Brussels explosion and Gold's Safe haven appeal: RSBL

                                                              By Mr. Prithviraj Kothari, MD, RSBL

As I was about to publish this blog, Brussels was rocked by multiple explosions that left many dead and wounded. My heartfelt condolences to their families in these challenging times of despair! 

Gold is known for its safe haven appeal and the same has been proven once again. A quick rise of nearly US$20 proved that traders and investors would flock behind Gold to protect themselves from unknown strikes and calamities. 

Hourly price rise of Gold_220316 - RSBL SPOT terminal

Moreover since the Global downturn, the precious metal has risen by nearly 13-month high.

I did mention in my last blog that I do expect some corrections before the next up move and we all witnessed the same before the FED meeting. The FED meeting on Wednesday did conclude that the global risks pose a threat to the US economic recovery.

The U.S. central bank held interest rates steady on Wednesday and indicated it would tighten policy this year, but fresh projections offered by the Fed showed policymakers expect two quarter-point increases by year-end, half the number forecast in December. Expectations that the Fed would raise rates steadily this year had faded since the bank's initial hike in December, as concerns about global growth roiled financial markets.

It decided to scale back the number of planned rate rises this year to two from four, which initially spurred the precious metal to a one-week high while bond yields and the dollar fell and equities made up some lost ground.

Spot gold was down 0.31 percent at $1,253.99 an ounce during Fridays trading hours though the yellow metal closed on a positive side and was up around 0.4 percent on the week. Gold edged down on Friday, as the dollar steadied above a five-month low, but the metal remained on track for a weekly gain after the Federal Reserve scaled down rate hike expectations.

Inflation is a very important economic number that the FED is watching closely. Until it is below their target of 2%, there won’t be much room for FED with the rate hike policy. Unemployment, according to FED is back on track. 

Commitment of Traders report that was realized on Friday, showed Gold and Silver ETFs have seen continued interest and strong buying has been the trend. Gold holdings increased by 915’000 ounces in just two days, while Silver added 3 Mio. ounces as per the report.

With the Easter holiday around the corner, buying interest would mute from here on until further developments on the Brussels’ incidence. 

A support of $1230 and a resistance of $1270 do play strong price levels for Gold’s next move while Silver price levels would be supported by $15.20 and a key resistance of $16.70.

Thank You!

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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 -
"Renewed confidence in Gold and Silver: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/03/renewed-confidence-in-gold-and-silver.html

Photo courtesy: Google search

Renewed confidence in Gold and Silver: RSBL

                                                               By Mr. Prithviraj Kothari, MD, RSBL

 

Gold prices rallied this week but gave up all gains established post ECB. Still the closing was in a positive trend.

The precious metals remain upbeat with average gains of 0.4 percent with gold prices last at $1,275.10, having set a fresh high at 1,282.90, the highest since February last year.

Gold Price rise

The Yellow metal hit a 13-month high in the wake of the European Central Bank (ECB) decision to lower deposit rates and sink another 80 billion euros per month into the economic region. President Mario Draghi said the new efforts will run until March 2017, but stated that he did not anticipate any further rate cuts.

In data, US weekly unemployment claims between February 27 and March 5 came in at 259,000, under the forecast of 272,000 and below the psychological 300,000 mark. This strong US employment report had driven optimism that the US economy and also the world economy may not be that weak as feared following which expectations on the demand viewpoint have been adjusted aloft.

The focus now shifts to Tuesday’s Federal Open Market Committee (FOMC) meeting 15- 16 March for fresh stance on the interest rates in the US, which is world’s largest economy. The meeting will be followed by a summary of economic projections from individual Fed members, as well as a press conference by Chair Janet Yellen. The policy-board has faced severe instability, but recent employment figures show the American economy is still recovering at a healthy pace.

On the domestic front, gold prices are expected to rise further followed by a weakening dollar. The other precious metals also seem to be facing resistance at these levels, although they also do seem to be attracting more investor interest now, which suggests dips will be supported. 

Key economic data watch out for in the coming week:

·         Tuesday - Retail sales, producer prices and the New York Fed Empire State manufacturing survey

·         Wednesday - consumer price index, housing starts and industrial production

·         Thursday - Jobless claims and the Philadelphia Fed manufacturing survey

There are several central banks meeting this week i.e. Bank of Japan, Bank of England and Swiss National bank whose rate related decisions could bring up some volatility in the markets.

Simultaneously, traders will be keeping an eye on is the conclusion of National People’s Congress in China and will be watching for any statements about fiscal stimulus or monetary easing.

My Sentiment for gold prices is positive and if it crosses $1280 an ounce then gold is expected to reach the next technical resistance levels of $1310 an ounce. As it failed to cross $1280 convincingly, I do feel that there could be a short term pull back in prices but Gold’s price of $1300 won’t be a surprise. Silver too has shown a good support around $15.50. In rupee terms, I feel Gold prices would be in the range of INR 28,000 to INR 31,000 while Silver would be in the range of INR 36,000 to INR 41,500.

Silver Price rise

Thank You!

You may follow me on:

Facebook: https://www.facebook.com/prithviraj.kothari
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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 -
"Post-Budget 2016: Views of RSBL - Mr. Prithviraj Kothari"
http://riddisiddhibullionsltd.blogspot.in/2016/03/post-budget-2016-views-of-rsbl-mr.html

Photo courtesy: Google search

Post-Budget 2016: Views of RSBL - Mr. Prithviraj Kothari

                                                          By Mr. Prithviraj Kothari, MD, RSBL

           Over all it was an average budget for the bullion industry as not much modifications were made as far the polices and regimes are concerned. We expected an implementation of GST for all round growth of our economy including supply chain, sourcing and distribution decisions, inventory cost, cash flows, pricing policy, accounting system and transactions management but nothing came up on that front.

             There were no changes in CTT (Commodity transaction tax) too.

     Bullion dealers and jewellery manufacturers have sent several representations to the government for reduction in import duty from the existing 10% to 2% to provide a fillip to the domestic jewellery sector. But nothing has taken place on that front too.
 
             On the contrary, an excise of one percent has been levied which will prove to be major setback for the officially organized sector of the bullion industry.

            Over all it was a neutral budget with no major developments for the bullion industry. On a scale of 1 to 10 I would rate this budget as 6.

Thank you!


You may follow me on:

Facebook: https://www.facebook.com/prithviraj.kothari
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Website: http://www.rsbl.co.in/
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Google+ URL: http://www.google.com/+PrithvirajKothari



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 -
"Pre-Budget 2016: Views of RSBL - Mr. Prithviraj Kothari & Importance of GST for Bullion Sector"
http://riddisiddhibullionsltd.blogspot.in/2016/02/pre-budget-2016-views-of-rsbl-mr.html

Photo courtesy: http://www.financialexpress.com/photos/budget-gallery/217311/budget-2016-live-income-tax-highlights-expectations-arun-jaitley-speech-service-tax-gst-bill-union-budget-news/

Pre-Budget 2016: Views of RSBL - Mr. Prithviraj Kothari & Importance of GST for Bullion Sector

                                                                                                                    By Mr. Prithviraj Kothari, MD, RSBL

The transcript of the video is as follows:

Anchor: How significant is goods and services tax (GST) for bullion industry?

Mr. Kothari:  Implementation of GST should be expedited for all round growth of our economy including supply chain, sourcing and distribution decisions, inventory cost, cash flows, pricing policy, accounting system and transactions management. The government should levy on bullion flat GST which would replace most indirect taxes like small local taxes, LBT, octroi etc currently in place. Not only that, there will be an ease in documentation too. 

Anchor: Government of India has focused reducing import of gold. Has time come to focus on gold mining in India?

Mr. Kothari: India is rich in mineral resources. But, because of poor research and development (R&D), gold mining has been at bay. Despite huge resources, total production from domestic mines constitutes between 1-3 tonnes out of India’s estimated consumption of 1000 tonnes. On the other hand, China boosted its gold refining business after allow single-window clearance along with fiscal and infrastructure incentives which has put the industry on fast track. China reported total gold production at 451.8 tonnes in 2014, up by 5-52 per cent from the previous year, and become the largest gold producer in the world eighth year consecutively. India needs to focus on R&D in an effective way to reduce dependence on import and therefore, foreign direct investment (FDI) in R&D should be expedited. Moreover there are lot of issues with mining like the local MLA issue, local population of a particular area concerns etc. Due to these issues, mining has lot of limitations.

Anchor: With such issues, mining will remain just a dream for India.

Mr. Kothari: See, today somebody invests and starts mining and then people come forward with a stay on it. So who will invest money in India? The government should provide single window, frame only one policy that clearing, environment, all will be issued by the central government. State government will have no say. The emerging revenue issues should be decided state versus centre.

Anchor: Despite repeated request, the government has not yet reduced import duty on gold. Do you expect the same in the upcoming budget?

Mr. Kothari:  Bullion dealers and jewellery manufacturers have sent several representations to the government for reduction in import duty from the existing 10% to 2% to provide a fillip to the domestic jewellery sector. Domestic jewellery buyers stayed away from fresh purchase since long amid expectations of cut in import duty.

Anchor: You have said earlier something that commodity exchanges are the best tools for hedging the price risk? Is the current system of trade sufficient or the government should do something else?

Mr. Kothari:   See, in the last conference we held, our Shaktikant Dasji had said that there should be a bullion bank. Indian Bullion Jewellers Association, I and others together worked out on the concept and have tied-up with BSE to establish an Exchange and Bullion Bank, subject to RBI clarification. So, if these things happen, the disparity the people have in the market today will reduce very much. According to me, if the bullion bank is there, the prevalent difference of parity and disparity (will be reduced to great extent). Sometimes, the premium becomes 13 Dollars, 20 Dollars, 30 Dollars and sometimes even minus 30 Dollars. So, during the minus period we cannot re-export them. So, in my opinion, the government should open a bullion bank here wherein if you deposit gold, you will also get benefit over that and (if) you want to re-export that, you can re-export through the Re-export Bank. Thus, to great extent, there would be support to the economy and in a way, the economy will boom.

Anchor: Take intercepts from your last interview, you had stated that Gold Bond and Monetization scheme are very good initiatives from the government. But the stats portray a different picture. What the government should adopt to make it more successful?

Mr. Kothari:  See, the initiatives by the government are very good. Until today, no government has taken such initiatives. One problem that is hindering its success is the gold deposit scheme. Today gold is lying in every household. If you ask them its sources it is very difficult for them to provide as it could be lying for ten years, twenty years, thirty years, forty years, since their grandparents time. Thus the government should do something like, you may say, a concession should be given up to 500 grams of deposit. Second emerging issue is that there of the jewellery. When the jewellery is melted there is a loss in the elements. Some steps would have to be taken to take into account the loss issue. With respect to the sovereign bond scheme, liquidity in the market is tight. Otherwise, the scheme is very good wherein 2.75% interest is also available. But with it, currently the market conditions aren’t favoring it. For example, the prevailing price was 27,000 and price of that sovereign bond was 26,000, even in that some 2700 plus crores rupees came. Thus, with this it is clearly visible that there is very much liquidity crisis in the market.

Anchor: To sum it up, any additional points to expect from the government with respect to BUDGET 2016?

Mr. Kothari: I hope that the ban on gold trading levied by the government on SEZ (Special Economic Zone) should be lifted. It would boost the exports in a major way. I hope that bullion bank and bullion exchange only for gold wherein the government itself would borrow from and lend into.

Anchor: Thank you so much Sir for your time. If you could throw some light on the Trade range; for Gold price during the Budget week and thereafter?

Mr. Kothari: With the geopolitical tensions and the economies faltering, I do see a good support for the Gold prices for a while. USD 1070 should act as a strong support while USD 1300 should act as a strong resistance. In rupee terms INR 25,500 to INR 33000 should be a trade range to look for in Gold prices.

Thank you!

You may follow me on:
Facebook: https://www.facebook.com/prithviraj.kothari
Twitter: https://twitter.com/prithvirajrsbl
Blogger: http://riddisiddhibullionsltd.blogspot.in/
Website: http://www.rsbl.co.in/
Youtube: https://www.youtube.com/user/PrithvirajKothari
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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 -

"BULL V/S BEAR FOR GOLD: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/02/bull-vs-bear-for-gold-rsbl.html

BULL V/S BEAR FOR GOLD: RSBL

By Mr. Prithviraj Kothari, MD, RSBL

So far 2016 has been subjugated by the fall out in Chinese equities and the consequent short selling of other asset classes as a proxy hedge.

Gold continued to rally this week as it gained by the strengthening of the yen which suggests that there is constant safe haven buying which does not fit too well with the pick-up in equities and industrial metals this week.

Gold soared 1 percent on Wednesday, breaking a three-day losing streak to trade above the key $1,200-an-ounce level as Asian shares and the dollar slipped.

Bullion rallied to a one-year high last week after a stock market rout boosted demand for the yellow metal as a safe haven, but has since given up some gains as equities steadied. With stocks slipping again on Wednesday, gold was back in focus.

Speculation has increased in recent days that the Fed might resort to negative interest rates to stimulate the economy after Fed Chair Janet Yellen said last week it was an option that would not be taken "off the table." Lower or negative rates would boost demand for non-interest-paying gold. Concerns remain that gold could correct further as some

Analysts say gold gained too much, too quickly.

The gold price fell during Asian trading hours on Friday after rallying overnight to a week’s high of $1,240.10 per ounce. But see the yellow metal remained well-supported on global economic uncertainty. 

Spot gold was last at $1,226.70-1,227 per ounce, down $3.80 from Thursday’s close.

The gold price had rallied overnight following a pull-back in US equities and weaker oil prices. 

Recently the analysts and market players have become more alarmed about

• The state of the global economy and
• The risk of debt default and
• Equity weakness

Gold’s positive and negative movements over the week were influenced by the following-

Oil Prices- Oil prices had risen more than 14 percent this week after Saudi Arabia, Russia, Venezuela and Qatar said they would freeze oil output at January levels as long as other producers also participate. Iran’s oil minister had welcomed the plan but did not commit to it.

The oil price rally also halted after Saudi Arabia’s foreign minister was reported as saying that Saudi Arabia was “not prepared” to cut production, scuttling hopes of a deal by major producers to cut output in an oversupplied market. 

Global Economic growth- Global economic growth remains friable with the Organization for Economic Cooperation and Development (OECD) cutting its global growth forecast on Thursday by 0.3 percent to three percent for 2016 as it warns of slowing economies in Brazil, Germany and the US, and exchange rate volatility in some emerging markets. 

The OECD on Thursday reports that some emerging markets are particularly vulnerable to sharp exchange-rate movements and the effects of high domestic debt.

Economic Data- Major economic data released on Thursday was mixed with a slight negative bias. China’s January PPI was -5.3 percent, a gentler decline than the forecast -5.5 percent and December’s -5.9 percent. January was the 47th straight month of decline, however. 

Weekly US unemployment claims came in at 262,000, below the forecast of 275,000 and under the psychological 300,000 mark. The Philly Fed manufacturing index for February at -2.8 was close to the -2.9 estimate. 

But the US CB leading index disappointed at -0.2 percent against a forecast of -0.1 percent Meanwhile in data, US CPI and Core CPI month-over-month in January came in unchanged and an increase of 0.3 percent respectively, both were above forecasts of a -0.1 decline and 0.2 percent gain.

Gold Demand- Physical demand slowed during the Chinese Lunar New Year, but global demand is also suffering as consumers and well-stocked jewellery manufacturers hold off while waiting for the price of gold to drop, according to multiple gold traders.

The gold price increased modestly for the third consecutive day as a safe-haven rally is being thwarted by weak physical demand.

Monetary policies- Market participants also await further monetary decisions out of the Eurozone and China, which has drawn closer scrutiny after the Japanese central bank decided to lower nominal interest rates into negative territory for the first time in history.

A lack of inflation and threats of another global recession has led central bankers to adopt looser monetary policy and aggressively combat sagging growth.

Market participants appear content to wait until monetary decisions out of the Eurozone and China become clearer.

The recent decision by the Japanese central bank to lower interest rates into negative territory has led other regions to consider the same action.

A lack of inflation and threats of another global recession are forcing central bankers to adopt looser monetary policy and aggressively combat sagging growth.

Till then we need to wait and watch and this seems to be the only mantra as the mart once again stands divided into a bear v/s bull market for gold.

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 Glitters All The Wayl: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/02/gold-glitters-all-way-rsbl.html