RSBL Gold Silver Bars/Coins

Friday, 6 January 2012

GOLD & SILVER - What's next?

I predicted a bearish outlook for gold and silver in 2012 with gold reaching 24k-25k and silver 45k-48k. However, my predicted targets were reached quite early and now since this correction has come about, I personally feel that people who purchased bullions at this point will not regret their decision.

From here on, I have a bullish outlook for bullions.

According to me, year 2012 will be good for commodities (especially gold) as compared to other markets. I feel:

1.      Gold’s bull market seems intact where prices spiked higher in August, then corrected sharply in September, but a rally is underway again. Given the stresses the European monetary system is experiencing, we expect the rally to continue. Few corrections are always expected.
2.      The world has become a scarier place in recent months as the European financial system is under severe test. If it does not hold up, the fallout is likely to be catastrophic.
3.      The situation in Asia also needs a careful monitoring as any deterioration in China’s economy is likely to spook global markets and that might well boost demand for safe-haven investments.

Overall, given the falling confidence in the economic outlook and in governments’ ability to get to grips with the situation, I feel there is a high risk of deflation and in such circumstances investors are likely to turn to cash – this is likely to be bullish for the dollar.

However, because faith in governments has waned with their handling of the crisis, we expect investors will not want to rely solely on paper money and will look to spread their risk by holding Gold as well.
Greater monetarisation of Gold is likely to be bullish for prices

As per the India's gold import report, the demand of Gold has reduced from 959 tonne in 2010 to 878 tonne in 2011. Gold has been and will always be considered a safe haven asset.

The reduction in demand can be accounted for following reasons:
1.      The prices of Gold had reached its peak in the year 2011. It was hard to find buyers at these prices as people expected for a correction.
2.      Across world including India, equity markets had lost ground. A bearish tide was rising. In this scenario, investors were required to clear their margin calls and in turn they became the biggest sellers of Gold.
3.      Other income sources like Real estate market etc, were also hit by the progressive rise in interest rates by the government. In turn Economy is slowing down.
4.      To add to the fire, Indian rupee weakening by around 20% against USD proved that one of the fastest growing economies had to slow down.
5.      One of the current trends that has hit jewellery demand is the increased popularity of investment bars and coins. In Asia, jewellery has always seen as both an investment as well as an adornment.

But with prices moving much faster these days and becoming more volatile and negligible making charges with buyback easy, investment bars and coins have provided a more standard product to trade. Due to this we have seen 100% increase in demand for RSBL coins.

Summing it up, according to me, Gold is a good buy for investors at INR 26,000 to INR 26,200 levels whereas Silver at INR 48000 to 48500 levels.

Monday, 2 January 2012


It’s been a wild ride for gold this year with the price surge through the first three quarters of the year and then the collapse in Q4.  The sell-off has confounded many analysts and investors who thought gold would serve as the ultimate safe haven in times of uncertainty.  In fact, the opposite has turned out to be the case with the US Dollar becoming the go-to asset in times of safety.
Gold and silver prices changed direction very sharply throughout 2011: despite the sharp gains of gold and silver prices up until September, precious metals prices changed direction during the last quarter of the year and plummeted in a very short period of time; from this drop precious metals didn’t recover throughout the remainder of the year. Silver price declined below its initial price level from the beginning of the year, while gold price ended the year only 12% above its price level from January 3rd 2011.
Spot gold prices soared to a record above $1,900 an ounce in early September, dipped below $1,600 late in the month, rebounded strongly, and then fell below $1,600 again last week. That's a 16 percent decline in three months, although the shiny metal is still up for the year.
Silver has had a very volatile year so far. Prices all but reached the 1980 high. They peaked at $49.81/oz after rallying 88% from the January low. Since then prices have dropped to $26.06/oz, but have now recovered
Factors that resulted in this downfall were; the FMOC’s decision not to add another stimulus plan (QE3) during the second half of the year, CME’s decision to raise margin on gold and silver, The European Debt Crisis which lead to liquidity problems for banks and traders, strengthening of the U.S Dollar, and shift in market sentiments from considering gold a safe haven to a risky asset.
Year-end selling by hedge funds and tight liquidity in European interbank money markets have also contributed to recent price falls.
Concerns about the euro debt crisis have sent investors scrambling to buy dollars as a haven from risk, rather than gold, which has caused the dollar price of gold to fall.
The market seems bearish for both gold and silver. The world economy is recovering at a very slow pace and the liquidity crisis in getting severe. The main reasons why I speculate a down fall is firstly a slow recovery of the U.S Economy. This may curb the rally of bullion prices. Though there are chances that bullion prices may rise (but not by much) if the Fed issues another stimulus plan (QE 3). Secondly if the EU continues to struggle in dealing with the debt crisis, it may also adversely affect gold and silver prices.
One important thing to note is that CME is likely to keep a vigilant eye on the bullion market and may also intervene and raise margins again if there will be a sharp gain in their prices. Not to forget that if the U.S dollar continues to strengthen then gold and silver prices are bound to fall.
In the Indian markets gold is expected to hover around Rs.24,000 - Rs. 25000 per 10 gram and silver around Rs. 45,000 - Rs. 48,000 per kg. Silver and platinum which are mainly used in industries shall also witness a drop due to reduced demand in line with the global slowdown.

Considering the statements mentioned above, I speculate there is a good chance gold and silver prices will perform poorer in 2012 than in 2011. If there will be another stimulus plan or an event that will stir up the markets then there is a small chance that gold and silver prices will perform better in 2012 than in 2011, but not by much.