GOLD LOSES DIRECTION: RSBL

By Mr. Prithviraj Kothari, MS RSBL

Amidst continued uncertainty regarding the Fed’s monetary policy, gold has off late, lost direction. 

It was moving in the positive territory. But on Friday, but gold erased intra-day gains, closing down on the day and lower on the week. The yellow metal yielded to pressure from a strong rally in the U.S. dollar.

The dollar gained ground, especially versus the Euro, following this week's European Central Bank meeting that hinted at further monetary easing this year. The dollar also garnered additional strength in the wake of interest rate cuts by the People's Bank of China (PBOC) on Friday. 

Some market analysts feel that the overnight monetary policy action by the Chinese central bank has created some mixed sentiments in the market. Moreover, before China’s announcement, the European Central Bank (ECB) announced that it is leaving the door open for more quantitative easing measures or even pushing the deposit rate deeper into negative territory in December.

Gold was a little changed on Thursday afternoon in London after the ECB decided to leave the rates unchanged.

The spot gold price was last seen trading in the range of $1,162.8 to $1,172.0.

Adding to the sentiments, was data indicators coming in from US: 

•  US weekly unemployment claims rose by 3,000, to 259,000 in the week ending October 17, 2015. However, they were below the forecast of 265,000 and under the psychologically important 300,000 mark.

• The House Price Index (HPI) for August came lower than expected at 0.3 percent as did CB leading index at -0.2 percent.

•  Existing home sales were better than expected at 5.55 million.

Now that we have some crucial data coming in next week, not only from the US but other leading and developing economies as well, some analysts feel the Federal Reserve is losing its dominance in the marketplace.

Gold traders are bracing for a heavy slate of U.S. economic releases next week, along with key central bank meetings from the U.S. Federal Reserve and the Bank of Japan. The focus could be on BoJ that meets next week and there is a growing expectation that it will announce new easing measures, which are expected to remain steady.

Moreover, the central bank is also slated to release its Outlook Report with forecasts for inflation and the GDP. 

Meanwhile in the domestic market, we saw a sluggish demand for gold. Following the nine-day Hindu festival of Navratri, India celebrated Dussehra on Thursday where demand for gold usually rises as people consider it auspicious to buy gold on this day.

But, a slow and easing demand for gold further declined the prices even though globally gold prices were rising.

The fourth quarter is typically a strong period for gold purchases in India, the world’s second biggest bullion consumer, due to festivals and weddings.

Demand from rural areas has been hit particularly hard, as farmers suffer from the first back-to-back drought in India in three decades.

Two-thirds of gold demand in India comes from farmers and residents of small villages who see jewellery as way to store wealth. But lower-than-normal monsoon rainfall this year due to El Nino weather pattern has eroded rural incomes.

One of the most awaited meetings of the Fed, due on October 27-28, could turn out to be a non-event for gold traders as markets speculate a delay in interest rate hike. The Fed's statement will be released on Wednesday and there is no press conference associated with this meeting. 

Apart from the Fed policy, traders are also monitoring the U.S. debt-ceiling situation. The U.S. federal government is moving closer to the deadline where it needs to raise the nation's $18.1 trillion borrowing limit.

The important reports coming in next week are:

·         Monday: Home Sales

·         Tuesday: Durable goods and consumer confidence

·         Thursday: Third quarter GDP and pending homes sales

·         Friday: The core PCE index on Friday. 

Next week's main event:

These events may provide clues of economic strength and inflation that could support potential for a Fed rate hike in December. 

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-
"Data- Dependent Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/data-dependent-gold.html
 

DATA- DEPENDENT GOLD

By Mr. Prithviraj Kothari, MD, RSBL

This week gold continued to hover around the levels of $1176.75 and broadly the key trade range for the yellow metal was $1170- $1175 an ounce.

Gold reached a four-month high of $1,192 on Thursday but was unable to maintain this level, because the US dollar was driven up by higher than expected US inflation figures for September, which in turn put pressure on gold.

Fed has set inflation target for years as it’s a part of the dual-mandate along with full employment. But Inflation has failed to meet the Fed’s target.

Persistently low inflation has led some Fed members to remain dovish on the apt timing for a stabilization of US monetary policy.

At the beginning of the week, Chicago Federal Reserve president Charles Evans said earlier today that he would prefer to wait until 2016 to raise interest rates, citing inflation as a central impediment.

Moreover, Data released on Thursday showed that the US labor market is steadily recovering despite the worrisome September job’s report – weekly unemployment claims came in at 255,000, below the consensus of 269,000.

Apart from this some other important data released through the week were-

• US CPI month-over-month in September met expectations of a 0.2 percent decline

• PPI month-over-month in September dipped 0.5 percent, disappointing market expectations of a 0.2 percent drawdown

• Empire State manufacturing index for October at -11.4 was worse than the expected -7.3

• The Philly Fed manufacturing index at -4.5 missed the -1.8 forecast

• Core retail sales month-over-month in September fell 0.3 percent, below the forecast of -0.1 percent. Retail sales over the same period rose 0.1 percent, just missing the 0.2 percent consensus

•  Labor's Bureau of Labor Statistics (BLS) said its Consumer Price Index fell by 0.2% for the month of September, in line with consensus estimates. A month earlier, the reading fell by 0.1% in August. On a year over year basis, the headline reading is identical to its level 12 months ago

• Core PPI month-over-month last month stood at -0.3 percent, another figure to miss estimates, which were a 0.1 percent uptick

Though the Core CPI was moving in a positive direction from its previous levels of August still it remained under the Fed's preferred gauge of under 1.5%.

The set target for long term inflation by the Fed is likely 2% before it raises its benchmark Federal Funds Rate.

Gold prices eased in Asia on Friday on profit taking on recent gains on a soft. Outlook for U.S. interest rates. On Thursday morning, the U.S. Department of There were signals throughout the report of weakness in the energy sector, restraining inflationary pressures overall.

The spot gold price was last at $1,176/1,176.20 per ounce, down $5.90 on Thursday’s close. 

Jobs data has acquired greater significance after the US Federal Reserve made its approach to the normalization of monetary policy entirely data-dependent.

Gold drifted lower still on Friday morning in Europe after dollar continued to pare earlier losses thanks to better-than-expected US jobs data.

As dissent grows in the Federal Reserve over the appropriate measures for 2015, the dollar has deteriorated to the weakest mark since August 25.

Various Fed members are growing more vocal in their view that the US economy is not ready for a federal funds hike – in direct opposition of Chairwoman Janet Yellen.

Yellen, along with vice chair Stanley Fischer, have said recently that a normalization of US monetary is still a viable option for 2015.

However as per market analysts, the FOMC is not seen lifting rates until March at the earliest.

While the market is once again divided into bearish and bullish supporters, the yellow-metal has found support as the market’s pricing of the next US Federal Reserve rate hike is pushed out.

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-

"Ambiguity For Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/ambiguity-for-gold.html

AMBIGUITY FOR GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

As we all know, lately gold has been majorly influenced by any data released from the Fed regarding its interest rate.

Gold prices dropped in Asia on Thursday as China markets returned from holidays and investors stake positions ahead of Fed minutes later in the day.

Trading activity had become more muted as the September Federal Open Market Committee (FOMC) meeting minutes approached.

Investors awaited the release of the minutes from the Fed's September meeting on Thursday for further hints on whether the U.S. central bank could raise short-term interest rates before the end of the year.

A combination of a weakening US economy and sowing down Chinese one, led to a delay in the rate hike expectation.
Now majority of the market players believe that rate hike won’t come in before March 2016.

Gold prices climbed on Friday morning after the release of minutes of the Federal Reserve’s September meeting raised speculation that the US central bank could wait until next year before tightening monetary policy.

Spot gold was last at $1,154/1,154.40 per ounce, up $14.40 on Thursday’s close. Trade has ranged from $1,139.50 to $1,154.60 so far.

The shifting expectations are helping to weaken the U.S. dollar and in turn boosting gold prices. Early in Friday’s session, December gold futures ended up hitting their highest prices since late August and are preparing to end with gains of almost 2% for the week. As of 12:40 p.m. EDT, December gold last traded at $1,158.70 an ounce.


One of the main reasons, apart from soft data, that has delayed the rate hike is the limo inflation in the US. It has prevented the central bank for raising rates from near-zero levels, where they have been since December 2008. 

The FOMC decision not raise the federal funds rate has led a majority of market participants to look at 2016 for a normalization of US monetary policy.

To state the exact month would be quite difficult but it could be around March or June 2016.

The Fed has been locked in an intense debate over the timing of a rate hike with sagging inflation impeding a launch-off.

Interest rates have been at near-zero levels since December 2008 and haven’t increased since 2006.

The other data released along were-

• Weekly unemployment claims came in at 263,000, besting the forecast by 9,000 and under the psychological 300,000 mark.
• September import prices month-over-month fell 0.1 percent, beating the forecast of -0.5 percent
• Wholesale inventories month-over-month were in-line with projections at 0.1 percent 

The FOMC minutes elaborated on its concerns about global markets, particularly the Chinese slowdown.

The September minutes released by the FOMC Thursday evening suggested that policymakers are unlikely to rush to tighten rates amid concerns over a China-led global economic slowdown.

The minutes stated that although US economic data releases generally met market expectations, domestic financial conditions tightened modestly as concerns about prospects for global economic growth, centered on China, prompted an increase in financial market volatility and a deterioration in risk sentiment during the intermeeting period.

Chinese markets reopened after a prolonged holiday as US trading session was the final one before a holiday weekend.

The minutes further stated that although US economic data releases generally met market expectations, domestic financial conditions tightened modestly as concerns about prospects for global economic growth, centered on China, prompted an increase in financial market volatility and a deterioration in risk sentiment during the intermeeting period.

Weak data sees gold prices to be in the positive territory. Moreover, in the Indian markets we see demand for gold to move high as the markets welcome one of  the main gold buying festivals- Dussehra and Diwali.

On the contrary gold prices could move lower next week term as markets have priced in renewed geopolitical turmoil in the Middle East.

Most analysts, though, are bullish on gold as the market is seeing a technical shift. Many expect to see prices retest the August highs at $1,170 an ounce and the 200-day moving average at $1,178.20 an ounce.

Though gold prices are likely to move higher, a stronger equity market could take some momentum away from gold.

When the Fed does start raising rates, something it has not done in nine years, it will eventually mean higher rates for consumer and business borrowers. But Fed officials, including Chair Janet Yellen, have stressed that the rate increases will likely be very gradual, meaning that rates would still remain near historic lows for a while.

GOLD GLITTERS: RSBL

                                                                                                          By Mr. Prithviraj Kothari, MD, RSBL

  

Positive data or negative?

Hike rate this year or next?

Strong dollar or weak?

Stable equities or volatile?

Gold up or down?

Well a lot was expected to happen this week. Precisely, the above mentioned questions are somewhere down the line related to each other.

A positive data strengthens the dollar thus increasing the chances of rate hike which would push gold prices down. And even vice a versa.

Till mid-week, majority of the market participants believed that the data due to be released on Thursday and Friday would come in as a surprise package for all. Gold eased on Wednesday, staying on track for its biggest quarterly loss in a year as the dollar strengthened and the market awaited clarity on the timing of a hotly anticipated U.S. interest rate rise.

The spot gold price was seen at $1,112.90/1,113.10 per ounce, down $2.30 on Wednesday’s close and its lowest in around two weeks. Gold was stable on Thursday afternoon in London following the release of mixed US data and ahead of tomorrow’s blockbuster US jobs report.

• On Thursday, US weekly unemployment claims came in at 277,000 under the psychological 300,000 mark. 
• During the third quarter, 205,759 jobs were shed, the largest figure since the third quarter of 2009.
• US PMI came in as expected at 53.1 and construction spending slightly better than forecast at 0.7 percent. 

Now that the unemployment’s claims and PMI data was out, markets shifted focus the significant US non-farm payrolls data slated for release on Friday. The tables for gold turned once the report was out:

• Non-farm payrolls in August sank to 173,000, the first sub-200,000 reading since April.
• The US economy added 142,000 jobs in September, below the forecast of 201,000, and the August figure was revised down to 136,000 from 173,000.
• The only positive news coming in was that unemployment rate was unchanged at 5.1per cent.
• The labor participation rate fell to the lowest level since October 1977 at 62.4 percent, while wage growth was flat. 

The yellow metal prices augmented on the release of lower than expected US data, nearly erasing the losses accrued in five consecutive negative sessions.

Physical demand and volatility did not come in much from the Asian markets as the Chinese markets are closed for Golden Week holidays and will reopen on October 8 and the Indian market too was closed on 2^nd October.

The disappointing non-farm employment change has taken the market by surprise and the reaction has been quite strong such that there are strong sentiments that a chance of increase in interest rates not happen this year thus declining some of the concerns that higher US rates would have a negative impact on emerging markets.

Investors were considering for indications on the timing of the US rate rise. With two Fed meetings now left before 2016, markets now believe that the rate hike won’t happen this year. But there are some who believe that the Fed may announce a rate hike in its last meeting of 2015 due in December. 

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

- Previous blog-

"Gold Directionless- RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/09/gold-directionless-rsbl.html