IT'S A GREECE GAME FOR GOLD:RSBL

                                                         By Mr. Prithviraj Kothari, MD, RSBL

A very boring week for Gold and rest of the precious metals complex. An extremely tight price range trading showing no clear indication for the next move in price. The $1200 level remains significant for Gold while for Silver it is $16.20, where it continues to place selling pressure.

During the last week it rallied well to move from a two month low near $1160 back up to above $1190 again before easing back to the $1180 level. The key $1170 level has consistently provided solid support and has held it up now for a couple of months.

Somehow the important data released from the US:

• US unemployment claims were in line with forecasts at 271,000.
• US GDP released on Wednesday showed that the retraction in Q1 was just -0.2% better than the expectation of -0.7%, increasing the necessary confidence in US economy growth.
• University of Michigan Consumer sentiment was 96.1, besting forecasts of 94.6, while inflation was rose 2.7 percent.
• Personal spending month-over-month in May was up 0.9 percent, above forecasts of 0.7 percent.

While recent positive US economic data strengthened the dollar and led to speculation over interest rate hike this year, the Greece negotiations have gone haywire.

Talks between Athens and its creditors have failed completely. Still there have been some signs of hope being shown by either parties. But if I understand, tomorrow being Greece's payment date to IMF, I feel they would default. Euro-zone rejected Greek's request for a one month extension to its bailout creating a non-payment type of scenario.

Greek prime minister Alexis Tsiparis called a referendum on July 5 for the Greek bill to approve the bailout demands. Like expected, Greece announced capital controls and will keep its banks closed on Monday until further notice. I feel it is the darkest hour in Greek's economy. 

Even when I see the potential Grexit, there are more chances that gold will be on a bearish side for the week to come particularly if Thursday’s nonfarm payrolls report shows the labor market is gaining strength. Positive data will provide the Fed the reason they need to raise interest rates in September.

So now it all depends on the Greece Game and the important US data.

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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"An Important Week For Gold: RSBL:

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AN IMPORTANT WEEK FOR GOLD : RSBL

                                                                             By Mr. Prithviraj Kothari, MD, RSBL

I must apologize to my readers for not writing a Blog last week. I would reply to all your queries via the content in this blog. My sole intention was to to see some developments in Greece as it was like a never ending tussle between Athens and its creditors.  It was taking Gold and Silver to rallies which was purely news based. 

Over a period of time we have seen some factors being very crucial for gold compared to the others. US dollar, Fed’s interest rate hike and the Greece crisis have been major drivers for gold prices apart from Geo-political economic crisis, inflation and demand for gold from India and China.

Lets jump straight to the key takeaways:

Greece: The mounting Greek Funding crisis is positive for gold, but its influence could be partial as there is still a chance the two sides can tangle through to come to another short-term agreement.

Polls have stated that the exit out of the Euro is opposed by the Greek people and European leaders, the current deadlock signals prolonged and painful negotiations ahead, with a possible extension of the June 30 deadline on the horizon.

But after Monday's emergency meeting, news have floated that the negotiations between Greece and its creditors have taken a positive step forward. Not much details have been provided yet but the upcoming meeting on June 24th-25th will give the answer as to where this is all going.

Till that time the Bulls and the bears will not allow to have a dramatic impact on Gold price.

US Economic data: Data on Thursday showed that U.S. initial jobless claims fell by 12,000 to 267,000 last week, pointing to ongoing strengthening in the labor market.

A separate report showed that factory activity in the U.S. mid-Atlantic region expanded at the fastest rate in six months in June.

Data also showed that showed that U.S. consumer prices increased at the fastest rate in more than two years in May, climbing 0.4% after a 0.1% gain in April. But economists had forecast an increase of 0.5% and inflation was still well below the Fed’s 2% target.

U.S. economic data as that will have a major impact on forecasts for when the Federal Reserve will hike rates. Positive data that supports a September rate hike will be positive for the U.S. dollar and negative for gold.

Interest Rate Hike: The economic data affects the dollar which in turn affects the interest rate hike. Fed Chairman Yellen also wants to see stronger consumer spending and a higher labor participation rate and wage growth before lifting rates. 

Gold is expected to remain caught in a tug of war between the U.S. dollar and safe-haven demand as Greece’s repayment deadline quickly approaches. Gold ended its second consecutive week in positive territory; the market managed to hold on to most of its gains from Thursday’s 1.5% rally.

There are ample amount of prospects for the market players to adjust their interest rate expectations as there is a slew of economic data including housing sales data, durable goods numbers, along with preliminary manufacturing data due to be released. Markets will also receive the final gross domestic report for the first-quarter, although this is now backwards looking, some economists warn that any major revision will impact annual economic growth projections

On the domestic front, Government of India is planning to issue Sovereign bonds linked to the bullion price in an effort to divert an estimated 300 tonnes of annual demand for Gold bars and coins. The provision of a 2 percent interest rate and use of the bonds as collateral are among the the key take away points that would attract the investors.

• 24th June:  Germany IFO business climate index, the U.S. final Q1 GDP and Euro Group Meetings
• 25th June: U.S. core price index 

Summing it up, a dramatic move in precious metals is expected in the coming days!

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1170- $1220 an ounce	Rs.26,250- Rs.27,700 per 10gm
SILVER	$15.60- $17.00 an ounce	Rs.36,000- Rs.39,000 per kg

 

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 -

"Bulls and Bears to Clash"

http://riddisiddhibullionsltd.blogspot.in/2015/06/bulls-and-bears-to-clash.html