VOLATILE MARKETS: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Markets were volatile as the week ended and this volatility was reflected in the movements of gold prices.

Gold prices fell on Friday, after shuffling between gains and losses as investors weighed concern about Europe's banking woes against heightened expectations of a Fed rate increase in December.

The yellow metal had fallen to as low as $1,311.95 on Friday – the lowest since September 21 – following news that Deutsche Bank was near a settlement with US regulators.

Amidst rise of uncertainty over the health of a financial industry, traders have shifted focus to gold to provide what it best does- safe haven. 

Traders are seeking for the yellow metal as uncertainty prevails after the news reports by Bloomberg that 10 hedge funds that do business with Deutsche Bank have pared their exposure. Its shares fell to a record low, and European and Asian equities retreated. There’s heightened haven buying as anxiety grows over the German lender, Australia & New Zealand Banking Group Ltd. said in a note.

Investors had been nervous about the uncertainty surrounding Deutsche Bank after some of its clients, among them several big hedge funds, were reported to have withdrawn securities or cash from the German lender amid concerns about its stability and their exposure.

But, on Friday, safe haven demand for gold dwindled after stocks in major markets largely recovered from a sell-off on easing concerns about Deutsche Bank. This lead to a fall in gold prices. Spot gold was down 0.3 percent at $1,316.32 per ounce during Friday trading hours.

As the session wore on, the focus turned to increasing expectations that the U.S. Federal Reserve will raise rates by the end of the year. Fed-funds futures, used to bet on central-bank policy, showed investors assigned a 61.6 % likelihood to a rate increase in December, up from 52% the previous day, according to CME data on Friday.

Expectations for higher rates tend to weigh on gold, which yields nothing and struggles to compete with Treasury’s and other investments when borrowing costs rise.

Hence there were sluggish sentiments in the market as it might have to edge lower before finding firm support.

A collapse in Deutsche Bank's already beaten stock had sent Europe into a fresh tailspin early on Friday and left world equity markets slipping towards their worst week in three months. Safe-haven demand had sustained bullion until the market turned its attention to U.S. economic data and important numbers coming from China.

The Commerce Department said on Friday that U.S. consumer Spending fell in August for the first time in seven months while Inflation showed signs of accelerating, mixed signals that could keep the Fed cautious about raising interest rates.

Let’s have a look on the key economic indicators-

US

   

• In US data released Friday, the core PCE price index was as expected at 0.2 percent but personal spending and personal income undershot at 0.0 percent and 0.2 percent.
• The Chicago PMI was better than expected at 54.2. Revised UoM consumer sentiment and revised UoM inflation expectations at 91.2 and 2.4 percent respectively were also better than forecasts.
•   A string of manufacturing PMI numbers are due from Eurozone countries as well as the US later today. The ISM manufacturing PMI, construction spending, ISM manufacturing prices and total vehicle sales from the US will also be of note.
•  In US data released on Thursday, second quarter final GDP growth came in at 1.4 percent quarter-on-quarter, slightly better than expectations of 1.3 percent. Weekly unemployment claims for last week was also better than expected at 254,000, against a forecast of 260,000.
• Pending home sales for August, however, fell 2.4 percent month-on-month – a 0.1 percent decline was called for.

China

• China’s official manufacturing PMI for September was at 50.4 (close to expectations of 50.5),
• China’s manufacturing sector remains in expansion mode alongside stable production and demand growths, the NBS said.
• But the foundation of the manufacturing sector’s stable growth is not solid as firms continue to face operating difficulties while industries eliminate excess capacities, the Bureau cautioned.
• The country’s official non-manufacturing PMI, which represents the services sector was at 53.7 in September, was up from August’s figure of 53.5.
• The official PMIs added to the continued Chinese growth story and risk on mood in markets, National Australia Bank said on Monday.
• For the time being The precious metals are looking quite diverse with gold prices struggling to rise and when they do they struggle to hold on to any gains
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  For the time being The precious metals are looking quite diverse with gold prices struggling to rise and when they do they struggle to hold on to any gains.

   
  

   
  
  
  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:
  "Buy And Hold Gold: RSBL"
  http://riddisiddhibullionsltd.blogspot.in/2016/09/gold-buy-and-hold-rsbl.html
   

GOLD- BUY AND HOLD: RSBL

 by Mr. Prithviraj Kothari, MD, RSBL

Bullion has rallied 26 percent in 2016, recovering from three years of losses, as low or negative interest rates have strengthened demand. Political uncertainty has also played a part, with the U.K.’s vote to quit the European Union spurring haven demand. Forecasters including Singapore-based DBS Group Holdings Ltd. have said that the U.S. contest may buttress prices amid concern about the possible implications of a Trump presidency.

Gold may be in for a bumpy ride in the final quarter as Republican candidate Donald Trump now has a 40 percent chance of winning the presidential election and investors will be preparing for the possibility of higher U.S. interest rates, according to Citigroup Inc. A probable victory of Donald Trump increases the chances of a single U.S. hike by the end of 2016.

But if it happens otherwise, then gold prices are likely to steady during 25-29 September after the US Federal Reserve decided to leave interest rates unchanged, according to analysts. 

Bullion has been provoked from inertia after Fed rate concerns had helped wipe out gains for the quarter.

There is once again an inflow of capital in the market as low borrowing costs in the U.S. and economic stimulus by central banks from Japan to Europe drive demand for the precious metal as a store of value.

Over the previous week, gold achieved the best performance since July 2016 with a 2.4% rise, while the US dollar index recoded the worst performance, reaching 95.472 against a basket of currencies.

The precious metal is heading for the biggest weekly advance since July after U.S. central bankers opted to leave interest rates unchanged while reining in their outlook for future increases.

Gold prices edged lower on Friday, but notched the strongest weekly advance in almost two months after the Federal Reserve held off on raising interest rates and scaled back the number of rate hikes it expects next year.

This has once again pushed gold prices upwards and traders are no into the buy-and-hold mode for gold.

The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.

Meanwhile, investors will be focusing on a series of important events lined up this week that play a pivotal role in influencing gold prices.

• A pair of speeches from European Central Bank President Mario Draghi is to testify before the Committee on Economic and Monetary Affairs of European Parliament, in Brussels.
• For fresh hints on whether the ECB will step up monetary stimulus in the coming months to boost inflation and prop up the economy.
• Speech by Bank of Japan Governor Haruhiko Kuroda will be eyed in wake of last week's decision by the BOJ to modify its policy framework
• Focus will also be maintained on the first U.S. presidential debate on Monday between Democratic nominee Hillary Clinton and Republican hopeful Donald Trump
• Other speeches to be given by

                -Swiss National Bank Chairman Thomas Jordan

                -Bank of Canada Governor Stephen Poloz

                -Federal Reserve Vice Chair Stanley Fischer

                -BoJ Governor Haruhiko Kuroda is to speak in Tokyo.

• U.S. is to release data on new home sales, private sector data on consumer confidence, publish data on durable goods orders, to publish final figures on second quarter growth
• Fed Chair Janet Yellen is scheduled to testify before the House Financial Services Committee on regulation and supervision, while St. Louis Fed chief James Bullard is to speak in St. Louis.
• The Bank of Japan's big policy review is likely to see more QE and negative rates in the long run.
• Germany is to publish preliminary inflation data and a report on unemployment change.
• Japan is to release data on inflation and household spending.
• China is to publish its Caixin manufacturing index.
• Germany is to release data on retail sales.
• The U.K. is to report on the current account and publish revised data on second quarter growth.
• The euro zone is to release preliminary data on consumer inflation.
• Canada is to publish data on economic growth.
• The U.S. is to round up the week with data on personal income and spending, a report on business activity in the Chicago region and revised data on consumer sentiment.

Now  that series of events are scheduled for the week we expects markets player to be alert and markets to be volatile.

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:
"BULLISH SENTIMENTS FOR GOLD: RSBL
http://riddisiddhibullionsltd.blogspot.in/2016/09/bullish-sentiments-for-gold-rsbl.html
 

BULLISH SENTIMENTS FOR GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Recently gold has been struggling to climb up due to the recurrent changes in the expectations of an interest rate hike. There is quite a possibility that market players are paying too much heed to the whole interest rate scenario and in turn missing on the bigger picture.

Nonetheless, Gold continues to work lower alongside the rest of precious metals – a resilient dollar and rising US real rates have prompted traders to unwind their long positioning. Investors have become increasingly edgy ahead of the conclusion of the Fed and the BoJ meetings

The spot gold price inched lower during Asian trading hours on Friday amid Mid-Autumn festival holidays in the region.

Spot gold was last at $1,314.66-1,315.00 per ounce, down $1.17 from Thursday’s close.

The spot gold price had tumbled to a week’s low of $1,307.75 on Thursday on selling pressures following a brief spike to $1,328.10 sparked by weak US retail sales data.

In data released Thursday-

• US retail sales in August undershot at -0.3 percent
• Core retail sales in August undershot at -0.1 percent.
• Industrial production month-over-month in August also disappointed at -0.4 percent
• The US PPI in August was unchanged; a 0.1-percent gain from the previous month has been expected.
• The core PPI – excluding food and energy costs – was in line at 0.1 percent.
• The Empire State manufacturing stood at -2.0 missed the expected -0.9
• The Philly Fed manufacturing index at 12.8 beat the predicted 1.1.
• Capacity utilization rate in August stood at 75.5 percent, a touch below the 75.8 percent
• Weekly unemployment claims for September 1-8 in at 260,000 were just below the forecast 262,000 and, more importantly, the psychological 300,000 mark.
• Lastly, the current account balance in June was in line with consensus at -$120 billion. Business inventories month-over-month was unchanged in July, missing the 0.1 percent forecast.

There was disappointment in the markets when the data was released that showed signs of a softening US economy,.aThe US economy has recently shown signs of softening – data including retail sales, its PPI and industrial production have undershot.

While disappointing numbers have lowered the likelihood of an imminent Fed rate increase - for September was just 12 percent, November was 19.3 percent and December was 46.2 percent. Earlier this week, majority had expected a rate hike in December.

With such soft data coming in from the US, expectations have largely diminished towards the Fed doing anything in September and the market is drifting back towards the view they might do nothing for quite a while.

Some even feel that markets are overeating to a potential rate hike and giving too much attention to it, thus ignoring other crucial factors that have the potential to influence gold prices.

The market is once again divided between the supported of bulls and bears for gold. The ones that are bullish are not worried about gold’s recent downtrend. What is the most important factor for investors is that the gains seen so far are sustainable and that gold has more or less stabilised before it takes that long jump to rally.

They believe Fresh disappointing US data has reinforced our view that the Fed should remain on hold in September, resulting in renewed weakness in the dollar and US real rates and prompting fresh buying in gold.
Moreover, demand for gold from China and India is expected to rise over the months to come which will further boost gold prices higher. The market is  moving towards to a festive season and this period of the year has generally seen demand for gold rising and this rise in demand will make up for the weakness gold has faced over 2016.

Given that gold is heavily influenced by fluctuations in the dollar and US real rates, we are not surprised by the metal continuing to weaken. But the bullish supporters for gold also believe that this weakness is temporary and is currently driven by a stronger dollar and higher US real rates

Our big-picture outlook remains bullish but more profit-taking could easily be triggered if the price action disappoints, as it may be starting to do.

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 STABILISES: RSBL"

 http://riddisiddhibullionsltd.blogspot.in/2016/09/gold-stabilises.html