GOLD- BUY AND HOLD: RSBL

 by Mr. Prithviraj Kothari, MD, RSBL

Bullion has rallied 26 percent in 2016, recovering from three years of losses, as low or negative interest rates have strengthened demand. Political uncertainty has also played a part, with the U.K.’s vote to quit the European Union spurring haven demand. Forecasters including Singapore-based DBS Group Holdings Ltd. have said that the U.S. contest may buttress prices amid concern about the possible implications of a Trump presidency.

Gold may be in for a bumpy ride in the final quarter as Republican candidate Donald Trump now has a 40 percent chance of winning the presidential election and investors will be preparing for the possibility of higher U.S. interest rates, according to Citigroup Inc. A probable victory of Donald Trump increases the chances of a single U.S. hike by the end of 2016.

But if it happens otherwise, then gold prices are likely to steady during 25-29 September after the US Federal Reserve decided to leave interest rates unchanged, according to analysts. 

Bullion has been provoked from inertia after Fed rate concerns had helped wipe out gains for the quarter.

There is once again an inflow of capital in the market as low borrowing costs in the U.S. and economic stimulus by central banks from Japan to Europe drive demand for the precious metal as a store of value.

Over the previous week, gold achieved the best performance since July 2016 with a 2.4% rise, while the US dollar index recoded the worst performance, reaching 95.472 against a basket of currencies.

The precious metal is heading for the biggest weekly advance since July after U.S. central bankers opted to leave interest rates unchanged while reining in their outlook for future increases.

Gold prices edged lower on Friday, but notched the strongest weekly advance in almost two months after the Federal Reserve held off on raising interest rates and scaled back the number of rate hikes it expects next year.

This has once again pushed gold prices upwards and traders are no into the buy-and-hold mode for gold.

The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.

Meanwhile, investors will be focusing on a series of important events lined up this week that play a pivotal role in influencing gold prices.

• A pair of speeches from European Central Bank President Mario Draghi is to testify before the Committee on Economic and Monetary Affairs of European Parliament, in Brussels.
• For fresh hints on whether the ECB will step up monetary stimulus in the coming months to boost inflation and prop up the economy.
• Speech by Bank of Japan Governor Haruhiko Kuroda will be eyed in wake of last week's decision by the BOJ to modify its policy framework
• Focus will also be maintained on the first U.S. presidential debate on Monday between Democratic nominee Hillary Clinton and Republican hopeful Donald Trump
• Other speeches to be given by

                -Swiss National Bank Chairman Thomas Jordan

                -Bank of Canada Governor Stephen Poloz

                -Federal Reserve Vice Chair Stanley Fischer

                -BoJ Governor Haruhiko Kuroda is to speak in Tokyo.

• U.S. is to release data on new home sales, private sector data on consumer confidence, publish data on durable goods orders, to publish final figures on second quarter growth
• Fed Chair Janet Yellen is scheduled to testify before the House Financial Services Committee on regulation and supervision, while St. Louis Fed chief James Bullard is to speak in St. Louis.
• The Bank of Japan's big policy review is likely to see more QE and negative rates in the long run.
• Germany is to publish preliminary inflation data and a report on unemployment change.
• Japan is to release data on inflation and household spending.
• China is to publish its Caixin manufacturing index.
• Germany is to release data on retail sales.
• The U.K. is to report on the current account and publish revised data on second quarter growth.
• The euro zone is to release preliminary data on consumer inflation.
• Canada is to publish data on economic growth.
• The U.S. is to round up the week with data on personal income and spending, a report on business activity in the Chicago region and revised data on consumer sentiment.

Now  that series of events are scheduled for the week we expects markets player to be alert and markets to be volatile.

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 SENTIMENTS FOR GOLD: RSBL
http://riddisiddhibullionsltd.blogspot.in/2016/09/bullish-sentiments-for-gold-rsbl.html
 

BULLISH SENTIMENTS FOR GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Recently gold has been struggling to climb up due to the recurrent changes in the expectations of an interest rate hike. There is quite a possibility that market players are paying too much heed to the whole interest rate scenario and in turn missing on the bigger picture.

Nonetheless, Gold continues to work lower alongside the rest of precious metals – a resilient dollar and rising US real rates have prompted traders to unwind their long positioning. Investors have become increasingly edgy ahead of the conclusion of the Fed and the BoJ meetings

The spot gold price inched lower during Asian trading hours on Friday amid Mid-Autumn festival holidays in the region.

Spot gold was last at $1,314.66-1,315.00 per ounce, down $1.17 from Thursday’s close.

The spot gold price had tumbled to a week’s low of $1,307.75 on Thursday on selling pressures following a brief spike to $1,328.10 sparked by weak US retail sales data.

In data released Thursday-

• US retail sales in August undershot at -0.3 percent
• Core retail sales in August undershot at -0.1 percent.
• Industrial production month-over-month in August also disappointed at -0.4 percent
• The US PPI in August was unchanged; a 0.1-percent gain from the previous month has been expected.
• The core PPI – excluding food and energy costs – was in line at 0.1 percent.
• The Empire State manufacturing stood at -2.0 missed the expected -0.9
• The Philly Fed manufacturing index at 12.8 beat the predicted 1.1.
• Capacity utilization rate in August stood at 75.5 percent, a touch below the 75.8 percent
• Weekly unemployment claims for September 1-8 in at 260,000 were just below the forecast 262,000 and, more importantly, the psychological 300,000 mark.
• Lastly, the current account balance in June was in line with consensus at -$120 billion. Business inventories month-over-month was unchanged in July, missing the 0.1 percent forecast.

There was disappointment in the markets when the data was released that showed signs of a softening US economy,.aThe US economy has recently shown signs of softening – data including retail sales, its PPI and industrial production have undershot.

While disappointing numbers have lowered the likelihood of an imminent Fed rate increase - for September was just 12 percent, November was 19.3 percent and December was 46.2 percent. Earlier this week, majority had expected a rate hike in December.

With such soft data coming in from the US, expectations have largely diminished towards the Fed doing anything in September and the market is drifting back towards the view they might do nothing for quite a while.

Some even feel that markets are overeating to a potential rate hike and giving too much attention to it, thus ignoring other crucial factors that have the potential to influence gold prices.

The market is once again divided between the supported of bulls and bears for gold. The ones that are bullish are not worried about gold’s recent downtrend. What is the most important factor for investors is that the gains seen so far are sustainable and that gold has more or less stabilised before it takes that long jump to rally.

They believe Fresh disappointing US data has reinforced our view that the Fed should remain on hold in September, resulting in renewed weakness in the dollar and US real rates and prompting fresh buying in gold.
Moreover, demand for gold from China and India is expected to rise over the months to come which will further boost gold prices higher. The market is  moving towards to a festive season and this period of the year has generally seen demand for gold rising and this rise in demand will make up for the weakness gold has faced over 2016.

Given that gold is heavily influenced by fluctuations in the dollar and US real rates, we are not surprised by the metal continuing to weaken. But the bullish supporters for gold also believe that this weakness is temporary and is currently driven by a stronger dollar and higher US real rates

Our big-picture outlook remains bullish but more profit-taking could easily be triggered if the price action disappoints, as it may be starting to do.

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 STABILISES: RSBL"

 http://riddisiddhibullionsltd.blogspot.in/2016/09/gold-stabilises.html