HOLD ON TO YOUR GOLD!

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

Gold in the spot market was up 4.8% for the week, thus stating its biggest weekly gain since October 2011. Gold rose by 2.62% to $1280.1 on Thursday and silver also increased by 4.13% to $19.95.

The markets were moved by the U.S Fed's speech on 10th July, Bernanke spoke after the markets closed on Wednesday. He said that the US economy desires a highly accommodative monetary policy for the likely future. He also suggested that the tapering of the QE3 programme does not means that monetary policy would be tightened or the interest rates would be raised.

The FOMC minutes reviewed that many Fed governors would like to see more signs of improvement in jobs before agreeing to tapering. Both risky assets and gold reacted positively to the dovish comments by the Fed. The most recent weekly jobless claims in the U.S. unexpectedly rose by 16,000 to 360,000. 

On Friday, among other precious metals, silver fell 1.1% to $19.87 an ounce. Platinum inched down 0.1% to $1,402.99 an ounce, while palladium gained 0.1% to $716.97 an ounce. Gold pared losses after government data showed that U.S. producer prices rose more than expected in June, increasing gold's inflation-hedge appeal. 

Gold supply remains tight with current market prices now below the highest cost of production. Miners are writing down asset values and cutting back on costs. As prices move lower, it will come to a point where supply and demand economics take over.

Gold's reaction was limited after Cypriot President Nicos Anastasiades said he hoped there would never be a need for the island to sell its gold reserves, an assessment stipulated in an international bailout for Cyprus.

Meantime in India – the world's heaviest gold-buying nation – the government's new campaign against household gold demand was challenged today by the jewellery industry, as well as market analysts. A number of jewellery units and workers have been idled due to the severe shortage of gold in the wake of several restrictions on the yellow metal’s import.

Imports in April and May together were a little over 300 tonnes. This fell to 38 tonnes in June. Excess imports in May gave some initial relief but that cushion is long gone.

Starting off next week, we have Chinese Q2:13 GDP data out early Monday. This number is generally not as important for precious metals as it is for other commodities. However, given that it is well known that Asian physical buying (particularly from China) has provided a crucial crutch for gold amid Fed tapering concerns, we could see a more marked reaction from precious metals than is usually the case. There is considerable risk that this number will disappoint (Bloomberg consensus: 7.6% y/y), although this time the market might not react as violently as it did in April — the market might be buoyed to some extent by hopes of stimulus, after Chinese Premier Li stated earlier this week that economic growth and employment must stay above a certain floor.

I expect gold prices to finish 2013 at around USD1,300/oz and rise mildly in 2014 and 2015. In the long term, uncertainty will continue to plague global markets as the international financial system adapts to a changing world economy. Gold will continue to play an important portfolio role for investors

"The primary purpose of this blog by Prithviraj Kothari - MD, RSBL(RiddiSiddhi Bullions Ltd.) is to educate the masses of the current happenings in the Bullion world."
-Previous Blog-
"Dollar Drags Down Gold" : 
 http://riddisiddhibullionsltd.blogspot.in/2013/07/dollar-drags-down-gold.html

DOLLAR DRAGS DOWN GOLD

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

Markets were less volatile towards the end of the week due to the closure of international markets on 4th July, as US celebrated it’s Independence day.

Gold dropped by around 0.6 per cent on Thursday but still remained strong over the week until Friday. The trend changed when, on Friday, the labour Department reported a stronger than expected  forecast . It stated 195000 rise in June non-farm payrolls, along with upward revisions for May and April.

The unemployment rate stayed at 7.6% however, rather than slipping as forecast. But average hourly earnings rose 2.2% annually against the 2.0% analysts predicted. 

Gold prices bounced and then dropped $20 per ounce to hit $1220 per ounce in London trade Friday, nearing their worst weekly finish since August 2010 after the release of June's US non-farm payrolls data.

With this improvement in the labour report, it gave more confirmation to traders that the Fed might scale back its quantitative easing program.

In fact it is believed that gold would have shown more movement and volatility had the markets remained operational on Thursday.

Many market players are on a four- day weekend after the International Holiday on fourth July. The markets are expected to show some pressure on gold on Monday as everyone will return from the long weekend holiday. I expect that rallies towards $1,300 and possibly $1,340 should continue to attract selling, till there are no stronger reasons for trend reversal.

Next week too, traders are surrounded by thoughts about when the Federal Reserve may curtail QE3. The other factors that will also matter are the ongoing conflict in Egypt and the exchange trade flow figures.

Now that the US economy has shown signs of growth and recovery and the US interest rates are rising, the dollar is now being reconsidered as a mode of investment. Gold works as a hedge against inflation. Now that inflation is declining, gold is gradually being replaced with other forms of investment.

In India too, the slag due the monsoon season and simultaneously curbs on imports of gold bullion has affected demand for gold and hence the promotion of diamond jewellery has been initiated much more forcefully.

Gold support is at $1,210 and $1,170. Resistance is at $1,262 and $1,273.

Silver support is at $18.70 and $18.40, resistance is at $19.50 and $19.90.

In the domestic market gold is expected to move in the range of Rs.25,000- Rs. 27,500 in the coming week.

"The primary purpose of this blog by Prithviraj Kothari - MD, RSBL(RiddiSiddhi Bullions Ltd.) is to educate the masses of the current happenings in the Bullion world."

- Previous Blog: "Good News Turns To Be Bad For Gold" : http://riddisiddhibullionsltd.blogspot.in/2013/06/good-news-turns-to-be-bad-for-gold.html