RSBL: A GOOD OPPORTUNITY TO BUY GOLD!!!

By Mr. Prithviraj Kothari, MD,RSBL

 

The last couple of years have been anything but normal for gold.  Back in early 2013, the Fed started augmenting its young QE3 debt-monetization campaign with aggressive jawboning.  It kept implying to stock traders that it was ready to quickly ramp up money printing if the stock markets sold off materially.  This short-circuited normal healthy sentiment re balancing sell offs, as traders feared nothing.

Thus the stock markets levitated, powered higher without normal material sell offs.  Since gold is an alternative investment that moves contrary to stock markets, this slowly strangled gold investment demand.  Investors gradually abandoned it, leaving this metal for dead.

FED's exiting the zero interest rates is a big point of debate for US economy. But frankly I do not think this is the only challenge we are talking about. To me, the unwinding of trillions of dollars used to purchase Bonds by the FED is more of a concern. Less than a year from now, FED will have take one of its biggest decisions of reinvesting $200 billion (approx) which are the proceeds from Treasury debt that is supposed to get matured in 2016. 

I did get some more idea by going through some news on the same:
 
1. If FED does not invest, it could lead to an increase in supply of security products available to the investors and put an upward pressure on yields.

2. If they plan to let it expire, it will shrink FED's balance sheet drastically leading to monetary tightening from increases in the benchmark interest rate officials envision for this year. That could mark a reversal of easing that FED achieved when it started its bond purchases programme after the recession.

For this week, Gold advanced for the first time in four days after holdings in exchange-traded products backed by bullion posted the largest increase in more than six weeks. On Thursday, gold-backed ETP holdings rose by 3.9 metric tons, the most since Feb. 23, to 1,620.1 tons, according to data compiled by Bloomberg. Holdings in the SPDR Gold Trust, the top bullion ETP, had the biggest jump in two months. This jump in holdings shows that there is some movement out of the conventional assets into gold.

CFTC data released on Friday showed that speculators sharply increased their bullish bets last week. The net weekly gain of 20,738 contracts was quite balanced from 10,312 of new longs and a 10,426 reduction of shorts. This increase brings the net position to +100,000 for the first time since March 3rd. This was also the third straight week of gains there.

But a good sign from Eurozone did come on Tuesday, where its private sector continued to improve in March with Markit's final composite PMI rising to 54.0 in March from 53.3 in February, an 11 month high.

Following suit, gold prices stabilized above $1200 on Friday although the markets watched the surging dollar. The dollar index remains strong at around its highest in three weeks – it was last at around 99.30, having earlier touched 99.69. The US currency has gained ground following the release of the mildly hawkish minutes from the March meeting of the US Federal Open Market Committee (FOMC) earlier this week.

The spot gold price was last at $1,207/1,208 per ounce, up $12.80 on Thursday’s close. Trade has ranged from $1,193 to $1,210.8. This does seem to be a pyschological boost for the boost.

To bottom it up, we saw gold getting support on Monday; post the weak jobs report that were released last Friday. Moreover, the dovish comment from New York Fed President William Dudley, gave gold the further push in prices. Furthermore, a weaker U.S. dollar provided underlying support for bullion. There may be more scope for bullion to rally.

Precious metals are highly sensitive and react instantly to the following

• Changes in monetary policy expectations,
• Fed's decisions
• Dollar prices
• Geo political crisis.

But currently what matter the most for the market watcher is - when the Federal Reserve will make its first move on rate and potential political fallout of Greece leaving the Eurozone.

Investment Tip: 
If gold breaks $1225 an ounce then it can be considered a good opportunity to buy in the market.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1188- $1224 an ounce	Rs.26,500 - Rs.28,000 per 10 gm
SILVER	$16.15- $17.30 an ounce	Rs.36,000 - Rs.38,000 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 -
"Playing Games With Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/04/playing-games-with-gold.html

LOTS OFTHINGS TO SMILE ABOUT FOR PRECIOUS METALS

                                                                                                      - By Mr. Prithviraj Kothari, MD, RSBL

Though we did see some trading in precious metals on Jan 1st and 2nd, it was the week from 5th-9th Jan that was actually considered the first volatile trading week of 2015.

The main news doing the rounds for the week was from US- minutes of the recent FOMC meeting and the non-farms payroll report.

Apart from the macro reports there were the following financial reports that were out in the week.

• US non-manufacturing PMI, factory orders and trade balance monthly reports.
• Europe, MPC rate
• The EU flash CPI
• Unemployment report,
• GB’s manufacturing PMI
• Germany retail sales
• The French trade balance.
• In China, CPI and trade balance
• And several economic reports from Canada and Australia.

But of all the above mentioned reports, the most influential for gold was the unemployment report.


Gold was seen to have a positive start for the week as it firmed above $1200 an ounce on Tuesday hitting a near three-week high, as tumbling global equities and concerns over Greece's future in the euro zone prompted investors to seek safety in the metal.

The uncertainty behind the euro zone is once again tempting investors to run after gold as a safe haven asset. This risk off sentiment in the markets may help bullion be stable at its recent upswing.

Adding to this we also saw that holding in the world’s largest gold-backed exchange traded fund- the SPDR Gold trust, rose 0.25 per cent to 710.81 tonnes on Monday, though still near a six-year low. But this rise did reflect improving investor sentiments towards gold.

Bullion traded in a ranged manner for most part of the week while volatility was high on Friday. The Greenback jumped on likely positive economic reports from the US coming week whereas speculation increased that Fed might talk about raising interest rates as also anticipated from its monetary policy minutes report due next week and likely putting weight on Bullion.

We have always seen that precious metal markets and the equities markets are inversely related. This week too, we saw precious metals rising while equity market and commodity bellwethers including copper and oil hit fresh multi-year lows. After a disappointing end to 2014 gold is beginning to build a base above $1,200 an ounce – the metal advanced 1.2% to $1,223 an ounce in late trade Friday, the highest since December 11.

Gold's gains since hitting four-year lows early November now top 7% and is made more remarkable by the fact that the advance has come despite a rampant dollar which hit a 12-year high against major currencies yesterday and a Friday jobs report that confirmed that the US economic recovery remains on track.

Though the market players were a lot dependent on the non-farm payrolls report, it did not show much after effect on gold.

The gold price wobbled briefly but was ultimately unaffected by a non-farm payrolls report that, while mostly positive, was not potent enough to shift the Federal Reserve’s rate-rise timeline.

Total non-farm payroll employment rose by 252,000 in December, which beat the 241,000 forecast, while the unemployment rate declined to 5.6 percent, the US Bureau of Labor Statistics reported today.

Additionally, the change in total non-farm payroll employment for October was revised to 261,000 from 243,000 and the change for November was revised to 353,000 from 321,000.
The forthcoming labor reports are expected to create added significance as there are expectations that the Federal Reserve in on the verge of raising interest rates. The current market consensus is that rates will rise in mid-2015 although this is a moving target that will be dictated by jobs and inflation data.

As said earlier, too gold is one such commodity which takes price direction from macro developments rather than its own demand-supply wherein we feel downside risks for the commodity may stay in the near future



- Previous blog - "An Impressive start For Gold In 2015 But A Dull End"
http://riddisiddhibullionsltd.blogspot.in/2015/01/an-impressive-start-for-gold-in-2105.html

GOLD WAS PULLED BETWEEN TWO MAJOR FORCES- SYRIAN ATTACK AND THE QE TAPERING

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold prices started weaker in Friday’s North American session, but reversed course and rose 1.5% following a lower-than-expected U.S. nonfarm payrolls report that increased confusions over when the Federal Reserve will start paring back its massive bind buying. The U.S. Bureau of Labor Statistics said that 169,000 jobs were created in August and the unemployment rate fell one basis point to 7.3%. That’s under the 170,000 to 180,000 expected. 

The better US Non-Manufacturing ISM data sent Gold heavily lower, as a Fed tapering for September seems on the cards now. Gold dropped by nearly 25 USD to a low of 1365 after the data with heavy volumes. Silver traded down to 23.01.

The U.S. August services sector ISM expanded to 58.6 compared to an expectation of 55.0. The ADP showed that 176,000 jobs were added in August while the jobless claims for the week ending 31 August declined 9,000, with the four-week average dropping to the lowest level since October 2007. The U.S. government bond yield surged while the Dollar Index climbed and the gold prices dropped upon the encouraging economic data. The European bond yield has also been rising in reaction to the Fed’s expected bond purchase tapering as well as the recent European growth recovery. The German 10-year government bond yield has surged above two percent on Thursday compared to 1.3 percent at the end of last year. 

Increase of jobs could push the Fed heavily in favour of tapering stimulus before the end of September, but a disappointing level of growth could sway the central bank to wait at least another month. 

Despite Friday's rally, gold ended the week 0.5 per cent lower for a second consecutive weekly loss as its safe haven appeal dropped on lack of progress about possible US military strikes against Syria.

Gold prices could rise next week as market awaits Fed tapering, moreover, there are some other factors underpinning gold, including decent physical demand in Asia and the likelihood of more Indian purchases ahead of the holidays there.

Another factor for gold is a potential military strike on Syria by the U.S., following reports that the government there allegedly used chemical weapons against its citizens. As President Obama persuades the Congress to vote and looks for the international backing for war in the G20 meeting, the delay in the Syrian strike has put a damper on gold prices

Gold traders are watching the Syrian conflict, but so far the saber-rattling has done little to impact markets. Several analysts said going into next week that Syria might take on added significance and the conflict will likely at least add support to prices.

The gold market has another week and half to mull what the Fed might do, as the Federal Open Market Committee meeting is Sept. 17-18, and there’s a debate over whether the Fed would taper its QE program or not. 

Monetary stimulus has been a major driver of gold's rally for recent years as the metal's stats as a hedge against inflation and economic uncertainty benefitted from increased money printing by central banks in low interest rate environment.

Gold rose to a record high of $1920.30 on 6th September - exactly two years ago. Year-to-date, the metal is down nearly 16 per cent.

Meanwhile, India welcomed the new RBI governor - Mr. Raghuram Rajan with open arms. And this was clearly visible in the market movements once he took his post. Equities were up, rupee appreciated and the sentiment became positive.

In a seven-page statement read out at a press conference after markets closed, Dr.Rajan set out a bold, reformist vision for his tenure at the central bank. Included in it are measures to deepen securities markets, improve financial inclusion including for SMEs, support and push for the rupee as an international currency and a warning for corporate defaulters of loans. Declaring that he would “preserve the value of the currency”, Dr. Rajan said India is a fundamentally sound economy with a bright future. 

On Tuesday, The Reserve Bank of India (RBI) has said gold supplied to units in Special Economic Zones (SEZs) and export units and to star/premier trading houses will not be treated as gold supplied to exporters under the 80/20 scheme — the allowing of import with the condition that a fifth must be supplied to exporters. With RBI’s new clarification, exports might be higher but gold supplied to exporters from a Domestic Tariff Area (any place outside an SEZ or other units outside a Customs-bonded one), other than export zones and by export houses, will be considered as part of the 20 per cent policy. Such exports last year were estimated at 55 tons and this year could be higher, with improved demand. An exporter will have to show a proof of export, including proof of inward remittance. Since the latter takes 270 days, waiting till then will mean the next export will be delayed. 

Now Indians have eyed their entire hopes on this new governor, who promises to deliver.

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 -

"It's Syria v/s Global Economy for gold"

http://riddisiddhibullionsltd.blogspot.in/2013/08/its-syria-vs-global-economy-for-gold.html

IT'S SYRIA V/S GLOBAL ECONOMY FOR GOLD!!!

-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)

Gold prices rallied above $1,430 an ounce to 3-1/2 month highs on Wednesday as rising tensions over Syria sparked safe-haven demand and a scramble among investors to cut their bets on falling prices

The metal hit a peak of $1,433.31 an ounce, its highest since May 14, as the United States and its allies geared up for a probable military strike against Syria in response to an apparent gas attack that killed hundreds of civilians in a rebel-held suburbs of Damascus. 

Gold was on track for a 5.40 percent gain on the month and its second straight monthly increase. It briefly trimmed its decline in the afternoon as U.S. Secretary of State John Kerry made a case for a "limited" strike against Syria, but prices fell back to pre-speech levels before he finished his televised address.

Till then, gold was dancing to the moves of the data released by US. Gold fell on Thursday, snapping a five-day rally as a U.S.-led military strike on Syria appeared not to be imminent and investors turned their attention to strong U.S. economic growth and the Federal Reserve's plans to rein in its stimulus program.

Gold prices in the international market declined as US economy grew by 2.5 percent annualized rate in Q2 up from previous quarters' 1.7%. Economists widely expected the GDP to grow by 2.2% and the trumping of expectations along with the dip in initial jobless claims by 6000 last week ensured a dip in gold futures. Gold slid below $1,400 an ounce on Friday as the dollar rallied to a four-week high, with investors squaring positions at the end of the month and cashing in on a recent run-up ahead of a long U.S. holiday weekend

I feel the correction in Gold prices came mostly from month-end position squaring and profit-taking after prices on Wednesday reached their highest levels since mid-May. I pray for all the souls who have lost their lives in Syria and may peace usher in the nation.

  

Meanwhile, In South Africa there was an atmosphere of unrest. The National Union of Mineworkers (NUM) has given 48 hours’ notice of a strike at South Africa’s gold producers, the country’s Chamber of Mines said on Friday.

The Chamber, which collectively bargains on behalf of South African gold miners AngloGold Ashanti, Gold Fields, Rand Uranium, Harmony Gold, Evander Gold Mine, Sibanye Gold and Village Main Reef, expects the strike to take effect from the night shift on September 3.

This too will affect gold prices.

While in the domestic market, the Indian rupee slipped for third consecutive day in a row on Wednesday to close at a fresh record low of 68.80 per dollar, as uncertainty over a possible US-led military strike against Syria knocked down Asian equity markets and currencies. This is the biggest ever single-day fall for the currency since 1995.

Apart from global factor, India suffers higher current account deficit fuelling worries that foreign investors will continue to sell out of a country facing stiff economic challenges.

The currency has plunged over 13 per cent so far in the month of August alone to mark its worst monthly fall since the year 1993.

Rupee has plunged nearly 25 per cent so far in the year 2013. A plunging rupee has affected bullion prices too taking gold to a life time high of in the Indian markets.

Risk of supply disruptions for platinum remains at large, I feel the sustainability of a price rally above $1,500 is likely to reduce as the jewellery demand will fade above $1,500. China is the dominant player in the platinum jewellery market, accounting for nearly 60% of the world platinum jewellery demand.  

With respect to Silver’s rally over the past few weeks, I believe the metal’s underlying fundamentals remain weak. I feel short covering was the major support that leads the metal prices to reach higher levels. I do believe for the time being the metal will also find support on dips (taking its lead from gold). 

The trade range for gold for the coming week is expected to be $1375-$1423 an ounce in the international markets, and in the domestic market it is expected to range between Rs.30,000- Rs.33,500 per 10 gram

“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 -

"Will Gold cross the $1400 mark?"

http://riddisiddhibullionsltd.blogspot.in/2013/08/will-gold-cross-1400-mark.html