Geopolitical cover for GOLD!

                                                        - Mr. Prithviraj Kothari, MD, RSBL

Till 2012, gold was considered as the highest return generating asset in its class. From December 2008 - June 2011 bullion climbed 70 per cent as the Fed bought debt and held borrowing costs near zero percent to spur economic growth after the recession. Prices ended the 12-year bull run last year as inflation remained low and on concern that the U.S. central bank would slow the pace of monetary stimulus.

Lately gold has been abandoned by many as investors seem to be captivated by other assets like equities. The equity market continues to attract money as people expect that the economy will improve further.

Though gold has risen lately, many investors believe that this price rise won't last for long and any easing of the geopolitical tension would bring gold prices down. It was these tensions that gave gold the all needed boost at the beginning of the week. Gold prices jumped 6.1 percent for the month, while recording a gain of 3 percent for the quarter ended June.

Gold was up on Monday and climbed to a three-month high on Tuesday as a softer dollar and escalating violence in Iraq increased the metal's appeal, boosting inflows into the top bullion-backed fund. Spot gold climbed to $1,332.10 an ounce, its highest since March 24 during the trading hours.

Post the release of employment data, gold tumbled as the nonfarm payrolls data was much stronger than expected. This data was released on Thursday as Friday was a holiday. The U.S. Labor Department said the U.S. added 288,000 jobs in June, with the unemployment rate falling to almost a six-year low of 6.1%. The headline figure was sharply above the consensus estimate of slightly more than 200,000 new jobs, while the jobless rate fell 0.2 basis point from last month’s 6.3%.

In addition, the government upwardly revised the May job figure to 224,000 from 217,000 and April job gains to 304,000 from 282,000.Wage gains remained as expected, up 0.2%, and the labour-force participation rate was also flat at 62.8%. US jobs data released Thursday supplied evidence that the country's economy is growing, with the unemployment rate nearing a six-year low.

As U.S. markets were closed in recognition of Independence Day, investors will have to wait until after the holiday long weekend to determine the full impact of Thursday’s much better-than-expected nonfarm payrolls report.

On Friday, gold prices rose as they were reinforced by mixed European shares and tensions in Iraq and Ukraine. But data indicating that the US economy is strengthening may soon reduce demand for the precious metal.

The yellow metal has benefited from its traditional haven status in recent months. However, when geopolitical tensions ease, less-committed investors are sure to exit; and one can expect gold to return to its downward trajectory witnessed since April last year.

Moreover, demand from two of the worlds largest consumers of gold has dampened in the recent months with slowdown in Chinese imports as well as continuing lacklustre performance by India. Customs duty of 10 per cent ad valorem and export obligation (80:20 scheme) have discouraged gold imports into India.

Meanwhile, a Bloomberg report indicated gold shipments into India may have plunged 77 percent in the first half amid government restrictions such as higher taxes on bullion imports.

However Modi’s government has hinted that it will relax some of the restrictions. Loosening those restrictions could help to revive Indian gold demand and further push gold prices higher. The next big event on the domestic front is the First Budget of the new government to go live on 10th July, 2014.

Meanwhile we expect gold and silver to trade in the following prices range:

METAL	INTERNATIONAL	DOMESTIC - RSBL BENCHMARK PRICE
GOLD	$1291 - $1345  an ounce	INR 27,500 - INR 29,500  per 10 gm
SILVER	$20.20 - $22.00  an ounce	INR 43,000 - INR 47,500  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 - "Halfway through 2014...But where is gold heading for??"

http://www.riddisiddhibullionsltd.blogspot.in/2014/06/half-way-through-2014but-where-is-gold.html

OUR LOVE FOR GOLD

                                                     - by Mr. Prithviraj Kothari, MD, RSBL

Gold is the world's favourite metal and being an Indian, I have always been brought up with the principle that gold is one such metal the "HAS" to be a part of regular investments.

Gold in one such unique asset in its class, that  enjoys a diverse set of loyal buyers. In fact, I wouldn't be wrong, if I Say that gold has a huge fan following.

• In the west, investors want to spread their risk.
• In 2013, demand for gold from India hit record levels. and the crash in April saw humongous number of buyers stepping into the market to take advantage of this crash. The situation went so out of control that the government brought down the shutters, hiking import duty to 10% and imposing the “80/20 rule” which forces dealers to re-export 20% of any new shipment before taking delivery.
• Meanwhile, China’s gold demand meantime rose faster, finally overtaking the world No.1 and swallowing well over 1,160 tonnes of imports, even while topping the league table of gold mining nations with a further 440 tonnes.

Though the gold fan club is always widening, last year it saw many betrayers.

• It was in April, 2013 that gold had crashed following Cyprus bailout.
• It had been downgraded by many and abandoned too, last year.
• Gold that has always stood proud in its category, for the first time in 13 years; it gave negative returns in 2013. Moreover, it headed for an annual drop of 30 percent. Since reaching a record high at $1,910 an ounce in 2011, it collapsed to a low of $1195 nearly 37% of its value.

And its April 2014, that gold has performed exceptionally well compared to its counterpart. Gold held around 2-1/2-week highs on Friday, heading for its biggest weekly gain in a month on sagging risk appetite and increasing hopes the U.S. Federal Reserve will hold off on raising interest rates as soon as early next year.

Meanwhile, US Secretary of State John Kerry’s commented that if Russia would intervene further in Ukraine then it would target Russia's energy, banking and mining industry. I feel Ukraine story is far from done!

The highly anticipated FOMC minutes were released and markets seemed to be looking for a hint that would have confirmed Janet Yellen’s latest comment from after the March FED meeting, when she made clear that “a considerable time” means about 6 months and that means a rate hike could come as soon as early 2015. But that statement was missing in the minutes. US yields traded lower, stocks jumped up, the US Dollar lost against the board and metal prices continued to rise.

In spite of Janet Yellen making it clear time and again that; decisions will be based on economic reading, I find it crazy that traders are still reacting to potential changes in QE taper and interest rate increases.

Gold continues to roll along in an uncertain market with no clear direction in which assets are moving: US equities, US dollar and the possibility of interest rate hike this year.

Some of the remarkable figures coming in from Asia and other countries were-

DUBAI

In 2013, the value of physical gold traded through Dubai surged to $75 billion compared to $6 billion in 2003, and $70 billion in 2012.  volumes accounted for 40 per cent of the total worldwide trade in 2013. This reinforced Dubai's position as the global gold and precious metals trade hub as stated by Ahmed bin Sulayem, Executive Chairman of Dubai Multi Commodities Centre (DMCC),

CHINA

China saw its gold output increase by 10.6% year on year to 63.2 tons in the first two months of this year, according to statistics released by China Ministry of Industry and Information Technology. In the first two months of this year, gold mines in the country produced 51.7 tons of gold, 10.4% more than in the same period of 2013

INDIA

Gold imports in India are on a recovery mode now, as March imports have been mooted to have doubled to 50t m/m. The decision to permit 5 more private banks to import gold led to this recovery. In fact as the auspicious occasion of Akshaya Tritya is approaching, we see the demand to surge even higher and thus the import figures are expected to rise too.

Keeping the current market trends and price drivers in mind, gold is expected to trade in the range of $1293-$1350 an ounce in the international market and Rs.29,000- Rs.31000 per 10 gram in the domestic market.

On the other hand silver is expected to move in the range of $19.50-$20.55 and Rs.42,000- Rs.46,000 per kg in the international and domestic markets respectively.

Reiterating, I feel buying physical Gold, Silver and Platinum should be on cost averaging basis. It has been a successful strategy since the bull year began, though it would be a bit strange for the investors who started investing in the last couple of years.  I am sure Gold or for that matter any precious metal investments would always give best returns if considered as long term investment options and something that you can bank on in financial instabilities.

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

- Previous article-

"Bad News Proves to Be Good For Gold"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/bad-news-proves-to-be-good-for-gold.html