RSBL: Gold & Silver prices rise

                                                                           By Mr. Prithviraj Kothari, MD, RSBL

Last week we saw gold prices setting to 15 month high on Friday.

This surge in prices was influence by nervous stock markets which raised gold’s safe haven demand. Currently A confluence of monetary and financial factors is supporting gold prices.

A solidly lower U.S. dollar index that hit an eight-month low Friday and Nymex crude oil prices that notched a five-month high are bullish "outside market" forces that are also propelling gold and silver prices higher.

On Wednesday, the US Federal Reserve continued its historically low nominal interest rates and didn’t signal to markets that another rate hike was forthcoming. We saw increased uncertainty in the markets on Thursday, one day after the Fed’s policy statement came out, but the Fed’s reflections had little to do with the market movements.

While in the US, unemployment claims hit a 42-year low of 247,000, which easily beat the 257,000 forecast. But US GDP increased by a 0.5-percent annual rate in the first quarter, the slowest pace since the first quarter of 2014 and below the 0.7-percent consensus estimate.

This paradox of a strong jobs market with tepid GDP growth has put the Federal Reserve in a bind. In its April statement released, the Fed decided to maintain near-zero interest rates despite noting that global risks had eased over the last several weeks.

Investors aren’t expecting the Fed to raise rates anytime soon with a majority of investors citing December as the most likely time for the Fed to rise rates again, according to the CME Group Fed Watch.

Additionally, the Bank of Japan’s (BOJ) shocked markets Wednesday by deciding to keep its monetary policy unchanged.

Now what needs to be watched is the action coming in for gold from the sidelined factors. Moreover what needs to be assessed is how the dollar will behave this week since currency continues to be the predominant driver in most commodity markets for the moment.

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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 -
 "BEST QUARTER FOR BULLION SINCE THREE DECADES: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2016/04/best-quarter-for-bullion-since-three.html

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Sovereign Gold Bonds Scheme by India & FED Rate Hike - Timing Matters: RSBL!

- Mr. Prithviraj Kothari, Managing Director, RSBL

Rather than talking about International Bullion, I am glad to put forward the decision of Government of India, in consultation with Reserve Bank of India (RBI), to issue Sovereign Gold Bonds. A welcome move by Government of India, after their announcement during the Budget. The best part of this is:

1. The investors will be compensated at a fixed rate of 2.75% per annum payable semi-annually on the initial value of investment. This a good interest rate that their offering as compared to the policy that they issued a decade back. For Indians who purchase Gold with a traditional respect can now get a chance to earn a fixed interest rate along with the benefit of Price appreciation.
2. Minimum permissible investment will be 2 units (i.e. 2 grams of gold. With already a wave of new bank accounts being opened due to Jan Dhan Yojna, this minimum permissible investment gives an added advantage to reach the masses who can invest as low as 2 grams.

My personal feeling is that the scheme would be a huge success with the financial, safety implications that have been covered in alternative to holding physical gold at home.

I am sure Sovereign Gold Bonds shall raise a new chapter in Indian Bullion Industry.

As mentioned in my previous Blogs, Gold is still a sell on rallies. The physiological level s US$1200 is yet to be broken convincingly if we talk about it on a technical front. Fundamentally, lower the price the better the buying opportunity.

The data dependent week for gold finished in the prices in red as investor sentiment eroded due to uncertainty in US monetary policy.

On Wednesday, the Federal Open Market Committee (FOMC) chose not to increase the federal funds rate but it did remove the prior concern over global growth and volatility. This was largely interpreted in the market as hawkish, signaling higher rates from the Federal Open Market Committee’s December 15-16 meeting.

I do feel that you would be a bit confused that if FED is not increasing the interest rates, it is good signs for Bullion as the safe heaven appeal rises due to uncertainties in economy. But the December meeting is the most anticipated one. There has been growth in US economy and as the FED says it has been moderately paced. But they cannot go on throughout their time with negative interest rates. The timing is crucial and that is where the whole delay is. So the rates increase has already priced in Gold poor show. The spot gold price was last at $1,1141.40/1,141.90 per ounce, down $5.70 on Thursday’s close. Silver prices followed the Gold fall where the last recorded price was $15.57/15.62.

RSBL SPOT Gold Price

Some of the important data released this week weren’t meeting the expectation of FED:

1. A Negative Advance GDP q/q print of 1.5% instead of 1.6% was a small hiccup for US economy.
2. CB consumer confidence in US showed a gloomy picture of 97.6 instead of 102.5
3. Core Durable Goods Orders m/m for US posted a negative performance too of -0.4% instead of 0.0%

US data releases between now and mid-December will be viewed as crucial but a major obstacle for the US central bank’ policy-setting board will be a key few who believe inflation should reach – or at least approach – the Fed’s target of two percent before a lift-off. Though a part of the FOMC wants to hold off until 2016, Fed chair Janet Yellen has said repeatedly she would prefer to rise the federal funds rate this year despite poor inflation and the tepid US economic recovery.

A rate hike this December would weigh on gold and given the recent gains in positioning could mean a deeper correction than would have been otherwise. A drop in gold prices would mean a good buying opportunity for physical buyers in China who need to stock up for the Lunar New Year festivities. Though the festival falls in the second half of February, people might advance their purchases if a dip in gold prices is witnessed.

Investors will now, desperately, await the December meeting for a potential normalization of monetary policy. Expectations in financial markets about a possible rate hike by the Fed this year are low, but a Fed rate hike is not completely priced out yet.

US data releases between now and the December 16 FOMC meeting will likely be very important as market participants try to gauge the health of the economy and whether or not a potential move in December would be justified. The Fed is ‘data dependent’ and there shall be a great deal of new information that shall be released between now and the December meeting, much of which shall have to turn for the better if the Fed is going to act

Technical Range for Gold price and Silver price next week:

METAL	International price range	Domestic price range
Gold	$1126 - $1177 per ounce	INR 26100 – INR 27000 per 10gm
Silver	$14.47 - $16.20 per ounce	INR 35200 – INR 38500 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 -
" GOLD LOSES DIRECTION: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/10/gold-loses-direction-rsbl.html 

RSBL: A PUZZLED MARKET FOR GOLD

 By Mr. Prithviraj Kothari, MD, RSBL

It was a rather confused market for gold this week. The negatives pushed gold high while the stability kept it low. 

Though it was a neutral week for gold, it managed to stabilize over $1200 an ounce. The recent gains on gold prices have been supported by-

• The sluggish reports from the US economy
• The dreary March payrolls report from the Labor Department
• The slowly advancing US housing reports
• Rise in SPDR Gold Shares
• The uncertainties about Greece’s finances
• Other geopolitical tensions

The sluggish economic reports have raised the expectations that the US central bank would not be hiking the interest rates before September. 

The weak economic data this week did not have much impact on gold prices. Neither the US housing reports nor the declining dollar – gold prices did not bank on any of these factors. 

The gold price remained in positive territory in Friday afternoon trading despite the dollar managing to claw back.  Spot gold was seen trading at $1,204.70/1,205.50 per ounce was up $7 on the previous session’s close. Reasons supporting this are:

Greece Crisis: Investors shifted focus to gold to seek safe haven after world stock markets tracked lower over worries of a potential Greek debt repayment default. 


Meanwhile, Consumer prices in the euro zone rose for the second straight month in March, not enough to pull annual inflation out of negative territory but another positive sign as the currency bloc looks to escape prolonged deflation.

Sluggish reports from US: US Industrial production disappointed in March to print -0.6% (expected: -0.3%) to suffer its largest fall in well over two years. US retail sales too printed a lower figure of 0.9% vs 1.1% expected

SPDR Gold trust- Holdings of SPDR Gold Trust, the world's largest gold backed exchange traded fund, remained unchanged at 736.08 tons, from its previous close of 734.29 tons

Demand for Gold: Physical buying in the world's top two gold consuming countries is expected to rise. A spate of manufacturing data from all the world’s major economies next week as well as the key Hindu festival of Akshaya Tritiya in India on Tuesday, which is widely regarded to be the most auspicious day in the country’s calendar to buy gold, could prove key to near-term direction. India’s March gold imports rose 94 percent year-on-year to $4.98 billion, according to the  trade ministry.

In the week to come factors supporting a bullish sentiment for Gold are: 

Weak US Dollar: A weak U.S. dollar could end up taking some momentum away from equity markets and that could help gold prices. Further weakness in the dollar could push up gold prices as bullion is seen as a safe-haven asset.

Eurozone: Negative bond yields in Europe continue to make the yellow metal an attractive safe-haven investment. Meeting of Eurozone ministers on the 24th April where Greece debt deal issue will take the center stage.

Economic Data from US: Though it will be a slow week for economic data, it will play a crucial role in influencing gold prices and the highlight will come on Friday with the release of U.S. durable goods for March. Disappointing economic data will make it clear the Federal Reserve will be unable to raise rates as high or as fast as markets are currently expecting and as a result, gold will benefit.

US rate hike: The G-20 did acknowledge the  fact that a FED tightening could send shock waves around the Globe.

For the time being Markets are puzzled when it comes to Gold price move. Until we get clear-cut news from the U.S. economy; that will allow the Fed to make a definitive move on rates or the clearance on Greece debt deal issue, Gold is bounded in a range of $1170 to $1238.

TRADE RANGE:
 

METAL	INTERNATIONAL price	DOMESTIC price
GOLD	$1194- $1230 an ounce	Rs.26,500- Rs.27,800 per 10gm
SILVER	$15.63- $17.00 an ounce	Rs.35,000-Rs.37,500 per kg

Investment tip:

For Gold: BUY ON DIPS

For Silver: Buy for future. Some facts:
1. 750 million ounces of Sivler are produced everyday which is worth US$14 billion. A price tag which is nothing in the current world. Individual companies are brought and sold at this price level.
2. New silver deposit exploration has found very little over the last decade.
3. Uses of Silver have been growing consistently in medical, Solar, Industrial etc fields. Relating to its increasing demand. A did read in an article that if the Silver is used at the current rate and only this much production happens across the world, then it can be extinct in the next 25 years or so.

“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 -

"RSBL: Good Opportunity To Buy Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-good-opportunity-to-buy-gold.html