CHINA SUPPORT FOR GOLD!

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

The world witnessed one of the greatest historic deals as an agreement was reached between the United States and Iran over Iran's nuclear ambitions. This breaking news on the geo political front created hype hoopla in the market.

However, the sentiments subdued on Thursday as the US markets were for the annual Thanksgiving. Hence gold managed to snap a two day losing streak with spot prices closing at $1243.60. Overall Gold had nothing to gobble about this week, with the precious metal mired in the $1,240 range amid low volumes due to the US Thanksgiving holiday.

Gold is down 6.1 percent in November, the worst performance since June, when prices touched a 34-month low of $1,180.50, and is little changed this week. The deal between US and Iran showed signs of decreased tensions in the Middle East which in turn pushed down gold and oil prices. Peace between the two countries means that Iranians will push up crude supplies and this created a drop in prices.

U.S. data this week showed jobless claims unexpectedly fell and leading economic indicators rose for a fourth month. Fed minutes released on Nov. 20 signalled that policy makers expected an improving economy to warrant trimming debt purchases in coming months. Also the jobs reports showed a 10,000 drop in weekly jobless claims, and this pushed gold futures under the 1240$ mark to 1239.60$.

Moreover, holdings in the world’s largest gold exchange-traded fund, the SPDR Gold Trust, fell by 5.7 tonnes on Wednesday, to their lowest level since 2009, Reuters reported

However, the losses were limited by a weaker dollar.

But what came as a silver lining in the dark clouds was the demand for gold from China. This is one country that hasn't lost its appetite for gold and has now set to become the largest consumer of gold in the world taking over India that has been sitting at this position since years. The Asian nation imported a whopping 131 tonnes of gold in October through Hong Kong — the sixth month in a row that China has brought in greater than 100 tonnes of the yellow metal. On Thursday, traded volumes of 99.99 percent purity gold on the Shanghai Gold Exchange hit their highest in seven weeks further driving the momentum on the physical market front.  As the Chinese gold demand will continue to pick up before the lunar New Year at the end of January 2014, China will likely overtake India as the largest consumer in the world in 2013. 

When looking at India; the average import of gold by India was around 60-80 mt per month (up to September). However, most of the gold imports took place during the first six months of this year, after which imports declined sharply. China, in comparison, has imported on average 80mt per month from only Hong Kong (total China gold imports could be higher). 

But the import numbers from India and China should be viewed in light of ETF liquidations. Over the course of the year, ETF liquidation has flooded the market with gold, in particular in April, May and June. The liquidation in April in particular almost matched combined imports into China and India for that month. Furthermore, since July, Indian imports have slowed substantially.

Looking at all this physical demand for gold is not the key driver for gold prices. There are other factors responsible for its movement. The prices of the metal move more on the basis of developments in the paper market as well tracks the comments and policy directives from major global central banks.

This is why Gold despite being having decent physical market demand is headed for its biggest monthly drop since June while is on track to its first annual loss in 13 years. 

What one needs to monitor is the final November PMI from China, E17, U.K. as well as the U.S. on 2 December, the U.S. initial jobless claims and the U.K. and the ECB monetary policy decisions on 5 December as well as the November U.S. non-farm payrolls, the unemployment rate, and the October core PCE price index

The extended rise in US and other western equity indices is leading traders and investors away from gold which is treated as a hedge against economic and financial uncertainty

The trade range for gold is $1210- $1277 an ounce in the international market and Rs.29500- Rs. 31,500 per 10 gram in the domestic market.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

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"FED UP?????"

http://www.riddisiddhibullionsltd.blogspot.in/2013/11/fed-up.html

"FED" UP?????

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

Post 2008 gold prices have sky rocketed and this made gold an investors favourite. Following the 2008 crisis, investors turned to gold as a hedge against inflation that was expected to rise as a result from central banks effort to stabilise the economy through bond purchases. But 2013 has been considered one of the worst years for bullions as it turned tabled for all precious metals.

Now with the US economy in the recovery mode and with inflation being more or less tame, many investors have disowned and abandoned gold and shifted to equities.

By the end of 2013 we see that god prices have tumbled 26 per cent over the uncertainty that the Federal Reserve will start to cut its monthly bind buying program which has even strengthened the dollar. Global demand for the precious metal fell 21 percent in the third quarter as investors continued to dump holdings through exchange-traded funds and central banks slowed purchases, the World Gold Council said.

After Janet Yellen's statement released last week, many believe that the uncertainty over Fed bond buying program has been lifted. Janet Yellen — the likely next Fed chair — said last week that she would press forward with the bank’s ultra-easy monetary policy until officials were confident a durable economic recovery was in place that could sustain job creation. Gold witnessed selling pressure immediately after the minutes of the latest meeting of the Fed raised supposition that the central bank could taper its bond buying program, as soon as December

Gold declined this week and it enters the sharpest weekly drop in more than two months as gold prices plunged on Friday. Spot gold was up 0.1% to $1,242.91 an during the trading hours, after hitting a fresh four-and-a-half-month low of $1,236.29 in the previous session

Furthermore, gold prices remained under pressure after data that showed that US consumer prices last month rose at the slowest pace in four years. This clearly indicates that inflation has been contained and when inflation is tame who would buy gold.

Summing it up, the week was not so good for gold because:

1. The Fed’s massive bond-buying programme has burnished gold’s appeal as a hedge against inflation

2. Solid US data over the past few weeks was hurting bullion prices as it could bolster the case for curbing stimulus soon.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 3.6 tonnes to their lowest since early 2009 at 856.71 tonnes on Thursday. Outflows have totalled 450 tonnes this year

Earlier this month the European Central Bank announced a surprise interest rate cut which put more pressure on gold. It also drove up the value of the dollar versus the euro and made investors loos its faith in gold as a store of value

Moreover, what cane as a surprise package was the announcement coming in From China stating that they have taken a step further in liberalizing the gold market. Swap trading on the Shanghai based China Foreign Exchange Trade system has been started by interbank gold.

Bullion has slumped 26 percent this year to $1,245.45 an ounce in London, reaching $1,236.88 yesterday, the lowest since July 9. The declines are another blow in what's been an awful year for gold bulls

Virtually it was the same scenario for other precious metals as we saw platinum struggling and silver trying to keep up.

Silver, like gold, is still a sell into rallies.

Gold support is at $1,238 and $1,227. Resistance is at $1,253 and $1,272. Silver support is at $19.50 and $18.85, resistance is at $20.37 and $20.65.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.
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"QE Support- US reamins fragile"
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