MARKETS REMAIN CALM AS WE ENTER 2016: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Firstly wishing you all a very happy new year. 

 

To begin with, United States, Europe, Japan and many other countries remained shut on account of New Year's Day and  hence markets were calm and serene market with volatility to its minimum.

Whatever fluctuation came in was mainly due to two reasons:

In the international market it was the data released from the US and in the domestic market it was the weakening rupee against the dollar.

Gold prices were also supported as weaker than expected economic data from United State likely to spurt safe haven demand for the yellow metal . Data released from the US was as follows-

• On Thursday, government data showed that the number ofmAmericans filing new claims for unemployment benefits rose sharply last week, a potential signal the job market was losing steam
•  Initial claims for state unemployment benefits rose 20,000 to a Seasonally adjusted 287,000 for the week ended Dec 26.
• US Chicago Purchasing Managers Index in December month fell to 42.9 compared to analysts' expectation of 49.8 and 48.7 a month ago, government data showed on Thursday.
• SPDR Gold Trust holdings dropped by 0.18% i.e. 1.19 tons to 642.37 tons on Thursday compared to 643.56 tons in previous trading day.
• After the SPDR Gold Trust reported outflows on Thursday, the harp gain in yellow metals was subdued as this outflow created a weak investment sentiment for gold on the market.

Gold prices fluctuated on Friday after the Indian rupee weakened against the dollar and on Exchange Trade Funds (ETFs) outflow, indicating subdued investment demand. Prices of the bullion were supported after the Indian rupee weakened against the dollar, denting prospects of higher imports. At 1:40PM dollar/rupee traded at Rs 66.21/$1 compared to previous close of Rs 66.15/$1.

Gold prices were also supported as weaker than expected economic data from United State likely to spurt safe haven demand for the yellow metals.

Prices of the precious metal were also supported by thin trading volumes as financial markets in United States, Europe, Japan and many other countries are shut on account of New Year's Day.

In short, Gold prices were supported by weak local currency while subdued investment demand capped the gain.


Now as we welcome 2016 with a bang we hope it has lots in store for the global economies and for the yellow metal precisely.

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 -

"Mr. Prithviraj Kothari, (MD, RSBL), makes gold price prediction for the year 2016

http://riddisiddhibullionsltd.blogspot.in/2016/01/mr-prithviraj-kothari-md-rsbl-makes.html 

Mr. PRITHVIRAJ KOTHARI (MD, RSBL) MAKES GOLD PRICE PREDICTION FOR THE YEAR 2016

(Brief details are given below. For full detail, view the embedded You Tube video) 

Link to the video: https://youtu.be/0vUYZf9M1RQ

QUESTION 1: After 2 consecutive years of negative returns, what is your Gold Price Forecast for 2016?

Prithviraj Kothari: I do agree that since couple of years there is a downward trajectory with respect to Gold prices, since it had been increasing for almost 11 odd years. But according to me a range of $1050 - $1070 an oz is the cost to the mines to procure Gold. Looking at that figure, I find it difficult for the price to go below this range. I see an increase to the extent of 7% to 8% compared to last year in the year 2016.

QUESTION 2: How will it translate in the Rupee term?

Prithviraj Kothari: In rupee term, gold price may hover between Rs 24,000 and Rs 30,000 per 10 grams.

QUESTION 3: What impact do you envisage on gold following the US Fed’s interest rate hike?

Prithviraj Kothari: A 25 bps interest rate hike after a decade in 2015 followed by four such hikes in 2016 by the US Fed has already been factored in with the price of Gold. If you see the price of Gold eventually appreciated when the rate hike took place. A bottom line could be $1000 to $1050 at the most in the line with the mining costs.

QUESTION 4: What impact do you see of high import duty on gold import into India?

Prithviraj Kothari: Indian population is around 125 crore with consumption less than 1gram, bringing import figure to 850-900 tons. With present import duty of 10%, it has created big gap between International price and Indian price. This import duty almost comes to INR 250,000 per kilo. Usually, import of gold has been in the range of 800 to 900 tons per year. Last year gold smuggling was around 200 tons. The increased price gap may give rise to increase in gold malpractices.

QUESTION 5: Do you see any impact of Government related Gold schemes? Would they be beneficial?

Prithviraj Kothari: I am positive with government efforts & schemes. Gold Monetization and Gold Sovereign Bond schemes are good. Gold Monetization scheme will be worthwhile, if it can draw 1000 tons or even 500 tons of gold from temples, public etc. will also have impact on international price. It should happen gradually.

QUESTION 6: India’s gold import has been diverted towards Dore. Would it really help gold jewellery industry at large?

Prithviraj Kothari: It depends on import. Dore import is processed in limited refineries to manufacture pure gold. These refineries import Dore at $2 lower. Those jewelers will be benefited by $3 to 4, who make ornaments by buying gold from refineries.

QUESTION 7: What is your final take on ending of 2015 and 2016 soon to begin?

Prithviraj Kothari: 2016 will be good for the trade. It may create bullion history and it may be ‘Golden Period’ for all traders.

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