Brussels explosion and Gold's Safe haven appeal: RSBL

                                                              By Mr. Prithviraj Kothari, MD, RSBL

As I was about to publish this blog, Brussels was rocked by multiple explosions that left many dead and wounded. My heartfelt condolences to their families in these challenging times of despair! 

Gold is known for its safe haven appeal and the same has been proven once again. A quick rise of nearly US$20 proved that traders and investors would flock behind Gold to protect themselves from unknown strikes and calamities. 

Hourly price rise of Gold_220316 - RSBL SPOT terminal

Moreover since the Global downturn, the precious metal has risen by nearly 13-month high.

I did mention in my last blog that I do expect some corrections before the next up move and we all witnessed the same before the FED meeting. The FED meeting on Wednesday did conclude that the global risks pose a threat to the US economic recovery.

The U.S. central bank held interest rates steady on Wednesday and indicated it would tighten policy this year, but fresh projections offered by the Fed showed policymakers expect two quarter-point increases by year-end, half the number forecast in December. Expectations that the Fed would raise rates steadily this year had faded since the bank's initial hike in December, as concerns about global growth roiled financial markets.

It decided to scale back the number of planned rate rises this year to two from four, which initially spurred the precious metal to a one-week high while bond yields and the dollar fell and equities made up some lost ground.

Spot gold was down 0.31 percent at $1,253.99 an ounce during Fridays trading hours though the yellow metal closed on a positive side and was up around 0.4 percent on the week. Gold edged down on Friday, as the dollar steadied above a five-month low, but the metal remained on track for a weekly gain after the Federal Reserve scaled down rate hike expectations.

Inflation is a very important economic number that the FED is watching closely. Until it is below their target of 2%, there won’t be much room for FED with the rate hike policy. Unemployment, according to FED is back on track. 

Commitment of Traders report that was realized on Friday, showed Gold and Silver ETFs have seen continued interest and strong buying has been the trend. Gold holdings increased by 915’000 ounces in just two days, while Silver added 3 Mio. ounces as per the report.

With the Easter holiday around the corner, buying interest would mute from here on until further developments on the Brussels’ incidence. 

A support of $1230 and a resistance of $1270 do play strong price levels for Gold’s next move while Silver price levels would be supported by $15.20 and a key resistance of $16.70.

Thank You!

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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 -
"Renewed confidence in Gold and Silver: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/03/renewed-confidence-in-gold-and-silver.html

Photo courtesy: Google search

AMBIGUITY FOR GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

As we all know, lately gold has been majorly influenced by any data released from the Fed regarding its interest rate.

Gold prices dropped in Asia on Thursday as China markets returned from holidays and investors stake positions ahead of Fed minutes later in the day.

Trading activity had become more muted as the September Federal Open Market Committee (FOMC) meeting minutes approached.

Investors awaited the release of the minutes from the Fed's September meeting on Thursday for further hints on whether the U.S. central bank could raise short-term interest rates before the end of the year.

A combination of a weakening US economy and sowing down Chinese one, led to a delay in the rate hike expectation.
Now majority of the market players believe that rate hike won’t come in before March 2016.

Gold prices climbed on Friday morning after the release of minutes of the Federal Reserve’s September meeting raised speculation that the US central bank could wait until next year before tightening monetary policy.

Spot gold was last at $1,154/1,154.40 per ounce, up $14.40 on Thursday’s close. Trade has ranged from $1,139.50 to $1,154.60 so far.

The shifting expectations are helping to weaken the U.S. dollar and in turn boosting gold prices. Early in Friday’s session, December gold futures ended up hitting their highest prices since late August and are preparing to end with gains of almost 2% for the week. As of 12:40 p.m. EDT, December gold last traded at $1,158.70 an ounce.


One of the main reasons, apart from soft data, that has delayed the rate hike is the limo inflation in the US. It has prevented the central bank for raising rates from near-zero levels, where they have been since December 2008. 

The FOMC decision not raise the federal funds rate has led a majority of market participants to look at 2016 for a normalization of US monetary policy.

To state the exact month would be quite difficult but it could be around March or June 2016.

The Fed has been locked in an intense debate over the timing of a rate hike with sagging inflation impeding a launch-off.

Interest rates have been at near-zero levels since December 2008 and haven’t increased since 2006.

The other data released along were-

• Weekly unemployment claims came in at 263,000, besting the forecast by 9,000 and under the psychological 300,000 mark.
• September import prices month-over-month fell 0.1 percent, beating the forecast of -0.5 percent
• Wholesale inventories month-over-month were in-line with projections at 0.1 percent 

The FOMC minutes elaborated on its concerns about global markets, particularly the Chinese slowdown.

The September minutes released by the FOMC Thursday evening suggested that policymakers are unlikely to rush to tighten rates amid concerns over a China-led global economic slowdown.

The minutes stated that although US economic data releases generally met market expectations, domestic financial conditions tightened modestly as concerns about prospects for global economic growth, centered on China, prompted an increase in financial market volatility and a deterioration in risk sentiment during the intermeeting period.

Chinese markets reopened after a prolonged holiday as US trading session was the final one before a holiday weekend.

The minutes further stated that although US economic data releases generally met market expectations, domestic financial conditions tightened modestly as concerns about prospects for global economic growth, centered on China, prompted an increase in financial market volatility and a deterioration in risk sentiment during the intermeeting period.

Weak data sees gold prices to be in the positive territory. Moreover, in the Indian markets we see demand for gold to move high as the markets welcome one of  the main gold buying festivals- Dussehra and Diwali.

On the contrary gold prices could move lower next week term as markets have priced in renewed geopolitical turmoil in the Middle East.

Most analysts, though, are bullish on gold as the market is seeing a technical shift. Many expect to see prices retest the August highs at $1,170 an ounce and the 200-day moving average at $1,178.20 an ounce.

Though gold prices are likely to move higher, a stronger equity market could take some momentum away from gold.

When the Fed does start raising rates, something it has not done in nine years, it will eventually mean higher rates for consumer and business borrowers. But Fed officials, including Chair Janet Yellen, have stressed that the rate increases will likely be very gradual, meaning that rates would still remain near historic lows for a while.

Calmness before the big move in Gold and Silver: RSBL

                                          - Mr. Prithviraj Kothari, MD - RSBL

In order to understand why I have given this title for the week's blog, I would like you to have a look at the price movements in the below charts of Gold and Silver:

Gold price range: RSBL SPOT Terminal

Silver price range: RSBL SPOT Terminal

If you see the above 2 charts of the price movements in Gold and Silver for the week (courtesy: RSBL SPOT terminal), you would agree with me that the price movements are identical. I would even look forward to quote it as same. That's how these 2 metals are coupled with each other.

In the third week of May, both the metals hit their key resistance and fell while last week both of them hit their key support and now have stabilized in their month on month trading range.

With the amount of news flow reducing, physical support dying out, these metals are just trying to stay up float. For the last week I saw more news coming from physical demand of these metals:

1. According to BBG, China's net Gold imports from Hong Kong fell for a third month as buyers deferred purchases in anticipation of further price drops and amid increasing government scrutiny of bullion trading. Net inbound shipments dropped to 46.6 metric tons last month from 61.8 tons in March and 65.4 tons a year earlier, according to data compiled by the Hong Kong Census and Statistics Department.

2. Switzerland exported 143.9 tons of gold in April which is 36% less than March. More startling were the exports to China which were down 67% to just 15.1 tons.

Judging from the physical demand shrinkage of the metals, I feel that these prices are not so inspiring for investors to invest in them.

Economic news from US showed:

• GDP figure contracted in Q1, hurt by Frigid winter and a debilitating West coast port strike. 
• The Chicago PMI tumbled in May to 46.2 (53.0 expected), reversing all the gain recorded in April (52.3 April). 
• Initial unemployment claims in the U.S. edged up from 275k to 282k in the week ended May 23 (270k expected).  Despite the latest increase, the level of claims remains extremely low by historical standards which is positive

When it comes to technical levels: US$ 1180 of Gold and US $16.70 acts as a fortress for these metals. Until the prices do not breach these levels, I feel that the ongoing range specific price movements is a part of a calm sea which could induce violent storms in no time for the next big move.

Things to watch out for in this week are:
1. News about Greece payments to IMF - All week
2. ISM Non-Manufacturing PMI - Monday
3. ADP Non-Farm Employment Change - Wednesday
4. ECB Press Conference - Wednesday
5. Non Farm Payrolls data - Friday

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1181 - $1238 an ounce	Rs.26,600 - Rs.28,300 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 - Gold prices Fall after hitting key resistance! - RSBL
http://riddisiddhibullionsltd.blogspot.in/2015/05/gold-prices-fall-after-hitting-key.html