RSBL Gold Silver Bars/Coins

Wednesday, 29 January 2020

Gold Is On The Move

So far in 2020, the yellow metal has been the best market to trade. Buy the dip has been the best possible scenario. We still have that scenario playing out. Gold is on the move. Risk aversion is pushing up gold prices. Weekend news showed that (the corona virus) is still spreading in many countries across the globe and this could impact economic activity and market sentiment.

As concerns about the impact of corona virus mount, investors have boosted holdings in exchange-traded funds backed by gold to the highest since November, with the assets now less than 25 tons shy of a record. Adding to the momentum, the Federal Reserve is gearing up for its first rate-setting meeting this year, where it’s expected to maintain easy monetary policy, and the World Gold Council will offer its assessment of global demand trends.

Gold jumped 1% on Monday to a near three-week high as growing concerns that the corona virus outbreak could impact the global economy pushed investors to safe havens.

Spot gold was up 0.8% at $1,582.41 per ounce during Mondays trading hours; having earlier touched it’s highest since Jan. 8.

The widely spreading corona virus has prompted the Chinese authorities to introduce travel restrictions across 10 cities, affecting up to 40 million people according to some reports, in the middle of the country’s most important holiday season, the Lunar New Year. Even Shanghai's Disneyland, one of the country’s most popular tourist destinations, has been shut.

Fears of a global contagion from the corona virus has plummeted stock markets worldwide. There’s nothing like a global contagion to get gold buyers to pile back into the safe haven. The yellow metal hit two-week highs on Friday, creeping toward the $1,580-per-ounce level targeted by gold bugs on worldwide fears over the economic fallout to the China-originated corona virus.

The death toll from the corona virus outbreak has risen to 81 in China, with 2,744 confirmed cases, and the virus has spread to more than 10 countries, including the U.S. and France.

Despite the strength of the greenback, the bullion price is taking advantage of this uncertain situation.

Markets are focused on news around the deadly corona virus. There will clearly be a significant economic impact, centered in China. A key question is the time it will take for the virus to be contained and one can only speculate at this stage.

Investors will be watching the U.S. Federal Reserve’s first policy meeting of this year on Jan. 28-29, where it is widely expected to keep rates unchanged.

In recent years, high interest rates, risk aversion stemming from the downturn in global trade, and support from earnings repatriation have supported the US dollar.

But over the coming years, US growth and interest rates will be closer to those elsewhere in the world, and uncertainty ahead of the US election and the waning effect of tariffs suggest a weaker greenback is likely.

The Fed at its monetary policy meeting on Wednesday use the same kind of cautious language heard by the ECB and BOC, then that could be the rocket fuel gold needs to sustain gains above $1600 per oz.

Prithviraj Kothari is the author of this article. Find more information about Prithviraj Kothari.

Thursday, 23 January 2020

A Breakout In Gold Is Expected Soon

The gold price rose by 39% from the low in 2018 to its peak this month, as it jumped on the news that the US had assassinated an Iranian general. The subsequent retreat in the gold price shows that individual events do not usually move the price for long. However, a number of factors have combined to encourage safe-haven purchases of gold. Increasing political and economic uncertainty, more monetary easing from the Federal Reserve, falling bond yields and huge quantities of negative yielding debt have all played a part.

This week too we saw gold being influenced by an array of events. Gold prices rose to their highest in more than a week on Monday, after a missile attack in Yemen over the weekend strengthened geopolitical concerns and boosted the metal’s safe-haven appeal, while buying ahead of the Chinese New Year also lent support.

Spot gold was up 0.3% at $1,560.89 per ounce during Mondays trading sessions, after touching its highest since Jan. 10 at $1,562.51 earlier in the session.

The market is also going up because of central bank buying, geopolitical risks such as Yemen missile attack - all these factors are supporting gold.

And since Gold is considered a safe investment in times of political and economic uncertainty, an encouraged buying of the yellow metal was witnessed.

Geopolitical tensions around the world have risen and further eroded the fundamental outlook which is already burdened with unusually-high uncertainty. Investors may therefore be particularly sensitive to comments from officials that have implications for monetary policy.

After the US and Iran stepped back from further confrontation, the gold price has given back some of the gains made following the US missile strike that killed an Iranian general. A more time-consuming correction is possible before gold attempts to reach new high.

We all know that a number of factors combined have resulted in safe haven purchases for the yellow metal; similarly, a number of factors will be the reason behind a rally in gold prices that is expected to happen soon.

TRADE TENSIONS- EU-US trade tensions may soon begin to escalate following a warning from the EU’s new trade chief Phil Hogan that the EU intends on retaliating with tariffs over WTO dispute with Boeing. Relations between Washington and Brussels have been put on the backburner, though it may become the new trade war of 2020. A revived cross-Atlantic trade tiff would further undermine global growth and may push gold prices higher.

COMPANY GAINS- A number of major corporations will be releasing their earnings this week, including giants such as Netflix and IBM. Despite equity markets reaching record-breaking highs, earnings reports are expected to be relatively flat. The worst-than-expected prints could make investors turn to the Fed in hopes that the poor data will make them more inclined to further ease credit conditions. Gold may rise on this far-reaching hope.

INDUSTRIAL DATA -A flow of PMI data from the US, France, Germany, Euro zone, UK and Australia will also be published this week which may reinforce slowdown fears and inflate easing bets. Gold prices may subsequently rise alongside demand for anti-fiat hedges. Given the fundamental risks laying ahead in 2020, the tepid stabilization in PMI may be less of a turning point and more a moment of calm before the prior trend resumes.

FED AND INFLATION- one of the US Federal Reserve’s two major goals is to maintain the inflation rate near 2%.  Because, you know, high inflation is bad. If the inflation rate went up to 4, 5, or 6%, suddenly a lot of people would find themselves in the poor house.  Basically inflation destroys savings because the purchasing power of the dollar you saved years ago is now greatly diminished.

History shows that gold prices rise to keep pace with inflation over time.  So if we move into a period of higher inflation, we can expect gold to go up.

Now, Gold traders will have to observe critical ranges for a breakout. If gold crosses $1563- $1565 then it will break out for big. So be tight, observe gold to take best advantage of the current situation and similarly in the local markets too it is expected cross Rs.40300 per 10g, whenever the breakout is witnessed.

Prithviraj Kothari is the author of this article. Find more information about Prithviraj Kothari.

Saturday, 18 January 2020

Commodities AS A Whole Had A Mostly Positive 2019

Gold, meanwhile, had its best year since 2010, climbing as much as 18.31 percent. The yellow metal’s role as an exceptional store of value shined brightly in the second half of the year when the pool of negative-yielding debt around the world began to skyrocket, eventually topping out at around $17 trillion in August. On the news last week that Iran launched a counterstroke against U.S.-occupied military bases in Iraq, the safe haven briefly broke above $1,600 an ounce for the first time since April 2013.

In the past two decades, gold has helped investors limit market volatility and portfolio losses. Between 2000 and 2019, the precious metal’s average annual price was down in only four years. Put another way, gold was up on average in four out of every five years—a remarkable track record.

Last week gold prices surged to seven-year highs after Iran launched a missile strike near U.S. troops in Iraq. Since then, prices have retreated, settling around $1,550 an ounce level as upbeat risk sentiment not the market working against the precious metal.

Gold prices continued to slip on Tuesday with overall global risk appetite still on the up as the markets eye an interim trade deal between China and the United States due to be signed in Washington on Wednesday.

The US has also dropped its designation of China as currency manipulator, which has lightened the mood still further, with markets sensing that there’s some chance of broadly improved relations between the world’s two largest economies.

Gold rallied nearly 4% in December, mainly in the second half of the month, and recently moved to an intraday high of US$1,613/oz as the US-Iran confrontation unfolded. We believe there are a few likely reasons for the move:

A technical breakout

Bullish positioning in derivatives markets

Light trading volumes

Portfolio rebalancing at the end of 2019 especially as investors hedged risk asset allocations-

Federal Reserve (Fed) repo activity

Berenberg Cited several “volatile situations in the global geopolitical space” behind its higher forecast, notably ongoing US-China trade negotiations, the potential outcome of Brexit, rising tensions between the US and Iran and the US elections in November.

“It feels that there should be some form of resolution between the US and China over trade in the coming months, and further clarity on Brexit over the same time period; an easing of tensions is likely to weigh somewhat on gold…However, in the background, there remain elevated tensions between the US and the Middle East, and the escalation of tensions between the US and Iran (which have eased somewhat over the last two days) remains an upside risk for gold”, the bank said.

They added that the victory of a “hard left president” in the US elections such as Bernie Sanders or Elizabeth Warren is “likely” to result in stronger gold prices on the potential for radical changes to US government policy.

Meanwhile, Berenberg’s analysts also said it was likely the Federal Reserve will leave US interest rates unchanged until 2021, which they viewed as “supportive for gold” as the metal tends to suffer when interest rates rise.

They added that a pickup in US inflation could potentially provide scope for further interest rate cuts, which could push gold prices upwards.

Rebalancing ahead of 2020

We saw a pullback in investor demand for gold in November, as demonstrated by outflows in gold-backed ETFs and a reduction in COMEX net longs. This reversed in December, with net longs moving back near all-time highs and gold-backed ETF holdings reaching all-time highs.

Anecdotal evidence suggests that investors may be inclined to maintain exposure to risk-on assets such as stocks, but not without hedging their portfolios in preparation for potential pullbacks – especially given the high level of geopolitical and geo-economic risks that have been carried over from 2019 And data suggests that gold may be a recipient of some of this activity.

Fed repo activity

The Fed began reducing their balance sheet in 2018, but reversed this decision in the second half of 2019 In particular, they began regular repurchase (repo) market injections totalling nearly US$500bn in the fourth quarter. This activity has continued into 2020 and has been described by some market participants simply as another form of quantitative easing (QE) – often dubbed “QE light” – and causing some investors to worry about liquidity in the Treasury market as a whole. And, historically, expansions of QE have led to increases in the gold price.

Increased geopolitical risk-

Tensions in the Middle East, driven by the US-Iran confrontation, supported safe-haven flows, pushing the gold price to a six-year high. While a more conciliatory tone by President Trump has recently eased concerns and pushed the price down to the US$1,550/oz level, gold remains up by approx. 2.4% as of 9 January 2020.

Prithviraj Kothari is the author of this article. Find more information about Prithviraj Kothari.

Tuesday, 7 January 2020

Gold Welcomes 2020 With A Bang

Since May, 2019 gold prices have been ticking high and it seems there is just no looking back. Last year gold prices were driven by recessionary indicators, economic volatility and geopolitical tensions.

Gold demonstrated impressive performance gaining over 17 percent in 2019 and continued to rally  on 31 December.

Major Eurasian nations, including Russia, China and India were seen boosting the yellow metals positions by acquiring and producing bullion.

Gold continued to rally in the current year too. It welcomed 2020 with a big bang. Gold was seen bouncing to fresh highs in a gap from $1551 to a high of $1587.93.

Last week we saw tensions escalating in the Middle East due to the killing of a leading Iranian commander in a US airstrike in Iraq. This brought about an elevation in gold prices following demand for this safe haven asset which is bound to benefit from this crisis.

The U.S.-ordered, and implemented, drone strike which killed Iran’s General Qasem Soleimani outside Baghdad Airport in Iraq had an immediately positive effect on the gold price.

The killing of General Soleimani, considered to be the second most important leader in Iran after Ayatollah Ali Khamenei, seems to have been nothing short of a U.S. state sanctioned assassination and will undoubtedly hugely increase tensions, and anti-American feelings in what is a hugely volatile part of the world.

The US drone strike which killed Major General Qassem Soleimani, head of the Quds Force, the Iranian Supreme Leader, Ayatollah Ali Khamenei, said harsh revenge awaited the (US) “criminals”. While US President Donald Trump said over the weekend, America is ready to strike 52 Iranian sites “very hard” if US assets are attacked.

Iran has promised severe revenge and looking from afar it would seem that the U.S. move is likely to increase the dangers for U.S. citizens and allies working in the Middle East and elsewhere in the world far more than any direct threats or actions from anti-American militants located anywhere.

Subsequently, the price of the yellow metal is holding in the $1,550s following a risk-off close on Friday in US benchmarks which moved back from their all-time peaks in response to Friday’s headlines.

This tense situation has come up suddenly. But what still remains in the basket for gold, that it really looks forward to as key influential factors-

If there is no Iranian response immediately apparent apart from rhetoric one suspects there will be a correction next week – a view supported by the performance of gold mining stocks on Friday which fell back despite the huge boost in the gold price.

It will be interesting to see whether demand picks up again in China and India this year, which could be key to gold price fundamentals, particularly if there is a slowdown in central bank and gold ETF purchases – not that we are expecting either to happen.

The U.S. and its economic progress will probably remain the principal gold price driver in 2020, and this is somewhat uncertain at the moment.

Government data tends to remain mixed and the price has been moving up and down accordingly.

Likewise perceived progress, or otherwise. In the U.S./China trade negotiations will likely be a factor too.  We do expect a Phase 1 accord to be signed in 10 day’s time which could be another negative for the gold price – that is until the realisation sets in that the principal differences between the world’s two leading economies remain as far apart as ever.

The U.S. Federal Reserve and its interest rate policies will also continue to be a price driver for gold, but unless it is seen as likely to diverge from its current cautious policy, and move interest rates up or down accordingly, the Fed may only have a relatively minor role to play as far as gold price influence is concerned in the year ahead.

The calendar year 2019 saw gold advancing 18 per cent — the highest return since CY2010, when it had generated a return of nearly 30 per cent. At this juncture, a break of 1590 opens risk to 1603 and 1632.

Comex gold is gaining its footings in past two years and from $1200 to 6 years high of $1565 that we saw in 2019. This was despite the fact that US and other global equities performed fairly good and hit life time highs. The bonds were also gaining similar tractions, with new geopolitical tensions like killing of the Iranian Commander Soleimani,  there could be a new risk premium opportunity for gold prices and may soon be seen surpassing CY2019 high of $1566 and headed towards $1600-$1625 initially. However this last $50 uptick in 2-3 sessions came from new buying from funds contouring new geo-political risks, so any easing will have an equal negative impact on gold prices.

Prithviraj Kothari is the author of this article. Find more information about Prithviraj Kothari.