GOLD GLITTERS: RSBL

                                                                                                          By Mr. Prithviraj Kothari, MD, RSBL

  

Positive data or negative?

Hike rate this year or next?

Strong dollar or weak?

Stable equities or volatile?

Gold up or down?

Well a lot was expected to happen this week. Precisely, the above mentioned questions are somewhere down the line related to each other.

A positive data strengthens the dollar thus increasing the chances of rate hike which would push gold prices down. And even vice a versa.

Till mid-week, majority of the market participants believed that the data due to be released on Thursday and Friday would come in as a surprise package for all. Gold eased on Wednesday, staying on track for its biggest quarterly loss in a year as the dollar strengthened and the market awaited clarity on the timing of a hotly anticipated U.S. interest rate rise.

The spot gold price was seen at $1,112.90/1,113.10 per ounce, down $2.30 on Wednesday’s close and its lowest in around two weeks. Gold was stable on Thursday afternoon in London following the release of mixed US data and ahead of tomorrow’s blockbuster US jobs report.

• On Thursday, US weekly unemployment claims came in at 277,000 under the psychological 300,000 mark. 
• During the third quarter, 205,759 jobs were shed, the largest figure since the third quarter of 2009.
• US PMI came in as expected at 53.1 and construction spending slightly better than forecast at 0.7 percent. 

Now that the unemployment’s claims and PMI data was out, markets shifted focus the significant US non-farm payrolls data slated for release on Friday. The tables for gold turned once the report was out:

• Non-farm payrolls in August sank to 173,000, the first sub-200,000 reading since April.
• The US economy added 142,000 jobs in September, below the forecast of 201,000, and the August figure was revised down to 136,000 from 173,000.
• The only positive news coming in was that unemployment rate was unchanged at 5.1per cent.
• The labor participation rate fell to the lowest level since October 1977 at 62.4 percent, while wage growth was flat. 

The yellow metal prices augmented on the release of lower than expected US data, nearly erasing the losses accrued in five consecutive negative sessions.

Physical demand and volatility did not come in much from the Asian markets as the Chinese markets are closed for Golden Week holidays and will reopen on October 8 and the Indian market too was closed on 2^nd October.

The disappointing non-farm employment change has taken the market by surprise and the reaction has been quite strong such that there are strong sentiments that a chance of increase in interest rates not happen this year thus declining some of the concerns that higher US rates would have a negative impact on emerging markets.

Investors were considering for indications on the timing of the US rate rise. With two Fed meetings now left before 2016, markets now believe that the rate hike won’t happen this year. But there are some who believe that the Fed may announce a rate hike in its last meeting of 2015 due in December. 

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

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"Gold Directionless- RSBL"

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GOLD DIRECTIONLESS: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Most of the global asset markets were quite unpredictable this week. Be it equities, precious metals, bond yields or oil- they moved up and down following last week’s FOMC meet.

Coming to gold, it neared its second weekly gain on Friday afternoon, touching $1145 per ounce but plunged back following new comments on US interest rates from Fed chair Janet Yellen.

Increased risk sentiment helped gold prices to end Friday’s session modestly lower with prices settling at $1,145.60 an ounce; however, the yellow metal has managed to end the week in positive territory, up 0.6% - its second consecutive weekly gain.

Spot gold was last at a high of $1,144.80/1,145 per ounce. Prior to a speech from Federal Reserve chair Janet Yellen in which she said the Fed has not ruled out the start of policy normalization before 2016, gold had been trading at two-month highs.

The gold price surged to its highest since August 25 during Thursday afternoon sessions as the yellow metal took advantage of a slump in the US dollar.

On Friday afternoon, gold moved back from Thursday’s gains, after the release of positive US data and talk that the country’s central bank will increase interest rates by the end of the year.

The US data released were as follows-

• Final GDP was better than expected at 3.9 percent
• Services PMI at 55.6.
• Revised UoM consumer sentiment and inflation expectation at 87.2 and 2.8 percent were little changed

A slowing global economic activity and excessively low inflation had delayed the Fed’s decision to hike interest rates. Its decision had raised concerns about the economic stability of the US, China and rest of the world and resulted in lifting of the dollar.

Aggressive comments from Yellen have provided the dollar with renewed upside momentum, depressing bullion prices through reduced safe-haven demand. 

There are expectations in the market that the FOMC is likely to raise the federal fund rates in December as they witnessed a likely upwards revision to US-second quarter GDP growth

Gold declined on Friday morning after Federal Reserve chairwoman Janet Yellen expressed optimism that the US economy would warrant an increase in interest rates before the end of this year.

She stated that it will be appropriate to raise rates in 2015. Now there are around 13 weeks let in 2015 and two more FOMC meetings are lime up in October and December each, which means there are just two opportunities left to raise interest rates.

Federal Reserve Chair Janet Yellen has spoken, and an interest rate hike remains on the table for 2015, but one trend watcher says the central bank is just talking ‘really tough.’

Moreover, Yellen noted that ‘idiosyncrasies’ like lower oil prices and weaker overseas economies have delayed the Fed from pulling the trigger. 

Yellen said FOMC officials “expect that the various headwinds to economic growth will continue to fade, thereby boosting the economy's underlying strength.”

Yellen’s bullish sentiment was buoyed through the third revision to second-quarter US GDP growth to 3.9 percent from 3.7 percent. The final GDP price index quarter-over-quarter was in line with forecasts at 2.1 percent.

Yellen and her colleagues at the Federal Open Market Committee (FOMC) have maintained interest rate at near-zero levels since December 2008.

Persistently low inflation, emerging global slowdown and an uneven recovery remain obstacles for the FOMC members to normalizing monetary policy.

Though the yellow metal is still showing encouraging signs, but in event of a rate hike, the impact on gold would be bad.

Currently old is searching for a direction as the FOMC has left the market wandering. The picture will get clearer by the end of the year or maybe early 2016.

Currently one need to follow the FOMC religiously as gold’s whereabouts depends on the Fed’s directions.

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

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"Rate Hike Hangover Continues on Gold: RSBL"

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RATE HIKE HANGOVER CONTINUES ON GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

The much awaited suspense over the Fed’s September interest rate hike was finally put to an end. It did create much volatility in the market and bought in some good news for gold.

Gold prices finished the week on a three day rally as the Federal Reserve’s sudden concern over emerging market growth boosted safe-haven demand.

The volatility was like a storm for gold and it tried to be holding on to the gains.

Thursday was a crucial day for gold as all eyes were focused on the FOMC meet that was due to release its monetary policy. 

Fed Chairwoman, Yellen, added that there was an argument to be made for raising rates in September; however, because of the global weakness and fragile financial market, the committee decided to err on the side of caution and leave rates unchanged.

We saw the global economic growth led to volatility shocks in the global equities market. This once again raised concerns over the world economic development. Hence the FOMC dropped to normalize US monetary policy after announcing concerns on overseas growth.

The Fed decided to maintain near-zero interest rate levels, citing recent equity volatility exacerbated by a global growth slowdown.

The central bank’s ultra-loose monetary policy, coupled with dovish comments from Fed Chair Janet Yellen on Thursday, helped gold end a three day losing streak as it finished Friday in positive territory. 

The spot gold price was last at $1,136/1,136.40 per ounce, its highest in around two weeks and up $3.80 on Thursday’s close.

Though in her proceedings press conference, Fed chairwoman did not rule out an October hike but the market is keener about a hike in December. This would force the FOMC to raise rates sharply to combat said inflation and prevent the organization from increasing the federal funds rate at a gradual pace.

Since the Fed removed all calendar references in its forward guidance in April, the bank is now entirely data-dependent.

Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.

Inflation remains a persistent issue – the FOMC said that declines in energy prices and non-energy imports are the underlying causes preventing inflation from hitting the Fed’s target of two percent.

As of now a weak US dollar would prove to be positive for gold in the near future and if the equities markets lower then gold could rally further.

But the current statement released by the Fed that it intends to raise rates by year-end has made the market players believe that this price rise on gold will be short lived as they expected the dollar to strengthen as early as October.

The Fed’s next opportunity to raise rates will fall in October or December.

Looking ahead, the Fed’s stance on interest rates and heightened concerns of the global economy hurting the U.S. economic recovery has created some strong positive sentiment in the gold market, at least in the short term. 

As we continue to see the after effects of the FOMC meet on gold, prices of the yellow metal are expected to rise in the short term.

As there is not much important data slated to release next week, gold prices are expected to range around 1150$ an ounce but will continue to struggle as soon the rate hike news creeps into the market.

Most analysts are centering on the global market for gold to rally. The fact that the central bank is concerned about the impact the global economy is having on equity markets, some analyst note that further weakness in U.S. stock markets could benefit gold. 

 

Some even expect the U.S. dollar to remain at elevated levels as markets continue to price in a rate hike later this year, which will limit gold’s potential. 

Although U.S. economic data will be limited next week some of reports that could create some volatility in the marketplace include manufacturing data, including durable goods numbers for August, home sales data for August and the final second-quarter U.S. gross domestic product report. 

A relatively light economic calendar next week means the gold market will continue to digest the Federal Reserve’s decision to leave rates unchanged. 

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

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"Uncertainties For Gold:RSBL"

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UNCERTAINTIES FOR GOLD: RSBL

By Mr. Prithviraj Kothari, MD, RSBL

It was September 2011 when gold reached its peak. It’s been years since gold has been out of favor. Does it mean that it’s time again for gold to regain its sheen?

What will happen in the weeks to come is what we all are waiting for , till then lets analyze gold’s price movement- how and why?

Gold was range bound on Thursday morning after the previous session’s price slump when a rally in global equities paused.

Gold did manage to rebound after hitting a 4-week low on Wednesday but many market players still have a negative sentiment in mind for gold.

Gold traded sideways for the week ahead of the much anticipated an talked about meeting of the Federal reserve that’s due on September 16 while investors remain cautious .

The spot gold price was last at $1,107.70/1,108 per ounce, little changed from the previous close. Trade has ranged from $1,104.0 to $1,108.6 so far. Gold slumped to $1,101.5 on Wednesday, the lowest level in a month.

With so much uncertainty surrounding the Fed’s monetary policy decision next week, the near-term outlook for gold can, at best, be described as mixed.

 

Although analysts are slightly more bullish heading into next week, their enthusiasm appears to be tempered. While some analysts are optimistic on gold prices and think that the yellow metal could bounce higher if the Fed delays its rate hike; however gains could be limited as expectations will only be pushed back until December. 

Currently the market is divided into two segments-

Firstly the ones who believe that the Fed would raise rates on September 17 while the others believe the opposite.

Let’s take a brief look at both these segments-

If the Fed hikes rates at first it will be U.S. dollar positive and gold negative, but the tightening could create a selloff in equity markets and capital could start moving into gold.

If the Fed raises rates on Sept. 17 then he would expect gold to fall below support at $1,080. Traders can then lock in profits from that put. In fact this drop could bring in some strong buying momentum, for gold which could later drive gold prices higher at around $1160. 

On the other hand, that if the Fed delays its hike it will be U.S. dollar negative and gold positive in the initial reaction. However, the loose monetary policy will support equity markets and capital will flow out of gold and back into stocks. If the Fed doesn’t hike rates then gold could push up to $1,150 in initial reaction.

Currently gold is being surrounded by a lot of uncertainties.

Though the FOMC meet will be the focus of the market, one should also bear in mind the key economic data slated for release during the week-

• U.S. August retail sales
• Regional manufacturing data
• The consumer price index for August,
• Housing market data.

The Federal Open Market Committee’s two-day policy meeting begins Sept. 16 and gold investors will focus on the conclusion to see if the central bank will raise rates for the first time in nine years. The consensus seems to be that if the Fed tightens, gold will suffer.

Apart from the US markets, another notable market is that of China.

China has now stepped into the global financial market by depreciating its currency, which has sent ripples through emerging market economies and may in turn unsettle financial markets in the months ahead.

The volatility in China’s equity markets has now stabilized, reducing both the tension in markets and the need for safe havens. 
Another positive news coming for gold was from the India market where gold monetization has now been approved.

For now, The FOMC meeting on September 17 is expected to initiate a more definitive price movement, especially if the FOMC decides to increase the Federal Funds rate for the first time since 2006.

Staying positive for the yellow metal, market players are expecting prices to be around $1,200 an ounce by the last quarter of 2015, with sturdy demand coming from central bank purchases.

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

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"No Help For Gold:RSBL"
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