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

THE DOLLAR IS BEING WATCHED CLOSELY

by Mr. Prithviraj Kothari, MD, RSBL

Gold's long term appeal continues to remain clouded by doubt. The dollar is getting stronger and the US economy is on the forefront and traders believe that interest rates will rise faster which weighs on gold as they lift the opportunity cost of holding non-yielding assets.

Till Thursday, gold price remained in a tight trading range. Precious metals sliced back early gains on Thursday after the lower than expected jobs number were released. Unemployment claims climbed 290000 more than the estimated 282,000 and Jolts jobs opening disappointed at 4.74 million against the expected 4.81 million.

The WGC released its Gold demand Trends report for Q3 and it showed that gold demand has been lying low along with the declining demand for jeweller, falling investment demand for bars and coins and reducing central bank purchases.

For the past few days gold has been hovering around $1159.20. But lately, gold has stabilised. After hitting its weakest level of the year till date on November 7.

But on Friday gold got the big push after a sudden weakening of the US dollar . Gold surged 2.5 percent on Friday to just shy of $1,200 an ounce.

Bullion secured more that $40 to a two -week high at $1,193.34 in New York after dropping more than 1 percent in early trade to test the $1,145 level, where strong support was seen twice in the last four sessions, triggering pre-weekend short covering.

Now that the dollar has been moving back and forth and everybody is watching the dollar very closely.

The dollar lately has hit a two-year high against the euro and seven-year high against the Japanese yen, fuelled by diverging interest-rate outlooks.

There are expectations that the US monetary policy will tighten next year as it is considered to be a stronger economy than Japan or the Euro zone. Which further dictates the fact the US dollar will strengthen  as precious metals often move inversely to the U.S currency, it means that they are bound to decline. 

Gold is often bought as an alternative currency when the dollar weakens, and vice-versa, while a muscular dollar also makes all commodities more expensive in other currencies and thus can hurt demand.

Next week a number of key economic indicators are lined and all investors will be closely watching over these. 

Monday- Industrial production and the New York Federal Reserve’s Empire State manufacturing index

Tuesday-  The producer price index 

Wednesday-  Housing and the Federal Open Market Committee releases minutes of its last meeting.

Thursday-  Jobless claims, the consumer price index, existing home sales and Philadelphia Fed manufacturing survey.

Moreover on Wednesday one of the key influential factors will the upcoming US economy data which will be a deciding factor for the Fed to decide as to when it is likely to increase the interest rates.

Apart from the key economic indicators traders will also we keeping an eye on physical demand for gold and the Swiss refendrum.

Demand -China and India are the world’s two largest gold-consuming nations. The Indian wedding season will primarily witness gold buying and the Chinese too stock up the metal ahead of the country’s New Year festivities.

Swiss referendum- Swiss gold referendum is scheduled for Nov. 30. In this referendum the Swiss voters will decide whether the Swiss National Bank would have to hold at least 20% of its assets in the precious metal. This would open doors for more demand for gold as the central bank would have to accumulate much more gold, adding to the requirement side of the equation. Also, the referendum asks voters if the SNB should be banned from selling gold and whether all of its gold reserves should be held in Switzerland.

With the Dollar Index at a four-year high, the U.S. stocks reaching new highs, disinflation occurring in Europe and Asia, and commodity prices plunging, the gold prices have a hard time rallying. 

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 Gold Being Completely Controlled By The Dollar?"

http://riddisiddhibullionsltd.blogspot.in/2014/11/is-gold-being-completely-controlled-by.html