GOLD GLITTERS: RSBL

                                                                                                          By Mr. Prithviraj Kothari, MD, RSBL

  

Positive data or negative?

Hike rate this year or next?

Strong dollar or weak?

Stable equities or volatile?

Gold up or down?

Well a lot was expected to happen this week. Precisely, the above mentioned questions are somewhere down the line related to each other.

A positive data strengthens the dollar thus increasing the chances of rate hike which would push gold prices down. And even vice a versa.

Till mid-week, majority of the market participants believed that the data due to be released on Thursday and Friday would come in as a surprise package for all. Gold eased on Wednesday, staying on track for its biggest quarterly loss in a year as the dollar strengthened and the market awaited clarity on the timing of a hotly anticipated U.S. interest rate rise.

The spot gold price was seen at $1,112.90/1,113.10 per ounce, down $2.30 on Wednesday’s close and its lowest in around two weeks. Gold was stable on Thursday afternoon in London following the release of mixed US data and ahead of tomorrow’s blockbuster US jobs report.

• On Thursday, US weekly unemployment claims came in at 277,000 under the psychological 300,000 mark. 
• During the third quarter, 205,759 jobs were shed, the largest figure since the third quarter of 2009.
• US PMI came in as expected at 53.1 and construction spending slightly better than forecast at 0.7 percent. 

Now that the unemployment’s claims and PMI data was out, markets shifted focus the significant US non-farm payrolls data slated for release on Friday. The tables for gold turned once the report was out:

• Non-farm payrolls in August sank to 173,000, the first sub-200,000 reading since April.
• The US economy added 142,000 jobs in September, below the forecast of 201,000, and the August figure was revised down to 136,000 from 173,000.
• The only positive news coming in was that unemployment rate was unchanged at 5.1per cent.
• The labor participation rate fell to the lowest level since October 1977 at 62.4 percent, while wage growth was flat. 

The yellow metal prices augmented on the release of lower than expected US data, nearly erasing the losses accrued in five consecutive negative sessions.

Physical demand and volatility did not come in much from the Asian markets as the Chinese markets are closed for Golden Week holidays and will reopen on October 8 and the Indian market too was closed on 2^nd October.

The disappointing non-farm employment change has taken the market by surprise and the reaction has been quite strong such that there are strong sentiments that a chance of increase in interest rates not happen this year thus declining some of the concerns that higher US rates would have a negative impact on emerging markets.

Investors were considering for indications on the timing of the US rate rise. With two Fed meetings now left before 2016, markets now believe that the rate hike won’t happen this year. But there are some who believe that the Fed may announce a rate hike in its last meeting of 2015 due in December. 

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 Directionless- RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/09/gold-directionless-rsbl.html

GOLD DIRECTIONLESS: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Most of the global asset markets were quite unpredictable this week. Be it equities, precious metals, bond yields or oil- they moved up and down following last week’s FOMC meet.

Coming to gold, it neared its second weekly gain on Friday afternoon, touching $1145 per ounce but plunged back following new comments on US interest rates from Fed chair Janet Yellen.

Increased risk sentiment helped gold prices to end Friday’s session modestly lower with prices settling at $1,145.60 an ounce; however, the yellow metal has managed to end the week in positive territory, up 0.6% - its second consecutive weekly gain.

Spot gold was last at a high of $1,144.80/1,145 per ounce. Prior to a speech from Federal Reserve chair Janet Yellen in which she said the Fed has not ruled out the start of policy normalization before 2016, gold had been trading at two-month highs.

The gold price surged to its highest since August 25 during Thursday afternoon sessions as the yellow metal took advantage of a slump in the US dollar.

On Friday afternoon, gold moved back from Thursday’s gains, after the release of positive US data and talk that the country’s central bank will increase interest rates by the end of the year.

The US data released were as follows-

• Final GDP was better than expected at 3.9 percent
• Services PMI at 55.6.
• Revised UoM consumer sentiment and inflation expectation at 87.2 and 2.8 percent were little changed

A slowing global economic activity and excessively low inflation had delayed the Fed’s decision to hike interest rates. Its decision had raised concerns about the economic stability of the US, China and rest of the world and resulted in lifting of the dollar.

Aggressive comments from Yellen have provided the dollar with renewed upside momentum, depressing bullion prices through reduced safe-haven demand. 

There are expectations in the market that the FOMC is likely to raise the federal fund rates in December as they witnessed a likely upwards revision to US-second quarter GDP growth

Gold declined on Friday morning after Federal Reserve chairwoman Janet Yellen expressed optimism that the US economy would warrant an increase in interest rates before the end of this year.

She stated that it will be appropriate to raise rates in 2015. Now there are around 13 weeks let in 2015 and two more FOMC meetings are lime up in October and December each, which means there are just two opportunities left to raise interest rates.

Federal Reserve Chair Janet Yellen has spoken, and an interest rate hike remains on the table for 2015, but one trend watcher says the central bank is just talking ‘really tough.’

Moreover, Yellen noted that ‘idiosyncrasies’ like lower oil prices and weaker overseas economies have delayed the Fed from pulling the trigger. 

Yellen said FOMC officials “expect that the various headwinds to economic growth will continue to fade, thereby boosting the economy's underlying strength.”

Yellen’s bullish sentiment was buoyed through the third revision to second-quarter US GDP growth to 3.9 percent from 3.7 percent. The final GDP price index quarter-over-quarter was in line with forecasts at 2.1 percent.

Yellen and her colleagues at the Federal Open Market Committee (FOMC) have maintained interest rate at near-zero levels since December 2008.

Persistently low inflation, emerging global slowdown and an uneven recovery remain obstacles for the FOMC members to normalizing monetary policy.

Though the yellow metal is still showing encouraging signs, but in event of a rate hike, the impact on gold would be bad.

Currently old is searching for a direction as the FOMC has left the market wandering. The picture will get clearer by the end of the year or maybe early 2016.

Currently one need to follow the FOMC religiously as gold’s whereabouts depends on the Fed’s directions.

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 -

"Rate Hike Hangover Continues on Gold: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/09/rate-hike-hangover-continues-on-gold.html