Gold vs Stocks

Past 3 to 4 years haven’t been that exciting for gold. In fact gold has surfaced to the current $1300 an ounce, a level that was previously seen 6 years ago. Gold has been trading in a tight range for quite some time.

Gold is an investment that people prefer when the times are uncertain. It’s not a type of investment that can be left to itself. There are times that are just right to enter the market. People buy at dips and try to make the most of every opportunity to buy gold. Physical gold also has a very high liquidity which again increases its appeal as an investment asset.

Today we are in a position where gold is liked more as a hedge tool, an asset that gives you protection against uncertainties. And this characteristic of gold helps in keeping its prices high when there is a global crisis. In fact many are even switching over from equities to gold.

Though the first half of 2018 was dull for gold, it did gain momentum in the second half. 2018 on a weekly chart produced 2 clear trends, and some pretty nice ones at that. We started the year flat, and then had a bear trend from May to October, then a nice rally taking it up. If we’re just holding gold all this time, this really won’t matter, but gold still moves and we can’t call it a complete dog over all this time, even though it’s been one from a longer-term perspective.

This year too, till date gold is up 2% and is expected to rise further given the factors that will influence the yellow metal and create bullish sentiments in the market.

Since the high of February, with each lasting a week or two, gold is producing some pretty well-defined moves, including the current upward one.

But just by seeing the current trends it won’t be possible to exactly predict a future upward movement. We need to consider the past too. We at least need to preface this by mentioning the current bull move with gold, and you won’t really discover that by just looking at its year to date, you have to go back to the beginning of the current move in October. It’s not that we can go back in time and buy some then, but if we’re looking to predict a future up move, we need to at least account for how much we’ve moved up thus far.

The number in play here is $1184 an ounce, the low last October 1. This is also around the time where the stock market started to sink, and when money started to flow out of the stock market more, with some making its way into gold.

We’ve been able to sustain a move of 10% through the subsequent stock market rally, so while the bearish turn with stocks may have given us a push forward, the better performance of gold involved more than this, perhaps our looking to recapture the amount that the market oversold it by earlier in the year.

This is what makes us say that gold is expected to rise further. For 6 years now, gold has been unable to move up much past where it is now. This doesn’t mean that it won’t happen. A weak US economy, Fed policies, US China trade war, Brexit, piling gold reserves, bearish stock markets  are some of the many key influencers that will cause a wave in the market and bring about a rally in gold price.

Chances of interest rate hike in near future fade

Initially gold began on a negative note. Gold witnessed a decline in prices till mid-week.
However by the end of the week gold prices picked momentum and closed on a positive note.
GOLD BULLION headed for a second weekly gain versus the falling Dollar Friday morning in London, trading at $1247 per ounce as the US currency held at its weakest in 14 months against the Euro.

The greenback faced a fresh barrage of assaults on the currency markets. June retail sales figures and inflation levels disappointed, and this led to a selloff of USD. Headline inflation plunged more than forecast, and retail sales reversed course.  Hence, sentiment towards the USD declined
Gold and the rest of the precious metals were up by an average of 0.3% during trading hours on Friday July 21, with spot gold prices at $1,246.44 per oz, a weaker dollar and continued choppy political waters in Washington providing support.

By Monday, 17 July, the greenback was trading near 10-month lows. Further, news reports of improved economic performance in China sent investors scampering away from the USD towards other assets. Safe-haven assets such as gold, silver, platinum, and the JPY and emerging market currencies gained favour as the USD retreated.

Gold’s rebound found new drive on the combination of the weaker dollar, which we think stems from the weak political scene in Washington and from the less hawkish US Federal Reserve stance.

A weakening dollar along with hawkish Fed comments strengthens gold prices as gold is generally preferred as a mode of investment in times of uncertainty and global turmoil.

It is clear that the US economy is not performing as expected. This naturally dampens expectations and results in weakness for the USD. When traders get antsy, they rush towards safe-haven assets such as gold bullion, and this is precisely what we are seeing now.”

The dollar index continued to fall, at 94.00 it has set a fresh low, these levels were last seen in June 2016. A negative impact on the USD is good for gold. Since bullion is a dollar-denominated asset, demand moves in the opposite direction to the strength of the USD. With weakening sentiment about the USD, foreign buyers of gold purchase more per unit of their currency. Plus, the perceived weakness of the USD drives traders to gold bullion.

With softness in inflation figures, members of the Federal Open Market Committee (FOMC) are reluctant to move forward with additional interest rate hikes. It is more likely that the Fed will opt for an unwinding of its $4.5 trillion balance sheet than more rate hikes this year.

If data continues to be negative and if the third-longest [economic growth] cycle in US history cannot produce a cyclical uplift in wages and prices then gold prices are expected to rise tremendously as any large disappointment in the [global economic] growth story will lead to an increase in gold prices.

The appeal of gold as an insurance asset is greater today than it was at the beginning of the year. It suggests to us that gold continues to be viewed as a [portfolio] diversifies and this should help keep the market supported overall.

The latest economic data releases once again bring the prospect of a Fed rate hike into question. According to the CME Group Fed Watch Tool, there is a 3.1% probability of an interest rate hike on Wednesday, July 26, 2017. For September 20, 2017, the probability of a rate hike is just 8.2%, and for November 1, 2017 the probability of a rate hike is just 11.6%. These economic forecasts are good for gold. Every time the Fed pushes back the prospect of a rate hike, currency traders take a bearish perspective on the greenback which further drives the demand for gold.

Gold stabilises around $1130

The Federal Open Market Committee (FOMC) on Wednesday December 14 raised interest rates to a range of 0.5-0.75% from 0.25-0.5%, which was widely anticipated and was largely priced in by commodities and equities.

Modestly analysts believe that higher interest rates in the USA are not expected to have much of an impact on metal markets unless it reaches 2%.

And while higher rates could cause issues if they are raised too quickly or too high, this is not an immediate threat.

The markets have somewhat calmed down with gold hovering near $1130 an ounce.

Gold was trading calm in London on Thursday December 22 – where prices are stuck around $1,130 per oz while many investors are side-lined as the end of the year approaches.

It’smore of a holiday mood where US and Chinese markets willremain shut for Christmas. And hence business and liquidity is expected to dry up till New Year.

The spot gold price was recently indicated at $1,130.25/1,130.45 per oz, down $0.60 on Wednesday’s close.

Later on, prices fluctuated in a nominal range following important data realised during the week.

This week’s highlights were as follows-

• The US final third quarter GDP growth was revised upwards to 3.5% from 3.2% and
• Core durable goods orders increased 0.5% month-on-month in November, which was better than the forecast of 0.2%.
• Durable goods orders fell 4.6% month-on-month in November, still better than expectations of a 4.9% drop.
• Weekly unemployment claims, however, came in at 275,000 above consensus of 255,000.
• The November core PCE price index was flat against the forecast of 0.1%
• Personal spending was at 0.2% below expectations of 0.4%.
• CB leading index and personal income were both unchanged in November, and below their forecast of 0.2% and 0.3%, respectively.
• The US government bond market strengthened slightly on Wednesday, with the 10-year US bond yield closing at 2.53%, down from a recent peak of 2.60% last week.

The latest [US] data which has both positive and negative reflects the state of the current US economy. Taking into consideration the outlook for the US economy, future US economic data should trend towards improvement. This could provide some downward pressure for gold and silver.

Recent strong US macroeconomic data and sanguinity over president-elect Donald Trump’s prospective infrastructure spending plans have raised expectations of more interest rate increases in the USA next year. This has also enhanced the US dollar and increased appeal of risk assets like equities, while decreasing the attractiveness of haven assets like gold.

However, he gold price was a touch higher on the morning of Friday December 23 in London, finding some support from bargain hunting before the year-end holidays but lacking sufficient momentum for a marked breakthrough.

The spot gold price managed slight gains during Asian trading hours on Friday December 23 following the release of a range of US data on Thursday.
The momentum for precious metals has slowed but broadermarkets remain tough and positivity for 2017 remains high,

This reflected a moderate decrease in risk appetite on the back of growing political tensions between the US and China after President-elect Trump picked Peter Navarro, a China hawk, to run the US National Trade Council.

Precious metals are expeted to shine next year . Investors may continue to remove their bullish bets to take advantage of positive global risk sentiment and lower volatility across risk asset classes. But the level of contentment in the financial markets may take some participants by surprise early next year, which may trigger a strong rebound across the complex.

Consolidation in Gold & Silver prices: RSBL

                                        By Mr. Prithviraj Kothari, MD, RSBL

So far this year has been positive for gold compared to the past couple of years. Reasons behind this are the current market uncertainty and unconventional monetary policies that have continued to support the prices of Gold along with central banks and ETF’s demand for gold has given a boost to Gold prices.

Gloom over the global economic outlook and concern over central banks’ firepower, uncertainty about China’s economic recovery and growing volatility ahead of the UK’s EU referendum next month are adding fuel to the fire.

Gold price action has been erratic at the start of the new trading month. At the start of May, gold surged to $1303, its strongest since January 2015, but earlier last week fell to a two-week low of $1257 and currently trading around $1250.

Precious metals showed a firm up move at the start of the week, with prices up an average of 0.7 percent, gold prices were up 0.5 percent at $1,271. But it has slowly faded and the down move has begun which could be due to the fact that over-extended gross fund long positions in Gold and Silver have made the markets vulnerable to a spate of profit-taking.

The Fed minutes released yesterday caused an increase in Dollar strength. The statements proved to be more hawkish than the market expected where some FED members would look forward to a June month rate hike if the economic situation improves. Labour market conditions continue to improve and the inflation progress is towards the committee objective but the consistency is important for the next hike to take place.

But physical demand in India has been a major obstacle. High prices and industrial action in India led to a 19-percent drop in jewellery demand that could not be offset by seasonal buying and the increase around the traditional gold-buying festivals.

Other data released during the week that influenced gold prices were:

• In US data released Thursday, weekly unemployment claims during the week ending May 7 raised for the third straight week to 294,000, above the forecast of 270,000.
• Import prices month-over-month in April ticked up 0.3 percent, under the economic consensus of 0.6 percent.
• The weak US data had sent spot gold to as high as $1,281 overnight but the rally proved short-lived as it was soon sold down to the mid-$1,260’s. 

The negative interest rate atmosphere in Europe and Japan, combined with uncertainty over the Chinese economy, anticipation of slower interest rate rises in the US and global stock market turmoil have proved to be in favour of gold.

The yellow metal along with Silver have been consolidating but are also holding up and what we need to watch is that whether it could suffer significant profit-taking given the extent of the long positions.

Until there is a sustained break above $1280, a new rally in Gold does not appear on the cards while Silver needs to break above $17.20. Currently, according to me in the Indian SPOT markets the Gold would trade in the range of INR 28,900 to INR 30,300 while in Silver the range would be INR 38,500 to INR 42,000.

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 –

HAPPY AKSHAYA TRITIYA: RSBL

http://riddisiddhibullionsltd.blogspot.in/2016/05/happy-akshaya-tritiya-rsbl.html

Photo courtesy: Google search

MARKETS REMAIN CALM FOR GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Gold showed wave like movements this week. Beginning with a positive tick on Monday, then lowering by the middle of the week and again picking up pace on Friday, it seemed like a see saw trend for gold.

Though gold was up on Monday, it continued to remain under pressure from a Federal Reserve policy meeting that was due on 15-16 December weeks, when the US central bank was expected to raise interest rates for the first time in nearly a decade. In its last policy meeting of the year on December 15-16, the Fed was seen raising rates by a quarter of a percentage point. 

Gold has already slid 9 percent for the year, its third straight annual decline, in anticipation of a rate hike.

Gold dipped on Thursday morning in the US, with the start of US monetary policy normalization spurring the dollar.

The Federal Open Market Committee (FOMC) decided to start to normalize US monetary policy after seven years of near-zero interest rates, lifting the federal funds rate to 0.5 percent from 0.25 percent. The policy board still sees the long-run rate at 3.5 percent and finishing next year around 1.375 percent.

After markets halted to examine the impact of the rise, the dollar gained against other major currencies and pressured the precious metals lower – the greenback was last 0.7 percent stronger at 1.0844 against the euro.

Post the FOMC meet, gold was expected to come under increased downside pressure from a stronger dollar.

Investors will now focus on the pace of future rate rises, which will be affected by the general strength of the economy and underlying inflation data.

In US data, weekly unemployment claims for were in line with forecasts at 271,000 and were below the psychologically important 300,000 mark.

The Philly Fed manufacturing index for December at -5.9 missed the predicted 2.1 while the current account for September at -$124 billion was largely as expected.

While the Fed does not expect to reach its inflation target of two percent until 2018, Chairwoman Janet Yellen said in the following press conference that current transitory factors stem from low oil prices.

After Thursdays decline, the markers expected gold to drop further. But Gold prices jumped in morning trades Friday after the dollar weakened against other currencies and as investors bought back oversold position after prices slumped to over four-month low on Thursday.

Gold prices finally found some support in the weakening dollar index following profit booking and buying at lower level. Prices of the bullion were down as dollar index weakened against other currencies, boosting investors' appetite for dollar-denominated commodities.

Gold was in positive territory on Friday morning in London after the dollar eased slightly amid growing expectations that the path to higher interest rates in the US will be a slow one.

The spot gold price was last at $1,054.9/1,055.2 per ounce, up $2.20 on Thursday’s close. Trade has ranged from $1,051.2 to $1,058.1 so far. In the previous session, the yellow metal dipped below $1,050.

Gold (and silver) rose on Friday, taking back about half of Thursday’s loss of approximately 2.00%.

Reasons behind the price rise were-

• The anxiety in equities restricting from the despair in crude prices
• A changed deliberation of a longer-term view that gold is “due” to rise because of weakening dollar strength
• Hurry to grasp snips.

In the coming days and weeks, the downside in precious metal prices may be limited due to low activity as a result of Christmas and New Year, volatility is expected to remain calm. But the year could start on a negative note for gold. Chairwoman Janet Yellen said future rate increases will be gradual and the policy could be reversed if the US economy begins to slow

In the interim, volumes are expected to shrink while market participants head to the sidelines during the holiday period, possibly resulting in choppy conditions.

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 -
"Tricky Week For Gold : RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/12/tricky-week-for-gold-rsbl.html 

Sovereign Gold Bonds Scheme by India & FED Rate Hike - Timing Matters: RSBL!

- Mr. Prithviraj Kothari, Managing Director, RSBL

Rather than talking about International Bullion, I am glad to put forward the decision of Government of India, in consultation with Reserve Bank of India (RBI), to issue Sovereign Gold Bonds. A welcome move by Government of India, after their announcement during the Budget. The best part of this is:

1. The investors will be compensated at a fixed rate of 2.75% per annum payable semi-annually on the initial value of investment. This a good interest rate that their offering as compared to the policy that they issued a decade back. For Indians who purchase Gold with a traditional respect can now get a chance to earn a fixed interest rate along with the benefit of Price appreciation.
2. Minimum permissible investment will be 2 units (i.e. 2 grams of gold. With already a wave of new bank accounts being opened due to Jan Dhan Yojna, this minimum permissible investment gives an added advantage to reach the masses who can invest as low as 2 grams.

My personal feeling is that the scheme would be a huge success with the financial, safety implications that have been covered in alternative to holding physical gold at home.

I am sure Sovereign Gold Bonds shall raise a new chapter in Indian Bullion Industry.

As mentioned in my previous Blogs, Gold is still a sell on rallies. The physiological level s US$1200 is yet to be broken convincingly if we talk about it on a technical front. Fundamentally, lower the price the better the buying opportunity.

The data dependent week for gold finished in the prices in red as investor sentiment eroded due to uncertainty in US monetary policy.

On Wednesday, the Federal Open Market Committee (FOMC) chose not to increase the federal funds rate but it did remove the prior concern over global growth and volatility. This was largely interpreted in the market as hawkish, signaling higher rates from the Federal Open Market Committee’s December 15-16 meeting.

I do feel that you would be a bit confused that if FED is not increasing the interest rates, it is good signs for Bullion as the safe heaven appeal rises due to uncertainties in economy. But the December meeting is the most anticipated one. There has been growth in US economy and as the FED says it has been moderately paced. But they cannot go on throughout their time with negative interest rates. The timing is crucial and that is where the whole delay is. So the rates increase has already priced in Gold poor show. The spot gold price was last at $1,1141.40/1,141.90 per ounce, down $5.70 on Thursday’s close. Silver prices followed the Gold fall where the last recorded price was $15.57/15.62.

RSBL SPOT Gold Price

Some of the important data released this week weren’t meeting the expectation of FED:

1. A Negative Advance GDP q/q print of 1.5% instead of 1.6% was a small hiccup for US economy.
2. CB consumer confidence in US showed a gloomy picture of 97.6 instead of 102.5
3. Core Durable Goods Orders m/m for US posted a negative performance too of -0.4% instead of 0.0%

US data releases between now and mid-December will be viewed as crucial but a major obstacle for the US central bank’ policy-setting board will be a key few who believe inflation should reach – or at least approach – the Fed’s target of two percent before a lift-off. Though a part of the FOMC wants to hold off until 2016, Fed chair Janet Yellen has said repeatedly she would prefer to rise the federal funds rate this year despite poor inflation and the tepid US economic recovery.

A rate hike this December would weigh on gold and given the recent gains in positioning could mean a deeper correction than would have been otherwise. A drop in gold prices would mean a good buying opportunity for physical buyers in China who need to stock up for the Lunar New Year festivities. Though the festival falls in the second half of February, people might advance their purchases if a dip in gold prices is witnessed.

Investors will now, desperately, await the December meeting for a potential normalization of monetary policy. Expectations in financial markets about a possible rate hike by the Fed this year are low, but a Fed rate hike is not completely priced out yet.

US data releases between now and the December 16 FOMC meeting will likely be very important as market participants try to gauge the health of the economy and whether or not a potential move in December would be justified. The Fed is ‘data dependent’ and there shall be a great deal of new information that shall be released between now and the December meeting, much of which shall have to turn for the better if the Fed is going to act

Technical Range for Gold price and Silver price next week:

METAL	International price range	Domestic price range
Gold	$1126 - $1177 per ounce	INR 26100 – INR 27000 per 10gm
Silver	$14.47 - $16.20 per ounce	INR 35200 – INR 38500 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 LOSES DIRECTION: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/gold-loses-direction-rsbl.html 

IT'S A GREECE GAME FOR GOLD:RSBL

                                                         By Mr. Prithviraj Kothari, MD, RSBL

A very boring week for Gold and rest of the precious metals complex. An extremely tight price range trading showing no clear indication for the next move in price. The $1200 level remains significant for Gold while for Silver it is $16.20, where it continues to place selling pressure.

During the last week it rallied well to move from a two month low near $1160 back up to above $1190 again before easing back to the $1180 level. The key $1170 level has consistently provided solid support and has held it up now for a couple of months.

Somehow the important data released from the US:

• US unemployment claims were in line with forecasts at 271,000.
• US GDP released on Wednesday showed that the retraction in Q1 was just -0.2% better than the expectation of -0.7%, increasing the necessary confidence in US economy growth.
• University of Michigan Consumer sentiment was 96.1, besting forecasts of 94.6, while inflation was rose 2.7 percent.
• Personal spending month-over-month in May was up 0.9 percent, above forecasts of 0.7 percent.

While recent positive US economic data strengthened the dollar and led to speculation over interest rate hike this year, the Greece negotiations have gone haywire.

Talks between Athens and its creditors have failed completely. Still there have been some signs of hope being shown by either parties. But if I understand, tomorrow being Greece's payment date to IMF, I feel they would default. Euro-zone rejected Greek's request for a one month extension to its bailout creating a non-payment type of scenario.

Greek prime minister Alexis Tsiparis called a referendum on July 5 for the Greek bill to approve the bailout demands. Like expected, Greece announced capital controls and will keep its banks closed on Monday until further notice. I feel it is the darkest hour in Greek's economy. 

Even when I see the potential Grexit, there are more chances that gold will be on a bearish side for the week to come particularly if Thursday’s nonfarm payrolls report shows the labor market is gaining strength. Positive data will provide the Fed the reason they need to raise interest rates in September.

So now it all depends on the Greece Game and the important US data.

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 -

"An Important Week For Gold: RSBL:

http://riddisiddhibullionsltd.blogspot.in/2015/06/an-important-week-for-gold-rsbl.html

BULLS AND BEARS TO CLASH

                                              By Mr. Prithviraj Kothari, MD, RSBL

 

Over the past year and to be precise, lately, there has been a strong belief in the market that the U.S. is on it way of raising its rates. While evidence of continued improvement in the US economy is not gold-friendly and ultimately acts as an obstacle for the price rise in yellow metal.

Let’s have a quick glance to the important highlights during the last week:

Non farm payrolls data: 
       The most awaited or rather the most influential factor this week was the jobs report. The US created 280,000 new jobs in May, significantly above analysts’ estimates of 222,000 and the highest climb in jobs figures seen in months. US indicators have increased in importance at the moment as the Federal Reserve specifically identified US jobs data as one of the key factors on its decision when to raise interest rates from near zero.
      The unemployment rate was essentially unchanged at 5.5 percent. Private sector job growth has increased 63 straight months, a US record.

EUROZONE:
      In the Eurozone, French trade balance in April was a negative three billion, above forecasts of four billion, while German factory orders month-over-month in April was up 1.4 percent, beating consensus of 0.6 percent. With investor sentiment for gold so weak gold prices may well continue lower, but we do feel this is leading to a better buying opportunity and given developments in Greece and with potential for corrections in other asset classes, it may not be too long before the markets start looking for a safe-haven again.

DOLLAR:
    The dollar jumped to a 13-year high against the yen and gained against most major currencies, cutting the appeal of precious metals as alternative assets. The expectation of an interest rate hike has benefited the dollar and it has enjoyed a dramatic and sustained rally. 

GREECE: 
      Meanwhile in Greece, the country delayed a 300-million-euro repayment to the IMF until the end of June and bundling all the payments together, increasing the risk of a Greek exit from the bloc. 
      Prime Minister Alexis Tsipras reportedly rejected proposals put together by its lenders, arguing that any deal to unlock crucial bailout funds must be based on his own side’s conditions. But the two sides remain “very close” to agreeing a deal, after creditors supposedly proposed lower primary surplus goals.


Geopolitical Tension:
       Ukrainian troops and pro-Russian separatists on Wednesday fought their first serious battles in months and Ukraine's defense minister said an attempt by rebels to take the eastern town of Maryinka had been thwarted.

Post the US job data release, gold prices tumbled as the economy showed strong signs of recovery after a lackluster first quarter. Investors have been barring gold on signs that the economy has grown enough adhesion to damp the need for haven assets, encouraging worry that better progress will push policy makers to raise rates. 

It’s not possible to give a clarity to what exactly the price of gold is going to be tomorrow. Nor it is easy to take a buy call in Silver as the metal continues to follow gold with the risk to the downside. There are many factors that support and upper drive and a contrary lower drive for gold prices.

First, we think about international geopolitical tensions. Second, the uncertainty coming from Greece is still lingering in the minds of traders and captains of industry. Third, strategic or policy-related bullion purchases by central banks remain significantly high: After eight quarters of capital outflows from the ETF industry, the first quarter of 2015 saw a rebound in gold purchases.

However, two factors might hamper the bullion’s technical ascent, reducing the precious metal’s value over time. The first element comes from long-term charts: Gold is still in a long-term bearish trend, which has caused the precious metal to drop 30% in value from the peak reached during the summer of 2011. Second obstacle to higher gold prices: the strong US dollar and the historically negative correlation between the American currency and the yellow metal. To add Hedge funds and money managers cut net long positions in gold and silver during the week ended June 2, U.S. Commodity Futures Trading Commission data showed on Friday.

A stimulating clash awaits for bulls and bears in the coming months! But, as usual, the final word rests with the markets.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1151 - $1191 an ounce	Rs.25,700 - Rs.27,300 per 10g
SILVER	$15.70 - $17.00 an ounce	Rs.36,500 - Rs.39,500 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 -

"Calmness before the big move in Gold and Silver"

http://riddisiddhibullionsltd.blogspot.in/2015/06/calmness-before-big-move-in-gold-and.html

RSBL: A PUZZLED MARKET FOR GOLD

 By Mr. Prithviraj Kothari, MD, RSBL

It was a rather confused market for gold this week. The negatives pushed gold high while the stability kept it low. 

Though it was a neutral week for gold, it managed to stabilize over $1200 an ounce. The recent gains on gold prices have been supported by-

• The sluggish reports from the US economy
• The dreary March payrolls report from the Labor Department
• The slowly advancing US housing reports
• Rise in SPDR Gold Shares
• The uncertainties about Greece’s finances
• Other geopolitical tensions

The sluggish economic reports have raised the expectations that the US central bank would not be hiking the interest rates before September. 

The weak economic data this week did not have much impact on gold prices. Neither the US housing reports nor the declining dollar – gold prices did not bank on any of these factors. 

The gold price remained in positive territory in Friday afternoon trading despite the dollar managing to claw back.  Spot gold was seen trading at $1,204.70/1,205.50 per ounce was up $7 on the previous session’s close. Reasons supporting this are:

Greece Crisis: Investors shifted focus to gold to seek safe haven after world stock markets tracked lower over worries of a potential Greek debt repayment default. 


Meanwhile, Consumer prices in the euro zone rose for the second straight month in March, not enough to pull annual inflation out of negative territory but another positive sign as the currency bloc looks to escape prolonged deflation.

Sluggish reports from US: US Industrial production disappointed in March to print -0.6% (expected: -0.3%) to suffer its largest fall in well over two years. US retail sales too printed a lower figure of 0.9% vs 1.1% expected

SPDR Gold trust- Holdings of SPDR Gold Trust, the world's largest gold backed exchange traded fund, remained unchanged at 736.08 tons, from its previous close of 734.29 tons

Demand for Gold: Physical buying in the world's top two gold consuming countries is expected to rise. A spate of manufacturing data from all the world’s major economies next week as well as the key Hindu festival of Akshaya Tritiya in India on Tuesday, which is widely regarded to be the most auspicious day in the country’s calendar to buy gold, could prove key to near-term direction. India’s March gold imports rose 94 percent year-on-year to $4.98 billion, according to the  trade ministry.

In the week to come factors supporting a bullish sentiment for Gold are: 

Weak US Dollar: A weak U.S. dollar could end up taking some momentum away from equity markets and that could help gold prices. Further weakness in the dollar could push up gold prices as bullion is seen as a safe-haven asset.

Eurozone: Negative bond yields in Europe continue to make the yellow metal an attractive safe-haven investment. Meeting of Eurozone ministers on the 24th April where Greece debt deal issue will take the center stage.

Economic Data from US: Though it will be a slow week for economic data, it will play a crucial role in influencing gold prices and the highlight will come on Friday with the release of U.S. durable goods for March. Disappointing economic data will make it clear the Federal Reserve will be unable to raise rates as high or as fast as markets are currently expecting and as a result, gold will benefit.

US rate hike: The G-20 did acknowledge the  fact that a FED tightening could send shock waves around the Globe.

For the time being Markets are puzzled when it comes to Gold price move. Until we get clear-cut news from the U.S. economy; that will allow the Fed to make a definitive move on rates or the clearance on Greece debt deal issue, Gold is bounded in a range of $1170 to $1238.

TRADE RANGE:
 

METAL	INTERNATIONAL price	DOMESTIC price
GOLD	$1194- $1230 an ounce	Rs.26,500- Rs.27,800 per 10gm
SILVER	$15.63- $17.00 an ounce	Rs.35,000-Rs.37,500 per kg

Investment tip:

For Gold: BUY ON DIPS

For Silver: Buy for future. Some facts:
1. 750 million ounces of Sivler are produced everyday which is worth US$14 billion. A price tag which is nothing in the current world. Individual companies are brought and sold at this price level.
2. New silver deposit exploration has found very little over the last decade.
3. Uses of Silver have been growing consistently in medical, Solar, Industrial etc fields. Relating to its increasing demand. A did read in an article that if the Silver is used at the current rate and only this much production happens across the world, then it can be extinct in the next 25 years or so.

“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

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