Gold vs Stocks

Past 3 to 4 years haven’t been that exciting for gold. In fact gold has surfaced to the current $1300 an ounce, a level that was previously seen 6 years ago. Gold has been trading in a tight range for quite some time.

Gold is an investment that people prefer when the times are uncertain. It’s not a type of investment that can be left to itself. There are times that are just right to enter the market. People buy at dips and try to make the most of every opportunity to buy gold. Physical gold also has a very high liquidity which again increases its appeal as an investment asset.

Today we are in a position where gold is liked more as a hedge tool, an asset that gives you protection against uncertainties. And this characteristic of gold helps in keeping its prices high when there is a global crisis. In fact many are even switching over from equities to gold.

Though the first half of 2018 was dull for gold, it did gain momentum in the second half. 2018 on a weekly chart produced 2 clear trends, and some pretty nice ones at that. We started the year flat, and then had a bear trend from May to October, then a nice rally taking it up. If we’re just holding gold all this time, this really won’t matter, but gold still moves and we can’t call it a complete dog over all this time, even though it’s been one from a longer-term perspective.

This year too, till date gold is up 2% and is expected to rise further given the factors that will influence the yellow metal and create bullish sentiments in the market.

Since the high of February, with each lasting a week or two, gold is producing some pretty well-defined moves, including the current upward one.

But just by seeing the current trends it won’t be possible to exactly predict a future upward movement. We need to consider the past too. We at least need to preface this by mentioning the current bull move with gold, and you won’t really discover that by just looking at its year to date, you have to go back to the beginning of the current move in October. It’s not that we can go back in time and buy some then, but if we’re looking to predict a future up move, we need to at least account for how much we’ve moved up thus far.

The number in play here is $1184 an ounce, the low last October 1. This is also around the time where the stock market started to sink, and when money started to flow out of the stock market more, with some making its way into gold.

We’ve been able to sustain a move of 10% through the subsequent stock market rally, so while the bearish turn with stocks may have given us a push forward, the better performance of gold involved more than this, perhaps our looking to recapture the amount that the market oversold it by earlier in the year.

This is what makes us say that gold is expected to rise further. For 6 years now, gold has been unable to move up much past where it is now. This doesn’t mean that it won’t happen. A weak US economy, Fed policies, US China trade war, Brexit, piling gold reserves, bearish stock markets  are some of the many key influencers that will cause a wave in the market and bring about a rally in gold price.

Dollar dependency reduces. Benefits gold

Why is gold being reconsidered as a mode of investment globally? Why is the dollar dependency reducing? Why are central banks world over piling up their gold reserves?

Well the answer to this looks simple but the reasons behind it are quite complex.

There are so many things happening in the international markets. Gone are the days where just The U.S. economy played an important role in influencing world market. Today there are many other factors that are responsible for the movement of equities, commodities and other markets.

This week too, while the dollar strengthened against the British Pound, gold premium eased in China. Where we saw weakening imports of gold in China on one hand, on the other bullion reserves rose in Russia.

Dollar against the pound - The British Pound was the worst-performing, adding to losses after the UK Parliament was unable to reach a consensus for an alternative Brexit strategy.

Arguably the best-performing major on Thursday was the US Dollar, which climbed alongside rising front-end government bond yields. This is despite a flurry of disappointing domestic economic news flow. US GDP missed expectations, clocking in at 2.2% q/q in the fourth quarter of 2018 against 2.3% anticipated and from 3.4% in Q3.

The U.S. dollar benefited Friday from sterling’s slide after parliament for the third time rejected Prime Minister Theresa May’s proposed deal to pull Britain out of the European Union.

The pound fell as much as half a percent to the day’s low of $1.2976. Sterling’s move led the dollar index higher, last up 0.07 percent to 97.274, helping it recover from an earlier drop on the weaker-than-expected report of U.S. inflation data, which added to the conviction that the country’s economy is losing momentum.

U.S. economic numbers - U.S. consumer spending barely rose in January and income increased modestly in February. The report from the Commerce Department also showed price pressures muted in January, with a measure of overall inflation posting its smallest annual increase in nearly 2-1/2 years. Consumer spending accounts for more than two-thirds of American economic activity.
With growth slower and inflation benign, Friday’s data bolstered the Fed’s case for ending its three-year monetary tightening campaign.

Spot gold was up 0.7 percent at $1,298.80 per ounce by the end of the week, testing resistance at the key $1,300 level.

Bullion was also set to notch up about a 1.2 percent gain for the quarter, helped mainly by a dovish U.S. Federal Reserve and concerns about the global economy.

However, gold was still bound for a second consecutive monthly drop, losing about 1 percent, which would be its biggest decline since August last year. The metal fell by about 1.5 percent on Thursday, the most in more than seven months.

Premium - Gold premiums in China eased in the past week as worries about a slowdown in the world’s top bullion consumer prompted some customers to hold off on purchases, while a price dip buoyed appetite in other Asian hubs.

In China, premiums of about $12-14 an ounce were being charged over global benchmark prices, a slight reduction from last week when they rose to the highest since March 2017 at $14-$16.
The country’s net gold imports in February via main conduit Hong Kong fell 13.6 percent from the previous month.

Gold Reserves - Central bank buying has helped support gold prices in recent years. Bullion has risen 20% since the start of 2016.

Within the span of a decade, Russia quadrupled its bullion reserves and 2018 marked the most ambitious year yet. And the pace is keeping up so far this year. Data from the central bank show that holdings rose by one-million ounces in February, the most since November.

The data shows that Russia is making rapid progress in its effort to reduce its dependency on the US dollar and to diversify away from American assets. Analysts, who have coined the term de-dollarization, speculate about the global economic impacts if more countries adopt a similar philosophy and what it could mean for the dollar’s desirability compared with other assets, such as gold or the Chinese Yuan.

For Russia, experts are starting to question whether it can afford to keep up its intense pace of buying. Some say the country will import more gold to guard against geopolitical shocks and the threat of tougher US sanctions as relations between the two powers continue to deteriorate. Gold buying last year exceeded mine supply for the first time. Still, others argue that Russia’s bullion demand is set to slow.

But it’s not single handed Russia that’s piling its reserves. Given the constant geopolitical unrest, more and more banks are shifting focus to the yellow metal, which leads us to conclude that gold prices are soon to rise further.

Dollar strengthens but sentiments for gold are positive

Gold started the week on its back foot, testing the $1,300 level mid week. The metal recovered sharply ending the week essentially unchanged. A key catalyst for the recovery in the USD gold price was the revelation that that Presidents Trump and Xi will not meet to resolve trade differences prior to the imposition of increased tariffs in March. U.S. President Donald Trump said last week that he had no plans to meet with Chinese President Xi Jinping before a March 1deadline to achieve a trade deal.

We continue to see the US China trade conflict, Fed and ECB actions as key drivers of equity and USD volatility, in turn driving investors to safe haven gold.

Concerns regarding the Chinese economy, weak growth and political tension in the Euro zone, Brexit and lingering global trade tensions are weighing in on market sentiment and the dollar is once more sought after as a refuge asset.

Investors strongly believe that there is much scope for gold to rise and they cite 3 main reasons for that-

• Geopolitical Risk. The U.S. trade war with China, the humanitarian crisis in Venezuela, and Britain's planned Brexit from the European Union are three examples of this. Each raises uncertainty for investors about the future, and that tends to make them anxious. Investors are also worried about the economic impact of U.S. government shutdown when global growth is already lean.

• High Stock Valuations. Investors are also increasingly wary of the stock market that's pricey relative to projected earnings. So, some investors are cashing in at least part of their stock holdings and sending some of the proceeds to gold funds. With stocks now showing signs of rolling over in response to trade talks concerns and a weaker growth forecast, gold should find enough support once again to prevent a serious challenge at support, currently at $1,300 an ounce, followed by $1,275

• Dollar - Gold is being pushed around by the U.S. dollar in the near term. Traders are getting out of anything to do with Europe on concerns of weakness in the region and going for safe-haven buying into U.S. treasuries, which is pushing up the dollar. But a possible shut down and impact of the US economy on its global counterpart, might make the dollar weak thus pushing gold further. 

• The Federal Reserve.  The Fed also seems to be at "an inflection point" when it comes to U.S. interest rates. He notes that the investment community went from expecting the Fed to boost rates multiple times this year to now perhaps making no increases in 2019. Lower interest rates tend to weaken the U.S. dollar and boost inflation risks, making gold more attractive. Gold and dollar are inversely related so whenever there is any negative effect on the dollar, gold prices tend to rise.

For gold, a lot of the recent action is largely dictated by the fact that the dollar is holding firm over the past two weeks. That has seen gold fall from resistance around $1,326 to current levels. But as long as the figure level still isn't breached, there's still favorable momentum to for gold to continue its upside run since November last year. We remain of the view that the $1,350 level is viable in the coming months, and note the $1,360 technical resistance level many market participants are watching.

Series of Events await for the precious metals market

Gold has been on a five month high, where prices climbed on Monday, with declines in a leading dollar index, Treasury yields and the U.S. stock market, as well as comments from a well-known fund manager, prompting prices to settle at their highest in just over a week.

The gains in gold come ahead of key central-bank policy decisions this week and uncertainty around concrete trade developments between the U.S. and China.

There were a host of reasons responsible for this positive splurge in gold prices-

US Dollar - On Monday, the ICE U.S. Dollar Index was down 0.4% at 97.054. Gold is often sensitive to movements in the dollar. A weaker U.S. unit typically boosts demand for commodities priced in dollars as it makes them less expensive to users of other currencies.

US stock - Benchmark U.S. stock indexes, meanwhile, traded broadly lower as gold futures settled, after ending last week in a rout that pushed the Dow Jones Industrial Average back into correction territory. Stock weakness generally supports gold resulting in an upward movement.

Fed rate hike - Market expectations for 2019 Fed rate increases, once put at three to four more increases, have also begun to lessen on the back of dovish comments from Fed officials, including Chairman Jerome Powell. Fed rate-hike expectations are plummeting. Fed fund futures imply only a good 70% probability of a rate hike at the Fed’s meeting next week, with the probability of another by the end of 2019 likewise at only around 70%.

Expert advice - Double line Capital Founder Jeff Gundlach predicted the U.S. dollar would struggle in the coming new year, and that U.S. equities will enter a bear market. Post this statement; Prices for the metal got an added boost to intraday highs.

Brexit - Brexit is another geopolitical factor whose uncertainty is supportive for haven metals, though, again, the reaction has been muted so far. In the U.K., solutions to the Brexit dilemma are still hard to come by, a background story that is keeping the dollar bid, but not offering much extra boost for precious metals.

Apart from the ongoing activities there are a series of events that await the precious metals markets-

And other monetary policy updates this week, the Bank of Japan will make an announcement late Wednesday and the Bank of England meets on Thursday. The dollar has enjoyed relative strength against the yen and the pound, in part because of the interest-rate differential between the U.S. and its major economic allies. the Bank of Japan will make an announcement late Wednesday monetary policy updates this week, and the Bank of England meets on Thursday China’s Central Economic Work Conference a speech by President Xi Jinping There have been signs if panic in the market resulting in higher volatility. Riskier assets have been under pressure due to geopolitical events.
Currently the highlight is the ongoing US china trade spat and the market needs to see some real signs that point towards resolving some of their differences.

Gold remains positive but lacks direction

Gold prices were modestly high last week reacting over a mixed bag of economic reports and geopolitical events. The yellow metal has been able to furnish gains over slightly weak US dollar.

GOLD PRICES rose against a falling US Dollar on Friday, halving last week's 1.9% drop to trade back above $1220 per ounce as Western stock markets fell and crude oil rallied from this month's 17% plunge so far.

Gold prices ended higher on Thursday, shaking off pressure from a stronger dollar to hold on to a week-to-date gain as U.S. and European equities declined.

Tumbling equities market, plunging oil prices, escalating worries about stresses in the global economy, ongoing trade tensions and uncertain growth projections have created a rally in gold prices. 

Let have look at these mixed bags -

BREXIT - The issues around Brexit have invigorated a little bit of safe-haven buying in the precious metals market. In the past week, U.K. Prime Minister Theresa May had two of her cabinet members resign Thursday, including her Brexit secretary, following May’s pronouncement Wednesday that she is sticking with her controversial Brexit plan. The British pound sunk on the news of the resignations, while European bond yields rose. Talks of a no confidence vote for May were also doing the rounds. This led to some safe haven buying in gold though it did not create that much an impact on the world marketplace.

DOLLAR - while the U.S. dollar remains the strongest and most consistent factor for gold, it’s likely that correlations with other asset classes will begin to strengthen and re-emerge over the next 6-12 months and thus reassert themselves in gold’s favour. Furthermore, the marketplace took note of U.S. Federal Reserve Chairman Jerome Powell’s comments at a speech late Wednesday that the Fed is closely monitoring the modest deceleration in world economic growth. However, Powell implied that situation is not now altering the Fed’s monetary policy tenor of continuing to slowly raise U.S. interest rates. Powell added that a further U.S. stock market selloff could impact the Fed’s policy decisions. Any further weakness in the dollar due to Feds decisions will pull gold prices high.

EURO ZONE CRISIS - Crisis and uncertainty continue to prevail in Europe, where Italy is locking horns with the EU and a Brexit deal hangs in the balance, mega-economy Germany has just produced the worst growth in nearly six years. Even if Wall Street can successfully shake off noise from the Old Country, a fresh threat from falling oil prices, along with worries over trade and a Fed misstep may cast long shadows

EQUITIES - Currently equities don’t belong to anyone and it appears to be in no-man’s-land. Gold and silver are seeing a bit of support as the U.S. stock indexes have backed down and might fall further. Any stronger stock market selling pressure surfacing in the near future would likely more significantly benefit gold and silver prices.

What we see from the above explanations is that the markets are now moving focus from dollar to geopolitical events.

But one notable interesting thing we see coming in is from China. China has developed tremendously in recent years. But what’s next? Is the country entering the growth recession? And how it will affect the world and the gold market?

Indeed, at the turn of this century, China was a minor player in this market. While today it is both the world’s largest consumer and producer of gold, accounting for 23% of total gold demand and 13% of total gold supply. However, there are still opportunities for further development, as the investor base is too narrow, while the market infrastructure and regulations need to improve.

So far, the Chinese authorities have postponed the inevitable slowdown. But it will arrive one day. Given the economy’s massive leverage, the growth recession is likely to cause a financial crisis, which would hit the whole world. Gold should shine, then. The problem is that nobody knows when it will happen.

While we remain positive on gold prices going toward and into 2019, gold still seems to lack clear price directionality for the time being.

Investors stockpile gold

Gold witnessed a series of events in the past week which ultimately proved fruitful for gold. Gold was highly influenced positively by a series of following key events:

1. Globally, equities markets plunged down sharply.
2. Uncertainties over the results of the U.S midterm, elections. At the moment there appears to be a strong chance of the Democrats gaining a majority in the House of Representatives, but the Republicans comfortably holding on to their Senate majority. Such a scenario would probably be gold-positive in that it would lead to political gridlock.
3. Trade war between China and US which was initiated by the implementation of tariffs on Chinese goods by the US governments
4. Uncertainty in Europe over the fallout from a possible no-deal scenario for Brexit, 
5. Nervousness over the forthcoming Italian budget which threatens to challenge the Euro zone hierarchy 
6. Geopolitical fallout from the Khasoggi murder which could upset Middle Eastern alliances.

Apart from the ones mentioned above, we still expect some geopolitical difficulties to occur, which may further strengthen gold and help it in breaking its comfort zone.

Gold has been back above $1,200 an ounce for the last two weeks, helped by safe-haven buying due to weakness in global equities and geopolitical tensions. Last week, Gold rose to test monthly highs near $1,240/oz but lost strength and pulled back. The retreat from the top, continued after the ECB meeting and during the American session, amid a stronger US dollar against majors and despite an improvement in risk appetite.

When the yellow metal crossed $1200 mark, it saw many investors retuning to the market with a great interest in gold. Retail buyers have started making their purchased as they expect a further price rise. Further, the investors’ class is also taking some stock profits as Wall Street volatility increased and they’re moving some of those profits to safer or more opportune areas, including gold and silver.

It’s not only the small investor class but also major central banks that are adopting gold. Russia and China have also been trying to win support from global governments to create a new gold-backed currency, thereby removing the US dollar as the world’s reserve currency.

Gold’s impressive performance of late, coming amid USD [U.S. dollar] strength, suggests that gold finally is behaving like a safe-haven asset.  There has been a pickup in gold purchases by central banks, including Hungary, Poland, India, Turkey and Mongolia, in addition to regular gold buyers Russia and Kazakhstan. And if this continues we will soon see gold at record highs.

Gold - Past performance future prediction

As the year comes to a close, let’s take a look back at the main gold trends this year, from the impact of US Federal Reserve interest rate hikes to widespread geopolitical uncertainty, how it performed and how the outlook is in 2018.

Though gold made double digit gains in some currencies, it did have a tough year. The precious metal has had some harsh criticism from the mainstream media and unfair comparisons to lubricious assets, such as bitcoin and US equities.

Few have acknowledged gold's impressive performance in the face of rising interest rates, tightening monetary policies and the ongoing equity bull market.

When we see gold’s performance over the past 12 months, I think it would be better to divide it over 4 quarters to get an enhanced understanding of gold, its performance and the reason behind its volatility.

Quarter 1- The main driving force for gold prices in this quarter was Trumps uncertainty.
Concerns about US President Donald Trump and anticipated rate hikes from the Fed caused worries, as did the Brexit process and European elections. All of those factors combined in the first three months of the year to drive the yellow metal’s price
During the first quarter, gold traded between $1,184.62 and $1,257.64.
The gold price made its eighth Q1 gain in 10 years in the first quarter of 2017, buoyed by safe-haven demand from anxious investors.
Early in 2017, GFMS noted a gradual rise in gold demand complimeeyed by a reduction in global mine output, resulting in smaller surplus in 2017. This supply demand gap further reflected a bright year for gold and gold stocks in particular in the first quarter.

Quarter 2- Herein steps the Fed, whose hawkish tone influences the market and gold prices in particular.
The gold price stalled in the second quarter of the year as concerns about geopolitical tension faded away. The Fed increased interest rates for the second time of the year in June — that hurt the yellow metal as gold is highly sensitive to rising rates.
Demand for gold dropped 14 percent year-on-year in the first half of 2017 due to a sharp fall in ETF inflows, according to the World Gold Council (WGC). Total global demand for gold reached 2,003.8 tonnes from January to June, down from 2,318.7 tonnes in the same period the year before.
The yellow metal traded between $1,218.80 and $1,293.60 during the quarter.

Quarter 3- a Series of uncertain events leading to geopolitical crisis once again put gold on the top list of safe haven assets.
The gold price gained more than 3 percent in the third quarter, even though September was one of its worst months of the year.
A weaker US dollar and geopolitical tensions between the US and North Korea supported gold over the quarter. Gains were offset by the Fed’s hawkish tone, which pointed to another interest rate hike later in the year and three more in 2018.
At the end of the quarter, most analysts agreed that worldwide political developments, as well as the US dollar, were set to be key drivers for the gold price for the rest of the year.
Gold traded between $1,212.20 and $1,348.60 during the quarter.

Quarter 4- The most awaited Fed meeting becomes the focus globally. 
The gold price remained almost neutral in the last quarter of the year, and was on track for a quarterly loss of less than 1 percent. Trump’s new Fed chair nomination and the expectation of another rate hike in December were some of the key factors driving prices during the period.
The yellow metal has been trading between $1,285.50 and $1,298 during the quarter.
So as we saw that in spite of witnessing volatilities, 2017 was a tough yet good year for gold.
Now what we need to pay heed to is that whether the above mentioned factors will continue to influence gold in 2018 or do we have many more surprise for the yellow metal in the following year-

The gold price is likely next year to continue the rise it commenced two years ago. The main contributory factors here remain the extremely

Loose monetary policy pursued by nearly all key central banks, resulting in ongoing very low to negative interest rates.

Political uncertainty is also likely to be a constant feature throughout the year. One example worth mentioning is the difficult process of forming a government in Germany, the outcome of which remains unclear. Parliamentary elections will probably be held in Italy in the spring of 2018 and could spark renewed unrest in the Euro zone

Brexit is likely to become an increasingly hot topic during the course of the year if agreement is still not reached in the negotiations between the EU and the UK and the UK’s disorderly exit from the EU becomes more likely in the spring of 2019.

 That the second year of Donald Trump’s presidency in the US will run any more smoothly in terms of domestic or foreign policy than the first one did.

The implementation of the tax reform and the possible implications for monetary policy are likely to keep the market just as much on tenterhooks as the ongoing investigations into contacts between Trump’s election campaign team and Russia.

A prediction of the future approach of the Fed towards the monetary policy gets difficult as, Trump will next year make several new appointments to the Fed’s Board of Governors.

What is more, midterm elections to the US Congress will be taking place in the autumn of 2018, which is likely to increase pressure on Trump and the Republicans to implement the tax reform. Otherwise there is a risk of the high-flying US stock markets correcting, which would benefit gold

The numerous geopolitical crises should likewise generate latent uncertainty. These include in particular the North Korea conflict, the growing tensions in the Middle East between Saudi Arabia and Iran, and the conflict between the West and Russia over Russian influence in the US elections and in Eastern Ukraine.

Admittedly, the Fed has already raised interest rates twice this year, and is likely to do so for a third time in mid-December. Our economists expect three further rate hikes next year. However, this does not necessarily preclude a rising gold price, as 2017 has shown. This is because other central banks apart from the Fed – such as the Bank of England and the Bank of Canada – have also increased interest rates in the meantime, which reduces the benefits of the rate hikes for the US dollar.

 Physical gold demand should generate somewhat more tailwind next year. It was fairly subdued in 2017. The World Gold Council (WGC) expects gold demand in India ultimately to reach a mere 650-750 tons after a strong first half of the year, putting it at a similarly low level as last year. Demand fell away when a goods and services tax was levied on gold purchases with effect from 1 July.

Gold ETFs On balance, ETF investors have hardly bought any gold at all since the end of September. By contrast, the world’s largest gold ETF – the SPDR Gold Trust that is listed in the US – recorded only minor net inflows. The numerous uncertainties and low real interest rates suggest that we will also see net inflows into gold ETFs in 2018. How pronounced these turn out to be will depend to a large extent on whether stock markets continue to fly high or whether they correct.

Numerous political uncertainty factors in Europe and the US, as well as a number of potential sources of geopolitical crisis, are likely to boost demand for gold additionally. Gold demand in Asia should have bottomed out and increase moderately in 2018. The gold price is likely to rise during the course of the year and to be trading at $1,350 per troy ounce by the end of 2018.

One risk factor for gold is the US tax reform. If this is fully implemented, the rally on the stock markets could continue, meaning that gold is in less demand accordingly.

So as we always say, gold is expected to have its share of highs and lows in 2018 and of the influencers discussed above, which happens first and how severely it happens will decide the fate of the yellow metal.

GOLD EXPECTED TO SHINE IN THE SECOND HALF OF 2017

It was strong opening for gold this week as gold neared its highest in a month on Monday amongst holiday thinned trade. A soft dollar and a pullback in equities helped this rise in gold prices.

Gold hit its highest level since May 1 on Friday at$1,269.50 an ounce, as nervousness over U.S. President Donald Trump's negotiations with other world leaders at the G7 summit prompted investors to buy bullion as an alternative to nominally higher-risk assets such as shares.

Spot gold settled at $1,266.67 an ounce, little changed from $1,266.66 late on Friday.
Though there is not much rise expected in gold prices, but the news from G7 meeting pushed gold prices up.

Under pressure from the G7, Trump on Saturday backed a pledge to fight protectionism but refused to endorse a global accord on climate change, saying he needed more time to decide.

Apart from this, market players await next month’s FOMC meeting to get clearer picture on the U.S. Federal Reserve's stance on interest rate increases.Gold is highly sensitive to rising U.S. rates, which
Increase the opportunity cost of holding non-yielding bullion, While boosting the dollar, in which it is priced.

Meanwhile this week, market participants will stay focused on the labor market report in the US slated to release during the week. If the data turn out to be positive, there is probably nothing to prevent the (Fed) implementing its next rate hike in mid-June.

The latest FOMC minutes suggest that the Fed may start decreasing its balance sheet later this year.
It is true that the first two rounds of quantitative easing were positive for the gold market. However, the third one was a disaster for the yellow metal, as the confidence in the U.S. economy came back and the safe-haven demand for gold declined. Therefore, the impact of the unwinding of the Fed’s balance sheet on the gold market is not easy to determine – a lot will depend on the broad macroeconomic picture.

On the one hand, the Fed’s shrinking balance sheet would imply rising long-term real interest rates, which would be negative for gold prices. On the other hand, there may be some turmoil in the financial markets, which would support the gold market. Moreover, it may be the case that the U.S. dollar rally which started in 2014 was caused by the rising expectations about the Fed’s upcoming tightening.

If this is true and investors really bought the rumor and sell the fact, then the greenback may start depreciating, which would likely send the price of gold higher. Gold’s response to the current Fed’s tightening cycle suggests that it is not impossible scenario. However, the whole process is likely to be conducted in a very conservative and cautious way to minimize market volatility and disruption. Hence, investors should not bet on doom scenarios and expect that the price of gold will necessarily skyrocket.

Though gold was not preferred in an investor’s portfolio during 2016, it gold regained investor confidence during 2017, as doubts about the Trump’s administration’s ability to see through their policy agenda and political difficulties have emerged. Moreover, there has also been a number of geopolitical events such as European elections – the results in France and Netherlands have somewhat assuaged financial markets – and the flash point in the Korean peninsula.”

These geopolitical tensions and uncertainties have influenced gold prices.

The spot price of gold jumped nearly 2% on the 17th of May, the most significant daily increase since the Brexit vote on May 2016. Political developments will be closely watched by the market, and could be a potential driver of additional uplift in gold prices going forward.

Comments by St. Louis Fed President, James Bullard, that inflation remains subdued, and the Fed’s interest rate expectations might be too aggressive, have also been supportive of gold.

Gold is expected to hover around USD 1250 an ounce and is further expected to range between USD $1245 to USD $1300 over 2017-18.

Short Term seems positive for Gold

Gold rose by 15 dollars last week from $1229 to $1244 having hit a high of $1252 and a low of $1227. Silver rose by 41 cents from $17.36 to $17.77 having reached a high of $17.78 and a low of $17.33. The dollar index stands at 99.62 that’s down 0.68 on the week. Gold prices moved higher as the Euro gained traction and the dollar edged lower following stronger than expected German PMI data. Analysts believe that gold has further to rise but will be seesawing between $1230- $1260 before perhaps it breaks out up to $1280 levels.

Silver markets were also positive last week and is attempting to reach $18 level. Similar to gold we see a see saw effect between the price range of $17 where there is significant support and the $18 level where there is resistance. As I have mentioned in my previous blogs that political uncertainty could have a greater effect on prices primarily because of their effect on the value of the dollar which actually fell a little during the week. Also a fall in the Dow enabled funds to be moved out of equities and back into gold, though to be fair this transference was relatively small.

Gold prices finished higher on Friday to log a second weekly gain in a row as demand for assets perceived as risky waned and the U.S. dollar touched its lowest level in about seven weeks.
Traders also eyed developments tied to a Republican-backed U.S. health-care bill, which could have wide-ranging influence in financial markets.

The main focus globally was on a vote by the U.S. House of Representatives on a bill to abolish the Affordable Care Act, also known as Obamacare.  The vote was expected late Thursday, but was postponed by the Republicans when there were serious doubts the Republicans had the votes to strike down Obamacare. After negotiations between the Trump administration and members of the House Thursday, President Trump took a hard line and declared the vote should take place Friday, or he would move on to other matters and leave Obamacare in place. There is no clear consensus in the marketplace on the outcome of this key vote, which could move markets in its immediate aftermath.
A “no” vote on the House bill would likely favour the gold market bulls, as it could put downside pressure on the U.S. stock market.

Gold could back off and The U.S dollar is expected to strengthen and bonds yields should rise if the health care bill gets passed. The main reason being that the markets will see it as one hurdle out of the way for finally moving onto tax reform and other fiscal stimulus measures.

But if it happens otherwise and if the bill doesn’t get passed then gold is quote likely to rise.
On Friday, St. Louis Fed President James Bullard said U.S. labour market improvement is slowing down. U.S. data on core durable goods has shown that the economy is strong, but this is not something which is going to excite the Fed that much.

The U.S. data released was as follows

• The Department of Commerce said new order of durable goods increased by $3.9 billion or 1.7% to $235.4 billion last month, following January’s revised 2.3% increase. According to consensus forecasts, economists were expecting to see a 1.1% rise.
• Stripping out the volatile transportation sector, new orders of core durable goods rose 0.4%, in February, following January’s revised increase to 0.2%. Economists were expecting to see an increase of 0.5%.

The political uncertainties over in Europe around French elections and Brexit are going to provide a lot of tailwinds for the gold rally .

Analysts believe that the short term outlook for gold is positive as it will rise and shine amidst all the volatility and uncertainty prevailing. The coming week, US durable goods orders and housing sales will be announced. Globally reports on Japanese trade and UK inflation could also influence the currency markets and so it is possible that the dollar may lose a little ground against the Sterling and the Euro as it did last week. So this week we are positive for gold and silver while the limits mentioned are tested. What also needs to be focused is the divergence between the Fed’s growth forecast of 2% and President Trumps envisaged plans for a 4% economy growth rate. Time will tell which of the two proves to be more accurate.

Effect of Presidential Election and BREXIT on Bullion Market

So Far, bullion has witnessed a 9.6 percent rise in prices mainly due to the prevailing political uncertainty over Trump’s unorthodoxy, European elections and Brexit ruffle confidence.
The yellow metal reached near a four month high last week amid intensified political uncertainty in the U.S. and the EU.

All precious metals have made gains, gold, silver, platinum and palladium, as both the euro and the dollar weakened over the week. Let's take a look as to what factors contributed to the rise and how far an important role will they play in the near future.

US uncertainty- Gold prices have hit a four month high to reaching their highest level since Donald Trump won the election.

The metal is considered as a safe haven asset for money and values rise when markets are in turmoil or in times of uncertainty. This sentiment has raised the demand for gold especially from investors thus pushing  its prices higher.

As markets await a major speech by US president Donald Trump, we saw equates retreating and dollar hesitating thus strengthening gold prices and shaking off most of the losses incurred following the surprise election result, as markets continue to unwind Trump trade.

Fed Rate Hike- Last Wednesday's release of minutes from the last FOMC meeting on January 31 – February 1 struck a slightly more hawkish tone as Fed members discussed the appropriateness of another rate hike 'fairly soon.' concerns over the risks and uncertainties surrounding the Trump Administration's fiscal stimulus plans as well as a strengthening US dollar tempered that hawkish stance. In the end, markets were once again left with continued ambiguity regarding the pace of monetary policy tightening in the coming months. Indeed, the Fed Fund futures market still saw a low percentage probability of a March rate hike – in the high-teens to low-20's – a day after release of the FOMC minutes. This sustained policy uncertainty helped weigh on the dollar while boosting the price of gold further. Reduced expectations of a US rate hike in March following the release of the minutes from the US Federal Reserve's last meeting are also helping gold.

EU elections- Despite the virtually relentless rally in US and global equity markets, geopolitical risks continued to abound, particularly in Europe. Article 50, which officially begins the process of separation between the UK and European Union ('Brexit'), is slated to be triggered no later than in March. A former European Commission official has recently stated that the triggering of Article 50 could lead to a 'complete breakdown' of UK/EU relations.

Additionally, France's far-right, anti-EU presidential candidate, Marine Le Pen, is leading in polls for the first round of the upcoming French elections. Although she is not currently favored to win against frontrunner Emmanuel Macron, any surprise victory by the populist/nationalist Le Pen will undoubtedly lead to serious questions about the future of the EU.

Geopolitical worries and political concerns in the EU continue which is leading a flight to safety bid in gold futures market and gold exchange traded funds (ETFs) and demand for safe haven gold bullion.

Dollar- The dollar looks vulnerable due to the uncertainty about US President Donald Trump and the new U.S. administration's policies. Overnight Trump attacked China and accused the Chinese of being ‘grand champions’ of currency manipulation.

This alone is quite bullish for gold. It does not create confidence about trade relations between the world's two biggest economies and it suggests that we may be about to embark on the next phase of the global currency wars.

The US president is to deliver his first speech to US Congress next week, after US Secretary of the Treasury Steven Mnuchin on Thursday said the impact of fiscal stimulus this year on the economy might be limited.

Amid these uncertainties in Europe as well as those in the US under the Trump Administration's still-hazy policy trajectory and the Fed's murky monetary policy, gold has continued to extend its sharp uptrend that began after price bottomed out around the $1125 support area in late December.

2017 - SURPRISES TO UNFOLD FOR GOLD : RSBL

Until Wednesday last week, gold was trading in positive territory continuing the rally from the previous session.

The spot gold price was quoted at $1,164.85/1,165.15 per oz, up $8.05 on the previous close.

There were many supporting factors for gold’s rally-

• Mainly all the uncertainty that lies ahead with the changeover in the US administration 
• Brexit 
• The weakening trend in the yuan. 

On Friday last week, gold slipped following the release of strong US employment data which was as follows-

• The USA added 156,000 jobs in December, compared with 204,000 in November, while wages grew 2.9% year-on-year to reach a seven-year high.
• German industrial production climbed 0.4%, which was down from the 0.7% expected, while the country’s trade balance climbed more than expected. 
• The non-farm employment change for December showed 156,000 Americans entered the workforce, a slight miss from the 175,000 forecast.
• However, the figure for the previous month was revised up 19,000 jobs and the headline unemployment figure came in as expected at 4.7%.
• The big surprise was that average hourly earnings grew by 0.4% month-on-month, bringing total wage growth to 2.9% for the year and the highest level since before the recession.

Gold prices were in positive territory in London on the morning of Monday January 9, recovering slightly from last week’s drop.

The spot gold price was recently quoted at $1,176.20/1,176.50 per oz, up $3.40 on the previous close. Trade has ranged from $1,172.50 to $1,178.75. Gold prices edged up in a technical rebound on Monday after one-month highs hit last week were undercut by the prospects of more interest rate hikes from the US Federal Reserve.

US employment increased less than expected in December but a rebound in wages pointed to sustained labour market momentum that sets up the economy for stronger growth and the prospect of further interest rate increases this year.

Chicago Federal Reserve President Charles Evans said on Friday the central bank could raise interest rates three times this year, faster than he had expected just a few months ago.

Evans and other regional Fed presidents are scheduled to speak this week, and the outlook for U.S. rates may become even clearer when Chair Janet Yellen appears at a webcast town hall meeting with educators on Thursday.

Expectations of US interest rate hikes lowers demand for the non-interest-paying bullion.
Apart from a rate hike the most discussed r rather the most awaited topic currently is the fiscal stimulus that Trump is promising and, of course, inflation.

Despite the rebound in the dollar, gold prices are holding up well – all thanks to the safe haven move by investors, just ahead of the shift in US administration.

By the end of 2016 or rather post the 2016 US election, confidence in the global markets was running high thus propelling gold to lose its safe haven appeal. But 2017 has lot of uncertainties and surprises to unfold for gold which will once again get into the investors basket keeping in the mind its appeal as a safe haven asset in times of global uncertainties.

In the week ahead, investors will be looking ahead to US economic reports, particularly Friday’s retail sales figures for December. Investors will also be watching an appearance by Fed Chair Janet Yellen on Thursday and speeches by a handful of other Fed officials during the week, as well as President-elect Donald Trump on Wednesday for a press conference.

Now investors await the upcoming inauguration of President-elect Donald Trump to see what the volatile leader will implement once in office.

GOLD CRASHES BUT LANDS SAFELY: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Gold prices have rallied 31.4 percent since the December low at $1,046.40. Safe-haven demand increased due to the following factors:

• The US Federal Reserve proposed in December four rate increases in 2016 but at best it might deliver just one rise before the end of the year
• Its inverse relationship with the dollar index has allowed gold to climb
• The growing number of negative-yielding sovereign bonds has made safe-haven assets that bear no yield much more appealing
• Pro-long utilisation of easy monetary policies by global central banks has eroded the value of paper money
• Speculative funds as well as ETF investors have flocked into gold in search of yield

Though 2016 has been one of the best performing years for gold since 2012 the yellow metal registered its biggest daily drop in three years on last Tuesday and extended losses in the previous session after forecast-beating U.S. manufacturing data and comments from Fed officials saying there was a strong case for raising rates.

Gold fell for the eighth straight session on Thursday, slipping to a four-month low, pressured by a stronger dollar after U.S. weekly jobless claims fell and ahead of key data that could put the Federal Reserve on track to raise interest rates this year.

Gold fell for a ninth straight session on Friday on a stronger dollar ahead of key U.S. jobs data and the metal was headed for its worst weekly dip in over three years on increased expectations of a Federal Reserve rate rise by year end.

Initial claims for state unemployment benefits unexpectedly declined by 5,000 to a seasonally adjusted 249,000 for the week to Oct. 1. The U.S. dollar .DXY rose to the highest in more than two months against a basket of currencies as the data reinforced the view that the Fed would raise rates at the end of the year

This declined gold prices drastically but by the end of Friday gold futures staged a modest recovery amidst all these concerns.

Though the unemployment benefits declined, a slow growth rate was recorded for the third straight month in September. Gold prices got an initial boost from this.

In Europe, the European Central Bank (ECB) intends to push on with its aggressive stimulus policy of negative interest rates and massive bond buying until it is happy with the outlook for euro zone inflation, senior officials said. ECB Vice President Vitor Constancio said a Bloomberg report suggesting that there was already consensus among ECB rate setters to reduce the 80 billion euros ($89 billion) monthly bond purchases was mistaken.

The report aggravated a sell-off in gold on Tuesday as the yellow metal fell over three percent to its worst one-day fall since September 2013. 

In the short term, gold prices might remain under selling pressure. While the metal could consolidate lower and put the bulls to the test, it remains to be seen how long or deep the consolidation process will be. But we remain friendly towards gold – our medium-to-long-term view remains bullish and we could see the metal seeking a strong technical support to rebound into.

But there are chances that gold might trade sideways in the short term keeping in mind the following factors-

• Strained projected longs show that this trade is very much overcrowded. With no fresh buyers, the path of least resistance is downward
• Profit-taking could be a theme and, should panic ensue, panic selling could escalate as speculators and ETF investors are sitting on large unrealised profits
• The bulls’ bounciness has not really been tested and a mild correction/pullback should do the overall bull structure a lot of benefit
• Physical demand has been subdued due to high future prices – the current rally has not had the backing of strong physical up-take
• The Fed has armed its policymakers to prepare the market with combative messages that the US economy is primed for a 25-basis-point-rate rise before the end of 2016

These put a limitation to the bullish trend for gold. Nonetheless as we approach towards the last quarter of 2016 we all hope that it ends on a similar note as its beginning.

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:

"Volatile Markets: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2016/10/volatile-markets-rsbl.html

GOLD- BUY AND HOLD: RSBL

 by Mr. Prithviraj Kothari, MD, RSBL

Bullion has rallied 26 percent in 2016, recovering from three years of losses, as low or negative interest rates have strengthened demand. Political uncertainty has also played a part, with the U.K.’s vote to quit the European Union spurring haven demand. Forecasters including Singapore-based DBS Group Holdings Ltd. have said that the U.S. contest may buttress prices amid concern about the possible implications of a Trump presidency.

Gold may be in for a bumpy ride in the final quarter as Republican candidate Donald Trump now has a 40 percent chance of winning the presidential election and investors will be preparing for the possibility of higher U.S. interest rates, according to Citigroup Inc. A probable victory of Donald Trump increases the chances of a single U.S. hike by the end of 2016.

But if it happens otherwise, then gold prices are likely to steady during 25-29 September after the US Federal Reserve decided to leave interest rates unchanged, according to analysts. 

Bullion has been provoked from inertia after Fed rate concerns had helped wipe out gains for the quarter.

There is once again an inflow of capital in the market as low borrowing costs in the U.S. and economic stimulus by central banks from Japan to Europe drive demand for the precious metal as a store of value.

Over the previous week, gold achieved the best performance since July 2016 with a 2.4% rise, while the US dollar index recoded the worst performance, reaching 95.472 against a basket of currencies.

The precious metal is heading for the biggest weekly advance since July after U.S. central bankers opted to leave interest rates unchanged while reining in their outlook for future increases.

Gold prices edged lower on Friday, but notched the strongest weekly advance in almost two months after the Federal Reserve held off on raising interest rates and scaled back the number of rate hikes it expects next year.

This has once again pushed gold prices upwards and traders are no into the buy-and-hold mode for gold.

The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.

Meanwhile, investors will be focusing on a series of important events lined up this week that play a pivotal role in influencing gold prices.

• A pair of speeches from European Central Bank President Mario Draghi is to testify before the Committee on Economic and Monetary Affairs of European Parliament, in Brussels.
• For fresh hints on whether the ECB will step up monetary stimulus in the coming months to boost inflation and prop up the economy.
• Speech by Bank of Japan Governor Haruhiko Kuroda will be eyed in wake of last week's decision by the BOJ to modify its policy framework
• Focus will also be maintained on the first U.S. presidential debate on Monday between Democratic nominee Hillary Clinton and Republican hopeful Donald Trump
• Other speeches to be given by

                -Swiss National Bank Chairman Thomas Jordan

                -Bank of Canada Governor Stephen Poloz

                -Federal Reserve Vice Chair Stanley Fischer

                -BoJ Governor Haruhiko Kuroda is to speak in Tokyo.

• U.S. is to release data on new home sales, private sector data on consumer confidence, publish data on durable goods orders, to publish final figures on second quarter growth
• Fed Chair Janet Yellen is scheduled to testify before the House Financial Services Committee on regulation and supervision, while St. Louis Fed chief James Bullard is to speak in St. Louis.
• The Bank of Japan's big policy review is likely to see more QE and negative rates in the long run.
• Germany is to publish preliminary inflation data and a report on unemployment change.
• Japan is to release data on inflation and household spending.
• China is to publish its Caixin manufacturing index.
• Germany is to release data on retail sales.
• The U.K. is to report on the current account and publish revised data on second quarter growth.
• The euro zone is to release preliminary data on consumer inflation.
• Canada is to publish data on economic growth.
• The U.S. is to round up the week with data on personal income and spending, a report on business activity in the Chicago region and revised data on consumer sentiment.

Now  that series of events are scheduled for the week we expects markets player to be alert and markets to be volatile.

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:
"BULLISH SENTIMENTS FOR GOLD: RSBL
http://riddisiddhibullionsltd.blogspot.in/2016/09/bullish-sentiments-for-gold-rsbl.html