OPTIMISM FOR GOLD: RSBL

 By Mr. Prithviraj Kothari, MD,RSBL

Those who began to completely disown gold for the past four weeks have now once again been captured by imagination. Gold typically acts as a safe haven – or a hedge – for investors during volatile periods or uncertainty in global markets and it so appears that the precious metal is not quite so useless after all when things get turbulent on the markets.

On July 24, spot gold touched $1,077.50 per ounce, the lowest price since April 2010. Prices remained at that level for a short period before climbing over the past few weeks.

But the tables have turned. Gold prices are preparing to close its second consecutive week in positive territory, showing gains of more than 5% after the market hit a six-week high in overnight activity Friday.

Gold prices surged during Thursday’s US trading session as the multi-year lows seen a month ago have evaporated as short covering boosted the entire precious metal’s complex.

The spot gold price was seen at $1,150.5/1,150.9- around its highest in more than a month.

Trade has ranged from $1,150.3 to $1,168.4 – it’s highest since July 7 – so far.

The past two sessions have seen the yellow-metal jump to the highest price in over a month upon the release of the Federal Open Market Committee (FOMC) July meeting minutes.

Investors read the statement – especially the concern over the slowdown in the Chinese economy – as a dovish tone heading into the oft-discussed September FOMC meeting. Apart from this there were some other factors that contributed to this rally-

Equities- Equities were in retreat once again as Chinese data added to concerns about global economic growth.

Investors looking to rotate out of strong markets are now looking for oversold asset classes, such as gold, to park their profits while corrections are underway. This demand for gold helped push its prices higher as investors shifted focus from equities to the yellow metal.

China- Gold is finally attracting safe-haven demand as concerns over the fallout from China’s devaluation spreads and the market is waking up to the likelihood that emerging market economies are entering another tough time and that could spread to mature economies.

In China, flash manufacturing PMI undershot expectations at 47.1 – below the 50 contraction level. It was the lowest reading since March 2009 and follows the previous poor reading of 48.2.

China’s economic problems are only worsening as recent data showed that China’s manufacturing sector fell to its weakest point in six-and-a-half years.

Many analysts and economists are expecting that continued financial turmoil in China could delay the Federal Reserve from hiking rates as early as September, which would be U.S. dollar negative and gold positive.

U.S. economic data- In a heavy US data day, weekly unemployment claims were at 277,000, near the forecast of 272,000 and holding below the psychological 300,000 mark.

Meanwhile existing home sales in July were at 5.59 million, above the forecast of 5.45 million. The Philly Fed Manufacturing Index in August was at 8.3, besting the 6.9 prediction.

In Wednesday’s US data, CPI in July was up 0.1 percent over the previous month, below the 0.2 percent forecast.

Core CPI – excluding food and energy – was also up 0.1 percent month-over-month in July, again missing the consensus of 0.2 percent.

Over the last few months, various members of the organization have become increasingly hawkish with Federal Reserve chairwoman Janet Yellen expressing a desire to raise rates sometime this year (September), but once again a weak economic report has delayed investor’s expectations.

 Fed Interest Rate Hike-  The July 28-29 FOMC meeting minutes released overnight suggested that the Fed may resist raising rates in September.

However, inflation continues to fall below the Federal Reserve’s target of two percent which has afftcted the delay if a hike which was probable to happen in September.

The minutes of the US Fed’s July meeting showed a committee relatively content with domestic economic activity and labor market progress. The advance in gold prices was largely driven by the dovish Federal Reserve July meeting minutes and as traders scaled back their views on a US interest rate rise in September.

According to the Fed Fund Future, a rate hike in September has been virtually priced out, and a rate hike by year’s end is regarded as only 75 percent probable.

Federal Reserve Chairwoman Janet Yellen has expressed a desire to raise interest rates this calendar year after rates have been at near zero levels since December 2008 which once again set gold prices moving high.

ETF- Meanwhile, inflows in gold ETF holdings accelerated – holdings in funds tracked by Fast Markets have increased to 1,526.70 tonnes.

Greece- In news, rancorous disputes in Greece over an additional bailout and further austerity measures has forced Greek Prime Minister Alexis Tsipras to resign as he called for a snap election next month.

So basically, its lot of uncertainty and turbulence in the world economies that has ignited up the rocket of gold prices and the same is expected to happen in the week to come.

Gold could continue to benefit next week as China’s financial crisis could have more weight on the Federal Reserve’s monetary policy decisions more than domestic economic data, according to some analysts.
Looking ahead, because of gold’s strong gains, optimism is high in the marketplace that this rally will continue in the near-term.

Continued weakness in equity markets, weakness in China and political uncertainty in Greece: all of these have the potential to boost gold higher next week which has recreated bullish sentiments in the market.

Although some economists are expecting U.S. economic data to take a back seat to global financial problems, some of the data that could attract some attention includes July’s durable goods report, housing sales data, and the preliminary reading of U.S. second quarter gross domestic product (GDP) all due for release in the week ahead.

Till then we wait for a new catalyst to push prices higher in the near term.

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 -

"This Time Its China v/s U.S.: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/08/this-time-its-china-vs-us-rsbl.html

ALL NOTIONS TO SEE GOLD AT $800 DESTROYED!!!

                                                                                                             - By Mr. Prithviraj Kothari, MD, RSBL

A few weeks earlier, we saw a lot of noise in the market…but this time it seems that someone left the loudspeakers on!

Well, oil and SNB played the game here.Precious metals showed great volatility- all thanks to the fluctuating oil prices.

Crude oil was highly volatile after a report from Paris based energy agency IEA depicted a likely reduction in Non-OPEC output for 2015 by 350,000 BPD. 

Moreover, gold and silver prices soared in Euro terms after the SNB moves and now many market players are beginning to wonder if a loss of confidence after the Swiss fiasco has started a run on gold? 

Bullion traders said sentiment turned better after gold rallied to the highest since September in global markets as the dollar weakened after Switzerland decoupled its currency to the euro and lowered the deposit rate.

Gold had closed at 1276.50 following a brief intraday break above 1280, its highest level since September 2014. We look to the September 2nd open of 1286 as the next important level of
Resistance, followed by 1300 and 1320. Momentum indicators are increasingly bullish.

Gold regained its safe-haven mantle following a shocking and unforeseen decision by the Swiss Central Bank (SNB) to scrap its cap on the franc’s exchange rate against the euro.


After the SNB- Swiss National Bank dropped the bombshell on the markets Thursday morning, the prices of the precious metals had gone in one direction… UP.  In just two days, the price of gold was up $40 and silver $1.10.

Post this action, gold rose more than 2 percent to a 4 month high in Thursday. This was a result of the move by Switzerland to abandon its three-year cap on the franc sent global shares and bond yields into turmoil. 

Following the Swiss National Bank’s unprecedented move to abandon the franc’s peg to the euro, the country’s currency had appreciated sharply against the U.S. dollar. The surge in the Swiss franc…means it is now the most overvalued of all the developed market (DM) currencies in terms of the deviation of the real effective exchange rate from its 10-year average

The SNB has been under growing pressure to revisit the peg as speculation grows that the European Central Bank could introduce outright money-printing as early as next week, which could see the euro zone flooded with liquidity.
It looks as is the SNB decision has finally destroyed the notion of $800 gold ever again.

Furthermore, a Labor Department report released on Thursday showed that Jobless claims climbed by 19,000 to 316,000 in the week ended Jan. 10, the most since early September, from a revised 297,000 in the prior period.

Adding to it, the gold price climbed on Friday after a lackluster US inflation report had participants readjusting their timetable for the next Federal Reserve rate increase.

In data, the US consumer price index fell 0.4 percent last month, the biggest drop since December 2008, after sliding 0.3 percent in November. It also undershot the -0.3 percent forecast.

This goes directly against the Federals Reserve’s mandate to achieve inflation of around two percent as the reports imply a deflationary trend. Which further means that the fed may probably delay its rate increase as it would want to know that inflation is on track to hit this level before acting?
Additionally, deciding not to reduce stimulus in 2015 would also be consistent with a goal-oriented approach to the employment mandate.
Additionally, Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 717.15 tons on Friday from 707.59 tons from its previous close on Thursday.

Fall in equities and worries over Euro area political and debt issues might continue to help Bullion complex as a whole and mainly the yellow metal.
Next week we could see further volatility as the ECB are set to meet and it is widely expected they will announced a broad-based government bond purchases.
We stay with our moderate positive bias in Gold and advice buying on small dips.




- Previous blog - "Lot of Things To Smile About For Precious Metals"

http://riddisiddhibullionsltd.blogspot.in/2015/01/lots-ofthings-to-smile-about-for.html

LOTS OFTHINGS TO SMILE ABOUT FOR PRECIOUS METALS

                                                                                                      - By Mr. Prithviraj Kothari, MD, RSBL

Though we did see some trading in precious metals on Jan 1st and 2nd, it was the week from 5th-9th Jan that was actually considered the first volatile trading week of 2015.

The main news doing the rounds for the week was from US- minutes of the recent FOMC meeting and the non-farms payroll report.

Apart from the macro reports there were the following financial reports that were out in the week.

• US non-manufacturing PMI, factory orders and trade balance monthly reports.
• Europe, MPC rate
• The EU flash CPI
• Unemployment report,
• GB’s manufacturing PMI
• Germany retail sales
• The French trade balance.
• In China, CPI and trade balance
• And several economic reports from Canada and Australia.

But of all the above mentioned reports, the most influential for gold was the unemployment report.


Gold was seen to have a positive start for the week as it firmed above $1200 an ounce on Tuesday hitting a near three-week high, as tumbling global equities and concerns over Greece's future in the euro zone prompted investors to seek safety in the metal.

The uncertainty behind the euro zone is once again tempting investors to run after gold as a safe haven asset. This risk off sentiment in the markets may help bullion be stable at its recent upswing.

Adding to this we also saw that holding in the world’s largest gold-backed exchange traded fund- the SPDR Gold trust, rose 0.25 per cent to 710.81 tonnes on Monday, though still near a six-year low. But this rise did reflect improving investor sentiments towards gold.

Bullion traded in a ranged manner for most part of the week while volatility was high on Friday. The Greenback jumped on likely positive economic reports from the US coming week whereas speculation increased that Fed might talk about raising interest rates as also anticipated from its monetary policy minutes report due next week and likely putting weight on Bullion.

We have always seen that precious metal markets and the equities markets are inversely related. This week too, we saw precious metals rising while equity market and commodity bellwethers including copper and oil hit fresh multi-year lows. After a disappointing end to 2014 gold is beginning to build a base above $1,200 an ounce – the metal advanced 1.2% to $1,223 an ounce in late trade Friday, the highest since December 11.

Gold's gains since hitting four-year lows early November now top 7% and is made more remarkable by the fact that the advance has come despite a rampant dollar which hit a 12-year high against major currencies yesterday and a Friday jobs report that confirmed that the US economic recovery remains on track.

Though the market players were a lot dependent on the non-farm payrolls report, it did not show much after effect on gold.

The gold price wobbled briefly but was ultimately unaffected by a non-farm payrolls report that, while mostly positive, was not potent enough to shift the Federal Reserve’s rate-rise timeline.

Total non-farm payroll employment rose by 252,000 in December, which beat the 241,000 forecast, while the unemployment rate declined to 5.6 percent, the US Bureau of Labor Statistics reported today.

Additionally, the change in total non-farm payroll employment for October was revised to 261,000 from 243,000 and the change for November was revised to 353,000 from 321,000.
The forthcoming labor reports are expected to create added significance as there are expectations that the Federal Reserve in on the verge of raising interest rates. The current market consensus is that rates will rise in mid-2015 although this is a moving target that will be dictated by jobs and inflation data.

As said earlier, too gold is one such commodity which takes price direction from macro developments rather than its own demand-supply wherein we feel downside risks for the commodity may stay in the near future



- Previous blog - "An Impressive start For Gold In 2015 But A Dull End"
http://riddisiddhibullionsltd.blogspot.in/2015/01/an-impressive-start-for-gold-in-2105.html

FED'S "CONSIDERABLE TIME" CREATES "CONSIDERABLE" IMPACT ON GOLD

 - By Mr. Prithviraj Kothari, MD, RSBL

Once the Federal Reserve statement was out on December 17, gold fell considerably to a two week low. 

The Fed removed the phrase ‘considerable time’ from the guidance statement and replaced it with patience, but then said patience is consistent with considerable time.
So it was rather a confusing but disappointing statement for gold. 

The Federal Reserve just came out and said that it was going to be “patient” when normalizing the monetary policy. This replacement referent to borrowing costs to remain low for a considerable time but at the same time it’s a pledge to be patient on the timing for higher rates. Rising rates and a stronger dollar can cut gold’s allure because bullion generally offers investors returns only through price gains.

As we are approaching 2015, we also are moving towards a long weekend with holiday cheers.
Just ahead of the Christmas break, the U.S. Department of Commerce will release the final estimate for fourth-quarter gross domestic product.
Said markets will receive important manufacturing data from the Institute of Supply Management, but they also said that the impact would be limited.
Over all, the markets won’t seem to having too much volatility over the next two weeks as holiday bells seem to be ringing around.

But yes, it doesn’t mean that it will be a hassle free week for gold. Gold prices could destabilize over the holidays if the Russian economy surprisingly deteriorates, or if there is more volatility in oil prices.

With everyone now focused on the holidays, most analysts are not expecting to see any major movement in the gold price in the next two weeks.
The trading week in North America will be disrupted as markets are closed on Dec. 25 for Christmas and January 1 for New Year’s Day. Analysts said that liquidity will be extremely leaving most market participants will sit on the sideline, waiting for activity to pick up in 2015.

While the market was into the Feds statement, there were rumors doing the rounds that Russia sold considerable amount of gold in November. But the Russian monetary authority made it quite clear, that at least in November, Russia not only did not sell any gold, but in fact bought another 600K ounces in the month of November.


The precious metals market is made up of various players- analysts, traders, investors, miners, customers, bankers etc. Each player has a different forecast for gold in 2015.

Market analysts state that gold seems to have stabilized at $1200 an ounce and could remain around these current levels, until at least the first or second week into the New Year.

Gold mining companies have noted that much of the gold mining industry is already under water at $1,200, let alone $1,150 or lower. Even those who have felt that using a gold price of only $1,000 to calculate whether their operations are viable or not at lower gold prices will be looking to re-assess where they stand at $900 gold.

While the traders predicted $1,100 level, or perhaps $1,050 or even lower.

Looking at these predictions do we feel that there is any hope left for the investors in the gold sectors?
Gold has already been driven downwards and has been pressurized on a number of occasions and at $1,100 gold or lower the supply gap is likely to continue to widen as scrap sales dwindle away, the lower price stimulates new purchases in the East and new mine production falls as some miners bow to the inevitable and have to shut down lossmaking operations. 

So do we feel that 2015 is going to be a better year for gold? Will gold return to its peak it had created in 2011?
Well it’s practically difficult to comment on this right now. Gold is actually seen as in short supply anyway in the West, which is why the gold believers cannot understand recent price movements which seem to fly in the face of economic supply/demand logic and a China boost could have a very rapid strong upwards effect. Western governments may be wise not to tweak the tail of the dragon as it certainly has the wherewithal to play the gold card and throw global markets into turmoil.

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 - "Is it an upside or a downside potential for gold"

http://riddisiddhibullionsltd.blogspot.in/2014/12/is-it-downside-or-upside-potential-for.html

IS IT A DOWNSIDE OR AN UPSIDE POTENTIAL FOR GOLD

 - Mr. Prithviraj Kothari, MD,RSBL

Overall, it was a decent week for gold. It was a swing for gold that swayed between the bullish and bearish trends. Since Nov. 7, the metal has climbed 9 percent from a four-year low.

Gold was up 2.5 percent this week after Tuesday's big rally. Falling stock markets have prompted some investors to buy the metal as an alternative asset, while a drop in the greenback made dollar-priced bullion cheaper for holders of other currencies. The spot gold price was last at $1,224.00/1,224.90 per ounce, down $1.80 on Thursday’s close. But overall it was a positive week for gold.

Some key influential factors for gold this week have been:

SPDR: An improvement in sentiment was seen in the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged higher to 725.75 tons on Friday, a nearly 5 tonnes rise last week. Since mid November its around 717 to 721 tonne range in terms of holdings.

US DATA: Gold soon touch a low on Friday to print a price of $1214 when the US consumer confidence spiked to a new post-recession high in December. The Thomson-Reuters/University of Michigan preliminary index of consumer sentiment leapt to 93.8 then the expected value of 89.5, the highest level in the past 8 years. This confidence could be attributed to the decline in fuel prices.

CHINA: China's National Bureau of Statistics report showed that industrial production to have advanced 7.2 percent in November from last year. This was the weakest growth in three months and slower than the 7.7 percent increase seen in October and 7.5 percent growth forecast by economists, which will only fuel speculation that further stimulus measures from Beijing might be needed.

EURO ZONE: data from Eurostat showed Eurozone industrial output to have edged up by a less than expected 0.1 percent October, after a revised 0.5 percent increase in the preceding month. Moreover, Fitch ratings cut its ratings on France to AA from AA+ on Friday, saying the country's revised deficit reduction target was not enough to avoid a downgrade.

DOLLAR: Gold extended gains as the dollar headed for the biggest drop in a month against a basket of 10 currencies. The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.32 on Friday, down from its previous close of 88.55 late Thursday in North American trade. 

OIL PRICES: Weakness in energy prices have weighed on gold sentiment lately, dulling the metal's appeal as a hedge against oil-led inflation. 

Overall, Safe-haven demand and short covering have been behind gold's recovery from 4-1/2-year lows hit last month. 

Silver does remain locked in the range of $17.00 - $17.35 with a break either side of this, would give some more idea on which side is the prices headed. Whereas the short term support for Gold is at USD $1215 and the resistance around $1235

With the FOMC meeting next week, and amid increased market concerns over Russia, Greece, global energy prices, Chinese economic growth etc. both gold and silver are likely to remain range bound and dominated by technical trading patterns.

Markets believe that the statement released by the FOMC all this while about “considerable time” shall be removed from their minutes now. Which means that the rate hike will happen soon which will further affect gold prices.

What needs to be watched closely this week?

• 15th - the U.S. November industrial production
• 16th - the December flash manufacturing PMI for China, the Eurozone, and the U.S. November housing starts
• 17th - the Bank of England MPC Minutes, the FOMC rate decision, the Fed’s press   conference and the U.S. November inflation
• 18th - Germany’s December IFO business climate
• 19th - the Chicago Fed’s speech 

As we approach 2015 while bidding farewell to 2014, we see three major events that will be affecting gold prices largely in the coming year:

1. FED's move towards normalizing monetary policy and raising interest rates
2. Problems in the Eurozone and the European Central Bank’s stimulus plans
3. China consumption and growth story

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 - "Appetite for Gold Declined"

http://riddisiddhibullionsltd.blogspot.in/2014/12/appetite-for-gold-declined.html

APPETITE FOR GOLD DECLINED

 -By Mr. Prithviraj Kothari, MD, RSBL

In the past few weeks we have seen volatility in gold but then it has settled back on the lower trading range. With fall in gold holdings in the SDPR gold trust we have seen investors interest weakening in the yellow metal. Apart from the SDPR, the dollar has also played a crucial role in influencing gold prices and it will continue to do so in the coming months.

Although, US economy is on a mend, the actions taken by central banks (Euro-zone and Japan) to prop up its economies will likely result in to weakening of their respective currencies and strength in the dollar in turn prices heading lower.

Moreover, the decision coming in from the Swiss referendum not to boost its gold reserves, at the same time falling oil prices and diminishing investment actions are also signifying that the market has temporarily disowned gold and has been replaced by more interest generating assets in its class.

Earlier in the week economists admitted there was some downside risk to the employment forecast following Wednesday’s private sector payrolls data, compiled by payrolls processor ADP. The report was weaker than expected as corporations and businesses created 208,000 jobs last month. The unemployment rate for November was 5.8%, unchanged from October’s reading of 5.8%; economists were expecting an unchanged reading. The report also said that the labor force participation rate was unchanged at 62.8%. Last month we saw a very strong labor market as the reports released by the US labor department states a significantly higher-than-expected nonfarm payrolls report for November.

On Friday, the Bureau of Labor Statistics said 321,000 jobs were created in November, up from October’s revised level of 243000; October’s initial report said 214,000 jobs were created. September's employment report was also revised higher to 271,000 from the original report of 256,000 jobs. This was the biggest jump in employment since January 2012. The report noted that the 12 month average for employment was 224,000.

There was a huge growth witnessed in the jobs in November which was led by gains in professional and business services, retail trade, health care, and manufacturing.

Even though the jobs report was extremely impressive, gold did not extend sharp losses after its release. The previous two jobs reports saw upward revisions in employment gains, and wages also rose. The job gains in 2014 are the fastest rate since 1999

Gold prices dropped under $1,200 following a blowout November nonfarm payrolls report. It instantly fell by 10$ as there were further expectations that the Fed will start talking about the Fed funds going higher than expected. Such news is not motivating for the commodities markets and it further expected that gold prices will weaken.

Simultaneously we saw the US dollar rising on this news. The dollar index rose above 89 for the first time since March 2009. The dollar advanced to the highest since 2009 against a basket of currencies, cutting the appeal of bullion as an alternative asset. Dollar is trading currently at $ 1.228 against euro. Euro is slacking after the ECB left the interest rates unchanged.

The strong labor report further signifies the fact the Federal Reserve may soon hike rates and this could happen as early as next spring.

The only issue that could be of concern would be the wage growth reports as it was not seen to be that strong and could keep the Federal Reserve apart from pulling the trigger on interest rate hikes.

Before hiking the rates the Fed would want to see some further improvement in the wage growth which could practically happen if the current momentum in hiring is maintained and the underemployment rate continues to fall.

The labor markets have been improving rapidly over the past few months. The issue of concern now is the Fed’s reaction to its mid-December meeting. But if we see the global scenario gold prices in the international markets is expected to trade lower as a hangover of the recent run of losses.

In the near past, we have the dollar being the key influential factor for the weakened in the yellow metal and it is expected to continue to do so in the near future to.

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 - "Too Many Economies Putting Pressure On Gold"
http://riddisiddhibullionsltd.blogspot.in/2014/11/too-many-economies-putting-pressure-on.html