Prithviraj Kothari's view on Gold and Silver

Wednesday, 20 July 2016

Gold prices to go up: RSBL

- Mr. Prithviraj Kothari, MD RSBL

While financial uncertainties were influencing gold prices, we have lately seen geo political uncertainties giving the yellow metal's safe haven appeal a further support if not permanent a temporary one. The failed military coup in Turkey did manage to shake the markets.

Spot gold prices turned higher, reversing earlier losses in late trade on Friday in New York after Turkish Prime Minister Binali Yildirim said a group within the country's military has attempted to overthrow the government. For several hours overnight on Friday violence shook Turkey's two main cities, as the armed faction which tried to seize power blocked a bridge in Istanbul and strafed the headquarters of Turkish intelligence and parliament in Ankara. But the coup attempt crumbled as Erdogan rushed back to Istanbul from a Mediterranean holiday and urged people to take to the streets to support his government against plotters he accused of trying to kill him. The government declared the situation under control, saying 2,839 people had been rounded up, from foot soldiers to senior officers, including those who formed "the backbone" of the rebellion.

Earlier on Thursday, spot gold price crashed down to a two-week low of $1,320.45 after the Bank of England’s (BOE), contrary to expectations, kept interest rates unchanged in its Thursday meeting. In a somewhat surprising move, the Bank of England (BoE) decided to keep rates steady despite fear over the health of the UK economy following the Brexit vote.

Holdings in Global Gold ETF’s rose on Friday but lost about 10 tons in total over the week to 2002 tons, which was the biggest decline since March/April this year.

Gold continues to trade range bound between USD $1,320 - $1,340, however participants are still looking to play on the long side and we are likely to see moves lower well supported.

I largely see the spot gold price supported at the $1,300 level due to a post-Brexit global economic uncertainty and possibly lower US interest rates and given this critical situation at Turkey, precious metals prices are expected to move higher as they have always been influenced by geopolitical uncertainties.

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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:

Bullish direction of Gold and Silver prices: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/07/bullish-direction-of-gold-and-silver.html

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Monday, 11 July 2016

Bullish direction of Gold and Silver prices: RSBL

- Mr. Prithviraj Kothari, MD RSBL

Gold has once again proved its worth and claims to be the best performing asset of 2016, emerging from a three-year bear market. The yellow metal has gained almost 26% since 1 January, the best half-year performance since 1980, Bloomberg data showed. Silver, following gold, rose 30% in the first six months, leaving other assets such as the US and German bonds, Japanese yen and the US dollar far behind.

The flight to safe haven assets triggered by global political and economic uncertainty has made bullion the year’s most preferred investment, with gold and silver beating other asset classes by a mile.

The past four sessions following the Brexit vote saw gold prices spike about 6%, while silver advanced about 5%. Gold has definitely benefited from the Brexit incident, but there have been reasons more than one that this yellow metal has once again has got into limelight.

Global economic uncertainty, slower growth in China, accommodative monetary policy of the major central banks and weakness in dollar earlier this year had prompted investments into safe haven assets like gold and silver.

Global Uncertainty:

The market continues to benefit from safe-haven investment flows in the wake of the UK vote to exit the EU, which has led to heightened uncertainty over global economic prospects and increased risk aversion.

Dollar:

Strength in the US dollar was the major contributor to weakness in gold and commodity prices for the past few years. However, increasing uncertainty about economic and political developments, low-to-negative interest rate environment as well as doubts over global economic recovery post the collapse of Lehman Brothers in 2008 have led to demand for precious metals, analysts said.

China:

Economic slowdown of the Chinese economy has raised questions over the global growth and development. These concerns have put an upward pressure on gold.

Monetary Policy:

The current economic backdrop, along with fading prospects of an interest rate hike by the US Fed at least till December validates further march of bullion on the upwards trajectory over medium-term.

Contradicting these prospects, the Jobs report released pulled gold prices down but not significantly. The report stated that in June, 287,000 Americans entered the labour market, far exceeding expectations of 174,000 while average hourly earnings period ticked up 0.1 percent, below the forecast 0.2 percent.

Still, the unemployment rate rose to 4.9 percent from 4.8 percent after the May figure was revised down to 11,000 jobs from what was already a multi-year low of 38,000. The June employment figure had gained greater significance following the disappointing May report, which suggested the US recovery was beginning to slow after seven years of expansion.

It was a session marked by extreme volatility on Friday with gold experiencing a $35 range and silver $1.00, with NFP's driving price action. The prices send a solid signal for the Gold price to move beyond $1400 in short to medium term.

Further supporting gold was the Chinese gold reserves figures. It stated that China's gold reserves stood at 58.62 million fine troy ounces at the end of June, up from 58.14 million at the end of May, the central bank said on Thursday. Such a stock up already appears to be in motion for the gold stocks.

Given these supporting factors for safe haven metals, investors have engaged themselves into purchases of gold and silver and this is further giving and upward thrust to precious metals.