INVESTORS BEING LOYAL TO GOLD

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

Gold was set for the first back to back weekly advance since January, as investors weighed prospects for more stimulus against improving U.S. economic data. Silver, platinum and palladium headed for weekly losses.

Gold and silver moved away from the weekly gain and slightly declined on Wednesday. This decrease corresponded with the drop of leading currencies against the USD such as Euro and Aussie Dollar. The US Retail Sales report published on Tuesday also showed that economic activity in US grew as retail sales rose last month by the highest rate in months. This could be the reason behind the restrained drop in bullion prices.

The US federal budget report too stated that the fiscal deficit so far in 2013 is 15% lower than in 2012. This too is an indication for a downturn in financial risk of the US economy.

This decline in prices moves an investor away from Gold, as they do not consider gold to be a safe haven asset in such situation.

Stronger U.S. economic data like the lower Jobless claims, higher industrial production etc, recently, has lead to the selling pressure for gold. But again, it can be argued gold prices have held up fairly well in the wake of that stronger U.S. data.

Many investors still believe that there is still upward scope in gold and it is more sensible in being loyal to it. Counting quantitative easing measures in key economies and lurking risks in the euro zone are amongst the favorite reason to own gold as gold is always considered a hedge against inflation and economic distress

Looking at the Asian markets, gold demand was quite calm as most people have already made their purchases last month when gold prices dipped considerably.

However, importers now expect a rising demand for gold once the fiscal year ends and the festival of Holi onsets in India. Holi, Gudi Padwa and Akshaya Tritya are considered to be very auspicious days t buy gold and all these festivals are lined up for the month of March and April.

Bullion market participants will be watching the Federal Reserve's policy meeting next week. A hawkish tone would further hurt investors' interest in gold, but Asian buyers would make purchases if prices drop near February's levels.

Till then one needs to find answers to the following

Will the Euro crisis resurface after months of blissful peace?

A positive takeaway on gold is whether the good US economic data will continue to get better after sequester?

Can central banks continue to contain inflation after the rampant money printing programme?

The current situation seems to set gold as a better alternative should all of the above negative economic sentiment resurface. Gold prices have come down considerably and left an upside gap despite all the negative sentiments it has been receiving. 

We are not gold bugs at all just a humble observer who wish to share our views on why holding some precious metals is important.

“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 -

"Is the gold cycle about to turn???"

http://riddisiddhibullionsltd.blogspot.in/2013/03/is-gold-cycle-about-to-turn.html

IS THE GOLD CYCLE ABOUT TO TURN???

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

As the US economy recovers and the investment holdings collapse, the cycle for gold is probably expected to turn. Gold is caught between conflicting signals neighbouring the prospects for continued central bank monetary accommodation. 

Gold traded in a narrow range and hovered around $1,575 an ounce on Wednesday, evoking little interest from investors who switched to riskier assets as confidence in the global economy grew. The exodus of investment from gold-backed exchange-traded funds underscored the sober sentiment for the precious metal and overshadowed physical purchases of the metal in Asia

Private investors added physical gold following the metal's heavy sell off late in February, underpinning a market hit hard by heavy fund liquidation last month.

SPDR Gold Trust, the world's biggest gold ETF, said its holdings dropped on Tuesday in the eleventh session of straight decline to a 16-month low of 1,244.855 tons.

Spot gold edged up 0.2 percent to $1,585, drifting within a $1,564-$1,587 range that it established recently. Spot gold has fallen nearly 6 percent so far this year and is down about 18 percent from a record high of $1,920.30 an ounce hit in September 2011.

The price of gold fell to a seven-month low near $1,550 an ounce on Feb. 21, hit by talk of hedge fund liquidation and fears the Federal Reserve might halt its stimulus earlier than expected. 

Gold prices dipped to two-week low by falling Rs 200 to Rs 29,850 per 10 gm in the domestic market this Friday on stockists selling, triggered by a weak global trend. Silver followed suit and dropped by Rs 360 to Rs 54,960 per kg on reduced off take by industrial units and coin makers.

Traders said stockists selling in tandem with a weak global trend where gold fell before a report that is forecast to show the US labour market improved, damping expectations for further stimulus and boosting the dollar, dampened the sentiment. As expected, there was great improvement in the labour report. Gold lowered On Friday after U.S. employment data showed the economy added many more jobs last month than expected. Employers added 236,000 jobs last month, far above the 160,000 jobs forecast by economists. The unemployment rate fell two-tenths of a percentage point to 7.7%, the lowest level since the end of 2008. The report is a clear indication that the [U.S.] economy is successfully navigating against the headwinds from fiscal graveness.

Attention will now turn to the next meeting of the Federal Reserve's policy board, scheduled for March 19-20, to see if the central bank is any closer to rolling back its easy-money policies in the wake of strengthening economic data. The Fed has said it will consider raising policy interest rates when unemployment falls to hits 6.5%.

Now the question of concern for the precious metals market is that how far the Fed will continue its stimulus plan.

“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 -

"Post budget reactions"

http://riddisiddhibullionsltd.blogspot.in/2013/02/post-budget-commment.html