Iraq to Ukraine - Safe haven boost!

- by Mr. Prithviraj Kothari, MD, RSBL

All that was written about Gold about the next downfall, proved incorrect till date. Safe haven buying returned lying a Torpedo which took out all the possible resistance levels. Silver proved that it is always the best ally of Gold and moved at a much faster pace than Gold.

Gold saw a very good recovery internationally and in the domestic markets last week. The main reason behind this upward movement of gold and silver prices was the ongoing Geo political crisis in Iraq and Ukraine. Gold has always been considered as a safe haven assets in times of crisis. Moreover, the equities market have been trading near record levels and have reached a saturation point. 

On Tuesday, we saw the economic data coming in from US. Though the crisis in the Middle East was escalating, the attention was towards the two day policy meeting of the Fed where it was expected to further taper US bond purchases. Gold edged lower on Tuesday, backing away from the previous session's three-week highs as a stronger dollar and possible thawing of Middle East-West tensions quelled appetite for safe-haven assets. Consumer prices reading were high which further raised the belief that the Federal Reserve was headed for more monetary tightening and it so did by announcing a further $ 10 billion reduction in QE3 programme.

There was no rush to hedge in the precious metal either after weaker U.S. home construction numbers for May indicated a softer economy in general. The Fed cut its U.S. growth forecast for 2014 from 2.9 percent to a range of between 2.1 percent and 2.3 percent, but it also expressed confidence that the U.S. economic recovery was on track.

As the Federal Reserve showed lack of commitment to lift interest rates and as the tensions in the Middle East continued to escalate, we saw gold surging over 3 per cent on Thursday. This gain has been its best in the past eight months.

Bullion hit its highest level in more than two months. Silver jumped as much as 5 percent, while platinum and palladium also climbed as new hurdles emerged to settling South Africa's mining strike.  

Gold edged lower on Friday as investors took profits after it posted its biggest daily rise in nine months, but was still set for its biggest weekly gain in four months due to conflict in Iraq and a softer dollar after the Federal Reserve's comments. 

As we all know, The key factor that has driven gold prices high is the current Middle East crisis and the Ukraine crises. Militants have routed Baghdad's army and seized the north of the country in the past week, threatening to dismember Iraq and unleash all-out sectarian warfare with no regard for national borders. U.S. and Iranian officials discussed the crisis in Iraq on the sidelines of separate negotiations about the Iranian nuclear programme in Vienna. The news says US President is sending as many as 300 US military advisers to assist the Iraqi Army. 

Fighting flared between Ukraine and pro-Moscow separatist forces, further straining a unilateral ceasefire declared by Ukraine as Russian president Vladimir Putin pressed Kiev to talk to the rebels. When gold is driven by geopolitical news, there's a tendency that this has to keep getting worse for gold to improve.

Moreover there are few data releases from US which the market players believe will be positive and prompt the USD to appreciate. Looking at the above scenario we might see gold prices may though initially rise which eventually likely to turn down. 

There is a possibility that the euro currency may also continue to depreciate which basically ECB wants so as to manage inflation and economic growth in the country. So any further decline in the euro currency might prompt USD to advance and by which may cap gold’s upmove.

These sorts of news are enough to shudder the market up and down. On a technical note, earlier I felt that the resistance near $1285 breaching which it might fuel to $1300 mark. Now the same levels would act as key support regions in short-term. 

Gold has gained momentum much more than expected and may not rise substantially in the coming week as the overall trend remains down till the world economies are improving due to unprecedented stimulus packages offered by central banks across the work to support their currencies. 

To top that I also feel that gold prices in the domestic market will get further support out of a minor depreciation of the rupee. hence I think buying on dips would be advised.

Gold is expected to range between $1277 - $1340 in the international market and Rs.27,500 - Rs.29,500 in the domestic market.

While silver is expected to range between $20.00 - $21.30 and Rs.43,500- Rs.47,000 in the international and domestic markets respectively.

  

- Previous blog -

"Safe Haven Buying Returns- Gold in Picture"

http://riddisiddhibullionsltd.blogspot.in/2014/06/safe-haven-buying-returns-gold-in.html

A DREADFUL WEEK FOR GOLD

                             - by Mr.Prithviraj Kothari,MD,RSBL(RiddiSiddhi Bullions Ltd.)

It's been a dreadful week for gold. The yellow metal is down almost 3%, the most in any week since late March. 

I have repeatedly been making a point that gold prices are being pulled by the bullish and bearish factors and it has been moving on a see saw as we get a positive growth report from US on one hand and escalating Ukraine crisis on the other.

Finally the strong resistance of $1280 gave up. On Wednesday, Gold prices fell to a near 4-month low as easing Ukraine crisis paved way in the market. But gold prices bounced off these levels after data showed that the U.S. economy contracted in the 1st quarter for the first time in three years. The US Commerce Department approximated that GDP dropped in the 1st quarter. Economists held severe weather conditions responsible for this. 

On the other hand, the US Labour Department report showed application for jobless benefits declined last week which reduced the safe haven appeal for Gold as the market is now moving their focus to riskier assets like equities that have given better returns than gold in the past year,

At each dip there are more people exiting the markets than entering.

In 2013, we saw gold moving in exorbitant quantities from West to East. Last year China overcame India as the world's top gold importer and gold jewellery and investment demand, rising to a record 1,065.8 tons. Most of that sold gold ended up in China and India and other growing gold consuming nations in Asia led by Vietnam and Indonesia.

But in the first quarter of 2014, that demand tanked. Mainland China's demand for gold fell 18% in the first quarter of the year as investors bought fewer bars and coins, offsetting record demand for jewellery.

India's bars and coins buying also showed a huge drop-off of 54% to 98 tonnes and with jewellery consumption also sliding overall gold demand on the subcontinent slid 26%.

One of the most important ongoing news was about the Major metal exchanges emerged as contenders in developing an alternative to the London silver price benchmark, or "fix", after the century-old system for setting the globally recognized price is disbanded in August. The major exchanges CME and LME both said on Thursday that they were working with LBMA and the precious metals industry to find an electronic-based solution.

Meanwhile, expectations remain high that a strong US economic data report might support the Fed's policy of scaling back its bullion friendly stimulus. 

The market will now be glued to the ECB meeting that will be held next week when the bank might take further steps to ease its monetary policy and enhance growth.

Gold remains 5% to the upside for 2014 but is down $120 an ounce from highs reached mid-March as the rally on the back of safe haven demand and bargain hunting loses steam.

Further for the week gold is expected to be in the range of $1238-$1273 in the international market and Rs.26,000 - Rs.27,800 in the domestic market.

While silver is expected to move in the range of $18.15 - $18.85 and Rs. 38,500- Rs.41,00 in the international and domestic markets respectively.

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 Investors be Cautious"

-http://www.riddisiddhibullionsltd.blogspot.in/2014/05/gold-investors-be-cautious-mr.html

GOLD INVESTORS BE CAUTIOUS!

                                        - Mr. Prithviraj Kothari : MD, RSBL(Riddisiddhi Bullions Ltd.)

                                 

On Friday, Gold prices were moving between small gains and small losses as the markets were quite calm as investors reined in their trading activity ahead of a long weekend in U.K. and the U.S. Spot gold was down 0.2% at $1,291.32 during trading hours where as silver was 0.3% lower at $19.391 an ounce. 

Through the week gold prices were held in a tight range between around $1280 and $1315. 

Gold prices remained low this week on strong dollar and the remarks released by the FED of a positive US economic recovery but with the Ukrainian elections Sunday, news out of the region may finally give the gold market the catalyst it needs to break through.

The market has been pulled between good news and bad news and this is what is given gold that pull and push. The big question and the reason why we are stuck in this range is the uncertainty about where to go next and need to determine what themes should be the overall driver for this sector at the moment. 

Global monetary factors in particular continue to favour gold.  In addition, geopolitical risk remains high, particularly as the Ukraine elections approach, and, longer-term, Russia and China cosy up, a significant long-term global game-changer to which Washington appears oblivious.

• Holdings in exchange traded products backed by physical gold continue to hit new 4½ year lows while physical demand may receive a boost from pent up Indian demand later this year when import restrictions are expected to be eased by the new government.
• In India, the government has just authorized seven more private agencies to import gold, thus easing gold import restrictions, which will lead to lower premiums and a rise in gold demand as the wedding and festive seasons will start in August. The easing out of the 80:20 rule is still a drag, however the relaxation to include the trading houses should be seen as a positive development. 
• The record high premiums that were being charged in the market have and will continue to drop drastically as supplies will be good. The premiums have fallen from record highs to nearly $40 which is expected to reduce to $25 as the time passes by. Usually 30-35 Tonnes of gold is imported, but With this rule relaxation, supply is expected to increase to  60-70 tonnes
• In Europe, the ECB is expected to ease monetary policy in the 5 June meeting as inflation is too low and economic growth is too slow at 0.2 percent in Q1
• According to a recent Bloomberg/CME Precious Metals Conference, the East holds the key to gold’s outlook. With China printing its money faster than mining its gold, consumers will continue to demand gold to protect them against inflation

To sum it up, gold prices have got glued to the $1300 level and until we see a critical shift in market dynamics such as correction in the equities market or some statement from the Fed or some escalation in crisis, we continue to see gold in this range.

Gold has been moving in this sideways pattern for over a month and has formed a wave like pattern.

Now what we need to watch for is more important-

• We will keep an eye on Ukraine’s 25 May presidential vote, 
• The U.S. April durable goods orders and March housing prices on 27 May, 
• The U.S. Q1 GDP second release and Japan April CPI and industrial production on 29 May, 
• The Philadelphia Fed President Plosser’s (FOMC voter) speech 
• The April U.S. Core PCE Price Index on 30 May. 

As per the current market trends gold is expected to range between $1272- $1310 in the international market and Rs.27,000- Rs.28,500 in the domestic market.

On the other hand silver is expected to move between  $18.85- $20.20 and Rs.39,500- Rs.41,500 in the international and domestic markets respectively.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets - MD, RSBL(Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog- "MODIfying India"

http://www.riddisiddhibullionsltd.blogspot.in/2014/05/modifying-india.html

MODIfying India

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Firstly, heartiest congratulations to Mr. Narendra Modi on his historic win. It was a time for celebration for entire India. messages, jokes, headlines etc were exchanged as Mr. Narendra Modi enjoyed a momentous win in the worlds largest democracy.

As India welcomes its most awaited PM with open arms, we saw Mr. Modi's effect extending across all assets class.

Friday at the prospect of a stable government led by Mr. Modi, whose own state, Gujarat, prospered under his leadership. stocks and the rupee jumped on optimism that Modi will make good on campaign promises to create jobs and attract foreign investment in all sectors except for multi-brand retail.

Indian rupee also benefited, strengthening to an 11-month high of 58.63 rupees to the U.S. dollar Friday. and Sensex sky rocketed at 25,000 (1400 points up.) while results were still being out.

This appreciation of the rupees pushed bullion prices down.

Gold and silver tumbled terribly on Friday. Though in the international market gold was at a weekly gain, in India , the prices declined as the rupee strengthened. Gold plunged almost 350 rupees and silver was down 825 rupees on the commodities exchange. Meanwhile, in the international market gold was playing a different move.

After dropping more than 1 percent on Wednesday, spot gold prices gained on Thursday as investors digested comments by Federal Reserve chair person that central banks are in no rush to reduce the size of its balance sheet. 

The yellow metal was also supported by escalation of geo-political tensions as pro-Moscow separatists in eastern Ukraine ignored a call by Russian President Vladimir Putin to postpone a referendum on self-rule, a move that could lead to war. However, comments from European Central Bank President Mario Draghi's that the bank may act to stem falling inflation at its June meeting knocked the euro and the strength in dollar capped sharp gains in prices.

Gold prices fell on Thursday on positive US unemployment claims data which weakened the precious metals complex while dollar strength added to the bearish sentiments.

Stronger growth is expected post the poor winter growth. backed up by data this week showing strong housing starts and an uptick in consumer prices, might move up the Fed's plans for raising benchmark interest rates from near zero.

Half of the sates in US now have unemployment rates below 6 per cent. This figure shows that the jobs market in US is improving but at a slow pace. While employers in 39 states added jobs, we see that hiring too is picking up well.

On Friday, Gold saw slight gains in Asia before it fell to $1291.95  and then bounced back to $1296.09 in the next four hours of trade, but it then dropped to a new session low of $1288.02 after  housing data was released and the yellow metal ended with a loss of 0.19%.  Silver slipped to as low as $19.271 and ended with a loss of 0.62%.

The Economy

Report	For	Reading	Expected	Previous
Housing Starts	Apr	1072K	975K	947K
Building Permits	Apr	1080K	1008K	1000K
Michigan Sentiment	May	81.8	84.5	84.1

Source- http://news.goldseek.com/GoldSeeker/1400271241.php

For now, the gold market’s key drivers are, first and foremost, the flow of U.S. economic indicators as they affect expectations about prospective Federal Reserve monetary policy . . . and, second, of a more temporary nature, the ebb and flow of geopolitical anxieties arising from events in and around Ukraine.

Now that India has formed  a stable government and that the world picture is minutely fading and getting clear, market players are once again expected a rally in gold prices.

Reasons Being- 

Import duty reforms in India- The his morning, for example, as I write the news has come through that India’s ruling Congress party has conceded defeat in the world’s biggest democratic election to Narendra Modi’s BJP which may even win enough votes to take power on its own without its coalition partners. The BJP is thought to be more sympathetic to gold and could repeal, or reduce, the import restrictions that have led to India falling from first place as the world’s biggest gold consumer. 

This will lead to a rise in demand for gold from India which in turn will push gold prices high.

Physical Demand- Demand for gold from China is also expected to provide support for gold. This factor will give gold a wild card entry into the bulls market. over the next three to five years the demand from Asia and, also from Central Banks which have been buying gold rather than selling it over the past couple of years, will actually be sufficient to drive the gold price higher.

U.S. Economy- Many traders expect the US economy to deteriorate further which will compel the Fed to rethink about its policy prospects. The recent statistical improvement in the U.S. economy is little more than a bounce back from the past winter’s weather-induced economic chill. 

As a more realistic view of economic prospects takes hold, the financial markets will re-assess expectations of Fed policy – and this could be the catalyst triggering a resumption of gold’s long-term bull market. 

At the same time, equities are due for a setback – perhaps mild, more likely not so gentle. Either way, the competition for investment funds between equities and gold – a competition that equities have won in recent years – will shift increasingly toward bullion

when we expect to see a deterioration in the economic indicators and a reassessment of Fed policy prospects.

De- Dollarization- Russia is actively pushing on with plans to put the US dollar in the rear-view mirror and replace it with a dollar-free system. Or, as it is called in Russia, a “de-dollarized” world.

Russian Ministry of Finance wants to reduce the share of dollar denominated transactions and is hence ready to green light a plan to radically in the role of Russian ruble in export operations. Dollar will then be replaced by gold. This too will give a support to gold prices.

Geo-political tensions in Russia-  as we all know, tensions in Russia can escalate any moment thus increase the chances of a war. Any spark in the geo-political crisis in Russia will shoot up gold prices.

Meanwhile, gold is expected to range between $1272 to $1310 in the international market and Rs. 28,000- Rs.29,000 in the domestic market. 

On the other hand silver is expected to range between $18.80-$20.00 and Rs.40,000- Rs.42,500 in the international and domestic markets respectively.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets - MD, RSBL(Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog- "Gold on a see-saw"

http://www.riddisiddhibullionsltd.blogspot.in/2014/05/gold-on-see-saw.html

GOLD ON A SEE SAW

- By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

The year began on a positive note for gold after a terribly weak performance in 2013. By 2014, Mid February gold was once again enjoying the status of the most sought after metal, as we saw the yellow metal moving on the road of recovery.

Now gold is being pulled between bullish and bearish factors. Gold prices peaked in march, but the pull back and consolidation is now lasting a bit too long to be considered healthy. Moreover, ETF redemptions are on the rise and this has given rise to the bearish pull for gold. Gold is now sitting on a see saw and is caught between US recovery on one side and the rising Geo-political tensions on the other.

Russian crisis brings along with it a strong bullish background for gold. But at the same time the global economic development, has shifted investors focus from gold to equities and pushed gold into the bear market. In addition, other markets are doing better and you need look no further than the fact that US equities are setting fresh record highs and corporate confidence seems to be picking up, as there has been a revival in M&A activity. Strong equities are therefore raising the opportunity cost of holding Gold.

Last year gold did disappoint many investors but still it has not been pushed out of the market. It's a temporary phase and key market players still believe that gold will soon begin to rally.

As such, we think the market could quickly get interested in Gold again if other markets start to correct, especially as Gold prices are much closer to their lows than highs. A relaxation in India’s import restrictions could be a bullish development, as could a pick-up in geopolitical tension. Nearly 70% reduction in Gold imports as compared to last year will surely please the new government with the reduction in CAD woes.

It's always stated that gold enjoys the status of a safe haven asset during times of uncertainty. Ukraine tensions have been behind much of gold's 7 percent rise this year. Pro-Moscow separatists in eastern Ukraine ignored a public call by Russian President Vladimir Putin to postpone a referendum on self-rule, declaring they would go ahead on Sunday with a vote that could lead to war. The decision, which contradicted the conciliatory tone set by Putin just a day earlier, caused consternation in the West, which fears the referendum will tear Ukraine apart. While on Saturday, tensions were running at fever pitch in eastern Ukraine on the eve of an independence referendum, as rebels briefly held several Red Cross staff on suspicion of espionage. These rebels voted for self rule. Ukraine's acting President Oleksander Turchinov sad that those stand for self rule do not understand that it would mean complete destruction of the economy , social programme and life in general for the majority of the population in these regions.

But, many traders fear the gains would dissipate quickly once the situation is resolved. Many gold analysts have said that the precious metal has remained resilient the past few weeks as fundamentals remain negative for the asset, such as the Fed's commitment to continue to scale back economic stimulus.

Data released on Thursday stated that the number of Americans filing new claims for unemployment benefits fell more than expected last week, indicating the labour market was strengthening despite a run-up in applications in prior weeks.

Overall, Gold posted second straight weekly decline as more strong U.S. data showed that the world's largest economy was recovering well, supportive of the Federal Reserve's stance to keep trimming monetary stimulus. Moreover, the European Central Bank stayed committed over leaving its main interest rates unchanged. Physical demand has also been muted despite the drop in prices, with many hoping that a stabilization in prices would bring back buyers.

Last year, Chinese demand for gold surged as many buyers entered the market at dips. That, along with strength in retail demand in Western markets, helped drive a 35 percent surge in physical investment last year to 47.1 million ounces and Jewellery consumption also rose 22 percent to 81.7 million ounces.

The Fed’s ongoing reduction in its bond purchases, easing concerns about fiscal situations on both sides of the Atlantic and low inflation are all headwinds for the yellow metal for the rest of 2014. This brief detention underscored jitters in the two regions of east Ukraine ahead of the disputed referendum likely to result in a new spike of Geo-political tensions.

We cannot then, underestimate gold. 

The trade range for Gold and Silver is expected to be as follows:

In the international markets gold and silver are expected to range between $1270 -$1310 and $18.20 - $20.50 respectively. While in the SPOT (delivery based) domestic markets Gold and Silver are expected in the range of INR 28,300 to 29,700 and INR 40,500 - INR 44,000 respectively

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 -

"Ukraine Reigns Over Gold Prices"

http://riddisiddhibullionsltd.blogspot.in/2014/05/ukraine-reigns-over-gold-prices.html

UKRAINE REIGNS OVER GOLD PRICES!!

                                    - By Mr. Prithviraj Kothari, MD,RSBL

Gold has been showing quite interesting movements lately. 

Last week, gold was lying at a three month low of $1,270 an ounce post the economic recovery and reduced safe haven appeal. This negative sentiment continued this week as Gold rose slightly but remained below $1,300 an ounce on Tuesday as the market focused on the U.S. Federal Reserve's policy meeting and expectations for strong U.S. data, with prices underpinned by uncertainty over Ukraine. The Fed did give a positive and upbeat assessment of the U.S economy and announced another cut in its massive bond buying program.

Following the previous 3 tapers, The US Central Back reduced its monthly asset buying to $45 billion for the fourth time on 30th April. This $10 billion cut has compelled the market players to believe that further reductions in measured steps are likely.

Positive economic growth was visible from the reports released during the week.  Gold further dropped post the release of the payrolls data, which showed that U.S. employers boosted payroll in April by the most in two years. Moreover unemployment rate stands at 6.3% which is much lower as compared to 6.7% last month.

This downtrend was further supported, as outflows from the world biggest  bullion fund resumed after a one and a half week halt. Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, fell 0.3 percent to 785.55 metric tons during the week, the lowest level since January 2009, according to data on its website. Outflows totalled 25.1 tons last month, more than offsetting combined gains of 19.9 tons in February and March

Spot gold fell 0.2 percent to $1,289.10 on Thursday, after losing 0.4 percent on Wednesday. Trading was thin as several Asian markets, including China, Hong Kong and Singapore, were closed for the Labour Day holiday.

However, traders remained cautious in expectation of further developments in the Ukrainian crisis and Friday changed the world scenario for gold as increased geo political tensions gave the yellow metal that much needed push. Demand for gold stepped up as the flaring of Ukraine's violence started making markets nervous and pushes the international price of the Gold above $1300.

Ukraine sent armoured vehicles and artillery to retake Slovyansk, a stronghold for pro-separatist forces, defying President Vladimir Putin’s demand to pull back troops with Russia’s army massed across the border. 

Acting President Oleksandr said that  many pro-Russia rebels had been killed, injured and arrested in the eastern city of Slovyansk. In a statement, he said the operation in the rebel-held city was not going as quickly as hoped. Separatists shot down two Ukrainian army helicopters, killing a pilot and a serviceman and further injuring seven.

The UN Security Council met in emergency session at Russia's request. In fact, catastrophic consequences have been signalled by Moscow's ambassador if Kiev's military operation in eastern Ukraine were not stopped.

Investors have now put the Ukraine issue above everything. As the week began gold was seen moving down post the Fed tapering, but rising geopolitical tensions and heavy short-covering helped bullion reverse an initial sharp sell-off. 

2014, witnessed 8.4 percent gain in bullion amidst signs of faltering U.S. economic growth and mounting political crisis in Eastern Europe. Any elevation in the ongoing crisis will give a further push to gold.

After nearly three months of continued strikes over wages, Platinum mines in South Africa are still far away from solution. This is significantly increasing the buying interest and pushing prices to new levels.

What to expect next week:
1. ISM non-manufacturing PMI on Monday
2. Fed's Yellen testify to Join Economic Committee on Wednesday
3. ECB press conference on Thursday. 

The trade range for gold and silver is expected to be as follows-

In the international markets gold and silver are expected to range between $1277 - $1320 and $18.15 - $21.00 respectively. While in the domestic markets gold and silver are expected to move in the range of INR 29,000 - INR 30,500 and INR 41,000 - INR 44,000 respectively.

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

- Previous article- "Gold Gains Momentum, Investors Gain Confidence!"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/gold-gains-momentum-investors-gain.html

Gold Gains Momentum, Investors Gain Confidence!

- By Mr. Prithviraj Kothari, MD, RSBL

While gold gained momentum, investors gained confidence in gold. Gold spurred the longest price rally in six months. Initially gold was on low, but prices got pushed higher by the end of the week.

On Monday, gold fell to nearly a three week low as we witnessed outflows from the worlds biggest bullion backed Exchange Traded Fund (ETF). Moreover, a lack of a further increase in geopolitical tension also prompted selling in gold. Last week, the fund's outflows totalled 9.3 tonnes, erasing all the gains made in the year.  

Gold fell to its lowest since mid-February on Tuesday after U.S. housing data beat expectations, boosting confidence in the U.S. economic recovery and lifting stock markets, which hurt gold's appeal as an alternative investment. 

On Wednesday, gold had firmed its position above a two and a half month low of $1,268.24 due to firmer equities and a weaker technical picture that had triggered strong selling,

However, the tables turned on Thursday as rising geopolitical tensions and options related buying helped gold in moving in the opposite direction and reverse the early sharp losses

Bullion prices mounted after Ukrainian forces killed up to five pro-Moscow rebels as they closed in on the separatists' military stronghold in the east. 

In March, bullion Prices reached a 6 month high after Russia took over Crimea. But then it fell almost 9 percent on signs that peace would return. But once again Hostilities this week are bringing back the gold bulls. Tensions between Moscow and Western powers over Ukraine are lending gold support, but it remains in a somewhat fragile situation as interest from long-term investors is still absent.

Though on the basis of the economic indicators of the US economy, there were signs of recovery, the conflict between Russia and Ukraine spurred traders to unwind bets on a drop. The metal has risen 8.2 percent in 2014 even though economic recovery has pushed the Federal Reserve to reduce its monetary easing. This tapering was responsible behind the 28 per cent drop in gold in 2013 because if the Fed would scale back its bond purchase then gold would lose its appeal of being an inflation hedge tool.

Apart from the Ukraine crisis, another big news that made rounds in the market was that major international banks were jettisoning their commodities business.*

Around 20 US based investors have filed antitrust claims against major leading banks over the past two months.  These investors have accused Barclay, Deutsche Bank, HSBC, Bank of Nova Scotia and Societe Generale of colluding to manipulate the gold price.

The court cases are complicating negotiations that Deutsche Bank had started with potential buyers after it announced in January that it was putting its seat at the fix up for sale, a source with knowledge of the matter said. In case any such decision is taking of discontinuing the commodity trading wings business then this will definitely calm down the price volatility of bullion prices.

Another fact the will play a major role in determining the gold prices is the worldwide demand from gold. CHINA- Chinese demand for gold is set to increase from the current level of 1,132 tonnes a year to 1,350 by 2017, cementing its place as the world’s largest gold market. According to report published by the World Gold Council, entitled:  ‘China’s gold market: progress and prospects’, private demand for gold in China will see sustained growth over the next four years.

China does not report any trade numbers. The only source of procuring these gold export numbers to China is through Hong Kong as its the prime medium of gold for China. But now that China has allowed Gold imports via Beijing, it may threaten Hong Kong’s export numbers to mainland.

INDIA- Physical demand in India over the next week is expected to rise as the country welcomes the auspicious occasion of Akshaya Tritiya on may 2. This could result in a slight pickup in gold demand , but with the heavy tariffs placed on gold, there are questions on how much buying will actually occur.

UK- Demand for gold from UK is tend to augment as investors are saving up for retirement with the U.K.’s Financial Conduct Authority considering adding bullion to its list of “standard assets. Last year, the FCA was replaced by The Financial Services Authority to oversee market regulation. They published a consultation paper with the list in 2012, asking whether other types of investment should be added. Various forms like Cash, bonds and exchange-traded commodities were included but  physical gold was not. There are expectations that gold may be added to the list by June. If any such possibility materializes then demand for gold from UK will definitely rise as gold is on the radar of more mainstream investors. 

Next week is full of revelation for gold as the market moving and price deterring event will unwrap for gold. With a Federal Reserve monetary policy meeting and April non-farm payrolls data set for release; additionally, any change in the standoff between Russia and Ukraine has the ability to move markets.

Moreover, The Federal Open Market Committee meets Tuesday and Wednesday, and economists said they expect the Fed to announce another $10 billion-a-month cut in its quantitative easing program, and on Friday the Labor Department is scheduled to release its April non-farm payrolls data.

Gold traders will have to be nimble next week as these headline-making events could cause volatile market action. Because of the uncertainty over the Ukraine situation, several gold-market players believe that gold prices will once again move upwards.

*source- http://in.reuters.com/

- Previous blog - "Gold Prices Off Route"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/gold-prices-of-route.html

Gold prices off the Route?

                                        - by Mr. Prithviraj Kothari, MD, RSBL

Gold prices have been battered over the week. Starting with a high of $1330 to a low of $1282 and giving a close of $1294 has brought Gold prices back to its major support $1280. ($1280 acts as a strong support for Gold, below which Gold prices could attain new lows).

The week started on a stronger footing carrying the upward trend of the last week.  Gold prices gained to a three week high on Monday on renewed concerns over the escalation of hostilities in Ukraine that prompted its safe haven appeal. Geo political tensions escalated as violence between pro-Russian separatists and Ukrainian government forces grew. Moreover gold prices were further supported over the news that a Russian fighter aircraft made repeated cross range passes near a US ship in the Black Sea. Apart from this SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings rose 1.80 tonnes to 806.22 tonnes the first inflow since March 24 acted as a positive factor.

But the upward trend was short lived. $1330 proved to be a crucial stage which wasn’t broken and Gold prices plummeted. US economic indicators showed positive signs starting with US retail sales. According to Bloomberg survey, U.S. retail sales probably accelerated in March, boosted by car purchases that indicate demand is recovering from a winter-led slowdown earlier this year.

Other factors that added to Gold and Silver price fall were:

U.S industrial production-
         Above expectations March industrial production data hinted that the US economy was starting to emerge from a weather-induced slowdown suffered over the initial stages of calendar 2014. Adding weight to this belief was the uplift seen in capacity utilization levels over the month.

EU industrial production-
        Euro zone industrial output edged higher in February, official data showed Monday, in line with recent data showing a very modest economic recovery in the single currency bloc.

U.S CPI, U.S housing starts and building permits-
        U.S. Consumer Prices rose slightly higher while the U.S. housing starts rose 2.8% in March to a seasonally adjusted annual pace of 946,000, fueled by growth in single-family homes, the Commerce Department said Wednesday. Starts for February were revised higher to a pace of 920,000 from an initially reported 907,000.

Philly Fed index-
         A reading of manufacturing sentiment in the Philadelphia region improved in April, according to data released Thursday. The Philadelphia Fed’s manufacturing index rose to a reading of 16.6 in April from 9.0 in March, stronger than a Market Watch-compiled economist forecast of 10.0.

Overall, Gold dropped nearly 1.85% this week.

Though the various reports released from US did show signs of a recovering economy, Federal Reserve Chairwoman, Janet Yellen restated that she expected interest rates to remain very low until the recovery is on a more secure footing and the American economy is more fully involving available workers and other resources. The Obama administration told asset managers last week that it was planning additional sanctions against Russia over the conflict in Ukraine. Some of the supporting factors that lead Gold prices recover from its support level of $1280.

Looking at the current market conditions, I feel that western countries are reducing their holding on every rally while the same is being absorbed by the physical demand on Asia. It’s a see saw battle where one reduces and one increases. Geopolitical tensions will act as a strong support for Bullion metal prices apart from the physical demand.

The labour dispute which broke out in January that shut most of the platinum mines in South Africa is extending the longest shortfall in global production since 2005. The strike by more than 70,000 South African workers will continue as long as companies refuse to improve wage offers, Joseph Mathunjwa, president of the Association of Mineworkers and Construction Union, said April 15. The workers want basic monthly pay boosted to 12,500 rand over four years, which the producers say they can’t afford after production costs jumped 18 percent annually in the last five years, as wage and electricity costs rose. Many laborers live in shacks made of iron sheeting. They share toilets, don’t always have water or power, and many spend much of their income servicing debt. The country has a 24 percent unemployment rate.

While the Gold and Silver precious metals group is being thrashed, their counterparts, Platinum and Palladium are looking strong. The biggest producer of these metals i.e. Russia is having tensions with Ukraine while the second biggest producer i.e. South Africa has union problem. Due to these issues, I feel Platinum will look forward to extend its lead over these metals.

My trading range for the upcoming week for Gold in international prices is around $1270 to $1330 and for Silver $19.30 to $20.20. While in Indian rupees, Gold prices will range from INR 27900 to INR 29200 and for Silver the trading range will be INR 41,500 to 44,500.

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

- Previous article- "OUR LOVE FOR GOLD"

http://www.riddisiddhibullionsltd.blogspot.in/2014/04/our-love-for-gold.html

(Source: http://www.bloomberg.com/news/2014-04-17/platinum-strike-widens-output-deficit-seen-lasting-years.html)