TOO MUCH NOISE IN THE MARKET

 By Mr. Prithviraj Kothari, MD, RSBL

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

TRADE RANGE FOR 2015:

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

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.
           - Previous blog - "Fed's "considerable time" creates "considerable impact" on gold"
http://riddisiddhibullionsltd.blogspot.in/2014/12/feds-considerable-time-creates.html

LOTS IN BASKET FOR GOLD IN THIS WEEK

by Mr. Prithviraj Kothari, MD, RSBL

The week was volatile for gold. Gold acted weak on Monday but later picked momentum by the end of the week, ultimately closing the week higher and notching a third straight week of gains.

On Monday, gold prices ended slightly lower and pulled back from the positive gains witnessed last Friday. A stronger US dollar weakened the gold and silver markets. But later in the week gold managed to rise above $1200 even though the dollar gained. 

George Gero, vice president with RBC Capital Markets Global Futures, said gold attracted some buying when it rebounded over $1,200. Few other news that moved the market:

• China: In order to fuel the slow moving Chinese economy,  China’s central bank reduced its interest rate. Chinese economic data in the past has been disappointing. This move by the China central bank comes as a bullish factor for gold. 

• European Central bank: The statement released by ECB president Mario Draghi made it very clear that the ECB will use all means within the ECB’s mandate to return the EU to its inflation target, including implementing quantitative easing and this he said will happen soon. 

• Gold Buying:  European and Russian central banks were looking to acquire more gold.The Dutch Central Bank says it has recently shipped 122.5 tons of gold worth around 4 billion Euros ($5 billion) from safekeeping in New York back to its headquarters in Amsterdam. With this move the Dutch Central Bank has joined the bandwagon along with other banks that are keeping a larger share of their gold supply in their own country. This boosts demand for gold and gives a positive outlook for the yellow metal. 

Gold futures climbed to a two-week high topping $1,200 an ounce after Russia added to reserves, fueling speculation that a rebound in demand for bars, coins and jewellery will help stem this year’s drop.

The gold market has a lot in basket to be seen in the next week. 

• There is a major meeting of the Organisation of Petroleum Exporting Countries, inflation data out of the euro zone, and a major holiday in the U.S. to keep volatility high.
• Swiss Referendum- The market may also see some last-minute positioning ahead of the Nov. 30 Swiss gold referendum. Traders are also already discussing next week’s Swiss referendum which would require the Swiss National Bank to hold 20% of its assets in gold. A Swiss poll on Wednesday showed the majority of voters were not in favour of the measure. This news was credited in part with weakness in the gold market Wednesday. This can be a game-changer worldwide. If the Swiss franc stops falling and starts rising because of this then more people will understand that a strong currency is good not a weak currency.
• November Germany IFO business climate 
• The November U.S. consumer confidence index 
• the October U.S. Core PCE price index and personal spending 
• the Euro zone private sector loans, 
• the October Japan inflation data, 
• Later in the week, analysts said they’ll watch to see what euro zone inflation data shows. Inflation has remained tame, which doesn't support gold, analysts said, and euro zone inflation has been particularly soft.

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1180-$1215 per ounce	Rs.26,250-Rs.27,000  per 10gm
SILVER	$16.00- $17.50 per ounce	Rs.35,000- Rs.39,000 per kg

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

- Previous blog -

"The Dollar Is Being Watched Closely" - http://riddisiddhibullionsltd.blogspot.in/2014/11/the-dollar-is-being-watched-closely.html

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FED SETS THE RULES FOR GOLD

by Mr. Prithviraj Kothari, MD, RSBL

Since December 2008 to June 2011, gold rose 70 % as the Fed bought debt and held borrowing costs near zero percent. 

Last year being the worst performing year for gold, as prices slumped 28 per cent as the markets had expected that the central bank would taper its monthly stimulus program which was the main reason for the spark rise in gold in 2011. 

After spending much of the month bouncing off a triple-bottom low around $1,180 made on Oct. 6, and previously in December and June 2013, gold prices turned weaker and spent the last week and a half drifting lower.  

The U.S. Federal Reserve had dismissed financial market volatility, a slowdown in Europe and a weak inflation outlook as factors that might undercut progress towards its unemployment and inflation goals.

The hawkish comments and the strong economic data dulled gold’s appeal as a hedge. This continued to put pressure on gold. 

Post FOMC, gold dropped more than $20. The market recouped some losses edging back up to $1215, but early London were aggressive sellers, pressuring the market another $20 lower to a low of $1196.50.

Moreover, on Wednesday, The Fed ended its monthly bond purchase program and dropped a characterization of U.S. labour market slack as "significant" in a show of confidence in the economy's prospects. As the Federal Reserve ended its asset purchase program amidst signs of a growing and improving US economy, gold lost its appeal as a safe haven asset and demand to won gold declined. 

Gold is 0.6 % lower in October after losing 6.2 % last month, and the metal during the last session erased the year’s advance as Dollar Spot Index rose to a three-week high. Gold traded USD 1160.85 while Silver and Platinum tested respective support levels of 15.80 and 1220. Gold support for the short term is expected at $1150.

Apart from this, there were few other reasons responsible for the crash in gold and silver prices.

Central Bank Interest Rate - The central bank, which has held its key rate at zero to 0.25 percent since 2008, this week cited an improving job market in deciding to end bond buying, while maintaining a commitment to keep rates low for a considerable time. It also said inflation is running below its 2 percent target.

SDPR Gold Trust- Reflecting bearish sentiment, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.16 percent to 741.20 tons on Thursday, the least since Oct. 2008.

US Data- Precious metals cratered, hit by a double-whammy of the rather hawkish Fed policy statement, coupled with a stronger-than-expected US GDP report. Fed officials this week cited an improving job market in deciding to end bond-buying, while maintaining a commitment to keep interest rates low for a considerable time. 

Dollar- Gold and silver were hit hard after the dollar rose to a near four-week high against a basket of major currencies on Friday, Reuters reported. The greenback got a boost from strong US gross domestic product data and the Bank of Japan’s surprise move to expand its massive monetary easing that weakened the yen.

Bond Buying Program- Gold was languishing near a three-week low on Thursday after the U.S. Federal Reserve ended its bond-buying stimulus program and expressed confidence in the economic recovery, dimming bullion's safe-haven appeal.

Lack Of Support From Asian markets- Gold failed to get any support from the Asian physical markets, a factor that could likely push it to further lows. Physical demand usually provides a floor to dropping prices.

China's factory activity unexpectedly fell to a five month low in October as firms fought slowing orders and rising costs in the slow moving economy.

Buyers in top consumer China failed to emerge despite the drop below $1,200. Gold of 99.99 percent purity on the Shanghai Gold Exchange - the main platform for physical trades in the country - sank as much as 3.1 percent to 230.05 Yuan per gram ($1,172.35 an ounce), the lowest level this year, Bloomberg reported. Volumes tumbled to a one-month low on Friday.

    

For the coming week, gold is expected to be influenced by any comments coming in from the ECB and also any important data cropping from the October U.S nonfarm payroll report. Following Thursdays GDP growth reports news, the Federal Reserve is more upbeat on the labour markets and the Federal Open Market Committee meeting to be held on Wednesday expects a strong data report. This may make the bearish sentiments strong for gold.

TRADE RANGE

METAL	INTERNATIONAL Gold/Silver price range	DOMESTIC Gold/Silver price range
GOLD	$1150 - $1200  an ounce	Rs.25,500 - Rs.26,750  per 10gm
SILVER	$15.00 - $17.00  an ounce	Rs.34,000 - Rs.37,500  per kg

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

- Previous blog - "Gold Once Again Surrenders In Front Of Gold"

http://riddisiddhibullionsltd.blogspot.in/2014/10/gold-once-again-surrenders-in-front-of.html