GOLD LOSES DIRECTION: RSBL

By Mr. Prithviraj Kothari, MS RSBL

Amidst continued uncertainty regarding the Fed’s monetary policy, gold has off late, lost direction. 

It was moving in the positive territory. But on Friday, but gold erased intra-day gains, closing down on the day and lower on the week. The yellow metal yielded to pressure from a strong rally in the U.S. dollar.

The dollar gained ground, especially versus the Euro, following this week's European Central Bank meeting that hinted at further monetary easing this year. The dollar also garnered additional strength in the wake of interest rate cuts by the People's Bank of China (PBOC) on Friday. 

Some market analysts feel that the overnight monetary policy action by the Chinese central bank has created some mixed sentiments in the market. Moreover, before China’s announcement, the European Central Bank (ECB) announced that it is leaving the door open for more quantitative easing measures or even pushing the deposit rate deeper into negative territory in December.

Gold was a little changed on Thursday afternoon in London after the ECB decided to leave the rates unchanged.

The spot gold price was last seen trading in the range of $1,162.8 to $1,172.0.

Adding to the sentiments, was data indicators coming in from US: 

•  US weekly unemployment claims rose by 3,000, to 259,000 in the week ending October 17, 2015. However, they were below the forecast of 265,000 and under the psychologically important 300,000 mark.

• The House Price Index (HPI) for August came lower than expected at 0.3 percent as did CB leading index at -0.2 percent.

•  Existing home sales were better than expected at 5.55 million.

Now that we have some crucial data coming in next week, not only from the US but other leading and developing economies as well, some analysts feel the Federal Reserve is losing its dominance in the marketplace.

Gold traders are bracing for a heavy slate of U.S. economic releases next week, along with key central bank meetings from the U.S. Federal Reserve and the Bank of Japan. The focus could be on BoJ that meets next week and there is a growing expectation that it will announce new easing measures, which are expected to remain steady.

Moreover, the central bank is also slated to release its Outlook Report with forecasts for inflation and the GDP. 

Meanwhile in the domestic market, we saw a sluggish demand for gold. Following the nine-day Hindu festival of Navratri, India celebrated Dussehra on Thursday where demand for gold usually rises as people consider it auspicious to buy gold on this day.

But, a slow and easing demand for gold further declined the prices even though globally gold prices were rising.

The fourth quarter is typically a strong period for gold purchases in India, the world’s second biggest bullion consumer, due to festivals and weddings.

Demand from rural areas has been hit particularly hard, as farmers suffer from the first back-to-back drought in India in three decades.

Two-thirds of gold demand in India comes from farmers and residents of small villages who see jewellery as way to store wealth. But lower-than-normal monsoon rainfall this year due to El Nino weather pattern has eroded rural incomes.

One of the most awaited meetings of the Fed, due on October 27-28, could turn out to be a non-event for gold traders as markets speculate a delay in interest rate hike. The Fed's statement will be released on Wednesday and there is no press conference associated with this meeting. 

Apart from the Fed policy, traders are also monitoring the U.S. debt-ceiling situation. The U.S. federal government is moving closer to the deadline where it needs to raise the nation's $18.1 trillion borrowing limit.

The important reports coming in next week are:

·         Monday: Home Sales

·         Tuesday: Durable goods and consumer confidence

·         Thursday: Third quarter GDP and pending homes sales

·         Friday: The core PCE index on Friday. 

Next week's main event:

These events may provide clues of economic strength and inflation that could support potential for a Fed rate hike 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-
"Data- Dependent Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/data-dependent-gold.html
 

DATA- DEPENDENT GOLD

By Mr. Prithviraj Kothari, MD, RSBL

This week gold continued to hover around the levels of $1176.75 and broadly the key trade range for the yellow metal was $1170- $1175 an ounce.

Gold reached a four-month high of $1,192 on Thursday but was unable to maintain this level, because the US dollar was driven up by higher than expected US inflation figures for September, which in turn put pressure on gold.

Fed has set inflation target for years as it’s a part of the dual-mandate along with full employment. But Inflation has failed to meet the Fed’s target.

Persistently low inflation has led some Fed members to remain dovish on the apt timing for a stabilization of US monetary policy.

At the beginning of the week, Chicago Federal Reserve president Charles Evans said earlier today that he would prefer to wait until 2016 to raise interest rates, citing inflation as a central impediment.

Moreover, Data released on Thursday showed that the US labor market is steadily recovering despite the worrisome September job’s report – weekly unemployment claims came in at 255,000, below the consensus of 269,000.

Apart from this some other important data released through the week were-

• US CPI month-over-month in September met expectations of a 0.2 percent decline

• PPI month-over-month in September dipped 0.5 percent, disappointing market expectations of a 0.2 percent drawdown

• Empire State manufacturing index for October at -11.4 was worse than the expected -7.3

• The Philly Fed manufacturing index at -4.5 missed the -1.8 forecast

• Core retail sales month-over-month in September fell 0.3 percent, below the forecast of -0.1 percent. Retail sales over the same period rose 0.1 percent, just missing the 0.2 percent consensus

•  Labor's Bureau of Labor Statistics (BLS) said its Consumer Price Index fell by 0.2% for the month of September, in line with consensus estimates. A month earlier, the reading fell by 0.1% in August. On a year over year basis, the headline reading is identical to its level 12 months ago

• Core PPI month-over-month last month stood at -0.3 percent, another figure to miss estimates, which were a 0.1 percent uptick

Though the Core CPI was moving in a positive direction from its previous levels of August still it remained under the Fed's preferred gauge of under 1.5%.

The set target for long term inflation by the Fed is likely 2% before it raises its benchmark Federal Funds Rate.

Gold prices eased in Asia on Friday on profit taking on recent gains on a soft. Outlook for U.S. interest rates. On Thursday morning, the U.S. Department of There were signals throughout the report of weakness in the energy sector, restraining inflationary pressures overall.

The spot gold price was last at $1,176/1,176.20 per ounce, down $5.90 on Thursday’s close. 

Jobs data has acquired greater significance after the US Federal Reserve made its approach to the normalization of monetary policy entirely data-dependent.

Gold drifted lower still on Friday morning in Europe after dollar continued to pare earlier losses thanks to better-than-expected US jobs data.

As dissent grows in the Federal Reserve over the appropriate measures for 2015, the dollar has deteriorated to the weakest mark since August 25.

Various Fed members are growing more vocal in their view that the US economy is not ready for a federal funds hike – in direct opposition of Chairwoman Janet Yellen.

Yellen, along with vice chair Stanley Fischer, have said recently that a normalization of US monetary is still a viable option for 2015.

However as per market analysts, the FOMC is not seen lifting rates until March at the earliest.

While the market is once again divided into bearish and bullish supporters, the yellow-metal has found support as the market’s pricing of the next US Federal Reserve rate hike is pushed out.

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-

"Ambiguity For Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/ambiguity-for-gold.html