WILL GOLD CROSS THE $1400 MARK

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

Is something wrong with market? Yes that's exactly what traders and investors were discussing. Gold has just touched $1400 which was once seen an untrue level after the fall. Will it be able to cross it and reach new highs is what the below given factors can forecast.

The main highlight for this week was the depreciating rupee. Initially the markets expected rupee to return from the level of 62. Then they claimed 64. But the rupee made new low of 65 against the dollar. Now it is expected to depreciate further to 70. However, by Friday evening rupee returned to the levels of 63.90

The economy is facing a slump. Inflation is at a high, growth has hampered and equities have shattered.

Although the government has been trying its level best to intervene at all critical levels and control the rupee, nothing seems to be helping.

This drop in the rupee pushed gold and silver upwards.

Strong US Dollar and rise in treasury yields were seen pressuring the commodity movement to certain extent. In the United States, ten-year treasury yields climbed to 2.92%, the highest since July 2011 after FOMC minutes were failed to give any further details on tapering monetary stimulus. Investors hope that the Central Bank may start tapering its monetary stimulus later this year.

Gold prices in the global market edged up on Friday after weekly US unemployment claims recorded an upward movement. However, concerns over the withdrawal of US monetary stimulus were seen pressuring the yellow metal prices to certain extent.

Gold jumped to a 11-week high, topping $1,400 an ounce in spot trading, as sales of new U.S. homes fell more than forecast, boosting speculation that the Federal Reserve will maintain economic stimulus. Sales of newly built homes in July plunged more than 13 percent, the most in more than three years, government data showed today. The 394,000 annualised pace compared with a drop to 487,000 forecast by analysts in a Bloomberg survey. Fed policy makers said they are “broadly comfortable” in scaling back debt purchase if the economy strengthens.

By Friday evening gold was seen trading at 1397$ up by 21$ and silver was up by 95 cents, trading at 24.07$

In the physical markets, renewed labour unrest in South Africa sent platinum and palladium higher on Thursday, and this too, provided an element of support to both gold and silver.

By Friday evening, in the domestic markets too we saw gold and silver rocketing. Gold climbed by INR 750 trading approximately at INR 31,900 per 10 gram and silver was up INR 2200 reaching a high of INR 53,400 per kg.

The fact that gold managed to reverse its losses and close modestly higher on the day was quite impressive and likely had something to do with the fact that better-than-expected Chinese data which suggests that the economy is stabilizing, potentially a positive in terms of future Chinese gold demand

Another report that caught attention was the World old Council's gold consumer demand report. The impressive thing to note was that Gold consumer demand rose by more than half in the second quarter of this year thanks to strong demand in China and India, the World Gold Council (WGC) said.

In India, the Gold Trade holds steady in spite of the government imposing import tax hikes on gold in an attempt to reduce the country’s current account deficit. In fact, according to the WGC, gold jewellery, bar and coin demand in India alone was 70 percent stronger in the second quarter of 2013 compared to the same quarter last year.

Consumer demand in China continued to show strong growth, totalling 276t in the second quarter, a rise of 87% compared to the same quarter last year, as investors used the lower gold price to buy in advance of expected future price rises. Jewellery demand in the quarter was 153t, up 54% on the same quarter last year, while bar and coin investment was 123t, up 157% on Q2 2012.

Recent falls in the gold price have boosted demand significantly – it rose 53 percent in the April-June period from the same three months of last year, the WGC said in a report on Thursday.

Looking at the good monsoons of India and the festive season closing by, the domestic prices for precious metals need to be watched closely. Whether supply will be able to meet the demand will be the question that every Indian attached to precious metals will be having in their mind. 

“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 -

"Precious Metals on the Run"

http://riddisiddhibullionsltd.blogspot.in/2013/08/precious-metals-on-run.html

PRECIOUS METALS ON THE RUN

- 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.

- Previous blog -

"Dollar makes gold look attractive"

http://riddisiddhibullionsltd.blogspot.in/2013/08/dollar-makes-gold-look-attractive.html