Pages

RSBL Gold Silver Bars/Coins

Wednesday 21 November 2018

Gold remains positive but lacks direction

Gold prices were modestly high last week reacting over a mixed bag of economic reports and geopolitical events. The yellow metal has been able to furnish gains over slightly weak US dollar.

GOLD PRICES rose against a falling US Dollar on Friday, halving last week's 1.9% drop to trade back above $1220 per ounce as Western stock markets fell and crude oil rallied from this month's 17% plunge so far.

Gold prices ended higher on Thursday, shaking off pressure from a stronger dollar to hold on to a week-to-date gain as U.S. and European equities declined.

Tumbling equities market, plunging oil prices, escalating worries about stresses in the global economy, ongoing trade tensions and uncertain growth projections have created a rally in gold prices. 



Let have look at these mixed bags -

BREXIT - The issues around Brexit have invigorated a little bit of safe-haven buying in the precious metals market. In the past week, U.K. Prime Minister Theresa May had two of her cabinet members resign Thursday, including her Brexit secretary, following May’s pronouncement Wednesday that she is sticking with her controversial Brexit plan. The British pound sunk on the news of the resignations, while European bond yields rose. Talks of a no confidence vote for May were also doing the rounds. This led to some safe haven buying in gold though it did not create that much an impact on the world marketplace.

DOLLAR - while the U.S. dollar remains the strongest and most consistent factor for gold, it’s likely that correlations with other asset classes will begin to strengthen and re-emerge over the next 6-12 months and thus reassert themselves in gold’s favour. Furthermore, the marketplace took note of U.S. Federal Reserve Chairman Jerome Powell’s comments at a speech late Wednesday that the Fed is closely monitoring the modest deceleration in world economic growth. However, Powell implied that situation is not now altering the Fed’s monetary policy tenor of continuing to slowly raise U.S. interest rates. Powell added that a further U.S. stock market selloff could impact the Fed’s policy decisions. Any further weakness in the dollar due to Feds decisions will pull gold prices high.

EURO ZONE CRISIS - Crisis and uncertainty continue to prevail in Europe, where Italy is locking horns with the EU and a Brexit deal hangs in the balance, mega-economy Germany has just produced the worst growth in nearly six years. Even if Wall Street can successfully shake off noise from the Old Country, a fresh threat from falling oil prices, along with worries over trade and a Fed misstep may cast long shadows

EQUITIES - Currently equities don’t belong to anyone and it appears to be in no-man’s-land. Gold and silver are seeing a bit of support as the U.S. stock indexes have backed down and might fall further. Any stronger stock market selling pressure surfacing in the near future would likely more significantly benefit gold and silver prices.

What we see from the above explanations is that the markets are now moving focus from dollar to geopolitical events.

But one notable interesting thing we see coming in is from China. China has developed tremendously in recent years. But what’s next? Is the country entering the growth recession? And how it will affect the world and the gold market?

Indeed, at the turn of this century, China was a minor player in this market. While today it is both the world’s largest consumer and producer of gold, accounting for 23% of total gold demand and 13% of total gold supply. However, there are still opportunities for further development, as the investor base is too narrow, while the market infrastructure and regulations need to improve.

So far, the Chinese authorities have postponed the inevitable slowdown. But it will arrive one day. Given the economy’s massive leverage, the growth recession is likely to cause a financial crisis, which would hit the whole world. Gold should shine, then. The problem is that nobody knows when it will happen.

While we remain positive on gold prices going toward and into 2019, gold still seems to lack clear price directionality for the time being.

Thursday 15 November 2018

Investors mantra - Stay Calm

Gold has lost around $30/oz. in less than one week as the US dollar charge continues. Last week’s FOMC meeting confirmed that US interest rates will continue to climb this year and next, while the Democrats’ victory in the House of Representatives is being taken as a USD positive so far, as it makes US President Trump more accountable for his actions. The precious metal was also unable to pick up a risk-off bid after US and Asian stock markets crumbled overnight on tech - mainly due to Apple - and worries that US-China trade wars may escalate.



Apart from the above mentioned acts, the way things are going- default concerns and inflation expectations are rather low by historical standards. As a result, financial markets could take a hard hit if investors ever wake up and demand a higher price for accepting credit and/or inflation risk. Such a scenario could make holding gold a particularly interesting option.

The recent weakness in gold is not over. In fact, we are worried about another leg down getting underway. While some believe that gold is moving to the bears there are some players in the market who still believe that gold prices will rally in the near future. Long term investors and speculation are making a shift from a bear to a bull market. Their belief is strongly supported by a few factors which these market players expected to occur soon-


  • First and foremost, the current gold price does not seem to be high and there is a lot of scope for recovery till it reaches its all time high
  • In a risk-on scenario, there is a good chance that the gold price will move up
  • Bargain hunting and weakness in equities, such as the sharp fall in U.S. stock market on are helping put a floor under gold during the metal’s recent slide. The fact that gold has not fallen further “is probably due to the correction on the stock markets, which has made gold attractive as an alternative investment
  • Oiling of gold reserves is a clear indicator that central banks do not want to be dollar dependent. A gold driven economy will definitely raise the demand for the yellow metal and furthermore its prices.
  • Gold is the only financial asset that’s not simultaneously somebody else’s liability. Hence the liking for this metal always remains high.
  • With uncertain world financial assets, there’s an excellent chance there’s going to be a volatile markets and hopefully a one that favors gold.


Currently we see investors acting very calm in the market. Maybe they await a strong and concrete signal from the global markets to get back into action mode.