GOLD PERPLEXED

 - By Mr. Prithviraj Kothari,MD,RSBL

Gold this week was giving confused or rather mixed behavioral patterns as it was being pulled between the bullish and bearish forces.

On Thursday, gold ended at $1,220.70 an ounce, up $1.10 or 0.1 percent, on a weak dollar and some disappointing economic data from the U.S. with retail sales dropping more than expected in January and first-time unemployment benefit claims rising more than anticipated last week.
Though gold was up on Friday, followed by weak US economic data, for the week gold was down 0.6%.

Let’s analyze the bullish and bearish factors that were responsible for this wavelike movement in gold-

BULLISH

Weak US Economic data-  Following Thursday’s reaction, gold was up for a second straight session in Friday.
Gold displayed the behavior post the release of some key reports from US. In some soft economic news from the U.S., a University of Michigan report on Friday showed an unexpected, sharp pullback on its U.S. consumer sentiment index in February, after having reported the index at an eleven-year high in the previous month.

Meanwhile, the Labor Department released a report on Friday showing another steep drop in U.S. import prices in the month of January, attributed largely to falling energy prices.
Additionally, the Labor Department said export prices slumped by 2.0 percent in January following a revised 1.0 percent decrease in December. Export prices had been expected to fall by 0.8 percent compared to the 1.2 percent decline that had been reported for the previous month.

Greece issues- Equity markets were hit by the uncertainty prevailing over Greece’s debt negotiations with its European lenders and its future in the euro zone. This has benefited the bullion markets that were up on Friday as safe haven demand for gold increased.

Greece agreed on Thursday to talk to its creditors about the way out of its international bailout in a political climb-down that could prevent its new leftist-led government running out of money as early as next month.

Increasing gold purchases by official bodies worldwide- Central banks were net buyers of gold for the fifth straight year in 2014, with purchases nearing a 50-year high, in the face of growing geopolitical risk. According to a report released Thursday by the World Gold Council in London, central banks' net purchases of gold came to 477 tons in 2014, up 17% on the year and the second-highest figure ( after 2012) since data were first kept 50 years ago.
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Other official bodies worldwide namely Russia's Central Bank (purchases exceeding sales by 173 tons ), Iraq’s Central Bank (added 48 tons to its stocks)  also hoarded gold. Official bodies have been net buyers of gold since 2010, when the euro crisis struck. Increasing volatility in the foreign exchange market is stimulating worldwide demand for gold.

India's consumer demand slid 14% to 842.7 tons, as the country raised import duties on gold in hopes of closing its growing current account deficit. In spite of the decline, India returned to the top spot as the world's biggest consumer as the former leader China’s demand for gold slide 38%.

USD-  Gold was firmly supported this week by a frail US dollar. The dollar trended lower against some select currencies after some soft economic data from the U.S. A weakening dollar supported gold by making the commodity priced in the greenback cheaper for holders of other currencies.

French Economic Report- The statistical office Insee reported on Friday that the French economic growth slowed as expected in the 4th quarter. France's gross domestic product rose 0.1 percent sequentially, in line with forecast, but slower than third quarter's 0.3 percent expansion



BEARISH

US interest Rate Hike-  Gold held above a five-week low on Friday amid a weaker dollar and uncertainty over debt-laden Greece, but the safe-haven metal was set to close down for a third straight week on expectations of higher U.S. interest rates.

Euro zone Data- Apart from the Fed’s anticipated interest rate hike, upbeat economic news from the Eurozone has weighed on gold prices all week. Helped by growth in Germany, the combined gross domestic product of the Eurozone was up 0.3% sequentially in the fourth quarter.

Germany’s Economic Data- Germany's economic growth accelerated more-than-expected on domestic spending and exports in the fourth quarter, while investment dragged expansion in France.
German gross domestic product advanced 0.7 percent sequentially- this was the fastest growth in three quarters and also exceeded a 0.3 percent rise forecast by economists.

 SPDR Gold trust- Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged down to 771.51 tons on Friday, from its previous close of 773.31 tons.


 Summing it up, markets worldwide await the interest rate hike by the Federal Reserve which is expected to happen sometime this year. Reacting to this, the outlook for dollar remains upbeat despite the recent losses.

Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could hurt demand for bullion, a non-interest-bearing asset.

TRADE RANGE-

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1211- 1245 an ounce	Rs.26,500- Rs.28,000 per 10gm
SILVER	$16.55- $18.00 an ounce	Rs.37,000- 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 -
"Trade Range For Gold Remains Tight"

http://riddisiddhibullionsltd.blogspot.in/2015/02/trade-range-for-gold-remains-tight.html

ALL NOTIONS TO SEE GOLD AT $800 DESTROYED!!!

                                                                                                             - By Mr. Prithviraj Kothari, MD, RSBL

A few weeks earlier, we saw a lot of noise in the market…but this time it seems that someone left the loudspeakers on!

Well, oil and SNB played the game here.Precious metals showed great volatility- all thanks to the fluctuating oil prices.

Crude oil was highly volatile after a report from Paris based energy agency IEA depicted a likely reduction in Non-OPEC output for 2015 by 350,000 BPD. 

Moreover, gold and silver prices soared in Euro terms after the SNB moves and now many market players are beginning to wonder if a loss of confidence after the Swiss fiasco has started a run on gold? 

Bullion traders said sentiment turned better after gold rallied to the highest since September in global markets as the dollar weakened after Switzerland decoupled its currency to the euro and lowered the deposit rate.

Gold had closed at 1276.50 following a brief intraday break above 1280, its highest level since September 2014. We look to the September 2nd open of 1286 as the next important level of
Resistance, followed by 1300 and 1320. Momentum indicators are increasingly bullish.

Gold regained its safe-haven mantle following a shocking and unforeseen decision by the Swiss Central Bank (SNB) to scrap its cap on the franc’s exchange rate against the euro.


After the SNB- Swiss National Bank dropped the bombshell on the markets Thursday morning, the prices of the precious metals had gone in one direction… UP.  In just two days, the price of gold was up $40 and silver $1.10.

Post this action, gold rose more than 2 percent to a 4 month high in Thursday. This was a result of the move by Switzerland to abandon its three-year cap on the franc sent global shares and bond yields into turmoil. 

Following the Swiss National Bank’s unprecedented move to abandon the franc’s peg to the euro, the country’s currency had appreciated sharply against the U.S. dollar. The surge in the Swiss franc…means it is now the most overvalued of all the developed market (DM) currencies in terms of the deviation of the real effective exchange rate from its 10-year average

The SNB has been under growing pressure to revisit the peg as speculation grows that the European Central Bank could introduce outright money-printing as early as next week, which could see the euro zone flooded with liquidity.
It looks as is the SNB decision has finally destroyed the notion of $800 gold ever again.

Furthermore, a Labor Department report released on Thursday showed that Jobless claims climbed by 19,000 to 316,000 in the week ended Jan. 10, the most since early September, from a revised 297,000 in the prior period.

Adding to it, the gold price climbed on Friday after a lackluster US inflation report had participants readjusting their timetable for the next Federal Reserve rate increase.

In data, the US consumer price index fell 0.4 percent last month, the biggest drop since December 2008, after sliding 0.3 percent in November. It also undershot the -0.3 percent forecast.

This goes directly against the Federals Reserve’s mandate to achieve inflation of around two percent as the reports imply a deflationary trend. Which further means that the fed may probably delay its rate increase as it would want to know that inflation is on track to hit this level before acting?
Additionally, deciding not to reduce stimulus in 2015 would also be consistent with a goal-oriented approach to the employment mandate.
Additionally, Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 717.15 tons on Friday from 707.59 tons from its previous close on Thursday.

Fall in equities and worries over Euro area political and debt issues might continue to help Bullion complex as a whole and mainly the yellow metal.
Next week we could see further volatility as the ECB are set to meet and it is widely expected they will announced a broad-based government bond purchases.
We stay with our moderate positive bias in Gold and advice buying on small dips.




- Previous blog - "Lot of Things To Smile About For Precious Metals"

http://riddisiddhibullionsltd.blogspot.in/2015/01/lots-ofthings-to-smile-about-for.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

IS IT A DOWNSIDE OR AN UPSIDE POTENTIAL FOR GOLD

 - Mr. Prithviraj Kothari, MD,RSBL

Overall, it was a decent week for gold. It was a swing for gold that swayed between the bullish and bearish trends. Since Nov. 7, the metal has climbed 9 percent from a four-year low.

Gold was up 2.5 percent this week after Tuesday's big rally. Falling stock markets have prompted some investors to buy the metal as an alternative asset, while a drop in the greenback made dollar-priced bullion cheaper for holders of other currencies. The spot gold price was last at $1,224.00/1,224.90 per ounce, down $1.80 on Thursday’s close. But overall it was a positive week for gold.

Some key influential factors for gold this week have been:

SPDR: An improvement in sentiment was seen in the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged higher to 725.75 tons on Friday, a nearly 5 tonnes rise last week. Since mid November its around 717 to 721 tonne range in terms of holdings.

US DATA: Gold soon touch a low on Friday to print a price of $1214 when the US consumer confidence spiked to a new post-recession high in December. The Thomson-Reuters/University of Michigan preliminary index of consumer sentiment leapt to 93.8 then the expected value of 89.5, the highest level in the past 8 years. This confidence could be attributed to the decline in fuel prices.

CHINA: China's National Bureau of Statistics report showed that industrial production to have advanced 7.2 percent in November from last year. This was the weakest growth in three months and slower than the 7.7 percent increase seen in October and 7.5 percent growth forecast by economists, which will only fuel speculation that further stimulus measures from Beijing might be needed.

EURO ZONE: data from Eurostat showed Eurozone industrial output to have edged up by a less than expected 0.1 percent October, after a revised 0.5 percent increase in the preceding month. Moreover, Fitch ratings cut its ratings on France to AA from AA+ on Friday, saying the country's revised deficit reduction target was not enough to avoid a downgrade.

DOLLAR: Gold extended gains as the dollar headed for the biggest drop in a month against a basket of 10 currencies. The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.32 on Friday, down from its previous close of 88.55 late Thursday in North American trade. 

OIL PRICES: Weakness in energy prices have weighed on gold sentiment lately, dulling the metal's appeal as a hedge against oil-led inflation. 

Overall, Safe-haven demand and short covering have been behind gold's recovery from 4-1/2-year lows hit last month. 

Silver does remain locked in the range of $17.00 - $17.35 with a break either side of this, would give some more idea on which side is the prices headed. Whereas the short term support for Gold is at USD $1215 and the resistance around $1235

With the FOMC meeting next week, and amid increased market concerns over Russia, Greece, global energy prices, Chinese economic growth etc. both gold and silver are likely to remain range bound and dominated by technical trading patterns.

Markets believe that the statement released by the FOMC all this while about “considerable time” shall be removed from their minutes now. Which means that the rate hike will happen soon which will further affect gold prices.

What needs to be watched closely this week?

• 15th - the U.S. November industrial production
• 16th - the December flash manufacturing PMI for China, the Eurozone, and the U.S. November housing starts
• 17th - the Bank of England MPC Minutes, the FOMC rate decision, the Fed’s press   conference and the U.S. November inflation
• 18th - Germany’s December IFO business climate
• 19th - the Chicago Fed’s speech 

As we approach 2015 while bidding farewell to 2014, we see three major events that will be affecting gold prices largely in the coming year:

1. FED's move towards normalizing monetary policy and raising interest rates
2. Problems in the Eurozone and the European Central Bank’s stimulus plans
3. China consumption and growth story

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 - "Appetite for Gold Declined"

http://riddisiddhibullionsltd.blogspot.in/2014/12/appetite-for-gold-declined.html