Gold prices off the Route?

                                        - by Mr. Prithviraj Kothari, MD, RSBL

Gold prices have been battered over the week. Starting with a high of $1330 to a low of $1282 and giving a close of $1294 has brought Gold prices back to its major support $1280. ($1280 acts as a strong support for Gold, below which Gold prices could attain new lows).

The week started on a stronger footing carrying the upward trend of the last week.  Gold prices gained to a three week high on Monday on renewed concerns over the escalation of hostilities in Ukraine that prompted its safe haven appeal. Geo political tensions escalated as violence between pro-Russian separatists and Ukrainian government forces grew. Moreover gold prices were further supported over the news that a Russian fighter aircraft made repeated cross range passes near a US ship in the Black Sea. Apart from this SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings rose 1.80 tonnes to 806.22 tonnes the first inflow since March 24 acted as a positive factor.

But the upward trend was short lived. $1330 proved to be a crucial stage which wasn’t broken and Gold prices plummeted. US economic indicators showed positive signs starting with US retail sales. According to Bloomberg survey, U.S. retail sales probably accelerated in March, boosted by car purchases that indicate demand is recovering from a winter-led slowdown earlier this year.

Other factors that added to Gold and Silver price fall were:

U.S industrial production-
         Above expectations March industrial production data hinted that the US economy was starting to emerge from a weather-induced slowdown suffered over the initial stages of calendar 2014. Adding weight to this belief was the uplift seen in capacity utilization levels over the month.

EU industrial production-
        Euro zone industrial output edged higher in February, official data showed Monday, in line with recent data showing a very modest economic recovery in the single currency bloc.

U.S CPI, U.S housing starts and building permits-
        U.S. Consumer Prices rose slightly higher while the U.S. housing starts rose 2.8% in March to a seasonally adjusted annual pace of 946,000, fueled by growth in single-family homes, the Commerce Department said Wednesday. Starts for February were revised higher to a pace of 920,000 from an initially reported 907,000.

Philly Fed index-
         A reading of manufacturing sentiment in the Philadelphia region improved in April, according to data released Thursday. The Philadelphia Fed’s manufacturing index rose to a reading of 16.6 in April from 9.0 in March, stronger than a Market Watch-compiled economist forecast of 10.0.

Overall, Gold dropped nearly 1.85% this week.

Though the various reports released from US did show signs of a recovering economy, Federal Reserve Chairwoman, Janet Yellen restated that she expected interest rates to remain very low until the recovery is on a more secure footing and the American economy is more fully involving available workers and other resources. The Obama administration told asset managers last week that it was planning additional sanctions against Russia over the conflict in Ukraine. Some of the supporting factors that lead Gold prices recover from its support level of $1280.

Looking at the current market conditions, I feel that western countries are reducing their holding on every rally while the same is being absorbed by the physical demand on Asia. It’s a see saw battle where one reduces and one increases. Geopolitical tensions will act as a strong support for Bullion metal prices apart from the physical demand.

The labour dispute which broke out in January that shut most of the platinum mines in South Africa is extending the longest shortfall in global production since 2005. The strike by more than 70,000 South African workers will continue as long as companies refuse to improve wage offers, Joseph Mathunjwa, president of the Association of Mineworkers and Construction Union, said April 15. The workers want basic monthly pay boosted to 12,500 rand over four years, which the producers say they can’t afford after production costs jumped 18 percent annually in the last five years, as wage and electricity costs rose. Many laborers live in shacks made of iron sheeting. They share toilets, don’t always have water or power, and many spend much of their income servicing debt. The country has a 24 percent unemployment rate.

While the Gold and Silver precious metals group is being thrashed, their counterparts, Platinum and Palladium are looking strong. The biggest producer of these metals i.e. Russia is having tensions with Ukraine while the second biggest producer i.e. South Africa has union problem. Due to these issues, I feel Platinum will look forward to extend its lead over these metals.

My trading range for the upcoming week for Gold in international prices is around $1270 to $1330 and for Silver $19.30 to $20.20. While in Indian rupees, Gold prices will range from INR 27900 to INR 29200 and for Silver the trading range will be INR 41,500 to 44,500.

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

- Previous article- "OUR LOVE FOR GOLD"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/our-love-for-gold.html

(Source: http://www.bloomberg.com/news/2014-04-17/platinum-strike-widens-output-deficit-seen-lasting-years.html)

OUR LOVE FOR GOLD

                                                     - by Mr. Prithviraj Kothari, MD, RSBL

Gold is the world's favourite metal and being an Indian, I have always been brought up with the principle that gold is one such metal the "HAS" to be a part of regular investments.

Gold in one such unique asset in its class, that  enjoys a diverse set of loyal buyers. In fact, I wouldn't be wrong, if I Say that gold has a huge fan following.

• In the west, investors want to spread their risk.
• In 2013, demand for gold from India hit record levels. and the crash in April saw humongous number of buyers stepping into the market to take advantage of this crash. The situation went so out of control that the government brought down the shutters, hiking import duty to 10% and imposing the “80/20 rule” which forces dealers to re-export 20% of any new shipment before taking delivery.
• Meanwhile, China’s gold demand meantime rose faster, finally overtaking the world No.1 and swallowing well over 1,160 tonnes of imports, even while topping the league table of gold mining nations with a further 440 tonnes.

Though the gold fan club is always widening, last year it saw many betrayers.

• It was in April, 2013 that gold had crashed following Cyprus bailout.
• It had been downgraded by many and abandoned too, last year.
• Gold that has always stood proud in its category, for the first time in 13 years; it gave negative returns in 2013. Moreover, it headed for an annual drop of 30 percent. Since reaching a record high at $1,910 an ounce in 2011, it collapsed to a low of $1195 nearly 37% of its value.

And its April 2014, that gold has performed exceptionally well compared to its counterpart. Gold held around 2-1/2-week highs on Friday, heading for its biggest weekly gain in a month on sagging risk appetite and increasing hopes the U.S. Federal Reserve will hold off on raising interest rates as soon as early next year.

Meanwhile, US Secretary of State John Kerry’s commented that if Russia would intervene further in Ukraine then it would target Russia's energy, banking and mining industry. I feel Ukraine story is far from done!

The highly anticipated FOMC minutes were released and markets seemed to be looking for a hint that would have confirmed Janet Yellen’s latest comment from after the March FED meeting, when she made clear that “a considerable time” means about 6 months and that means a rate hike could come as soon as early 2015. But that statement was missing in the minutes. US yields traded lower, stocks jumped up, the US Dollar lost against the board and metal prices continued to rise.

In spite of Janet Yellen making it clear time and again that; decisions will be based on economic reading, I find it crazy that traders are still reacting to potential changes in QE taper and interest rate increases.

Gold continues to roll along in an uncertain market with no clear direction in which assets are moving: US equities, US dollar and the possibility of interest rate hike this year.

Some of the remarkable figures coming in from Asia and other countries were-

DUBAI

In 2013, the value of physical gold traded through Dubai surged to $75 billion compared to $6 billion in 2003, and $70 billion in 2012.  volumes accounted for 40 per cent of the total worldwide trade in 2013. This reinforced Dubai's position as the global gold and precious metals trade hub as stated by Ahmed bin Sulayem, Executive Chairman of Dubai Multi Commodities Centre (DMCC),

CHINA

China saw its gold output increase by 10.6% year on year to 63.2 tons in the first two months of this year, according to statistics released by China Ministry of Industry and Information Technology. In the first two months of this year, gold mines in the country produced 51.7 tons of gold, 10.4% more than in the same period of 2013

INDIA

Gold imports in India are on a recovery mode now, as March imports have been mooted to have doubled to 50t m/m. The decision to permit 5 more private banks to import gold led to this recovery. In fact as the auspicious occasion of Akshaya Tritya is approaching, we see the demand to surge even higher and thus the import figures are expected to rise too.

Keeping the current market trends and price drivers in mind, gold is expected to trade in the range of $1293-$1350 an ounce in the international market and Rs.29,000- Rs.31000 per 10 gram in the domestic market.

On the other hand silver is expected to move in the range of $19.50-$20.55 and Rs.42,000- Rs.46,000 per kg in the international and domestic markets respectively.

Reiterating, I feel buying physical Gold, Silver and Platinum should be on cost averaging basis. It has been a successful strategy since the bull year began, though it would be a bit strange for the investors who started investing in the last couple of years.  I am sure Gold or for that matter any precious metal investments would always give best returns if considered as long term investment options and something that you can bank on in financial instabilities.

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

- Previous article-

"Bad News Proves to Be Good For Gold"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/bad-news-proves-to-be-good-for-gold.html

BAD NEWS PROVES TO BE GOOD FOR GOLD

                                                       - by Mr. Prithviraj Kothari

I was awaiting this...gold bouncing back from its lows last week. As expected, gold crossed the $1300 mark on Friday.

Bad news turned out to be the good news last week for gold. A higher unemployment rate and worse than expected job creation is the bad news that has proved good for gold.
Throughout the week gold was lying low, but on Friday post the release of the US jobs report, gold managed to cross $1300. (future delivery)

The US jobs report were not as strong as expected. Though they were decent, but the market came off with a strong belief that the Federal reserve won't become any more aggressive in scaling back its accommodative monetary policy.

Now let's see what exactly the jobs report was all about.

Labor Department data showed private employers boosted hiring to 192,000 jobs in March, just a shade below analysts' average estimate of 195,000 net new jobs. The government reported that nonfarm payrolls rose by 192,000 in March, when expectations had been for 195,000 to 200,000. Job gains for the prior two months were revised higher by a combined 37,000. However the US jobless rate remained unchanged from February at 6.7 percent as the number of unemployed held steady at 10.5 million.

Before the jobs report was out, Analysts believed that that positive jobs data means the US Federal Reserve will likely continue cutting each month the amount of monetary stimulus it injects into the economy. But that did not happen. Markets now expect the Fed to begin raising its ultra-low interest rates in the middle of next year.

The jobs data prompted some short covering along with fresh buying, as (traders) were looking for a little better report than they got. Some traders were buying to offset, or cover, positions in which they had previously sold.

Yellow metal finds its support in the simmering geo political tensions in Ukraine and the reduced curiosity about the Fed's tapering.

Earlier in the week, Fed Chair Janet Yellen provided a relatively dismal outlook of the labour market and said she and other committee members believe “extraordinary commitment is still needed and will be for some time.”

Prices for the yellow metal also got a boost from sustained consolidation in the stock market and it saw a little extra benefit due to the fact that it was a bit oversold after a few weeks where gold was lying low.

In the Asian markets, precious metals fetched a premium in Shanghai's trade as compared to London for the first time since March. This saw demand rising from top buyer China, on Wednesday.

Prices for 99.99 percent purity gold on the Shanghai Gold Exchange hit a premium of about $1 an ounce to spot prices in London before paring gains. Shanghai prices had traded at a discount of between $8-$10 to London gold since March. Before this week, the last time they were at premium to London was in January, when Shanghai prices fetched a premium of about $20 or more an ounce on ramped up demand for gold before the Chinese New Year holidays.

Amongst other precious metals, platinum rose to $1432 an ounce, a rise of one per cent and palladium gained 1.2 per cent an ounce on continued worries over supply constraint and positive US car sales.

As the Anglo American Platinum said that it has sent out force majeure motives on its supple, which underscored the impact of a near 10-week old workers strike on the leading platinum producer. It's been 10 weeks since the AMCU members have been on strike at the platinum mines. there are 70.000 members of the AMCU that have been in strike. These 70,000 workers account for more than 70 per cent of the platinum production. the AMCU has been on strike since 23rd Jan, at the Impala, Anglo American Platinum  ltd. and Lonmin Plc. Due to disruptions in operations the companies have lost more than 10.3 billion rand in revenue and workers 4.6 billion rand in earnings. This has resulted in pushing the platinum prices higher.

On the other hand, gold, in the coming week, is expected to range between $1277 and $1230 an ounce in the international markets and Rs.28,000- Rs. 30,000 on the domestic markets.

While silver is expected to range between $19.20 to $20.55 and Rs 42,000 to Rs. 46,000 per kg 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 -
"Is it the right time to buy gold, silver platinum?"
http://www.riddisiddhibullionsltd.blogspot.in/2014/03/is-it-right-time-to-buy-gold-silver.html

Is it the right time to buy Gold, Silver & Platinum?

No doubt this had to be the blog for the week. Precious metal prices have been rocketing down for the entire week.

Let’s first focus on the reasons for the price fall:

1.    FED’s QE3 is being unwound at a steady pace. Tracking the improving US economic conditions, FED might even increase the pace of tapering.  QE was responsible to set record highs for gold and the same is the reason for its downfall in 2013.

2.    Ukraine turmoil had given the much necessary support to safe haven buying assets like Gold where the prices were on an upward spiral. As the turmoil continues to unwind itself and most of the news being discounted by the market participants, the support is slowly fading away.

3.    Physical demand is a concern. Bloomberg had reported that Iraq had increased their Gold reserves by a massive 36 tons in March and IMF data showed that Turkey was back increasing their Gold reserves by 9.3 tons in February. Hong Kong Trade Statistics showed a strong month of Chinese Gold imports for February, which were a net of 109.2 tons, which was 30% more than January and 80% more than the previous year. When I had seen these stats, I did feel that the physical demand is holding strong to support the Gold price fall. But frankly, Turkey or Iraq aren’t the main supporters for Gold. Undoubtedly it has been the show of Asian countries and majorly China. Now to track Chinese physical demand, I take support of SGE premiums. When the prices fall, SGE premium is the first one to go up, while that has not been the case lately. SGE premiums have been locked in a negative territory or hardly minutely up despite Gold price fall from $1390 to $1290 in a span of 2 weeks or so. Due to this I feel that once March data is released, it is likely to show a decline in imports relative to February numbers as SGE premiums were in positive range for most of the time in Feb.  With SGE premiums mostly in negative to hardly anything, it would have been less attractive to import metal. Even the But as the economic uncertainties increasingly looming over Chinese banking sector through shadow banking issues, I feel their physical purchases would dampen a bit.

4.    On the domestic front, Gold and Silver prices are dropping faster than its dollar denominated counterparts. Rupee has appreciated considerably when compared to dollar over the past few weeks. This has led to downfall in gold prices. Indian government and RBI had to take tough decisions over the past year and now the results are paying off. With the CAD in control, Indian economy is looking to improve from here on. Due to which investors are regaining their faith in India and investments are gradually increasing.

5.    Silver prices are more or less dragged along with Gold prices. With regards to platinum, the AMCU does not seem to be willing to accept less than double salaries, as it announced it would give Platinum producers one year extra time to adjust the wages and would only then return to work

My take on Gold prices in dollar terms will be in the range of $1180-$1400 i.e. INR 26500 to INR 32500. I feel this is the range that the investor should keep in mind while buying Gold.

My take on Silver prices in dollar terms will be in the range of $18.50-$23.50 i.e. INR 41000 to INR 47000. I feel this is the range that the investor should keep in mind while buying Silver.

Like others I do feel that if overall the economy improves than the downward journey for precious metals will continue. But like others, I feel the below given reasons will always play a crucial role in providing returns to the investors who trust on Gold and other precious metals.

1.    With the upcoming elections in India and CAD in control, I do expect that the new government will surely take some steps to boost the R&D for mining Gold in India as well as provide some relaxations in Gold import policies. If that happens, Asian demand will get a boost from India. But government policies will play a key role as they know the best when it is about deciding the best for Indian economy.

2.    As the prices head lower, I am sure that the physical demand will improve drastically world over and not only China because everyone knows that Gold is the only asset that can be taken into account during any economic turmoil.

3.    Gold will always play an important role in geopolitical conflict situations and economic uncertainties.

4.    As the prices continue to spiral down, mining industry will face hurdles to operate in low margin or no margin environments. If that is taken into consideration, I feel that their operational costs will rise more than the income they generate from mining creating the necessary closure of mines as it will be difficult to stay in business in such conditions.

5.    Silver and Platinum continue their downfall as they are more or less dragged along with gold prices. But as the economy improves their use in industries across the world will continue to rise and in turn increase their demand and prices.

6.    The bubbles created by money printing and market manipulation - not just in the U.S., but the entire world has never been universally unbacked, nor government intervention so widespread. This has not been seen over the years and the stimulus programmes have led to gigantic balance sheets of central of banks of the world under the word: “Economic Development”

Gold has always stood by one and all when it comes to economic uncertainties. But with Central banks and governments trying their best to revive their economies, Gold is loosing its investment appeal to some extent, as investors look for short term benefits.

I feel buying physical Gold, Silver and Platinum should be on cost averaging basis. It has been a successful strategy since the bull year began, though it would be a bit strange for the investors who started investing in the last couple of years.  I am sure Gold or for that matter any precious metal investments would always give best returns if considered as long term investment options and something that you can bank on in financial instabilities.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog - "GOLD GOES ON A BUMPY RIDE"
http://riddisiddhibullionsltd.blogspot.in/2014/03/gold-goes-on-bumpy-ride.html

GOLD GOES ON A BUMPY RIDE

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

On Monday, gold reached a high of $1391.99, after the Crimean people had voted over the weekend in favour of joining Russian Federation. As Putin passed on the legislation, the west did their move with the first sanctions on Russia, now it is time to wait and see what Putin Replies. 

After shifting focus from Ukraine issues, gold then concentrated on growth figures from China and then the US tapering.

On Wednesday, gold dropped two percent, when Fed Chair Janet Yellen said the central bank will probably end its massive bond-buying program this fall, and could start raising interest rates around six months later.

It was a bumpy week for gold. After surging to near $1,400 earlier this week when Crimean voters agreed to join Russia, gold prices tumbled, picking up speed after the Federal Open Market Committee cut another $10 billion from its monthly bond purchases, and new Federal Reserve Chair Janet Yellen said the Fed may consider hiking interest rates about six months after it ends its quantitative easing program.

The US data so far has been supple. The month of Feb did not show a positive growth (weather conditions and harsh winter to be blamed) but now the economic growth is expected to accelerate.

However, the bank said it could take several more weeks, until April economic data is released, to get confirmation that the economy is  fact picking up. The Fed, as expected, tapered its QE by $10 billion on 19 March. With inflation staying low, rising nominal interest rate will lead to a jump in the real interest rate, which will likely cause the gold prices to trade lower.

Apart from this, precious metals were also partly related to the data released from the Chinese economy. The worries over this have also been rampant. The growth forecasts of China have been downgraded by many. In fact in 2014 the growth is expected to be 7.3 per cent compared to the prior estimate of 7.6 per cent. This means that the demand for gold will be affected which in turn will push gold prices down as China plays a central role in the market and had also become the leading consumer of gold in the world in 2013.

On the domestic front, this week, RBI added 5 domestic private banks to import Gold under the 80/20 rule, which is will assist in facilitating imports and ease premiums to some extent. Their quota will be dependent on how many customers do they have for exports.

India's CAD level is now nearly at 4 years low. The deficit is around$4.5 billion in Oct-Dec period as compared to $5.2 billion in the previous year. This is surely good news for Gold trade in India as it provides a chance for the government to work out strategy to allow Gold imports, but the time frame for that decision to come will take sometime since general elections are just about to begin.

What we need to watch out for in the week-

U.S. - Consumer Spending, new home sales on 25 March, the U.S. Q4 final GDP and core PCE Index

U.K.- Consumer Price Data

Japan- Inflation rates

Germany-a report on business confidence, IFO Business Climate Index

China- March flash manufacturing PMI 

Europe- Developments in Ukraine and Crimea

Since there is a lot to watch out for gold, giving "a" particular prediction for the yellow metal gets difficult at this stage.

But in the long run, gold is expected to be range bound by $1272-$1430 in the international market and Rs.28,000- Rs.31,500 in the domestic market.

On the other hand silver is expected to range between $19.55 and $23.00 and Rs.43,000- Rs.52,000 in the international and domestic markets respectively.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Lots of If's and But's for gold"

http://www.riddisiddhibullionsltd.blogspot.in/2014/03/lots-of-ifs-and-buts-for-gold.html

LOTS OF IF's AND BUT's FOR GOLD

-by Mr. Prithviraj Kothari,MD,RSBL

Last year it was Syria...This year it’s Ukraine. Geopolitical tensions have always been a booster for gold and other precious metals and it has helped gold in enjoying its safe haven appeal as it always does in times of economic turmoil recession, inflation etc.

This week gold remained on the top and showed some interesting record movements too.

Gold prices bounced on Friday during the trading hours, rising 3.3 per cent from last week's close at 1385$ per ounce, a level not witnessed since early September. Gold sailed through US$1,380 and was on course for a sixth successive week of gains as the situation in Ukraine showed no signs of easing.

Apart from the Ukraine Crisis deceleration of Chinese economic growth has dampened the investors risk appetites. Retail Sales and Industrial output figures were out this week and it has been quite disappointing. According to MNI, a Chinese Government source said not to panic if 1Q GDP would be below target. This once again raised the question that the all so hyped China and its economy and its hunger for gold was just a temporary thing? Well we need to wait and watch

This uncertainty surrounding the rising economies has to an extent eroded investors confidence. The catalyst for a shift in risk sentiment remains to be seen as the market shrugged off positive US data overnight, suggesting the potential for a lacklustre reaction to upcoming Consumer Confidence figures.

Gold continues to be well supported as Russia is seemingly un-phased by the prospect of sanctions from the West. The population in the Crimea province votes this weekend on whether to secede from the Ukraine, with the way the ballot has been set out seemingly certain to guarantee that is the outcome say observers. It is likely to be followed by the US and its allies imposing sanctions on Russia on Monday, potentially starting a round of tit-for-tat retaliation with serious implications for financial markets and the US dollar.

The last time gold had such a gold run was in July/August 2011, soon after which the metal started its climb to the all-time record high of $1,921 per troy ounce.

Looking at the week ahead, if emerging markets fears abate and US data continues to improve; traders may ease out of safe-haven plays like US Treasuries. The resulting rise in yields would likely help the greenback to recover some lost ground, which in turn would weigh on gold prices. 

If situation in Ukraine results in unrest or rioting, gold prices would breach $1,400. But if the Ukrainian situation either resolves itself in the coming days or stabilizes to the current standoff and does not further escalate gold could sell off quickly — returning towards $1,300 an ounce. 

Lots of ifs and buts for the Gold next move! But one thing is clear, safe haven appeal of Gold will always be there.

For the week gold is expected to range between $1364-$1420 an ounce in the international market and Rs.29,500-Rs.31,500 per 10 gram in the domestic market.

On the other hand, silver is expected to range between $20.55-$22.00 and Rs.45,000-Rs.48,00 in the international and domestic markets respectively.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Gold Trapped?"

http://www.riddisiddhibullionsltd.blogspot.in/2014/03/gold-trapped.html

ON BEHALF OF RSBL, I WOULD LIKE TO WISH EVERYONE A VERY COLORFUL, GLITTERING AND HAPPY HOLI!

GOLD TRAPPED?

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

Gold was choppy this week. It was seen moving sideways just before the payrolls data was released. Investors believed that a weak figure would mean that the economy is still fragile and this would underpin gold prices.

Geopolitical tensions in Ukraine have underpin gold prices this week. Spot gold is at $1,350/oz, down 40 cents from its previous close. Spot gold prices rose 1.2% overnight after U.S. President Barack Obama said that Crimea's referendum on seceding from Ukraine to join Russia is illegal and added that the U.S. and European Union are united against Russia's intervention in Ukraine. In case the situation worsened then gold prices are expected to rise.

But the actual scenario was completely opposite.

Gold plunged nearly 1 per cent after US data showed that job growth picked up pace sharply, thus ruling out fears of an economic slowdown. This in turn would meant that the Federal  Reserve would continue to taper its monetary stimulus.

Gold  closed 1% lower on Friday, suffering from their biggest one-day point and percentage loss in more than a week, after a closely-watched jobs report signalled stronger-than-expected employment trends, dulling the metal’s investment appeal.

The Labour Department said that the employers had added 1,75,000 jobs to their payrolls compared to 1,29,000 in January. The unemployment rate, rose to 6.7 percent from a five year low if 6.6 per cent as Americans flooded into the market to search for work. However, many believe that this data could not be valid up to a certain point because of the extreme weather conditions that prevailed last month.

Spot gold fell as much as 1.5 per cent to a low of 1329.35 an ounce and was last seen trading at 1338.09

An optimistic economic data creates such a sentiment in the market that people believe that holding safe haven assets in your portfolio is no longer feasible.

Compared to December and January, February's report was much positive than expected.

While some investors said the January and December reports were distorted by severe winter weather, others worried the weakness was indicative of a broader economic slowdown and would force the Federal Reserve to sustain its stimulus efforts for longer than previously thought. Instead, February's data showed improvement even though winter storms continued to pummel much of the Northeast U.S.

In the short term, what holds more importance than US data is that what happens in Ukraine. On Friday, President Vladimir Putin rebuffed a warning from US President Barack Obama over Moscow's military intervention in Crimea, saying that Russia could not ignore calls for help from Russian speakers in Ukraine.

The other factor that pushed gold prices down, was the data released from China. Data released over the weekend showed that Chinese exports collapsed 18.1% in February from a year earlier, disappointing expectations for a 6.8% increase. Imports rose 10.1%, compared to forecasts for an 8% increase. The significant decline in China’s exports led to a deficit of $22.98 billion last month, compared to a surplus of $31.86 billion in January. Analysts had expected a surplus of $14.5 billion in February.

A separate report showed that consumer price inflation in China rose 2% in February from a year earlier, in line with expectations, while producer price inflation declined 2%, compared to forecasts for a 1.9% drop. The downbeat data highlighted concerns about slowing growth in the world's biggest consumer of the industrial metal. I do feel that there are high chances that the numbers were distorted due to New year holidays observed by Chinese. Recovery should be on its way but we will have to wait for the next set of numbers for more clarity. 

Platinum was seen up for a consecutive week. It gained 2.6 percent, trading at $1477.2 while  silver fell 2.9 percent to $20.82    

In the week ahead, investors will be anticipating what will be closely-watched data on retail sales and consumer sentiment for further indications of the strength of the economy and the future course of monetary policy.

Gold prices are set to rise next week as the yellow metal's trend is expected to remain upward.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"2014- An Interesting Start Up For Gold"

http://www.riddisiddhibullionsltd.blogspot.in/2014/03/2014-interesting-start-up-for-gold.html

2014- AN INTERESTING START UP FOR GOLD

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

Whenever a slightest of hope arises that the global economy is on a path of recovery ...a jerk hits and turns this hope into a nightmare. But these people are surely giving gold and other precious metals a jerk in the upward direction.

Price trend of gold in 2013, compelled many investors to believe that gold was finally entering the bear market and that it was time to shift focus to other metals. Gold had bottomed in December 2013, reaching $1182. But by February 2014, gold has managed to gain 13% by touching levels of $1340. In February itself, gold has gained 7 per cent. This has been its biggest monthly rise since July 2013 mostly due to weak data in US and geopolitical tensions around the world.

This week too gold was up. On Monday, gold rose 1 per cent over uncertainty and geopolitical tensions going on in Ukraine. Under these uncertain scenarios, people have once again given gold the safe haven status that it has been enjoying since years.

Russian-backed president Viktor Yanukovich cast doubt on a bailout deal with Moscow, saying it needed $35 billion over the next two years. Acting President Oleksander Turchinov warned that Ukraine was close to default and heading into the abyss.

U.S. data on Friday showed fourth-quarter growth expanded at a 2.4 percent annual rate, down sharply from the 3.2 percent pace reported last month.

Gold steadied around $1,330 an ounce on Friday and was on track for its biggest monthly gain as persistent concerns about a slowdown in the U.S. economy hurt the dollar. 

But the Federal Reserve chairman, Janet Yellen, stated that the harsh winter weather was to be blamed for this slowdown and economy will soon improve once weather conditions get better.

In the previous two meetings, the Fed had trimmed its monthly bond purchases by $10 billion and is expected to do so in its next meeting to be scheduled on March 19.

The entire market awaits this meeting as the picture will get clear that is it the weather or something else that has to be blamed for a disappointing US economy. It is then that the Fed will be able to take a concrete decision regarding its tapering or it could even mean some loosening. The softer tone and the apparent readiness of the Fed to slow the pace of tapering have boosted both the gold prices and stocks.

Moreover, ETF gold liquidation has slowed down as the price has of Gold moved upwards. ETF gold holdings have been moving sideways since the middle of January. SPDR gold trust is stable at a holding of 803.70 tons. 

But what stole the show was Platinum, as prices reached a high of $1455, outperforming gold. As such the reports by Impala that given the ongoing strikes, it could meet guaranteed contractual deliveries only until the end of March and for the South African market until April which was already in the press and should be discounted by now.

The latest gold import and export figures from Hong Kong Census and Statistics Department, the special administrative region exported a net 83.6 tons of gold to the Chinese mainland in January. This figure may be less compared to export figures of December, but if we compare it to January 2013, it has been an exorbitant rise of 330 per cent.

Currently there are a lot of indicators for gold price movement-

- The US January core PCE price index

- The final February China HSBC manufacturing PMI

- The February flash PMI of the E18 in 3rd March

- The start of the Chinese NPC meeting on 5th March

-The monetary decision and announcements of the Bank of England and the ECB on 6th March

-The US nonfarm payrolls and unemployment rate of February slated to release on 7th March.

Political tension in Ukraine, uncertainty in Europe along with weak US data helped the price of gold due to increased safe haven demand. Next week should get more interesting data wise, as February numbers should come cleaner of winter effects.

Meanwhile, gold is expected to range between $1307-$1361 and Rs.29,500-Rs.31,000 in the international and domestic markets respectively. Whereas silver is expected to range between $20.55 to $22.00 and Rs.45000- Rs.48,000 in the international and domestic respectively.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog - "The Changing China"

http://riddisiddhibullionsltd.blogspot.in/2014/02/the-changing-china.html

THE CHANGING CHINA

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

Amidst all the chaos that has happening at the Global level, I feel we should just relax a bit and understand what gold is really up to. At the current levels, it would be tough to make any short term predictions from Gold or Silver price levels. But lets take a recap and try to work out something...

The yellow metal price by the end of 31st Dec, 2013 ended a 12 year rally which saw trading below $1200.This decline was driven by low interest rates and certain steps taken by the global central banks to foster the world economy. 

But in 2014, gold showed a remarkable re-bounce and touched 1327$ an ounce this week. On Tuesday, gold reached 1332.10, its highest since October. Last week gold gained four percent and this week it followed suit. Thursday too saw gold moving up as dollar gave up gains. By Friday, gold was seen gaining for a third consecutive week on uncertainty over the stimulus measures. 

Gold rallied to a three and half month high earlier this week after reports stated that US economic indicators were disappointing. A report showed that existing US home sales fell more than expected to an 18 month low in January. This sparked speculation that the Federal  Reserve might slow the tapering of its bond purchases.

Expectations that US Federal Reserve would maintain the pace of a withdrawal of monetary stimulus may diminish gold's investment appeal as a hedge against inflation. 

Apart from the FED's QE3 uncertainty, there are various factors that influence gold prices. The general global investment factors, or monetary policy or economic strength. The move to raise the US debt ceiling limit to unspecified limit until next year March will surely support Gold prices.  But lately, the most important factor has been the Chinese demand for gold. This has held up gold prices strongly. The Chinese demand for gold has helped in boosting gold prices at a time when the Fed's monetary stimulus measures have been driving down the prices and the global economy is showing signs of recovery.

Till last year, India was considered the largest consumer of gold worldwide. But according to the World Gold Council, in 2013, China overtook India as the largest buyer of gold. In fact China imported 1066 metric tonnes of gold as the demand for gold bars, coins and jewellery soared 32 per cent to a record high.

*

2014, has just begun and China has already imported exorbitant quantity of gold. This year, the World Gold Council expects China to remain the world’s largest consumer of physical gold. While down slightly from last year’s record level, the research body projects China will still gobble up a robust 1,000 tonnes to 1,100 tonnes of gold in 2014. 

Till 2002, Beijing had barred its citizens from owning gold bars and coins. Even though gold appreciated for a long time in china, the citizens were not able to use it to that extent. but once the government lifted restrictions on gold ownership the Chinese rushed to buy gold and this gave a boost to gold prices.

Moreover, as an economy china has witnessed speedy development. This has also resulted in higher spending power as incomes have risen. Generally, people buy gold as one of the safest forms of investment and also include gold in their portfolios. And given that till 2012, gold has given the best returns in its asset class it's obvious that people are tempted to own it.

The same has happened in China. Though gold dropped almost 25 per cent last year, demand for it from China did not drop and this kept the gold prices moving.

Meanwhile in India, duty on gold that had been levied to rectify the current account deficit has been the major factor for a decline in demand as the precious metal is being sold at very high premiums making the yellow metal even more dearer. The interim budget did not have any changes with regards to Gold import policy or import duty cuts. Gold premium over international price jumped USD 30 on that day.

According to Bloomberg, Silver had its longest daily straight gain since more than 40 years on 18th Feb, after moving higher for 11 consecutive days from 19.08 on 3rd Feb to close at 21.83 on 18th Feb.

Seeing strong physical demand from China and US disappointing economic data, I do feel that Gold price should hover between $1307 to $1360 in the international market whereas in the Indian markets it is expected to be between Rs.30,000 to Rs.31,500. Respectively silver is expected to range between $21.05 and $23.10 and Rs.46,500 and Rs. 48,500.

*goldsilverworlds.com

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog - "Let's Get Gold"
http://riddisiddhibullionsltd.blogspot.in/2014/02/lets-get-gold.html