Calmness before the big move in Gold and Silver: RSBL

                                          - Mr. Prithviraj Kothari, MD - RSBL

In order to understand why I have given this title for the week's blog, I would like you to have a look at the price movements in the below charts of Gold and Silver:

Gold price range: RSBL SPOT Terminal

Silver price range: RSBL SPOT Terminal

If you see the above 2 charts of the price movements in Gold and Silver for the week (courtesy: RSBL SPOT terminal), you would agree with me that the price movements are identical. I would even look forward to quote it as same. That's how these 2 metals are coupled with each other.

In the third week of May, both the metals hit their key resistance and fell while last week both of them hit their key support and now have stabilized in their month on month trading range.

With the amount of news flow reducing, physical support dying out, these metals are just trying to stay up float. For the last week I saw more news coming from physical demand of these metals:

1. According to BBG, China's net Gold imports from Hong Kong fell for a third month as buyers deferred purchases in anticipation of further price drops and amid increasing government scrutiny of bullion trading. Net inbound shipments dropped to 46.6 metric tons last month from 61.8 tons in March and 65.4 tons a year earlier, according to data compiled by the Hong Kong Census and Statistics Department.

2. Switzerland exported 143.9 tons of gold in April which is 36% less than March. More startling were the exports to China which were down 67% to just 15.1 tons.

Judging from the physical demand shrinkage of the metals, I feel that these prices are not so inspiring for investors to invest in them.

Economic news from US showed:

• GDP figure contracted in Q1, hurt by Frigid winter and a debilitating West coast port strike. 
• The Chicago PMI tumbled in May to 46.2 (53.0 expected), reversing all the gain recorded in April (52.3 April). 
• Initial unemployment claims in the U.S. edged up from 275k to 282k in the week ended May 23 (270k expected).  Despite the latest increase, the level of claims remains extremely low by historical standards which is positive

When it comes to technical levels: US$ 1180 of Gold and US $16.70 acts as a fortress for these metals. Until the prices do not breach these levels, I feel that the ongoing range specific price movements is a part of a calm sea which could induce violent storms in no time for the next big move.

Things to watch out for in this week are:
1. News about Greece payments to IMF - All week
2. ISM Non-Manufacturing PMI - Monday
3. ADP Non-Farm Employment Change - Wednesday
4. ECB Press Conference - Wednesday
5. Non Farm Payrolls data - Friday

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1181 - $1238 an ounce	Rs.26,600 - Rs.28,300 per 10g
SILVER	$16.70 - $18.00 an ounce	Rs.38,500 - Rs.42,000 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 - Gold prices Fall after hitting key resistance! - RSBL
http://riddisiddhibullionsltd.blogspot.in/2015/05/gold-prices-fall-after-hitting-key.html

Gold prices Fall after hitting key resistance! - RSBL

                                                               - Mr. Prithviraj Kothari, MD - RSBL

Another buying opportunity or it is a one such half hearted rally? A question that is pushing investors away from the precious metals complex. I would do my best to give you an idea by starting a gist of things that took place over the week.

The above picture depicts the Gold price range for the entire week (Picture taken from RSBL SPOT terminal). The week started off from where it closed, at a doorstep of the key resistance level US$1238. In almost all my previous blogs have emphasized on this particular level, that if broken, we can expect some change in trend. But it didn't. Gold continues to oscillate around USD $1200 with initial support sitting around this level.

Last week did show us, some spectacular movement in Silver where it broke key levels to enter in the range of US$17. Like Gold it did take a beating and US$17 does act as a short term base for the Silver metal. (image taken from RSBL SPOT terminal).


Key levels do make a lot of difference when the metal prices try to change a trend. But what caused this sudden drop:

1. U.S. housing starts jumped to their highest level in nearly 7 and a half years in April and building permits soared, providing hopeful signs for US economy gaining grounds over a dismal first quarter.

2. U.S. CPI data for April showed a +0.1% increase (expected: 0.1%) to mark the third monthly increase. The core CPI too read 0.3% (expected 0.2%), the largest increase since 3-4 years.

3. One of the most prominent news coming out of the week was from Federal Reserve Chair Janet Yellen. While speaking at the Greater Providence Chamber of Commerce on Friday, she addressed, ".... If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the Federal Funds target rate." A step to increase the rate hike is inversely proportional to gold price rise.


That goes without saying that U.S. data is highly influential for movements in precious metal complex prices as the other data that could have given a better support, weren't that influential:

1.  According to the latest CFTC data, hedge funds and money managers have hiked their net long silver stance to a near 10 month high and boosted their bullish gold bets to its biggest since March (+123k contracts, +77k prior week) for the week up to May 19.

2.  Greece cannot make debt repayments to the International Monetary Fund (IMF) next month unless it achieves a deal with creditors, its interior minister said on Sunday, the most explicit remarks yet from Athens about the likelihood of default if talks fail. European leaders told Greece on Friday to return to the negotiating table for "intensive work" to wrap up a reform agreement before cash runs out, sidestepping Athens' demand for a comprehensive, long-term solution to its troubles.

3. Iraqi forces recaptured territory from advancing Islamic State militants near the recently-fallen city of Ramadion Sunday, while in Syria the government said the Islamists had killed hundreds of people since capturing the town of Palmyra.

4. Russia's gold reserves rose to 40.1 million troy ounces as of May 1 compared with 39.8 million ounces a month earlier, the central bank said on Wednesday.

On the domestic front,  India could allow individuals deposit a minimum of 30 grams of gold with banks in return for interest payments to help monetize large quantities of the metal lying with households, a step that is aimed at cutting expensive imports. India released a draft documents of gold monetization plan on Tuesday.


Looking at the price jump from Silver, it does look a strong price comeback for me. I have always asked my readers to be invested in Silver. A metal that has multiple functionality.

With the FED meeting round the corner at Greek debt payment on June 5th, a lot more lies for the price movements in precious metals. Still the range play continues and strong conviction from Bears and Bulls is lacking.

It was a memorial day in US and spring bank holiday in UK, due to which price movements were muted yesterday.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1194 - $1238 an ounce	Rs.26,700 - Rs.28, 500 per 10g
SILVER	$16.70 - $18.00 an ounce	Rs.38,500 - Rs.42,000 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: GOLD CONTINUES TO RISE!
http://riddisiddhibullionsltd.blogspot.in/2015/05/rsbl-gold-continues-to-rise_17.html

FED SETS THE RULES FOR GOLD

by Mr. Prithviraj Kothari, MD, RSBL

Since December 2008 to June 2011, gold rose 70 % as the Fed bought debt and held borrowing costs near zero percent. 

Last year being the worst performing year for gold, as prices slumped 28 per cent as the markets had expected that the central bank would taper its monthly stimulus program which was the main reason for the spark rise in gold in 2011. 

After spending much of the month bouncing off a triple-bottom low around $1,180 made on Oct. 6, and previously in December and June 2013, gold prices turned weaker and spent the last week and a half drifting lower.  

The U.S. Federal Reserve had dismissed financial market volatility, a slowdown in Europe and a weak inflation outlook as factors that might undercut progress towards its unemployment and inflation goals.

The hawkish comments and the strong economic data dulled gold’s appeal as a hedge. This continued to put pressure on gold. 

Post FOMC, gold dropped more than $20. The market recouped some losses edging back up to $1215, but early London were aggressive sellers, pressuring the market another $20 lower to a low of $1196.50.

Moreover, on Wednesday, The Fed ended its monthly bond purchase program and dropped a characterization of U.S. labour market slack as "significant" in a show of confidence in the economy's prospects. As the Federal Reserve ended its asset purchase program amidst signs of a growing and improving US economy, gold lost its appeal as a safe haven asset and demand to won gold declined. 

Gold is 0.6 % lower in October after losing 6.2 % last month, and the metal during the last session erased the year’s advance as Dollar Spot Index rose to a three-week high. Gold traded USD 1160.85 while Silver and Platinum tested respective support levels of 15.80 and 1220. Gold support for the short term is expected at $1150.

Apart from this, there were few other reasons responsible for the crash in gold and silver prices.

Central Bank Interest Rate - The central bank, which has held its key rate at zero to 0.25 percent since 2008, this week cited an improving job market in deciding to end bond buying, while maintaining a commitment to keep rates low for a considerable time. It also said inflation is running below its 2 percent target.

SDPR Gold Trust- Reflecting bearish sentiment, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.16 percent to 741.20 tons on Thursday, the least since Oct. 2008.

US Data- Precious metals cratered, hit by a double-whammy of the rather hawkish Fed policy statement, coupled with a stronger-than-expected US GDP report. Fed officials this week cited an improving job market in deciding to end bond-buying, while maintaining a commitment to keep interest rates low for a considerable time. 

Dollar- Gold and silver were hit hard after the dollar rose to a near four-week high against a basket of major currencies on Friday, Reuters reported. The greenback got a boost from strong US gross domestic product data and the Bank of Japan’s surprise move to expand its massive monetary easing that weakened the yen.

Bond Buying Program- Gold was languishing near a three-week low on Thursday after the U.S. Federal Reserve ended its bond-buying stimulus program and expressed confidence in the economic recovery, dimming bullion's safe-haven appeal.

Lack Of Support From Asian markets- Gold failed to get any support from the Asian physical markets, a factor that could likely push it to further lows. Physical demand usually provides a floor to dropping prices.

China's factory activity unexpectedly fell to a five month low in October as firms fought slowing orders and rising costs in the slow moving economy.

Buyers in top consumer China failed to emerge despite the drop below $1,200. Gold of 99.99 percent purity on the Shanghai Gold Exchange - the main platform for physical trades in the country - sank as much as 3.1 percent to 230.05 Yuan per gram ($1,172.35 an ounce), the lowest level this year, Bloomberg reported. Volumes tumbled to a one-month low on Friday.

    

For the coming week, gold is expected to be influenced by any comments coming in from the ECB and also any important data cropping from the October U.S nonfarm payroll report. Following Thursdays GDP growth reports news, the Federal Reserve is more upbeat on the labour markets and the Federal Open Market Committee meeting to be held on Wednesday expects a strong data report. This may make the bearish sentiments strong for gold.

TRADE RANGE

METAL	INTERNATIONAL Gold/Silver price range	DOMESTIC Gold/Silver price range
GOLD	$1150 - $1200  an ounce	Rs.25,500 - Rs.26,750  per 10gm
SILVER	$15.00 - $17.00  an ounce	Rs.34,000 - Rs.37,500  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 Once Again Surrenders In Front Of Gold"

http://riddisiddhibullionsltd.blogspot.in/2014/10/gold-once-again-surrenders-in-front-of.html