RSBL: A VOLATILE WEEK WAITS FOR GOLD

                                                                  - By Mr. Prithviraj Kothari, MD, RSBL

The week was interesting for gold especially for gold traders and investors, as they enjoyed the doubts surrounding the dramatic and volatile moves which later kept the market wondering whether the yellow metal will be bullish or bounce back from its high prices.

Last Monday’s price action promised much, promptly reversing the previous Friday’s losses and surging back above the resistance level at $1190 per ounce to close at $1203.20 per ounce. This bullish sentiment continued into Tuesday, albeit on dropping volume with the price action just managing to breach the resistance at $1210 per ounce, thereby giving longer term investors hope this could be the start of some sort of retrieval.

However, Wednesday’s price action was unable to follow through, before Thursday’s dramatic move when the gold bears once again took control, sending gold prices hitting through the $1190 per ounce support region, accompanied by high volume and validating the move lower.

Friday’s price action followed through with further selling, but on lower volume as the platform of support in the $1174 per ounce region was duly tested before gold closed the week at $1174.50 per ounce. Spot gold was last at $1,171.70/1,172.60 per ounce, down $11.50 on the previous session’s close and around intraday lows – it struck its cheapest since March 20 at $1,170.20 earlier. 

The precious metals’ moves may have been worsened as parts of China, India and parts of Europe were absent for May Day holidays.

But there is a bullish sentiment for gold in the market. SPDR Gold trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.32 percent to 741.75 tonnes on Friday.

Currently, Equities seem to be in a bubble zone and are prone to devaluation. In such case there is a chance that both Wall Street and world stock markets will tumble down especially when there is clarity on signs that the Fed is beginning to tighten-up its current zero interest-rate policy – and this could be the spark that triggers a resumption of the long-term bull market in gold.  

Factors that support this bullish sentiments are-

• Persian Gulf Crisis
• Russian- Ukraine escalating tensions in Europe
• Greece default
• Increase in demand for gold as a safe haven appeal keeping in mind the above mentioned points

Thus yet another volatile week waits for gold as investors and traders prepare for April’s employment report on Friday. Volatility will be an important factor for the gold market next week and the ones that will be actively creating volatile situations are:
 

Employment Report: Currently there are expectations in the market that the U.S may have created 210,000 jobs in April. If it so happens then gold prices are expected to remain near the bottom end of their current range and if employment comes in above 200,000 then prices could fall below current support.

Other Data: Although the biggest data report will come at the end of the week, ahead of the employment report, markets will receive ISM non-manufacturing data on Tuesday and private company employment data from ADP Wednesday.

Britain: Apart from the key economic indicators coming in from U.S, there are chances that Britain’s federal elections on May 7 could have an impact on gold markets is the results show a majority for Conservatives, who have said that if they win they will hold an referendum on its membership to the European Union by 2017. Analysts have noted that a Britain’s exit from the EU could pose a threat to the euro, which would create safe-haven demand for gold prices. Currently polls show a close race between Britain’s federal parties.

Reassessment of economic prospects – and revised financial-market expectations of Fed policy – sometime in the next few months could support a spring-summer recovery in the price of gold, lifting the yellow metal up and out of its recent trading range.

  
Until that happens, gold prices will likely remain “range-bound” in the short term, perhaps through midyear or longer, trading mostly between a floor price of $1,175 and a ceiling around $1,225.  

As these boundaries are approached or briefly broached, technical traders will continue to step in as buyers or sellers, respectively, keeping the yellow metal’s price relatively stable within this range.  

Despite some disagreement among the voting members of the Fed’s FOMC policy-setting committee, the Fed will likely honor its pledge not to begin easing up on interest rates until the economy shows clear signs of a continuing and sustainable expansion. 

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1163-$1207 an ounce	Rs.26,500- Rs.27,300 per 10g
SILVER	$15.73-$16.48 an ounce	Rs.35,000- Rs.38,000 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: Friendly News ....But Gold Fails To Ignite"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-friendly-newsbut-gold-fails-to.html

RSBL: A PUZZLED MARKET FOR GOLD

 By Mr. Prithviraj Kothari, MD, RSBL

It was a rather confused market for gold this week. The negatives pushed gold high while the stability kept it low. 

Though it was a neutral week for gold, it managed to stabilize over $1200 an ounce. The recent gains on gold prices have been supported by-

• The sluggish reports from the US economy
• The dreary March payrolls report from the Labor Department
• The slowly advancing US housing reports
• Rise in SPDR Gold Shares
• The uncertainties about Greece’s finances
• Other geopolitical tensions

The sluggish economic reports have raised the expectations that the US central bank would not be hiking the interest rates before September. 

The weak economic data this week did not have much impact on gold prices. Neither the US housing reports nor the declining dollar – gold prices did not bank on any of these factors. 

The gold price remained in positive territory in Friday afternoon trading despite the dollar managing to claw back.  Spot gold was seen trading at $1,204.70/1,205.50 per ounce was up $7 on the previous session’s close. Reasons supporting this are:

Greece Crisis: Investors shifted focus to gold to seek safe haven after world stock markets tracked lower over worries of a potential Greek debt repayment default. 


Meanwhile, Consumer prices in the euro zone rose for the second straight month in March, not enough to pull annual inflation out of negative territory but another positive sign as the currency bloc looks to escape prolonged deflation.

Sluggish reports from US: US Industrial production disappointed in March to print -0.6% (expected: -0.3%) to suffer its largest fall in well over two years. US retail sales too printed a lower figure of 0.9% vs 1.1% expected

SPDR Gold trust- Holdings of SPDR Gold Trust, the world's largest gold backed exchange traded fund, remained unchanged at 736.08 tons, from its previous close of 734.29 tons

Demand for Gold: Physical buying in the world's top two gold consuming countries is expected to rise. A spate of manufacturing data from all the world’s major economies next week as well as the key Hindu festival of Akshaya Tritiya in India on Tuesday, which is widely regarded to be the most auspicious day in the country’s calendar to buy gold, could prove key to near-term direction. India’s March gold imports rose 94 percent year-on-year to $4.98 billion, according to the  trade ministry.

In the week to come factors supporting a bullish sentiment for Gold are: 

Weak US Dollar: A weak U.S. dollar could end up taking some momentum away from equity markets and that could help gold prices. Further weakness in the dollar could push up gold prices as bullion is seen as a safe-haven asset.

Eurozone: Negative bond yields in Europe continue to make the yellow metal an attractive safe-haven investment. Meeting of Eurozone ministers on the 24th April where Greece debt deal issue will take the center stage.

Economic Data from US: Though it will be a slow week for economic data, it will play a crucial role in influencing gold prices and the highlight will come on Friday with the release of U.S. durable goods for March. Disappointing economic data will make it clear the Federal Reserve will be unable to raise rates as high or as fast as markets are currently expecting and as a result, gold will benefit.

US rate hike: The G-20 did acknowledge the  fact that a FED tightening could send shock waves around the Globe.

For the time being Markets are puzzled when it comes to Gold price move. Until we get clear-cut news from the U.S. economy; that will allow the Fed to make a definitive move on rates or the clearance on Greece debt deal issue, Gold is bounded in a range of $1170 to $1238.

TRADE RANGE:
 

METAL	INTERNATIONAL price	DOMESTIC price
GOLD	$1194- $1230 an ounce	Rs.26,500- Rs.27,800 per 10gm
SILVER	$15.63- $17.00 an ounce	Rs.35,000-Rs.37,500 per kg

Investment tip:

For Gold: BUY ON DIPS

For Silver: Buy for future. Some facts:
1. 750 million ounces of Sivler are produced everyday which is worth US$14 billion. A price tag which is nothing in the current world. Individual companies are brought and sold at this price level.
2. New silver deposit exploration has found very little over the last decade.
3. Uses of Silver have been growing consistently in medical, Solar, Industrial etc fields. Relating to its increasing demand. A did read in an article that if the Silver is used at the current rate and only this much production happens across the world, then it can be extinct in the next 25 years or so.

“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: Good Opportunity To Buy Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-good-opportunity-to-buy-gold.html

RSBL: A GOOD OPPORTUNITY TO BUY GOLD!!!

By Mr. Prithviraj Kothari, MD,RSBL

 

The last couple of years have been anything but normal for gold.  Back in early 2013, the Fed started augmenting its young QE3 debt-monetization campaign with aggressive jawboning.  It kept implying to stock traders that it was ready to quickly ramp up money printing if the stock markets sold off materially.  This short-circuited normal healthy sentiment re balancing sell offs, as traders feared nothing.

Thus the stock markets levitated, powered higher without normal material sell offs.  Since gold is an alternative investment that moves contrary to stock markets, this slowly strangled gold investment demand.  Investors gradually abandoned it, leaving this metal for dead.

FED's exiting the zero interest rates is a big point of debate for US economy. But frankly I do not think this is the only challenge we are talking about. To me, the unwinding of trillions of dollars used to purchase Bonds by the FED is more of a concern. Less than a year from now, FED will have take one of its biggest decisions of reinvesting $200 billion (approx) which are the proceeds from Treasury debt that is supposed to get matured in 2016. 

I did get some more idea by going through some news on the same:
 
1. If FED does not invest, it could lead to an increase in supply of security products available to the investors and put an upward pressure on yields.

2. If they plan to let it expire, it will shrink FED's balance sheet drastically leading to monetary tightening from increases in the benchmark interest rate officials envision for this year. That could mark a reversal of easing that FED achieved when it started its bond purchases programme after the recession.

For this week, Gold advanced for the first time in four days after holdings in exchange-traded products backed by bullion posted the largest increase in more than six weeks. On Thursday, gold-backed ETP holdings rose by 3.9 metric tons, the most since Feb. 23, to 1,620.1 tons, according to data compiled by Bloomberg. Holdings in the SPDR Gold Trust, the top bullion ETP, had the biggest jump in two months. This jump in holdings shows that there is some movement out of the conventional assets into gold.

CFTC data released on Friday showed that speculators sharply increased their bullish bets last week. The net weekly gain of 20,738 contracts was quite balanced from 10,312 of new longs and a 10,426 reduction of shorts. This increase brings the net position to +100,000 for the first time since March 3rd. This was also the third straight week of gains there.

But a good sign from Eurozone did come on Tuesday, where its private sector continued to improve in March with Markit's final composite PMI rising to 54.0 in March from 53.3 in February, an 11 month high.

Following suit, gold prices stabilized above $1200 on Friday although the markets watched the surging dollar. The dollar index remains strong at around its highest in three weeks – it was last at around 99.30, having earlier touched 99.69. The US currency has gained ground following the release of the mildly hawkish minutes from the March meeting of the US Federal Open Market Committee (FOMC) earlier this week.

The spot gold price was last at $1,207/1,208 per ounce, up $12.80 on Thursday’s close. Trade has ranged from $1,193 to $1,210.8. This does seem to be a pyschological boost for the boost.

To bottom it up, we saw gold getting support on Monday; post the weak jobs report that were released last Friday. Moreover, the dovish comment from New York Fed President William Dudley, gave gold the further push in prices. Furthermore, a weaker U.S. dollar provided underlying support for bullion. There may be more scope for bullion to rally.

Precious metals are highly sensitive and react instantly to the following

• Changes in monetary policy expectations,
• Fed's decisions
• Dollar prices
• Geo political crisis.

But currently what matter the most for the market watcher is - when the Federal Reserve will make its first move on rate and potential political fallout of Greece leaving the Eurozone.

Investment Tip: 
If gold breaks $1225 an ounce then it can be considered a good opportunity to buy in the market.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1188- $1224 an ounce	Rs.26,500 - Rs.28,000 per 10 gm
SILVER	$16.15- $17.30 an ounce	Rs.36,000 - Rs.38,000 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 -
"Playing Games With Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/04/playing-games-with-gold.html