HIGHER GOLD PRICES FOR THE DOMESTIC MARKET: RSBL

  By Mr. Prithviraj Kothari, MD, RSBL

Firstly I would like to congratulate all the Rio Olympic representatives of India who worked so hard and attained commendable feats for our country. While we saw Indian achieving remarkable feats, at the same time gold prices in the domestic market were shining in spite of a global downtrend.

Where on one hand gold in the global markets was down 0.34 percent at $1,347 per ounce, on the other hand the yellow metal in the national capital, gold of 99.9 and 99.5 per cent purity commenced the week higher at Rs. 31,130 and Rs. 30,980 and advanced to closed at Rs. 31,250 and Rs. 31,100 per 10 gram respectively, showing a rise of Rs. 175 each.

Markets remained closed on Monday for 'Independence Day' and Thursday for 'Raksha Bandhan'. Bullion traders said increased buying by jewellers to meet festive season demand from retailers amid a firm global trend mainly kept precious metal prices higher.
While Makar Sankrant marks a pause to festive celebrations, on the other hand Raksha Bandhan marks the onset of the festive season in India. 

Gold has seen a sharp upsurge in demand on a sudden jump in Japanese yen against the dollar. Crude oil prices have also increased over the last few months. With the investment buying continues, gold is seen touching $1400 an oz in global markets translating thereby setting a new record in near future.

Coming to international markets, analysts hold the dovish July policy meeting minutes issued this week responsible for the decline in prices.

Interest rate expectations are the driving force behind the recent moves in both the dollar and gold. Expectations of higher interest rates here in the U.S. support a stronger dollar while they weigh on the price of precious metals.

Interest Rate Hike- Gold prices slipped on Friday, weighed down by a strengthening dollar after two Federal Reserve officials' comments that increased expectations for an interest-rate increase this year.


Gold is sensitive to higher rates which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced. The week has seen a run of mixed signals from Federal Reserve policymakers.


San Francisco Fed President John Williams on Thursday joined a growing chorus of his colleagues signalling support for a U.S. interest rate hike in coming months. New York Fed President William Dudley reinforced his confidence in a possible rate hike for a second time in the week.  Dallas Fed President Robert Kaplan, however, saw limited room to manoeuvre on rates.

US Dollar- The dollar against a basket of six major currencies was up about 0.27 percent at 94.414. The current ‘ultra low’ interest rate environment has sent global investors on a search for yield.  Hence any prospect of an interest-rate increase in the U.S. makes U.S. dollar investments more attractive to international investors, leading to an increase in the value of the U.S. dollar vs. other currencies across the globe.
The U.S. dollar, after tapping a seven-week low this week, strengthened Friday, cutting demand for precious metals, which are priced in the currency.

SDPR- Among exchange-traded funds, the SPDR Gold Trust GLD, -0.88% was 0.7% lower. Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.2% to 955.99 metric tons in the week through Thursday, according to Bloomberg data.
ECB- Meanwhile, European Central Bank rate setters agreed not to discuss any policy change at their July meeting and to keep market hopes for more stimuli in check, minutes showed on Thursday.

U.S. Jobs report- Reports showed the number of Americans filing for unemployment benefits fell more than expected last week, while manufacturing activity in the U.S. Mid-Atlantic region saw a mild improvement this month. Members of the Fed's rate-setting Federal Open Market Committee were generally upbeat about the U.S. economy and labour market, but several said any slowdown in future hiring would augur against a near-term rate hike. U.S. economic data will continue to offer clues on the Fed’s next move. Fed Chairwoman Janet Yellen will also speak at a conference in Jackson Hole, Wyo. next Friday. Admittedly, a very strong U.S. labour market report in early September could already be enough to prompt the Fed to hike interest rates next month.

Still range bound, gold looks to break through USD $1,360 as the possibility of a September rate rise tempers.

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:

"Indian Gold Bullion Market- Issues, Challenges, Opportunities and the way forward: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/08/indian-gold-bullion-market-issues_13.html 

GOLD DIRECTIONLESS: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Most of the global asset markets were quite unpredictable this week. Be it equities, precious metals, bond yields or oil- they moved up and down following last week’s FOMC meet.

Coming to gold, it neared its second weekly gain on Friday afternoon, touching $1145 per ounce but plunged back following new comments on US interest rates from Fed chair Janet Yellen.

Increased risk sentiment helped gold prices to end Friday’s session modestly lower with prices settling at $1,145.60 an ounce; however, the yellow metal has managed to end the week in positive territory, up 0.6% - its second consecutive weekly gain.

Spot gold was last at a high of $1,144.80/1,145 per ounce. Prior to a speech from Federal Reserve chair Janet Yellen in which she said the Fed has not ruled out the start of policy normalization before 2016, gold had been trading at two-month highs.

The gold price surged to its highest since August 25 during Thursday afternoon sessions as the yellow metal took advantage of a slump in the US dollar.

On Friday afternoon, gold moved back from Thursday’s gains, after the release of positive US data and talk that the country’s central bank will increase interest rates by the end of the year.

The US data released were as follows-

• Final GDP was better than expected at 3.9 percent
• Services PMI at 55.6.
• Revised UoM consumer sentiment and inflation expectation at 87.2 and 2.8 percent were little changed

A slowing global economic activity and excessively low inflation had delayed the Fed’s decision to hike interest rates. Its decision had raised concerns about the economic stability of the US, China and rest of the world and resulted in lifting of the dollar.

Aggressive comments from Yellen have provided the dollar with renewed upside momentum, depressing bullion prices through reduced safe-haven demand. 

There are expectations in the market that the FOMC is likely to raise the federal fund rates in December as they witnessed a likely upwards revision to US-second quarter GDP growth

Gold declined on Friday morning after Federal Reserve chairwoman Janet Yellen expressed optimism that the US economy would warrant an increase in interest rates before the end of this year.

She stated that it will be appropriate to raise rates in 2015. Now there are around 13 weeks let in 2015 and two more FOMC meetings are lime up in October and December each, which means there are just two opportunities left to raise interest rates.

Federal Reserve Chair Janet Yellen has spoken, and an interest rate hike remains on the table for 2015, but one trend watcher says the central bank is just talking ‘really tough.’

Moreover, Yellen noted that ‘idiosyncrasies’ like lower oil prices and weaker overseas economies have delayed the Fed from pulling the trigger. 

Yellen said FOMC officials “expect that the various headwinds to economic growth will continue to fade, thereby boosting the economy's underlying strength.”

Yellen’s bullish sentiment was buoyed through the third revision to second-quarter US GDP growth to 3.9 percent from 3.7 percent. The final GDP price index quarter-over-quarter was in line with forecasts at 2.1 percent.

Yellen and her colleagues at the Federal Open Market Committee (FOMC) have maintained interest rate at near-zero levels since December 2008.

Persistently low inflation, emerging global slowdown and an uneven recovery remain obstacles for the FOMC members to normalizing monetary policy.

Though the yellow metal is still showing encouraging signs, but in event of a rate hike, the impact on gold would be bad.

Currently old is searching for a direction as the FOMC has left the market wandering. The picture will get clearer by the end of the year or maybe early 2016.

Currently one need to follow the FOMC religiously as gold’s whereabouts depends on the Fed’s directions.

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 -

"Rate Hike Hangover Continues on Gold: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/09/rate-hike-hangover-continues-on-gold.html

RATE HIKE HANGOVER CONTINUES ON GOLD: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

The much awaited suspense over the Fed’s September interest rate hike was finally put to an end. It did create much volatility in the market and bought in some good news for gold.

Gold prices finished the week on a three day rally as the Federal Reserve’s sudden concern over emerging market growth boosted safe-haven demand.

The volatility was like a storm for gold and it tried to be holding on to the gains.

Thursday was a crucial day for gold as all eyes were focused on the FOMC meet that was due to release its monetary policy. 

Fed Chairwoman, Yellen, added that there was an argument to be made for raising rates in September; however, because of the global weakness and fragile financial market, the committee decided to err on the side of caution and leave rates unchanged.

We saw the global economic growth led to volatility shocks in the global equities market. This once again raised concerns over the world economic development. Hence the FOMC dropped to normalize US monetary policy after announcing concerns on overseas growth.

The Fed decided to maintain near-zero interest rate levels, citing recent equity volatility exacerbated by a global growth slowdown.

The central bank’s ultra-loose monetary policy, coupled with dovish comments from Fed Chair Janet Yellen on Thursday, helped gold end a three day losing streak as it finished Friday in positive territory. 

The spot gold price was last at $1,136/1,136.40 per ounce, its highest in around two weeks and up $3.80 on Thursday’s close.

Though in her proceedings press conference, Fed chairwoman did not rule out an October hike but the market is keener about a hike in December. This would force the FOMC to raise rates sharply to combat said inflation and prevent the organization from increasing the federal funds rate at a gradual pace.

Since the Fed removed all calendar references in its forward guidance in April, the bank is now entirely data-dependent.

Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.

Inflation remains a persistent issue – the FOMC said that declines in energy prices and non-energy imports are the underlying causes preventing inflation from hitting the Fed’s target of two percent.

As of now a weak US dollar would prove to be positive for gold in the near future and if the equities markets lower then gold could rally further.

But the current statement released by the Fed that it intends to raise rates by year-end has made the market players believe that this price rise on gold will be short lived as they expected the dollar to strengthen as early as October.

The Fed’s next opportunity to raise rates will fall in October or December.

Looking ahead, the Fed’s stance on interest rates and heightened concerns of the global economy hurting the U.S. economic recovery has created some strong positive sentiment in the gold market, at least in the short term. 

As we continue to see the after effects of the FOMC meet on gold, prices of the yellow metal are expected to rise in the short term.

As there is not much important data slated to release next week, gold prices are expected to range around 1150$ an ounce but will continue to struggle as soon the rate hike news creeps into the market.

Most analysts are centering on the global market for gold to rally. The fact that the central bank is concerned about the impact the global economy is having on equity markets, some analyst note that further weakness in U.S. stock markets could benefit gold. 

 

Some even expect the U.S. dollar to remain at elevated levels as markets continue to price in a rate hike later this year, which will limit gold’s potential. 

Although U.S. economic data will be limited next week some of reports that could create some volatility in the marketplace include manufacturing data, including durable goods numbers for August, home sales data for August and the final second-quarter U.S. gross domestic product report. 

A relatively light economic calendar next week means the gold market will continue to digest the Federal Reserve’s decision to leave rates unchanged. 

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 -

"Uncertainties For Gold:RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/09/uncertainties-for-gold-rsbl.html

AN ACTION PACKED WEEK FOR GOLD

                                                                                                             -By Mr. Prithviraj Kothari, MD, RSBL

Yes Indeed…It seems like a miracle. It’s so surprising to see what a difference a few days can make as the gold market sees renewed optimism, ending the week solidly positive on the back of a weaker U.S. dollar and lower U.S. treasury yields.

Gold prices hit two-week highs on Friday and were poised for their biggest weekly jump since mid-January, after the U.S. Federal Reserve's cautious note on interest rates arrested a dollar rally and sparked broad-based buying of commodities.
Though the week began with a rough patch for gold by the end of the week it was a completely different scenario for gold.
On Tuesday, Gold fell to a four month low of $1,142.92 an ounce. Market players had expected gold prices to drop further amid the dollar's surge and speculation about when the Federal Reserve will begin raising interest rates.  

With positive economic indicators, the US dollar gets stronger. The interest rate hike expectation had further strengthened the dollar which meant that the future for gold is not good.


Following these sentiments the precious metal traded at $1,148.60 Wednesday morning and plummeted 12 percent in the last eight weeks.

Gold prices were seen heading towards a consecutive loss in the past seven sessions as a robust dollar and expectations of higher U.S. interest rates curbed appetite for the metal.
But Wednesday FOMC meet was a game changer for gold. Following  the Federal Open Market committee (FOMC) meeting on Wednesday, The Federal Reserve Chair Janet Yellen made it clear (again) those interest rates would not be raised until inflation gains more steam. With current inflation rates negative for the first time since 2009, and with the U.S. dollar index at an 11-year high, we can probably expect near-record-low interest rates for some time longer.

Post this news, gold prices sparked immediately rising nearly 2 percent, from $1,151 to $1,172. That’s the largest one-day move we’ve seen from the yellow metal in at least two months.

At the highest peak of the week, Spot gold was up 1.2 percent at $1,184.55 an ounce by 1:55 p.m. EDT (1755 GMT) after hitting $1,187.80

Wednesday’s FOMC policy meeting caused a stir in the gold market, which is now looking like it may close off the week on a positive note.


The U.S. currency fell as much as 1.8 percent against a basket of major currencies on Friday, after the Fed downgraded its growth and inflation projections earlier in the week, signaling it is in no rush to push borrowing costs to more normal levels.

Apart from the main game changer for the week, we saw following significant activities in the market.

• Post-Fed, the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, saw its first inflows since Feb. 20, also boosting sentiment. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.24 percent to 749.77 tonnes on Wednesday - the first inflow since Feb. 20.
• In the physical markets, Chinese buying was steady, with premiums on the Shanghai Gold Exchange staying at a robust $6-$7 an ounce on Friday. Sustained physical buying could further support prices.
• Gold climbed on the heels of a softening U.S. dollar and focus in Europe turning back from its political problems to the [European Central Bank] stimulus rollout.
• Demand for gold from India picker up ahead of the auspicious occasion of Gudi Padwa.

Though there is not much data set to be released next week, analysts are expecting gold to continue to take its cue from the U.S. dollar. Most commodity analysts see room for the yellow metal to move higher as investors take some of their U.S. dollar profits off the table.

A significant number coming in for the week will be the housing date- release for existing and new home sales number.

Next week, financial markets will receive more housing data with the release of existing and new home sales numbers.

Apart from the key US indicators, one more thing that needs consideration is Greece. Investors need to keep a watch on what is happening in Greece as funding talks are expected to resume again. Greece is once again pushing back against austerity measures, but with no new funding deal, there is a chance they would default on their debt and be forced out of the Eurozone.

Any breakdown in funding talks next week is going to be positive for gold, as a safe-haven asset.
Though no major game changers are in queue for gold, the yellow metal will be taking cues from the above mentioned data.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1163- $1205 an ounce	Rs.25,700- Rs.27,000 per 10gm
SILVER	$16.15- $18.00 an ounce	Rs.36,000- Rs. 40,000 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 To React To FOMC"

http://riddisiddhibullionsltd.blogspot.in/2015/03/gold-to-react-to-fomc.html