RSBL Gold Silver Bars/Coins

Tuesday, 28 April 2020

Gold continues to remain in demand

Last week passed in a much quiet phase for the world. It was rumoured that North Korean President was unwell, but later his spokesperson confirmed that he is alive and in good health. While crude did not receive much good news pertaining to demand and overflow, gold had a pretty stable week and an amazing monthly rally as gold began its journey at $1590 and gained nearly 8-9%, touching $1730 on Thursday.

Gold has continued to play its role as a safe haven, as central banks and governments have announced massive amounts of support for economies in lockdown, but this should now be in the price.

While the broader macro backdrop remains supportive for gold prices in the near term, real yields are being tracked more closely. Safe-haven buying has continued to support gold primarily through ETF inflows and continued retail investor demand. So if we see different economies starting to reopen, we might see some of that safe haven demand starting to ease.

U.S. unemployment is at a totally unprecedented, and unpredicted, 16.5 % of the workforce and may yet rise further, although moves to re-open a very limited section of the economy could mean this could soon be stagnating. On one side there is optimism the US economic figures will improve, but on the other side there is fear that the virus may not get contained and can spread further.

The U.S. economy tends to be the driver for the rest of the world but world virus data is at least equally alarming. Globally total COVID-19 known infections have already hit 3 million, with more than 210,000 deaths.  True, Asian and European figures – and even those in the U.S. - could already have peaked and be beginning on a downwards path, but the virus incidence in Africa and parts of Central and South America, where health systems are supposedly less able to cope with the virus spread, may only just be beginning.

 There’s also a chance of a second wave of infections if, and when, lockdown measures are eased, or if there is resurgence in the northern winter months.  COVID-19 is likely to be with us for some time yet and poses an enormous continuing threat to the global economy and to what we consider to be our normal way of life.

Prithviraj Kothari says that Investors now shift their focus to a U.S. Federal Reserve meeting ending on Wednesday and a European Central Bank (ECB) meeting on Thursday as major central banks once again take the stage as the global economy grapples with blows inflicted by the COVID-19 outbreak.

Even when the lockdown is lifted, the world will still be far from any kind of normality. The bigger risk then is economic collapse which brings in tension for the bullion dealers in India. But gold tends to benefit from widespread stimulus measures as it is often seen as a hedge against inflation and currency debasement.

Any kind of recovery will be gradual and gold will benefit from this prolonged phase of weakness which gives the top gold dealer in India reassurance. Economic indicators reveal that the numbers won’t be pleasing and that after lock down is eased we might face an economic collapse. We very well know that governments around the world are doing their best to spend parallel sums of money to boost the economy. Central banks have been pushing enough stimuli to keep the markets alive.

And hence even in the long term, Gold should remain in demand as a crisis currency in this environment which makes the future brighter for the yellow metal says RiddiSiddhi Bullions Limited.

Friday, 24 April 2020

Akshaya Tritiya 2020

Akshaya Tritiya will be celebrated across the country on Sunday, 26th April, 2020. But this year celebrations will be locked indoors given the pandemic situation. Akshaya Tritiya is considered to be a very auspicious day to buy gold and silver.

Economically this day is quite productive for marketers as they cash in on the festivity to boost their sales. Marketers indulge in high voltage advertisement campaigns especially the jewellery stores. In fact people in India and overseas book jewellery in advance and take delivery on Akshaya Tritiya day. It’s a day of frenzy buying for all precious metals especially gold. Sales on Akshaya Tritiya day usually increases four to five times compared to normal days, said a top gold dealer in India.

After Dhanteras, Akshaya Tritiya has been considered a festival where gold is bought in huge numbers. But this year, as the country witnesses a national lockdown, sales will be damp, remarked one of the bullion dealers in India.

He further explains that Akshaya Tritiya, which falls this year on April 26, is a lost opportunity for jewellers due to the nationwide lockdown. Jewellery sales have come to a standstill, he added. Factories are closed resulting in a massive loss for jewellery manufacturers and retailers. There were many weddings that were lined up in the month of May. But due to cancellations of public gatherings like weddings, jewellers won’t be able to cash in on the festive season.

It is almost a month since the lockdown was first announced and jewellery shops remain shut. Many fear they will not be able to capitalise on the huge opportunity to boost their revenues in a month traditionally known for the highest demand for ornaments.

Jewellers are concerned about the increasing financial stress this would cause them as they haven't done business since March. To make matters worse gold prices were ruling high at a time most Indians consider inauspicious for buying gold. All were well stocked to meet demand after this inauspicious period ended, when a large part of the off-take is usually attributed to the spike in marriages and the auspicious period of Akshaya Tritiya. However, with the current liquidity crisis, jewellers fear that whenever they are allowed to raise their shutters, customers will rush to sell their gold holdings in order to generate cash, commented Mr Prithviraj Kothari, Managing Director of RiddhiSiddhi Bullions Limited.

There are jewellers who are accepting bookings, but all deliveries are expected to be processed after the lockdown.

With offices shut and lack of liquidity in markets, sales figures will not even be close to impressive. World over the pandemic has affected all possible markets and precious metals have also not been spared.

We saw gold performing extremely well as the year started. In fact, jewellers in India were expecting to have good sales figures in the current years Akshaya Tritiya. But no one had ever predicted this drastic dip in global growth.

The precious metals markets, especially jewellers, will suffer a huge setback and it will take a long time for things to get back on track, concluded the ‘Bullion King Of India’.

But for the ones who are really keen to buy gold on Sunday, they need not worry as the option of buying gold online(in the form of ETF)  is always open, said an executive at RSBL. Sadly, physical gold shops will be shut and online would be the only choice available for gold buyers.

Thursday, 23 April 2020

Stay With Gold

Since 20th March gold prices have rallied in a spectacular manner. They have not only made up for the price weakness earlier in March, but even set a new high on 14 April (still far below the all-time of USD 1,921 on 6 September 2011). Spot gold has surged more than 10% this year, reaching an around 7-1/2 year high of $1,746.50 on April 14, as the coronavirus pandemic roiled global markets and central banks unleashed a wave of monetary stimulus’s.

In the wake of the rapid spread of the new coronavirus throughout the world, gold gained significant ground due to panic. Bullion dealers in India and around the global markets believed that gold might cross $2000 per ounce given that the situation is getting worse worldwide.

However, on the other hand, we see economies pumping in stimulus and planning to reopen soon after the lockdown. This is boosting confidence in investors of a faster economic recovery world over, commented a top gold dealer in India on the condition of anonymity.

There were constant warnings regarding potential for a major hit to the U.S. and global economies since February 1st when U.S. virus cases were in single figures and President Trump pontificated that it would rapidly fade away completely in America.  However, by the start of this weekend, the U.S. has recorded over 700,000 virus cases, rising at around 30,000 daily and more than 37,000 deaths.  This works out at 3.7 times the number of cases which have occurred in Spain, the second most affected country according to official statistics (although true Chinese figures remain suspect) and nearly twice the number of deaths.

However the U.S. population is far higher than that of any European nation and in terms of cases and deaths per million people, the U.S. is still well below similar figures for the most affected European countries, but the overall figure is still rising rapidly, while those in most of Europe appear to be diminishing.   At the current rate of infections and deaths, the U.S. could reach 1 million known virus cases and 50,000 deaths by the end of the current month.

Despite the alarming figures, Friday saw a big uptick in global equities and the gold price dropped back below $1,700 for the first time in the week.  Global equities picked up quite strongly on Friday and, as they did so, safe-haven assets like gold and silver fell back – equally sharply.  This was prompted, no doubt, by President Trump’s statement on getting America back to work in some less-affected states and reports that the drug, Remdesivir, was showing good results in controlling the virus in already-affected patients.

However, it is up to the state governors to order reductions of the lockdown restrictions and relaxations. Some less affected states, however, with mostly agricultural communities, may see some return to work fairly quickly, but overall the economy will remain in the grip of the virus for some months to come. Recovery will definitely be gradual and slow.

Currently, Gold has been moving to and fro, following a series of events that have been constantly influencing its prices.

Supply constraints- when gold prices were close to the previous low around USD 1,450 per ounce, there were signs of a shortage in the physical gold market. The temporary closing of three gold refineries in Switzerland was a major reason for these constraints. As a result, it was more difficult for investors to get their hand on physical gold.

Support level- the level of USD 1,450 per ounce has been an important support in the past. As gold prices failed to move below this level after several attempts, investors became convinced that this was a good buying opportunity.

Monetary Policy- the Fed used its full array to fight the shortage in the dollar market and to support the economy. The Fed announced unlimited asset purchases to replace the previous $700bn commitment. This has driven the balance sheet much higher. Other central banks have also eased monetary policy substantially. Aggressive monetary policy easing sounds like music to the ears of gold investors, especially as official rates and government bond yields are unlikely to rise substantially in the coming years and real yields to stay low or move even lower.

Financial stimulus- Investors have become optimistic regarding the current pandemic. There is optimism amongst investors that the world has already seen the worst scenarios in the COVID 19 crisis and that the current recession will be short-lived. Many banks announced monetary and fiscal stimulus across the globe, combined with some improvement in the number of Covid-19 casualties in countries that have been in lockdown have resulted in some optimism among investors. Gold prices have weathered well in a risk-on environment, so they have rallied in tandem with US stocks (see graph on the left below). As risk-off sentiment eased, the dollar has declined, and this has also been a support to gold prices.

Overall, therefore, the near term outlook for general economic growth looks to be dreadful, but (for gold) the outlook for more debt, more liquidity, and potentially an increase in the likelihood of inflationary pressures growing, looks positive for the price – at least in dollar terms.  We also see the longer-term negative economic outlook as keeping the equities extremely vulnerable for the foreseeable future.

We at RiddhiSiddhi Bullions Limited also think that a lot of investors will re-evaluate the gold positions they have or the positions they would like to have. One of the subject experts at RSBL recommends staying with gold as a primary wealth protection investment.  Improvement in investor sentiment, aggressive monetary policy easing, ultra-low interest rates and fiscal stimulus has all supported gold prices.

Tuesday, 21 April 2020

Gold's future looks bright

With uncertainty surrounding the world economy because of the coronavirus and crude oil price crash, gold prices have been a rollercoaster throughout the start of 2020.

Spot bullion is trading around $1 720 -- close to a more than seven-year high -- and is forecast by numerous banks to extend gains as the impact of the virus pushes economies toward recession and prompts action from central banks. Those factors are adding to what was already a strong outlook, with rising demand among middle-class consumers in China and India and signs of supply constraints, commented a top gold dealer in India.

On the other hand, the current crisis results not only from a negative supply shock but also from a negative demand shock pointed one of the bullion dealers in India. As a result of uncertainty, people cling to cash and forego unnecessary expenses. In addition, social distancing means reduced household spending on many goods and services, which exerts deflationary pressure. The most prominent example I would say is the recent crude oil price crash. The price has temporarily dropped below $0 a barrel (this was partly due to the contract for West Texas Intermediate crude). Lower fuel prices will translate into lower CPI inflation rate. Entrepreneurs, especially those with large stocks of goods, will probably lower prices to encourage shopping. Moreover, the appreciation of the US dollar means lower prices of imported goods.

Many of my peers at RSBL and industry friends are afraid that the coronavirus crisis will spur inflation. And they are right  After all, the increased demand for food and hygiene products raised the prices of these goods. Moreover, supply-side disruptions can reduce the availability of many goods, contributing to their increasing prices I am afraid.

The US CPI inflation rate declined 0.4 percent in March, following a 0.1 percent increase in February. It was the largest monthly decline since January 2015. The decrease was mainly driven by a sharp decline in the gasoline prices. However, the core CPI rate, which excludes energy and food prices, also decreased in March - by 0.1 percent (versus 0.2 percent rise in February), which was its first monthly decline since January 2010.

Gold prices consolidated around the $1,750 mark on Thursday, extending a recent pattern that has seen them rally on risk-friendly news and outperform on more bearish developments. spot gold  was up 0.6% at $1,724.45 an ounce, outperforming the futures contract after the U.S. Mint closed its West Point facility due to the coronavirus.

Havens were in favor again after another immense number for U.S. initial jobless claims, which fell only slightly from the previous week to 5.245 million. The U.S. economy has now lost more than 20 million jobs in a month due to the pandemic.

What will happen to gold irrespective of inflation or deflation? I would say Gold has always been a safe-haven asset and it does shine during both inflationary and deflationary periods. After all, gold also rallied in the aftermath of the Lehman Brothers' bankruptcy, when the economy plunged into deflation for a while. Why one would ask? Experts at RiddhiSiddhi Bullions Limited say that gold's price is also sensitive to market sentiment and risk aversion. Then, gold is no one's liability. So, when deflation is accompanied by significant economic worries and a loss of confidence in the US dollar, gold may shine. Anyway, gold's future - in a world of negative real interest rates, elevated risk aversion and high public debt - looks bright.

Monday, 13 April 2020

Time to keep a watch on gold supply disruption

Gold has been shining all the way, ever since Covid-19 became a pandemic. There was great volatility witnessed the world over, wherein prices climbed to their highest level since 2012.

Though we did see gold prices moving a bit lower during the past few weeks, the virus scare kept the rally in gold alive. On one side gold is being considered as a safe haven asset and on the other side, it is being oversold in order to cover up the losses incurred in the stock market, commented a  top gold dealer in India. It’s being pulled from both the sides.

The Covid-19 outbreak has had a major impact on the gold market, bringing massive price swings as investors react to new developments related to the pandemic.

The World Health Organization officially declared Covid-19 a pandemic on March 11, but gold prices didn’t immediately rally as many expected, even as the hit to the global economy became apparent with the closure of schools and businesses around the world.

That’s because gold generally goes through a shakeout of weak hands before reaching new highs.

Currently, the U.S dollar is considered the strongest fiat currency, while gold has broken out into new all-time highs against the other currencies.

Gold had reached an all-time intraday high of $1923.70 on September 6, 2011. Last week, on Thursday, gold was just $171 an ounce away from this high as it settled at $1752.80.
Gold did drop a bit on Friday, but it still remained very well supported.

We saw a lot of pumping in during the week by major world economies-

  • In a bid to keep the economy afloat amid the outbreak, which had forced 16.8 million Americans to file for unemployment benefits since the week ended March 21; the Fed on Thursday announced a broad, $2.3 trillion stimulus package.                                                         
  • European Union finance ministers also agreed on half-a-trillion Euros worth of economic support but left open the question of how to finance recovery in the bloc headed for a steep recession.

Subject experts at RiddhiSiddhi Bullions Limited stated that any form of stimulus attracts gold. It improves the opportunity cost for holding the yellow metal.

Meanwhile, major physical bullion dealers in India saw activity dwindle last week due to coronavirus-led restrictions, with strained supply chains cut off from soaring safe-haven demand in some regions.

Supply disruptions have been a growing worry as governments around the world are shutting down businesses deemed as nonessential. Three of the world’s largest gold refineries—Valcambi, Argor-Heraeus and PAMP—have suspended production in Switzerland for at least a week on the back of mandatory closure of nonessential industry in the country to prevent the spread of coronavirus, said a senior-level executive at RSBL.

The problem is there are logistical issues moving metals around, so you cannot satisfy supplies of gold from one area and bring to another
The hunt for existing gold supplies in the near-term threatens to create significant issues with various markets that cannot connect with one another easily. There’s the possibility here of longer supply chain disruptions, which will make the odds grow that more interest in existing Comex inventories will be demanded. Even we at RisddhiSiddhi Bullions are finding it difficult to move around RSBL Gold.

Currently, we don’t see economies reviving up that fast, at least not for the current calendar year. A hold above $1,700 would be very constructive in terms of giving [gold] a boost up to the all-time highs. Hence there could possibly be an acceleration in buying pressure on gold. All said and done, it is a great time to buy gold equities which were sold off with general equities in the rush to meet margin calls.

Meanwhile, in the domestic markets, especially the prices shall keep reflecting higher growth in gold compared to Global Comex as the depreciating rupee factor shall play a role.

The rupee which was trading at Rs72/$ odd average rate in March has spiked to an average rate to Rs 74-76/$ levels which indicates that the price of USDINR pair shall keep giving support to the yellow metal despite a global fall.

I believe that one should allocate at least 25 percent of your portfolio in Gold ETFs, and another 30 percent in cash till a cure for COVID-19 is found, or lockdown is removed.

Monday, 6 April 2020

Pumping of liquidity pumps up gold prices

The coronavirus, which emerged in China late last year, has turned into a global pandemic that has claimed lives of over 70,000 people and paralysed large wraps of the global economy.

From a spark in prices, gold did witness a minor correction as it dipped in March. According to the Bullion King of India; Mr Prithviraj Kothari, the decline in gold prices in March can primarily be attributed to two reasons.

  • Investors were selling everything including equities, bonds and precious metals owing to the panic caused by an unprecedented non-financial hazard — the coronavirus — to global financial markets.
  • Partial or full lockdowns by various governments to enforce social distancing in order to curb the spread of the virus, raised concerns about gold mining.

As per the sentiments of bullion dealers in India, gold continues to receive support as all central banks are trying to inject more liquidity into the system with their easy monetary policies.

FED- Fed has reduced the benchmark interest rate to zero.  A top official at the U.S. Federal Reserve on Sunday said the $2.3 trillion economic relief bill approved by Congress was appropriately sized and that a further relief effort may not be needed if support efforts are well executed.

The ECB and the Bank of Japan- they are maintaining a negative interest rate policy for a long time. Japan’s PM Shinzo Abe is set to declare a state of emergency soon as the number of confirmed cases in Tokyo soars past the 1,000 mark. In addition, things remain tense in Britain with the death toll nearing 5,000 even as PM Boris Johnson gets hospitalized due to coronavirus. Lower interest rates decrease the opportunity cost of holding non-yielding bullion, making gold cheaper for investors holding other currencies

However, post the dip in gold prices in March, the precious yellow metal regained momentum after President Donald Trump told U.S. citizens to prepare for “very, very painful two weeks” on Mar 31. Moreover, weak economic data dented market participants' confidence, commented one of the top gold dealer in India.

Gold prices rallied to erase three-quarters of this week's earlier $60 drop Thursday in lunchtime, rising to $1612 per ounce as US stock markets rose despite weekly claims for jobless benefits setting their second new all-time record in a row amid the fast-worsening Coronavirus Crisis.

The initial jobless claims by the Americans skyrocketed to a historic high of nearly 10 million for two consecutive weeks ended Mar 21 and Mar 28. The United States has never lost more than 1.4 million jobs in any two successive weeks in its history. Moreover, U.S. auto sales declined to 11.4 million in March from 16.7 million in February.

After rising steadily for 113 consecutive months, job creation in the US witnessed a contraction during the month of March, with the US economy registering a loss of 701k jobs because of the shutdown of workplaces and factories across the country. This boosted the safe-haven appeal of gold as markets worry about the economic fallout from the pandemic and the rising risks of an upcoming recession not just in the US economy but also in the global economy.

However, gains in gold remained limited as the US dollar continued to make gains as a preferred safe haven currency despite the weak economic data from the US. The dollar shares a negative correlation with gold as a higher dollar makes it more expensive for holders of non-dollar currencies to purchase gold.
From a long term standpoint, gold will still remain the preferred asset as the environment of low-interest rates and virus-induced global slowdown would support a prolonged rally.

While equities tend to dominate the headlines, it has been the star performer of the past two decades. The graphic below shows how gold has outperformed both the Down Jones and the US Dollar since 2001. Gold is up 498% compared to the Dow up 98% and the dollar down 81%. Gold indeed remains a favourite

Gold continues to be in wait-and-see mode on how bad the global economy will get and how long will the depression-like conditions last.

Most traders would expect gold to be higher, after the payrolls data but “gold’s problem is that supply tightness is easing, and the dollar continues to grind higher. Ultimately gold will shine from the entire fiscal and monetary stimulus being pumped into markets globally.

The aggravation of coronavirus pandemic with each passing day has left investors scurrying for safe-haven assets as they remain apprehensive regarding the recovery of global economic growth and its consequent impact on stock markets. This, in turn, has triggered a demand for gold, which is considered as a key investment option during times of financial turbulence.

Wednesday, 1 April 2020

Gold fights back as the world fights back COVID-19

Over the past few weeks, Covid-19 has reached into the pandemic stage globally, and is creating havoc not only medically but also economically. We have seen Covid-19 evolve from a predominantly Chinese outbreak to a global crisis. As of 1st April, 2020, there have been nearly 859,929 confirmed cases and over 42,000 deaths across 203 countries, and these numbers continue to increase on a daily basis. Although China remains the hardest-hit country in absolute terms, relative to its population, more than 20 countries, most of them in Europe, have now surpassed it, the most affected being Italy.

Italy, Spain and France have already implemented aggressive containment measures that will undoubtedly affect their economies. Other nations may well follow suit, while individuals are also likely to increasingly exercise caution in their day-to-day activities.

Against this backdrop, further pressure on global growth seems inevitable. Investor anxiety towards that prospect will likely intensify this as far as market moves are concerned. In this environment, gold’s downside will at the very least be supported. Eventually, we expect a healthy rebound to appear, as the appetite for safe haven assets remains strong.

While China is back on its path of recovery and has finally announced movement of flights and opening of lockdowns, still world over countries continue to struggle this medical monster that has been one of the most lethal virus of all times.

According to the World Health Organisation, concerns about Covid-19’s ability to continue spreading have sent shock waves across markets. Equity prices around the world have suffered sharp declines and bond yields in key markets have collapsed to all-time lows. Industrial commodities have also come under pressure.
As a result, authorities in a number of countries have either implemented or promised monetary and fiscal interventions, which at times have offered some support. In spite of such efforts, risk aversion has continued to spread. Most notably, the 50 and 100 bps cuts by the US Federal Reserve on March 3 and March 15 respectively have done little to help US equity prices.
For a while, gold was one of the few beneficiaries, as investors have looked for safe haven assets to help diversify their portfolios. Since the beginning of February, gold exchange-traded fund (ETF) holdings have increased by more than 100 tonnes and in the first half of February, money managers’ net positions in Comex futures rose by nearly 180 tonnes, although more than a third of that was later sold off.
In turn, this fuelled a rally to a peak of $1,703, a level unseen since before the 2013 liquidations. Meanwhile, gold prices denominated in euro as well as a number of Asian currencies reached all-time highs.
But gradually as other markets crashed, we saw investors selling gold, in order to cover up losses made elsewhere. As panic selling eventually spread across all asset classes, safe haven assets also experienced heavy liquidations. Bond yields rebounded and gold prices collapsed.
Gold prices retreated again on Tuesday under pressure from end-of-quarter repositioning, but also from the awareness that emerging market central banks, having been keen buyers of gold in recent years, now have to push more out into the market to defend their currencies.
Gold prices dropped as much as 2.4pc on Tuesday as the dollar strengthened and strong Chinese economic data boosted risk appetite but bullion was heading for a sixth straight quarterly rise amid fears over a global shutdown due the coronavirus.
The combination of a strengthening dollar and better risk appetite is weighing on gold. The dollar index rose 0.8pc after posting a nearly 1pc gain overnight, as Japanese investors and companies rushed to cover a greenback shortage before their fiscal year ends.
Central banks around the world have announced major fiscal and monetary packages to try to limit the economic damage, as governments have extended lockdowns to combat the virus.
Major central banks moves seen this week-
  • The Central Bank of Ecuador said it had raised $300 million through a one-month gold swap which involved pledging 240 thousand ounces of its reserves.
  • On Monday, the central bank of Russia confirmed widely-held expectations in saying it would stop buying gold from domestic producers on April 1, a move that will bolster its reserves as it fights to stop the ruble depreciating too fast against the dollar and euro.
  • The CBR had already cut its purchases by around 40% last year as gold prices rallied to multiyear highs.
  • Strong Chinese factory data lifted world stocks on Tuesday but markets were heading their worst quarter since 2008, on jitters about the economic hit from the coronavirus
A further factor weighing on gold Tuesday was a second-straight day of gains for the dollar as it recovered its poise from last week’s selloff. A strong dollar drives up the price of gold in local currencies worldwide.
However, it is important to stress that even after these corrections, gold continued to significantly outperform other asset classes, most notably equities, where most major markets have suffered double-digit declines year-to-date.
Looking ahead, we believe the Covid-19 outbreak is likely to continue affecting global markets and, by implication, precious metals, at the very least for the next few weeks and likely the next two to three months. Although the rate at which confirmed cases are growing has slowed down significantly in China, it is accelerating across some key Western economies, notably the United States, Italy, France and Germany.
With central banks unleashing a tsunami of quantitative easing (QE) at a time when fear is running rampant in markets and (as) government debts are about to explode, it seems like the perfect cocktail that could push gold back to record highs.