INTERESTING TIMES TO COME

by Mr. Prithviraj Kothari, MD, RSBL

Last year was catastrophic for gold as it performed terribly and ended the year at around $1200, almost 28 per cent down. However, in 2014 we saw a decent act from gold as it reached $1380 in March before falling back to $1240 and then, moving up to $1340. Since then gold has been hovering around $1295, approximately 8 percent up. This highlights a good progress for gold but if we compare it to its life time high of $1900 (In September 2011), it's still 32 per cent down from its peak.

Currently, gold looks weak.

• The ongoing political tensions in Ukraine, Iraq, Israel and Syria have been weighed down 
• No major economic reforms announced by the Government of India for Bullion industry
• Chinese demand for gold has slowed down
• sales out of the gold ETFs seem to have reversed to become net purchases (just) so far this year, 
• The Fed has expressed a comfort in the economic growth and a positive recovery.

The market had been awaiting the end of the U.S. Federal Reserve's two-day policy meeting on Wednesday to see if the central bank will raise interest rates faster than expected.These sentiments created nervousness in the market and gold fell on Tuesday. On Wednesday too, gold fell after the Federal Reserve announced a sixth $10 billion cut to its bond-purchases program amid signs that the U.S. economic recovery is gaining traction.

The monthly bond buying programme has been tapered to $25 billion, which if followed will put an end to the purchase program in October.

The Federal Reserve on Wednesday reaffirmed it was in no rush to raise interest rates, even as it upgraded its assessment of the U.S. economy and expressed some comfort that inflation was moving up toward its target. After a two-day meeting, Fed policymakers took note of both faster economic growth and a decline in the unemployment rate, but expressed concern about remaining slack in the labour market

Gross domestic product in the second quarter rose at a 4 percent annualized rate, compared with a revised 2.1 percent drop in the first quarter.

Though, amidst the Middle East and Ukraine tensions, gold has climbed up, but the positive growth reports released on Wednesday, subdued this rise in prices. Now any further disturbing news coming in would push gold prices high as once again the market would run behind this safe haven asset.

The dollar weakened versus major rivals in the wake of the data. Commodities priced in dollars are sensitive to movements in the currency. A stronger dollar can weigh on gold by making it more expensive to users of other currencies, while a weaker dollar can lift the commodity.

Till Thursday gold was down, but on Friday, gold prices spiked, recovering almost half of the weeks 1.8% loss and was seen trading at $1295 an ounce post the US  nonfarm payrolls jobs data release for July, was weaker than expected. This data dampened talks of an early interest rate rise by the Fed and this increased gold's appeal.

The Labor Department said nonfarm payrolls increased 209,000 last month, below economists' expectation of a 233,000 job gain. Unemployment rate also rose to 6.2 percent from 6.1 percent as more people entered the labour market. 

Portugal will spend 4.9 Billion Euros ($6.58 Billion) to rescue its largest listed bank, Banco Espirito Santo, testing the Euro's resilience to another banking crisis.

There isn't much US data this week except the US Non-Manufacturing ISM and the ECB rate decision that could keep the market alive.

Moreover there is a positive outlook for the month as demand from Asia particularly India will pick up as India witnesses the onset of its festive season beginning with Rakshabandhan.

The month of August will be an interesting one as it will give us an indication of which way this market is going. Should it fall significantly then we could be in for a re-test of the June 2013 lows of $1180/oz. 

The presence of tapering and the expectation of interest rate increases cast a dark shadow over the precious metals  making it difficult to predict  just where the momentum for higher prices will come from.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1275- $1314 an ounce	Rs.27,500- Rs.28,500 per 10 gm
SILVER	$20.15- $21.00 an ounce	Rs.42,000- Rs.45,500 per kg

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Escalating Tensions....Escalating Prices"

http://riddisiddhibullionsltd.blogspot.in/2014/07/escalating-tensionsescalating-prices.html

ESCALATING TENSIONS.....ESCALATING PRICES!!!!

by Mr. Prithviraj Kothari, MD, RSBL

In the past week gold and silver dropped drastically. Even the ongoing tensions in Russia and Israel could not provide support to gold. US laying sanctions along with European counter parts on Russia hasn't proven that effective till now whereas the cease fire process between Israel and Hamas group has gone for a toss.

It is very difficult to list "a" particular reason for fall in gold prices. Rise and decline are both influenced by a variety of factors. 

CHINA: 

China has been one of the key drivers of gold in recent years, but now there is word that China may be increasingly less important to the gold story.

While the U.S. economy recovers, China’s demand for gold plummeted in the first six months of 2014. This helped to allow gold to fall back under the $1,300 per ounce mark on Thursday, after having been up more than 8% so far in 2014. Demand in China for gold was down by a whopping 62% for gold bars, and gold coin demand was also down by a sharp 44%.

China announced gold consumption figures for the first half of 2014. The China Gold Association announced that they fell to 569.45 tons as demand for gold bars declined 62 % to 105.58 tons, the world’s largest consumer said. Gold coins and other uses of gold dropped 44 % to 10.95 tons, while use in jewellery rose 11 % to 426.17 tons and industrial use climbed 11 % to 26.75 tons.

Last year was a record and China and the nation’s consumers are focusing on other internal and external issues rather than gold. Still, this drop in demand is much more than many industry observers might have assumed.

US ECONOMY:
After China it was key US economic indicators that continued to pressurize gold.

The number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years last week, suggesting the labour market recovery was gaining traction. The belief that the US economy is on the path of recovery pulled gold prices down. 

Geo-political tensions: 
Escalating geopolitical tensions have induced support to Gold prices. 

The U.S. stated late Thursday that Russian troops or pro-Russia rebels are shooting artillery shells at Ukraine targets from within Russia’s border. Russian President Vladimir is facing more pressure to expedite the investigation into the crash of a Malaysian passenger on July 17 in Ukraine.

Meantime, the Israel-Hamas fighting continued to be intense. Gaza authorities said Israeli forces shelled a shelter at a U.N.-run school on Thursday, killing at least 15 people. Fighting this month in Gaza has killed more than 800 Palestinians and 35 Israelis. 

Ukraine and Russia traded accusations of cross-border shelling as tensions between the ex-Soviet neighbors intensified. 

The growing tensions and havoc on Eastern Europe and the Middle East this week has boosted demand for safe haven assets liked Gold. 

Spot gold was up 0.7 percent at 1,301.81 an ounce, after losing nearly 1 percent on Thursday, when it hit its lowest since June 19 at $1,287.46. Gold rose on Friday, re-bouncing from the previous session's drop to a one-month low, as heightened tensions between Russia and the West over Ukraine and situation of Gaza not getting better prompted speculators to buy back their bearish bets ahead of the weekend.

RUSSIA AND TURKEY:  
Gold holdings in Russia's and Turkeys bullion reserves increased in June as both countries lifted their reserves.

Russia, the world's fifth-largest bullion holder after the United States, Germany, Italy and France, increased its gold holdings by 16.8 tonnes to 1,094.8 tonnes in June, the IMF's International Financial Statistics report showed.

Turkey, the world's 12th-largest nation in terms of gold ownership, raised its precious metal by 9.9 tonnes to 512.9 tonnes for the month. It counts gold held on deposit with it by commercial banks as part of the central bank's bullion holdings.

THE BANK ESPIRITO SANTO- This crisis has been contagious for the world. When the world of electronic finance catches the flu, the true nature is all systems fail. One of Portugal's largest banks, Espirito Santo, sent waves through the financial system when we learned they would default on a payment. And they have been fighting against bankruptcy ever since.

Next week, will be a week to watch. 

• Comex expiry for Gold contracts on 28th July.
• 2nd Quarter Advance GDP release on Wednesday morning
• Wednesday afternoon we will hear the results of a two day FOMC meeting. 
• The Non-Farm Payrolls Report for July on Friday August 1. 
• The Chicago PMI, Michigan Sentiment, and the ISM Index
• Geo political tensions.

Lots more in the basket and lots of surprises for precious metals. These factors will surely influence gold prices...what we need to see is HOW?

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1292-$1334 an ounce	Rs.27,700-Rs.28,700 per 10 gram
SILVER	$20.15- $21.50 an ounce	Rs.43,600-Rs.46,000 per kg

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.
- Previous blog - "Gold and Silver On A  Swing"
http://www.riddisiddhibullionsltd.blogspot.in/2014/07/gold-and-silver-on-swing.html