AN IMPRESSIVE START FOR GOLD IN 2015 BUT A DULL END

By Mr. Prithviraj Kothari, MD, RSBL

 

Every year, when we start afresh, each one has a hope- a hope that markets will do good. There was a similar feeling now as it was when 2014 began.

At the start of 2014 expectations were high that the gold market could shake off and recover from 2013’s drop, where prices ended the year in negative territory for the first time in 12 years.

However, despite strong optimism, gold once again closed the year in negative territory.
In the gold market, optimism was strong during the first half of the year. But later, the news hovering around the interest rate hike for gold pulled its prices down.

Fed’s interest rate hike played a significant role for gold in 2014. This helped drive the US dollar higher and pull down gold prices lower. 

By the end of 2014, Fed Chair Janet Yellen stated that interest rates will remain unchanged for the next two meeting. Hence analysts and economist expect that the Fed may bring in the first rate hike as early as June.

A thought some believe that interest rate hike may come in soon but there is part of the market who feel that any renewed expectation of looser U.S. monetary policy for a longer period could create some weakness in the U.S. dollar and in turn help push gold prices higher. 

Now we await next year’s crude prices and other commodities to see if inflation rears its head or if geopolitics suddenly moves gold.
This was a general scenario for 2015. Now let’s take a glance on the first trading day of 2015.
The first trading day of 2015 has been exciting for the gold market as prices have swung within a $27 dollar range during the session. Silver prices followed gold's volatility; as of 1:57 p.m. EST,
Gold closed 1.6% higher; reclaiming $1,200 after nearing $1,211 in intraday trade, as global risk-aversion and a weaker dollar boosted its safe-haven appeal.

Gold rebounded from a one-month low on Friday, as lower equities counteracted the impact of a stronger dollar and falling oil markets, but still posted its third straight weekly loss.
Spot gold fell to its lowest since Dec. 1 at $1,168.25 an ounce after the dollar strengthened, but rebounded to $1,194.10, up 0.63 percent at midday on a disappointing ISM manufacturing index report.
 

Gold added 0.2% to close above $1,186. Once again varied reasons behind this.

• Weak U.S. manufacturing data lifted demand for the metal as an alternative asset.
• The rising probability that a new Greek president, when elected, will break the terms of the ECB bailout sent yields Greek bonds and European stocks dipping as traders ran for safety in gold, silver, and the yen.
• Factory reports from Europe and China were even weaker. This added to the expectations that their respective central banks will be forced to add more stimuli.
• Gold was further supported by a falling dollar, which lifts demand for commodities denominated in it by making them less expensive to users of other currencies. 

Though we have always been discussing the precious metals market in general, this time I have also menti0oend the global economies which will down the line affect gold prices in 2015.


Chinese Economy- 

 
We all know that the Chinese economy is heading towards a slowdown. This has led to a rout in commodity prices, may continue to haunt global investors this year as well.
The country’s central bank helped the market with interest rate cuts and there is a reasonably good chance for a further cut, given that the real rate of interest is high.

US Economy

 
Like last year, this year too the interest rate move of the Federal Reserve will be a noticing factor to watch for.
The Fed believes that the risks to the outlook for economic activity and the labor market are nearly balanced and expects to remain ‘patient’ to regularize its stance of monetary policy, as per the statement published in December. 

Other Economies
The ECB will we forced to continue with its easy monetary policy as high unemployment, unutilized capacity and low inflation continue.
Apart from these, growth may inch up in Europe and Japan, but may drop in the UK.
Among the emerging markets, Russia will decelerate, while Brazil may not pick up appreciably. 

If you strongly believe that growth will improve globally his year then it could prove to be incorrect.
Thought the much-dreaded US quantitative easing (QE) concluded smoothly last year, but with Japan, Europe and China eyeing QE options, what may be in store for investors in 2015?
We need to wait and watch this for!

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1180-$1207 an ounce	Rs. 26,000- Rs.27,500 per 10gm
SILVER	$15.40- $16.30 an ounce	Rs.35,000- Rs.37,800 per kg

- Previous blog - "Too Much Noise In The Market"

http://riddisiddhibullionsltd.blogspot.in/2014/12/too-much-noise-in-market.html

IS GOLD BEING COMPLETELY CONTROLLED BY THE DOLLAR?

by Mr. Prithviraj Kothari, MD, RSBL

Gold is being pressurised on multiple fronts-

• Equities
• U.S Dollar
• Chinese Demand for Gold
• European Union
• Japanese Bank

The equities markets is yet another reason that continues to pressurise gold. The stock market continues to look poised for another run higher into new high territory.  

Moreover investors have been more confident about the equities market as compared to gold and this has prolonged the ongoing lack of interest in gold and precious metals.

Apart from equities, The US dollar index too has been mounting pressure on gold. 

Dollar is at multi-year highs and does not appear headed for a reversal anytime soon. Ongoing deflationary pressures in the Euro zone along with economic struggles in Japan could potentially keep the greenback well-supported for some time. 

Gold has been dancing to the tunes of the U.S dollar and there is a big expectation that the U.S. economy will continue to grow and that will further boost the dollar. The notion of higher rates and economic strength is driving the dollar higher and gold lower. 

Surge in the dollar, in which gold is priced, has knocked the metal in recent days through key chart support at $1,180 an ounce -- the lowest level hit during last year's 28 percent plunge -- and $1,155 to its lowest since early 2010 at $1,137.40.

Initially $1150 was considered a good support level for gold but now that gold has crossed this level too,  technical analysts have said a test of the $1,000 level could be on the cards after a break of support at $1,155, a retracement level of its rally to record highs in 2011.

Moreover, robust demand for gold from China has been raising concerns amongst analysts and investors. It has been marked that China, the leading gold consumer of the world, usually buy lot of jewellery, bars and coins at dips. 

Chinese gold buyers, who in the past often took advantage of falling prices as a cheap way of buying into the yellow precious metal, are still biding their time. But this year demand from this country has also been low.

On Wednesday, gold touched the lowest since April 23, 2010. Gold sank about 2 percent on Wednesday to its lowest since mid-2010, potentially opening the way for a fall to $1,000 as a surging U.S. dollar weakened the investment case for non-yielding bullion.

Moreover,  the divergence between the U.S. and economies including the European Union and Japan is driving gains for the dollar. 

Gold futures fell, capping the longest slump since May 2013, as the dollar rally eroded the appeal of the precious metal as an alternative investment.

Gold prices ended the U.S. day session narrowly mixed Thursday and not far above this week’s 4.5-year lows. Trading was quieter ahead of Friday morning’s important U.S. jobs report.  Once the report was out and the key indicators were not as per expectations , precious metals rebounded. The spot gold price was last $8 higher at $1147.90/ $1,1468 an ounce in Thursdays close after spiking up to $15850 with the dollar last at 1.2374 against the euro.

The metal has lost around $100 an ounce over the past week, regenerating memories of a stunning two-day drop in 2013 that started a huge wave of divestment and an annual drop in gold prices after 12 consecutive years. 

Silver was down 3.6 percent at $15.43 , paring losses after hitting $15.13, its lowest since mid-2010.

On Thursday, spot gold prices gained after the US jobs data was out. Spot gold was $8 higher at $1147.90/1148.60 per ounce. The US jobs data stated that the US added just 214,000 jobs in October. This was down from 248,000 in September and also below the predicted 235,000. This gave some support to gold that been witnessing a tumble since quite some time now.

Next week brings more attention to euro zone and Chinese economic data, and the results may serve to underscore the monetary policy divergence between the U.S. and the rest of the world.

The would result in strengthening of the dollar thus further putting pressure on gold which would act completely opposite to gold price movements on Friday.

Moreover, several European countries will release their first third-quarter gross domestic product data, and China will release reports on industrial production growth, producer price index and export data.

Even as China Japan and the Euro zone shows that their economy has been growing as much slow pace and they need easy monetary policies, next week there will more outlook on policy divergence with the Federal Reserve needing to decide on the interest rate hike which many analysts believe wont come in March

While the longer-term trend remains down, gold will likely not go straight down. A short covering and/or relief rally will likely be soon in the coming weeks and gold could possibly test the breakdown level of $1183 before potentially heading lower again.

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

- Previous blog -

"Fed Sets The Rules For Gold"

http://riddisiddhibullionsltd.blogspot.in/2014/11/fed-sets-rules-for-gold.html

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INVESTORS LOSING INTEREST IN GOLD OVER INTEREST RATE RISE

by Mr. Prithviraj Kothari, MD, RSBL

Last week we saw that the dollar denominated all the markets especially gold. It was the strengthening dollar that was responsible for the plunge in gold prices. 

This week it was even more worse. Precious metals tumbled down and the losses coincided with the recovery of USD against leading currencies such as Euro and Yen and the rally of U.S equities. 

The main market movers were the US Dollar and the Chinese economy. 

Though other markets have also seen volatility, the impact on the precious metals markets has been severe. Equities have been on a bull run but commodities have consistently been on the downside and have been hit with sliding prices and withdrawals by investors, squeezing profit opportunities for funds and traders. 

Gold closed at $1205 in 2013 and picked up well in 2014, rising to a high of $1380 in March. But post March, gold prices plummeted and have witnessed a loss of 5.5 per cent so far in September.

Gold prices declined for the third straight week after the Fed raised it approximate for a key lending rate even as policy makers confirmed an assurance to keep borrowing costs close to zero percent for a substantial time.

The chief reason for the recent weakness is the US Federal Reserve's projection for where official interest rates will be heading. The reason why the market has been so reactive to the interest rate rise is that an increase in interest rates and bond yields would raise the opportunity cost of holding gold. Currently gold has is not strong and has been giving negative returns. The strong co relations between gold and US bond yields will further reduce gold prices. Moreover, higher rates also tempts investors to shift to riskier assets like stocks that have been considerable returns. Moreover it continued to set records in 2014.

On Thursday, gold settled at its lowest closing price since the end of December, pressured by the dollar’s move higher after the Federal Reserve meeting on Wednesday

Spot gold was down 0.5 percent on Friday and among other precious metals, silver was down 2.5 percent to $18.01 an ounce. It touched $17.81, its lowest since August 2010.

On Friday the price of gold fell again, reaching a fresh 2014 low following three weeks of straight selling on the back of a strong dollar and expectations of a rise in US interest rates

Globally, we have witnessed financial uncertainty from 2009-2012. This had compelled investors to adopt gold as gold has always been considered a safe haven asset in turmoil.

The Fed now expects that short-term interest rates will be back to normal levels of around 3.75% by the end of 2017.

With the US Federal Reserve announcing a further $10 billion reduction in its monthly purchases, leaving the programme on course to be shuttered next month, it has also made clear that record low interest rates would be around for at least a few more months.

China followed by India are the worlds largest consumers of gold. But this year, demand for gold from both countries faded. Demand in China, which overtook India to become the top consumer of the metal last year, fell by 22 per cent to 351 tonnes in the first half of the year as the country's economic growth slows down, after reaching record levels in 2013. Jewellery fabrication in India, the world's second largest gold consumer, declined by 18 per cent to 296 tonnes in the first half on lower official imports after the hike in imports duty last year.

We still await some rise in demand from both countries because July, August and September are typically months for strong months of Gold performance months as buying from Asia increases – particularly due to upcoming festivals and wedding season in India.

A good gauge of demand is buyers' willingness to pay a premium over the international price.

Gold imports travelling through Shanghai's Pudong International Airport surged by 200 percent month on month since June as the Shanghai Gold Exchange (SGE) announces plans to allow foreign investment into China's gold market.

Some modest signs of increased demand in the physical gold market after a dramatic slump in Asia this year, have emerged.

To conclude, I think that precious metals are more likely to suffer tougher times if the dollar stays strong and if positive data continues to flow in from US. Well if it happens otherwise then gold may witness a bullish run.

WEEKLY TRADE RANGE-

METAL	INTERNATIONAL price	DOMESTIC price
GOLD	$1206 - $1256 AN OUNCE	RS. 26,200 - RS. 27,500 PER 10 GM
SILVER	$1750 - $1825 AN OUNCE	RS.39,000 - RS. 41,000 PER KG

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

- Previous blog - "Denominating Dollar"

http://www.riddisiddhibullionsltd.blogspot.in/2014/09/denominating-dollar.html

A BOOSTER MONTH FOR GOLD?

by Mr. Prithviraj Kothari, MD, RSBL

Gold has established a support level at $1275 since March and prices have risen post this level. 

But, during the second half of March gold fell heavily from resistance around $1400 back down to a several week low near support at $1275.

As 2014 began, gold moved very well for the initial months towards a six month high near $1400 and has now plunged to levels closer to $1300.

As news of the escalating tensions in Middle East and Ukraine gained momentum, gold gained 5.4 per cent year due to rise in demand for this safe haven asset.

After hovering at around $1290 gold has plunged sharply over the last week and has broken through the support at $1275. 

It rallied a day ago however ran into further resistance at $1275 before falling lower to a four month low around $1258.  

Though gold has always been the markets favourite metal during uncertainties, but this time bullion investors continue to worry over strong U.S. economic data and its impact on the dollar.

This week we saw gold falling to its lowest level in three months, on Friday before it recovered modestly.

On Tuesday, Gold witnessed its greatest drop this week as the market broke through recent support at the $1,270 area.

Gold was  unable to capitalize on the news of the ECB’s interest rate cut and QE program as the euro weakness offset any support gold would have received from the new liquidity programs.

AS tensions lingered over Ukraine and a weak dollar forced bargain hunting, we saw gold prices rising on Wednesday after prices earlier fell to a two and a half month low.

The yellow metal was under pressure after the Russian President drew plans for a ceasefire but then regained its prices when the Ukraine prime minister later dismissed Russia's proposal.

The metal is under pressure as the euro languished near a 14-month low versus the dollar on Friday, struggling to regain its footing after the European Central Bank delivered a fresh round of stimulus and promised even more if needed.

Gold was standing firm above the $1270 level in Thursday as it was impacted by a weaker Euro and surging equities after the European Central Bank cut interest rates to record lows which was counteracted by lower than expected U.S. jobs data. 

The main refinancing rate was cut to 0.05 per cent from 0,,15 per cent and the ECB lowered the rate on bank overnight deposits to -0.20 percent. 

But what surprised the market was Fridays U.S. jobs data that gave gold a push thus helping it to return to modest levels overnight. 

The U.S. Labor Department said the economy created 142,000 jobs in August, far below expectations for a figure of over 200,000. The unemployment rate fell to 6.1%, a six-year low. The average pace of job creation this year is 215,000, up from 194,000 in 2014. 

Gold rose from an 11-week low, after U.S. employers added the fewest jobs this year, adding some pressure on the Federal Reserve to maintain lower interest rates.

Initially data reports had stated the US economy was back on the path of recovery but Fridays number were a bit disappointing .

A stronger greenback is a setback for dollar denominated gold as it makes the yellow metal more expensive for users of other currencies.

 Gold traders are likely to keep an eye on currency moves next week after the euro fell to a 14-month low versus the dollar Thursday, following the surprising move by the European Central Bank to cut interest rates and embark on a quantitative easing program.

Traders will also extend a warm welcome to the month of September as it has historically been the best performing month for gold giving an average return of 2.16 per cent since 1969.

A spike in retail demand in India is another reason for the typical bump.

We hope this month the be a booster for gold.

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

- Previous blog -

"Bull v/s Bear"

http://riddisiddhibullionsltd.blogspot.in/2014/08/bull-vs-bear.html

UNCERTAINTY OVER INTEREST RATE HIKE !!!

by Mr. Prithviraj Kothari, MD, RSBL

From December 2008, to September 2011, Bullion futures more than doubled to a life time high of $1,923.70 an ounce. Gold prices sky rocketed as the Fed purchased debt and cut rates to an all-time low to spur economic growth. 

This year, gold bounced once again after its downfall in 2013. 

The metal rose 6.1 percent this year , partly as unrest in Ukraine and the Middle East increased haven demand.

This week investors eagerly waited for the minutes of the FOMC meeting that were to be released n Wednesday and the Jackson Hole Economic Symposium on Thursday and Friday that was expected to bring in some volatility in the market.  Apart from this many economic reports were slated to release-

• CPI
• Housing figures 
• Philly fed index from the U.S
• BOE rate decision and CPI from Great Britain
• Japan’s trade balance
• China's manufacturing PMI
• Retail sales and CPI from Canada.

Let's have a look at the data released from these reports

• U.S. home resale's raced to a 10-month high in July 
• Six straight months of payroll growth over 200,000 jobs per month — the first time that’s happened since before the Great Recession in 2007!  
• There were signs of a strengthening economy as the  number of Americans filing new claims for jobless benefits fell last week
• On Thursday, data released showed that the Business growth in China and across Europe slowed this month
• But U.S. activity picked up speed, leaving a mixed picture of global economic growth.  

This week , gold was mainly hovering around the interest rate news. The entire investment market- be it stock, bond, currency or commodities, is presently pre occupied with the only one question- When will the first interest rate increase happen? 

A positive economic growth from the US economy and an expectation for an early rate hike is expected to pull prices down.

Many researchers are expecting that the forecasting the U.S. central bank to raise rates in mid-2015 but some economists believe that it may happen much earlier.

A slowing world economy on one hand and a strengthening US economy on the other, is giving mixed reactions from the market. Uncertainty prevails and investor anxiety is on the rise. This means there will be higher movement for gold and silver.

It all depends on whether each new piece of economic data is inflationary or deflationary in nature

Though the market has been linked to rising interest rates, some say that it won't have a less negative impact on gold moving forward.

In fact now all eyes are headed towards inflation - a major driver for gold prices.

There is still some uncertainty over inflation because of the unprecedented steps the Fed has taken. Inflation along with rising interest rates will have an impact on gold. 

There are various key influential factors that will provide good support to gold -

• Rising interest rates could halt the free-flow of capital into the record-breaking equity markets and compel investors to take a more self-protective position. 
• A decline in supply  from mining and recycling sector on one hand and rising demand on the other will  raise a spark in gold prices. Also supportive for the gold market is an expected decline in supply, both from mining and recycling.

On Thursday, gold posted its steepest decline in over a month as investors left the market ahead of Friday's speech by Federal Reserve Chairwoman Janet Yellen . Gold fell to a two month low this week after the minutes of the Feds last meeting were released and it showed signs that policy makers may raise interest rates earliest than expected.  But Fed Chairman Janet Yellen also stated in a conference in Jackson Hole, Wyoming that “underutilization of labour resources still remains significant.

The debate now is about "when" to raise the interest rates. Any hike in these rates would diminish the sentiment to own gold. Gold produces no income and struggles to compete with interest-bearing investments such as Treasury bonds and bank deposits, whose yields will rise once market interest rates turn up. At the same time, signs that crisis in Ukraine and the Middle East are having a limited impact on global growth also have reduced demand for gold as a haven.

The Pentagon on Friday condemned the movement of a Russian convoy into eastern Ukraine, calling it a violation of Ukraine's sovereignty and demanding that it be withdrawn and failure of which would result in additional costs and isolation.

The world economy  is being pulled by the tug-of-war being held between the forces of inflation and deflation

In any case, all eyes are headed towards the FOMC meeting in September, which will also have a press conference and could be the one, in which FOMC chairman Yellen offers some more information regarding the next rate hike. The current estimates range mostly between the end of the first quarter of 2015 and the end of the second quarter.

TRADE RANGE-

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1264- $1297 an ounce	Rs. 27,800- Rs. 28,500 per 10 gram
SILVER	$19.00- $19.75 an ounce	Rs. 41,500- Rs. 43,000 per kg

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

- Previous blog -

"The Sentiments Are Bearish For Gold"

http://www.riddisiddhibullionsltd.blogspot.in/2014/08/the-sentiments-are-bearish-for-gold.html

GOLD AND SILVER ON A SWING

by Mr. Prithviraj Kothari, MD, RSBL

Last year investors sent bullion tumbling by the most in three decades which they kept dumping the metal recently.  But gold has once again become a valuable commodity. Demand for gold is increasing and prices are defying bearish forecasts.

Gold has proved that the bearish sentiment in the market was indeed just a thought and gold's performance this year has proved it. 

US economy is on the path of recovery and it is clearly visible from the recent government data that was released. Prices are speculated to retreat by the end of the year and inflation concerns along with pockets of unrest are sending investors into gold as a safe haven.

Violence spread in the Ukraine and Iraq and the Fed's reservations that it will keep interest rates near record lowed has kept gold prices high.

The gold and silver market heated up last week after they didn’t do much in the previous week. The minutes of the FOMC meeting may have partly contributed to the rally of precious metals by the end of last week: The minutes revealed the FOMC may keep the interest rates for a long time until the inflation start to pick up towards the Fed’s target of 2%. This dovish tone may have sparked another rally of gold and silver. 

During last week, the price of gold increased by 1.27%; the average price reached $1,326.88/t. oz which was 0.21% above last week’s average. 

The FOMC dovish policy is getting gold and silver back and is boosting up their prices too.

Moreover, if the Chinese economy doesn't show much progress, it will play a secondary role in impacting the bullion market. But on the other hand if the US economy moves on the path of recovery then it will pull up equities and curb down the rally of gold and silver.

Short term concerns over inflation and the ongoing geopolitical turmoil in many parts of the world has been the main reason behind pushing gold prices high. 

Gold was once again on the see saw this week. As the week began, gold fell sharply. On Monday, gold witnessed on profit taking after reaching the highest level since March in the previous week and ahead of Federal Reserve Chair Janet Yellen’s congressional testimony. 

There was a rally in gold prices on Thursday, over the tragic plane crash incident and a pickup in hostilities in the Israeli-Hamas conflict.

On Thursday, The Malaysian Airlines Boeing 777 flying from Amsterdam to Kuala Lumpur was "blown out of the sky", by a ground launched missile killing nearly 300 people aboard and sharply raising the stakes in a conflict between Kiev and pro-Moscow rebels that has set Russia and the West at daggers drawn.

The blame game , cranked up global pressure which created a way for a local conflict.

Ukraine's state security chief accused two Russian military intelligence officers of involvement with pro-Russian rebels in the downing of a Malaysian airliner on Thursday, releasing chilling testimony of what he called an "inhuman crime."

This incident kept gold over $1300. Gold for August delivery, the most actively traded contract, jumped $7.50 or 0.6 percent to close at $1,309.40 an ounce on the Comex division of the New York Mercantile Exchange on Friday. Gold for August delivery scaled an intraday high of $1,325.50 and a low of $1,305.00 an ounce.

But by Friday, gold pulled back from the knee-jerk reaction. The safe-haven benefits for gold faded on Friday, with the precious metal dropping in electronic trading, as a lack of physical follow-through made that upward move unsustainable.

Moreover, SPDR Gold Trust, the world's largest gold backed exchange traded fund, said its holdings fell 2.69 tonnes to 803.34 tonnes on Thursday.

But the yellow metal is still down nearly 2 per cent for the week, following a six week winning line over fears as Portugal financial crisis faded and investors worry about a sooner than expected hike in US interest rates

Even if U.S. rates don’t change before the second quarter of next year, the upside potential for gold over the medium term will remain capped and we may see some price pressure in the back of speculative selling, 

Next week’s economic reports are fairly light, with consumer price index data and existing home sales due out Tuesday, new home sales on Thursday and durable goods orders on Friday.

Still, gold markets will continue to watch geopolitical events, especially ahead of the weekend, which could produce more headlines out of Russia and Ukraine over the downed jet and the Middle East, where Israel has launched a ground offensive in Gaza.

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1292-$1328 per ounce	Rs.27,500-Rs.29,000 per 10 gram
SILVER	$20.45-$21.70 per ounce	Rs.44,000-Rs. 47,000 per kg

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.
- Previous blog -
"Precious Metals.....Indeed Precious"
http://www.riddisiddhibullionsltd.blogspot.in/2014/07/precious-metalsindeed-precious.html