SPEAKER AT DUBAI PRECIOUS METALS CONFERENCE 2013

Dubai Multi Commodities Centre - Government of Dubai, has taken an initiative of organizing a Conference with Foretell Business Solutions: Dubai Precious Metals Conference.

Theme of the conference: Enhancing the Global Precious Metals Supply Chain

I am glad to be a part of this conference. I will be providing insights on the topic: Gold consumption giants; opportunities linking the UAE with China, India and the U.S.
1. How can the UAE strengthen its ties with India?
2. What does it take to serve the Chinese markets?
3. Going west; can Dubai explore the third largest consumption hub?    

Time & date of my Speech: 11:15 am – 12:00 noon, 7th April, 2013.
Venue: Almas Conference Centre, Almas Tower, Jumeirah Lakes Towers, Dubai      
Looking forward to see you there!                                        

For further info. kindly check: http://www.dpmc.ae/index.html

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

"0.1% VAT increase on precious metals"

http://riddisiddhibullionsltd.blogspot.in/2013/03/01-vat-increase-on-precious-metals.html

0.1% VAT INCREASE ON PRECIOUS METALS

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

The Maharashtra government will raise the value added tax on gold, silver, other precious metals, diamonds, and jewellery to 1.1% from 1.0% earlier, State Finance Minister Ajit Pawar said today in his budget for 2013-14 (Apr-Mar). 

The government is planning to implement GST and LBT by the end of this year. If this actually takes place, then I feel there was no such requirement for this step. The hike will directly have an effect on imports. Gold price in Maharashtra will become costlier by INR 6,000 per kg(inclusive of Octroi and additional VAT) when compared to other states. This additional cost will definitely reduce the demand for gold in Mumbai and will have a negative impact on the gem and Jewellery sector. 

Mumbai is the hub for jewelry manufacturers. All machine chain bangles are made in Mumbai  along with hand made jewellery which is made in rest of Maharashtra. This additional VAT will compel manufacturers to shift their base to other states. Hence the rate of unemployment will rise. If this tax was levied all over India, then it wouldn't have made much a difference. But since it is levied only in Maharshtra, gold here will become more expensive than other states and people will prefer to buy from other centers. We have already witnessed a shift of silver business to other states. Levy of this extra VAT will also move gold business away from Maharashtra.  It will create a major impact not only on demand but also the workers especially the small business units. The government has to take some initiative to protect the interests of workers and the entire bullion industry.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”


- Previous blog -

"Investors being loyal to gold"

http://riddisiddhibullionsltd.blogspot.in/2013/03/investors-being-loyal-to-gold.html

INVESTORS BEING LOYAL TO GOLD

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold was set for the first back to back weekly advance since January, as investors weighed prospects for more stimulus against improving U.S. economic data. Silver, platinum and palladium headed for weekly losses.

Gold and silver moved away from the weekly gain and slightly declined on Wednesday. This decrease corresponded with the drop of leading currencies against the USD such as Euro and Aussie Dollar. The US Retail Sales report published on Tuesday also showed that economic activity in US grew as retail sales rose last month by the highest rate in months. This could be the reason behind the restrained drop in bullion prices.

The US federal budget report too stated that the fiscal deficit so far in 2013 is 15% lower than in 2012. This too is an indication for a downturn in financial risk of the US economy.

This decline in prices moves an investor away from Gold, as they do not consider gold to be a safe haven asset in such situation.

Stronger U.S. economic data like the lower Jobless claims, higher industrial production etc, recently, has lead to the selling pressure for gold. But again, it can be argued gold prices have held up fairly well in the wake of that stronger U.S. data.

Many investors still believe that there is still upward scope in gold and it is more sensible in being loyal to it. Counting quantitative easing measures in key economies and lurking risks in the euro zone are amongst the favorite reason to own gold as gold is always considered a hedge against inflation and economic distress

Looking at the Asian markets, gold demand was quite calm as most people have already made their purchases last month when gold prices dipped considerably.

However, importers now expect a rising demand for gold once the fiscal year ends and the festival of Holi onsets in India. Holi, Gudi Padwa and Akshaya Tritya are considered to be very auspicious days t buy gold and all these festivals are lined up for the month of March and April.

Bullion market participants will be watching the Federal Reserve's policy meeting next week. A hawkish tone would further hurt investors' interest in gold, but Asian buyers would make purchases if prices drop near February's levels.

Till then one needs to find answers to the following

Will the Euro crisis resurface after months of blissful peace?

A positive takeaway on gold is whether the good US economic data will continue to get better after sequester?

Can central banks continue to contain inflation after the rampant money printing programme?

The current situation seems to set gold as a better alternative should all of the above negative economic sentiment resurface. Gold prices have come down considerably and left an upside gap despite all the negative sentiments it has been receiving. 

We are not gold bugs at all just a humble observer who wish to share our views on why holding some precious metals is important.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”


- Previous blog -

"Is the gold cycle about to turn???"

http://riddisiddhibullionsltd.blogspot.in/2013/03/is-gold-cycle-about-to-turn.html

IS THE GOLD CYCLE ABOUT TO TURN???

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

As the US economy recovers and the investment holdings collapse, the cycle for gold is probably expected to turn. Gold is caught between conflicting signals neighbouring the prospects for continued central bank monetary accommodation. 

Gold traded in a narrow range and hovered around $1,575 an ounce on Wednesday, evoking little interest from investors who switched to riskier assets as confidence in the global economy grew. The exodus of investment from gold-backed exchange-traded funds underscored the sober sentiment for the precious metal and overshadowed physical purchases of the metal in Asia

Private investors added physical gold following the metal's heavy sell off late in February, underpinning a market hit hard by heavy fund liquidation last month.

SPDR Gold Trust, the world's biggest gold ETF, said its holdings dropped on Tuesday in the eleventh session of straight decline to a 16-month low of 1,244.855 tons.

Spot gold edged up 0.2 percent to $1,585, drifting within a $1,564-$1,587 range that it established recently. Spot gold has fallen nearly 6 percent so far this year and is down about 18 percent from a record high of $1,920.30 an ounce hit in September 2011.

The price of gold fell to a seven-month low near $1,550 an ounce on Feb. 21, hit by talk of hedge fund liquidation and fears the Federal Reserve might halt its stimulus earlier than expected. 

Gold prices dipped to two-week low by falling Rs 200 to Rs 29,850 per 10 gm in the domestic market this Friday on stockists selling, triggered by a weak global trend. Silver followed suit and dropped by Rs 360 to Rs 54,960 per kg on reduced off take by industrial units and coin makers.

Traders said stockists selling in tandem with a weak global trend where gold fell before a report that is forecast to show the US labour market improved, damping expectations for further stimulus and boosting the dollar, dampened the sentiment. As expected, there was great improvement in the labour report. Gold lowered On Friday after U.S. employment data showed the economy added many more jobs last month than expected. Employers added 236,000 jobs last month, far above the 160,000 jobs forecast by economists. The unemployment rate fell two-tenths of a percentage point to 7.7%, the lowest level since the end of 2008. The report is a clear indication that the [U.S.] economy is successfully navigating against the headwinds from fiscal graveness.

Attention will now turn to the next meeting of the Federal Reserve's policy board, scheduled for March 19-20, to see if the central bank is any closer to rolling back its easy-money policies in the wake of strengthening economic data. The Fed has said it will consider raising policy interest rates when unemployment falls to hits 6.5%.

Now the question of concern for the precious metals market is that how far the Fed will continue its stimulus plan.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

"Post budget reactions"

http://riddisiddhibullionsltd.blogspot.in/2013/02/post-budget-commment.html

POST BUDGET REACTIONS

Reactions:

Let me first list down the important highlights of the budget with regards to the Bullion, Gems and jewellery Industry:

1. FM has announced to levy Commodity transaction tax (CTT) of 0.01% on all non-agro commodity trades such as Gold, Silver, non-ferrous metals and crude oil.

2. To prevent harassment to passengers, the government has proposed to increase the limit of duty-free import of jewellery via passenger baggage to INR 50,000 for males and INR 1,00,000 for females. The rule has been amended for Indian passenger who has been residing abroad for over a year or a person who is transferring his residence to India.

Budget 2013 has been neutral

          India's greatest worry is current account deficit and when you need more than $75 bln this year and next year to fund current account deficit, I was expecting that a Duty hike is on the cards. Fortunately that is not the case. The government has neither imposed any restriction nor has it hiked the import duty on gold.

I did expect CTT tax to be introduced. But CTT tax will only add INR 300 per kilo of Gold. Though a nominal amount, but unnecessarily added on a common man’s purchase of Gold.  I feel this should have been introduced only when Options product had been established in the commodity’s exchange along with Tax structure that is currently applicable while trading in Equity markets. This would create a level playing field between the stock investor and the commodity exchange investor

Increasing the Duty free limit on gold for a passenger coming to India (conditions already given), is a positive move undertaken by the government, as it will definitely help in curbing the imports to some extent and reduce the pressure on forex.

I was expecting some announcement on the R&D front, new financial instruments to extract Gold lying in India so as to increase CAD, but these were missing.

On a scale of 1 to 10, I would personally rate this budget as 6.

GOLD AND SILVER SHOW WAVE LIKE MOVEMENTS

Gold looses glitter and silver loses its shine. Precious metals were moving on a see saw all week and then the blood bath of prices had swept the markets. On the exchange gold plummeted to a low of INR 29,100 while silver dropped down to INR 53,100. In the physical market gold and silver were being traded at INR 29,400 and INR 54200 respectively.

Investors, traders and the whole market in general stated different reasons for this crash.

Within a fortnight gold crashed by almost 1000 rupees. But Thursday set a recovery stage for gold. Some weaker U.S. economic data did help to lift gold prices, as the weaker-than-expected Philadelphia Fed business survey worked against notions the Federal Reserve will soon end its major bond-buying program. The other reason that helped gold to bounce back on Thursday from a seven-month intra-day low, was the physical buyers in Asia picked bargains a day after the market was rattled by concerns the U.S. Federal Reserve could scale back its monetary stimulus. This created some positivity in the market.

But before the Fed released its minutes the precious metals markets had already plunged down sharply as rumours swirled that a large commodity hedge fund had been forced to liquidate its holdings, the largest gold-backed exchange-traded fund, New York's SPDR Gold Trust reported its biggest outflow in 18 months on Wednesday, coinciding with the price drop

Gold seemed to know what would come later on Wednesday, as short dated put buying, was followed by a push lower, to trigger a first round of sell stops below the 1600 USD level around midday. Technical inspired selling joined the sell off and as seen from the release of global ETF holding numbers, large long liquidation took place. Around the European lows of 1580 in the afternoon, as so often happens when commodities do a large move, rumours started to make the round that a large commodity fund would be in trouble

A panic selling behaviour was seen in the market.

Spot prices reached a low of $1,554.49 on Wednesday, their weakest since July. They slid 2.6 percent on Wednesday after Federal Reserve minutes suggested the bank may wind down its ultra-loose monetary policy sooner than expected.

It had since reversed course to post a rise of 0.2 percent to $1,565.06 Thursday evening. It fell 2.6 percent on Wednesday, posting the biggest daily drop in a year. 

Quantitative easing tends to support gold, as it keeps interest rates low while stoking fears of inflation. Tumbling prices attracted buying interest in the physical markets overnight in Asia, with analysts and traders reporting high volumes traded on the Shanghai Gold Exchange.

Gold has been caught up in a sandwich between hopes of central bank easing which enhances its inflation-hedge appeal and expected recover of the economy which hollows its safe haven status.

As far as the current outlook is concerned, Gold is expected to move in the range of 28,500. However, one can take a call to buy at this dip as gold is expected to move in the range of 29,500-33,000 rupees in the long run.

PRE-BUDGET VIEWS

1. Government had increased import duty on Gold before the budget. The government's move to hike the customs duty from 4 to 6 percent will have a loud impact on the Bullion sector. The hike sums up to around INR 60,000 (approx) per kilogram of gold. To be clear, with this duty hike a difference of 7 percent between the international and domestic price of the yellow metal is evident. Due to this, the increase in duty on the actual price of gold is being passed on to the retail consumers by the jewelers. This may also lead to rise of illegal channels and malicious activities with respect to importing gold and related products like jewellery etc., in the country. In turn it will lead to an increase in unemployment among the skilled artisans of the country (around 1-2 million families depend on this sector to earn their livelihood) as well the businesses of local jewelers across the country. I expect that this budget will address this issue and a fix duty structure will be levied. The extra revenue generated from the increased duty should be used by the government for creating new hallmarking centers, Research & development in mining sector. 

Hallmarking for jewellery is a great move by the government. It will ensure customer satisfaction by purity assurance. For this, the current need is to increase the hall marking centers at a faster pace so that the implementation is done in no time.

Research & development is the key to the future of Indian bullion industry. India is rich in mines but the R&D is so poor that we are hardly in position to extract much of its abundant resources. To be precise the country produced and refined only 1 - 3 tonnes worth of Gold. That’s less than 1% of the value of metallic mineral production in the country. On the other hand, China boosted its gold refining business after it gave companies a single-window clearance along with fiscal and infrastructure incentives which have put the industry on a fast track and made it a pillar industry in many of the country's gold producing areas. China's gold output increased 11.66 percent from a year earlier to hit a record high of 403.05 tons in 2012, confirmed by China Gold Association (Source: chinadaily.com.cn). This data showed that it is the largest producer for the sixth straight year. I feel that if R&D is carried in an efficient way, production of the metal will increase. This will reduce dependency on imports and in turn help the government to increase the forex reserve. As the metal will be extracted locally, customers will be benefitted pricewise, due to local production.'

I feel FDI is extremely important with regards to Research and Development. R&D is costly but with the help of FDI we can surely work out the way to get the most out of it. FDI will help in strengthening our rupee and in turn reduce the depreciation of our currency.

2. Most importantly, GST implementation is a must. If implemented, it is expected to provide a significant boost to investment and growth of the economy. GST will have a significant impact on almost all aspects of businesses operating in the country, including the supply chain, sourcing and distribution decisions, inventory costs and cash flows, pricing policy, accounting systems and transactions management. A flat 1% across India should be levied by the government, which would replace most indirect taxes currently in place.

3. Commodity exchange have now completed almost 9 years in India. Introduction of Option product for this exchange is must. Those who have the exposure should be given an opportunity. It will be a boon for a bullion trader and jeweler. By using this instrument they can hedge their future position and in a way provide the necessary risk cover. An investor will also be highly benefitted from this instrument. He/she will get a chance to invest in a larger quantity of metal with a lower investment and reap benefits till the expiry date. 

4. I understand that Government is thinking of introducing CTT tax, like the one in the equity market. CTT tax should not be charged on bullion dealers & jewelers, as it will only increase the metal price and in turn increase the price for the customers. It should be charged onto speculators only.

5. Gold Deposit Schemes are offered by banks in which investors deposit gold for a period of certain 3 years earning a fixed rate of interest.  Currently that has been reduced to 6 months. The depository scheme that the banks and MFs are enjoying should also be allowed to corporate, working for bullion industry. It will help to increase the gold reserves and in turn benefit the customers willing to deposit their idle gold. The government should harness the existing reserve of gold in our country rather than turning towards imports and implementing this alarming hike on customs duty. Hiking the duty on imports will in no way, curtail the demand, as the precious metal has always been regarded as one of the best investment options for social security. 

6. Indian households have nearly 25,000 to 30,000 tonnes of Gold. I expect that this budget would show an effective way to gain revenue by exporting it. I would suggest Government of India to introduce schemes like minimum tax scheme wherein an investor is charged minimum tax to convert his/her unaccounted gold into an accounted one. By this the government treasury will also increase and the idle gold can be put to use. The other scheme can be a VDS scheme (voluntary disclosure scheme) by which the Gold /Silver can be brought to the market.

7. I expect an increase in Gold loan scheme period to extend from 180 days to 360 days and LC tenure from 90 to 180 days. As of now Gold Loan is allowed up to 180 days which implies, a jeweler has to rollover his/her position twice in a year and that in turns leads to increase in imports. If the loan period is extended to 360 days, one cycle of loan will be reduced. A direct effect will be reduction in imports.

8. Currently, NRI’s are allowed to bring 1 Kilo of Gold while arriving in India. Earlier this was 10 Kilos. I feel this cap should be raised back to the earlier levels or even more. This too will help in reduction of imports and reduce the Forex pressure.

9. Indian Government does allow export of Gold in form of Jewellery. Export of Gold in form of bars etc should be allowed through banks to avoid money laundering. Moreover the exports should take place at the international market prices only (there is a value addition of 3%+, as per law, which should not levy in this case). Once the exports from India are allowed, there will be a direct effect on Gold price. Over the years, India has purely been an importer. With Exports, I expect the International price would reduce by $100-200 and provide the necessary reduction in India's Current account deficit. On exporting Gold, the refund of Duty should take place in cash or license form.

ANNUAL DEMAND FOR GOLD RISES DESPITE RISING PRICES (2012)- WGC

Today we scan and analyse the main highlight of the World Gold Council 4th Quarter Report 2012 - It states that demand for gold increased in the 4th quarter despite rising prices and economic slowdown.

Let's see WHY and HOW..........

Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises (including investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest). The gold market is subject to speculation as are other markets, especially through the use of futures contracts and derivatives.

Today, like most commodities, the price of gold is driven by supply and demand as well as speculation. However unlike most other commodities, saving and disposal plays a larger role in affecting its price than its consumption.

The World Gold Council released its Gold demand analysis for the 4th quarter of 2012. In 2012 total demand reached an all-time high of $236.4 billion; although on a tonnage basis it declined by 4per cent to 4405.5 tones. Global ETF demand increased by 51% compared to 2011. 

One important trend to be noted worldwide is that this annual demand for gold was coming from central banks and institutional investors. Central Banks added 534.6 tons to their reserves. In the fourth quarter of 2012, gold demand in tonnage terms declined by 4% wherein demand from the above mentioned parties had offset the consumer demand.

Chinese demand was flat year-on-year, reflecting the impact of economic slowdown. However looking at Q4, total demand was up 1% on the previous quarter to 202.5ton. Jewellery demand was 137ton up 1% on Q4 2011 and investment demand was 65.5ton, up 2% on the previous year. These increases may reflect the fact that the economic slowdown in China appears to have been shorter than expected.

During 2012 we saw gold touching its life time high in the Indian market. Adding to this, the government also increased duty on gold first to 4% and then to 6% in January 2013.

Interesting to note was that Indian full year demand was only down by 12% on the previous year, with a strong performance in the last quarter, where 261.9 tons meant an increase of 41% over the last quarter the year before. Demand for jewellery was up 35% year-on-year and the expected duty increase in 2013 was the reason for the strong imports at year end. 

Similarly, during Diwali (the biggest gold buying festival) there was an increase in gold demand in terms of value but simultaneously a drop of almost 30-40 per cent in terms of volume. The main reason behind this was the rising prices of gold. Rising prices meant that though demand for gold will go up in rupee terms but the denominations in which they are purchased will shrink.

For example, in November 2011 the price of gold per 10 grams was around INR 28000 however in November 2012, with the same amount you will be able to buy only 9 grams of gold given that price at that time was INR 31000 per 10gm.

But then India is also enjoying growth, the accompanying urbanization and a rapid increase in the size of the middle class. As this process progresses, dependence on the poorer agricultural sector diminishes and the gold market deepens and widens its demand shape. The Hindu family tradition that favors gold so much does not diminish with this process. Just as life insurance to the developed world stays in place with greater wealth, so gold retains its attractiveness with the Indian community. After all, since the year 2000, who can argue with the performance of gold? We expect that, as prices find support at higher prices, new and bigger demand will appear in this particular gold market

As gold and silver prices rise just like a thermometer measuring global financial uncertainty and instability, more and more investors are entering these markets for the first time, not for profit per se, but for protection against such fears and in an attempt to preserve the wealth they have. These investors come from the entire spectrum of investors across the length and breadth of our world

This is the quintessential reason why demand for gold will rise as gold prices rise.

China and India remain the world’s gold power houses, and by some distance, despite challenging domestic economic conditions. In India, consumer sentiment towards gold remained strong despite measures aimed at curbing demand, reaffirming gold’s role in Indian society. In an underdeveloped financial system in India, gold has an important role to play

Notwithstanding the predicted economic slowdown in China, investment demand was up 24% in Q4 on the previous quarter and jewellery consumption held steady at 137.0t.

Central banks’ move from net sellers of gold, to net buyers that we have seen in recent years, has continued apace.  The official sector purchases across the world are now at their highest level for almost half a century.

Despite the turbulent macroeconomic climate throughout the year, as well as the regional uncertainties affecting India and China, the two largest gold markets, annual demand was 30% higher than the average for the past decade

To give a brief on the past week turmoil:

RSBL Spot Gold price has plummeted from a high of INR 30,800 (Approx.) to INR 30, 100(Approx.) in the past week while Silver has plummeted from a high of INR 59300 to 56950 (approx).

PLATINUM AND PALLADIUM CREATING A BUZZ

Precious metals and to be precise - Gold, has been trading in a tight range since the last couple of weeks, underpinned by a series of US economic releases and renewed optimism over global growth that has reduced investor appetite for the yellow metal. The outbreak of positive reports has lifted the US equities as well. Optimistic global economic outlook usually diminishes the bullion’s safe haven appeal and makes it cheaper.

In the near future gold is expected to range between $1651- 1700 and any of the side breakouts would create a new range for the yellow metal. Silver too is expected to range within a mild negative bias. Close above the reaction high crossing at 32.485 are needed to renew the rally off January's low. Close below last Monday's low crossing at 30.745 is the next downside target.

Gold Prices floated above $1670 per once Wednesday morning. Gold traded in a tight range of $ 1675 and weakened to $1670 area. This was due to the prevailing uncertainty in the Euro zone. However, I do not expect a very high or very low range for gold thus remaining neutral and would advise to look to trade according to the direction of the market. Gold price remains stuck but technically, it is setup to rise but bouts of profit taking capped upside movement. 

Moreover Gold has lost its shine as investors are moving to other conventional assets like equity that have recently shown strong performances. Safe-haven assets have performed fairly poorly as expectations of growth have improved. A lot of those debt-related risks have for the time being faded into the background. Safe haven assets have disappointed investors and traders and have not met the expectations of growth. In that kind of environment, there is no significant motivation for gold prices to rise on the basis of investment demand.

Meanwhile platinum and palladium held near 17 month highs due to rising industrial demand that raised confidence in growth outlook and also concerns over the supply outlook from South Africa and Russia. We believe part of the latest rally in platinum (and palladium) was spurred by the Swiss customs data which indicated that in December, Switzerland remained a net exporter of platinum (456,973 oz) for the fourth consecutive month and also a net exporter of palladium (432,650 oz)

  

Technically, a breakout on gold prices may come sooner rather than later. A break higher to $1685 gives a bullish signal to retest previous high of $ 1697. Should that fail, the bears will be in total control to push it back down to $ 1625. The MACD is rolling flat but stochastic showing more bullish attitude. It is a matter of time before prices breakout from this potentially bullish ensign.

Gold support is at $1,663 and $1,656. Resistance is $1,682 and $1,693. Silver support is at $31.50 and $31.32, resistance is at $31.99 and $32.30.

Platinum support is at $1,712 and $1,686. Resistance is at $1,738 and $1,760. Palladium support is at $756 and resistance at $777.

CURRENT FALL IN GOLD PRICES!

The prices of precious metals showed a downward trend on Thursday, though they were under the green range on Wednesday. On Thursday, the price of gold decreased by 1.15% to $1,660.6; Silver price also fell by 2.54% to $31.34. 

The main reason behind this was the release of China’s manufacturing PMI report. It stated that China's PMI inched down to 50.4, which means that the development and expansion in China has caught a slow pace, which in turn means that the demand for gold from China will reduce.

However, most traders and investors were more interested in the nonfarm pay roll report that was released on Friday. Gold and silver prices went up after the release of US payroll data.  Gold, silver and equities were all moving on a higher note on Friday.

The U.S. employment rose again by lower than many had anticipated – according to ADP the non-farm payroll rose by 192k – during January: according to the latest U.S. employment report, which was published on February 1st by the Bureau of Labor Statistics the number of non-farm employees rose by 157,000. The main sectors that grew during January were in Retail trade, construction, health care, and wholesale trade.

 One likely reason that affected Gold and Silver is that the Federal Reserve is unlikely to make any changes to its very accommodative monetary policy with that news. The Fed has set actual goals for the unemployment rate – 6.5 percent – and quantitative easing is expected to continue until the unemployment rate hits that figure. 

Other data showing improved US factory activity and better consumer confidence data also set the prices upwards. Spot gold was up 0.6 per cent a $1672.61 an ounce retreating from an earlier high of 1681.70.

The metals went low in a sell off position after St. Louis Fed President James Bullard said that the US Economy will show a better performance this year, which will put the central bank in a position to slow or halt its massive bond buying.

As per the MCX india site, almost 4.7 tons of Gold is already in their warehouse. This is a huge amount of Gold that is sitting idle with fewer takers. Technically, for the past 4 weeks the metal has been stuck within a $1643 to $1695 trading range. These long periods of sideways consolidation typically result in a break in the next direction of the trend. We are starting to think the market is building a base considering that 3 of the past 4 weeks have been up weeks. A close back above $1695 would bring in fresh buying looking for a return to October highs.

Going forward the factors that will affect the Gold Price are:

1. Easing Eurozone stress and better financial conditions 
2. Growth momentum & Stimulus program in US,
3. Indian Government policies 
4. Strengthening of Indian rupee against Dollar

FED'S END OF EASING PROGRAMS MAY MAKE THINGS DIFFICULT FOR GOLD

Gold remained stable near its one month high- above $1690 an ounce till Wednesday morning. Gold eased on Wednesday, retreating from the previous session's one-month high, as signs of an improving global economy capped investor interest in safe-haven investments. 

Silver jumped above $32.30 an ounce, again at a one month high, as stocks and commodities were broadly flat.

However, by noon, the precious metals market moved down. The metal fell for the first time in the last three sessions, after the European Commission said consumer morale in the euro zone improved sharply in January.

Spot gold fell 0.3 percent to $1,685.54 an ounce by . It did hit a one-month high of $1,695.76 in the previous session but failed to retain upward momentum on lower investment demand and technical resistance. 

The current support level on gold is at $ 1661 and $ 1653 respectively. Gold has not reacted positively on bullish bullion news and does not seem to correlate well with currencies or oil

Gold prices in the spot market were less volatile on Wednesday due to the rise in the risk aversion in the international markets ahead of the US debt ceiling voting. Though gold and silver were moving on a positive note on Wednesday morning, worries over the decision on the US debt ceiling propelled the prices to fall by noon.

As far as China is concerned, demand continues to rise ahead of the Lunar Year Celebration on February 10. In fact traders have already stocked up for the holiday demand.

In India, appreciation in the rupee forced downside pressure on the gold prices.

Moreover in India, the market for physical gold remains quiet due to the increase in duty on gold. The Indian government lifted the import duty on refined gold to 6 percent from 4 percent and more than doubled the import duty on gold bars and ores. 

The government's move to hike the customs duty will have a loud impact on the Bullion sector. The hike sums up to around INR 60,000 (approx) per kilogram of gold. To be clear, with this duty hike a difference of 7 percent between the international and domestic price of the yellow metal is evident.

This may lead to rise illegal channels and malicious activities with respect to importing gold and related products like jewellery etc., in the country and also adversely affect the jobs of skilled artisans and local jewelers.

The government should harness the existing reserve of gold in our country rather than turning towards imports and implementing this alarming hike on customs duty. Also other opportunities for revenue generation, like increasing exports should be explored by the government of India.

Friday being Eid and Saturday being Republic Day, domestic markets were more or less stable.

Demand in the physical gold market remained strong in most of Asia, but buying by major bullion consumer India was expected to pause in the next few days while the government provides details on tax changes this week.

Meanwhile, the further talks regarding the US debt ceiling and the spending cut may influence precious metals prices in the weeks to come.

The current support level on gold is at $1661 and $1653 respectively. Gold has not reacted positively on bullish bullion news and does not seem to correlate well with currencies or oil

Gold investors were looking ahead this week to a heavy schedule of economic indicators, including gross domestic product, the Institute for Supply Management Manufacturing Index and the January employment situation report, among others.

1st FOMC MEET OF 2013 MAY CREATE WAVES IN THE BULLION MARKET

Gold and silver were on an upward trend during most of the last week. The speech addressed by Mr., Bernanke did not create much impact in the market. Now most traders and investors are waiting for the next FOMC meeting at the end of January. All eyes will be glued on the Fed's decision to adjust its policy.

Gold ended at $1687 per ounce at the end of the week and silver increased by an average 3.83 per cent this reaching $31.56.

Gold and silver prices were mainly affected due to the data published last week, namely China GDP growth, US retail sales, US jobless claims and many more. The Chinese GDP growth data and the US economic progress report may have contributed to the rally of commodities.

The same trend is continued to expect this week. As mentioned before, gold and silver price volatility will be dependent on the first FOMC meeting of 2013. The meeting might show if the FOMC is planning to slowdown its monetary expansion.

Moreover, the QE3 program is starting to have some positive effect on the prices of gold and silver. The uncertainty around future steps U.S policymakers will take vis-à-vis spending cuts and debt ceiling could keep contributing to the rally precious metals in the coming weeks. 

Bullion traders could also be affected by the EU summit. Demand for gold in India may be positively affected if the Indian Rupee will continue to strengthen against the dollar. These factors could potentially keep the pressure on the U.S. dollar to the downside, while possibly making gold and silver coveted safe haven assets for investors.

But as I stated last week, the main metal that has caught the glimpse of the investors is 'Platinum'. Platinum remained in the limelight after news abut production from the world's largest platinum miner pushed prices to their highest levels since early October. Outlook for the platinum group of metals is bullish in general and the news of supply disruption has added the price positive side of platinum

Given the 8.5% rise in the white metal since end of December, several market watchers said a pullback is likely, but that the bullish backdrop for platinum makes a drop in price a buying opportunity.

Gold, meanwhile, has meandered for this year, but with the gains in platinum and the yellow metal’s ability to hold support in the $1,660s an ounce area, market watchers said gold could be ready to rally if it can decidedly break through stiff resistance at $1,700. Gold should see resistance at the 55 DMA of 1697, followed by the psychological 1700 mark and more importantly the 1707 bear trend channel established since the beginning of October 2012. Support comes in at around 1675, the most recent uptrend channel and 1667.50, the 200 DMA.

GOVERNMENT HIKES DUTY on GOLD to 6%

The government's move to hike the customs duty from 4 to 6 percent will have a loud impact on the Bullion sector. The hike sums up to around INR 60,000 (approx) per kilogram of gold. To be clear, with this duty hike a difference of 7 percent between the international and domestic price of the yellow metal is evident.

This may lead to rise illegal channels and malicious activities with respect to importing gold and related products like jewellery etc., in the country. In turn it will lead to an increase in unemployment among the skilled artisans of the country (around 1-2 million people depend on this sector to earn their livelihood) as well the businesses of local jewelers across the country. 

The government should harness the existing reserve of gold in our country rather than turning towards imports and implementing this alarming hike on customs duty. Also other opportunities for revenue generation, like increasing exports should be explored by the government of India. Hiking the duty on imports will in no way, curtail the demand, as the precious metal has always been regarded as one of the best investment options for social security.

My Defamation case against BBA!

On Wednesday, 16th Jan, 2013, 

I had invited media for a press conference at RSBL's office, wherein the agenda was to give the clarity on the recent events between RSBL and BBA.

 

                      Kindly note that, the following is a PRESS RELEASE handed over to media!

RSBL, Kothari file defamation case against Bombay Bullion Association

a.   It is not Mr. Prithviraj Kothari who is a member of the BBA but RiddiSiddhi Bullions Limited (RSBL) who is a member of the BBA (membership no 895). Mr. Prithviraj Kothari was the President of the BBA till his term as a President of BBA got over in September 2012.

b.   BBA’s allegations in the newspaper that Mr. Kothari was involved in a fraud are wrong, illegitimate and malicious. Mr. Kothari did not act in his personal capacity as a President but in a board meeting of the BBA in March 2011, the directors resolved to give the lower ground floor of the Bombay Bullion Exchange Refinery building on leave and license to M/s S.L. Industries, a firm which is into the minting of coins. Mr. Prithviraj Kothari was not a signatory to any of the documents concerning the lease. This fact can be confirmed from the leave & license agreement dated 29^th May, 2012 registered with the Sub-Registrar of Assurances, Mumbai on 05^th June, 2012. Since the floor was in a dilapidated condition since 60 years and due to maintenance and cleanliness of sewage lane, it took additional time for BBA to get it operational. Proper procedure was followed. Paper advertisements were given twice and on the basis of that, two firms had submitted their interest. S.L. Industries was finalized as it offered favorable terms to the association. Hence the following allegations are baseless:

i. That it was 3000 sq ft was wrong. It was only 780 sq ft built up. These details are mentioned in the agreement.

ii. Besides, the allegation that there was no royalty income to BBA was wrong. S.L. Industries was to pay BBA royalty of Re 1 on every gold coin and Rs 0.25 on every silver coin.

iii. That Mr. Kothari manipulated the minutes of meetings for giving undue advantage to his nephew is baseless since the premise was given on rent to a firm where one Mr. Shailesh Jain of S.L. Industries who is in the business of minting coins since 25 years, is the main partner. The board had resolved that the unused premise be given for a combination of rent and royalty. An extract of the same is attached. Further, a letter from the then serving Directors of BBA is also attached confirming their presence and approval of the said resolution.

iv. The idea behind setting up a minting facility was to enable member-jewelers inside the market to use the facility for minting of coins without commuting. Hence this would save time and money for the members at large and lesser risk. Please also note that in no way was RSBL to gain from this arrangement. To the contrary, it would become easy for other to mint coins and compete with RSBL. Various members had benefited from this service.

v.  S.L. Industries was to set up a minting facility and invest in the interiors. Also, S.L. Industries paid the full year rent in advance. The 60 year old dilapidated property was finally put to productive use.

vi.  A basement area of 780 sq ft given for a fixed rent of Rs 50000 plus royalty was market price. The arrangement didn’t last for long. The BBA, under the new president compelled S.L. Industries to vacate the premises and the latter did so with articles lying therein within less than forty eight hours. S.L. Industries have now filed proceedings in the civil court for restoration of possession and have claimed damages.

c.  The fact that BBA published photograph of Mr. Kothari (even though he is not a member of BBA) in various newspapers along with a press release accusing him of fraud, is a conspiracy and a ploy to defame RiddiSiddhi Bullions Limited and Mr. Prithviraj Kothari.

Series of Events:

December 2012

31^st Dec – BBA publishes ‘Notice’ in at least six news papers with a photograph of Mr. Prithviraj Kothari mentioning: “Mr. Prithviraj Kothari, Director of RiddiSiddhi Bullions Ltd. Membership No 895 has been expelled from the membership of the Association in terms of powers of the Board”.  Besides this, various newspapers and television channels cover this story related to the expulsion of Mr. Kothari. Important things to note: Though the expulsion is for RiddiSiddhi Bullions as a member of BBA, carrying the photograph of Mr. Kothari was with the intention to damage his reputation worldwide.

January 2013

3^rd Jan – RSBL sends a letter asking the BBA to give an extract of the resolution. RSBL tells BBA that the expulsion was illegal and illegitimate. RSBL demanded copies of various documents which were never produced by the BBA.

7^th Jan – The Bombay City Civil Court passed an order of injunction against The BBA, staying the resolution expelling RSBL and further restrained BBA, its president and its directors and office bearers from publishing any article in the media or any other manner in respect of the expulsion of RiddiSiddhi Bullions Limited/Mr. Prithviraj Kothari.

11^th Jan – RiddiSiddhi Bullions Limited sends notice to 17 parties including the Association, its president, vice-presidents and directors asking them to furnish apologies. The notice mentions that all the parties would be liable to pay damages to the extent of Rs 100 crores and also liable to be prosecuted and punished for having committed an offence of defamation under section 500 of the IPC for which RSBL/Mr. Kothari intend to adopt appropriate proceedings, criminal as well as civil in the Court of Law against them.

14^th Jan – BBA releases another press release through a leading English daily terming Mr. Kothari as a ‘criminal fraud’. This is a clear contempt of the court. All 17 parties will be sent notices for contempt of court.

For details regarding the 17 parties kindly refer the BBA website.

MIXED SENTIMENTS FOR PRECIOUS METALS

  

It was a “risk-on” trading day in many markets as the world market place breathed a sigh of relief that U.S. lawmakers came to a 12th-hour agreement on the fiscal cliff.

Gold and silver continued to rally on Wednesday .The recent news from the U.S is that the fiscal cliff was averted. This news received the final confirmation as Congress approved the plan to increase taxes on household making over $400k per year.  Despite this news, President Obama will still need to augment the debt ceiling in February – it currently stands on $16.4 billion. This is another uncertainty that could contribute to the market volatility in the weeks to follow.

Spot gold was last quoted up $13.50 at $1,689.25. In the Indian markets gold increased by rupees 150 and was seen trading at INR 31,500 per 10gram and silver climbed almost Rs.1000 and was trading at INR  58,800 on Wednesday.y.

Silver was seen as the biggest gainer amongst precious metals after the decision from the US lawmakers regarding fiscal cliff was reached on the 12th hour. The US lawmakers reached an agreement on taxes but decisions such as debt ceiling and government spending have been delayed as of now.

Nonetheless, it was a great sigh of relief for the cluster of markets from equities to precious metals to energy on Wednesday.

Many markets worldwide, including Asian, European and U.S. stocks were cheered by U.S. lawmakers coming to agreement on the fiscal cliff matter that had been overhanging the market place for weeks. U.S. lawmakers had to reach a deal to avoid a series of tax increases and spending cuts that would have automatically gone into effect this week.

In Asia, the Hong Kong stock market hit a fresh 19-month high on some more positive economic news coming out of China. China’s manufacturing sector continues to expand, as its manufacturing PMI increased to 50.6 in December. The recent better Chinese economic data has been an underlying bullish factor for the precious metals markets

The market place Wednesday took on a “risk-on” attitude that benefitted the precious metals.

Metals are sharply higher across the board Wednesday in a relief rally after U.S. lawmakers steered the country away from the fiscal cliff, at least for the time being.

Though silver jumped high comparatively there was not much movement in gold. It could be due to the postponement of the debt ceiling and spending cut decisions.

However, Gold prices plummeted Friday, a day after the Federal Reserve released minutes that reported mixed sentiment among Fed members about the central bank's extremely loose monetary policy.

The Federal Open Market Committee -- the Fed's policy-making wing -- said Thursday that there were potential risks to financial stability over a disorderly finish to the fiscal cliff, impending disagreements about raising the debt ceiling and possible deterioration of conditions in Europe

Simply, analysts and gold investors generally view the quantitative easing measures implemented by the Fed as inflationary policy, which makes gold a safe-haven asset to defend against inflation.

Nevertheless, analysts cautioned, more turbulence may occur in the weeks ahead since the legislation approved by Congress in essence provides only a temporary reprieve on fiscal issues and did not address the debt ceiling or include spending cuts.

The aversion of fiscal cliff has proved like a temporary power booster for all markets. But how long do these markets remain charged up is the question of the day.

However, look for the market place to now focus more on the European Union and its sovereign debt crisis, now that the U.S. fiscal cliff matter has been temporarily resolved

Looking ahead to next week, technical analysts are keeping an eye on the 200-day moving average, which comes in around $1667.50. If gold remains under that level, it could keep the metal trapped in the lower part of the current range.