AWAITING A GOLDEN YEAR:RSBL

By Mr. Prithviraj Kothari, MD, RSBL

Holiday fever, kept the markets calm with very little volatility in gold prices.

After the Federal Reserve’s interest-rate rise last week, trading remains cautious while investors assess conditions in a non-zero bound environment for the first time in seven years.

Gold prices ended the U.S. day session and a holiday-shortened trading week modestly higher Thursday. Some short covering in the futures market and perceived bargain-basement buying in the cash market heading into a long weekend gave gold its lift.

There were no major international news developments Thursday and the marketplace worldwide was very subdued ahead of the Christmas holiday on Friday.

Spot gold was last at $1,073.60/1,073.90 per ounce, a $2 increase on Wednesday’s close. The yellow metal has climbed away from five-year lows from the start of the month of just $1,046.40.

The gold price was higher on Thursday morning, tracking the recovery in the oil price and a slight decline in the dollar, in thin pre-Christmas trading conditions.

Now that we have rounded up for the week, I would also like to share my view on gold outlook for 2016.

As we all have seen that after increasing consecutively for 11 years, gold started giving negative returns since 2013.  Formerly gold was seen as the highest return generating asset in its class. But now economies have changed and people have shifted to other modes of investment like equities and hence gold has lost its appeal as a safe haven asset.

Will gold bottom further? Has it reached its support level? What’s in store for gold in 2016? 

 Well these questions have been constantly rotating the market since the past fortnight, especially after the fed rate hike.

Everyone in the markets had hopes that the Fed will raise interest rates for the first time in a decade. The day the Fed increased its rates we saw ETF gain 18.6 tonnes for the first time in the past three years. Everyone thought that a rate hike would slosh gold prices but gold managed to stabilize at 1075$ and did not decline as expected.

Moreover, if we see from the mining aspect, the mining cost of gold is around 1000 $- 1050 $ and I don’t see gold going below that level. Now that gold has already witnessed this bottom. I think this year gold might appreciate around 7-8 per cent compared to last year.

Moving on to the Indian markets. As far as the Indian markets are concerned, the INR is gradually appreciating which is in turn affecting gold prices. If you see the international market. Gold may bottom at 1000/1050 dollar and may witness an upswing towards 1200-1300 dollars. But at the same time the rupee appreciating will bring gold in the range of Rs. 24,000- Rs.30, 000 in 2016.

The population of India is 125 crore. Every year 800-900 tonnes gold is imported whether the price is $1900 or $700. A matter of concern is the custom duty that is currently 10 percent. Due to this, there is a huge difference between off shore and domestic markets. This duty increases gold prices by Rs.2, 50,000 per kilo. 

Due to high duty the quantity of gold smuggled into the country is also rising.  Last year around 200 tonnes of gold was smuggled. And this year the figure might touch and 300 tonnes thus bringing the official import figures down to 500-600 tonnes. 

The government has been trying its best to get some viable and profitable schemes into the market like the gold monetization scheme and gold sovereign bonds. Gold sovereign bonds are not a viable option as prices are fixed at Rs.26840 and currently the prices are almost 5per cent down.

Gold monetization is a scheme where the temples are more willing to deposit gold in banks. This scheme may take time for proper implementation but once it pick up we are really positive that the idle gold lying in the temples and Indian household) almost 500-1000 tonnes) will be flushed into the market and this would really help the economy.

  

To conclude I would say that 2015 was a year with nervous sentiments. But 2016 could be the golden year literally especially the jewelers and the investors.

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 -
"Markets Remain Calm For Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/12/markets-remain-calm-for-gold-rsbl.html 

MARKETS REMAIN CALM FOR GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Gold showed wave like movements this week. Beginning with a positive tick on Monday, then lowering by the middle of the week and again picking up pace on Friday, it seemed like a see saw trend for gold.

Though gold was up on Monday, it continued to remain under pressure from a Federal Reserve policy meeting that was due on 15-16 December weeks, when the US central bank was expected to raise interest rates for the first time in nearly a decade. In its last policy meeting of the year on December 15-16, the Fed was seen raising rates by a quarter of a percentage point. 

Gold has already slid 9 percent for the year, its third straight annual decline, in anticipation of a rate hike.

Gold dipped on Thursday morning in the US, with the start of US monetary policy normalization spurring the dollar.

The Federal Open Market Committee (FOMC) decided to start to normalize US monetary policy after seven years of near-zero interest rates, lifting the federal funds rate to 0.5 percent from 0.25 percent. The policy board still sees the long-run rate at 3.5 percent and finishing next year around 1.375 percent.

After markets halted to examine the impact of the rise, the dollar gained against other major currencies and pressured the precious metals lower – the greenback was last 0.7 percent stronger at 1.0844 against the euro.

Post the FOMC meet, gold was expected to come under increased downside pressure from a stronger dollar.

Investors will now focus on the pace of future rate rises, which will be affected by the general strength of the economy and underlying inflation data.

In US data, weekly unemployment claims for were in line with forecasts at 271,000 and were below the psychologically important 300,000 mark.

The Philly Fed manufacturing index for December at -5.9 missed the predicted 2.1 while the current account for September at -$124 billion was largely as expected.

While the Fed does not expect to reach its inflation target of two percent until 2018, Chairwoman Janet Yellen said in the following press conference that current transitory factors stem from low oil prices.

After Thursdays decline, the markers expected gold to drop further. But Gold prices jumped in morning trades Friday after the dollar weakened against other currencies and as investors bought back oversold position after prices slumped to over four-month low on Thursday.

Gold prices finally found some support in the weakening dollar index following profit booking and buying at lower level. Prices of the bullion were down as dollar index weakened against other currencies, boosting investors' appetite for dollar-denominated commodities.

Gold was in positive territory on Friday morning in London after the dollar eased slightly amid growing expectations that the path to higher interest rates in the US will be a slow one.

The spot gold price was last at $1,054.9/1,055.2 per ounce, up $2.20 on Thursday’s close. Trade has ranged from $1,051.2 to $1,058.1 so far. In the previous session, the yellow metal dipped below $1,050.

Gold (and silver) rose on Friday, taking back about half of Thursday’s loss of approximately 2.00%.

Reasons behind the price rise were-

• The anxiety in equities restricting from the despair in crude prices
• A changed deliberation of a longer-term view that gold is “due” to rise because of weakening dollar strength
• Hurry to grasp snips.

In the coming days and weeks, the downside in precious metal prices may be limited due to low activity as a result of Christmas and New Year, volatility is expected to remain calm. But the year could start on a negative note for gold. Chairwoman Janet Yellen said future rate increases will be gradual and the policy could be reversed if the US economy begins to slow

In the interim, volumes are expected to shrink while market participants head to the sidelines during the holiday period, possibly resulting in choppy conditions.

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 -
"Tricky Week For Gold : RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/12/tricky-week-for-gold-rsbl.html 

Latest Gold & Silver news + Diwali wishes from Prithviraj Kothari!

                                            https://www.youtube.com/watch?v=7l0NRhQxmFc

AN UPBEAT DOLLAR BEATS UP GOLD

- By Mr. Prithviraj Kothari, MD, RSBL

 

As the outlook for the U.S dollar remained upbeat, we saw a bearish sentiment in the market for gold. Many investors expect that an interest rate hike by the U.S Federal Reserve will come sometime in 2015 was responsible for this sentiment. 

The Fed had stated that before it would tighten its policy, after it sees acceleration in wage growth. But at the same time the Fed had also made it clear in the January minutes in recent weeks that rate hikes could occur even if inflation is floundering. For now, as the Fed doesn’t consider the drop in inflation anything more than transitory, it’s unlikely that the wage figures ruffle too many feathers, at least for the U.S. Dollar.

Apart from the interest rate hike, there is also a great deal of uncertainty about the geopolitical and macroeconomic situation and gold continues to react to development in this regards.
The strong greenback has pushed gold prices below the key psychological level of $1,200 an ounce and has pushed the euro to a 12-year low

Both the euro and gold prices remain under significant pressure from the U.S. dollar.
The U.S. dollar has strengthened, particularly against the euro and that is negative for gold.

Though gold ended down for the week, it did show modest gains on Thursday afternoon although in euro terms it struck a near-one-month high following a speech from ECB president Mario Draghi on the bank’s QE programme.

An optimistic Draghi today outlined the ECB’s bond-purchasing plan that will begin on March 9. But he set a floor for bond purchases at the ECB’s deposit rate of -0.2 percent, following questions regarding to the extent to which the central bank will dabble with negative-yielding bonds.

As the week ended, gold prices fell to a two month low on Friday following a strong U.S non-farm payrolls report. Details are as following-

• US total non-farm payroll employment increased by 295,000 in February and the unemployment rate edged down to 5.5 percent from 5.7 percent, which was significantly better than the forecast for the addition of 240,000 jobs and a 5.6-percent unemployment rate.
• Labor reports over the next several months will take on added significance because the Federal Reserve is on the verge of raising interest rates.

This reading put added pressure on the Federal Reserve to raise interest rates in the near term.


By Friday afternoon prices had hit a session low of $1,162.90 an ounce and settled only marginally higher at $1,164.30, down 2.6% for the day. The gold ended the week at its lowest point since Dec. 1, shedding 4% since Monday.
Many cautious investors displayed a large scale pullout, looking for refuge in investment opportunities like stock, assuming bullish prospects for equity markets would continue in emerging markets like India.

Currently investment in equities looks more fruitful. Many investors are seeking shelter under this avenue as it is expected to give better returns than bullion; hence many investors sold their holding in gold to divert funds into equities in markets like India.
The jobs report definitely added fuel to fire for those who are expecting higher interest rates. Gold’s fall today shows that there is faith in the interest rate underpinning the dollar right now.

Strengthening dollar which is trading at its 11 year peak because of optimism in the US economy will be a strong factor for gold prices to come down in this month.

Although most of the market focus will revolve around the U.S. dollar and interest expectations, the two economic reports that will garner investors’ attention are-

•  February retail sales
•  Producer inflation data

The question now on everyone’s mind is just how low gold prices will go next week, in what is a quiet week for U.S. economic data. Most analysts expect that markets will spend most of next week preparing for the Federal Reserve monetary policy meeting on March 18.
Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could hurt demand for bullion, a non-interest-bearing asset. If there is no physical demand then the market could be vulnerable.

The current strategy that market players should follow is “BUY ON DIPS”. 

Following trade range could possibly give an idea for the same.

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1130-$1200 an ounce	Rs.25,700- Rs.27,000 per 10gm
SILVER	$15.40-$ 17.00 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 -
"Overall A Decent Budget For Gems & Jewellery Industry"

http://riddisiddhibullionsltd.blogspot.in/2015/02/overall-decent-budget-for-gems.html

TRADE RANGE FOR GOLD REMAINS TIGHT

- By Mr. Prithviraj Kothari, MD, RSBL

The sentiments are so strong for the gold market that people get overly excited about the top as well as the bottom of the market. At times gold seems to be behaving like a common man who is fleeced by the minutest to the most extreme global scenarios.

This week too gold was dancing to the tunes of the US dollar, The US Jobs Data, Fed Interest rate hike, ECB’s actions on Greece, crude oil prices. So it’s basically a vicious circle for gold.

Ups and mostly downs were being strongly witnessed by gold. For the month of January Gold was up 8.4 per cent, its biggest monthly rise in three years, helped by a sharp slowdown in US fourth-quarter economic growth. US gold for April delivery edged up 0.2 per cent to US$1,265.20 an ounce.

But the first week of February was disappointing for gold. Gold steadied on Friday ahead of crucial US employment data, but was set to post its biggest weekly loss in almost two months after steep gains at the start of the year.

The gold market appears to be in a tug of war with uncertainty: in Europe, with Greece boosting safe-haven demand on one side, and a strong U.S. dollar on the other side. The metal dropped 1.5 percent this week the most since December.

Let’s analyze the key influential factors for gold

US Employment Data- The employment data released on Friday was much above the expectation levels and this changed the market’s view on when the U.S. Federal Reserve will announce a rate hike, and has hurt the metals complex since then.

Total nonfarm payroll employment rose by 257,000 in January, and the unemployment rate was little changed at 5.7 percent, from 5.36 percent the U.S. Bureau of Labor Statistics report stated.  Job gains occurred in retail trade, construction, health care, financial activities, and manufacturing. The change in total nonfarm payroll employment for November was revised from +353,000 to +423,000, and the change for December was revised from +252,000 to +329,000. With these revisions, employment gains in November and December were 147,000 higher than previously reported.

This further raises the expectations for the Federal Reserve to hike interest rates by mid-year, denting the appeal of non-interest yielding assets such as gold.

Strength in the U.S. economy is backing the case for the Federal Reserve to raise interest rates, curbing gold’s appeal because the metal generally gives investors returns only through price gains.

Greece- Meanwhile, investors remained wary of developments in Greece, after the European Central Bank said it would no longer accept Greek bonds as collateral for lending, shifting the burden on to Greece’s central bank to provide additional liquidity for its lenders and increasing pressure on Athens.

Greece’s government is seeking debt relief on its current €240 billion bailout, which has fuelled fears over a clash with its creditors that could bring about its eventual exit from the euro zone.

This uncertainty over Greece has provided the much needed support to gold prices.


ECB's action on Greece- The market kept an eye over the ECB’s actions on Greece after the newly elected Greek Prime Minister wanted to end the austerity programme by the Troika. The ECB restricted Greece from tapping the ECB’s direct liquidity lines, forcing the Greek banks to borrow at a higher rate from the Bank of Greece under the Emergency Liquidity Assistance.


Uncertainty about the ECB’s funding for Greece and the country’s exit from the Euro has led to a stronger demand for gold. Despite the weak Euro, which has fallen five percent against the Dollar this year, the gold price has risen 6.64% year-to-date and has climbed as high as ten percent this year. While some profit taking is natural after the big gold price move, the continuous liquidity boost from China and Europe and the volatility in the currencies are likely to support gold prices in the medium-term.


The metal is still up 6.8 percent this year amid concern about austerity measures in Greece and as central banks in Europe and Asia announced more stimuli to bolster economic growth. Investors have added to bullion holdings in exchange - traded funds for the past month, bringing assets to the highest level since October.

Apart from global facilitation., another element that will be crucial for the gold market are the growing problems in Europe as the European Union and Greece have been unable to develop a renegotiation agreement.

Following factors shall be monitored over the weeks to come-

• G20 meeting on 9 February,
• China’s January inflation data on 10 February
• U.K. December manufacturing output on 10 February,
• The Eurozone December industrial production on 12 February
•  The U.S. January retail sales on 12 February
• The Eurozone Q4 preliminary GDP on 13 February.

TRADE RANGE FOR GOLD:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1180- $1270 an ounce	Rs. 26,000- Rs. 28,000 per 10 gm
SILVER	$16.15- $18.00 an ounce	Rs. 36,000- 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 -
"Too Many Surprises For Gold In The Week To Come"
http://riddisiddhibullionsltd.blogspot.in/2015/01/too-many-surprises-for-gold-in-week-to.html