Gold being pulled between uncertainities and rate hike

Gold is often used as a hedge against political and financial uncertainty and security risks. And that’s exactly what’s happening with gold currently.

Gold hit a five-month high on Friday after U.S. jobs data dampened expectations that the U.S. Federal Reserve will raise interest rates, but the metal gave up most gains as the dollar rose and safe haven demand ebbed.

Spot gold rose 1.2 percent to $1,265.95 an ounce by during trading hours on Friday, after touching its highest since Nov. 10 at $1,270.46,putting it on track for a fourth consecutive week of gains. U.S. gold futures climbed 1.1 percent to $1,267.60 an ounce. This is the most supportive environment we have seen for gold in some time given that there is geopolitical tension and disappointing U.S. payrolls number.

Data released showed that U.S. employers added the fewest number of workers in 10 months in March, boosting gold, which is most attractive to investors in a low interest rate environment.
Gold was also underpinned by investors looking for safety after the United States fired cruise missiles at a Syrian air base, escalating tensions with Russia and Iran.

Russia, a staunch ally of Syria, said relations between Washington and Moscow had been seriously damaged by the strike, which was in retaliation for a deadly chemical attack on a rebel-held area of Syria.

The precious metal hit a 5-month high as investors sought safe-haven assets after the United States launched cruise missiles against a Syrian air base, potentially escalating tensions with Syrian allies Russia and Iran. U.S. President Donald Trump unleashed the military strikes in response to a deadly chemical attack on a rebel-held area, a U.S. official said on Thursday.

Later in the session, however, safe haven demand faded and the dollar index. DXY climbed to three-week highs which further rose questions that unless the geopolitical risk continues; will the sentiment remain positive for gold?

Investors were cautious ahead of the meeting between U.S. President Donald Trump and Chinese President Xi Jinping, but Trump said on Friday he had made progress in talks and expected them to overcome many problems. Investors had already been on edge as Trump met Chinese leader Xi Jinping on Thursday for talks over flash points such as North Korea and China's huge trade surplus with the United States.      

Gold is often used as a hedge against political and financial uncertainty and security risks. It has benefited alongside other assets considered safe, such as the yen and U.S. Treasury bonds.
Though geo political uncertainties are creating room for gold to rise, we shouldn’t ignore the key influential factor for gold i.e. U.S. interest rate hike.

Increases in U.S. interest rates will prove too much of a headwind for gold prices. As such, we think that the price of gold is likely to fall from about $1,265 today to $1,050 by the end of the year if there is any news coming in from the Fed regarding hike in interest rates.

Clearly this raises the stakes and we expect to see gold prices continuing to push higher in the short-term, at least until there is some clarity around whether this is a one-off or develops into something more.

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

GOLD PERPLEXED

 - By Mr. Prithviraj Kothari,MD,RSBL

Gold this week was giving confused or rather mixed behavioral patterns as it was being pulled between the bullish and bearish forces.

On Thursday, gold ended at $1,220.70 an ounce, up $1.10 or 0.1 percent, on a weak dollar and some disappointing economic data from the U.S. with retail sales dropping more than expected in January and first-time unemployment benefit claims rising more than anticipated last week.
Though gold was up on Friday, followed by weak US economic data, for the week gold was down 0.6%.

Let’s analyze the bullish and bearish factors that were responsible for this wavelike movement in gold-

BULLISH

Weak US Economic data-  Following Thursday’s reaction, gold was up for a second straight session in Friday.
Gold displayed the behavior post the release of some key reports from US. In some soft economic news from the U.S., a University of Michigan report on Friday showed an unexpected, sharp pullback on its U.S. consumer sentiment index in February, after having reported the index at an eleven-year high in the previous month.

Meanwhile, the Labor Department released a report on Friday showing another steep drop in U.S. import prices in the month of January, attributed largely to falling energy prices.
Additionally, the Labor Department said export prices slumped by 2.0 percent in January following a revised 1.0 percent decrease in December. Export prices had been expected to fall by 0.8 percent compared to the 1.2 percent decline that had been reported for the previous month.

Greece issues- Equity markets were hit by the uncertainty prevailing over Greece’s debt negotiations with its European lenders and its future in the euro zone. This has benefited the bullion markets that were up on Friday as safe haven demand for gold increased.

Greece agreed on Thursday to talk to its creditors about the way out of its international bailout in a political climb-down that could prevent its new leftist-led government running out of money as early as next month.

Increasing gold purchases by official bodies worldwide- Central banks were net buyers of gold for the fifth straight year in 2014, with purchases nearing a 50-year high, in the face of growing geopolitical risk. According to a report released Thursday by the World Gold Council in London, central banks' net purchases of gold came to 477 tons in 2014, up 17% on the year and the second-highest figure ( after 2012) since data were first kept 50 years ago.
.
Other official bodies worldwide namely Russia's Central Bank (purchases exceeding sales by 173 tons ), Iraq’s Central Bank (added 48 tons to its stocks)  also hoarded gold. Official bodies have been net buyers of gold since 2010, when the euro crisis struck. Increasing volatility in the foreign exchange market is stimulating worldwide demand for gold.

India's consumer demand slid 14% to 842.7 tons, as the country raised import duties on gold in hopes of closing its growing current account deficit. In spite of the decline, India returned to the top spot as the world's biggest consumer as the former leader China’s demand for gold slide 38%.

USD-  Gold was firmly supported this week by a frail US dollar. The dollar trended lower against some select currencies after some soft economic data from the U.S. A weakening dollar supported gold by making the commodity priced in the greenback cheaper for holders of other currencies.

French Economic Report- The statistical office Insee reported on Friday that the French economic growth slowed as expected in the 4th quarter. France's gross domestic product rose 0.1 percent sequentially, in line with forecast, but slower than third quarter's 0.3 percent expansion



BEARISH

US interest Rate Hike-  Gold held above a five-week low on Friday amid a weaker dollar and uncertainty over debt-laden Greece, but the safe-haven metal was set to close down for a third straight week on expectations of higher U.S. interest rates.

Euro zone Data- Apart from the Fed’s anticipated interest rate hike, upbeat economic news from the Eurozone has weighed on gold prices all week. Helped by growth in Germany, the combined gross domestic product of the Eurozone was up 0.3% sequentially in the fourth quarter.

Germany’s Economic Data- Germany's economic growth accelerated more-than-expected on domestic spending and exports in the fourth quarter, while investment dragged expansion in France.
German gross domestic product advanced 0.7 percent sequentially- this was the fastest growth in three quarters and also exceeded a 0.3 percent rise forecast by economists.

 SPDR Gold trust- Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged down to 771.51 tons on Friday, from its previous close of 773.31 tons.


 Summing it up, markets worldwide await the interest rate hike by the Federal Reserve which is expected to happen sometime this year. Reacting to this, the outlook for dollar remains upbeat despite the recent losses.

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.

TRADE RANGE-

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1211- 1245 an ounce	Rs.26,500- Rs.28,000 per 10gm
SILVER	$16.55- $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 -
"Trade Range For Gold Remains Tight"

http://riddisiddhibullionsltd.blogspot.in/2015/02/trade-range-for-gold-remains-tight.html

APPETITE FOR GOLD RISES!

by Mr. Prithviraj Kothari, MD, RSBL

When global risk escalates - financially and politically - gold is always considered as an insurance against it. The speculations that the Federal Reserve may raise interest rates has kept the yellow metal  in small trading ranges around $1,300.

In the previous week precious metals were down throughout the week until the payroll data was released on 1st August which showed that the jobs added were less than market expectations. These reports had raised speculation that the Fed could soon raise interest rates which would then increase the opportunity cost of holding gold. This sent gold to a six week low in the last week of July but was later pushed as the month ended over a report that showed that U.S. jobs growth slowed in July. This strengthened the belief that the Fed may keep interest rates lower for longer.

For the month of August, so far, gold has held within a narrow range of $30 over speculation that the U.S. interest rates may rise. This sentiment was offset by the escalating violence in Ukraine and the Middle East. Since mid- June there have been a lot of major influential factors that have been influencing gold prices-

• Some weeks there were better U.S. data
• The constant tensions presiding in Ukraine and Middle East.
• The Euro zone economy

These and many other micro influential factors have been responsible for the pull and push in gold prices.

Let's have a look on the weekly movements of gold.

MONDAY - with a rise in banking stocks that lifted European shares and a speculation that the Fed may raise interest rates soon, gold edged low as the week began. Spot gold was down 0.2 percent at $1,290.70 an ounce at 1433 GMT, after falling 1.1 percent last week for its first three-week decline since September.

TUESDAY - Gold edged up on Tuesday following disappointing Chinese economic data, but a firmer dollar and stronger European equity markets limited gains. Spot gold rose 0.2 percent to $1,290.63 an ounce during the trading hours. 

WEDNESDAY - Wednesday too gold was on the upper side as it rose 1.6 percent over the continuing conflict in Ukraine. These concerns had put global equities under sustained pressure, thus raising demand for a safe haven asset like gold. And in times of such crisis gold acts as an insurance against risk.

Russia has amassed around 20,000 troops on Ukraine's eastern border and could use the excuse of an humanitarian or peacekeeping mission to send them into Ukraine, NATO said in a statement on Wednesday. NATO issued warning to Russia to step back from Ukraine’s borders.

Iraq's largest dam was taken over by the militants. 

THURSDAY-  Spot gold climbed to $1,314.40 on Thursday - its highest since July 22, and is on track to snap a three-week losing streak. U.S. gold, also up over 1 percent for the week, is headed for its best week in seven.

A build-up of Russian troops on the border with Ukraine and tit-for-tat economic sanctions between the West and Moscow on Wednesday drove investors out of assets seen as higher risk including stocks and into the relative safety of bonds and gold. Moscow banned imports of most food from the West on Thursday in retaliation against sanctions against it over Ukraine, a stronger-than-expected response that isolates Russian consumers from world trade to a degree unseen since Soviet days

Growing fears that Conflict in Ukraine and the middle East could weaken economic growth also pushed bullion prices high. 

Fighting resumed in Gaza between Palestinian militants and Israel after a 72-hour ceasefire expired. 

FRIDAY - Friday too, gold hit a three and a half week high after U.S. President Barack Obama authorised air strikes in Iraq. A Bloomberg heading stated that Obama authorized air strikes in Iraq sent equity markets lower, while Gold jumped 8 USD to 1318 and WTI Crude Oil gained 1 USD per barrel.

Spot gold hit its highest since July 14 at $1,322.60 an ounce earlier, and was up 0.1 percent at $1,314.90 during trading hours. The metal has gained 1.9 percent this week, its first increase in four weeks and the highest weekly gain in seven.

Gold has gained eight per cent so far this year. Bouts of international tension, worries about the business cycle in Euro zone, soft economic data released in Germany all this and much more has lifted demand for assets like government bonds and precious metals. These factors have been so influential that even a strong dollar couldn't offset it.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1290- $1330 an ounce	Rs.27,500- Rs.29,500 per 10 gm
SILVER	$19.50 - $21.20 an ounce	Rs.42,000- Rs.45,500 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 -

"Interesting Times to Come"

http://www.riddisiddhibullionsltd.blogspot.in/2014/08/interesting-times-to-come.html

ARE THEY REALLY PRECIOUS?

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

This week a lot has happened with precious metals and in the coming week too a lot is bound to happen with gold, silver and platinum

The bears are in the driving seat in Gold. Gold prices shed 5.6 percent for the week. Gold fell to a five-week low on Friday at $1,304.56, heading for its worst week in more than two months.

For the first time in a month silver traded below $22. It suffered a huge sell off on Thursday. Silver prices fell 5.32 per cent on Thursday, closing at $21.90.

Platinum was not sparred from the selling pressure, falling 2.31 percent to close at $1,438 and saw some slight recovery to the $1,440 levels now. 

There are various factors responsible for this Sell - off. Let's take a look at them one by one.

SYRIAN EFFECT:

Gold prices rallied above $1,430 an ounce to a three-and-a-half-month high in late August on safe-haven buying, as the United States and its allies looked set to launch military strikes on Syria.

But the metal’s appeal has been dented by diplomatic efforts to place Syria’s chemical weapons under international control, which may avert a US military strike. The risk mood improved with Syria welcoming a Russian plan to surrender their chemical weapons

Obama has threatened to act alone, if necessary, and his administration credits that threat with Russia's surprise proposal last week to have Syria turn over its chemical weapons arsenal to international control. Outside of the United Nations, however, administration officials insisted they would not take the military threat off the table.

As of now gold doesn't seem to be playing much to the tunes of the Middle East tensions as the UN has clearly not given a go ahead for any attack on Syria.

QE TAPERING EFFECT:

The FOMC meeting to be held on 17-18th September and its speculations over the tapering of the quantitative easing program will be one of the biggest events for the movement.

Since the inception of the Fed’s quantitative easing programme in 2008, gold price has more than doubled from about $837 an ounce in 2008 to reach a peak above $1,900 in 2011. 

Since the Ben Bernanke’s Speech on QE3, prices have saw humungous correction and fell to a low of $1,180 in June this year. 

With talks of possible withdrawal of their liquidity injection programme coming up at the FOMC meeting next week, it is no wonder we see such volatility in bullion prices.

DEMAND EFFECT:

Another factor that affected gold prices was the lacklustre physical gold demand, particularly out of India, one of the biggest importers of Gold, where the Government restrictions to import Gold have further dented the supply. The dramatic trend decline in the Indian Rupee against the US dollar has sharply increased the local price of gold with the gold price measured in Rupee up some 20% since late June. 

The Indian jewellery market, which is a major component of global jewellery demand, has tended to be price sensitive. Thus the high local gold price is likely to dampen Indian jewellery demand and pull down gold prices unless the rupee depreciates further

Although physical demand has picked up in Asian Markets over the past two days, it is not nearly as strong as what we have witnessed in at the start of August. The strong physical demand during August had pushed plenty of shorts out of the market (this short covering assisted in pushing gold above $1,400). Should physical demand improve now, there may not be the same level of short covering to help push gold higher again.

MINING EFFECT:

Furthermore, the trend weakening of the South African Rand and the Australian dollar have lowered gold mining cuts in the two countries with the highest production costs which makes production costs less likely. It is also worth noting that the gold labour strikes in South Africa are now over which will may pull gold prices down

Having discussed these factors, I would expect Gold to trade sideways until FOMC meeting with its stimulus plan can lead to a direction.

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 was pulled between two major forces- Syrain attack and the QE tapering"

http://riddisiddhibullionsltd.blogspot.in/2013/09/gold-was-pulled-between-two-major.html

GOLD WAS PULLED BETWEEN TWO MAJOR FORCES- SYRIAN ATTACK AND THE QE TAPERING

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold prices started weaker in Friday’s North American session, but reversed course and rose 1.5% following a lower-than-expected U.S. nonfarm payrolls report that increased confusions over when the Federal Reserve will start paring back its massive bind buying. The U.S. Bureau of Labor Statistics said that 169,000 jobs were created in August and the unemployment rate fell one basis point to 7.3%. That’s under the 170,000 to 180,000 expected. 

The better US Non-Manufacturing ISM data sent Gold heavily lower, as a Fed tapering for September seems on the cards now. Gold dropped by nearly 25 USD to a low of 1365 after the data with heavy volumes. Silver traded down to 23.01.

The U.S. August services sector ISM expanded to 58.6 compared to an expectation of 55.0. The ADP showed that 176,000 jobs were added in August while the jobless claims for the week ending 31 August declined 9,000, with the four-week average dropping to the lowest level since October 2007. The U.S. government bond yield surged while the Dollar Index climbed and the gold prices dropped upon the encouraging economic data. The European bond yield has also been rising in reaction to the Fed’s expected bond purchase tapering as well as the recent European growth recovery. The German 10-year government bond yield has surged above two percent on Thursday compared to 1.3 percent at the end of last year. 

Increase of jobs could push the Fed heavily in favour of tapering stimulus before the end of September, but a disappointing level of growth could sway the central bank to wait at least another month. 

Despite Friday's rally, gold ended the week 0.5 per cent lower for a second consecutive weekly loss as its safe haven appeal dropped on lack of progress about possible US military strikes against Syria.

Gold prices could rise next week as market awaits Fed tapering, moreover, there are some other factors underpinning gold, including decent physical demand in Asia and the likelihood of more Indian purchases ahead of the holidays there.

Another factor for gold is a potential military strike on Syria by the U.S., following reports that the government there allegedly used chemical weapons against its citizens. As President Obama persuades the Congress to vote and looks for the international backing for war in the G20 meeting, the delay in the Syrian strike has put a damper on gold prices

Gold traders are watching the Syrian conflict, but so far the saber-rattling has done little to impact markets. Several analysts said going into next week that Syria might take on added significance and the conflict will likely at least add support to prices.

The gold market has another week and half to mull what the Fed might do, as the Federal Open Market Committee meeting is Sept. 17-18, and there’s a debate over whether the Fed would taper its QE program or not. 

Monetary stimulus has been a major driver of gold's rally for recent years as the metal's stats as a hedge against inflation and economic uncertainty benefitted from increased money printing by central banks in low interest rate environment.

Gold rose to a record high of $1920.30 on 6th September - exactly two years ago. Year-to-date, the metal is down nearly 16 per cent.

Meanwhile, India welcomed the new RBI governor - Mr. Raghuram Rajan with open arms. And this was clearly visible in the market movements once he took his post. Equities were up, rupee appreciated and the sentiment became positive.

In a seven-page statement read out at a press conference after markets closed, Dr.Rajan set out a bold, reformist vision for his tenure at the central bank. Included in it are measures to deepen securities markets, improve financial inclusion including for SMEs, support and push for the rupee as an international currency and a warning for corporate defaulters of loans. Declaring that he would “preserve the value of the currency”, Dr. Rajan said India is a fundamentally sound economy with a bright future. 

On Tuesday, The Reserve Bank of India (RBI) has said gold supplied to units in Special Economic Zones (SEZs) and export units and to star/premier trading houses will not be treated as gold supplied to exporters under the 80/20 scheme — the allowing of import with the condition that a fifth must be supplied to exporters. With RBI’s new clarification, exports might be higher but gold supplied to exporters from a Domestic Tariff Area (any place outside an SEZ or other units outside a Customs-bonded one), other than export zones and by export houses, will be considered as part of the 20 per cent policy. Such exports last year were estimated at 55 tons and this year could be higher, with improved demand. An exporter will have to show a proof of export, including proof of inward remittance. Since the latter takes 270 days, waiting till then will mean the next export will be delayed. 

Now Indians have eyed their entire hopes on this new governor, who promises to deliver.

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 -

"It's Syria v/s Global Economy for gold"

http://riddisiddhibullionsltd.blogspot.in/2013/08/its-syria-vs-global-economy-for-gold.html

IT'S SYRIA V/S GLOBAL ECONOMY FOR GOLD!!!

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold prices rallied above $1,430 an ounce to 3-1/2 month highs on Wednesday as rising tensions over Syria sparked safe-haven demand and a scramble among investors to cut their bets on falling prices

The metal hit a peak of $1,433.31 an ounce, its highest since May 14, as the United States and its allies geared up for a probable military strike against Syria in response to an apparent gas attack that killed hundreds of civilians in a rebel-held suburbs of Damascus. 

Gold was on track for a 5.40 percent gain on the month and its second straight monthly increase. It briefly trimmed its decline in the afternoon as U.S. Secretary of State John Kerry made a case for a "limited" strike against Syria, but prices fell back to pre-speech levels before he finished his televised address.

Till then, gold was dancing to the moves of the data released by US. Gold fell on Thursday, snapping a five-day rally as a U.S.-led military strike on Syria appeared not to be imminent and investors turned their attention to strong U.S. economic growth and the Federal Reserve's plans to rein in its stimulus program.

Gold prices in the international market declined as US economy grew by 2.5 percent annualized rate in Q2 up from previous quarters' 1.7%. Economists widely expected the GDP to grow by 2.2% and the trumping of expectations along with the dip in initial jobless claims by 6000 last week ensured a dip in gold futures. Gold slid below $1,400 an ounce on Friday as the dollar rallied to a four-week high, with investors squaring positions at the end of the month and cashing in on a recent run-up ahead of a long U.S. holiday weekend

I feel the correction in Gold prices came mostly from month-end position squaring and profit-taking after prices on Wednesday reached their highest levels since mid-May. I pray for all the souls who have lost their lives in Syria and may peace usher in the nation.

  

Meanwhile, In South Africa there was an atmosphere of unrest. The National Union of Mineworkers (NUM) has given 48 hours’ notice of a strike at South Africa’s gold producers, the country’s Chamber of Mines said on Friday.

The Chamber, which collectively bargains on behalf of South African gold miners AngloGold Ashanti, Gold Fields, Rand Uranium, Harmony Gold, Evander Gold Mine, Sibanye Gold and Village Main Reef, expects the strike to take effect from the night shift on September 3.

This too will affect gold prices.

While in the domestic market, the Indian rupee slipped for third consecutive day in a row on Wednesday to close at a fresh record low of 68.80 per dollar, as uncertainty over a possible US-led military strike against Syria knocked down Asian equity markets and currencies. This is the biggest ever single-day fall for the currency since 1995.

Apart from global factor, India suffers higher current account deficit fuelling worries that foreign investors will continue to sell out of a country facing stiff economic challenges.

The currency has plunged over 13 per cent so far in the month of August alone to mark its worst monthly fall since the year 1993.

Rupee has plunged nearly 25 per cent so far in the year 2013. A plunging rupee has affected bullion prices too taking gold to a life time high of in the Indian markets.

Risk of supply disruptions for platinum remains at large, I feel the sustainability of a price rally above $1,500 is likely to reduce as the jewellery demand will fade above $1,500. China is the dominant player in the platinum jewellery market, accounting for nearly 60% of the world platinum jewellery demand.  

With respect to Silver’s rally over the past few weeks, I believe the metal’s underlying fundamentals remain weak. I feel short covering was the major support that leads the metal prices to reach higher levels. I do believe for the time being the metal will also find support on dips (taking its lead from gold). 

The trade range for gold for the coming week is expected to be $1375-$1423 an ounce in the international markets, and in the domestic market it is expected to range between Rs.30,000- Rs.33,500 per 10 gram

“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 -

"Will Gold cross the $1400 mark?"

http://riddisiddhibullionsltd.blogspot.in/2013/08/will-gold-cross-1400-mark.html