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

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

GOLD TEND TO MOVE SIDE-WAYS

by Mr. Prithviraj Kothari, MD, RSBL

As we just thought gold was acting positive and making a comeback, it proves us wrong by the end of Friday.

Gold erased this year’s gains earlier this month on the outlook for higher borrowing costs as the U.S. economy improves. Bullion has since rebounded as the Fed signalled a worldwide economic slowdown may delay interest-rate increases and as equities to commodities slid.

The week was decent enough for gold in the domestic markets, but then internationally showed a sideways performance.

Internationally, gold prices declined after the U.S data reports were in. The better than expected consumer sentiment data lowered gold's safe haven appeal while on the other hand the ongoing concerns over global economic growth and a recovery in global stock markets gave the yellow-metal some support.

Equities and bond yields dropped sharply and the uncertainty over the Fed's hike in interest rates have changed the sentiment for gold from bearish to neutral. Gold showed mixed trends in the week over various economic figures coming in from US

• U.S retail sales and inflation numbers slumped
• Core Retail Sales dipped 0.2%, its first decline since April 2013.
• This indicated to a decline in consumer spending which one of the key indicators of economic growth
• PPI fell by 0.1%, after a reading of 0.0% a month earlier
• US Unemployment Claims dropped to 264 thousand, marking a 14 -year low. 
• Manufacturing numbers were a mix, as Industrial Production gained 1.0%, its best showing since November. 
• The Philly Fed Manufacturing Index dipped to 20.7 points, but this beat the estimate of 19.9 points.

So it was quite a volatile market for gold and there were several factors responsible for this volatility.

DISAPPOINTING GLOBAL GROWTH AND MIXED US DATA REPORTS-

The global equity drop was induced by the European equities sell-off, which was prompted by the negative August industrial production data from Germany and the market's disappointment with the lack of further monetary announcements by the ECB to fight deflation and a likely recession in Europe. The September U.S. retail sales of -0.3%, an inflation expectation of 1.5% in 2019, and foreign growth slowdown have fuelled growth recovery concerns in the U.S. The September manufacturing output climbed 0.5% compared to -0.5% in August, which can signal that the U.S. recovery is holding up.

GOLD DEMAND

The global equity tumult and the ongoing geopolitical concerns have raised the appetite for gold even though the inflationary pressure has created a negative attitude for gold.

The U.S. SPDR gold trust holdings have risen 0.20% this week after declining for four consecutive weeks. 

Moreover demand for gold from India has risen ahead of the biggest festive season of Diwali and many have made their purchases at dips. India's September gold imports jumped sharply to $3.75 billion ahead of the wedding and festival season, data from the trade ministry showed.

Meanwhile in China, the world's largest consumer for gold, has witnessed a significant drop in demand for gold even though price are running low but demand here is also expected to pick up. Growth in Gold mine output from China is set to slow significantly in coming years in the face of declining ore grades and waning profitability, an analyst at Business Monitor International said on Friday.

Now we need to see what's in basket for gold in the coming week. Gold could trade sideways next week and multiple factors are expected to influence the price of the precious metal.

FED- markets will keep an eye in the Fed Chair's speech this Friday

US- Traders will be tracking news coming in from the equity markets, alongside news about a likely global slowdown, the future pace of US stimulus, US interest rates, the Ebola scare in the US , the U.S leading indicators index , the U.S September new home sales, the U.S September CPI, September US leading indicators index and geopolitical tensions the world over.

CHINA-Next week, we will monitor the September China industrial production data, the Q3 China real GDP growth.

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 -

"Is Gold Making A  Comeback?"

http://riddisiddhibullionsltd.blogspot.in/2014/10/is-gold-making-comeback.html

IS GOLD MAKING A COMEBACK?

by Mr. Prithviraj Kothari, MD, RSBL

Gold has fallen nearly 40% from its 2011 high above $1900 to reach below $1200 at the start of the week. A resurgent dollar, coupled with positive U.S. economic data, had been driving gold's declines over the past few weeks. Investors tend to withdraw from non-interest-bearing assets to seek higher yields elsewhere when the dollar gains.

But gold picked momentum in the past seven days. We finally saw gold catching a bid on global risk aversion. It has rebounded nearly 4 percent from the 15-month low of $1,183.46 it hit on Monday on heavy selling pressure that followed a better-than-expected U.S. payrolls report last week.

There were various factors responsible for the rise in prices-

• The end of QE
• Geopolitical uncertainty
• Falling global growth estimates

All these factors once again made gold a good prospect as a safe haven asset.

On the second day of the week, gold was up after the  International Monetary Fund cut its global economic growth forecasts and weak German industrial data stoked further concerns. Following this the dollar fell which further gave a push to gold prices.

Gold rose consecutively for four days marking its longest winning gain in seven months. In fact traders witnessed heavy short covering for gold rise over the Fed minutes which created uncertainty over the timing of a Fed interest rate rise.

*source- www.kitco.com

The minutes of their last policy meeting showed that they are still struggling to come to grips with the dual threats of a stronger dollar and a global slowdown and hence they were further uncertain about linking the interest rate rise to U.S economic progress. Equities further weakened on concerns over global growth mainly in China and Europe.

Gold prices bounced off 2014 lows this week after testing support around the $1,180 area, a price gold hadn’t seen since June and December 2013. Analysts said short covering, which is the buying back of previously sold positions, and the return of Chinese traders from their Golden Week holiday helped return the yellow metal above $1,200.

However, In India it's a different scenario this year. Last year the volumes were much high as people rushed to buy gold, when prices crashed. This year prices have been consistently low. Moreover, disappointing monsoons and continued import restrictions have also affected gold demand in India.

Now the market awaits movement in equities, dollar and crude oil which could have a major role in influencing gold prices. Also, gold-market watchers will keep an eye on the Indian market to gauge metal demand ahead of the Diwali holiday later this month. Apart from this, the market player will also watch the economic data that will be flowing in- China releases a slew of economic reports, while The U.S. will see inflation data with the producer price index expected to show falls in energy and food prices, reflecting the recent drop in commodity prices.

If the US equities market continue to drop then it could create a favourable position for gold but if investors flush in more money into equities keeping the "buy on dips" funda in mind then we could see the dollar rally and gold would once again be pulled back from its gains.

Current view: BUY ON DIPS

Trade Range:

METAL	INTERNATIONAL price range	DOMESTIC price range
GOLD	$1207 - $1242 an ounce	Rs.26,500 - Rs.28,000 per 10 gm
SILVER	$16.85 - $17.85 an ounce	Rs.38,000 - Rs.40,000 per kg

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's Future at Stake!"

http://riddisiddhibullionsltd.blogspot.in/2014/10/golds-future-at-stake.html

GOLD'S FUTURE AT STAKE!!

by Mr. Prithviraj Kothari, MD, RSBL

As 2014 began, it was all green for gold. Investors thought that gold has once again entered the bull market. But this week gold shunned all its gains in 2014 and fell 0.7 per cent.

On the other hand the dollar reached a four year high this week as there were high expectations in the market that more jobs were added in three months. This further added to the speculation the Fed may raise interest rates next year.

When the dollar gets strong and the U.S. yields are higher than gold is counted as one of the least attractive investments. The feeling that investors had about gold in 2008, they are feeling the same for dollar now as all investors are bullish about the dollars prospects. 

Now gold has been abandoned by many as this metal is not paying interest and  Gold was also depressed by a rebound in European shares, which had slumped on Thursday on disappointment the European Central Bank wasn't more aggressive at its meeting. Dollar has strengthened more than a per cent against a basket of other currencies and is on a straight track of gains for the 12th week. 

The non-farm report. US non-farm payrolls rose by 248,000 jobs, and the jobless rate fell to 5.9 percent last month, the lowest since July 2008,as stated by the Labour Department. The change in total non-farm payroll employment for July was revised from 212,000 to 243,000, and the change for August was revised from 142,000 to 180,000. With these revisions, employment gains in July and August combined were 69,000 more than previously reported.

Post this report spot gold fell as much as 1.4 percent to its lowest since Dec. 31 at $1,195.38 an ounce and was down 1.3 percent at $1,197. It was for the first time in 2014 that gold fell below $1200 on Friday as the dollar strengthen over the positive US non-farm payroll data. Gold fell even further when the markets agreed that the interest rate hike could happen by mid-2015 or even earlier.

Rising interest rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value.

Moreover, SPDR Gold Trust, the top gold-backed exchange-traded fund and a good proxy for investor sentiment, said its holdings fell 1.19 tonnes to 767.47 tonnes on Thursday - a new low since December 2008. This declined gold prices further. 

Apart from the data reports released during the week, it was weak physical demand that could not provide support to gold prices.

Demand from China was low as the Chinese markets remain closed for a week long holiday. Though gold prices did get some support from the Pro-democracy rallies in Hong Kong but it was not enough to reverse all the losses from a stronger dollar.

Now the markets await for the Chinese and Indian markets come back next week, they may see lower prices as a good buying opportunity, so possibly some support will come from physical demand in Asia and in the U.S. the Fed policymakers will scrutinize the data as they prepare for a policy meeting on Oct. 28-29

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1180- $1207 an ounce	Rs. 26,000- Rs. 27,500 per 10gm
SIILVER	$16.40- $17.50 an ounce	Rs. 37,000- Rs. 40,000 per kg

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 -
"Dollar Drawing Directions For Gold" - http://riddisiddhibullionsltd.blogspot.in/2014/09/dollar-drawing-directions-for-gold.html