IS IT TIME TO ADOPT GOLD OR ABANDON IT??

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

Gold and silver showed mixed sentiments last week and continued to make wave like movements despite many news that did the rounds in the previous week. Mixed movements in the forex market could have resulted in the mixed movements witnessed in the commodities market so far.

Gold and Silver slightly declined on Tuesday, after the news from Cyprus that its parliament passed on the bailout plan. On the other hand, other commodities prices such as oil prices and the stock market indexes such as S&P 500 rose. The shift in market sentiment towards bullish may also have contributed to decline in demand for precious metals and other safe haven investments. 

However, On Wednesday, though gold and silver opened with a negative note, they managed to bounce back by late evening. Causing the climb was a fall in U.S. equities which made the metal more appealing as an investment. In addition, continuing euro zone fears, following developments in Italy, gave gold extra upside impetus. The speculation around Cyprus bailout plan is currently pulling down the Euro and EU stock markets. These speculations have helped rally gold and silver prices. 

The Cyprus bailout is a wake-up call to buy gold. All those who have waited long to buy gold, can now start making decisions. With Europe's unsolvable debt crisis and America's own unemployment problems wherein for the first-time jobless claims rose by 16,000 to 357,000 in the week ended March 23, the highest level in more than a month, it's only a matter of time before we witness another gold rally.

Thanks to the Federal Reserve, central banks around the world are losing trust in the U.S. dollar; which used to be the “safe haven” currency. As more countries print paper money, known as “fiat currency,” the same countries will be reluctant to hold the fiat currencies of other countries in their reserves. Gold bullion is becoming a need for central banks, and I believe central banks will buy more gold bullion, because they have to, as paper money becomes too plentiful. While central banks are buying gold bullion at a rate not seen in 49 years, the price of gold bullion has declined—actions that bring forward the question of price manipulation in the gold market. If gold prices are indeed being suppressed, which is very difficult to prove, the end result will eventually be a major breakout for gold bullion prices on the upside. 

To give you an idea, China has the biggest reserve in the world—worth more than $3.0 trillion. But compared to the gold bullion holdings of other major central banks, China is still far behind. The U.S., Germany, and Italy hold more than 70% of their reserves in gold bullion. Imagine what would happen to gold bullion prices if China even just tried to double its gold reserves. In the backdrop of the gold bullion buying spree, central banks around the world are printing paper money, working to depreciate their currencies to jumpstart exports. (Source: business2community.com)

I feel its matter of time. If things get messier for either, investors can see gold easily hitting $2,000/ounce by the end of the year.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”


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"Cyprus gives gold a helping hand"

http://riddisiddhibullionsltd.blogspot.in/2013/03/cyprus-gives-gold-helping-hand.html

CYPRUS GIVES GOLD A HELPING HAND

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

Gold traded near a 3-1/2-week high on Friday, underpinned by safe-haven demand on the fear of a potential financial meltdown in Cyprus, which has put bullion on track for its biggest weekly rise in four months. The clock is ticking for Cyprus to come up with a solution to clinch an international bailout; otherwise it could face the collapse of its financial system and likely exit from the euro zone.  

 The Cyprus crisis has offered gold a helping hand, after investors had been pulling out of the precious metal and piling into stock markets which have rallied this year on a brighter economic outlook. The other reason for this upmove is the fact that FOMC’s decision is still active to keep policy unchanged. 

Gold traded as high as $1,608.63/oz, its first break above the $1,600/oz marker since late February, but pared its gains as a stronger U.S. dollar damped buying. On Thursday, the price of gold rose by 0.39% to $1,613.8; Silver also increased by 1.37% to $29.19

U.S. dollar gold prices continued to hover around $1610 per ounce Friday morning, dipping back below that level after making gains in Asian trading, while stocks and commodities were flat on the day ahead of a vote by Cyprus’s parliament on measures aimed at raising money and securing a bailout. 

European patience with Cyprus is running out after Cypriot lawmakers rejected a plan to tax bank deposits agreed on last weekend by the 17 euro-area finance ministers. The same finance chiefs are now considering a plan to shutter the two biggest banks in Cyprus and freeze the assets of uninsured depositors, four European officials said yesterday. European and Cypriot officials were locked in talks to find a formula to avert the Mediterranean island’s financial collapse, struggling to forge consensus on a bailout package before the European Central Bank cuts funding. Cyprus’s options narrowed on Friday after Russia spurned a bid for a loan and coalition lawmakers in Germany dismissed the Cypriot government’s latest rescue proposals. That left the troika of international creditors to hammer out fresh terms with President Nicos Anastasiades’s coalition focusing on the fate of Cyprus’s ailing banks. The ECB has said it will cut off emergency funding to Cypriot banks at the end of Monday, March 25 unless there is a deal. 

Looking ahead to early next week, Cyprus is going to remain front and centre and euro-zone confidence readings for March will also be significant next week.

Holdings of SPDR Gold Trust, the world’s largest gold ETF, fell 0.902 tons from the previous session to 1,221.26 tons on March 21, the lowest since July 2011. The fund is headed for a twelfth week of outflows.  Adding to the headwind, a string of U.S. data on Thursday, including on the labour market, factory activity and home sales, pointed to a growing momentum in the U.S. economy, diminishing gold’s appeal as an investment vehicle during time of economic and political distress.

On the other hand demand from India, the world's biggest gold consumer, languished before next week's Holi festival, a period considered inauspicious for gold purchases, coinciding with the end of the financial year when traders prefer to keep low inventories.

 I am eyeing key resistance at $1,620 an ounce, a price unseen since Feb. 26. A break above that level could rekindle enthusiasm in trading. All said, Thanks to Cyprus, that gold has started glittering again!

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

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"Speaker at Dubai Precious Metals Conference 2013"

http://riddisiddhibullionsltd.blogspot.in/2013/03/glad-to-be-speaker-at-dubai-precious.html