FINANCIAL CALAMITY AVOIDED OR THE WORSE IS YET TO COME??

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

Gold was going gaga over the week. Usually, we don't see much trading, just a few hundred lots of gold futures, on an early Thursday morning in New York. But what we saw this Thursday came as a shock. A wave of buy orders worth over $2.3 billion gushed into the market.

While other commodities declined, gold prices rose on Thursday despite dollars drop.

In just 10 minutes gold prices rose 3 per cent. It created a rhythm for the next 12 hours of trade. In fact many traders and investors were baffled and bewildered as they have seen such inexplicable soaring prices and trade surges over the past two weeks and this time too there were no explanations.

Spot gold rallied to a session high of $1,324.06 per ounce , up more than 3 percent on the day.

Late on Wednesday, the U.S. Congress approved an 11th-hour deal to end a partial government shutdown and pull the world's biggest economy back from the brink of a debt default that could have threatened financial calamity.

The US government shutdown ended and the nations borrowing authority was extended as US President Barack Obama signed in to the deal.

It funds the government until January 15 and raises the debt limit until February 7 so there is the possibility of another manufactured crisis in Washington early next year.

The resolution reached in Congress avoiding US government default left investors sufficiently uncertain that US dollar fell, bond yields eased and gold and other precious metals jumped

Despite the US signing a deal for the debt ceiling and putting a halt to the shutdown, we saw an opposite reaction in the market. 

Gold held onto 3 percent gains throughout the session as the dollar tumbled on Thursday following the U.S. congressional deal to restart the government and avoid a federal debt default.

Now what compelled this behavior????

Investors and traders are concerned that this extension of the debt ceiling had only delayed another shutdown by a few months. In fact, in February, once again they predict another shutdown in Congress between republicans and Democrats. if this happens then we should await a worsened economic scenario and even higher gold prices. 

Moreover, gold once again caught the investors attention as the dollar slumped on ideas that the extension of the debt ceiling and economic damage done to economy as a result of the government shutdown may delay the Fed from tapering in December

The US debt deal is being taken as a positive factor for gold as it will last just a few months. Investors say that it's just a temporary solution which has raised uncertainty once again over the Fed's decision to taper its bond buying.

The two-week shutdown and acrimonious debate over raising the U.S. debt ceiling have knocked investor and business confidence, denting growth prospects for the world's largest economy.

Markets will now refocus on economic news and the timeline for the US Federal Reserve's tapering of its monetary stimulus bond-buying programme. The Fed surprised financial markets in September by opting to delay the start of stimulus reduction.

The Fed is committed to purchasing $85 billion in new debt per month in an open-ended programme (QE). Accommodative measures from the US central bank are supportive of gold because extra liquidity tends to debase the dollar and create future inflationary risks.

Meanwhile in the Asian markets too there were a few factors that soared gold prices.

China's Dagong ratings agency downgraded America to an ‘A -' rating from ‘A’ after the US Congress only avoided defaulting on its debt by a couple short hours.

The decision taken by Dagong has caused precious metal prices to soar, all gaining by around 2-3 percent and breaking away from the remaining commodities sector,

In India, gold was being sold at a hit record premium of $100 an ounce.  A shortage f supplies to me the festive demand has resulted in this high premium.  Due to the additional premiums, quoted gold prices in India are 8 percent higher than the current spot price of $1,261 an ounce Banks, the primary dealers of bullion, are currently importing the yellow metal chiefly for exporters, as under the so-called 80/20 principle, jewellery exporters get priority for supplies over domestic manufacturers. The principle, part of a package of measures announced in July aimed at cutting India’s current account deficit by reducing gold imports, states that 20 percent of all gold imported into India must be re-exported.

Following government clarifications, banks have begun to process fresh orders, but the rule will still inhibit imports.

But nonetheless, the demand supply gap is widening and affecting gold prices.

The trade range for gold this week is expected to be $1290-$1350 (an ounce) in the international markets and Rs.29000- Rs.32000 (per 10gm) in the domestic markets.

The primary purpose of this blog (Prithviraj Kothari - MD, RSBL |  Bullion market blog) is to educate the masses of the current happenings in the Bullion world.
- Previous blog -
"US Deal or No Deal"
http://riddisiddhibullionsltd.blogspot.in/2013/10/us-deal-or-no-deal.html

U.S. DEAL OR NO DEAL?

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

Firstly, I apologize to my readers for not posting the Blog on Saturdays, that I usually do. We were busy with the SPARSH – Touch of Elegance store launch in Borivali, Mumbai. Secondly, what just happened to Gold on the day of my store launch? Gold sent the entire market into shockwaves.

It lost $30 in just two minutes. There was huge sell order that triggered the plunge. This single order was said to be the culprit as it took gold down to a three month low. Friday extended bullion's drop to a fourth consecutive day, its longest losing streak since late June. For the week, the metal was down 3.4 percent, its sixth weekly decline in seven weeks. 

Gold's sudden price tumble was a result of hedge funds and institutional investors flooding the gold futures market with sell orders. Spot gold was down 1.5 percent at $1,266.80, having earlier fallen as much as 1.8 percent to its lowest since July 10 at $1,262.14 an ounce.  An unusual large sale order in New York Futures and signs that a deal strike to avert potential US debt default prompted investors to sell and flee the market.

Gold is generally viewed as a safe haven asset in turmoil. But some confusion prevails in the market that has set gold moving on the other side.

However, later in the day markets attention was again moved towards the data that was out for release. Though gold was under selling pressures, the losses were almost halted by data that showed US weekly jobless claims touched a six month high in the previous week. Gold was quickly sold below 1300 again, but had to rally when US jobless claims came out with a 374’000 number and headline traders let it jump to the day’s high of 1312. The U.S. Bureau of Labor Statistics however said the number was wrong, due to a new computer system in California, as well as the government shutdown, so that gains were immediately given back.

Trading volume, which has been light this week, heated up briefly for about 10 minutes in U.S. morning trade. Prices remained range bound, with buyers on the sidelines due to a lack of U.S. data and anxiety over how the stand-off in Washington will play out, as a U.S. government shutdown continues. 

Gold remains vulnerable and possibly quite volatile in the short term but it is becoming increasingly attractive to long-term buyers with a significant rise in the price all the more likely over the next three-to-five years.

The uncertainty over the US government shut down is expected to create a negative impact on consumer spending, unemployment and economic activity. And if the impact will last longer then it's is less likely that the Federal Reserve would make any pending change in the US monetary policy. The Federal Reserve will not risk adoption of policies that might trigger a full-blown recession.

The current situation of the market place is that the US government will come to a budget agreement and raise the debt ceiling. But, in case that does not happen, the market has to be prepared for soaring gold prices as the yellow metals will once again dress up as a safe haven asset.

In the domestic markets, it's the demand numbers that's playing games. Despite seasonal demand, there is a weak trend in the domestic market. However, the demand is expected to pick up as rural income is expected to boost.

India gold purchases may go up this year on likely firm rural demand boosted by higher than expected monsoon showers, weak yellow metal prices. A report by the WGC expected demand to high in gold this quarter. Crashing international prices are also prompting buyers to enter the market at dips.

First thing that Indians stock is food and then Gold,. Gold, in India, is always considered above all other asset classes. Be it equities, real estate, funds etc. Demand for gold is expected to increase in the days to come.

Looking ahead, Indian festival and wedding-related demand, restocking by jewellery manufacturers worldwide in anticipation of Christmas and New Year retail buying, continuing strong demand from China, and a pick-up in central-bank acquisitions, should underpin the gold price and could contribute to a resumption of the long-term uptrend in the metal’s price.

Gold in the international and domestic markets is expected to trade in the range of $1230- $1320 an ounce and Rs.27,000- Rs. 31,000 per 10 gram 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 -

"Only one thing is certain for gold.....uncertainty"

http://www.riddisiddhibullionsltd.blogspot.in/2013/10/only-one-thing-is-certain-for-gold.html

RSBL's SPARSH - Touch of Elegance - Second showroom!

With the grand success of our first showroom, our valuable clientele wanted us to bring the creations in the suburbs of Mumbai. So here we are, justifying my Motto: “Make products that meet customer needs”. 

We are delighted to announce the opening of our second Sparsh – Touch of Elegance showroom in Mumbai. The city continues to be an important market for us, one we take pride in and understand perfectly. Few challenges faced by the Gold & Diamond jewellery sector of India which will be catered by this product are transparent pricing scenario when it comes to making charges & raw materials costs like Diamonds etc and absolute brand assurance. We are confident that the new showroom will set new standards in jewellery sales in the area and help us move forward in our business endeavours. Customer satisfaction is our utmost priority and the showroom promises to provide patrons a completely new experience in buying high quality one-of-a-kind jewellery.

                                     

INVITATION FOR THE OPENING OF RSBL SPARSH'S SECOND SHOWROOM!

We find great pleasure in cordially inviting you to the Grand opening of our second exclusive Gold & Diamond Jewellery showroom of Sparsh-Touch of Elegance by RSBL. Please find the details below.

Your presence will be highly honoured.

ONLY ONE THING IS CERTAIN FOR GOLD....... UNCERTAINTY!

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

The U.S. shut down was the most discussed topic last week. The world largest economy might be pushed into default in case of a failure to increase the debt limit. Though the partial shutdown did not create much impact on gold prices globally, this shutdown along with the debt ceiling will surely have a major impact on bullion prices worldwide.

As shutdown enters its second week, there prevails lot of uncertainty in the markets.

Gold fell on Thursday, as investors booked profits after the previous session's gains due to uncertainty about a partial U.S. government shutdown and slow demand in key physical markets. 

It rose 2.2 percent on Wednesday, posting the biggest daily gain in two weeks, as the dollar fell to an eight-month low and no end appeared in sight to the shutdown. 

Gold prices closed lower on Friday, held down by dollar strength to lose more than 2% for the week after having been batted around by the U.S. government shutdown and debt-ceiling worries.

Gold was trading in a tight range during Asian hours on Friday as the Chinese markets were closed for a national holiday through Monday and simultaneously there was not much US data expected or released through the week.

In such an uncertain environment where even a partial shutdown is expected to move gold prices higher and increase its demand as a safe haven asset, we found an exactly opposite trend prevailing in the market. Demand for gold crumpled as there was speculation in the market that the effect of the partial U.S. government shutdown will be short lived.

In the past too, such stand offs have been resolved at the last minute just before a major deadline. the same was expected this time too. But now the scenario seems to be changing,

As many as 800,000 U.S. federal employees are temporarily out of work. Congress also faces a dispute over raising the $16.7 trillion debt ceiling this month.

Further, the market is starting to look ahead toward the Oct. 17 date by which the Treasury has said it will hit its borrowing authority, meaning another potential political fight over the debt ceiling.

While the temporary U.S. government shutdown has not been a positive driver for prices, the risk of a debt ceiling breach holds scope to reignite interest.

Other factors that could influence the market next week include minutes of the last meeting of the Federal Open Market Committee and the return of Chinese buyers after a week-long holiday.

Next week, As India marks the onset of the festive season (to begin with Navratri) and Chinese buyers are back after an extended holiday,  demand for gold is expected to increase. Whatever the case, many anticipate the metal will get a lift if the political stalemate and U.S. government shutdown goes into a second week. Meanwhile, a week-long Chinese holiday will end next week, bringing potential buyers of physical metal back into the market. All these factors will extend a supporting hand for gold.

Traders who have been active in the market have been closely watching the US data on the labour and housing markets. Key figures will help in judging the strength of the US economy which in turn could decide when the Federal Reserve would begin cutting back its bullion-friendly stimulus measures

Fed officials have said this week that the lack of data was making it difficult to read the economy and the Fed might have to keep monetary policy for longer to help offset the harm caused by political fighting in Washington.  Spot gold eased 0.1 percent to $1,315.44 an ounce by 0307 GMT after sharp swings earlier in the week.

This shutdown has also started affecting economic data releases. US nonfarm payrolls, considered the most importantly monthly data release in financial markets, is unlikely be published as scheduled.

Thus has left the data calendar rather light, with August German PPI coming in at -0.1 per cent, 0.2 percent points below the forecast.

The International Monetary Fund managing director Christine Lagarde among others, has warned that the US and the global economy could be dragged into further difficulty unless the US can resolve both issues (shutdown and debt ceiling) quickly. In the rest of the precious metals, trade has been broadly stable, though most lost some ground.

Platinum and palladium slipped $1. Platinum last $50 in this week, a fall of 3.5 per cent and palladium dropped $32 (4.3per cent). Silver was down five cents at $21.60 per ounce.

The trade range for gold in the international and domestic market in the coming week is expected to be $1301-$1370 an ounce and Rs.28,500- Rs.31,000 per 10 gram respectively.

Now all eyes are glued on the debt ceiling.

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 -

"Debt Ceiling or Death Ceiling for Gold?"

http://www.riddisiddhibullionsltd.blogspot.in/2013/09/debt-ceiling-or-death-ceiling-for-gold.html

DEBT CEILING OR DEATH CEILING FOR GOLD?

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

Gold prices seemed to be in a wavy mood all this week. With prices gaining momentum on Tuesday and Wednesday and then falling back on Thursday and picking up on Friday again.

Let's take a look at the weekly movement of gold prices.

Monday- On Monday, gold and silver slightly declined. Their decline coincided with the downfall of other commodities such as crude oil. In the forex market, leading risk related currencies such as the Euro and Aussie dollar depreciated against the USD. 

Tuesday- Gold went to test the downside and dropped to 1305.50 when aggressive selling hit the market in the afternoon. A lower US September consumer confidence number seemed to provide the needed support, and by the end of the day, Gold shorts got squeezed out when it recovered all the way up to 1328 again.

Wednesday- On Wednesday there was uncertainty in the market on the issue whether the US lawmakers would be able to agree to a spending bill before next Tuesday to avert a government shutdown. Focus again shifted to gold as it witnessed safe haven buying. According to US Treasury Secretary Lew the Government will be out of money on 17th October and won’t be able to meet all of its financial obligations. Gold reacted with a move higher to a high of 1338.20

Thursday- Gold fell on Thursday as a rise in the dollar and mixed US economic indicators prompted investors to take profits after gains in the previous session. In US economic data on Thursday, contracts to buy previously owned home fell for a third straight month in August, while fewer Americans filed new claims for jobless benefits last week. Spot gold was down 0.8 percent at $1322.40 an ounce

Meanwhile, Republicans in the US House of Representatives refused to give in to President Barack Obama's demands for straightforward bills to keep the government running beyond Sept. 30 and to increase the government's borrowing authority to avoid default. 

Friday- Gold prices gained more than one percent on Friday as the trading hours closed. Prices rose over expectations ahead of a weekend that could yield a decision on whether the US government shuts down next week.

Gold jumped more than 1 percent on Friday as wrangling over the U.S. budget and jitters over the outlook for Federal Reserve policy stoked buying interest, with buying accelerating sharply on a break of a key chart level.

New York Fed President William Dudley said on Monday that the U.S. central bank could still reduce its support for the economy later this year, while St. Louis Fed President James Bullard said on Friday that stimulus could be scaled back in October, depending on economic data. Comments from a Federal Reserve official that suggested a bond-buying taper could be pushed out to next year helped spur the precious metal upward.

It was this month of the year, in 2011 that gold reached its life time high of 1920$ when the first US debt ceiling crisis surfaced. The crisis was resolved at the last minute. A similar crisis creates waves (though minute) in the market where investors wait and watch the US economic data reports and key figures that determine whether the US Federal Reserve could begin reducing its bond purchases this year.

The metal also received a boost from the International Monetary Fund, which reported that central banks continued to increase gold reserve. The data showed an increase of 12.7 tons in Russia’s Gold Reserves, Turkey adding 23.3 tons, Kazakhstan 2.5 tons and also Ukraine, as well as Azerbaijan were among two tons of buying. On the sell side stood Canada, Mexico and the Czech Republic with marginal amounts of a few hundred kilos in total.

Still, the price of bullion has fallen about 20 percent this year, after 12 years of gains.

Moves by India to cut gold imports as it wrestles with its ballooning current account deficit have been keeping buyers at bay. 

The US debt ceiling debate is heating up, but while a temporary Government shutdown cannot be ruled out, no one really expects the US to default, but finally increase the limit again.

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 -
"Final surprise or more to go!!"
http://www.riddisiddhibullionsltd.blogspot.in/2013/09/final-surprise-or-more-to-go.html

FINAL SURPRISE OR MORE TO GO!!

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

So finally.....the much awaited and the most discussed meeting was held this week. The FOMC meet began on 18th September and was over by the 19th. All expectations, rumours, speculations and predictions were finally put to a halt.

Everything was going red for the yellow metal until Wednesday. On Wednesday gold jumped 4.1 per cent (the highest in 15 months) when the Fed made a statement that they would need more evidence and clear signs of US recovery before curbing its $85 billion-a-month of bond buying. No taper! The Fed topped the surprise no-tap vote, by delinking tapering to any “magical number”

Gold hovered near one week highs and was on track for its biggest weekly gain on five weeks after the US Federal Reserve postponed the tapering of its stimulus measures that have long been a supporter for bullion.

Bullion rose 70 percent from December 2008 to June 2011 as the U.S. central bank pumped more than $2 trillion into the financial system by buying debt, increasing concern about currency debasement. Bernanke said there is no fixed schedule for tapering and a statement from the Fed signalled interest rates will stay near zero as long as unemployment remains above 6.5 percent and inflation forecasts don’t exceed 2.5 percent.

Gold slid on Thursday and more so on Friday after positive data release from the US. Spot gold prices were last at $1,352.45/1,353.20 per ounce, down $15.10 or 1.1 percent on the Thursday’s close. Spot Bullion prices for gold fell $25 on Friday morning from Thursday's 7-session high, trading at $1350 per ounce as concerns grew that next month's US "debt limit" deadline could spark panic in financial markets. In the other precious metals, silver prices at $22.53/22.59 per ounce were down sharply on Thursday’s close of $23.12, while platinum prices fell $14 to $1,448/1,453.

Initial jobless claims for the week ending September 14 increased 15,000 to 309,000 but were well below the expected 330,000 and the Philadelphia Fed business outlook index rose to 22.3 in September, much better than the forecast of 10.3 and Augusts' reading of 9.3. Reports released showed sales of previously owned U.S. homes unexpectedly rose in August to the highest in more than six years and manufacturing in the Philadelphia region expanded in September at the fastest pace since March 2011. Apart from the encouraging data, Gold sank more on later part of Friday after Federal Reserve Bank of St. Louis President James Bullard said that the US central bank may move next month to taper its QE and reduce stimulus pending which has acted a booster for precious metals over the years. He simply put it in this way, “Market overeacted with taper expectations”

The next big event is the appointment of a new Fed Chairman. Any tapering that is expected to happen in October will be dependent on data released from the US and speculative interest may remain soft as investors prefer to wait and watch before jumping into the markets.

On the domestic front, the government on Tuesday raised the import duty of Gold Jewellery to 15% from 10% earlier, introducing a 5% tariff differential with raw gold. The move, which underlined the government’s persistent efforts to dampen the demand for Gold imports and stabilize the rupee, will also give some comfort to domestic jewellery industry with a decisive export orientation. The Finance ministry’s decision followed RBI’s tightening norms for Gold Loan non-banking financial companies (NBFCs). 

Usually artisans manufacture gold jewellery factoring in local demand and the process of manufacturing does take time. This move if not had implemented, the absence of duty differential between the imports of plain Gold and jewellery, bulk buyers who didn’t want to wait for purchases started importing. This affected the livelihood of artisans who were dependent on jewellery making.

India's gold shipments came to a virtual halt after the Reserve Bank of India (RBI) told importers on July 22 that a fifth of their purchases would have to be turned around for export and that 80 percent would be available for domestic use. Clearing the air on gold import norms, a government official today said more than 20 per cent of the imported metal can be exported back, a clarification that is likely to help release inbound shipments held up at the customs. 

Domestic jewellers can now breathe a sigh of relief with this clarification, as demand is expected to pick up in the coming months with the arrival of the wedding and festival season, traditional times to give gold. And this year's good monsoon will boost incomes of farmers, who often use gold as an investment.

As far as the trade range for gold is concerned  it is expected to hover between $1270-$1370 and Rs.28,500- Rs.31,000 in the international and domestic markets respectively.

The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -
"Are they really precious?"
http://www.riddisiddhibullionsltd.blogspot.in/2013/09/are-they-really-precious.html

ARE THEY REALLY PRECIOUS?

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

This week a lot has happened with precious metals and in the coming week too a lot is bound to happen with gold, silver and platinum

The bears are in the driving seat in Gold. Gold prices shed 5.6 percent for the week. Gold fell to a five-week low on Friday at $1,304.56, heading for its worst week in more than two months.

For the first time in a month silver traded below $22. It suffered a huge sell off on Thursday. Silver prices fell 5.32 per cent on Thursday, closing at $21.90.

Platinum was not sparred from the selling pressure, falling 2.31 percent to close at $1,438 and saw some slight recovery to the $1,440 levels now. 

There are various factors responsible for this Sell - off. Let's take a look at them one by one.

SYRIAN EFFECT:

Gold prices rallied above $1,430 an ounce to a three-and-a-half-month high in late August on safe-haven buying, as the United States and its allies looked set to launch military strikes on Syria.

But the metal’s appeal has been dented by diplomatic efforts to place Syria’s chemical weapons under international control, which may avert a US military strike. The risk mood improved with Syria welcoming a Russian plan to surrender their chemical weapons

Obama has threatened to act alone, if necessary, and his administration credits that threat with Russia's surprise proposal last week to have Syria turn over its chemical weapons arsenal to international control. Outside of the United Nations, however, administration officials insisted they would not take the military threat off the table.

As of now gold doesn't seem to be playing much to the tunes of the Middle East tensions as the UN has clearly not given a go ahead for any attack on Syria.

QE TAPERING EFFECT:

The FOMC meeting to be held on 17-18th September and its speculations over the tapering of the quantitative easing program will be one of the biggest events for the movement.

Since the inception of the Fed’s quantitative easing programme in 2008, gold price has more than doubled from about $837 an ounce in 2008 to reach a peak above $1,900 in 2011. 

Since the Ben Bernanke’s Speech on QE3, prices have saw humungous correction and fell to a low of $1,180 in June this year. 

With talks of possible withdrawal of their liquidity injection programme coming up at the FOMC meeting next week, it is no wonder we see such volatility in bullion prices.

DEMAND EFFECT:

Another factor that affected gold prices was the lacklustre physical gold demand, particularly out of India, one of the biggest importers of Gold, where the Government restrictions to import Gold have further dented the supply. The dramatic trend decline in the Indian Rupee against the US dollar has sharply increased the local price of gold with the gold price measured in Rupee up some 20% since late June. 

The Indian jewellery market, which is a major component of global jewellery demand, has tended to be price sensitive. Thus the high local gold price is likely to dampen Indian jewellery demand and pull down gold prices unless the rupee depreciates further

Although physical demand has picked up in Asian Markets over the past two days, it is not nearly as strong as what we have witnessed in at the start of August. The strong physical demand during August had pushed plenty of shorts out of the market (this short covering assisted in pushing gold above $1,400). Should physical demand improve now, there may not be the same level of short covering to help push gold higher again.

MINING EFFECT:

Furthermore, the trend weakening of the South African Rand and the Australian dollar have lowered gold mining cuts in the two countries with the highest production costs which makes production costs less likely. It is also worth noting that the gold labour strikes in South Africa are now over which will may pull gold prices down

Having discussed these factors, I would expect Gold to trade sideways until FOMC meeting with its stimulus plan can lead to a direction.

The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -

"Gold was pulled between two major forces- Syrain attack and the QE tapering"

http://riddisiddhibullionsltd.blogspot.in/2013/09/gold-was-pulled-between-two-major.html

MICHHAMI DUKKADAM

LORD GANESHA ACCESSORIES

Ganesh Chaturti is one of the most widely celebrated festivals in India and brings about prosperity and a spirit of happiness amongst people. RSBL's Sparsh constantly aims at bringing about innovation into its products and offerings. 

Our unique gold plated collection of semi-precious stones studded Ganesha accessories made of silver truly signifies this and reflects the love, affection and devotion of people towards Lord Ganesha. 

GOLD WAS PULLED BETWEEN TWO MAJOR FORCES- SYRIAN ATTACK AND THE QE TAPERING

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

Gold prices started weaker in Friday’s North American session, but reversed course and rose 1.5% following a lower-than-expected U.S. nonfarm payrolls report that increased confusions over when the Federal Reserve will start paring back its massive bind buying. The U.S. Bureau of Labor Statistics said that 169,000 jobs were created in August and the unemployment rate fell one basis point to 7.3%. That’s under the 170,000 to 180,000 expected. 

The better US Non-Manufacturing ISM data sent Gold heavily lower, as a Fed tapering for September seems on the cards now. Gold dropped by nearly 25 USD to a low of 1365 after the data with heavy volumes. Silver traded down to 23.01.

The U.S. August services sector ISM expanded to 58.6 compared to an expectation of 55.0. The ADP showed that 176,000 jobs were added in August while the jobless claims for the week ending 31 August declined 9,000, with the four-week average dropping to the lowest level since October 2007. The U.S. government bond yield surged while the Dollar Index climbed and the gold prices dropped upon the encouraging economic data. The European bond yield has also been rising in reaction to the Fed’s expected bond purchase tapering as well as the recent European growth recovery. The German 10-year government bond yield has surged above two percent on Thursday compared to 1.3 percent at the end of last year. 

Increase of jobs could push the Fed heavily in favour of tapering stimulus before the end of September, but a disappointing level of growth could sway the central bank to wait at least another month. 

Despite Friday's rally, gold ended the week 0.5 per cent lower for a second consecutive weekly loss as its safe haven appeal dropped on lack of progress about possible US military strikes against Syria.

Gold prices could rise next week as market awaits Fed tapering, moreover, there are some other factors underpinning gold, including decent physical demand in Asia and the likelihood of more Indian purchases ahead of the holidays there.

Another factor for gold is a potential military strike on Syria by the U.S., following reports that the government there allegedly used chemical weapons against its citizens. As President Obama persuades the Congress to vote and looks for the international backing for war in the G20 meeting, the delay in the Syrian strike has put a damper on gold prices

Gold traders are watching the Syrian conflict, but so far the saber-rattling has done little to impact markets. Several analysts said going into next week that Syria might take on added significance and the conflict will likely at least add support to prices.

The gold market has another week and half to mull what the Fed might do, as the Federal Open Market Committee meeting is Sept. 17-18, and there’s a debate over whether the Fed would taper its QE program or not. 

Monetary stimulus has been a major driver of gold's rally for recent years as the metal's stats as a hedge against inflation and economic uncertainty benefitted from increased money printing by central banks in low interest rate environment.

Gold rose to a record high of $1920.30 on 6th September - exactly two years ago. Year-to-date, the metal is down nearly 16 per cent.

Meanwhile, India welcomed the new RBI governor - Mr. Raghuram Rajan with open arms. And this was clearly visible in the market movements once he took his post. Equities were up, rupee appreciated and the sentiment became positive.

In a seven-page statement read out at a press conference after markets closed, Dr.Rajan set out a bold, reformist vision for his tenure at the central bank. Included in it are measures to deepen securities markets, improve financial inclusion including for SMEs, support and push for the rupee as an international currency and a warning for corporate defaulters of loans. Declaring that he would “preserve the value of the currency”, Dr. Rajan said India is a fundamentally sound economy with a bright future. 

On Tuesday, The Reserve Bank of India (RBI) has said gold supplied to units in Special Economic Zones (SEZs) and export units and to star/premier trading houses will not be treated as gold supplied to exporters under the 80/20 scheme — the allowing of import with the condition that a fifth must be supplied to exporters. With RBI’s new clarification, exports might be higher but gold supplied to exporters from a Domestic Tariff Area (any place outside an SEZ or other units outside a Customs-bonded one), other than export zones and by export houses, will be considered as part of the 20 per cent policy. Such exports last year were estimated at 55 tons and this year could be higher, with improved demand. An exporter will have to show a proof of export, including proof of inward remittance. Since the latter takes 270 days, waiting till then will mean the next export will be delayed. 

Now Indians have eyed their entire hopes on this new governor, who promises to deliver.

The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

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"It's Syria v/s Global Economy for gold"

http://riddisiddhibullionsltd.blogspot.in/2013/08/its-syria-vs-global-economy-for-gold.html

IT'S SYRIA V/S GLOBAL ECONOMY FOR GOLD!!!

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

Gold prices rallied above $1,430 an ounce to 3-1/2 month highs on Wednesday as rising tensions over Syria sparked safe-haven demand and a scramble among investors to cut their bets on falling prices

The metal hit a peak of $1,433.31 an ounce, its highest since May 14, as the United States and its allies geared up for a probable military strike against Syria in response to an apparent gas attack that killed hundreds of civilians in a rebel-held suburbs of Damascus. 

Gold was on track for a 5.40 percent gain on the month and its second straight monthly increase. It briefly trimmed its decline in the afternoon as U.S. Secretary of State John Kerry made a case for a "limited" strike against Syria, but prices fell back to pre-speech levels before he finished his televised address.

Till then, gold was dancing to the moves of the data released by US. Gold fell on Thursday, snapping a five-day rally as a U.S.-led military strike on Syria appeared not to be imminent and investors turned their attention to strong U.S. economic growth and the Federal Reserve's plans to rein in its stimulus program.

Gold prices in the international market declined as US economy grew by 2.5 percent annualized rate in Q2 up from previous quarters' 1.7%. Economists widely expected the GDP to grow by 2.2% and the trumping of expectations along with the dip in initial jobless claims by 6000 last week ensured a dip in gold futures. Gold slid below $1,400 an ounce on Friday as the dollar rallied to a four-week high, with investors squaring positions at the end of the month and cashing in on a recent run-up ahead of a long U.S. holiday weekend

I feel the correction in Gold prices came mostly from month-end position squaring and profit-taking after prices on Wednesday reached their highest levels since mid-May. I pray for all the souls who have lost their lives in Syria and may peace usher in the nation.

  

Meanwhile, In South Africa there was an atmosphere of unrest. The National Union of Mineworkers (NUM) has given 48 hours’ notice of a strike at South Africa’s gold producers, the country’s Chamber of Mines said on Friday.

The Chamber, which collectively bargains on behalf of South African gold miners AngloGold Ashanti, Gold Fields, Rand Uranium, Harmony Gold, Evander Gold Mine, Sibanye Gold and Village Main Reef, expects the strike to take effect from the night shift on September 3.

This too will affect gold prices.

While in the domestic market, the Indian rupee slipped for third consecutive day in a row on Wednesday to close at a fresh record low of 68.80 per dollar, as uncertainty over a possible US-led military strike against Syria knocked down Asian equity markets and currencies. This is the biggest ever single-day fall for the currency since 1995.

Apart from global factor, India suffers higher current account deficit fuelling worries that foreign investors will continue to sell out of a country facing stiff economic challenges.

The currency has plunged over 13 per cent so far in the month of August alone to mark its worst monthly fall since the year 1993.

Rupee has plunged nearly 25 per cent so far in the year 2013. A plunging rupee has affected bullion prices too taking gold to a life time high of in the Indian markets.

Risk of supply disruptions for platinum remains at large, I feel the sustainability of a price rally above $1,500 is likely to reduce as the jewellery demand will fade above $1,500. China is the dominant player in the platinum jewellery market, accounting for nearly 60% of the world platinum jewellery demand.  

With respect to Silver’s rally over the past few weeks, I believe the metal’s underlying fundamentals remain weak. I feel short covering was the major support that leads the metal prices to reach higher levels. I do believe for the time being the metal will also find support on dips (taking its lead from gold). 

The trade range for gold for the coming week is expected to be $1375-$1423 an ounce in the international markets, and in the domestic market it is expected to range between Rs.30,000- Rs.33,500 per 10 gram

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

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"Will Gold cross the $1400 mark?"

http://riddisiddhibullionsltd.blogspot.in/2013/08/will-gold-cross-1400-mark.html

INVITATION FOR TIMES GLAMOUR EXHIBITION 2013 BY RSBL DIA JEWELS

WILL GOLD CROSS THE $1400 MARK

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

Is something wrong with market? Yes that's exactly what traders and investors were discussing. Gold has just touched $1400 which was once seen an untrue level after the fall. Will it be able to cross it and reach new highs is what the below given factors can forecast.

The main highlight for this week was the depreciating rupee. Initially the markets expected rupee to return from the level of 62. Then they claimed 64. But the rupee made new low of 65 against the dollar. Now it is expected to depreciate further to 70. However, by Friday evening rupee returned to the levels of 63.90

The economy is facing a slump. Inflation is at a high, growth has hampered and equities have shattered.

Although the government has been trying its level best to intervene at all critical levels and control the rupee, nothing seems to be helping.

This drop in the rupee pushed gold and silver upwards.

Strong US Dollar and rise in treasury yields were seen pressuring the commodity movement to certain extent. In the United States, ten-year treasury yields climbed to 2.92%, the highest since July 2011 after FOMC minutes were failed to give any further details on tapering monetary stimulus. Investors hope that the Central Bank may start tapering its monetary stimulus later this year.

Gold prices in the global market edged up on Friday after weekly US unemployment claims recorded an upward movement. However, concerns over the withdrawal of US monetary stimulus were seen pressuring the yellow metal prices to certain extent.

Gold jumped to a 11-week high, topping $1,400 an ounce in spot trading, as sales of new U.S. homes fell more than forecast, boosting speculation that the Federal Reserve will maintain economic stimulus. Sales of newly built homes in July plunged more than 13 percent, the most in more than three years, government data showed today. The 394,000 annualised pace compared with a drop to 487,000 forecast by analysts in a Bloomberg survey. Fed policy makers said they are “broadly comfortable” in scaling back debt purchase if the economy strengthens.

By Friday evening gold was seen trading at 1397$ up by 21$ and silver was up by 95 cents, trading at 24.07$

In the physical markets, renewed labour unrest in South Africa sent platinum and palladium higher on Thursday, and this too, provided an element of support to both gold and silver.

By Friday evening, in the domestic markets too we saw gold and silver rocketing. Gold climbed by INR 750 trading approximately at INR 31,900 per 10 gram and silver was up INR 2200 reaching a high of INR 53,400 per kg.

The fact that gold managed to reverse its losses and close modestly higher on the day was quite impressive and likely had something to do with the fact that better-than-expected Chinese data which suggests that the economy is stabilizing, potentially a positive in terms of future Chinese gold demand

Another report that caught attention was the World old Council's gold consumer demand report. The impressive thing to note was that Gold consumer demand rose by more than half in the second quarter of this year thanks to strong demand in China and India, the World Gold Council (WGC) said.

In India, the Gold Trade holds steady in spite of the government imposing import tax hikes on gold in an attempt to reduce the country’s current account deficit. In fact, according to the WGC, gold jewellery, bar and coin demand in India alone was 70 percent stronger in the second quarter of 2013 compared to the same quarter last year.

Consumer demand in China continued to show strong growth, totalling 276t in the second quarter, a rise of 87% compared to the same quarter last year, as investors used the lower gold price to buy in advance of expected future price rises. Jewellery demand in the quarter was 153t, up 54% on the same quarter last year, while bar and coin investment was 123t, up 157% on Q2 2012.

Recent falls in the gold price have boosted demand significantly – it rose 53 percent in the April-June period from the same three months of last year, the WGC said in a report on Thursday.

Looking at the good monsoons of India and the festive season closing by, the domestic prices for precious metals need to be watched closely. Whether supply will be able to meet the demand will be the question that every Indian attached to precious metals will be having in their mind. 

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

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"Precious Metals on the Run"

http://riddisiddhibullionsltd.blogspot.in/2013/08/precious-metals-on-run.html