Gold Will Be Watched Closely

Gold has had a great run of late, encompassing a 14.7% rise across just 60 trading days (from 1673 on Mar 8 to 1919 on June 1) which is an annualized pace of 61.8%. Last week gold and gold coin prices were seen hovering around $1900 an ounce. A lot of activity was seen happening which led to this price movement -

• The debate around price pressures,
• Speculation over whether the Federal Reserve will start talks on the idea of tapering its massive bond-buying program, 
• Thursday’s U.S. consumer-price index report numbers.

Data coming in from the US created a significant impact on the markets. On Friday, gold rose 1.1% as a Labour Department report showed the following key numbers -

• Some 599k jobs were added last month, compared to a 650k baseline forecast. 
• The unemployment rate fell to 5.8% from 6.1% in the prior month, hitting the pandemic-era low.
• The labour participation rate was little changed. 

However, this rally was short-lived as Yellen's comments dampened the rise. Bullion ticked lower after Yellen said on Sunday that President Joe Biden should push forward with his $4 trillion spending plans even if they trigger inflation that persists into next year, adding a “slightly higher” interest rate environment would be a “plus.”

Gold prices pulled back slightly following Yellen’s comment about inflation and interest rates. As a result, the 10-year Treasury yield rebounded, reflecting reflation hopes. Real yields edged higher, denting the appeal of gold as the opportunity cost of holding is increased.

Looking back at Friday’s close, a slight miss on May’s nonfarm payrolls data cooled fears about the Fed tapering stimulus and sent bullion prices 1% higher, keeping bullion dealers in India on their toes. Gold declined as investors weighed comments by Treasury Secretary Janet Yellen on interest rates against U.S. jobs data which missed expectations.

Piling on record historical global debts and holding rates down at 5,000-year lows are likely to stoke inflation like we haven't seen for a long time. Gold and RSBL gold coins have been sensing this since 2000 but have kicked into high gear once again since late 2019. You've no doubt seen and felt the increase in the prices of food and pretty much every other consumable. The Fed says the recent bump in inflation is transitory, but the action in precious metals says otherwise. It's why gold prices are up 42% in just the last two years. Sustained high inflation, coupled with low nominal interest rates, creates an environment of extended negative real interest rates. And that is when gold thrives, making bullion dealers in India happy.

Investors and bullion dealers in India will be closely watching commentary by the U.S. central bank as inflation ticks higher and policymakers move closer to paring the huge asset acquisition that saved the economy from the turmoil caused by the pandemic. The monetary support has driven the Fed’s balance sheet to a record, while muscular fiscal spending has enhanced government debt. Both may pose a concluding risk to the dollar’s value, potentially buffing the appeal of alternatives and probably pushing gold to new highs. 

Crucial Week For Gold Ahead

 Last week gold closed above $1900 an ounce for the first time since the start of 2021. This could once again mark the onset of bullish sentiments for the yellow metal. Spot Gold kept firm tone and consolidated under new nearly three-month high ($1912) on Monday, supported by weak dollar while growing inflationary pressures lift gold’s appeal as the metal is used as a hedge against inflation. Moving further, gold and gold coin prices in Mumbai scaled a near five-month high on Tuesday. This rally was driven by -

Weaker Dollar - The dollar index was down 0.2% against its rivals, making gold and gold coins in Mumbai less expensive for other currency holders. The U.S. unit registered its second consecutive monthly loss. Broad US dollar weakness became the main catalysts to help the gold post the biggest run-up in 11 months. The US dollar index (DXY) remained on the back foot as hopes of further stimulus and steady vaccinations in the West, recent in Asia as well, improved risk appetite for the metal.

Stimulus - The other supportive factor for the yellow metal is the monetary policy as it remains firmly stable, refusing to start changing the policy in response to rising inflation, arguing that the latest increase in consumer prices is transitory. Having proposed a $6.0 trillion budget, US President Joe Biden stretched talks over his $1.7 trillion infrastructure spending to June even as tax hikes become the key hurdle for the much-awaited stimulus.

Growing Inflationary Pressures - Last week, data showed U.S. consumer prices surged in April, with a measure of underlying inflation blowing past the Federal Reserve’s 2% target. The constant subdued tone around the US dollar, in retort to Fed’s policy expectations, continued to underpin gold price, as per the gold dealers in India. While investors awaited more U.S. data to gauge the extent of global economic recovery, Federal Reserve officials have repeatedly maintained they expect any rise in inflation to be short-lived, and said monetary stimulus would stay in place for some time.

Rising Demand - China’s factory activity expanded at the fastest pace this year in May as domestic and export demand picked up, though sharp rises in raw material prices and strains in supply chains crimped some companies’ production. Rising demand has resulted in pushing gold prices higher.

The true test for gold will be after the next couple of months of hot inflation reports and if we have some surprising better-than-expected nonfarm-payrolls reports.

Friday’s US Nonfarm Payrolls (NFP) will become important catalyst to watch for gold traders as markets for consolidation in the previous month’s disappointment. Should the headline US jobs figures print upbeat figures, traders may have an additional reason to expect the Fed action during the upcoming Federal Open Market Committee (FOMC), which in turn may underpin the US dollar and drag the gold and gold coin prices in India. But weak Nonfarm payrolls number this Friday may jolt gold prices toward the $1975 level.

Investors eagerly await Friday’s US Nonfarm Payrolls data for fresh hints on the economic recovery, which would likely affect the Fed’s policy outlook and in turn gold price. In the near-term, if gold can breach the $1,922 per ounce mark, it can open the room for further upside potential.

Crypto- Is It A Bubble Trouble

 Gold prices edged higher during Monday’s Asia-Pacific trade, reaching a four-month high of $1,887 before pulling back slightly. Stronger-than-expected US manufacturing and service PMI data released on Friday boosted the inflation outlook and thus bolstered the appeal of precious metals perceived as an inflation-hedge.

Factors that played a key role in influencing gold prices are very much active in these markets. These factors greatly affect Treasury yields and in turn, the treasury yields affect bullish or bearish sentiment in RSBL gold.

Dollar Weakness - Since the end of March, the greenback, seen as a safe-haven trade, has retreated steadily with optimism about the recovery. But lately, that move down seems to have slowed down as traders begin to anticipate higher U.S. interest rates coming when the U.S. Federal Reserve reacts to signs of increasing inflation. Any important data becomes important for the US Treasury yields that recently weighed on the US dollar and helped the RSBL gold buyers. As a result, Monday’s downbeat figures of the US Chicago Fed National Activity Index backed a corrective pullback of gold.

The US rates fell and dragged the greenback lower after Fed policymaker’s statements. The Fed’s conciliatory remarks boosted the Wall Street indices and capped gold’s upside, as markets once again believed the Fed could maintain lower rates for longer. However, amid a lack of notable US economic news and holiday-thinned trading conditions, gold price stuck to its recent trading range between $1870-$1890, keeping bullion dealers of India at bay.

Inflation - Recently the U.S. Labor Department showed that the consumer price index jumped to 4.2% in April. It is up 2.6% from the numbers revealed in March. Gold steadied near the highest level in over four months as investors weighed comments by Federal Reserve officials who sought to soothe concerns about inflation.

Governor Lael Brainard, Atlanta Fed President Raphael Bostic and St. Louis’s James Bullard said they would not be surprised to see bottlenecks and supply shortages push prices up in coming months as the pandemic subsides and the pent-up demand would be unleashed, but much of those price gains should prove temporary.

Gold is close to erasing this year’s decline as investors turn more bullish on the precious metal, with holdings in bullion-backed exchange-traded funds on an uptrend. While market-based measures of inflation expectations have dipped, traders remain cautious about price pressures as well as flare-ups in Covid-19 cases in some parts of the world.

Bitcoin - We have always seen bitcoin as a reason behind gold’s bearish behaviour. But this time the scenario was completely different. Bitcoin is up nearly 30% for the year but has fallen by almost half from its April record peak of $64,895. The volatility has undermined the case for its mainstream acceptance.

The catalyst for Sunday’s slump was that cryptocurrency “miners,” who mint cryptocurrencies by using powerful computers to solve complex math puzzles, were halting Chinese operations in the face of increasing scrutiny from authorities.

Extreme volatility in the Bitcoin-led cryptocurrencies encouraged traders to look again at gold as capital flows sought safety and stability. Investors weighed uncertainties and risks in trading the digital tokens amid doubts surrounding Main Street adoption and regulatory headwinds. Gold coins in India offer an alternative to cryptocurrencies for investors who are looking for assets that are non-fiat and therefore cannot be diluted by central bank easing.

Looking ahead, this Friday’s US core PCE inflation data will be closely monitored by traders for clues about rising prices levels and their ramifications for the economy as well as the Fed. Core PCE data is a key inflation gauge that the Federal Reserve uses to determine monetary policy. A higher-than-expected print may intensify inflation fears and drive market volatility.

It should also be noted that the Fed speak, coronavirus (COVID-19) updates and US Treasury yield moves will also be important for near term gold prices forecast. Overall, gold remains on the bull’s radar amid inflation fears.

Go For Gold

 As the week opened, Gold was seen climbing to 3 months highs at $1855 as real interest rates on US debt fell to 3-month lows amid a rush to re-impose Covid lockdowns in Asia, where the latest Chinese economic data came in weaker than the analysts' forecast. Spot gold rose as much as 0.2% to $1,870.73 an ounce, the highest since Feb 1 during Monday's trading sessions. 

The spread of the coronavirus was also dragged in some markets, with Singapore reporting the highest number of local infections in months and Taiwan also witnessing a spike in cases.

Gold and gold coins in Mumbai rose to the highest in more than three months as concerns over the pace of a global recovery crept back in following a flare-up in coronavirus cases in parts of Asia.

The second wave of this pandemic has hit India drastically. Families are being wiped out, restrictions have increased and the growth rate has fallen. In fact, it seems that not all the ones, who are affected, are being reported and the ground situation is even worse. 

Furthermore, gold dealers in India are getting a boost from a more downbeat U.S. economic data outlook, which might push gold to $1900 levels. The $1,900 level has been dodging gold since the beginning of January when the precious metal initially began its downtrend, which only ended last month after gold seemed to have found a bottom just above the $1,680 an ounce level. And right now is the time when markets digest several misses on the data front. Market consensus is also likely to downgrade its expectations.

We have always seen an inverse relationship between gold and economic data. Gold and RSBL coins tends to outperform when economic data is weakening and underperform when the economic prospects improve. Economic data expectations are often adaptive, falling sharply following a negative shock such as COVID shutdowns and the accompanying weak data. As the data starts to follow a downward trajectory again and the market enters the corrective part of the data cycle, yields are held down and the USD come under pressure. Low real yields should send gold higher again. All of this could help push gold even higher.

Going forward, investors and bullion dealers in India should keep a close eye on gold's relationship with the U.S. macroeconomic data that have been disappointing recently, especially when it came to the U.S. latest employment and retail numbers.

Investors remain concerned that a sign of rising inflation will force the U.S. Federal Reserve to hike interest rates earlier than expected. However, Fed President Robert Kaplan said on Monday that he doesn’t see inflation becoming a problem anytime soon and reiterated that he didn’t expect a hike in the interest rate until 2022. However, he also urged the Fed to start normalizing policy.

Gold has been in the negative for some time now; however, the recent price rise has put the gold pack into the green and helped it erase this year’s decline. We see several reasons that will bring about a rally in gold -

ETF - ETF investors are starting to swing into net buyers again, after the recent consolidation, and it makes sense for the metals to play catch up to the recent moves higher in other commodities. Investor sentiment has boosted with inflows into bullion-backed exchange-traded funds.

Consumer prices - Further expectations increase in consumer prices as they start to bolster demand for gold as a hedge.

Inflation - The precious metal is a traditional hedge against inflation, which is back with a vengeance. Inflation fears are finally translating into higher precious metals prices.

Pandemic - A lot of uncertainty with Covid-19 strains and mutations in the Asia-Pacific region will lead to safe-haven buying increasing gold prices.

Equities - The gold price usually climbs when stock markets crash. The S&P 500 index of top US stocks blasted through 4,000 for the first time at the start of April, but now looks overvalued as jobs growth disappoints and higher inflation threatens.

Investors, gold dealers and bullion dealers in India now await minutes of the Fed's latest meeting, due on Wednesday, for further clues to the movement of the central bank’s monetary policy. Investors will turn to the minutes from the Federal Reserve’s April meeting due Wednesday for potential clues to officials’ views on the recovery and how they define “transitory” when it comes to inflation. Fed Vice Chair Richard Clarida said Monday that the weaker-than-expected U.S. jobs report for April showed the economy had not yet reached the threshold to warrant scaling back the central bank’s massive bond purchases. Meanwhile, Fed Bank of Dallas President Robert Kaplan said supply and demand imbalances and base effects will contribute to elevated inflation this year, but he expects price pressures to ease in 2022.

While the week is expected to be relatively quiet for economic data, investors will be anxious to see minutes on Wednesday from the Federal Reserve's policy meeting last month, which could shed more light on the policymakers' outlook on an economic rebound.

Important Data Expected To Bring Volatility

After a record-breaking rally last year, gold has lost momentum amid optimism over economies reopening and vaccine rollouts, with the advancing dollar and rising bond yields denting demand for bullion.

 

Rising bond yields and upbeat risk appetite is denting the safe-haven metal. Gold fell more than 1% on Thursday as U.S. Treasury yields gained on upbeat U.S. economic data. Benchmark 10-year note yields rose to more than a two-week high during the session on U.S. President Joe Biden's proposal of trillions of dollars in new spending and data showing U.S. economic growth accelerated in the first quarter. Higher yields increase the opportunity cost for holding non-yielding bullion. 

The move higher in yields (and a corresponding strengthening of the US Dollar) brought pressure to the gold chart, and precious metals’ spot prices fell steadily throughout Tuesday’s session and into the Asian and European sessions. The pattern repeated in the morning hours of Thursday’s session, thanks to another boost to (possible) inflation expectations when the first pass at calculating growth in the US economy for Q1 of 2021 returned a very strong year-over-year increase (as expected) and the 4-week average of new jobless claims continued to fall towards 600K. After rebounding from Thursday morning’s steep losses, gold stabilized and looked strong on Friday, consolidating near $1770/oz. 

 

In the days to come, markets will be flooded with key economic numbers coming in from the US and a lot of volatility is expected owing to these numbers. All eyes will be on the slate of what looks to be very strong macroeconomic data, including manufacturing and employment reports.

• the ISM manufacturing
• Payroll numbers are quite important. 
• factory orders
• ADP nonfarm employment
• ISM non-manufacturing PMI
• jobless claims

Key U.S. data will be running hot, and gold will be closely following the market's inflation expectations as commodities continue to surge. Generally speaking, any surprise to the upside will get inflation expectations higher. That could drive real rates lower, which would be a good catalyst for gold and gold coins from RSBL.

On the other hand, we are seeing a rise in gold and RSBL coins appetite from the world’s 2 biggest consumers of gold- India and China. In India, prices are down more than 15% from a record high in August, according to the largest bullion dealers in India. Purchases in the world’s second-biggest consumer jumped 37% in the January to March period to 140 tons after slumping to the lowest in more than two decades last year, according to the World Gold Council. A combination of softening gold prices, a sharp pick-up in economic activity and the return of social activities such as weddings supported higher consumption, it said

 

China too saw a steep rise in demand for the yellow metal. The release of a spike in demand has become a feature of the gold market with first-quarter sales of jewellery to Chinese women at their highest since 2015. China’s gold jewellery consumption in the first quarter stood at 119.1 tons, the highest quarterly level in seven years, according to the World Gold Council’s latest survey released on Thursday.

 

The three main reasons behind this rising demand for jewellery were- 

• The improving economic conditions
• A slightly lower gold price and 
• A sales spree related to holidays

While on one side we see the supply-demand equation, on the other side there is inflation and important US data. For now, the gold market is ignoring its perfect storm of low-interest rates, more government spending, and rising inflation expectations. However, next week could test the Federal Reserve's policy stance that it is too early to start tapering.

Before gold can move above $1,800 constantly, the market will need to be certain that the U.S. will see persistent inflation, not just momentary. Plus, other parts of the world should begin to recover according to the RiddiSiddhi Bullions.

Analysts are warning investors that if gold can't go up in this current environment, then look for lower prices. However, many analysts say that a retest of recent support could attract new buying momentum to the marketplace.

Crucial Week for Gold

Gold prices held steady on Monday morning as markets, in general, seem to be in an optimistic holding pattern ahead of another big week of earnings reports, this time accompanied by some key macroeconomic inputs. Gold picked up roughly $5/oz after the global markets reopened on Sunday evening, and stabilised during Monday's trading sessions.

Gold prices have been supported by the recent demand from India (according to the bullion dealers in India) and China, regardless of how weak the U.S. dollar and the retreating Treasury yield is.

The Chinese demand for gold and gold RSBL coins at current levels is no doubt helping support prices, with the PBOC stepping up quotas for gold imports. The local premium above spot still remains at around $7 to $9 an ounce, which could be impacting local availability of gold and gold RSBL coins in Australia, as much of what is produced today may well be heading into that market. Since February 2020 the country has averaged around $600 million a month worth of imports, or circa 10 tonnes, so the new 150 tonnes green light is a significant volume of gold to hit the hungry Chinese market in the months to come.

India’s demand for gold and gold RSBL coins also remains very strong at the current price with record-breaking imports in March of 160 tonnes. Gold shipments from Switzerland to India and China rose last month, indicating renewed buying by the top consumers after a year on the sidelines.

The second wave has been pushing economies back to sluggish growth and stricter lockdowns. Any hindrance in growth will lead to a weaker US dollar and stronger yellow metal. The bullion is stabilizing near an eight-week high as bond yields trend lower, lifting the appeal of the non-interest bearing precious metal.

Increasing covid-19 cases in some parts of the world have raised concerns over the pace of global growth, although stimulus measures remain in place. If the economic situation worsens again, the Fed might be forced to pump more money into the system, altering the hawkish outlook. In that case, gold and gold RSBL coins would most likely breach the current record highs above 2,000 USD.

However, there are bearish sentiments also that prevail in the market over the following - 

• The view that any spike in inflation is likely to be transitory and that the Fed will keep interest rates lower for a longer period extended some support to the dollar-denominated commodity and helped limit any deeper losses, rather assisted to regain some positive traction on the first day of a new trading week. That said, the upside is likely to remain capped as investors might prefer to wait on the sidelines ahead of the latest FOMC monetary policy update, scheduled to be announced on Wednesday.
• All the money printing and inflation are probably priced in, as evident from gold’s rise from 1,400 to 2,000 USD, with investors now being forward-looking and gold dealers in India waiting on that. They see one more year of ultra-loose monetary policy, and then the Fed will need to start hiking rates and taper the QE. Both hawkish actions could come even sooner than 2022.

Should this outlook stay in place, the upside for gold is probably limited.

Moving on to this week, it is going to be an important week for gold with key data to be watched over the coming days -

1. FOMC Meet - The main economic event of the week will be the Federal Reserve’s Open Market Committee (FOMC) meeting that will commence on Tuesday morning and will end on Wednesday afternoon with a statement and press conference from Fed Chair Powell. While there is no expected change in the U.S. monetary policy, the marketplace will closely scrutinize the Fed’s inflation outlook and any comments on the future path of monetary policy. Wednesday’s FOMC meeting and press conference will be followed by a first read on Q1 economic growth on Thursday morning and then the Fed’s report on consumer price inflation.
2. Capital gain taxes - President Biden will address a joint session of Congress where he is expected to lay out the Administration’s plan for an increase to capital gains taxes for the wealthiest Americans. We’ll be watching to see if the formal announcement will stumble the markets similar to what happened last week.

Important data to watch out for-

• EDT/GDP Growth
• Initial jobless claims
• PCE Price Index

With such a crucial week ahead, investors will all be glued to all the important numbers coming in. And on the other hand, the top gold dealers in India and largest bullion dealers in India will wait for investors to make their decisions and pounce on them. Wait and watch is all that we can say.

China On A Gold Buying Spree

 All over the world, economies are improving and stimulus measure is helping to get things back on the growth track. But all this is not as easy as it seems. The main reason behind this recovery is fiscal stimulus. Any dort of stimulus brings along certain pressures - concerned balance site and budget deficit. This further leads to inflation, in fact, currently, we are expecting the nation to create pressure on the U.S. dollar which will further release bullish sentiments for the precious metal.

Although gold prices have struggled in the last seven months, the precious metal still plays an important role in a portfolio. Gold remains to be an attractive safe-haven asset as real interest rates remain near historically low levels.

The precious metal and RSBL coins were seen heading to their second consecutive week of gains after a positive start to Q2 amid a weaker U.S. dollar and retreating U.S. 10-year Treasury yield.

It would be sensible for investors to take some defensives positions in their portfolio because of current valuations. The U.S. economy is expected to see strong economic growth this year. So, fundamentally, equity markets have room to go higher and hence there should be a balanced portfolio allocation.

The growth that we are seeing in equities is being supported by stimulus, earnings and by the recovery of global economies. But this growth won’t come alone, it will definitely bring some volatility along with it. But this volatile situation would be a great opportunity to park investment into portfolio risk hedges like commodities. Some players believe that it is just the right time to jump into the market and make the most of this opportunity and reach out to the top gold dealers in India and the largest bullion dealers in India. 

While talking about portfolio allocation, there is this huge superpower that aims to pile up reserves to the best possible strength. China has cleared the way for a massive surge of gold and gold coin imports into the country. An exclusive report from Reuters suggested about 150 tonnes of gold (worth $8.5 billion at current prices) is likely to be shipped into China following the green light from Beijing. This information was revealed by four different sources that China has permitted domestic and international banks to import large amounts of gold into the country.

China is in the race to build up its reserves. In fact, analysts say that tonnes of gold in China still stands unreported. Of the official numbers, it is believed that in 2019, China's gold imports ran at about $3.5 billion a month, or roughly 75 tonnes.

The report quoting two people said the gold would be shipped in April and the other two said it would arrive over April and May. China brings in the bulk of its gold from South Africa, Switzerland, and Australia. China has, on average, imported gold worth about $600 million a month, or roughly 10 tonnes. The move, cited by the news agency, is "potentially helping to support global gold prices after months of declines."

China is the world's biggest gold consumer, gobbling up hundreds of tonnes of the precious metal worth tens of billions of dollars each year, but its imports plunged as the coronavirus spread and local demand dried up. The main reason behind this purchase is to revive the dampened gold market.

A fair recovery in gold demand this year will require a generally much higher level of gold import. Next week also marks the Federal Reserve media blackout period ahead of its monetary policy announcement on April 28. ING said that no additional Fed speakers could mean a weaker U.S. dollar, which is beneficial for gold. A quieter week for U.S. data and the Fed in the blackout period could favour a continuation of benign market trends and a slightly weaker US and stronger yellow metal. On one hand, we have gradual growth, speedy jab drives and on the other hand, we see a second Covid wave engulfing the world.

Too much happening globally. In this current environment, with so many unknown factors impacting investment strategies, it is advisable for investors to remain actively involved with their portfolios and remain calm and balanced.

Investors Pull Out From Gold And Pool In Other Assets

 Compared to last year, the first quarter wasn’t that interesting for gold. However, the yellow metal showed a decent start to the second quarter. Gold prices were seen moving up around  1.5% last week. It ended close to the $1760 an ounce, we closed for the week. As the week opened, Gold prices fell on Monday, weighed down by firmer U.S. Treasury yields and dollar after better than expected U.S. economic data lifted prospects for higher inflation. Spot gold fell 0.2% to $1,739.20 per ounce.

Stronger than expected data suggests that inflation (will be) picking up faster than expected in months to come, which is leading to a rise in real yields, exerting pressure on gold. If we do get flaming inflation readings next week, it could be a catalyst for higher Treasury yields, which would be bad for gold. But once we pass that event and if gold would still near $1,750, that would be a green light for prices to rise higher. There could be more upside potential for gold after the CPI data.

The gold dealers in India remain optimistic as the gold prices might have already hit their bottom in the first quarter of this year. In that case, we can expect a favourable environment for gold to rose. The Fed removed the big risk as far as yields surging. This will act in favour of the yellow metal. And even though we might not see the August record highs, gold could make a move towards $2,000 again.

We have a line up of data releases this week, which might catch investors attention-

• CPI
• U.S. jobless claims
• Retail sales
• NY Empire State manufacturing index
• Philadelphia Fed manufacturing index
• Industrial production

Other supportive drivers for gold are- 

Stronger physical demand - Since the onset of the pandemic, gold has also seen an uptrend. A few minor drops were witnessed, but overall it has been a green zone gold. High demands amongst the Chinese and Indian coupled with renewed interest from central banks have all delivered sufficient support for the yellow metal.

Piling gold reserves by central banks - With 2021, the gold dealers in India and largest bullion dealers in India expect that the new year will bring a global economic rebound, "The possibility of capital inflows into emerging markets and the low interest-rate environment may lead to central banks adding gold for diversification purposes The breadth of central banks purchasing gold could potentially rise substantially considering the massive increase in sovereign debt and the rapid pace of money supply growth in reserve currency countries. A sustained rise in official interest could provide further support for the yellow metal.

Furthermore, domestically, the top gold dealers in India are expecting that Gold and Silver could become expensive from the current levels on two counts. With the international prices going up, the resurgence of the Coronavirus Pandemic could drift investments towards this haven, resulting in the increasing demand for gold.

However, we still find some players in the market who are pulling out from gold and pooling into equities, cryptos and other asset forms. But as many say that crypto is a bubble and if this bubble pops then it will be a huge and significant game changer for gold. But to be sure, this is technically not possible. All we can say is that if at all the bubble bursts then $2250 an ounce for gold will be a cakewalk.

Gold Loses Shine But Later Gains Lustre

 Gold was seen gearing up for another leg to the upside, as the bulls extended the recovery from three-week troughs of $1677.

Bullion has clawed back some ground after dropping last week to near the lowest level since June, with recent movements largely being dictated by the direction of bond yields

The weakness in the US dollar and Treasury yields continued to lend support. However; traders believe that the improved market mood on the economic optimism plays could likely play a spoilsport.

Gold steadied as investors weighed signs of an economic rebound amid better-than-expected U.S. jobs data against the implications of President Joe Biden’s spending plans.

U.S. employers added the most jobs in seven months with improvement across most industries in March, as more vaccinations and fewer business restrictions supercharged the labour market recovery.

The U.S. economy created the most jobs in seven months in March as more Americans got vaccinated and the government doled out additional pandemic relief money.

• Nonfarm payrolls increased by 916,000 last month
• February employment was revised up to a 468,000

Following these data numbers, gold dealers in India witnessed the first quarterly drop in the price of gold since 2018. A growing economic recovery and rising bond yields created bearish sentiments for the yellow metal.

We’ve already seen a $1.9 trillion helicopter money drop this year, and the Biden administration appears just to be getting started.

The latest reading of the government’s CPI (Consumer Price Index) continues to suggest that inflation so far remains low. Even if we do experience high inflation, government officials continue to assure, it will be transitory. Despite these weak guarantees, the financial establishment is starting to sound the alarm.

U.S. President Joe Biden's announcement of a long-awaited $2 trillion-plus job plan last week has raised some concerns over inflation.

The ongoing threat of inflation – and actual inflation – will result in more buying of gold, silver, and other hard assets. Especially since Fed Chief Jerome Powell has said that the central bank would be happy to allow inflation to persist for a while before taking any action.

This means that the central bankers will not hike interest rates or pull back bond purchases to slow things down. And when government-reported inflation rises well above 2%, while interest rates remain at lower levels, the resulting negative real interest rates will support gold prices.

This inflationary scare comes at a time when the government is allowing running free massive stimulus measures to bail out states, businesses, and consumers – all in the name of combating the pandemic.

During these times, some investors view gold as a hedge against inflation and hence the drop was not much lived.

Gold once again gained momentum as this week opened, over the following reasons – 

Yields- The benchmark 10-year US Treasury yields have slid below 1.7% after rising to the highest level seen in 14 months over the past few sessions. This has also turned the dollar bearish, sending it to an almost two week low against most of its major rivals. While lower bond yields decrease the opportunity cost of bullion and make it more appealing as an investment, a weaker dollar drives up purchases of gold and gold coins in Mumbai by holders of other currencies, helping push up its demand as a result.

Corporate taxes- The yellow metal is also trading bullish on the rising prospects for higher corporate taxes in the US after President Biden stood by this proposal as a way to pay for the recently announced $2 trillion infrastructure plan. Additionally, the precious metal’s safe-haven appeal also enjoyed support from recent comments from Cleveland Fed President Loretta Mester on the central bank’s plans to remain dovish to boost economic growth further.

Meanwhile, traders are also watching the progress of debate over Biden’s $2.25 trillion infrastructure proposal, as Republicans expressed guarded support for a more limited plan. Any progress in these talks will directly affect gold and gold coins in India. Whether on the upside or downside- we need to wait and watch!

Covid has become avid

Recently we have seen gold coming under pressure. Even officials from the US government and central bank anticipate the economy to post a swift recovery, boosted by strong COVID-19 vaccine rollout programs and multiple rounds of fiscal stimulus. 

Top gold dealers all over India agree that there is optimism in the markets about improved economic outlook. This positivity is further supported by an improvement in consumer spending, which in turn would hike up inflation – one of the main reasons that have been strengthening US Treasury yields.

On March 29, gold and silver plunged again amid strength in the dollar index. Both the precious metals settled on a weaker note in the international markets. Gold made a swift move to $1744 from its base of $1728 last week on Thursday evening but later the pressure of rising USD Index towards 93 killed all the gains. Now the 10y and 30y finds key barrier of 1.65 and 2.40 respectively.

The dollar index gained again and traded at four and a half months highs and inched closer towards the 93-mark, pushing the yellow metal lower. Strength in the dollar index triggered selling in both the precious metals.

Gold extended its biggest fall in more than three weeks as President Joe Biden prepared to unveil big spending plans after announcing major progress on rolling out vaccines. Biden said 90% of U.S. adults will be eligible for Covid-19 vaccines by April 19, boosting risk appetites even as they linger around new strains of the virus. The president will also this week unveil major plans to reboot the U.S. economy and boost employment.

Analysts at RiddiSiddhi Bullions Limited suggested that gold is heading for its first quarterly decline since 2018 as a budding global recovery reduces the safe-haven’s appeal. A stronger-than-expected dollar and increasing bond rates have also pulled bullion down from its record high in August last year.

In a speech on Wednesday, Biden is expected to focus on infrastructure as his administration aims to reshape the post-pandemic U.S. economy and government

The US also recorded a jobless claims figure of 684,000 for the week before last – the first reading below 700,000 since the pandemic sparked mass layoffs last year. This further boosted the dollar in one of its better recent weeks.

In another busy week for FX markets, the US dollar benefitted from its ‘safe haven’ status amid crises in Turkey and on the Suez Canal.

Last week started with news that Turkey’s President Recap Erdogan had sacked the country’s Central Bank governor Naci Agdal for raising interest rates to check inflation and to support the Turkish lira. He was the third Central Bank chief to be sacked since 2019.

The removal of Agdal from office led to “risk-off” dollar buying as the value of the lira against the dollar fell by approximately 12%.

Furthermore, the MV Ever Given has caught up attention all over in the media – a 400-metre, 200,000-tonne cargo ship that got stuck across the Suez Canal. 

With roughly 250 ships stacked on either side of the blockage and a reported $15bn worth of goods on board, there were worries that disrupted trade flows could disrupt international recoveries from the Covid-19 pandemic.

Analysts have also forecast further bearishness in sight for the precious metal on the back of rising hopes for global economic recovery. However, gold prices are likely to enjoy some support from the latest wave of the pandemic that has sent parts of Europe back into lockdown mode even as emerging markets like Brazil and India are also reporting a spike in fresh infections confirmed a spokesperson from RSBL.

Experts say the yellow metal could remain volatile amid strength in the dollar index and a rise in the US bond yields could weigh on the precious metal

The monthly U.S. non-farm payrolls report will be closely watched at the end of this week, with Federal Reserve policymakers so far citing slack in the labor market for their continued lower-for-longer stance on interest rates.

“In a week when the market is feeling so optimistic about the forthcoming payrolls release, it seems very likely that the greenback will find strong support.

Further strength in the dollar index could push gold prices below $1,700 per troy ounce this week. We expect precious metals to remain volatile this week.

Important week for gold

Lately we have seen both gold and silver under bearish pressure. On one hand we saw gold reaching its lifetime high of $2075 in 2020, we even saw the yellow metal crashing to as low as $200 in the first quarter of 2021.

Market analysts and technicians have been consumed as they analyse the multiple factors that had created bearish pressure on both gold and silver pricing. Of all these factors, there are two connected factors that seem to have the greatest impact on creating negative market sentiment towards gold and silver. They are –

• Dollar strength 
• US government bonds and yields

A strengthening dollar is a direct result of rising yields and hence both remain interconnected.

There are signs that gold has found a bottom after a streak of weekly losses, according to analysts. Now, the focus is shifting to the Federal Reserve's rate announcement on Wednesday. All eyes remained glued to the  U.S. Federal Reserve meeting, due to start later on Tuesday.

U.S. Treasury Secretary Janet Yellen said Sunday the U.S. inflation risk is small and manageable. The Federal Reserve's two-day Open Market Committee (FOMC) meeting begins Tuesday morning and ends Wednesday afternoon with a statement and new U.S. economic projections. While no change in U.S. monetary policy is expected at this week's meeting, traders will be closely scrutinizing wording on the Fed's economic growth and inflation prospects.

Analysts are not expecting any significant policy changes as markets are starting to wonder if the U.S. could see sooner-than-expected rate hikes due to strong economic growth and rising yields.

Top gold dealers in India, investors and traders are generally more focused on better global economic growth prospects and the pandemic being tamped down by rising vaccination levels, and less focused on rising government bond yields that have at times recently produced speed bumps for the stock market bulls. The benchmark 10-year U.S. Treasury note yield is presently fetching 1.613%.

Currently we see yield rising over the following reasons-

• Massive stimulus
• Fast vaccination rollouts 
• Low-interest rates

Inflation expectations have soared over the past three months, with five-year breakeven rates rising to 2.6%, the highest since 2008. U.S. 10-year Treasury yields are now trading above 1.6% and some market participants are expecting the benchmark could reach 2% before year-end.

According to the gold dealers in India, Gold has lost $200 so far this year. But now analysts believe that the selling is probably done off and Wednesday’s Fed announcement will be a key driver for the precious metals sector this week.

In such uncertain environment it’s quite natural for investors to find ways to protect themselves against inflation. But they are also very well aware that the central bank may raise interest rates to keep inflation under control. 

While gold coins in Mumbai looks like an attractive hedge against rising prices, this isn’t the case when interest rates are going up too. However, it’s the real interest rates that matter — that is, the interest rates adjusted for inflation. In other words, when inflation kicks in but central banks hold off from raising rates in response. When investors see this happening, gold coins in Mumbai will then become an attractive investment proposition.

Stimulus may lead to inflation worries

Gold has declined by around 5% over the last few months, despite expectations of inflation rising to their highest since 2008.

Gold prices pulled back on Friday as robust U.S. bond yields and a strong dollar weighed on the metal, but bullion was on course for its biggest weekly gain in four weeks. 

Benchmark U.S. Treasury yields climbed, increasing the opportunity cost of holding gold, while the dollar bounced back from a near one-week low. President Joe Biden on Thursday signed his $1.9 trillion stimulus bill into law and said he was working to speed COVID-19 vaccinations and move the country closer to normality by July 4. 

Now that President Biden’s latest stimulus package (a cool $1.9 trillion) has been approved, inflation worries are on the rise. With the money supply enormously increasing and the oil price mounting, it’s pointing to an inflationary situation. While financial markets don’t like inflation, safe-haven assets such as gold tend to prosper.

The Americans have welcomed the stimulus program, but as we know any such package always creates government debt. This is a long-term problem that’s only getting worse but it’s also rapidly devaluing the dollar believes all the top gold dealers of India.

Analysts at RSBL believe that while the vaccine rollout is reassuring, the road to normality is going to come at a significant cost. Along with direct checks to members of the public, this massive stimulus package includes provisions for employment. It also includes a financial injection into state and local governments along with schools. This is all meant to help get the economy reopened and life back on track.

Investors are now awaiting the U.S. Federal Reserve meeting next week for direction on its monetary policy. Meanwhile, once can consider to buy April gold future at dips of $1703 and average at $1969 target $1723 and $1738 extension $1746.

All 3 sentiments exisit for gold- bearish bulish and neutral

 Gold prices continued to stay under pressure and recently reached at $1679, the lowest level since early June, affecting the gold dealers in India. It then bounced modestly to the upside but remained under pressure about to pots the eight daily losses out of the last ten trading days.

In an environment of rising U.S. yields, growth recovery, vaccine rollouts, and investors getting more optimistic on growth prospects; hence demand for safe havens is expected to struggle.

Gold slumped last week, hurt by the rising Treasury yield environment. The rising Treasury yield, driven by strong economic data and an appetite for taking on risk, has sent the demand for gold falling continuously.

Higher US yields and a stronger greenback continues to be the key factor keeping gold on a negative bias. Not even risk appetite in the US has helped the yellow metal. 

U.S. 10-year Treasury yields edged lower, raising the appeal of holding gold. A steady rise in bond yields makes holding gold less attractive as investors typically tend to gravitate toward assets that generate steady income in the form of interest or dividend.

It was a combination of U.S. dollar strength and market participants bidding the precious yellow metal lower that resulted in gold’s considerable decline

Two sessions and DOW gained nearly +1000 points on US Covid package but the NASDAQ slipped by 3% and most bond yields did not show huge positive traction. 

Gold stayed below $1700 since Mondays opening and testing crucial support bands of $1680-1685. As said this and around $1678, all are significant support bands and on a pull back before Wednesdays’ report- CPI, Block buster data. It can be $1705-$1715 again. 

Gold ETF holdings have now fallen three months in the last four and this trend is set to continue if yields continue inching higher.

On Monday, the yellow metal dropped to the fresh low since June 2020 amid the US dollar rally and strong Treasury yields defying commodity bulls. However, the bears seem to have stopped for a breather while waiting for the US House session on Tuesday.

The price of gold coins in Mumbai rose on Tuesday, as a pullback in U.S. Treasury yields added some lustre to the metal after it hit a nine-month low in the previous session.

Spot gold rose 0.7% to $1,692.21 per ounce during early trading hours in Tuesday. Prices had fallen more than 1% on Monday to $1,676.10, their lowest since June 5.

Gold picked up bids near $1,683, up 0.20% intraday, during early Tuesday. The yellow metal recently benefited from the recent halt in bond rout while also ignoring the US dollar’s sustained rally.

Rising bond yields have taken a significant bite out of the gold dealers in India this year, but investors shouldn't fear increasing nominal yields as real interest rates will remain negative for the foreseeable future.

We continue to remain optimistic on gold coins as the price is supported by long-term fundamentals, including rising debt levels and extremely accommodative monetary policy.

Additionally, issues concerning the vaccinations and economic recovery should also be observed as fears of the coronavirus (COVID-19) variants battle unlock efforts in the West.

Markets may have turned bearish for gold in the short term and neutral in the long term, we still see gold as investors favourite. 

Uncertainity Prevails

 Gold prices began rallying in 2019 and reached an all-time high of US$2,000 an ounce in mid-2020. Since then, the yellow metal has consolidated around US$1,800 an ounce.  Before the consolidation, gold was declared as one the best performing assets of 2020. It surpassed the S&P 500, global treasuries, international and emerging market stocks, as well as commodities and oil.

Gold began the year with disdainful expectations on the back of a record high and its biggest annual gain in a decade. Instead, the precious metal is off to its worst start in 30 years.

Gold had a strong start to the year, moving to its monthly high of $1,959 per ounce on 6 January at the same time the U.S. dollar index (DXY)1 made fresh three-year lows. However, gold quickly reversed course as it became clear the democrats had won a runoff election in Georgia, which, with the help of a democratic vice president, gave them control of the Senate. With this crucial victory, the markets quickly embarked on a “reflation trade”, betting that the democrats would pass trillions of dollars of additional spending on pandemic relief, infrastructure and green initiatives. Interest rates spiked higher, taking ten-year treasuries to a ten-month high of 1.18% on 12 January. The rise in rates bolstered the U.S. dollar, driving the DXY to its monthly high on 18 January, while gold fell to its monthly low of $1,804.

February witnessed similar behaviour for the yellow metal. Spot prices touched a seven-month low on Friday, extending a fall and penetrating through a support level that analysts say could signify further losses. 

Gold gained in 2020 mainly over the following-

• pandemic-induced haven buying
• low interest rates 
• stimulus spending

However, this year gold is suddenly facing a series of unexpected and uncertain hindrances. Mainly-

• resilience in the dollar 
• a rally in U.S. Treasury yields 
• Global  economic recovery from the pandemic 

With rates going higher and inflation expectations peeking out, we’re seeing a lot of profit-taking in gold and people are going from gold into other investment options confirms analysts from RSBL.

However, RiddiSiddhi Bullions Limited is confidents and still believe prospects for rsbl gold coins and bullions to make a comeback, betting that the inability of governments and central banks to normalize stimulus policy will see it climb again. Currently the Federal Reserve has kept additional stimulus and interest rates on hold.  So, some analysts still believe that the metal continues to remain an investors favourite for the time being. 

The outlook for gold is challenging as yields rise and a general risk-on tone across markets impacts safe haven demand. The surprising resilience of the USD is at the core of this drop in investor appetite, and profit taking has emerged following gold’s strong start to the year. 

While gold is seen as an inflation hedge, higher inflation expectations have pushed yields up, increasing the opportunity cost of holding non-yielding bullion.

Gold should still benefit from continued loose monetary policy and low real interest rates this year. 

The recent rise in yields suggests that some investors are starting to anticipate a tightening of policy sooner than anticipated to accommodate a potential rise in inflation.

There is a cycle that finds correlation between a series of events. Let’s have a look. With central bank support removed, bonds usually fall in price which sends yields higher. This can also spill over into stock markets as higher interest rates means more debt servicing for firms, causing traders to reassess the investing environment.

As we know that uncertainties are bound to continue in the economic environment, we would not advice reducing your gold exposure. In fact, any form of uncertainty promotes bullish sentiment thus compelling investors to own gold and add resilience to their portfolio.

Gold continues to look attractive

When gold rallied, majority of the market layers jumped into the bull’s band wagon. Now that gold is showing bearish sentiments, analysts and traders have revised their forecasts for gold, but nonetheless still expect prices to recover from current levels. There are some who even believe that gold will reach new highs this year. 

Gold has benefited from action by central banks to slash interest rates and pump cash into the economy, which raises the threat of inflation and reduces returns on bonds, a competing asset class. But while global economic recovery may weaken the dollar, helping gold by making it cheaper for buyers outside the United States, it also is likely to raise bond yields, making gold less attractive confirms top gold dealer RiddiSiddhi Bullions Limited.

Gold has always been perceived as a safe place to store wealth, as a hedge tool and as a safe haven asset, owing to this gold was seen touching record highs of $2072.50 as the world was hit by the pandemic.

But as news of successful vaccine rollout was out, gold prices started dipping. A vision of positive and gradual economic growth, compelled investors to diversify their money into others assets likes equities that generally shoot up over economic growth and boom.

Lately also gold was significantly influenced by the price movements of other asset forms.

Benchmark U.S. Treasury yields rose to their highest levels since March on Friday, while inflation expectations edged up to a six-year high.

Higher inflation boosts gold but also lifts Treasury yields, which in turn increases the opportunity cost of holding bullion.

The week opened with dampened trades due to the holiday After Presidents Day Holiday on Monday, in the US, the Dow Futures indicated +244points gain, on sizeable stimulus with senate hope.

China is closed due to the Lunar New Year break. The Chinese Holiday will be in progress for another two more days and hence data inflow will be low.  But US retail sales data for Feb and PPI will be key at 7.00 pm IST. Gold trying to take out $1815-1820 barrier and, in the meanwhile, silver moved to $28 which is eluding since last week. US markets on life highs and ending the run up on Covid relief funds coming from Biden’s admin. 

U.S. President Joe Biden pushed for the first major legislative achievement of his term on Friday, turning to a bipartisan group of local officials for help on his $1.9 trillion coronavirus relief plan.

U.S. Treasury Secretary Janet Yellen on Friday urged G7 finance leaders to “go big” with additional fiscal stimulus to recover from the COVID-19 pandemic.

Physical gold demand eased last week in India as volatility in domestic prices put off buyers, while interest for silver remained strong in Singapore and Japan.

Retail Sales data will likely be our biggest data point, and focus will be on the discussion of minutes from the most recent FOMC meeting, released on Wednesday. The lack of scheduled data doesn’t presuppose a calm market, of course. Presuming the second impeachment trial of Donald Trump is wrapped up (or close to it) by Tuesday, all eyes and effort will be on the efforts to pass the Biden administrations COVID-19 rescue package.

We expect gold to perform well in 2021, although at a slightly more subdued rate compared to 2020.

News packed week for gold

 Gold cracked towards the low of November, where postmodern vaccine, it was sold out to $1767. Now the situation is slightly different since U.S Job situation has been improving gradually. New stimulus package in the US will help sustain jobs and economic growth. That’s why gold slipped and we need to address caution says most of the top gold dealers in India. But before that, markets were also waiting for the key jobs numbers. 

The Friday US Jobs report was pretty worrisome for the policy maker. The payrolls for Jan 21 was 49K against expectations of 85K and the unemployment rate shot up to 6.3 % as the low profile job additions were high. Still the Nov and Dec 2020 negative adjustment was not showing a healthy sign on job situation. Its impact was seen largely on USD index which tumbled from 91.65 to 90.9. 

Last Friday, the US employment report showed a smaller than expected increase in jobs across the country, raising concerns of a slowdown in the labor market that could potentially impede recovery in the world’s largest economy following the coronavirus crisis. 

The disappointing figure sent the US dollar lower after it had touched a two-month high over the past few sessions, helping boost gold prices.

Spot gold rose 0.1% to $1,813.99 per ounce and U.S. gold futures gained 0.2% to $1,816.50 during Monday’s trading session. 

The dollar fell from an over two-month peak on Friday after a U.S. jobs report indicated a slow recovery from the impacts of the COVID-19 pandemic. A weaker dollar makes gold cheaper for holders of other currencies believes analysts from RSBL.

The employment report on Friday showed job losses in manufacturing and construction, two sectors which have been propping up the economy.

U.S. President Joe Biden and his Democratic allies in Congress forged ahead with their $1.9 trillion COVID-19 relief package on Friday.

Early on Monday, gold prices are on the rise on the back of a disappointing employment report which brought back worries about the pace of economic recovery in the US and weakened the US dollar. 

The weaker jobs report also supported the safe haven appeal of gold as it further highlighted the weakness caused to the US economy by the coronavirus pandemic, which remains ongoing despite the rollout of vaccines. Key sectors of the economy, manufacturing and construction, suffered the most severe job losses.

Prices were also climbing higher on the back of improvement in demand for physical gold among consumers in China and India. The upcoming Lunar New Year holiday in China has spurred sales of gold while Indian retail consumers spent more on gold after its domestic rates slid lower.

Another significant factor that triggered gold was Bitcoin. The BC bulls got an electric jolt to the upside when it was just announced that Tesla has invested $1.5 billion in Bitcoin and that the electric vehicle maker will incorporate Bitcoin into its operation. Gold prices also pushed higher about the same time the Tesla news came out.

This week can show significant movement in gold as Wednesday is a packed day, as Fed Chair Powell will also be speaking about the labor market at a webinar hosted by the Economic Club of New York. Later that evening, the U.S. Federal Budget Balance will be published, while on Thursday, initial jobless claims numbers will be released.

Gold prices are the cusp of a breakout or stalling at the low $1,800s this week, depending on U.S. inflation data and a speech by Federal Reserve Chair Jay Powell that could set the tone for longs trying to find their feet after last week’s shake-up in the yellow metal.

Any of these data releases, along with Powell’s speech, could determine the direction and velocity for gold this week

Union Budget 2021- its a 10 on 10

Presenting the Union Budget 2021-22, Finance Minister Nirmala Sitharaman announced that the custom duty on gold and silver will be rationalised to bring them closer to previous levels.

Gold and silver presently attract a basic customs duty of 12.5 per cent. The custom duty on gold has been reduced from 12.5 to 7.5% which has pleasantly been beyond expectations. 

RSBL Gold dore bars and silver dore bars will attract customs duty of 6.9 and 6.1 per cent, respectively, as opposed to the existing rates of 11.85 per cent and 11 per cent respectively. These items will also attract Agriculture Infrastructure and Development Cess at the rate of 2.5 per cent.

While gold and silver will attract agriculture infrastructure and development cess at the rate of 2.5 per cent and social welfare surcharge of 10 per cent. Including the GST, the total tax on gold and silver would be around 13.75 per cent, which was at 15.50 per cent, earlier

Since the duty was raised from 10 per cent in July 2019, prices of precious metals have risen sharply. To bring it closer to previous levels, custom duty on gold and silver has been rationalised. 

As far as post budget reactions are concerned, gold prices plunged over Rs 2,100 on Monday after the Union Finance Minister Nirmala Sitharaman announced the changes in customs duty rate for precious metals. 

The reduction in duty has been warmly welcomed by the entire jewellery and bullion industry as it will result in an increase in physical demand for the yellow metal (which has been dampened due to the pandemic) and at the same time it will compress down illegal gold importing channels.

Further more , income tax assessment has been reduced from 6 years to three years. This will reduce the burden on the tax payers.

Analysts from RiddiSiddhi Bullions Limited feel that the government has given its best and introduced many good schemes, which will work in the favour of the Indian economy. Lot of money has been pumped in to the economy for revival and sustainability. We will witness a significant growth and developments in the form of infrastructure, jobs, industrial development.etc

The much awaited budget during the pandemic has lived up to the expectations as the government has tried from all sides to push economic growth and development.

For people at RSBL the budget is a sure shot 10/10 as players across the sectors has been quite satisfied with the new policies and its spill effect was seen on the equities markets as it rose high

Gold will benefit in the long run

Last year was very challenging for gold. At the same time it was a great platform for the yellow metal to once again prove its safe haven appeal. Investors jumped in to the market, shifted funds from other assets class to gold. There was significant portfolio diversification that was witnessed. While other assets were struggling to sustain, gold and other precious metals were taking complete advantage of the pandemic. 

Almost a year down the line and gold has a completely different story to tell. Gold seems to be losing its shine as it declines. While gold has reached its life time high of $2000 in August 2020, today it lies at $1850. 

Top gold dealers in India and across the globe are of the opinion that the massive stimulus packages and renewed animal spirits have seen its price fall. Some believe that this downfall will continue at least for the next 6 months owing to the following reasons-

US Dollar- dollar and gold are always inversely proportional. A strong dollar is bad for gold, since it makes the metal more expensive for those buying in other currencies. Better GDP growth and high US treasury yields will result in a strong dollar and a weakening gold. 

Risk Taking- there are many factors that will compel investors to increase their exposure to riskier assets at the expense of gold.

• Fiscal stimulus
• Monetary support
• Vaccination
• Positive growth and revenue

These all will lead to a shift in focus from gold to other assets.

Even though the above mentioned factors compel us to believe that gold will gradually lose its lustre, but we can’t forget the much known fact that gold has always remained consistent since ages. Precious yet durable, finite yet accessible enough to be traded, bullion of gold is worth roughly the same now as it has always been. It has time and again proven itself able to withstand volatility while other assets rise and fall.

Many investors and RSBL analysts still have faith in the yellow metal and believe that this downfall is just a bubble and gold will soon recover and cross new highs. Gold has been facing challenges but the larger picture seems to be different

Equities- Even if equities can continue their forward momentum, a rise in inflation looks increasingly likely. Inflation would be bad news for traditional asset classes (bonds in particular), but good for gold, which would see its value rise at the expense of the dollar’s. It would also be unaffected by any change in interest rates while shares could suffer.

Crypto currency- The value of crypto currencies is almost entirely speculative. That is to say, whereas an asset like gold finds value in its commercial and industrial uses, Bit coin’s lies solely in what people are willing to pay for it.

Risk taking- gold has always been used as a hedge tool against volatility. The basic appeal of being a safe haven asset has always been alive in gold. This means that even when risk appetites are highest, there is always a good case for holding at least part of a balanced portfolio in gold.

All in all, the noise in the market says that gold is here to stay and whatever be the global situations it will benefit gold in all forms. 

Gold Manages to recover

 Last year we saw gold being one of the best performing assets amidst the crisis mainly due to the following reasons-

• high risk 
• low interest rates 
• Positive price momentum – especially during late spring and summer.

While on one side it reached life time highs, on the other side it also had one of the lowest declines during the year, and thus helping investors limit losses and manage volatility risk in their portfolios.

We have seen repeatedly, that gold always performs well during equity market pull backs and inflation. Whenever inflation has crossed 3%, gold prices have increased 15% on an average. 

Further, gold has been more effective in keeping up with global money supply over the past decade than US T-bills, thus better helping investors preserve capital.

Gold prices plunged to a six-week low of US$ 1,805 before bouncing back quickly on Monday. The rising US Dollar and uncertainties surrounding US President-elect Biden’s 1.9 trillion stimulus plans appear to be the primary weighing factors. Market sentiment is tilted towards the cautious side after US equities pulled back from their recent highs despite robust corporate earnings. As US markets are closed for a public holiday, thinner liquidity conditions could exacerbate price volatility.

The $1.9 trillion new relief package by Biden is going to help U.S economy sustain its falling growth. However, the bond yields cracked since then and another worry remains on 20th Jan. Over Biden’s Presidential ceremony as 50 U.S states are under alert for any kind of riots. Gold needs recover some lost ground of Thursday and Friday, since U.S Bond yields dumped. Over all the activities, now investors will keep a watch on the USD index. 

This week opened on a positive note for gold. We saw gold prices rising on Monday after hitting a 1-1/2-month low earlier in the session, as prospects of a massive U.S. coronavirus relief aid outweighed a stronger dollar and lifted bullion's appeal as an inflation hedge.

However, trades remained low profile as US observed holiday on Martin Luther King Day

The gold market remains relatively supported at these levels, as the current run of the U.S. dollar has more to do with safe haven, rather than a discernible pivot to a stronger dollar.

U.S. President-elect Joe Biden last week unveiled a $1.9 trillion stimulus package proposal to jump-start the economy and said he wants 100 million COVID-19 vaccine shots during his first 100 days in office. Is considered a hedge against inflation and currency debasement, likely from large stimulus

The U.S. dollar .DXY hit a four-week peak against rival currencies, making gold expensive for holders of other currencies.

RiddiSiddhi Bullions Limited, one of the top gold dealers in India remarks that the market view remains bullish for the long term as the U.S. dollar is expected to remain structurally weak in the long term.

Many investors are now concerned about the inflationary pressures owing to-

Low interest rate environment

Growing money supply

There are a few key drivers that will significantly influence gold prices and also affect various sectors of demand and supply-

• Economic growth
• Risk and insecurity
• Opportunity cost
• Momentum

In this context, we expect that the need for effectual cautiousness and the low-rate environment will keep investment demand well supported, but it may be heavily influenced by the perceptions of risk linked to the growth and development of the economy.

A big hardship for gold bulls

Gold extended the bounce from six-week lows on Tuesday, finishing Wednesday,  with moderate gains well above the $1850 level. On Wednesday, the yellow metal gathered pace to test the $1872 hurdle ahead of US CPI reports.

Gold prices fell back again in London trade Tuesday, retreating $20 from a rally to $1863 per ounce before steadying as Western stock markets fell once more against a backdrop of worsening Covid infection and death rates, supply-chain issues with mass vaccinations, but also a rise in longer-term interest rates in the bond market ahead of the "trillions" in new borrowing due from incoming US President Joe Biden's spending plans.

Following last Wednesday's violent attack on the US Congress by a mob backing Donald Trump, a 'source' at the FBI warned of further protests and terrorism by pro-Trump supporters at next week's inauguration of Biden as President.

Trump is being pressured to resign and yet there is no response from him. However as mentioned, Biden has reassured that there would be additional stimulus coming in. A Fed Government stated good US growth prospect and bond purchase program. 

A much larger financial package of $2 trillion is possible as per the early reports suggest by Biden on taking full charge. On the other hand, US 50 states under server alert during Biden’s oath ceremony on 20th January, as President Trump is defiant and put up only a small remark for his supporters. 

Gold drifted higher in quiet mid-week trading, with the $1850 looking like the support level – at least for now. It was up $3 at $1860 during Thursday’s trading session. Generally speaking, the markets are in the quiet mode this morning, with nothing standing out save the latest chapter in the unfolding saga in Washington.

Gold came into a difficult phase as it comes to $1830-$1835 final support. Since bond yields are staying positive and USD again attempting 90.4, it’s a big hardship for gold bulls. This sentiment was echoed by many top gold dealers in India. 

For traders it’s imperative to hold $1822.9. A final stop and support bands of $1830-$1836, once it’s done, gold will fast move to $1855-1865.

Right now, gold has a strong support at $1,820 and that is because the expected stimulus package will increase the inflation rate which is significantly important for gold prices.

2021 starts with a choppy ride

2021 began with a choppy ride for the US and EU markets. The Dow and S&P opened with a new life high and later cracked by 2.5-3% from the highs. But later reduced their losses to half.

Gold after hitting a precise $1962.5 targets, crashed for $1902 to fill the gap. The USD index stayed lower at around 89.4 but the bonds yield made massive 10-15% gains on Wednesday. Gold after gaining $50 on Monday and losing $50 on Wednesday, showed significant volatility. These fluctuations are expected to continue as there would be a line up of significant global news from vaccine to new mutations, from stimulus to geopolitical worries.

Currently, there are two worries that would be vexing investors in the precious metals sector in recent weeks believes the RSBL analysts.

One is that gold and silver won’t rise much because big banks like JP Morgan will cap it by dumping onto the paper market. The key point to keep in mind is that gold is “real money” and this being so,  the idea that a currency like the dollar can collapse towards zero and gold won’t go up because the banks will be selling it on the paper market is both absurd and ridiculous – what would happen is that an untenable massive gap would develop between the price on the paper market and the price on the physical market, and the paper market would become rapidly irrelevant and obsolete, so we don’t have to worry about that. In fact, to the extent that they are actually suppressing the gold price, all they are doing is creating a “pressure cooker” effect that will lead to a massive upside explosion, but you certainly don’t want to wait for that to happen before you take positions across the sector.

 The other is that Cryptos are stealing “gold’s thunder” and siphoning off funs that would otherwise go into the precious metals. One reason that Cryptos are going ballistic now is that the NWO (New World Order) plan to use Cryptos as the vehicle to pay the Universal General Allowance (UGI) to the dispossessed serfs who are permitted to live in their new system. In order to qualify for this they will have to be fully compliant with all the dictates of their Masters which will of course include being vaccinated.

There is also a misplaced belief that you are “outside the system” when you buy Cryptos, but you won’t be outside the system if they decide to “pull the plug” on the internet, a possibility raised in this dystopian short film Dark Winter, which they may do because the internet is the only way to find out the truth about what is going on. The NWO are believed to be developing and perfecting their own Cryptos, and when it suits them they will simply outlaw or block all of the others, or make ownership of them punishable by a jail sentence – don’t forget they are above the law and can do anything they like, like the current lockdowns which are illegal. At least with the Precious Metals you can physically own them and they will not disappear if banks close their doors or the internet is taken down believes the top gold dealer in India RiddiSiddhi Bullions Limited.

Gold has already punched through its 2011 highs last year, but has since reacted back below them which are thought to be a normal reaction prior to renewed advance. A big concern with a pattern like this is that it could stall out for a long time marking out a Handle to complement the Cup before continuing higher, but this doesn’t look likely on this occasion because the dollar looks like it is on the verge of collapse with the Fed set to continue attacking it relentlessly.

We now have a very rare setup for gold which is in position to “go ballistic” as the dollar collapses. The dollar is being intentionally destroyed by the Fed which is creating dollars in vast unprecedented quantities in order to buy up distressed assets on the cheap and in order to pave way for the new “digital dollar”. We are in the last stages of the fiat endgame where money creation goes vertical, quickly leading to becoming worthless, as happened in Venezuela and Zimbabwe.

Its Wrap Up Time

 In the year 2020 the new positive was the word negative. Well for gold, it was all positive only. The yellow metal rose more than 22% since the start of the year, with the highest peak reached in August when it hit a new record high of $2,075 an ounce. Since then, gold has been consolidating below the $1,900 an ounce level.

In 2020, the economic and social uncertainties triggered by the coronavirus pandemic turned the spotlight on gold as a safe haven.

RSBL analysts argued that it was a sharp turn in global monetary policies that led to a low interest rate scenario and unprecedented liquidity, which began in mid-2019, gave a boost to gold price in all major currencies, making the yellow metal attractive for investors.

There were restrictions, lockdowns, weakening economies, declining dollar and overall a poor global growth which pushed investors towards gold. Though vaccination campaign did try to shake gold, but it couldn’t break it. Gold managed to recover the drops it faced as the vaccine ride began.

In the domestic market too, gold opened this year at Rs.39, 199 and steadily rose to Rs.56, 191. The price of the yellow metal reached an all-time high of Rs 56,191 per 10 grams at MCX and USD 2,075 an ounce in the international market in August.

RSBL Gold prices in India got an additional support from rupee depreciation against the dollar during the year as spot rupee was down by around three per cent year-to-date.

Further, the sharp decline in US equity indices in the first half of the year and the fall in real yields drove investors out of dollars which boosted buying in gold.

As we approach 2021, gold will remain in focus for investors. The main drivers cited include

Inflation-let’s assume that many people do get vaccinated and the vaccine is effective, then the economy should take off in a serious way in the second half of next year. The inflationary scenario would then become a real possibility, which would be positive for metals

Inflation will be a big concern to watch next year, which will encourage a flight to gold's safety trade.

Weaker U.S. dollar- The dollar could weaken on the back of more stimuli and that could help gold prices rise once again. Also, inflationary expectations due to the massive stimulus can be seen as a positive factor that could attract investment buying once again in 2021.

Economic concerns- With all this money printing we've gone through in 2020, next year will be the year we are all illusioned of the notion that we can print money without consequences. Gold can go through $2,100, and we could possibly challenge $3,000.  Rising debt-to-GDP ratio, quantitative easing, and the narrative in Modern Monetary Theory (MMT) as the reasons behind gold's move to new record highs next year.

Currency debasement fears- For gold, this means new all-time highs with more investors choosing to diversify into the precious metal in order to protect themselves from rising prices and currency debasement.

Debt- Vaccine is not going to cure the amount of global debt. Central Bank policies would continue to remain accommodative in spite of a successful vaccine.

Central Banks low interest rates and easy liquidity -_Next year will see central banks holding their foot down on the stimulus pedal with no chance of rates going higher which keep the bullish sentiments alive for the yellow metal.

Stimulus package. - Fed has been consistent, and we will see more fiscal support next year. This is the main reason why gold will make a strong run-up towards $2,300. Central banks across the globe, have pledged to keep rates low and easy liquidity to aid growth. Further, a stimulus package from the US government will add to the existing dollar liquidity in the system and may end up weakening the greenback and strengthening gold

Equities Another key trigger that will boost gold towards $2,100 next year will be stock market volatility. The U.S. share market is trading at historical extremes because investors are optimistic about the vaccine curing it all. In 2021, we are likely going to have equity market volatility throughout the year, and that should be supportive of precious metals prices.

Senate Runoff elections- the key driver that precious metals traders are eyeing is the Jan5 Senate runoff elections in Georgia. If Democrats win both the seats that are up for grabs, it would give them control of the Senate agenda and the fiscal policy is likely to stay loose which would heavily weigh on the green back and be bullish for the precious metals.

Overall, it is going to be a very strong year for gold. You are going to see unprecedented fiscal and monetary stimulus continue in the first half of the year confirmed the top gold dealer in India, RiddiSiddhi Bullions Limited.

These were the key drivers that will play a key role in influencing gold prices towards the higher end. 

Not to forget the very important Vaccines- A successful vaccine drive is still far from the near reality. We don’t know how many people it will reach out, how effective will it be, will it be able to combat the new mutation etc.  If the vaccine is not as effective or less than 50% of the population takes the vaccine, then the economy is going to struggle, and both the government and the Fed is not going to have any option but to increase stimulus which will further be constructive for gold.

So over all, the Bull Run continues for gold in 2021. Even if the vaccine works, there are concerns that will suppress the vaccine sentiments and will continue to push gold higher maybe to new life time highs.

Trump signs the stimulus bill

 Gold prices were thrown about last week as the dollar rebounded sharply from 2-½ year lows after the British pound crumbled on fresh Brexit woes.

Gold tumbled early in the week on the dollar's strength before recovering in recent days on the stimulus drama. The rebound fell short, however, of its Friday settlement of $1,888.90, resulting in the weekly loss reported RSBL team.

Gold prices jumped as much as 1% on Wednesday, bolstered by a weaker dollar, while investors kept hopes pinned on a U.S. stimulus package even after President Donald Trump threatened to not sign the relief bill.

Gold prices rose on Thursday but still finished with a weekly loss, after the twist to a U.S. coronavirus stimulus package and the dollar’s unexpected gains in recent days prevented the yellow metal from extending a three-week rally.

President Donald Trump threatened to not sign an $892 billion coronavirus relief bill, seen as a lifeline for the nation’s pandemic-battered economy saying the amount in the stimulus checks should be increased.

Gold has also been tugged around since Sunday’s deal by U.S. Congress on a $900 coronavirus stimulus and $1.4 trillion in federal government funding. Both those packages are now at a midpoint after President Donald Trump’s refusal to sign them, particularly due to his objection over a measly $600 in personal Covid-19 aid for needy Americans approved by his own Republican party.

But that didn’t affect gold much because Even if Donald Trump declines to sign the bill, it is widely expected that Biden will make it pass.

But against all expectations, the Trump signed the stimulus bill on Monday. Amidst these speculations and developments over weekend Brexit deal, uncertainty over these issues will finally be clear. 

Trump on Sunday signed into law a $2.3 trillion pandemic aid and spending package, restoring unemployment benefits to millions of Americans and averting a partial federal government

The gold (0.27%) price moved higher in early EU trade on Monday. One of the reasons for the move higher in gold came as outgoing US President Donald Trump signed the COVID 19 relief deal.

Volatility continues for gold and silver this week amid a rollercoaster on the U.S. stimulus, new virus strain, and volatility in the dollar index.

Gold markets have gone back and forth during the course of the week, showing signs of exhaustion. Ultimately, top gold dealers across India think that if we get a pullback, we could see an opportunity to pick up gold “on the cheap.”

Over the long term, markets look volatile with a lot of instability on geopolitical grounds. Markets continue to remain in panic mode over the new strain. Moreover massive amount of liquidity has been forced into the market. 

As the uncertainty continues, it’s expected for investors to move to gold in order to protect their wealth. Given this, gold is expected to wave goodbye to 2020 on a positive note.

Buy on Dips

 Gold price attempted to push through the key psychological resistance level of $1,900 an ounce this week but ended up settling just below that on Friday. Gold prices hollowed in on Friday as the decrepit dollar bounced back from 2-½ lows. But that didn’t stop the yellow metal from posting a third straight weekly rise from gains accumulated on bets that the U.S. Congress will soon pass another corona virus fiscal relief.

Gold futures settled with a loss on Friday, but tallied a gain of about 2.5% for the week following a decline in the U.S. dollar. Top gold dealers in India and across the world believed the following to be reasons that had an impact on the dollar:

There were three major events this week that had a profound impact on U.S. equities, gold, silver and the U.S. dollar.

1. Bipartisan deal- The first major event was a renewed optimism on the revision of a bipartisan proposal which was introduced last week. 
2. FOMC Meet- a key event that had a huge impact was the information from the Federal Reserve that was presented through this month’s FOMC statement and the following press conference by Chairman Powell immediately following the conclusion of the last FOMC meeting year. 
3. Vaccine- The third event that influenced the financial markets this week was the rollout of a Covid-19 vaccine that had just been granted emergency use authorization by the FDA.

After US Fed pretty dovish views we saw a collapse of the US Dollar and a big run up in gold and bit coin on Thursday. Though it hit most mentioned targets and even surpassed it to kiss $1901 an ounce.

Analysts from RiddiSiddhi Bullions Limited viewed that with the end of the pandemic was in sight, the U.S. dollar is behaving less like a safe-haven asset, and the currency is weakening, adjusting to its own fundamentals, suggesting strong support for gold.

Gold markets initially fell during the week, but then turned around to recover quite nicely to break above the top of the shooting star from the previous week. This suggests that perhaps gold is trying to turn things around and take off again. The $1900 level will offer a certain amount of psychological and structural resistance, but I do think that we break above there and eventually go challenge the $1950 level. That being said, it does not mean that we get there right away.

So it’s about the $900 billion Covid package from the US. Unless the USD index will now move beyond 90.5, gold will see bounce towards $1905-1915. On Friday the gold market was quite zig zag. Gold has rallied again during the week, breaking above the top of the shooting star from the previous one. It suggests that we still have plenty of momentum.

We would suggest buying gold on dips on levels $1878/1863/1858 and upper side it is expected to reach $1904/1930. So buying in dips would be the investment mantra.