Investors parking funds into Gold

Gold is on a winning streak, shining brighter than before. Investors, households, traders and central banks around the globe are parking cash in it. Gold has rallied its highest in the last six years in the international market. In India, it hit it’s highest ever on June 25. In one month, gold has gained 12% and it appears the Bull Run for the yellow metal will last longer than one thought.

Gold prices have surged to the highest since 2013 as the U.S. and the global economy slow and due to the likelihood of a return to ultra-loose monetary policies. Rising geopolitical tensions in the Middle East and between an aligned Iran, Russia and China versus the U.S. is also leading to safe haven demand. U.S.-Iran relations have deteriorated sharply whereby war has become a very real possibly alas.

Monetary policies - The US Federal Reserve, the country’s central bank, did what many expected last Wednesday, and held interest rates steady while signalling that a rate cut is on its way. Now, meaning no change to the 2.25% to 2.5% range on the federal funds rate. Nine of 10 FOMC members voted to keep rates unchanged. The Fed reportedly dropped its pledge to be “patient” on widely anticipated rate cuts, meaning it could be poised to act. Also, Reuters said, Fed Chair Jerome Powell stopped referring to below-target inflation as “transient”. Reading between the lines gold traders took the message and ran with it, with the precious metal’s price hitting a five-year high.

Economic slowdown - Macroeconomic growth is falling all over the world. Joblessness is not peculiar to India, jobs are falling across the globe and investors are not comfortable opening their purse strings due to the uncertain economic and political environment. Hence, the cash will be parked in the safest haven, the value of which could possibly never come to zero.

US-China trade war - The other reason for gold being on a tear is the risk of the ongoing trade war spiralling into a currency war. If that happens, gold will turn into a bigger monetary asset, it will gain further.4he likelihood of more central banks joining in the race to buy gold will increase with the increase in anxiety about an uncertain future. Gold will also play as the most important asset class as global risks in equity markets rise.

Geopolitical tensions - Concerns arising out of mounting trade war and geopolitical tensions between the US and Iran have added to the dollar weakness and therefore lending an extra shine to gold. On June 25, gold hit its highest in six years, selling at Rs 35,800 per 10 grams, clawing back to 2013 level when it had touched the highest due to government’s desperate measure of an unprecedented import duty hike on the yellow metal

The result was an immediate jump in the gold prices. The rise in gold futures was even more dramatic, with gold for delivery in August rocketing to a fresh high $1,366.60. The last time bullion was priced that high was just over five years ago.

Weak Dollar - gold prices share an inverse relation with the dollar. When the dollar, the world’s most powerful currency loses shine, gold takes over from there. In the month of June, it shined the most, boosted on the back of a weakness in the dollar after the US Federal Reserve signalled it would cut interest rates, going forward, as the US economy was sagging.

Trade, economic and geopolitical uncertainty have seen safe-haven demand return and pushed prices higher.

Apart from this news what made headlines was the G20 summit which ended with a lot of positives and negatives.
Positives- Finally the US and China formally agreed for a re-talk of their completely stopped talks 6 weeks ago.

Negatives - Trump looked desperate for any kind of deal with China, which compelled markets to believe that there is some kind of deterioration of the US economy.  This happened following his face-saving comment on Huawei and later Kudley clarified that there is no big relief for this Chinese company.

His visit to the North Korean border didn’t go down well with the markets.
Some important numbers that market will track in the week are-
• China Manufacturing PMI
• US Manufacturing PMI

The month ended with a lot of glitters for gold as it claimed 6 years high of $1422 and is expected to see big ranges this week if there some kind of news coming in  from
• Economic data
• Trump
• China

Based on the futures markets we can say that if gold crosses 34005 then we can expect a rally of 34250- 34400. If it drops below 34005 then e can expect a further fall between 33875 to 33625.

Will 2017 end on a negative note for gold

It was a soft week for gold as we saw prices declining over a strengthening U.S Dollar.
The U.S dollar recovered at the start of the week after the US Senate passed its tax reform bill. This created pressure on gold and hence the yellow metals price declined during Asian trading hours on Monday, 4th December.

The dollar strengthened over tax reform bill passed on Sunday, 3rd December. With both bills calling for a reduction in the corporate tax rate to 20%, US tax reform progress is expected to help sustain growth in corporate capital investment.

The upside for the yellow metal was capped after the dollar rose and equities markets rejoiced in response to the US Senate passing the bill. A House- Senate conference committee will now work to resolve the differences between the House and Senate tax bills

Moreover, markets now gear up for the next Fed meeting due to be held this week from 12- 13 December. Now with the market expecting an interest rate rise, the weakness we are seeing is a pre effect of this expectation.

This negative sentiment for gold continued throughout the week, as we saw gold prices dropping over Thursday.

Gold surrendered majority of the early modest recovery gains and was placed at the lower end of its daily trading range, around the $1245 region.

However, the precious metal edged up during the Asian session on Friday as investors resorted to bargain hunting, especially after the overnight slump to its lowest level in more than four months. The initial uptick, however, turned out to be short-lived and was being capped by a strong follow-through US Dollar, which tends to dent demand for dollar-denominated commodities - like gold.

Meanwhile, a goodish pickup in the US Treasury bond yields was also seen driving flows away from the non-yielding yellow metal. Moreover, the prevalent risk-on mood, as depicted by strong gains across global equity markets, further dented the precious metal's safe-haven appeal and collaborated to the slide over the past hour or so.

Currently the scenario is such that entire focus is on the fact that is pulling down gold prices.

• Rising equity markets,
• A rising dollar on the back of a likely tax deal out of Congress before yearend,
• The certainty of more Fed rate hikes
• The next Fed meet on December 13 - and
• Other attractive speculative alternatives including art, real estate, bitcoin, etc

Are all putting a dent in the short term investment prospects for the yellow metal as investors look for better returns elsewhere. 

However we can’t just ignore the currently subtle uncertainties out there which could turn the scenario around for gold – notably
• Mueller’s investigation, a geopolitical crisis per se North Korea
• Trump Administration internal problems 
• A further possible Middle East conflagration
• An escalation in the Trump/Iran rhetoric (which some suggest could lead to military action), the much predicted crash in equities markets and
• A possible bursting of the bitcoin bubble
Even though all of the above mentioned points don’t seem to erupt in the near future, it may extent to 2018, but still they can’t be ignored as they will be playing a significant role in the gold price movement in the long run.

Trump policy under trouble as Gold goes weaker against Dollar

Gold prices crawled higher on Monday on a weaker dollar and as uncertainty over US policy under President Donald Trump stoked safe-haven demand, although gains were curbed with many in Asia on holiday for the Lunar New Year, said Mr. Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited.

Spot gold had edged up 0.1 per cent to $1,191.98 per ounce by 0735 GMT, while US gold futures were up 0.24 per cent at $1,191.2.

Trump's administration on Sunday tempered a key element of his move to ban entry of refugees and people from seven Muslim-majority countries in the face of mounting criticism and protests in major American cities.

Some of Trump's statements and a lack of detail on policy have led some investors to opt for gold, often seen as an alternative investment in times of geopolitical and financial uncertainty.

The executive order signed by Trump has raised the uncertainty even higher.
The upturn in safe-haven buying comes at a time when physical demand has been sapped due to the Lunar New Year holiday in Asia, added Kothari.

The dollar index, which measures the greenback against a basket of currencies, was down 0.12 per cent at 100.410.

The market for the precious metal has also been buoyed by sluggish US economic data released on Friday.

Economic growth in the country slowed sharply in the fourth quarter as a plunge in shipments of soybeans weighed on exports, the data showed.

"That puts just enough doubt into the industry's mind about the timing of (US interest) rate hikes," Hynes said.

Meanwhile, holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust GLD, remained unchanged on Thursday from Wednesday.

Speculators crimped their net long position in gold futures and options, following two straight weeks of increases, data showed. They also raised their silver holdings to the highest since early November.

Spot silver was up 0.23 per cent at $17.16 per ounce.

Platinum shed 0.14 per cent to $980.75 per ounce, while palladium dropped 0.5 per cent to $732.4 per ounce. Palladium touched its lowest since Jan. 4 at $708.97 an ounce in the previous session.