Markets wait for 2022 to end on a positive note

 “Gold ticked higher on Monday as a retreat in the dollar made bullion more attractive for other currency holders, drawing further support from some safe-haven demand from China amid wide protests over its strict COVID-19 curbs.” says the top gold dealer in india.
 
The US markets fell on Monday post the sudden hawkish comments released by the Fed and also the ongoing unrest in China. But on Tuesday morning there were reports that China State Council will have a press conference to hopefully call off the zero Covid policy. This created a direct and positive impact ion Hong Kong and Shanghai markets, noted by bullion dealers in India.
If the China COVID situation does not come under control and the crisis gets worse then it could be positive for the gold market.
On one hand we have the escalating crisis in China and on the other hand we have hawkish Fed comments. Both these are acting as opposite drivers for the yellow metal.
Gold prices slipped from a more than one-week high on Monday, as the dollar rose from session lows on hawkish comments from members of the U.S. Federal Reserve reiterating their fight against inflation.
Various members of the Federal Reserve have been extremely vocal about upcoming interest rate hikes. One of the more hawkish Federal Reserve members is the St. Louis Fed President James Bullard. Last week he commented on the need for the Federal Reserve's benchmark rate to go as high as 7% to deal with lowering inflation. This week speaking to Greg Robb an editor at Market Watch when asked a question about how long expects the fed funds rate will need to remain in the 5% to 7% range, he said that "the Federal Reserve will likely need to keep its benchmark policy rate north of 5% for most of 2023 and into 2024 to succeed in taming inflation.

Spot gold last fell 0.86% to $1,740.557 per ounce, after hitting its highest since Nov. 18 earlier in the day. U.S. gold futures settled down 0.8% at $1,740.3.
The dollar turned positive after falling to a near two-week low earlier in the session. A stronger dollar makes greenback-priced metals more expensive for other currency holders.
Fed Presidents James Bullard and John Williams stated that there was a long way to go to fight inflation, with Bullard stating that rates should be held high “throughout next year and into 2024.”

But a very strange or rather bizarre trend being witnessed in some of the leading economies (excluding US) is the reduced dollar dependency.
This has been highlighted even more post the Russian –Ukraine War.
West sanctions against Russia are backfiring, particularly fir the US dollar, which is slowly but surely losing its grip on global dominance.
After witnessing western nations unilaterally freeze Russia’s foreign assets in response to Moscow’s military operation in Ukraine, largest bullion dealers in India noticed that central banks have been boosting their gold reserves so the same thing doesn’t happen to them should Washington suddenly turn unfriendly. Over $300 billion of Russian foreign reserves— not including assets owned by businesses and individuals— were frozen by the Biden administration and other western allies
 
China and Russia are allies with the former closely associated with the World Economic Forum, whose plans to implement the Chinese social credit system globally are well advanced.
On the other hand, social unrest, inflation, disrupted supply chain and food supplies etc have created pressure on the dollar and its importance as a world currency has depleted.
If this continues to happen, the U.S. will no longer be able to exchange piles of intrinsically worthless paper for the goods and services produced by the rest of the world and will rapidly become a banana republic, kind of like Haiti but without the mild winter climate. China and Russia have been moving toward this goal for many years, which is why they have been accumulating vast quantities of gold at knockdown prices in preparation for the day when they will launch a gold-backed currency that will see the dollar might lose its significant hold at astonishing speed.
They have been waiting for the right moment, and with the Fed doubling the number of dollars in existence every few years now, that time is believed to have arrived. The imminence of this may explain why the dollar tanked this month.
But this data is not being supported by strong evidence and we can do nothing but wait for concrete facts. Meanwhile some important data coming up-
 
Jerome Powell is due to speak at a Brookings Institution event on Wednesday, on the outlook for the U.S. economy and the labour market
U.S. non-farm payroll data for November is due on Friday, which might shift expectations around the Fed’s policy move in December. Traders currently anticipating a 50-basis-point rate hike.

Keeping fingers crossed, we at RiddiSiddhi Bullions Limited hope global markets to end 2022 on a positive note, thus benefiting the max.

Heavy Decline in gold prices- Unlikely

 What a year it’s been world over. Financial markets have swung from all-out bullishness to maximum bearishness. Most asset classes- equities. Bonds, crypto-coins, commodities (ruling out energy) have fallen by a fifth or more from their highs.  In such a situation gold should have been shining and how. But dollar, monetary policies, inflation and rate hikes have dampened the bullish sentiments for the yellow metal.
Bullion prices plummeted this year, recently hitting an over two-year low as rising yields drove up the opportunity cost of holding gold. The metal has largely lost its safe-haven status this year, and also appears to have failed as an inflation hedge.
“With U.S. inflation staying stubbornly high this year, rising interest rates are expected to pressure bullion prices in the near-term” says the largest bullion dealers in India.
 
 
Gold has tumbled from above $2,000 an ounce in March to around $1,650 as the U.S. Federal Reserve and other central banks raised interest rates rapidly to tackle inflation.
Higher rates pressured gold by lifting returns on other assets such as government bonds and the dollar that compete with gold for investment
 
And this was very well witnessed in the current week by gold dealers in India.
The precious metal quickly tumbled during Powell's press conference, which followed Fed's decision to raise rates by 75 basis points for the fourth time in a row. The latest hike means that the Fed has already raised rates by 375 bps since March, bringing the key policy rate to a range between 3.75%-4%.
Gold prices fluctuated in a narrow range on Thursday, following a volatile session after US Federal Reserve Chair Jerome Powell tamped down on expectations of a policy pivot saying it was “premature to discuss pausing”.
Gold lost all gains, post-Fed statement, as Chair Jerome Powell signalled that the "ultimate level" of interest rates would likely be higher than previously thought. He also said the window for a soft landing has "narrowed."

Spot gold rose as much as 1.3% after the release of the policy statement at the end of the two day meet. However the price rise dampened post Powell’s remarks.

Powell said that even though a slowdown in rate hikes might happen in December or February, the U.S. central bank is likely to take rates higher than previously thought. "At some point … it will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2% goal," he said. "We still have some ways to go. And incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected."

Powell also acknowledged that the window for a soft landing has "narrowed" as monetary policy has become more restrictive this year. "The inflation picture has become more and more challenging over the course of this year," he said. "That means that we have to have policy be more restrictive, and that narrows the path to a soft landing."
Although gold is considered a hedge against inflation, higher US interest rates increase opportunity cost of holding the non-yielding asset and this further boosts the dollar.
During the press conference, Powell hinted that rate increases could be less aggressive from now on. According to him, the critical question becomes not how fast but how high to raise the policy rate and how long to keep it elevated.
Another hawkish point was that it was still premature to think about a pause in rate hikes, with the December meeting expected to reveal how high the Fed might raise rates thus strengthening the dollar and pushing gold down further.

But one positive outcome of all these events will be will be the old trading mantra- BUY ON DIPS.
“Well then it’s obvious that any dip in prices of the yellow metal will result in a surge in its demand and people are more likely to buy it given the uncertain times that lie ahead. Hence gold won’t be under a strong impact thus a heavy decline in its prices is not expected.” is predicted by the top gold dealers in India at RiddiSiddhi Bullions Limited.