APPETITE FOR GOLD RISES!

by Mr. Prithviraj Kothari, MD, RSBL

When global risk escalates - financially and politically - gold is always considered as an insurance against it. The speculations that the Federal Reserve may raise interest rates has kept the yellow metal  in small trading ranges around $1,300.

In the previous week precious metals were down throughout the week until the payroll data was released on 1st August which showed that the jobs added were less than market expectations. These reports had raised speculation that the Fed could soon raise interest rates which would then increase the opportunity cost of holding gold. This sent gold to a six week low in the last week of July but was later pushed as the month ended over a report that showed that U.S. jobs growth slowed in July. This strengthened the belief that the Fed may keep interest rates lower for longer.

For the month of August, so far, gold has held within a narrow range of $30 over speculation that the U.S. interest rates may rise. This sentiment was offset by the escalating violence in Ukraine and the Middle East. Since mid- June there have been a lot of major influential factors that have been influencing gold prices-

• Some weeks there were better U.S. data
• The constant tensions presiding in Ukraine and Middle East.
• The Euro zone economy

These and many other micro influential factors have been responsible for the pull and push in gold prices.

Let's have a look on the weekly movements of gold.

MONDAY - with a rise in banking stocks that lifted European shares and a speculation that the Fed may raise interest rates soon, gold edged low as the week began. Spot gold was down 0.2 percent at $1,290.70 an ounce at 1433 GMT, after falling 1.1 percent last week for its first three-week decline since September.

TUESDAY - Gold edged up on Tuesday following disappointing Chinese economic data, but a firmer dollar and stronger European equity markets limited gains. Spot gold rose 0.2 percent to $1,290.63 an ounce during the trading hours. 

WEDNESDAY - Wednesday too gold was on the upper side as it rose 1.6 percent over the continuing conflict in Ukraine. These concerns had put global equities under sustained pressure, thus raising demand for a safe haven asset like gold. And in times of such crisis gold acts as an insurance against risk.

Russia has amassed around 20,000 troops on Ukraine's eastern border and could use the excuse of an humanitarian or peacekeeping mission to send them into Ukraine, NATO said in a statement on Wednesday. NATO issued warning to Russia to step back from Ukraine’s borders.

Iraq's largest dam was taken over by the militants. 

THURSDAY-  Spot gold climbed to $1,314.40 on Thursday - its highest since July 22, and is on track to snap a three-week losing streak. U.S. gold, also up over 1 percent for the week, is headed for its best week in seven.

A build-up of Russian troops on the border with Ukraine and tit-for-tat economic sanctions between the West and Moscow on Wednesday drove investors out of assets seen as higher risk including stocks and into the relative safety of bonds and gold. Moscow banned imports of most food from the West on Thursday in retaliation against sanctions against it over Ukraine, a stronger-than-expected response that isolates Russian consumers from world trade to a degree unseen since Soviet days

Growing fears that Conflict in Ukraine and the middle East could weaken economic growth also pushed bullion prices high. 

Fighting resumed in Gaza between Palestinian militants and Israel after a 72-hour ceasefire expired. 

FRIDAY - Friday too, gold hit a three and a half week high after U.S. President Barack Obama authorised air strikes in Iraq. A Bloomberg heading stated that Obama authorized air strikes in Iraq sent equity markets lower, while Gold jumped 8 USD to 1318 and WTI Crude Oil gained 1 USD per barrel.

Spot gold hit its highest since July 14 at $1,322.60 an ounce earlier, and was up 0.1 percent at $1,314.90 during trading hours. The metal has gained 1.9 percent this week, its first increase in four weeks and the highest weekly gain in seven.

Gold has gained eight per cent so far this year. Bouts of international tension, worries about the business cycle in Euro zone, soft economic data released in Germany all this and much more has lifted demand for assets like government bonds and precious metals. These factors have been so influential that even a strong dollar couldn't offset it.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1290- $1330 an ounce	Rs.27,500- Rs.29,500 per 10 gm
SILVER	$19.50 - $21.20 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 -

"Interesting Times to Come"

http://www.riddisiddhibullionsltd.blogspot.in/2014/08/interesting-times-to-come.html

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