GOLD CRASHES BUT LANDS SAFELY: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Gold prices have rallied 31.4 percent since the December low at $1,046.40. Safe-haven demand increased due to the following factors:

• The US Federal Reserve proposed in December four rate increases in 2016 but at best it might deliver just one rise before the end of the year
• Its inverse relationship with the dollar index has allowed gold to climb
• The growing number of negative-yielding sovereign bonds has made safe-haven assets that bear no yield much more appealing
• Pro-long utilisation of easy monetary policies by global central banks has eroded the value of paper money
• Speculative funds as well as ETF investors have flocked into gold in search of yield

Though 2016 has been one of the best performing years for gold since 2012 the yellow metal registered its biggest daily drop in three years on last Tuesday and extended losses in the previous session after forecast-beating U.S. manufacturing data and comments from Fed officials saying there was a strong case for raising rates.

Gold fell for the eighth straight session on Thursday, slipping to a four-month low, pressured by a stronger dollar after U.S. weekly jobless claims fell and ahead of key data that could put the Federal Reserve on track to raise interest rates this year.

Gold fell for a ninth straight session on Friday on a stronger dollar ahead of key U.S. jobs data and the metal was headed for its worst weekly dip in over three years on increased expectations of a Federal Reserve rate rise by year end.

Initial claims for state unemployment benefits unexpectedly declined by 5,000 to a seasonally adjusted 249,000 for the week to Oct. 1. The U.S. dollar .DXY rose to the highest in more than two months against a basket of currencies as the data reinforced the view that the Fed would raise rates at the end of the year

This declined gold prices drastically but by the end of Friday gold futures staged a modest recovery amidst all these concerns.

Though the unemployment benefits declined, a slow growth rate was recorded for the third straight month in September. Gold prices got an initial boost from this.

In Europe, the European Central Bank (ECB) intends to push on with its aggressive stimulus policy of negative interest rates and massive bond buying until it is happy with the outlook for euro zone inflation, senior officials said. ECB Vice President Vitor Constancio said a Bloomberg report suggesting that there was already consensus among ECB rate setters to reduce the 80 billion euros ($89 billion) monthly bond purchases was mistaken.

The report aggravated a sell-off in gold on Tuesday as the yellow metal fell over three percent to its worst one-day fall since September 2013. 

In the short term, gold prices might remain under selling pressure. While the metal could consolidate lower and put the bulls to the test, it remains to be seen how long or deep the consolidation process will be. But we remain friendly towards gold – our medium-to-long-term view remains bullish and we could see the metal seeking a strong technical support to rebound into.

But there are chances that gold might trade sideways in the short term keeping in mind the following factors-

• Strained projected longs show that this trade is very much overcrowded. With no fresh buyers, the path of least resistance is downward
• Profit-taking could be a theme and, should panic ensue, panic selling could escalate as speculators and ETF investors are sitting on large unrealised profits
• The bulls’ bounciness has not really been tested and a mild correction/pullback should do the overall bull structure a lot of benefit
• Physical demand has been subdued due to high future prices – the current rally has not had the backing of strong physical up-take
• The Fed has armed its policymakers to prepare the market with combative messages that the US economy is primed for a 25-basis-point-rate rise before the end of 2016

These put a limitation to the bullish trend for gold. Nonetheless as we approach towards the last quarter of 2016 we all hope that it ends on a similar note as its beginning.

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:

"Volatile Markets: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2016/10/volatile-markets-rsbl.html

GOLD- BUY AND HOLD: RSBL

 by Mr. Prithviraj Kothari, MD, RSBL

Bullion has rallied 26 percent in 2016, recovering from three years of losses, as low or negative interest rates have strengthened demand. Political uncertainty has also played a part, with the U.K.’s vote to quit the European Union spurring haven demand. Forecasters including Singapore-based DBS Group Holdings Ltd. have said that the U.S. contest may buttress prices amid concern about the possible implications of a Trump presidency.

Gold may be in for a bumpy ride in the final quarter as Republican candidate Donald Trump now has a 40 percent chance of winning the presidential election and investors will be preparing for the possibility of higher U.S. interest rates, according to Citigroup Inc. A probable victory of Donald Trump increases the chances of a single U.S. hike by the end of 2016.

But if it happens otherwise, then gold prices are likely to steady during 25-29 September after the US Federal Reserve decided to leave interest rates unchanged, according to analysts. 

Bullion has been provoked from inertia after Fed rate concerns had helped wipe out gains for the quarter.

There is once again an inflow of capital in the market as low borrowing costs in the U.S. and economic stimulus by central banks from Japan to Europe drive demand for the precious metal as a store of value.

Over the previous week, gold achieved the best performance since July 2016 with a 2.4% rise, while the US dollar index recoded the worst performance, reaching 95.472 against a basket of currencies.

The precious metal is heading for the biggest weekly advance since July after U.S. central bankers opted to leave interest rates unchanged while reining in their outlook for future increases.

Gold prices edged lower on Friday, but notched the strongest weekly advance in almost two months after the Federal Reserve held off on raising interest rates and scaled back the number of rate hikes it expects next year.

This has once again pushed gold prices upwards and traders are no into the buy-and-hold mode for gold.

The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.

Meanwhile, investors will be focusing on a series of important events lined up this week that play a pivotal role in influencing gold prices.

• A pair of speeches from European Central Bank President Mario Draghi is to testify before the Committee on Economic and Monetary Affairs of European Parliament, in Brussels.
• For fresh hints on whether the ECB will step up monetary stimulus in the coming months to boost inflation and prop up the economy.
• Speech by Bank of Japan Governor Haruhiko Kuroda will be eyed in wake of last week's decision by the BOJ to modify its policy framework
• Focus will also be maintained on the first U.S. presidential debate on Monday between Democratic nominee Hillary Clinton and Republican hopeful Donald Trump
• Other speeches to be given by

                -Swiss National Bank Chairman Thomas Jordan

                -Bank of Canada Governor Stephen Poloz

                -Federal Reserve Vice Chair Stanley Fischer

                -BoJ Governor Haruhiko Kuroda is to speak in Tokyo.

• U.S. is to release data on new home sales, private sector data on consumer confidence, publish data on durable goods orders, to publish final figures on second quarter growth
• Fed Chair Janet Yellen is scheduled to testify before the House Financial Services Committee on regulation and supervision, while St. Louis Fed chief James Bullard is to speak in St. Louis.
• The Bank of Japan's big policy review is likely to see more QE and negative rates in the long run.
• Germany is to publish preliminary inflation data and a report on unemployment change.
• Japan is to release data on inflation and household spending.
• China is to publish its Caixin manufacturing index.
• Germany is to release data on retail sales.
• The U.K. is to report on the current account and publish revised data on second quarter growth.
• The euro zone is to release preliminary data on consumer inflation.
• Canada is to publish data on economic growth.
• The U.S. is to round up the week with data on personal income and spending, a report on business activity in the Chicago region and revised data on consumer sentiment.

Now  that series of events are scheduled for the week we expects markets player to be alert and markets to be volatile.

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:
"BULLISH SENTIMENTS FOR GOLD: RSBL
http://riddisiddhibullionsltd.blogspot.in/2016/09/bullish-sentiments-for-gold-rsbl.html
 

Gold prices Rise: RSBL

                                                       - Mr. Prithviraj Kothari, MD RSBL

                           

 
Just when Gold was raising questions on its recent rally, last week’s labour report proved to be a saviour for the yellow metal. Gold prices traded sharply higher in Friday thus giving a technically bullish weekly high close to gold.

In May, the US non-farm workforce grew up only 38,000, missing the forecast of 160,000 and indicating that the US recovery may be starting to slow. Additionally, the March and April figures were revised 22,000 and 37,000 lower respectively while growth in average hourly earnings last month of 0.2 percent was below the predicted 0.3 percent. The Labour Department report released Friday showed employers added jobs in May at the slowest pace since 2010 as unemployment dropped to 4.7 percent, already reaching the level Fed officials expected to see by the end of 2016. Apart from disappointing headline NFP (nonfarm payrolls) number, there is a also a sharp jump in involuntary part time workers.

A much-weaker-than-expected U.S. jobs report prompted the yellow metal to surge higher, and those initial solid gains have been extended to show gold trading over $30 higher on the day. A sharp drop in the U.S. dollar index also helped push gold prices higher.

A broad slowdown is troubling for the Federal Reserve, which has grown increasingly hawkish in recent weeks following the April meeting minutes, giving their support to a rise in interest rates as early as this month if data warranted such a move. But a negative jobs report has once again left the markets perplexed per se the rate hike.

Considering the pliability of the US economy, has once again raised some questions about the momentum of growth and about the outlook. This in turn takes June off the table for a Fed hike.

Apart from the current news what needs to be watched this week for gold are:

1. THE MAIN EVENT: Fed Chair Janet Yellen's speech today at 10.00 pm.  
2. Central Bank (Rate Cut) Watch:

• Reserve Bank of Australia (June 7) no change expected
• Reserve Bank of India (June 7) no change expected
• Reserve Bank of New Zealand (June 9) 0.25% rate cut expected

Sentiments for gold are bullish and the major turning pint for this sentiment is the US dollar. Gold could remain in rally mode through the coming week as traders reassess their U.S. dollar and Fed outlook.

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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 –

" INTEREST RATE HIKE SPOILING GOLD PRICE RISE :RSBL" - http://riddisiddhibullionsltd.blogspot.in/2016/05/interest-rate-hike-spoiling-gold-price.html

INTEREST RATE HIKE SPOILING GOLD PRICE RISE :RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Just when gold had started entering in to the good books of majority of the market players, it once again started losing its appeal. Gold has started trending differently from the beginning of May. Along with platinum, palladium and silver, it is heading for the biggest monthly loss since November as investors anticipate higher borrowing costs in the U.S.

Gold has pared this year’s rally after retreating more than 5 percent in May as investors raised bets on the Federal Reserve increasing interest rates from as early as next month, causing the dollar to rally. Higher rates curb bullion’s appeal against interest-bearing assets.

At the start of this month, markets were excessively dovish, pricing almost no probability of a U.S. rate hike in June but a run of better U.S. economic data plus the minutes of April’s FOMC meeting have seen U.S. forward rates move up, the dollar rally and gold has naturally sold off.

The fundamental data released that changed the game for gold were:

• The U.S. Federal Reserve continued to lay the groundwork for an interest rate hike in the next two months, with Governor Jerome Powell saying he felt the U.S. economy was on a "solid footing" and within reach of the central bank's inflation goals.
• The U.S. economy is set to grow by a 2.9 percent annualized rate in the second quarter following the latest data on durable goods orders and advance goods trade, the Atlanta Federal Reserve's GDP Now forecast model showed on Thursday. 
• U.S. business spending intentions weakened in April for a third straight month amid soft demand for machinery, but a surge in contracts to purchase previously owned homes to a 10-year high supported views economic growth was gaining speed. 
• Japan's core consumer prices fell 0.3 percent in April from a year earlier, the second straight month of declines, keeping the central bank under pressure to deploy additional stimulus to achieve its ambitious 2 percent inflation target. 

Gold crawled higher early on Friday but stayed near seven-week lows and remained on track for its biggest weekly decline in nine, with positive economic data boosting expectations U.S. interest rates will rise in the next two months. The dollar stayed in consolidation mode early on Friday after its rally to two-month highs ran out of steam with bulls looking for fresh from the head of the U.S. central bank.

Now the market eagerly waits for the Fed officials will gather in Washington June 14-15 to decide whether to increase rates for the first time since December.

Thank You!

You may follow me on:

       Facebook: https://www.facebook.com/prithviraj.kothari
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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 –

"RSBL launches RSBL SPOT APP- Live Gold, Silver, Platinum  prices at your fingertips"

http://riddisiddhibullionsltd.blogspot.in/2016/05/rsbl-launches-rsbl-spot-app-live-gold.html