LOTS OFTHINGS TO SMILE ABOUT FOR PRECIOUS METALS

                                                                                                      - By Mr. Prithviraj Kothari, MD, RSBL

Though we did see some trading in precious metals on Jan 1st and 2nd, it was the week from 5th-9th Jan that was actually considered the first volatile trading week of 2015.

The main news doing the rounds for the week was from US- minutes of the recent FOMC meeting and the non-farms payroll report.

Apart from the macro reports there were the following financial reports that were out in the week.

• US non-manufacturing PMI, factory orders and trade balance monthly reports.
• Europe, MPC rate
• The EU flash CPI
• Unemployment report,
• GB’s manufacturing PMI
• Germany retail sales
• The French trade balance.
• In China, CPI and trade balance
• And several economic reports from Canada and Australia.

But of all the above mentioned reports, the most influential for gold was the unemployment report.


Gold was seen to have a positive start for the week as it firmed above $1200 an ounce on Tuesday hitting a near three-week high, as tumbling global equities and concerns over Greece's future in the euro zone prompted investors to seek safety in the metal.

The uncertainty behind the euro zone is once again tempting investors to run after gold as a safe haven asset. This risk off sentiment in the markets may help bullion be stable at its recent upswing.

Adding to this we also saw that holding in the world’s largest gold-backed exchange traded fund- the SPDR Gold trust, rose 0.25 per cent to 710.81 tonnes on Monday, though still near a six-year low. But this rise did reflect improving investor sentiments towards gold.

Bullion traded in a ranged manner for most part of the week while volatility was high on Friday. The Greenback jumped on likely positive economic reports from the US coming week whereas speculation increased that Fed might talk about raising interest rates as also anticipated from its monetary policy minutes report due next week and likely putting weight on Bullion.

We have always seen that precious metal markets and the equities markets are inversely related. This week too, we saw precious metals rising while equity market and commodity bellwethers including copper and oil hit fresh multi-year lows. After a disappointing end to 2014 gold is beginning to build a base above $1,200 an ounce – the metal advanced 1.2% to $1,223 an ounce in late trade Friday, the highest since December 11.

Gold's gains since hitting four-year lows early November now top 7% and is made more remarkable by the fact that the advance has come despite a rampant dollar which hit a 12-year high against major currencies yesterday and a Friday jobs report that confirmed that the US economic recovery remains on track.

Though the market players were a lot dependent on the non-farm payrolls report, it did not show much after effect on gold.

The gold price wobbled briefly but was ultimately unaffected by a non-farm payrolls report that, while mostly positive, was not potent enough to shift the Federal Reserve’s rate-rise timeline.

Total non-farm payroll employment rose by 252,000 in December, which beat the 241,000 forecast, while the unemployment rate declined to 5.6 percent, the US Bureau of Labor Statistics reported today.

Additionally, the change in total non-farm payroll employment for October was revised to 261,000 from 243,000 and the change for November was revised to 353,000 from 321,000.
The forthcoming labor reports are expected to create added significance as there are expectations that the Federal Reserve in on the verge of raising interest rates. The current market consensus is that rates will rise in mid-2015 although this is a moving target that will be dictated by jobs and inflation data.

As said earlier, too gold is one such commodity which takes price direction from macro developments rather than its own demand-supply wherein we feel downside risks for the commodity may stay in the near future



- Previous blog - "An Impressive start For Gold In 2015 But A Dull End"
http://riddisiddhibullionsltd.blogspot.in/2015/01/an-impressive-start-for-gold-in-2105.html

AN IMPRESSIVE START FOR GOLD IN 2015 BUT A DULL END

By Mr. Prithviraj Kothari, MD, RSBL

 

Every year, when we start afresh, each one has a hope- a hope that markets will do good. There was a similar feeling now as it was when 2014 began.

At the start of 2014 expectations were high that the gold market could shake off and recover from 2013’s drop, where prices ended the year in negative territory for the first time in 12 years.

However, despite strong optimism, gold once again closed the year in negative territory.
In the gold market, optimism was strong during the first half of the year. But later, the news hovering around the interest rate hike for gold pulled its prices down.

Fed’s interest rate hike played a significant role for gold in 2014. This helped drive the US dollar higher and pull down gold prices lower. 

By the end of 2014, Fed Chair Janet Yellen stated that interest rates will remain unchanged for the next two meeting. Hence analysts and economist expect that the Fed may bring in the first rate hike as early as June.

A thought some believe that interest rate hike may come in soon but there is part of the market who feel that any renewed expectation of looser U.S. monetary policy for a longer period could create some weakness in the U.S. dollar and in turn help push gold prices higher. 

Now we await next year’s crude prices and other commodities to see if inflation rears its head or if geopolitics suddenly moves gold.
This was a general scenario for 2015. Now let’s take a glance on the first trading day of 2015.
The first trading day of 2015 has been exciting for the gold market as prices have swung within a $27 dollar range during the session. Silver prices followed gold's volatility; as of 1:57 p.m. EST,
Gold closed 1.6% higher; reclaiming $1,200 after nearing $1,211 in intraday trade, as global risk-aversion and a weaker dollar boosted its safe-haven appeal.

Gold rebounded from a one-month low on Friday, as lower equities counteracted the impact of a stronger dollar and falling oil markets, but still posted its third straight weekly loss.
Spot gold fell to its lowest since Dec. 1 at $1,168.25 an ounce after the dollar strengthened, but rebounded to $1,194.10, up 0.63 percent at midday on a disappointing ISM manufacturing index report.
 

Gold added 0.2% to close above $1,186. Once again varied reasons behind this.

• Weak U.S. manufacturing data lifted demand for the metal as an alternative asset.
• The rising probability that a new Greek president, when elected, will break the terms of the ECB bailout sent yields Greek bonds and European stocks dipping as traders ran for safety in gold, silver, and the yen.
• Factory reports from Europe and China were even weaker. This added to the expectations that their respective central banks will be forced to add more stimuli.
• Gold was further supported by a falling dollar, which lifts demand for commodities denominated in it by making them less expensive to users of other currencies. 

Though we have always been discussing the precious metals market in general, this time I have also menti0oend the global economies which will down the line affect gold prices in 2015.


Chinese Economy- 

 
We all know that the Chinese economy is heading towards a slowdown. This has led to a rout in commodity prices, may continue to haunt global investors this year as well.
The country’s central bank helped the market with interest rate cuts and there is a reasonably good chance for a further cut, given that the real rate of interest is high.

US Economy

 
Like last year, this year too the interest rate move of the Federal Reserve will be a noticing factor to watch for.
The Fed believes that the risks to the outlook for economic activity and the labor market are nearly balanced and expects to remain ‘patient’ to regularize its stance of monetary policy, as per the statement published in December. 

Other Economies
The ECB will we forced to continue with its easy monetary policy as high unemployment, unutilized capacity and low inflation continue.
Apart from these, growth may inch up in Europe and Japan, but may drop in the UK.
Among the emerging markets, Russia will decelerate, while Brazil may not pick up appreciably. 

If you strongly believe that growth will improve globally his year then it could prove to be incorrect.
Thought the much-dreaded US quantitative easing (QE) concluded smoothly last year, but with Japan, Europe and China eyeing QE options, what may be in store for investors in 2015?
We need to wait and watch this for!

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1180-$1207 an ounce	Rs. 26,000- Rs.27,500 per 10gm
SILVER	$15.40- $16.30 an ounce	Rs.35,000- Rs.37,800 per kg

- Previous blog - "Too Much Noise In The Market"

http://riddisiddhibullionsltd.blogspot.in/2014/12/too-much-noise-in-market.html