Sharp increase in Silver prices: RSBL

                                                       -  Mr. Prithviraj Kothari, MD RSBL

On announcement of BREXIT, the markets panicked and this was reflected in the movements of gold prices. Initially gold prices soared and were at fresh highs of past few years. Once markets settled, gold did see some correction but then there were signs of a modest pick-up in risk appetite leading to further rise in gold prices. Once again gold was considered as a saviour in times of uncertainties and it regained its safe haven appeal with current prices at US$1,350.

But what surprised the market were the movement in prices of the white metal: Silver. 

Silver jumped to the highest level since September 2014 as investors speculated central banks will need to continue support the global economy in the wake of Britain’s vote to quit the European Union. Governor Mark Carney said on Thursday the Bank of England could cut interest rates within months as it tries to shield an unstable UK economy. 

The price of silver climbed 26% through the first four months of 2016. That not only beat gold prices by 7.5%, but it also bettered the Dow Jones Industrial Average and S&P 500 by 24% and 25%, respectively. Silver prices had surged to a high of $20.46 (a near two year high) and currently trading at $19.80. 

Silver Price rise_RSBL SPOT Terminal

Apart from BREXIT, the Caixiin Chinese manufacturing purchasing managers index (PMI) released on Friday continued to raise concerns about China’s weaker-than-expected economic recovery with the Chinese manufacturing PMI for June read 48.6, which was below forecast of 49.1 and May’s number of 49.2. It was the index’s third monthly decline in a row and marked the steepest deterioration in manufacturing conditions since February.

Not only the above news item, but Silver’s bullish stance can be supported by the below given key points:

• Lower Gold/Silver ratio. The current ratio stands around 75 much lower than the peak of around 84 in March. Over the same time the Silver prices have gone up by nearly 11 off percent.
• Prospects for further US interest-rate increases have been wound back since the BREXIT vote. Commodity prices in US usually benefit from lower interest rates.
• Silver plays a key role in Photovoltaic (PV) cells that are being used in Solar panels. World economies around the globe are jumping on clean energy bandwagon to reduce the pollution levels and solar energy plays an important role. With an avid increase in solar energy contribution, Silver demand will increase exponentially.
• India is one of the key importers of Silver over the past few years and the demand has only been increasing in the wake of lower prices till Jan, 2016.

 

Silver prices still have room for further movement upwards and the current panic and fear in the markets could raise these prices further. Gold may have a room to correct till $1,280 – 1,300 in short term but the political and unknown economic conditions created by BREXIT, could raise prices further for precious metals.

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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:

UK Departs, GOLD prices shine: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/06/uk-departs-gold-prices-shine-rsbl.html

Photo courtesy: http://news.goldseek.com/GoldSeek/1441894582.php

UK Departs, GOLD prices shine: RSBL

                                                              - Prithviraj Kothari, MD RSBL

The most talked about and the most awaited trend changer of the year after the FED rate hike is finally out: UK has exited EURO after 43 years and BREXIT has been implemented. UK themselves have got divided during the results of the referendum where England and Wales voting strongly for leave, while Scotland and Northern Ireland backed staying in the EU. 

Undoubtedly, along with me almost everyone was caught by surprise. There were possibilities but a result like this is a bit hard to digest. Simply because it creates fractions in Euro group where countries like France, Netherlands could also take up a similar decision. It sent shock waves across the financial markets, with all the risky asset classes such as equities heavily down and safe-haven vehicles such as government bonds, gold and silver steeply higher. The volatility, uncertainty, fluctuation went beyond expectations. Gold saw investor favour resume on safe-haven Brexit buying. Let’s pick each market individually and see the effect Brexit had them.

GOLD:

Gold soared as much as 8 percent to its highest in more than two years on Friday after the UK referendum results, sending investors rushing for protection. Gold prices surged to its highest level in more than two years, at $1,359 since March 17, 2014, sending shock waves across markets. Gold is currently trading around $1316 a $40 lower from the high.

Major Indices:

All the major indices across the world were nearly 3% down while European indices fell to the tune of 5%. The indices have shown some resilience as the news item fades, but the uncertainty in the markets have reached to unprecedented level, calling in government, state heads to provide clarity on the future map ahead.

India:

Even before the final numbers were out, India’s benchmark Sensex index opened over 700 points or 2.85% lower in the early trading hours When the trading ended for the day at 3:30 PM, the Sensex closed at 605 points lower, marking a decent recovery. Though BREXIT pushed Indian equity prices down, the governments has been very confident in their message and do not see a much long term impact on the Indian economy.

Currency - Pound versus others:

The British pound fell more than 10% against the US dollar, lowest since the 1980s. In morning trade, the rupee fell to 68.22 a dollar, the lowest level since March 1. Weaker pound will reduce burden on children studying in UK but it might get partially offset by a rise in cost of living. The dollar index shot higher on safe-haven buying, last at 96.10, the euro had dropped to 1.0912, the Aussie dollar had fallen to 0.7335, but the yen has had a massive rally to 99. In emerging market currencies, the Yuan has fallen to 6.6295 and most others had a knee-jerk reaction to the downside as the dollar has strengthened and as risk-off has hit the markets.

ETF:

ETF investors are expected to boost their physical holdings following the vote. According to market estimates, they have just accumulated 7.3 tonnes of gold so far this week after buying 25 tonnes in the previous week.

For investors:

      Do not lay your investments in one asset class only. Returns on Gold have surpassed most of the indices returns in the current year. A whopping $100 movement and thereafter settling at around $1330, showcases the metal's safe haven appeal strength.

Investors currently see gold as a currency – it is rising alongside other safe-haven currencies such as the dollar and the yen. Gold’s upside potential will be dependent on the degree of uncertainty and instability stemming from the Brexit as well as the ability of central banks to provide a co-ordinated solution to calm the storm in the financial markets.

Gold set a fresh 2016 high although the rally was quicker and stronger than expected given that the UK would remain in the EU. Brexit helped it to be a white Friday for gold after the vote against markets expectation of it turning to be a black one. Gold has done what’s its best at- acting as a safe haven for its investor, giving protection against uncertainties and volatility.  Such environment is expected to persist for a few days until the central banks provide a co-ordinated package of measures to calm the financial markets, in turn triggering some profit-taking in gold.

Thank You!

You may follow me on:

• Facebook: https://www.facebook.com/prithviraj.kothari
• Twitter: https://twitter.com/prithvirajrsbl
• Website: http://www.rsbl.co.in/
• YouTube: https://www.youtube.com/user/PrithvirajKothari
• Google+: http://www.google.com/+PrithvirajKothari

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:

BREXIT – Unity of Europe challenged: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/06/brexit-unity-of-europe-challenged-rsbl.html

Photo courtesy: https://twitter.com/trade_24