meet again till September, but investors aren’t anticipating any adjustment to the bond-buying programme in the near-term thus leaving the door open to more policy stimulus, highlighting "great" uncertainty and abundant risks to the economic outlook.
Though bullion has benefited from the loose policy decisions coming in from central banks of Europe and Japan, but on the other side the dollar has gained on strong U.S. data, boosting bets the Fed will raise U.S. rates by year-end.

Globally, gold nearly fell to $1,312 and silver to USD 19.46. Traders attributed the fall in gold prices to a weak global trend where the precious metal headed for its first back-to-back weekly decline since May as gains in equities and the dollar ate into demand for the metal as a storage value. Few other important indicators that contributed to the downfall:

  • Data released from the U.S. showed that U.S home resale’s hit their highest in nearly 9 and a half years in June as low interest rates lured first-time buyers into the market and the number of Americans filing for unemployment benefits fell last week, underscoring the economy's strength.     
  • Adding to the down trend in prices were the figures released by SPDR. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.22 percent to 963.14 tonnes on Thursday.

I do feel that the Price action will likely be skewed to the downside and expect to test the post-Brexit low around USD $1,305 and below this USD $1,300 should global equities continue their upward trajectory.

The Jackson Hole Symposium Aug. 25-27, where Yellen is scheduled to speak is where we will most likely get more relevant information about coming Fed policy and the next direction.
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.

Previous blog:

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