RSBL Gold Silver Bars/Coins

Sunday, 8 June 2014


                                                     - by Mr. Prithviraj Kothari, MD, RSBL

Once again, gold was surrounded by a cloud of doubt.....doubt of gold being a safe haven asset...doubt of gold being the most dependable asset in times of uncertainty.

While Thursday showed signs of gold on the path of recovery, the US jobs data released on Friday once again proved fatal for gold. Bullion climbed 0.8 percent on Thursday, reaching the highest since May 30, after the euro strengthened against the dollar as the market discarded the European Central Bank’s unparalleled effort to weaken the single currency and strengthen growth. On Thursday, The European Central Bank announced a new and aggressive monetary stimulus package. This once again raises a question over the global economic recovery. This package along with dovish corresponding remarks from ECB president Mario Draghi  considered stock market and European bond market bullish. 

This move of the ECB has reinforced the notions of some in the market place that the U.S. Federal Reserve may be forced to back off its plan of “tapering” its quantitative easing. 

This has created a contradictory environment in the economic world where the European Union is stimulating its monetary policy while at the same time the Fed is tapering its monetary easing.

It was this tapering of the FED that gold saw its worst performance in 2013. It was in 2013 that we saw the yellow metal dropping almost 28 percent over expectations that the Federal Reserve will taper its monetary stimulus programme as the US economy strengthened. Since January, 2014, The Fed has made four tapers as we saw US moving gradually towards the path of recovery

This week too gold dropped on positive jobs data released on Friday. Gold prices fell on Friday as the dollar index swung back into positive territory, after a closely watched U.S. employment report came in almost exactly in line with expectations, showing a solid pace of hiring in May. Friday morning’s U.S. employment report for May showed a slightly higher than expected rise of 217,000 in non-farm payrolls. The key in the report was forecast to rise by 210,000. Nonfarm payrolls increased last month, the Labor Department said on Friday, against expectations for a 218,000 rise, while data for March and April was revised to show 6,000 fewer jobs created than previously reported.

The bearish trend in the international market is further expected to bring down gold prices in the near term. This sentiment further strengthened as premium on gold in the domestic markets dropped. 

At the same time, gold consumers in India are waiting to exhale. Consumers in India are following the "wait and watch" policy as they expect prices to decline below the crucial Rs.25,000 level in the near future as the market expect customs duty to decline.

Post election, gold premiums have dropped drastically. premiums had slid from 10% to 1% and 2%, soon after the government allowed premier trading houses to import gold and increased the availability of the metal in the market. and markets have a positive feel towards a lot of sectors including precious metals. Investors and traders now await a new gold policy to be unveiled by the government.

Many have even postponed their purchases as they feel that prices will decline further.
Jewellers expect prices to slide further in the next 4-6 days, given the price slump in the international market.

In the international markets people have shifted focus from gold to equities. Following suit, In India too, stocks are stealing the lime light as gold has been sidelined. Moreover, customers expect a further fall in import duties after which gold prices are anticipated to fall further. Demand in the domestic market is also expected to remain slack for the next two months, as there is no festive season.

Many traders who had resorted to hoarding gold due to supply concerns would refrain from doing so now, as import norms for exporters have been relaxed to a certain extent, said jewellers. Moreover, June is considered a slow month as far as demand is concerned.

So as of now gold is just hanging around. While some people have shifted focus to equities and physical demand for gold isn't strong, the announcements of the ECB meeting has found some cover for gold.

Most people will just wait for the market to make a decisive move before entering at this dip.

While the only mantra now is wait and watch I expect gold to be in the range of $1238- $1273 and Rs.26,200- Rs.27,500 in the international and domestic markets respectively.

On the other hand silver is expected to move in the range of $18.15- $20.15 and Rs.39,500- Rs.41,000 in the international and domestic markets respectively.

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 -
"A Dreadful Week For Gold"

Sunday, 1 June 2014


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

It's been a dreadful week for gold. The yellow metal is down almost 3%, the most in any week since late March. 

I have repeatedly been making a point that gold prices are being pulled by the bullish and bearish factors and it has been moving on a see saw as we get a positive growth report from US on one hand and escalating Ukraine crisis on the other.

Finally the strong resistance of $1280 gave up. On Wednesday, Gold prices fell to a near 4-month low as easing Ukraine crisis paved way in the market. But gold prices bounced off these levels after data showed that the U.S. economy contracted in the 1st quarter for the first time in three years. The US Commerce Department approximated that GDP dropped in the 1st quarter. Economists held severe weather conditions responsible for this. 

On the other hand, the US Labour Department report showed application for jobless benefits declined last week which reduced the safe haven appeal for Gold as the market is now moving their focus to riskier assets like equities that have given better returns than gold in the past year,

At each dip there are more people exiting the markets than entering.

In 2013, we saw gold moving in exorbitant quantities from West to East. Last year China overcame India as the world's top gold importer and gold jewellery and investment demand, rising to a record 1,065.8 tons. Most of that sold gold ended up in China and India and other growing gold consuming nations in Asia led by Vietnam and Indonesia.

But in the first quarter of 2014, that demand tanked. Mainland China's demand for gold fell 18% in the first quarter of the year as investors bought fewer bars and coins, offsetting record demand for jewellery.

India's bars and coins buying also showed a huge drop-off of 54% to 98 tonnes and with jewellery consumption also sliding overall gold demand on the subcontinent slid 26%.

One of the most important ongoing news was about the Major metal exchanges emerged as contenders in developing an alternative to the London silver price benchmark, or "fix", after the century-old system for setting the globally recognized price is disbanded in August. The major exchanges CME and LME both said on Thursday that they were working with LBMA and the precious metals industry to find an electronic-based solution.

Meanwhile, expectations remain high that a strong US economic data report might support the Fed's policy of scaling back its bullion friendly stimulus. 

The market will now be glued to the ECB meeting that will be held next week when the bank might take further steps to ease its monetary policy and enhance growth.

Gold remains 5% to the upside for 2014 but is down $120 an ounce from highs reached mid-March as the rally on the back of safe haven demand and bargain hunting loses steam.

Further for the week gold is expected to be in the range of $1238-$1273 in the international market and Rs.26,000 - Rs.27,800 in the domestic market.

While silver is expected to move in the range of $18.15 - $18.85 and Rs. 38,500- Rs.41,00 in the international and domestic markets respectively.

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 Investors be Cautious"