A very important week for gold

Although the gold market has struggled to attract the attention of general investors, the precious metal might not be as unloved as one would think.
The metal posted its biggest daily percentage gain in seven weeks on Friday after the dollar fell against a basket of currencies, as investors overlooked the strong economic growth in the United States to focus on the pain points.

Gold prices were mostly unchanged on Monday, trading near the more-than one week high touched in the previous session, on bets that the U.S. Federal Reserve might cut interest rate this year after a recent data showed inflationary weakness. Spot gold mildly eased by 0.1 percent to $1,284.31 per ounce at 0626 GMT, having hit its highest since April 16 at $1,288.59 in the previous session.

The main reason for rally in gold prices, were the important data numbers released from the US over the past few days.

• Data showed that U.S. first quarter growth of 3.2 percent was only motivated by the short term stimuli of a dwindling trade deficit and the largest accumulation of unsold merchandise since 2015 which may later weigh on the country’s economic picture.
• Core personal consumption expenditure price index figure, the Fed’s preferred metric of inflation, increased at only a 1.3 percent rate versus 1.8 percent in the prior quarter.
• About a third of economists polled by Reuters on April 25, already expect one real rate cut by 2020
• Lower interest rates in the U.S. put pressure on the dollar and bond yields, making greenback-denominated gold less expensive for holders of other currencies. It also increases the appeal of non-yielding assets such as bullion.


Apart from the data released, we now look forward to the series of events that are lined up. It’s going to be a very busy week ahead with the calendar packed full of market data and events across the globe.
From Monday 29th April to Friday 3rd May a host of data releases await the markets

• USD Employment Cost Index
• USD Chicago Purchasing Manager
• USD Pending Home Sales
• USD Consumer Confidence Index
• USD Pending Home Sales
• EUR ECB Vice President Guindos Speaks in London
• USD ISM Manufacturing
• USD ISM Employment
• USD Continuing Claims
• USD Non Farm Productivity
• EUR Euro Zone Producer Price Index
• EUR Euro-Zone Producer Price Index
• EUR Euro-Zone Consumer Price Index Core
• EUR Euro-Zone Consumer Price Index Estimate


Japan will be closed celebrating ‘Golden Week’ thinning liquidity in Asian hours, leaving markets vulnerable to ‘spike’ moves.

 In such conditions, gold would normally grab a bid but with the US dollar continuing to weigh on the precious metal, a neutral stance looks justified.
But all this doesn’t end here. These were the main data releases/events. A look at the calendar shows that there are a 28 ‘high importance’ data releases and events, all of which could change the risk landscape. A few highlights include, the latest interest rate decisions from the Bank of England and the Federal Reserve, the monthly US Labour report and various GDP and inflation releases across the Euro-Zone. Now we need to see how positively it affects the yellow metal or plays a spoiler instead.

Gold looks moderately bullish in 2019

To recap, gold prices have held pretty firm in 2018. Trading just 5% lower versus the Dollar, gold has now risen back to last New Year's Eve for Euro and UK investors.

Gold futures on Monday closed out New Year's Eve with a loss for the session and year, but garnered some upward momentum as stock-market carnage reignited haven-related demand and as the dollar weakened somewhat. Weakness in equities over the past three months has given bullion some support, as has a weakening dollar over the past month. A weaker buck can provide support for commodities priced in the unit, as it makes it cheaper to users of other currencies.

Gold was expected to drop with the stock market, but instead it rose. It was expected that gold will behave the way it did in 2008. But there are big differences between now and 2008, it still looked likely that gold would get dragged down with the stock market when it dropped hard due to a flight into cash driving the dollar up but so far at least, this has not happened.

The biggest difference between now and 2008 is that back then money flooded into the dollar in order to buy Treasuries, but this time round that does not appear to be happening, and it is not hard to see why. Those who have been paying attention will know that other major powers like China and Russia have been preparing to dump the dollar for a long time now, by buying gold as fast as the West will sell it to them, devising their own payments systems to replace the SWIFT system and making bilateral trade agreements, etc. They also know that unless they have the military power to defend themselves, they would at some point be subject to military aggression by the U.S. if they try to cease using the dollar, hence their major effort to beef up their defensive capabilities.

Thus, what we are seeing is an intensifying buyers strike with respect to Treasuries that will continue to hike interest rates until the economy implodes, a process which has already started.

Thus, the fact that the dollar failed to rally either on the severe drop in the stock market of recent weeks or on the latest rate hike is viewed as an ominous development, both for the dollar itself and for the economy. This is what gold is picking up on and is the reason why it is has started to move ahead over the past couple of weeks.

• Gold over the medium term looks moderately bullish over the following influences-
• The rising frequency of US equity market draw down's
• The gradual unwind of QE
• Higher overall macro market volatility
• Elevated geopolitical risks should all continue to favor gold buying on the dips.

Currently, the biggest threat to the gold market remains the U.S. dollar. However, the greenback could less of a factor to the precious metals market if equity markets continue to push lower.

Though gold isn't guaranteed to rise in price but global issues might spark trouble for investors. So in order to maintain a balance, owning a little physical bullion, stored securely and ready to sell the moment you need looks like a wise decision, given the fact the 2019 has come into view and a lot of ups and downs are expected to shake the market.

Gold remains positive but lacks direction

Gold prices were modestly high last week reacting over a mixed bag of economic reports and geopolitical events. The yellow metal has been able to furnish gains over slightly weak US dollar.

GOLD PRICES rose against a falling US Dollar on Friday, halving last week's 1.9% drop to trade back above $1220 per ounce as Western stock markets fell and crude oil rallied from this month's 17% plunge so far.

Gold prices ended higher on Thursday, shaking off pressure from a stronger dollar to hold on to a week-to-date gain as U.S. and European equities declined.

Tumbling equities market, plunging oil prices, escalating worries about stresses in the global economy, ongoing trade tensions and uncertain growth projections have created a rally in gold prices. 

Let have look at these mixed bags -

BREXIT - The issues around Brexit have invigorated a little bit of safe-haven buying in the precious metals market. In the past week, U.K. Prime Minister Theresa May had two of her cabinet members resign Thursday, including her Brexit secretary, following May’s pronouncement Wednesday that she is sticking with her controversial Brexit plan. The British pound sunk on the news of the resignations, while European bond yields rose. Talks of a no confidence vote for May were also doing the rounds. This led to some safe haven buying in gold though it did not create that much an impact on the world marketplace.

DOLLAR - while the U.S. dollar remains the strongest and most consistent factor for gold, it’s likely that correlations with other asset classes will begin to strengthen and re-emerge over the next 6-12 months and thus reassert themselves in gold’s favour. Furthermore, the marketplace took note of U.S. Federal Reserve Chairman Jerome Powell’s comments at a speech late Wednesday that the Fed is closely monitoring the modest deceleration in world economic growth. However, Powell implied that situation is not now altering the Fed’s monetary policy tenor of continuing to slowly raise U.S. interest rates. Powell added that a further U.S. stock market selloff could impact the Fed’s policy decisions. Any further weakness in the dollar due to Feds decisions will pull gold prices high.

EURO ZONE CRISIS - Crisis and uncertainty continue to prevail in Europe, where Italy is locking horns with the EU and a Brexit deal hangs in the balance, mega-economy Germany has just produced the worst growth in nearly six years. Even if Wall Street can successfully shake off noise from the Old Country, a fresh threat from falling oil prices, along with worries over trade and a Fed misstep may cast long shadows

EQUITIES - Currently equities don’t belong to anyone and it appears to be in no-man’s-land. Gold and silver are seeing a bit of support as the U.S. stock indexes have backed down and might fall further. Any stronger stock market selling pressure surfacing in the near future would likely more significantly benefit gold and silver prices.

What we see from the above explanations is that the markets are now moving focus from dollar to geopolitical events.

But one notable interesting thing we see coming in is from China. China has developed tremendously in recent years. But what’s next? Is the country entering the growth recession? And how it will affect the world and the gold market?

Indeed, at the turn of this century, China was a minor player in this market. While today it is both the world’s largest consumer and producer of gold, accounting for 23% of total gold demand and 13% of total gold supply. However, there are still opportunities for further development, as the investor base is too narrow, while the market infrastructure and regulations need to improve.

So far, the Chinese authorities have postponed the inevitable slowdown. But it will arrive one day. Given the economy’s massive leverage, the growth recession is likely to cause a financial crisis, which would hit the whole world. Gold should shine, then. The problem is that nobody knows when it will happen.

While we remain positive on gold prices going toward and into 2019, gold still seems to lack clear price directionality for the time being.

Drivers for Gold

The past few trading days have seen the gold price hovering above and below the $1,200 mark in the light of a stronger dollar and a lack of Chinese data due to the nation’s Golden Week holiday this week.  Every time the gold price has nosed above $1,200 it has been taken down a few dollars again.
There were important key events that occurred during the week.

Let’s have a look at all that has been affecting gold - 

US Economic Data - Data on Wednesday showed that U.S. service sector activity accelerated to a 21-year high in September and another report showed that private sector hiring increased at the fastest pace in seven months in September.

US Dollar - Gold prices inched down on Thursday as the dollar strengthened on positive U.S. economic data. Rising U.S. Treasury yields were also cited as headwind for the precious metal.
The dollar hit an 11-month high against the yen and stood tall against other its peers on Thursday, boosted by a spike in Treasury yields following upbeat U.S. data and comments from Federal Reserve Chairman Jerome Powell that were seen as hawkish.

Rupee at an all time low - Rupee was at an all time low of 73.34 on Wednesday, which further spikes gold prices in spite of a global down fall. Increased buying by the world’s second-biggest gold consumer would support global prices that have traded near $1,200 an ounce since late August, but also widen India’s trade deficit and add to pressure on the Indian rupee.  Rupee is consistently falling and we don’t know how much it will fall further. It is prompting investors to hedge their risk with exposure to gold.

Domestic gold prices - Gold prices crossed the Rs 32,000 per 10-gram mark on Wednesday at the bullion market as fresh buying by local jewellers ahead of the festive season pushed up prices. Positive global cues also supported the price move. Prices of the yellow metal surged by Rs 555 to reach Rs 32,030 per 10 gram.

Demand for gold - Traders in India,  said that they are building up inventory ahead of Diwali and Dhanteras next month. Also, globally sentiments for gold improved after US and Canada reached an agreement to salvage a North American free trade deal. India’s gold imports may rise in the fourth quarter as investors seek alternatives to faltering equity markets and a plunging rupee. Traditional buying will also rise during the festival season, said several sources involved in the market.

Meanwhile we expect the gold price to continue hovering around the $1,200 mark, give or take a few dollars.  There does seem to be an appetite to take it higher, but every time it does so it seems to be knocked back.

What will probably drive gold in the following few months -
• Positive or negative U.S economic data
• Any news on Chinese gold demand which will surface once the Chinese Golden Week holiday ends
• Euro zone trials
• Italian Debt Situation
• Brexit negotiations
Keeping the above events in mind, a mixed bags of reactions is expected from the markets for gold.

Gold May Regain its Safe Haven Status

In January, precious metal prices peaked. Since then they have fallen substantially by 9% (gold prices).

In recent weeks, the sell-off has accelerated. There are several reasons for this price weakness.

Trade War - a looming trade war between the US and China has weighed on prices, especially cyclical precious metals such as platinum and palladium.

US Dollar - Rising U.S. Fed rates and rising real interest rates – up 20% from the start of the year as measured by 10-year bonds — are supporting the dollar. While the dollar remains strong, gold is being depressed.
To some effect, the metals markets are experiencing the same depressing impact on prices.
 The recovery of the US dollar is negative for all precious metal prices.

Euro - a downshift in expectations about the euro zone economy has been a negative for precious metals.

Global Markets - weakness in emerging markets has lowered all precious metal prices as well. More recently the substantial fall in the Yuan has accelerated the decline in precious metal prices. Yuan weakness reflects the heightened trade tensions between the US and China and nervousness about Chinese corporate bond defaults. China is a crucial consumer of precious metals. So fears of lower Chinese demand are negative for prices.

But this may not be the end as markets believe that this downfall may continue. The US dollar is expected to strengthen further due to strong economic data and ongoing Fed Hike.

Furthermore, markets look negative for gold as the 10y US Treasury yields is expected to rise.
Gold and other precious metals are highly sensitive to these issues and hence analysts believe the gold, in the near-term, is expected to fall.

In addition, trade tensions between the US and China will probably linger on and there may be more volatility in the Chinese Yuan in the near term. These are also negatives for precious metal prices.
Finally, it is likely that concerns about Italy will return if Italy’s fiscal balance will get into focus again later in the summer. This will weigh on the euro but also on platinum prices as the euro zone is an important market for platinum

In such an environment, holding gold is seen as a cost, not an opportunity. Although market turnover has been high, the bulls have not been in evidence and prices have remained depressed.
BUT HOPE STILL PERSISTS.

Though precious metals are expected to fall, hope still prevails over the factors that support gold prices.

U.S. - By the end of the year US dollar and 10y Treasury yields are expected to peak. Which further pours in the thought that it might pull down from its peak? Lower US growth could result in a downward adjustment in demand.

Moreover, we expect the fall in the Chinese Yuan to come to an end as Chinese authorities will probably intervene to calm sentiment. We find it hard to imagine the Chinese authorities letting the Yuan drop in an uncontrolled manner. However, in the near-term, Yuan weakness may yet continue. In addition, our base case scenario is that a significant escalation of the trade conflict is averted. This should support all precious metal prices.

We expect gold prices to bottom out between USD 1,200 and 1,250 per ounce and silver prices between USD 15.2 and 15.6 per ounce. We see these levels as an opportunity to position for higher gold and silver prices next year.

If sentiments were to change and, for example, growth was to slow in the U.S. in reaction to trade concerns, then gold could make headway. But while the dollar is king, gold will remain lackluster despite rising tensions.

In the near term, we expect weakness in gold to persist, before investors flock to gold’s safe haven status in light of the ongoing trade and geo-political tensions – and the attendant negative consequences that might ensue

Dollar gains safe haven appeal

With the first half of 2018 now drawn to a close, much of the financial medias’ headlines and commentary relating to the gold market has been focusing on the fact that the US dollar gold price has moved lower year-to-date. Specifically, from a US dollar price of $1302.50 at close on 31 December 2017, the price of gold in US dollar terms has slipped by approximately 3.8% over the last six months to around $1252.50, a drop of US $50.

It’s been a choppy first half. After trading above $1,300 since the start of the year, prices ticked lower in mid-May and went into free fall two weeks ago, erasing the year’s gains. Investors shunned bullion and favoured the dollar and Treasuries instead as they weighed the uncertainties surrounding the impact of a U.S.- China trade war on global growth.

Gold’s losses in June, driven by an ascendant dollar, have put the precious metal on course for its biggest monthly drop since November 2016, when markets were roiled by Donald Trump’s victory in the U.S. election.

The metal dropped 3.6 percent in the month of July, while a gauge of the greenback is up for a third straight month amid escalating global trade tensions.

Investors have moved to the US dollar as a preference choice for safe haven .This has benefited the dollar and weakened gold. It has indirectly led to gold-price weakness, as the dollar and gold typically move inversely to each other. With the emergence of inflation, gold is likely to find a bottom, as the dollar’s gains weaken.

On the contrary, Suddenly, On Friday, gold finally gained support near $1245 after falling to a six month low.

Reasons being-

1. U.S. Final GDP Disappoints – The gross domestic product was expected to grow at a pace of 2.2%, but the actual figure fell to 2%. Consequently, the weakness in the U.S. dollar underpinned gold. 
2. EU Leaders Agreed on Conclusion – The Chairman of the talks, Donald Tusk said, “EU28 leaders have agreed on (summit) conclusions, including on migration”.

In response to this news, the investors moved their investments from Greenback to Euro. Therefore, the Euro jumped over 0.7% on Friday and dollar index fell 0.3%, causing a bullish reversal in gold.

But this week opened on a negative note for gold. Gold prices edged lower on Monday as the dollar firmed after last week’s U.S. inflation data supported the Federal Reserve’s outlook for future interest rate increases. The dollar strengthened against a basket of currencies and extended its gains against the yen to hit a fresh six-week high of 111.06 yen, supported by the relative strength of the U.S. economy and on prospects of further rate hikes from the Federal Reserve.

US dollar strengthens by any normalization of monetary policies thus weakening the yellow metal.
U.S. consumer prices accelerated in the year to May, with a measure of underlying inflation hitting the Federal Reserve’s 2 percent target for the first time in six years, data showed on Friday
The rise in price pressures will probably not shift the Fed from its stated path of gradual interest rate increases as policymakers have indicated they would not be too concerned with inflation overshooting its target.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the greenback.

As dollar strengthens, the yellow metal weakens

Spot gold was up 0.1 percent at $1,318.52 past week, not far from a low of $1,315.06 hit in the previous session, it’s weakest since March 21.

The metal was on track to finish the week down more than 1 percent for its second consecutive weekly decline and the biggest weekly drop in four.

The strength of the U.S. dollar - combined with the weakness of the euro zone currency after (ECB chief) Mario Draghi’s speech - is pushing down the yellow metal.

The dollar hit a 3-1/2-month high against a basket of currencies on higher U.S. yields while the euro was hampered by a dovish tone from the European Central Bank. On Wednesday the benchmark 10-year Treasury yield reached its highest since January 2014 at 3.035 percent. A rise in U.S. bond yields pressures gold by reducing the attractiveness of non-yielding bullion, which is priced in dollars.

Thursday’s trading started on a weak footing, but most of the metals ended the day in positive territory, which suggested dip buying and support are features of the market. Precious metals prices were little changed on Thursday morning, with gold and silver prices off by 0.1% – with the former at $1,316.54 per oz. Meanwhile, the platinum group metals were both up by 0.1%.

Gold continued losing ground through the early NA session and is currently placed at fresh 6-week lows, around the $1312-11 region.

After Friday's corrective bounce, resurgent US Dollar demand was seen as one of the key factors weighing heavily on dollar-denominated commodities - like gold at the start of a new trading week.  Gold prices retraced upward in what looked like a correction after higher and sent the yellow metal to a one-month low.

Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off. This rise in the dollar seems to be weighing on gold and is likely to be a headwind for metals’ prices generally.

Recent increases in geopolitical tensions and rising commodity prices, especially oil, seem to have spurred inflationary concerns that have led to stronger bond yields and in turn that has lifted the US dollar, with the dollar index at 90.97. This has broken above the previous peak at 90.94 from March 01.

At their summit on Friday, North Korean leader Kim Jong Un  and South Korean President Moon Jae-in declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the "denuclearisation" of the Korean peninsula.           

North Korean leader Kim Jong Un and South Korean President Moon Jae-in on Friday declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the “denuclearisation” of the Korean peninsula.

The signs of detente in the North Korean conflict are ... contributing to the lack of solid demand for gold as a safe haven at present

Further as tensions o the Korean peninsula eased, the European shares rose after a positive session among Asian stocks overnight. The dollar index rose 0.2 percent on Monday, 30th April, holding just below its strongest since mid-January.

Gold fell at the start of this week, pulling back towards last week's more than one-month low as easing tensions on the Korean peninsula boosted appetite for assets seen as higher risk, such as stocks, and lifted the dollar.
   
The metal slid 1 percent last week on the back of a stronger dollar and a rise in Treasury yields to above 3 percent, which weighed on interest in non-interest bearing assets. On Thursday, it hit its lowest since March 21 at $1,315.06 an ounce.

That has left it on track to end April down 0.5 percent, erasing all the previous month's gains.
Spot gold was down 0.4 percent at $1,316.15 an ounce during trading hours.
   
Meanwhile, the Fed’s favoured PCE inflation gauge is expected to put core price growth at a 13-month high of 1.9 percent.

The latter would put the Fed within a hair of at least ostensibly meeting its dual objectives. Policymakers aim for inflation of 2 percent to be sustained in the medium term – abating the significance of a single month’s reading – but another sign of steady progress may reinforce the case for tightening.

Gold may return to suspicion, if this materializes as the prospect of higher rates sustains the US Dollar, undercutting demand for non-interest-bearing and anti-fiat assets.

   

Winter demand good for gold but prices likely to fall

Gold prices were hovering near multi-week highs for most investors outside the US Dollar and Euro on Thursday, as the Bank of England followed the Federal Reserve's widely expected "no change" decision by raising UK rates off an all-time record low as analysts and traders had forecast.
However in Friday, Spot gold was down 0.2 percent at $1,267.01 per Ounce and touched a one-week low of $1,265.16 over positive economic data and central bank decisions.

The past week was a significant week for central banks. The Bank of England raised interest rates for the first time in ten years, the Federal Reserve indicated that a December rate hike may happen and President Trump named Powell as his choice for leader of the Federal Reserve.

But still uncertainty prevails as there is no surety that how economies will manage when the central bank support is withdrawn. Moreover none of the financial centers have managed to meet inflation targets which they were all so vocal about.

Adding to the uncertainty is the issue that three of the world’s four most important central bank chiefs are nearing the end of their terms and may be well replaced. The rally in the gold price and fall in the dollar is just the first indication with how markets feel about such changes.

Gold held steady on Monday, but hovered near a one-week low hit in the previous session, as largely upbeat U.S. economic data reinforced the prospects of another rate hike by the Federal Reserve next month.

U.S. jobs growth accelerated in October, although wage growth was tepid, adding to the Fed’s assessment last week that “the labor market has continued to strengthen”, with the sluggish wage data doing little to change expectations.

JP Morgan Chase & Co on Friday raised its forecast on the number of U.S. interest rate increases by the Federal Reserve next year to four from three as the October payrolls data reinforced the view of a tightening domestic labor market.

Markets are increasingly confident the Fed will hike interest rates in December, which has weighed on the precious metals complex,

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

The Federal Reserve looks likely to raise interest rates, and that should bring up the value of the US dollar in general. If that’s the case, then gold could roll over a bit. Ultimately, this is a market that will continue to be just as mixed up as many others are right now, as we do not know with any type of certainty that the Federal Reserve is going to do one thing or the other.

Analysts said the yellow metal could also find support after U.S. President Donald Trump, who kicked off a 12-day Asia trip, looked to present a united front with Japan against North Korea.
Moreoverdemand for gold is likely to rise not only in the domestic market butinternationally too.
While we see the onset of the wedding season in India, normally winter is also a good time for gold globally with men buying their significant others jewellery for Christmas and lots of New Year’s Day marriage proposals

This rise in demand is expected tousher in renewed interest for bullion in coming week.

Short Term seems positive for Gold

Gold rose by 15 dollars last week from $1229 to $1244 having hit a high of $1252 and a low of $1227. Silver rose by 41 cents from $17.36 to $17.77 having reached a high of $17.78 and a low of $17.33. The dollar index stands at 99.62 that’s down 0.68 on the week. Gold prices moved higher as the Euro gained traction and the dollar edged lower following stronger than expected German PMI data. Analysts believe that gold has further to rise but will be seesawing between $1230- $1260 before perhaps it breaks out up to $1280 levels.

Silver markets were also positive last week and is attempting to reach $18 level. Similar to gold we see a see saw effect between the price range of $17 where there is significant support and the $18 level where there is resistance. As I have mentioned in my previous blogs that political uncertainty could have a greater effect on prices primarily because of their effect on the value of the dollar which actually fell a little during the week. Also a fall in the Dow enabled funds to be moved out of equities and back into gold, though to be fair this transference was relatively small.

Gold prices finished higher on Friday to log a second weekly gain in a row as demand for assets perceived as risky waned and the U.S. dollar touched its lowest level in about seven weeks.
Traders also eyed developments tied to a Republican-backed U.S. health-care bill, which could have wide-ranging influence in financial markets.

The main focus globally was on a vote by the U.S. House of Representatives on a bill to abolish the Affordable Care Act, also known as Obamacare.  The vote was expected late Thursday, but was postponed by the Republicans when there were serious doubts the Republicans had the votes to strike down Obamacare. After negotiations between the Trump administration and members of the House Thursday, President Trump took a hard line and declared the vote should take place Friday, or he would move on to other matters and leave Obamacare in place. There is no clear consensus in the marketplace on the outcome of this key vote, which could move markets in its immediate aftermath.
A “no” vote on the House bill would likely favour the gold market bulls, as it could put downside pressure on the U.S. stock market.

Gold could back off and The U.S dollar is expected to strengthen and bonds yields should rise if the health care bill gets passed. The main reason being that the markets will see it as one hurdle out of the way for finally moving onto tax reform and other fiscal stimulus measures.

But if it happens otherwise and if the bill doesn’t get passed then gold is quote likely to rise.
On Friday, St. Louis Fed President James Bullard said U.S. labour market improvement is slowing down. U.S. data on core durable goods has shown that the economy is strong, but this is not something which is going to excite the Fed that much.

The U.S. data released was as follows

• The Department of Commerce said new order of durable goods increased by $3.9 billion or 1.7% to $235.4 billion last month, following January’s revised 2.3% increase. According to consensus forecasts, economists were expecting to see a 1.1% rise.
• Stripping out the volatile transportation sector, new orders of core durable goods rose 0.4%, in February, following January’s revised increase to 0.2%. Economists were expecting to see an increase of 0.5%.

The political uncertainties over in Europe around French elections and Brexit are going to provide a lot of tailwinds for the gold rally .

Analysts believe that the short term outlook for gold is positive as it will rise and shine amidst all the volatility and uncertainty prevailing. The coming week, US durable goods orders and housing sales will be announced. Globally reports on Japanese trade and UK inflation could also influence the currency markets and so it is possible that the dollar may lose a little ground against the Sterling and the Euro as it did last week. So this week we are positive for gold and silver while the limits mentioned are tested. What also needs to be focused is the divergence between the Fed’s growth forecast of 2% and President Trumps envisaged plans for a 4% economy growth rate. Time will tell which of the two proves to be more accurate.

UK Departs, GOLD prices shine: RSBL

                                                              - Prithviraj Kothari, MD RSBL

The most talked about and the most awaited trend changer of the year after the FED rate hike is finally out: UK has exited EURO after 43 years and BREXIT has been implemented. UK themselves have got divided during the results of the referendum where England and Wales voting strongly for leave, while Scotland and Northern Ireland backed staying in the EU. 

Undoubtedly, along with me almost everyone was caught by surprise. There were possibilities but a result like this is a bit hard to digest. Simply because it creates fractions in Euro group where countries like France, Netherlands could also take up a similar decision. It sent shock waves across the financial markets, with all the risky asset classes such as equities heavily down and safe-haven vehicles such as government bonds, gold and silver steeply higher. The volatility, uncertainty, fluctuation went beyond expectations. Gold saw investor favour resume on safe-haven Brexit buying. Let’s pick each market individually and see the effect Brexit had them.

GOLD:

Gold soared as much as 8 percent to its highest in more than two years on Friday after the UK referendum results, sending investors rushing for protection. Gold prices surged to its highest level in more than two years, at $1,359 since March 17, 2014, sending shock waves across markets. Gold is currently trading around $1316 a $40 lower from the high.

Major Indices:

All the major indices across the world were nearly 3% down while European indices fell to the tune of 5%. The indices have shown some resilience as the news item fades, but the uncertainty in the markets have reached to unprecedented level, calling in government, state heads to provide clarity on the future map ahead.

India:

Even before the final numbers were out, India’s benchmark Sensex index opened over 700 points or 2.85% lower in the early trading hours When the trading ended for the day at 3:30 PM, the Sensex closed at 605 points lower, marking a decent recovery. Though BREXIT pushed Indian equity prices down, the governments has been very confident in their message and do not see a much long term impact on the Indian economy.

Currency - Pound versus others:

The British pound fell more than 10% against the US dollar, lowest since the 1980s. In morning trade, the rupee fell to 68.22 a dollar, the lowest level since March 1. Weaker pound will reduce burden on children studying in UK but it might get partially offset by a rise in cost of living. The dollar index shot higher on safe-haven buying, last at 96.10, the euro had dropped to 1.0912, the Aussie dollar had fallen to 0.7335, but the yen has had a massive rally to 99. In emerging market currencies, the Yuan has fallen to 6.6295 and most others had a knee-jerk reaction to the downside as the dollar has strengthened and as risk-off has hit the markets.

ETF:

ETF investors are expected to boost their physical holdings following the vote. According to market estimates, they have just accumulated 7.3 tonnes of gold so far this week after buying 25 tonnes in the previous week.

For investors:

      Do not lay your investments in one asset class only. Returns on Gold have surpassed most of the indices returns in the current year. A whopping $100 movement and thereafter settling at around $1330, showcases the metal's safe haven appeal strength.

Investors currently see gold as a currency – it is rising alongside other safe-haven currencies such as the dollar and the yen. Gold’s upside potential will be dependent on the degree of uncertainty and instability stemming from the Brexit as well as the ability of central banks to provide a co-ordinated solution to calm the storm in the financial markets.

Gold set a fresh 2016 high although the rally was quicker and stronger than expected given that the UK would remain in the EU. Brexit helped it to be a white Friday for gold after the vote against markets expectation of it turning to be a black one. Gold has done what’s its best at- acting as a safe haven for its investor, giving protection against uncertainties and volatility.  Such environment is expected to persist for a few days until the central banks provide a co-ordinated package of measures to calm the financial markets, in turn triggering some profit-taking in gold.

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

Previous blog:

BREXIT – Unity of Europe challenged: RSBL - http://riddisiddhibullionsltd.blogspot.in/2016/06/brexit-unity-of-europe-challenged-rsbl.html

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GOLD BOUNCES BACK: RSBL

 By Mr. Prithviraj Kothari,MD, RSBL

Christmas seems to have come in early for gold as it finished the week on a strong note, ending a six-week losing streak and bouncing off a fresh 5 and-a-half year low.

After hitting a 5.5-year low earlier this week, Gold prices prepared to end Friday's session on a very upbeat note, with the metal up 2% during the day.

The magic move happened despite a relatively in-line November jobs report that all strengthened the expectations that the Federal Reserve will raise rates after its monetary policy meeting December 16.

Gold’s rally started in earnest Friday, following the release of November’s nonfarm payrolls report, which was relatively in line with expectations.

Because expectations of a rate hike are close to fully priced into the markets, many investors and traders are starting to doubt whether the U.S. dollar can move higher under current market conditions, prompting them to take profits in their long U.S. dollar positions.

Good news for gold also came in when the Euro rebounded over the announcement of a minimum cut in its deposit rate over the disappointing market by the European Central. The central bank eased its monetary policy, dropping its deposit rate to negative 0.30% from negative 0.20% on Thursday.

The rebound in the euro, following the ECB’s monetary easing that was less than expected, pushed the dollar index down to 97.59, last at 98.30 and that seems to be helping to underpin the metals.

Markets eagerly awaited the US employment report that is likely to be the next directional influence on the dollar and markets generally. 

The gold prices recovered after falling to fresh five-and-a-half year lows during Thursday morning trading after Asian participants reacted to the strong US job data from the previous session.  

Spot gold was indicated $1,053.20/1,053.50 per ounce, down $0.80 from Wednesday and off its session low of $1,046.40, its lowest since February 2010 – market participants largely expect the US FOMC to increase interest rates this month. 

The Bureau of Labor Statistics, on Friday,  said 211,000 jobs were created in November, down from October’s upwardly revised number of 298,000; September's employment report was also revised higher to 145,000, from the previous report of 137,000. The report noted that 35,000 more jobs were added in the previous two months as a result of the revisions.

According to consensus estimates, economists were expecting to see job gains of 200,000.

Over the past 3 months, job gains have averaged 218,000 per month. As expected the unemployment rate held steady at 5.0% last month; at the same time the participation rate was little changed at 62.5%.

As anticipated the U.S. labor market cooled off a little in November after seeing immense gains in the previous month; however, the job growth still managed to slightly beat outlooks, according to the latest employment data from the Labor Department.

It was one of last few data releases before the Federal Reserve meets in two weeks to decide whether to raise interest rates and these reports will play a significant role for the same.

This raises expectation that the Fed has a go ahead signal to increase interest rates on December 16 as long as other things remain steady globally over the next few weeks.

Yellen has been adamant about raising rates before the year concludes, citing concerns over an expedited tightening cycle if the policy-board waits until 2016.

With another two weeks to go before the Federal Open Market Committee meets to discuss raising rates for the first time since 2006 the market remains focused on the expected positive impact such a move might have on the dollar together with the subsequent negative gold impact. Taking a look at the past four rate hikes we actually find that instead of rising, the dollar has weakened in the weeks and months following the first announcement. 

While this time round may be different considering the expected diverging trajectories of the ECB and FOMC it nevertheless raises the risk of a correction both on dollar longs and gold shorts. Not least considering the big jump in positioning seen in both markets during November.  

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 -
"Critical Week For Gold: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/11/critical-week-for-gold-rsbl.html