DATA- DEPENDENT GOLD

By Mr. Prithviraj Kothari, MD, RSBL

This week gold continued to hover around the levels of $1176.75 and broadly the key trade range for the yellow metal was $1170- $1175 an ounce.

Gold reached a four-month high of $1,192 on Thursday but was unable to maintain this level, because the US dollar was driven up by higher than expected US inflation figures for September, which in turn put pressure on gold.

Fed has set inflation target for years as it’s a part of the dual-mandate along with full employment. But Inflation has failed to meet the Fed’s target.

Persistently low inflation has led some Fed members to remain dovish on the apt timing for a stabilization of US monetary policy.

At the beginning of the week, Chicago Federal Reserve president Charles Evans said earlier today that he would prefer to wait until 2016 to raise interest rates, citing inflation as a central impediment.

Moreover, Data released on Thursday showed that the US labor market is steadily recovering despite the worrisome September job’s report – weekly unemployment claims came in at 255,000, below the consensus of 269,000.

Apart from this some other important data released through the week were-

• US CPI month-over-month in September met expectations of a 0.2 percent decline

• PPI month-over-month in September dipped 0.5 percent, disappointing market expectations of a 0.2 percent drawdown

• Empire State manufacturing index for October at -11.4 was worse than the expected -7.3

• The Philly Fed manufacturing index at -4.5 missed the -1.8 forecast

• Core retail sales month-over-month in September fell 0.3 percent, below the forecast of -0.1 percent. Retail sales over the same period rose 0.1 percent, just missing the 0.2 percent consensus

•  Labor's Bureau of Labor Statistics (BLS) said its Consumer Price Index fell by 0.2% for the month of September, in line with consensus estimates. A month earlier, the reading fell by 0.1% in August. On a year over year basis, the headline reading is identical to its level 12 months ago

• Core PPI month-over-month last month stood at -0.3 percent, another figure to miss estimates, which were a 0.1 percent uptick

Though the Core CPI was moving in a positive direction from its previous levels of August still it remained under the Fed's preferred gauge of under 1.5%.

The set target for long term inflation by the Fed is likely 2% before it raises its benchmark Federal Funds Rate.

Gold prices eased in Asia on Friday on profit taking on recent gains on a soft. Outlook for U.S. interest rates. On Thursday morning, the U.S. Department of There were signals throughout the report of weakness in the energy sector, restraining inflationary pressures overall.

The spot gold price was last at $1,176/1,176.20 per ounce, down $5.90 on Thursday’s close. 

Jobs data has acquired greater significance after the US Federal Reserve made its approach to the normalization of monetary policy entirely data-dependent.

Gold drifted lower still on Friday morning in Europe after dollar continued to pare earlier losses thanks to better-than-expected US jobs data.

As dissent grows in the Federal Reserve over the appropriate measures for 2015, the dollar has deteriorated to the weakest mark since August 25.

Various Fed members are growing more vocal in their view that the US economy is not ready for a federal funds hike – in direct opposition of Chairwoman Janet Yellen.

Yellen, along with vice chair Stanley Fischer, have said recently that a normalization of US monetary is still a viable option for 2015.

However as per market analysts, the FOMC is not seen lifting rates until March at the earliest.

While the market is once again divided into bearish and bullish supporters, the yellow-metal has found support as the market’s pricing of the next US Federal Reserve rate hike is pushed out.

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-

"Ambiguity For Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/ambiguity-for-gold.html

THIS TIME ITS CHINA V/S U.S.: RSBL

By Mr. Prithviraj Kothari, MD, RSBL

It was China v/s U.S or rather to be precise it was the devaluations of the Yuan v/s the positive economic numbers from U.S.

While one was trying to give the much needed push to gold prices, the other, on the contrary was pulling gold prices down.

Till the middle of the week, gold prices moved upwards and the market was just about to its faith in it. But once the US numbers were out, gold was once again losing its sheen.

Gold got the much needed lift when China roiled global markets by devaluing its currency. Till then gold was travelling on a mostly lower route since mid-June. By the end of the week, however, it appeared the situation was stabilizing, with Chinese authorities on Thursday saying there was no reason for the Yuan to fall further.

In the initial part of the week, Gold prices boosted and the metal regained its safe haven status as news out of China proves to be favorable for gold. The People’s Bank of China surprised markets on Tuesday when it devalued the Yuan against the U.S. dollar for three consecutive days, tumbling the currency by about 3%. 

Gold prices lacked direction on Friday as the People’s Bank of China (PBoC) increased the value of the Yuan while boosting its gold holdings.

The Chinese government released gold holding figures for the second time in recent weeks. The PBoC announced that it bought 19 tonnes of gold last month when prices were at five year lows and Total holdings were at 1,677 tonnes at the end of July, a one percent bump from the previous month.

The gold price continued to slide lower on Thursday afternoon after the dollar strengthened following upbeat US data, and as concerns over China’s economy eased.

Spot gold was last at $1,116/1,116.4 per ounce, down $8.20 on the previous close. Trade has ranged from $1,113.7 to $ 1126.8 so far.

The important numbers coming from the US were as follows-

• PPI month-over-month in July was at 0.2 percent, above the 0.1 percent mark, while Core PPI in July rose 0.3 percent, besting the forecast of 0.1 percent.

• The capacity utilization rate in July was at 78 percent, matching predictions, with industrial production month-over-month in July jumped 0.6 percent, above the consensus of 0.3 percent.

• Preliminary University of Michigan Consumer sentiment in August was 92.9, just off the 93.5 forecast. Preliminary University of Michigan inflation expectations in August were at 2.8 percent, equaling the previous reading.

• The Dow Jones industrial average and S&P were each up 0.3 percent, while the dollar was 0.3 percent stronger at $1.1120 against the euro.

• Core retail sales month-over-month in July was in-line with forecasts at 0.4 percent, while retail sales month-on-month in July matched the consensus at 0.6 percent.

• US weekly unemployment claims were 274,000, near the prediction of 272,000 and the previous reading of 270,000.

The timing of the first rate rise by the Federal Open Market Committee (FOMC) is becoming increasingly important to investors. The FOMC meeting is just over a month away and debate is ongoing whether the Fed should maintain near zero interest rates or raise rates by 25 basis points.

The two main highlights for the coming week are China and the FOMC. While everyone will be on a lookout for any further price-supportive developments out of China or if instead the Federal Open Market Committee says anything to rain on the yellow metal’s parade.

Currently China is proving to be one of the most influential factors for gold prices because the devaluation of their currency sparked interest in gold as a safe haven again and China has reignited the buying in gold.

If the Chinese markets remain more or less stabilized then focus will be shifted on expectations for the FOMC, which holds a policy meeting next month. The Federal funds futures have oscillated lately between factoring in a greater- or smaller-than-50% chance of a tightening in September.

The biggest factor will be Wednesday’s Fed meeting minutes as the minutes are from the July 28-29 meeting, after which there was no news conference.

The picture is expected to get clear on how the Fed is thinking about a potential September rate rise. 

An aggressive sentiment coming out of these minutes will probable pull down gold prices but on the other hand dovish minutes could offer some support

Additionally, traders will keep close tabs on U.S. economic data-

• Monday- The New York Federal Reserve’s Empire State manufacturing

• Tuesday- Housing

• Wednesday- Consumer inflation

• Thursday- jobless claims, the Philadelphia Fed’s business survey and sales of existing homes

 
The focus continues to be on what the Fed is going to do at its September meeting. It’s going to be the fundamental factor across the board as far as commodity markets are concerned, particularly gold.

Apart from this meeting, traders and analysts will also keep a watch on any comments coming out of the European Central Bank, in case policy-makers should hint at increased bond buying known as quantitative easing. Further QE could provide further support to gold prices. 

Given this picture, as of now majority of the market players expect gold prices to fare better in the week to come.

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 -

"Gold To Be Pressured Downwards: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/08/gold-to-be-pressured-downwards-rsbl.html

Gold prices Fall after hitting key resistance! - RSBL

                                                               - Mr. Prithviraj Kothari, MD - RSBL

Another buying opportunity or it is a one such half hearted rally? A question that is pushing investors away from the precious metals complex. I would do my best to give you an idea by starting a gist of things that took place over the week.

The above picture depicts the Gold price range for the entire week (Picture taken from RSBL SPOT terminal). The week started off from where it closed, at a doorstep of the key resistance level US$1238. In almost all my previous blogs have emphasized on this particular level, that if broken, we can expect some change in trend. But it didn't. Gold continues to oscillate around USD $1200 with initial support sitting around this level.

Last week did show us, some spectacular movement in Silver where it broke key levels to enter in the range of US$17. Like Gold it did take a beating and US$17 does act as a short term base for the Silver metal. (image taken from RSBL SPOT terminal).


Key levels do make a lot of difference when the metal prices try to change a trend. But what caused this sudden drop:

1. U.S. housing starts jumped to their highest level in nearly 7 and a half years in April and building permits soared, providing hopeful signs for US economy gaining grounds over a dismal first quarter.

2. U.S. CPI data for April showed a +0.1% increase (expected: 0.1%) to mark the third monthly increase. The core CPI too read 0.3% (expected 0.2%), the largest increase since 3-4 years.

3. One of the most prominent news coming out of the week was from Federal Reserve Chair Janet Yellen. While speaking at the Greater Providence Chamber of Commerce on Friday, she addressed, ".... If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the Federal Funds target rate." A step to increase the rate hike is inversely proportional to gold price rise.


That goes without saying that U.S. data is highly influential for movements in precious metal complex prices as the other data that could have given a better support, weren't that influential:

1.  According to the latest CFTC data, hedge funds and money managers have hiked their net long silver stance to a near 10 month high and boosted their bullish gold bets to its biggest since March (+123k contracts, +77k prior week) for the week up to May 19.

2.  Greece cannot make debt repayments to the International Monetary Fund (IMF) next month unless it achieves a deal with creditors, its interior minister said on Sunday, the most explicit remarks yet from Athens about the likelihood of default if talks fail. European leaders told Greece on Friday to return to the negotiating table for "intensive work" to wrap up a reform agreement before cash runs out, sidestepping Athens' demand for a comprehensive, long-term solution to its troubles.

3. Iraqi forces recaptured territory from advancing Islamic State militants near the recently-fallen city of Ramadion Sunday, while in Syria the government said the Islamists had killed hundreds of people since capturing the town of Palmyra.

4. Russia's gold reserves rose to 40.1 million troy ounces as of May 1 compared with 39.8 million ounces a month earlier, the central bank said on Wednesday.

On the domestic front,  India could allow individuals deposit a minimum of 30 grams of gold with banks in return for interest payments to help monetize large quantities of the metal lying with households, a step that is aimed at cutting expensive imports. India released a draft documents of gold monetization plan on Tuesday.


Looking at the price jump from Silver, it does look a strong price comeback for me. I have always asked my readers to be invested in Silver. A metal that has multiple functionality.

With the FED meeting round the corner at Greek debt payment on June 5th, a lot more lies for the price movements in precious metals. Still the range play continues and strong conviction from Bears and Bulls is lacking.

It was a memorial day in US and spring bank holiday in UK, due to which price movements were muted yesterday.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1194 - $1238 an ounce	Rs.26,700 - Rs.28, 500 per 10g
SILVER	$16.70 - $18.00 an ounce	Rs.38,500 - Rs.42,000 per kg

The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog - RSBL: GOLD CONTINUES TO RISE!
http://riddisiddhibullionsltd.blogspot.in/2015/05/rsbl-gold-continues-to-rise_17.html