- by Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)
Gold, Silver and Platinum all of them have found a new life after they broke their technical resistances, strongly.
Gold rose nearly 1 percent to a two-month high on Friday, and bullion posted its biggest weekly gain of almost 5% in many weeks.
Silver rose 1.5 per cent for an eighth consecutive daily gain. The grey metal has sharply outperformed gold and was up 14 per cent this week for its biggest weekly rise in almost five years. The Gold/Silver ratio has corrected 50% of its move since end November last year and given that the 200 day moving average should provide some support too at 58.08, we might cool down in Silver versus Gold and digest the strong recent out performance.
Platinum is trading above $1,500—hitching its star to gold’s wagon.
Gold's and Silver’s rally came as U.S. stock indexes were lower on Friday and on track for their biggest weekly declines in months. The rally in gold towards $1,372 is perhaps even more impressive because the price rise came despite the 10-year US government bond yield breaking above 2.75% yesterday. Rising bond yields have been negatively correlated with the gold price over the past few months – but not yesterday. Adding more support is that we are not seeing any major slowdown in physical gold demand yet despite the rally in the gold price. Rallies like we experienced yesterday would typically see physical demand fall away until the price volatility settles once again. The SGE premium has not fallen below $22/oz the past few days.
Even the greenback pared its early gains against its peers on Friday as release of weaker-than-expected U.S. University of Michigan consumer confidence fueled expectations that the Federal Reserve will keep its stimulus measures by the end of this year.
The Bureau of Labor Statistics published its recent report of the U.S CPI for July 2013. Based on the latest update, the consumer price index rose again for the third consecutive month; in annual terms the US CPI increased by 2%. Despite the moderate rise in the CPI, it is still very low and remains lower than the inflation target of the Federal Reserve. The low inflation could suggest the U.S economy isn’t heating up, which could raise the odds of the Fed leaving its policy unchanged and keeping the current asset purchase program unchanged. This news may have contributed to the rally of gold and silver prices.
Last but not least, the largest increase in SPDR GLD holdings turned out to be by Goldman Sachs Group, who added 3.7 Mio.
In the domestic market, a record low in the rupee lifted Indian gold futures above the closely watched 30,000-rupee mark. Dealers said the high local price of gold in the world's largest gold buyer is expected to weigh down on demand. This week gold was more of a game of demand and rupee depreciation.
This week, Government of India increased the import duty on Gold by 2%, Silver by 4% and Platinum by 2% to new 10%. The festive season had given tremendous rise to the demand for gold. The yellow metal witnessed a sharp climb as stockists weighed supply constraints in view of the ensuing festival and marriage seasons in the midst of incessant duty hikes from the government and RBI measures. Besides other extreme steps, like abolishing the purchase of property abroad for Indians, or reducing heavily the amount Indian companies can invest abroad, they also abolished the import of gold coins and medallions. Imports of coins and medallions; however should not have a big impact on thets total import number, as most of the imports are in form of bars and not coins. These new regulations that come up now almost on a daily basis without being too clear have brought imports to a standstill and we still wait for more details on how exactly to conduct imports in the coming days ahead.
Silver also reflected the shiny metal’s surge and zoomed to hit a four-month high owing to heavy speculation.
A sharp fall in Sensex and rupee against dollar and strong global cues also contributed to the upsurge in gold price, which posted the biggest single-day gain after August 19, 2011. Interestingly, the metal had shot up by INR 1,310 on August 19, 2011 as well.
But for Indians who want to invest in gold, you may have a host of restrictions. The big ones are a trade deficit, a current account deficit and a collapsing currency. The rupee is down 28% over the last two years. That's the biggest fall since 1991.
For the weeks to come there is lot of uncertainty prevailing over precious metal prices.
The trade range for golf for the coming week is 1340$- 1420$ and in the domestic market it is expected to trade between Rs.29,000- Rs. 32,000 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.
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