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.

DISAPPOINTING WEEK FOR GOLD: RSBL

                                                                                     By Mr. Prithviraj Kothari, MD, RSBL

 

Gold has always been considered a commodity and a currency. But currently it has lost its appeal as both. At present it is not sought after in either form.

Investors are selling the metal from gold-backed funds at the fastest pace in four months. Holdings in exchange-traded products declined 17.6 metric tons this week to the lowest since 2009, data compiled by Bloomberg show.

This year gold has plunged 8.3 percent. Gold’s appeal has been curbed due to high borrowing costs. This in turn doesn’t pay interest or generate yields like other current income generating assets including equities. Moreover, a projection of an interest rate hike in September is influencing gold in losing its sheen.

A strong dollar and expectations that the US Federal Reserve will hike their interest rates by the end of the year triggered selling pressure on gold and took prices to their lowest point since April 2010. The US greenback rallied to a three-month high following comment from the Fed Chairperson last week, which eased gold’s appeal as a safe haven. Huge selloffs witnessed in Chinese futures market and breaking the key technical support of $1130 has ignited liquidation.

Earlier, spot gold tumbled to a fresh five year low of $1,077.50. 

The gold market has some pretty big hurdles to cross as prices hit fresh five-year lows early Friday. Although a late-day rally helped push prices back to around $1,100 an ounce and cut gold’s loss to only around 3% from Monday. Gold prices bounced back after touching a 5-year low earlier in the trading session as the dollar flattened on poor US housing data.

The gold price recovered from its earlier lows during Friday sessions, but sentiment surrounding the yellow metal remained poor as it continued to trade under $1,100 per ounce.
Spot gold was last at $1,082.90/1,083.70, but off the fresh five year lows it hit earlier when gold tumbled to just $1,077.50.

               

But there many analysts in the market who still believe that gold prices will rise. On the other side there are some who believe that gold will no longer be accepted as a commodity or a currency.
The current volatility has created new waves in the market that has disowned gold from many investors list. Let’s view the reasons behind the bull v/s bear sentiment.

This week’s volatility sparked as we saw important data coming in from various economies
U.S. - better-than-expected US jobs data sparked the move lower. After an optimistic US weekly unemployment reading was released, market participants wondered how that would affect next week’s Federal Open Market Committee (FOMC) meeting. Further hints that the Fed is on track for a September rate hike could present downside risks for gold especially given current momentum.

China- Chinese Caixin Flash China General Manufacturing PMI came out at 48.2 against a forecast of 49.8. The number was below the psychologically important 50 level for the first time in 15 months. This created disappointment in the market for gold.

Eurozone- in the Eurozone, EU flash services number disappointed at 53.8, though the manufacturing number was as expected at 53.8. EU flashes services number disappointed at 53.8, though the manufacturing number was as expected at 53.8.

Although there is improving market sentiment among some analysts who say gold is oversold and are expecting to see a modest technical rally, there is still a strong bearish undertone among retail investors.

• Gold has fallen by 7.9 percent year-to-date compared with base metals, which in aggregate are down 15.6 percent and energy commodities which in aggregate are down 9.7 percent
• Even though gold is down this year, it remains a relative outperformer against the bulk of commodities
• Expectations that further data coming in from US maybe under expectations, which again sends positive signals for gold.

More volatility is likely next week as the market will switch its attention to the US FOMC meeting.


 Next week, the focus will be on the FOMC meeting – further hints that the Fed is on track for a September rate hike could present downside risks for gold especially given current momentum.
Investors are bailing on gold on expectations the Federal Reserve will soon raise interest rates as the economy strengthens.
All eyes will be on the Federal Reserve, the U.S. dollar and economic data next week; and, according to analysts, any weakness could be positive for the gold market

- Previous blog -
"Gold Keeping Investors Perplexed: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/07/gold-keeping-investors-perplexed-rsbl.html

GOLD KEEPING INVESTORS PERPLEXED: RSBL

                                                               By Mr. Prithviraj Kothari, MD, RSBL

The gold market is preparing to end its fourth consecutive week in negative territory, as prices dropped to a session low at $1,129.60 an ounce, its lowest level since April 2010.

Gold prices remained under pressure after touching a four month low on Friday, as the dollar tumbled against the euro on signs of renewed optimism that Greece may secure fresh funding from its’ European creditors.

With regard to the Greek financial crisis and at the time of writing, after more than 17 hours of negotiations, Greece reached a deal with its European creditors on Monday, pledging stringent austerity to avoid an exit from the euro.
Let’s have a detailed look at what exactly the agreement states.

This agreement gives Greece a chance to obtain its third international bailout in 5 years. (A compendium of as much as 86 billion euros). Moreover it facilitates easier repayment terms on some of its existing debt of more than €300 billion and a short-term economic stimulus plan
But, it will require Greece to accept a wide array of measures, including pension cuts and tax increases, and effectively subject itself to intensive international oversight in order to qualify for the aid.

While the summit agreement averted a worst-case outcome for Greece, it only established the basis for negotiations on an aid package, which would also include 25 billion euros to recapitalize its weakened financial system.

With Greece running out of money and its banks shut the past two weeks, the summit was billed as its last chance to stay in the euro. Greece has been in financial limbo since the government missed a payment to the International Monetary Fund and allowed its second rescue package to lapse on June 30.

Apart from the Greece crisis, there was a vague picture that was put across by Fed Chair Janet Yellen on the interest rate hike.
On Thursday, she said the U.S. labor market had moved to a more normal state, a reason why the central bank is likely to raise short-term interest rates later this year. 

Analysts state that the biggest factor currently influencing gold prices is an expectation of rise in U.S interest rates. Wednesday and Thursday, Federal Reserve Chair Janet Yellen testified before Congress and reiterated that the Federal Open Market Committee feels it would be appropriate to raise interest rates later this year.

“Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy,” stated Federal Reserve Chair Janet Yellen in a speech on Friday to the City Club of Cleveland.  She recommended that an interest rate hike may come before the end of the year. She further said “I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step.”

By the first quarter of 2015, there was a string belief in the market that a rate hike would be happen in June, given the positive economic reports from U.S. However, the general consensus seems to be that the Fed will delay any rate hikes until January 2016, though many doubt it will take that long.

Although most economists had expected that the US central bank would raise interest rates as early as June and then September, an increasing number of analysts and traders doubt any rate hikes will happen until January 2016.

What came as a surprise or I should say rather say a “shock” to the bullion market was the disclosure by  China of an increase in its official gold holdings for the first time in 6 years.  
China last reported a figure of 1,054 tonnes in April 2009, and now says it sits at 1,658 tonnes today – an increase of 57%. The central bank’s gold holdings make it the fifth biggest gold reserve in the world, surpassing Russia.

Gold prices didn’t move up on the news rather the metal sold off, hitting a fresh 5-year low during the session.

After a broad- based commodity sell-off on Tuesday, which saw the price of gold fall more than 2% hitting a four month low of $1,145 an ounce, the price of the yellow metal ended up on the week to settle at $1162.80 per ounce.

The sell-off last Tuesday was precipitated by the collapse of Chinese equities. AndA, since China is the world’s biggest importer of raw commodities, weaker growth expectations is spooking the markets and there seems to be spillover effect into precious metals.
Once again, investors remain perplexed about the price action of gold, especially after Greece defaulted on its debt owed to the International Monetary Fund and imposed bank closures and capital controls amid its debt crisis.

But, it is unlikely that the price of the yellow metal will remain suppressed for too long as global demand for gold remains strong despite the recent price dip in US dollar terms.




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 Directionless"

http://riddisiddhibullionsltd.blogspot.in/2015/07/gold-directionless-rsbl.html

WISHING EVERYONE A HAPPY, COLOURFUL AND SAFE HOLI

GOLD PERPLEXED

 - By Mr. Prithviraj Kothari,MD,RSBL

Gold this week was giving confused or rather mixed behavioral patterns as it was being pulled between the bullish and bearish forces.

On Thursday, gold ended at $1,220.70 an ounce, up $1.10 or 0.1 percent, on a weak dollar and some disappointing economic data from the U.S. with retail sales dropping more than expected in January and first-time unemployment benefit claims rising more than anticipated last week.
Though gold was up on Friday, followed by weak US economic data, for the week gold was down 0.6%.

Let’s analyze the bullish and bearish factors that were responsible for this wavelike movement in gold-

BULLISH

Weak US Economic data-  Following Thursday’s reaction, gold was up for a second straight session in Friday.
Gold displayed the behavior post the release of some key reports from US. In some soft economic news from the U.S., a University of Michigan report on Friday showed an unexpected, sharp pullback on its U.S. consumer sentiment index in February, after having reported the index at an eleven-year high in the previous month.

Meanwhile, the Labor Department released a report on Friday showing another steep drop in U.S. import prices in the month of January, attributed largely to falling energy prices.
Additionally, the Labor Department said export prices slumped by 2.0 percent in January following a revised 1.0 percent decrease in December. Export prices had been expected to fall by 0.8 percent compared to the 1.2 percent decline that had been reported for the previous month.

Greece issues- Equity markets were hit by the uncertainty prevailing over Greece’s debt negotiations with its European lenders and its future in the euro zone. This has benefited the bullion markets that were up on Friday as safe haven demand for gold increased.

Greece agreed on Thursday to talk to its creditors about the way out of its international bailout in a political climb-down that could prevent its new leftist-led government running out of money as early as next month.

Increasing gold purchases by official bodies worldwide- Central banks were net buyers of gold for the fifth straight year in 2014, with purchases nearing a 50-year high, in the face of growing geopolitical risk. According to a report released Thursday by the World Gold Council in London, central banks' net purchases of gold came to 477 tons in 2014, up 17% on the year and the second-highest figure ( after 2012) since data were first kept 50 years ago.
.
Other official bodies worldwide namely Russia's Central Bank (purchases exceeding sales by 173 tons ), Iraq’s Central Bank (added 48 tons to its stocks)  also hoarded gold. Official bodies have been net buyers of gold since 2010, when the euro crisis struck. Increasing volatility in the foreign exchange market is stimulating worldwide demand for gold.

India's consumer demand slid 14% to 842.7 tons, as the country raised import duties on gold in hopes of closing its growing current account deficit. In spite of the decline, India returned to the top spot as the world's biggest consumer as the former leader China’s demand for gold slide 38%.

USD-  Gold was firmly supported this week by a frail US dollar. The dollar trended lower against some select currencies after some soft economic data from the U.S. A weakening dollar supported gold by making the commodity priced in the greenback cheaper for holders of other currencies.

French Economic Report- The statistical office Insee reported on Friday that the French economic growth slowed as expected in the 4th quarter. France's gross domestic product rose 0.1 percent sequentially, in line with forecast, but slower than third quarter's 0.3 percent expansion



BEARISH

US interest Rate Hike-  Gold held above a five-week low on Friday amid a weaker dollar and uncertainty over debt-laden Greece, but the safe-haven metal was set to close down for a third straight week on expectations of higher U.S. interest rates.

Euro zone Data- Apart from the Fed’s anticipated interest rate hike, upbeat economic news from the Eurozone has weighed on gold prices all week. Helped by growth in Germany, the combined gross domestic product of the Eurozone was up 0.3% sequentially in the fourth quarter.

Germany’s Economic Data- Germany's economic growth accelerated more-than-expected on domestic spending and exports in the fourth quarter, while investment dragged expansion in France.
German gross domestic product advanced 0.7 percent sequentially- this was the fastest growth in three quarters and also exceeded a 0.3 percent rise forecast by economists.

 SPDR Gold trust- Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged down to 771.51 tons on Friday, from its previous close of 773.31 tons.


 Summing it up, markets worldwide await the interest rate hike by the Federal Reserve which is expected to happen sometime this year. Reacting to this, the outlook for dollar remains upbeat despite the recent losses.

Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could hurt demand for bullion, a non-interest-bearing asset.

TRADE RANGE-

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1211- 1245 an ounce	Rs.26,500- Rs.28,000 per 10gm
SILVER	$16.55- $18.00 an ounce	Rs.37,000- Rs.40,000 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 -
"Trade Range For Gold Remains Tight"

http://riddisiddhibullionsltd.blogspot.in/2015/02/trade-range-for-gold-remains-tight.html

ESCALATING TENSIONS.....ESCALATING PRICES!!!!

by Mr. Prithviraj Kothari, MD, RSBL

In the past week gold and silver dropped drastically. Even the ongoing tensions in Russia and Israel could not provide support to gold. US laying sanctions along with European counter parts on Russia hasn't proven that effective till now whereas the cease fire process between Israel and Hamas group has gone for a toss.

It is very difficult to list "a" particular reason for fall in gold prices. Rise and decline are both influenced by a variety of factors. 

CHINA: 

China has been one of the key drivers of gold in recent years, but now there is word that China may be increasingly less important to the gold story.

While the U.S. economy recovers, China’s demand for gold plummeted in the first six months of 2014. This helped to allow gold to fall back under the $1,300 per ounce mark on Thursday, after having been up more than 8% so far in 2014. Demand in China for gold was down by a whopping 62% for gold bars, and gold coin demand was also down by a sharp 44%.

China announced gold consumption figures for the first half of 2014. The China Gold Association announced that they fell to 569.45 tons as demand for gold bars declined 62 % to 105.58 tons, the world’s largest consumer said. Gold coins and other uses of gold dropped 44 % to 10.95 tons, while use in jewellery rose 11 % to 426.17 tons and industrial use climbed 11 % to 26.75 tons.

Last year was a record and China and the nation’s consumers are focusing on other internal and external issues rather than gold. Still, this drop in demand is much more than many industry observers might have assumed.

US ECONOMY:
After China it was key US economic indicators that continued to pressurize gold.

The number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years last week, suggesting the labour market recovery was gaining traction. The belief that the US economy is on the path of recovery pulled gold prices down. 

Geo-political tensions: 
Escalating geopolitical tensions have induced support to Gold prices. 

The U.S. stated late Thursday that Russian troops or pro-Russia rebels are shooting artillery shells at Ukraine targets from within Russia’s border. Russian President Vladimir is facing more pressure to expedite the investigation into the crash of a Malaysian passenger on July 17 in Ukraine.

Meantime, the Israel-Hamas fighting continued to be intense. Gaza authorities said Israeli forces shelled a shelter at a U.N.-run school on Thursday, killing at least 15 people. Fighting this month in Gaza has killed more than 800 Palestinians and 35 Israelis. 

Ukraine and Russia traded accusations of cross-border shelling as tensions between the ex-Soviet neighbors intensified. 

The growing tensions and havoc on Eastern Europe and the Middle East this week has boosted demand for safe haven assets liked Gold. 

Spot gold was up 0.7 percent at 1,301.81 an ounce, after losing nearly 1 percent on Thursday, when it hit its lowest since June 19 at $1,287.46. Gold rose on Friday, re-bouncing from the previous session's drop to a one-month low, as heightened tensions between Russia and the West over Ukraine and situation of Gaza not getting better prompted speculators to buy back their bearish bets ahead of the weekend.

RUSSIA AND TURKEY:  
Gold holdings in Russia's and Turkeys bullion reserves increased in June as both countries lifted their reserves.

Russia, the world's fifth-largest bullion holder after the United States, Germany, Italy and France, increased its gold holdings by 16.8 tonnes to 1,094.8 tonnes in June, the IMF's International Financial Statistics report showed.

Turkey, the world's 12th-largest nation in terms of gold ownership, raised its precious metal by 9.9 tonnes to 512.9 tonnes for the month. It counts gold held on deposit with it by commercial banks as part of the central bank's bullion holdings.

THE BANK ESPIRITO SANTO- This crisis has been contagious for the world. When the world of electronic finance catches the flu, the true nature is all systems fail. One of Portugal's largest banks, Espirito Santo, sent waves through the financial system when we learned they would default on a payment. And they have been fighting against bankruptcy ever since.

Next week, will be a week to watch. 

• Comex expiry for Gold contracts on 28th July.
• 2nd Quarter Advance GDP release on Wednesday morning
• Wednesday afternoon we will hear the results of a two day FOMC meeting. 
• The Non-Farm Payrolls Report for July on Friday August 1. 
• The Chicago PMI, Michigan Sentiment, and the ISM Index
• Geo political tensions.

Lots more in the basket and lots of surprises for precious metals. These factors will surely influence gold prices...what we need to see is HOW?

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1292-$1334 an ounce	Rs.27,700-Rs.28,700 per 10 gram
SILVER	$20.15- $21.50 an ounce	Rs.43,600-Rs.46,000 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 - "Gold and Silver On A  Swing"
http://www.riddisiddhibullionsltd.blogspot.in/2014/07/gold-and-silver-on-swing.html