Gold expected to perform well in 2019

Last fortnight gold fell near two week lows. It was heading for its biggest weekly fall in nearly four months on 28th Feb. A strengthening dollar backed by rising equities created pressure on the yellow metal. Better sentiment on the stock markets and a reluctance by the physical gold investors are weighing on its price.

The dollar favored over the Jobs data and Gross Domestic Product news. This resulted in some long liquidation. The dollar, which gained impetus from better than expected fourth quarter U.S. GDP data, hit a 10-week high against the yen.

Rallies in the dollar were taking their toll on gold much more than they were a few weeks ago which is a clear sign that sentiment towards the yellow metal has shifted.

Just when the sentiment towards the yellow metal shifted, gold prices soared in the past week.  Gold prices soared to their highest level in 10 months on Tuesday, driven by technical buying, dovish central bank commentary and continuing uncertainty as the end of the 90-day trade truce between the U.S. and China draws near.

Just when investors became pessimistic about gold, some developments in the trade war resulted in the yellow metal hovering to its 10 month high on Wednesday mainly due to Fed comments and Equities.

Fed - Looking beyond the dollar’s relationship with gold, the yellow metals prices have been boosted by Fed commentary recently. The markets in general reacted favorably to the dovish tilt adopted by the Fed following its December rate hike.

Equity - Stocks were still climbing on Tuesday with key indices like the S&P 500 and Dow Jones Industrial Average on a steady upward march since the beginning of the year. However, both indices started to struggle early Wednesday as investors awaited the latest commentary from the Federal Reserve.

Gold found further support from job numbers released in Friday.

On Friday, prices got a jolt after a report showed that US hiring last month was the weakest in more than a year. The news helped gold push back above US$1,300 an ounce amid renewed demand for a haven.

Spot gold later settled at US$1,298.30 an ounce, down 1.14 percent for the week.
Gold has been caught in a tug of war. Four straight months of price gains amid economic hand-wringing gave way to losses last month as the US dollar gained traction.

The two main factors that are expected to influence gold in the months to come-

Dollar - Despite the recent strength in the dollar, the U.S. currency is expected to weaken “noticeably.” When that finally does happen, it should boost gold prices further—if the usual negative correlation between the two assets returns. They believe “a fair amount” of the greenback’s length has been removed but still see it as “structurally overvalued.”

Central Bank buying - central banks, especially Russia and China, have boosted the share of gold in their foreign reserves. Other analysts have also pointed out this same thing recently. The World Gold Council estimated a 74% year-over-year increase in this “official sector demand” in 2018.

Short term factors like US economic numbers and long term including a more dovish U.S. Fed, U.S.-China trade war, Brexit, Italian recession, fear of global economic slowdown, equity volatility, and increased central-bank buying are expected to push gold higher and help it   perform well in 2019.

5 YEAR (2011-2016) POST DIWALI ANALYSIS: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Buying gold and silver is considered to be auspicious in most of the festival especially on Akshay Tritiya, Dussehra, Dhanteras and Diwali. Even jewellers project gold in different manner during festival season.  Jewellery houses offer attractive discounts and other such schemes to lure the customers. Some have gone a step further and are offering discounts on the making charges as well.

We usually hear in advertisement that “Diamond is forever” but for Indian market if we see craziness about gold than for us “Gold is forever” seems to be the apt statement.

A historical analysis shows that largely on the day of Diwali, gold prices witness a correction, while the price increase actually takes place around two weeks prior to the festival.

Generally I have always been asked what are your projections for Diwali, how does the market look etc. But this year I have put across a post Diwali gold analysis from 2011- 2016. Let’s have a look.

                   

Diwali 2011- Gold prices ended steady at INR 31,300 per ten grams in special Diwali trading on 26^th October,  on selective buying, while silver fell by INR 150 to INR 49,000 per kg on reduced off-take.
Traders said the gold remained steady on token buying by market participants to mark the beginning of new Hindu Samvat year 2070, while silver declined on lack of support.

They said buying activity was restricted and the volume of business limited. Gold buying in India, the world's biggest buyer of the metal, tapered off further after the festival week, even as domestic users started getting small import lots, weighing on premiums.
India, struggling with a high trade deficit and weak currency, had been trying to curb demand for gold, the second-biggest import item after oil. It has made gold expensive for consumers by setting a record 10 percent import duty and made supplies harder to come which kept gold more or less stablisied.

Diwali 2012- Generally, gold sales remain good throughout year but when festival season starts gold breaks record in terms of purchase demands in India. Its seems to be true for 2012 too. Although gold price was nearby INR 32,000/- per 10 gm. on Dhanteras, it did not affect the demand and the craze to own the yellow metal continued. Gold is considered as safe haven. Gold investment also helps in bad financial situation that is the reason people don’t hesitate in purchasing gold even at higher price.

Once again this year people showed added interest in purchasing Gold. That is the reason country’s top two exchanges BSE and NSE recorded a total turnover of over INR 2,200 crore in gold ETF on Dhanteras and simultaneously demand for gold coins and bars as also high. 

Although Gold was trading at a record price of INR 32,000 per 10gm. Investors were still investing in gold because they knew that investment in gold is secure as it gives return like 670% in 10 years which is difficult to achieve from other asset class and it was a life time high in 2012 which kept the faith of investors in the yellow metal alive

Diwali 2013-  Since 2013 was one of the worst performing years for gold, the demand for it declined too. In the domestic bullion market shows that demand had slowed drastically as compared to the last festive season. Gold prices were trading at levels of around

Rs30, 000/10gm and this factor to a great extent is seen as having a dampener effect on demand for gold jewellery. While compulsive gold shoppers would yearn to buy gold coins and bars, because of the tight supply conditions they may not be able to do so.

A firm global trend on speculation that the US Fed might maintain stimulus to boost economic growth also supported the sentiment, they said. On the other hand, jewellers were seen offering discounts on making charges in order to lure buyers. Then too, sentiments doing rounds in the gold market are on the weaker side for 2013  thus affecting big purchases among the small to-middle income group category

Diwali 2014-  Gold sales in India during the festivals of Diwali and Dhanteras celebrated this week rose by about a fifth, a senior official at the country's biggest gold trade group said

Premiums in India, the second biggest buyer of bullion, jumped to $17-$18 an ounce during Diwali. Diwali sales across the country were very good. It was about 20 per cent higher compared to 2013. The strong demand from India was supporting global gold prices.
India set a record high import duty on gold last year to curb its trade deficit, and made it necessary for importers to re-export a fifth of all their purchases. The move contained imports into the country, with the resulting supply shortage sending local premiums to about $160 an ounce over the global benchmark at one point. Some of the rules were eased earlier this year, leading to higher imports and a fall in local prices. This year prices were low, sentiment was good and there was a  stable government in the centre; all of these helped boost sales. In anticipation of strong demand during the festivals, India had imported $3.75 billion worth of gold in September - a 450 per cent jump from the same period last year.

India imported 151.6 tonnes of gold in November, up nearly 38 per cent from October, as traders bought aggressively expecting curbs on overseas purchases.

India last year levied a record import duty of 10 per cent on gold and introduced the 80:20 rules after surging trade and current account deficits sparked the worst currency turmoil since the 1998 balance of payment crisis.

But instead of putting in place more restrictions, the government surprisingly scrapped the so-called 80:20 rule in the previous month, mandating traders to export a fifth of all imported gold. Traders had few takers for the gold they bought in November.
Trading agencies were expecting curbs on imports and subsequently higher premium in December. So they imported more than their requirement but were then struggling to find buyers.

Diwali 2015- Rising for the second straight day, gold prices edged up by INR. 5 to reach INR. 26,235 per 10 grams on the eve of Diwali that fell on November 11.The bullion market witnessed increased buying by jewellers to meet festive and wedding season demand amid a mixed global trend.

Silver, however, met with resistance and dropped by INR. 535 to trade below INR. 35,000-mark at INR. 34,875 per kg. Traders said sustained buying by jewellers to meet festive season demand and a better trend overseas mainly kept gold prices higher.

Diwali 2016- Gold prices drifted lower by INR 100 to INR 30,650 per 10 grams in special 'Diwali Muhurat' trading at the bullion market on Sunday in the absence of worthwhile activity.

However, silver held steady at INR 43,000 per kg on scattered buying support from industrial units and coin makers. Traders attributed the fall in gold prices to absence of activity as jewellers kept buying restricted.

They, however, added that token buying activity on the auspicious occasion of 'Diwali' and the beginning of Hindu Samvat Year 2073 capped the fall.

Over all, unlike 2012, we did not get to see gold touching Rs. 32000 mark during Diwali since then. Gold seems to have been steady withing Rs. 25,5000- Rs.30,500 range around the festive season.

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:

"An Action Packed December: RSBL"

 http://riddisiddhibullionsltd.blogspot.in/2016/10/an-action-packed-december.html

AN IMPRESSIVE START FOR GOLD IN 2015 BUT A DULL END

By Mr. Prithviraj Kothari, MD, RSBL

 

Every year, when we start afresh, each one has a hope- a hope that markets will do good. There was a similar feeling now as it was when 2014 began.

At the start of 2014 expectations were high that the gold market could shake off and recover from 2013’s drop, where prices ended the year in negative territory for the first time in 12 years.

However, despite strong optimism, gold once again closed the year in negative territory.
In the gold market, optimism was strong during the first half of the year. But later, the news hovering around the interest rate hike for gold pulled its prices down.

Fed’s interest rate hike played a significant role for gold in 2014. This helped drive the US dollar higher and pull down gold prices lower. 

By the end of 2014, Fed Chair Janet Yellen stated that interest rates will remain unchanged for the next two meeting. Hence analysts and economist expect that the Fed may bring in the first rate hike as early as June.

A thought some believe that interest rate hike may come in soon but there is part of the market who feel that any renewed expectation of looser U.S. monetary policy for a longer period could create some weakness in the U.S. dollar and in turn help push gold prices higher. 

Now we await next year’s crude prices and other commodities to see if inflation rears its head or if geopolitics suddenly moves gold.
This was a general scenario for 2015. Now let’s take a glance on the first trading day of 2015.
The first trading day of 2015 has been exciting for the gold market as prices have swung within a $27 dollar range during the session. Silver prices followed gold's volatility; as of 1:57 p.m. EST,
Gold closed 1.6% higher; reclaiming $1,200 after nearing $1,211 in intraday trade, as global risk-aversion and a weaker dollar boosted its safe-haven appeal.

Gold rebounded from a one-month low on Friday, as lower equities counteracted the impact of a stronger dollar and falling oil markets, but still posted its third straight weekly loss.
Spot gold fell to its lowest since Dec. 1 at $1,168.25 an ounce after the dollar strengthened, but rebounded to $1,194.10, up 0.63 percent at midday on a disappointing ISM manufacturing index report.
 

Gold added 0.2% to close above $1,186. Once again varied reasons behind this.

• Weak U.S. manufacturing data lifted demand for the metal as an alternative asset.
• The rising probability that a new Greek president, when elected, will break the terms of the ECB bailout sent yields Greek bonds and European stocks dipping as traders ran for safety in gold, silver, and the yen.
• Factory reports from Europe and China were even weaker. This added to the expectations that their respective central banks will be forced to add more stimuli.
• Gold was further supported by a falling dollar, which lifts demand for commodities denominated in it by making them less expensive to users of other currencies. 

Though we have always been discussing the precious metals market in general, this time I have also menti0oend the global economies which will down the line affect gold prices in 2015.


Chinese Economy- 

 
We all know that the Chinese economy is heading towards a slowdown. This has led to a rout in commodity prices, may continue to haunt global investors this year as well.
The country’s central bank helped the market with interest rate cuts and there is a reasonably good chance for a further cut, given that the real rate of interest is high.

US Economy

 
Like last year, this year too the interest rate move of the Federal Reserve will be a noticing factor to watch for.
The Fed believes that the risks to the outlook for economic activity and the labor market are nearly balanced and expects to remain ‘patient’ to regularize its stance of monetary policy, as per the statement published in December. 

Other Economies
The ECB will we forced to continue with its easy monetary policy as high unemployment, unutilized capacity and low inflation continue.
Apart from these, growth may inch up in Europe and Japan, but may drop in the UK.
Among the emerging markets, Russia will decelerate, while Brazil may not pick up appreciably. 

If you strongly believe that growth will improve globally his year then it could prove to be incorrect.
Thought the much-dreaded US quantitative easing (QE) concluded smoothly last year, but with Japan, Europe and China eyeing QE options, what may be in store for investors in 2015?
We need to wait and watch this for!

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1180-$1207 an ounce	Rs. 26,000- Rs.27,500 per 10gm
SILVER	$15.40- $16.30 an ounce	Rs.35,000- Rs.37,800 per kg

- Previous blog - "Too Much Noise In The Market"

http://riddisiddhibullionsltd.blogspot.in/2014/12/too-much-noise-in-market.html

TOO MUCH NOISE IN THE MARKET

 By Mr. Prithviraj Kothari, MD, RSBL

By the time you read my next article we will be in the next year. So let’s have a brief outlook on how 2014 was for gold.

But before we begin an in-depth analysis of the same let’s have a quick glance through the soft quite week that passed. A week that was a continuous tussle between Bulls and Bears where $1200 was a new price target for Gold.

Markets were generally quiet overnight on this Christmas Eve day. U.S. markets closed early and many traders and investors had checked out for the week, if not for the rest of the year. Due to thin trading volumes gold did not show much volatility in the market. It gained one percent on Friday as the dollar slipped against a second straight weekly drop, underscoring the bearishness in the market.

Spot gold was up one percent and was seen trading at $1,194.05 thus moving away from a three week low of $1170.17 that it hit earlier in the week. Though gold gained on Friday, the week ended on a low note for gold. Gold declined after data released from U.S. showed that that economy grew in the third quarter at its quickest pace in 11 years. Moreover, other data released showed that initial claims for state unemployment benefits dropped for the fourth straight week.

SPDR Gold Trust, the world's largest gold - backed exchange - traded fund, said its holdings fell 0.08% to 712.30 tonnes on Friday - a fresh six-year low.

Not only for the week, even for the year Bullion has declined 0.6 percent as prospects for higher U.S. borrowing costs, accelerating economic growth and a plunge in crude-oil prices crimped investor demand for the metal. 

Some of the key influential factors for gold throughout the year 2014 have been - (chronologically)

• Tapering of the QE3
• Crimean Vote
• Geo political tensions in Ukraine (Iraq, Syria, Israel)
• Historic win of Mr. Narendra Modi
• Middle East Tensions
• ECB’s aggressive monetary stimulus package
• THE BANK ESPIRITO SANTO crisis
• Uncertainty over interest rates hike by the Federal reserve
• Strengthening US Dollar
• Slowdown of the Chinese Economy
• Swiss Referendum

Simultaneously we also need to have a look at what would turn the tables for gold in 2015.

The US economy: The US economy progress is measured in areas such as retail sales, industrial production, housing starts, payroll numbers and the broadest measure of unemployment. If the economy deteriorates then there are renewed expectations that the Federal Reserve may accommodate the financial system, particularly the banking system, and the combination of those factors could trigger a massive decline in the U.S. dollar. As a result of that, we will see spikes in commodity prices, such as crude oil, gold and silver.

Dollar: The number one thing for gold is the dollar, particularly in the near term. The dollar has to turn. Several Fed officials are now expressing concern about the strength of the dollar. If we see several weak economic reports in the next few months, the Fed is going to make noises about continuing to ease. That would push the dollar down and push up the price of gold.

Chinese economy: Gold may advance amid speculation that China, the world’s biggest consumer, will take more measures to bolster the economy, boosting demand for the precious metal as a store of value.

Russian and European Economies: Russia’s economy has been struggling with high inflation, crushing economic sanctions and weak oil prices.

Europe is still feeling some of the effects of its financial crisis as economic growth remains anemic and the central bank fights deflation. This uncertainty could create another crisis in emerging markets, and gold would benefit as a safe-haven investment.

Fed’s interest rate hike: If they make an outright comment that they're going to raise rates on a specific date, I think that could have a pretty serious hit to the equity markets.

Equities market: With equity markets back at record highs, that it also wouldn’t take much of a global crisis to spook investors, driving them back into gold markets.

Demand Supply: Any significant drop in gold prices will cause some supply disruptions, creating a floor for the market. Another benefit for the gold market should also come from gold-backed exchange-traded funds, which has seen lower redemptions throughout 2014


What we notice here is that the factors are similar to that of 2014 but will work in favour of gold. When the year is about to end, whoever I meet keeps asking for only thing- my outlook for gold for the coming year.

Well to begin with I would first like to share with you the various predictions that I have got from different people.
Some are really optimistic for the gold market for 2015 compared to other analysts as they think that the yellow metal could end next year around $1,250 while some feel that it will be well stuck at around $1200.

Some feel that gold prices will fall to $1,100 or even $1,080 an ounce as the U.S. dollar continues to dominate the marketplace and investors adjust to normalized U.S. interest rates.

   
There’s a lot of noise in this market right now, and this noise is causing volatility in the metals that a rude rumour is coming when the Fed, instead of raising rates, launches a QE4 to keep the economy from slipping back into a recession.

Investors shouldn’t rule out gold’s appeal as a safe-haven investment as a lot of uncertainty still remains in the marketplace. In fact safe-haven demand could help the gold market in early 2015.

TRADE RANGE FOR 2015:

METAL	INTERNATIONAL PRICE	DOMESTIC PRICE
GOLD	$1130- $1350  an ounce	Rs.24,000- Rs.32,000  per 10 gm
SILVER	$14.50- $24.00  an ounce	Rs. 32,000- Rs.60,000  per kg

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 - "Fed's "considerable time" creates "considerable impact" on gold"
http://riddisiddhibullionsltd.blogspot.in/2014/12/feds-considerable-time-creates.html