AN IMPORTANT WEEK FOR GOLD : RSBL

                                                                             By Mr. Prithviraj Kothari, MD, RSBL

I must apologize to my readers for not writing a Blog last week. I would reply to all your queries via the content in this blog. My sole intention was to to see some developments in Greece as it was like a never ending tussle between Athens and its creditors.  It was taking Gold and Silver to rallies which was purely news based. 

Over a period of time we have seen some factors being very crucial for gold compared to the others. US dollar, Fed’s interest rate hike and the Greece crisis have been major drivers for gold prices apart from Geo-political economic crisis, inflation and demand for gold from India and China.

Lets jump straight to the key takeaways:

Greece: The mounting Greek Funding crisis is positive for gold, but its influence could be partial as there is still a chance the two sides can tangle through to come to another short-term agreement.

Polls have stated that the exit out of the Euro is opposed by the Greek people and European leaders, the current deadlock signals prolonged and painful negotiations ahead, with a possible extension of the June 30 deadline on the horizon.

But after Monday's emergency meeting, news have floated that the negotiations between Greece and its creditors have taken a positive step forward. Not much details have been provided yet but the upcoming meeting on June 24th-25th will give the answer as to where this is all going.

Till that time the Bulls and the bears will not allow to have a dramatic impact on Gold price.

US Economic data: Data on Thursday showed that U.S. initial jobless claims fell by 12,000 to 267,000 last week, pointing to ongoing strengthening in the labor market.

A separate report showed that factory activity in the U.S. mid-Atlantic region expanded at the fastest rate in six months in June.

Data also showed that showed that U.S. consumer prices increased at the fastest rate in more than two years in May, climbing 0.4% after a 0.1% gain in April. But economists had forecast an increase of 0.5% and inflation was still well below the Fed’s 2% target.

U.S. economic data as that will have a major impact on forecasts for when the Federal Reserve will hike rates. Positive data that supports a September rate hike will be positive for the U.S. dollar and negative for gold.

Interest Rate Hike: The economic data affects the dollar which in turn affects the interest rate hike. Fed Chairman Yellen also wants to see stronger consumer spending and a higher labor participation rate and wage growth before lifting rates. 

Gold is expected to remain caught in a tug of war between the U.S. dollar and safe-haven demand as Greece’s repayment deadline quickly approaches. Gold ended its second consecutive week in positive territory; the market managed to hold on to most of its gains from Thursday’s 1.5% rally.

There are ample amount of prospects for the market players to adjust their interest rate expectations as there is a slew of economic data including housing sales data, durable goods numbers, along with preliminary manufacturing data due to be released. Markets will also receive the final gross domestic report for the first-quarter, although this is now backwards looking, some economists warn that any major revision will impact annual economic growth projections

On the domestic front, Government of India is planning to issue Sovereign bonds linked to the bullion price in an effort to divert an estimated 300 tonnes of annual demand for Gold bars and coins. The provision of a 2 percent interest rate and use of the bonds as collateral are among the the key take away points that would attract the investors.

• 24th June:  Germany IFO business climate index, the U.S. final Q1 GDP and Euro Group Meetings
• 25th June: U.S. core price index 

Summing it up, a dramatic move in precious metals is expected in the coming days!

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1170- $1220 an ounce	Rs.26,250- Rs.27,700 per 10gm
SILVER	$15.60- $17.00 an ounce	Rs.36,000- Rs.39,000 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 -

"Bulls and Bears to Clash"

http://riddisiddhibullionsltd.blogspot.in/2015/06/bulls-and-bears-to-clash.html

RSBL: FRIENDLY NEWS....BUT GOLD FAILS TO IGNITE

                                                        By Mr. Prithviraj Kothari, MD, RSBL

  
The week has lot of gold friendly news: but unfortunately none of it supported gold. Be it the soft US data reports or the Greece Crisis or the weakening US dollar any many other news: Gold failed to benefit from any of them.

Any news failed to ignite gold prices leaving it range bound for the week untill the later part of Friday which did some new movement but downwards.

On Friday, the price of gold was down more than 1.5%, or nearly $20 an ounce, to as low as $1,176, the lowest price for the precious metal since late March. Gold ended lower on Friday as investors were more interested in next week’s monetary policy meet of the Federal Reserve. Investors believe that this meeting would give signals on Fed’s interest rate hike plans. The yellow metal was also impacted after some upbeat manufactured durable goods data from the U.S., even as the dollar continued to fluctuate.

US Data: 
          US weekly unemployment claims increased to 295,000 in April, higher than the forecast 288,000. US new home sales for March, meanwhile, came in at an annual rate of 481,000, which was 11.4 percent below the prior month’s reading and missed the 514,000 forecast. The recent soft data from the US could delay the Federal Open Market Committee (FOMC) from raising interest rates from near-zero levels until later this year. The Fed’s next meeting takes place on April 28.

            In some upbeat economic news, new orders for U.S. manufactured durable goods increased much more than expected in March, a report from the Commerce Department showed Friday.

Fed Interest Rate Hike:
             Soft economic US data has pushed the expected dates of interest rate hike even further. The run of weak US macroeconomic data has taken a June rise in interest rates by the Federal Reserve off the table and even a change in September now looks unlikely, according to the CME Group’s Fed Watch. Interest rates have been zero since December 2008 and now the members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise interest rates with most of them believing that the hike will come sometime in September.


US Dollar: 
           Weak data on U.S. jobless claims, manufacturing and home sales have hurt the dollar this week, boosting uncertainty over whether the Federal Reserve will conduct its first U.S. rate rise in nearly a decade in June or September.

Equities: 
           Gold fell on Friday, on track for a third successive weekly loss as strength in global equities diverted interest, though uncertainty over the timing of a U.S. rate rise pegged prices in a narrow range. World stocks hit all-time highs on Friday as corporate updates in Europe and a post-dot com-boom peak for the U.S. NASDAQ stoked investor optimism.
          Gains for equities are spurring investors to shun gold, with prices posting the biggest tumble in seven weeks.

Greece: 
          Gold prices dipped below $1,180 on the London spot market and on the Chicago Mercantile Exchange on Friday afternoon after some progress was made in Greek debt talks. Gold’s credentials as a safe-haven investment appear to have taken a hit on suggestions that Greece is closer to a bailout deal after a summit of Eurozone ministers in Riga. The country is running out of money – Athens is under pressure to accelerate reforms that would secure a deal before it defaults on its debts.
           Greece ordered state entities from municipalities to a fund meant for future generations to park idle cash at the central bank in a scramble on Monday to pay the bills. With IMF loan repayments due next month, Greece has been tapping into public cash reserves in temporary transactions.

Meanwhile Eurozone ministers are attended a summit again  to discuss Greece’s possible default on its debt obligations but positive headlines have been supportive of the single currency, which possibly reduced gold’s safe-haven appeal.

In other news, Russia have increased their Gold reserves by adding nearly 30 tons in April. The brings the country's total reserve to 1238 tons. Russia have steadily invested in Gold through the last nine months of 2014, to diversify reserves and protect Ruble illiquidity.

Now the market players have turned their attention to Wednesdays Federal Open Market Committee statement. Investors was looking out for some signs of tightening of monetary policy as the FOMC decides exactly when to start normalizing. That would raise the opportunity cost of holding non-yielding bullion, while boosting the dollar.

Despite the current stickiness within the range, I do feel that a bigger move is about to come. GDP and FOMC or even the Greece could be the next big catalyst not leaving the Geo-political tensions out of the way.

Whatever be the move, yellow metal will always be known for its safe haven appeal and as the countries are adding their reserves, it clearly indicates that Gold will never be out of picture.
 

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1173- $1200 an ounce	Rs.26,500- Rs.27,500 per 10gm
SILVER	$15.40- $16.30 an ounce	Rs.35,000- Rs.37,000 per kg

“The primary purpose of this bullion blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -
"RSBL:A Puzzled Market For Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-puzzled-market-for-gold.html

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