BULLIONS: 1st to 10th Sep, 2012

The prices of gold and silver resumed their rally, much like the U.S stock market. Further, the rise of major foreign exchange rates including the Euro, Aussie dollar and Canadian dollar against the USD may have also contributed to the recovery of bullion rates.

The U.S ADP Non-Farm Employment Change was expected to have a clear and substantial effect on commodities, equities and forex markets. If the report shows growth rate of above 120thousand jobs then the chances of the FED introducing a stimulus plan in 2012 will be lower. This report plays an important role not only for the US dollar but also for the bullion prices. A stable labor market would reduce pressure on the Fed to take aggressive monetary easing as its Sept. 12-13 policy meeting, such as a 3^rd round of bind buying known as quantitative easing, to underpin growth.

On 7th September, the price of gold rose by 0.68% to $1,705; Silver also increased by 1.07% to $32.67. During the week, gold increased by 1.07%; silver by 3.92%. Comex gold futures prices ended the U.S. day session with moderate gains Thursday, and hit a fresh six-month high early on.

The monthly meeting of the European Central Bank did produce the widely expected, fresh EU monetary stimulus plan, in which the ECB will buy EU countries’ bonds. The bank left rates unchanged at 0.75%, but ECB President Mario Draghi announced an “outright monetary transaction” plan, which would allow the ECB decide when to start, continue or suspend bond purchases.

In a press briefing after the ECB meeting, Draghi said this plan allows the central bank “to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro.

The bond purchases would be “sterilized,” meaning that the amount of money put into the market via bond buys would be taken out taken out of the system in equivalent measures by other means. Also at the meeting, the ECB lowered its forecast for European growth. Since Draghi spoke, gold prices came off of their six-month high, but have held above $1,700.

Market sentiment improved after the data showed U.S employment rose more than expected and growth in the services sector gathered pace. The combination of the U.S. jobs figures and the ECB’s downward growth revision helped the U.S. dollar recover from earlier weakness.

Increase in gold prices internationally also created an impact on the domestic market

Last week, In India, gold peaked to its lifetime high crossing the 32,000 mark, just ahead of the huge festive season.

HOLE GIVES HOPE TO PRECIOUS METALS

Gold prices have been consolidating since the beginning of the year as the market is waiting for the US Federal Reserve to undertake a third round of quantitative easing. Investors expect the central bank to announce stimulus measures at its meeting in September to boost the fragile economic recovery.

The economic agenda is busy with German unemployment, EU retail PMI, UK money supply, the usual Thursday US initial jobless claims, personal income and spending and the start of the gathering at Jackson Hole 

Gold  is set for the biggest gain since January. Prices reached a four-month high of $1,676.90 on Aug. 27 on speculation that the Fed will embark on a third round of debt purchase after the Jackson Hole meeting.

The economic agenda is busy with German unemployment, EU retail PMI, UK money supply, the usual Thursday US initial jobless claims, personal income and spending and the start of the gathering at Jackson Hole 

  

Comex gold futures prices on Friday rallied sharply, hitting a fresh five-month high and are now within easy striking distance of $1,700.00. The precious metals markets took flight late Friday morning following the much-anticipated remarks by Federal Reserve Chairman Ben Bernanke at a Fed symposium in Jackson Hole, Wyoming. The Fed chief strongly hinted fresh, unconventional U.S. monetary policy stimulus will be implemented at some point. Indeed, he left the door wide open for a fresh quantitative easing initiative to be unveiled at the September FOMC meeting.

Friday is the last trading day of the month, which makes it an extra important trading day from a technical perspective—and the gold and silver bulls even took full advantage of that by pushing prices to multi-month highs. The gold and silver bulls gained fresh, solid upside technical momentum Friday, to suggest that prices can continue to trend sideways to higher for at least the near term.

Investors expectations of imminent stimulus had dimmed somewhat heading into the symposium in Jackson Hole at which Bernanke said the Fed was ready to provide more stimulus if needed, but gave no signal it was imminent.

International gold prices reflect the domestic prices too. In India, gold reached crossed it highest mark, with the rate per 10 gm reaching – Rs. 31,500 as on 28^th August 2012.

Gold is expected to move ahead of its life time high. Prices of gold may hit new highs around the Diwali festival as rising tensions in West Asia may increase demand for the metal as a safe haven investment. Civil war in Syria and geopolitical tensions in Iran are major factors pushing up prices of gold despite the fall in physical retail demand for the metal in India, China, and many other countries. In such a scenario, we could see gold touching a price over 32,000 rupees per 10 gm, may be by Diwali.

Overall the metals seem to be holding patterns ahead of what unfolds from Jackson Hole, there has unsurprisingly been some pull back after last week’s rallies as the markets consolidate and overall, although there may be some initial disappointment if QE3 is not announced (which is not likely) - the likelihood that QE3 will be kept firmly on the table may provide comfort