TOO MUCH NOISE IN THE MARKET

 By Mr. Prithviraj Kothari, MD, RSBL

By the time you read my next article we will be in the next year. So let’s have a brief outlook on how 2014 was for gold.

But before we begin an in-depth analysis of the same let’s have a quick glance through the soft quite week that passed. A week that was a continuous tussle between Bulls and Bears where $1200 was a new price target for Gold.

Markets were generally quiet overnight on this Christmas Eve day. U.S. markets closed early and many traders and investors had checked out for the week, if not for the rest of the year. Due to thin trading volumes gold did not show much volatility in the market. It gained one percent on Friday as the dollar slipped against a second straight weekly drop, underscoring the bearishness in the market.

Spot gold was up one percent and was seen trading at $1,194.05 thus moving away from a three week low of $1170.17 that it hit earlier in the week. Though gold gained on Friday, the week ended on a low note for gold. Gold declined after data released from U.S. showed that that economy grew in the third quarter at its quickest pace in 11 years. Moreover, other data released showed that initial claims for state unemployment benefits dropped for the fourth straight week.

SPDR Gold Trust, the world's largest gold - backed exchange - traded fund, said its holdings fell 0.08% to 712.30 tonnes on Friday - a fresh six-year low.

Not only for the week, even for the year Bullion has declined 0.6 percent as prospects for higher U.S. borrowing costs, accelerating economic growth and a plunge in crude-oil prices crimped investor demand for the metal. 

Some of the key influential factors for gold throughout the year 2014 have been - (chronologically)

• Tapering of the QE3
• Crimean Vote
• Geo political tensions in Ukraine (Iraq, Syria, Israel)
• Historic win of Mr. Narendra Modi
• Middle East Tensions
• ECB’s aggressive monetary stimulus package
• THE BANK ESPIRITO SANTO crisis
• Uncertainty over interest rates hike by the Federal reserve
• Strengthening US Dollar
• Slowdown of the Chinese Economy
• Swiss Referendum

Simultaneously we also need to have a look at what would turn the tables for gold in 2015.

The US economy: The US economy progress is measured in areas such as retail sales, industrial production, housing starts, payroll numbers and the broadest measure of unemployment. If the economy deteriorates then there are renewed expectations that the Federal Reserve may accommodate the financial system, particularly the banking system, and the combination of those factors could trigger a massive decline in the U.S. dollar. As a result of that, we will see spikes in commodity prices, such as crude oil, gold and silver.

Dollar: The number one thing for gold is the dollar, particularly in the near term. The dollar has to turn. Several Fed officials are now expressing concern about the strength of the dollar. If we see several weak economic reports in the next few months, the Fed is going to make noises about continuing to ease. That would push the dollar down and push up the price of gold.

Chinese economy: Gold may advance amid speculation that China, the world’s biggest consumer, will take more measures to bolster the economy, boosting demand for the precious metal as a store of value.

Russian and European Economies: Russia’s economy has been struggling with high inflation, crushing economic sanctions and weak oil prices.

Europe is still feeling some of the effects of its financial crisis as economic growth remains anemic and the central bank fights deflation. This uncertainty could create another crisis in emerging markets, and gold would benefit as a safe-haven investment.

Fed’s interest rate hike: If they make an outright comment that they're going to raise rates on a specific date, I think that could have a pretty serious hit to the equity markets.

Equities market: With equity markets back at record highs, that it also wouldn’t take much of a global crisis to spook investors, driving them back into gold markets.

Demand Supply: Any significant drop in gold prices will cause some supply disruptions, creating a floor for the market. Another benefit for the gold market should also come from gold-backed exchange-traded funds, which has seen lower redemptions throughout 2014


What we notice here is that the factors are similar to that of 2014 but will work in favour of gold. When the year is about to end, whoever I meet keeps asking for only thing- my outlook for gold for the coming year.

Well to begin with I would first like to share with you the various predictions that I have got from different people.
Some are really optimistic for the gold market for 2015 compared to other analysts as they think that the yellow metal could end next year around $1,250 while some feel that it will be well stuck at around $1200.

Some feel that gold prices will fall to $1,100 or even $1,080 an ounce as the U.S. dollar continues to dominate the marketplace and investors adjust to normalized U.S. interest rates.

   
There’s a lot of noise in this market right now, and this noise is causing volatility in the metals that a rude rumour is coming when the Fed, instead of raising rates, launches a QE4 to keep the economy from slipping back into a recession.

Investors shouldn’t rule out gold’s appeal as a safe-haven investment as a lot of uncertainty still remains in the marketplace. In fact safe-haven demand could help the gold market in early 2015.

TRADE RANGE FOR 2015:

METAL	INTERNATIONAL PRICE	DOMESTIC PRICE
GOLD	$1130- $1350  an ounce	Rs.24,000- Rs.32,000  per 10 gm
SILVER	$14.50- $24.00  an ounce	Rs. 32,000- Rs.60,000  per kg

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 - "Fed's "considerable time" creates "considerable impact" on gold"
http://riddisiddhibullionsltd.blogspot.in/2014/12/feds-considerable-time-creates.html

FED'S "CONSIDERABLE TIME" CREATES "CONSIDERABLE" IMPACT ON GOLD

 - By Mr. Prithviraj Kothari, MD, RSBL

Once the Federal Reserve statement was out on December 17, gold fell considerably to a two week low. 

The Fed removed the phrase ‘considerable time’ from the guidance statement and replaced it with patience, but then said patience is consistent with considerable time.
So it was rather a confusing but disappointing statement for gold. 

The Federal Reserve just came out and said that it was going to be “patient” when normalizing the monetary policy. This replacement referent to borrowing costs to remain low for a considerable time but at the same time it’s a pledge to be patient on the timing for higher rates. Rising rates and a stronger dollar can cut gold’s allure because bullion generally offers investors returns only through price gains.

As we are approaching 2015, we also are moving towards a long weekend with holiday cheers.
Just ahead of the Christmas break, the U.S. Department of Commerce will release the final estimate for fourth-quarter gross domestic product.
Said markets will receive important manufacturing data from the Institute of Supply Management, but they also said that the impact would be limited.
Over all, the markets won’t seem to having too much volatility over the next two weeks as holiday bells seem to be ringing around.

But yes, it doesn’t mean that it will be a hassle free week for gold. Gold prices could destabilize over the holidays if the Russian economy surprisingly deteriorates, or if there is more volatility in oil prices.

With everyone now focused on the holidays, most analysts are not expecting to see any major movement in the gold price in the next two weeks.
The trading week in North America will be disrupted as markets are closed on Dec. 25 for Christmas and January 1 for New Year’s Day. Analysts said that liquidity will be extremely leaving most market participants will sit on the sideline, waiting for activity to pick up in 2015.

While the market was into the Feds statement, there were rumors doing the rounds that Russia sold considerable amount of gold in November. But the Russian monetary authority made it quite clear, that at least in November, Russia not only did not sell any gold, but in fact bought another 600K ounces in the month of November.


The precious metals market is made up of various players- analysts, traders, investors, miners, customers, bankers etc. Each player has a different forecast for gold in 2015.

Market analysts state that gold seems to have stabilized at $1200 an ounce and could remain around these current levels, until at least the first or second week into the New Year.

Gold mining companies have noted that much of the gold mining industry is already under water at $1,200, let alone $1,150 or lower. Even those who have felt that using a gold price of only $1,000 to calculate whether their operations are viable or not at lower gold prices will be looking to re-assess where they stand at $900 gold.

While the traders predicted $1,100 level, or perhaps $1,050 or even lower.

Looking at these predictions do we feel that there is any hope left for the investors in the gold sectors?
Gold has already been driven downwards and has been pressurized on a number of occasions and at $1,100 gold or lower the supply gap is likely to continue to widen as scrap sales dwindle away, the lower price stimulates new purchases in the East and new mine production falls as some miners bow to the inevitable and have to shut down lossmaking operations. 

So do we feel that 2015 is going to be a better year for gold? Will gold return to its peak it had created in 2011?
Well it’s practically difficult to comment on this right now. Gold is actually seen as in short supply anyway in the West, which is why the gold believers cannot understand recent price movements which seem to fly in the face of economic supply/demand logic and a China boost could have a very rapid strong upwards effect. Western governments may be wise not to tweak the tail of the dragon as it certainly has the wherewithal to play the gold card and throw global markets into turmoil.

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 - "Is it an upside or a downside potential for gold"

http://riddisiddhibullionsltd.blogspot.in/2014/12/is-it-downside-or-upside-potential-for.html