AN IMPORTANT WEEK FOR GOLD : RSBL

                                                                             By Mr. Prithviraj Kothari, MD, RSBL

I must apologize to my readers for not writing a Blog last week. I would reply to all your queries via the content in this blog. My sole intention was to to see some developments in Greece as it was like a never ending tussle between Athens and its creditors.  It was taking Gold and Silver to rallies which was purely news based. 

Over a period of time we have seen some factors being very crucial for gold compared to the others. US dollar, Fed’s interest rate hike and the Greece crisis have been major drivers for gold prices apart from Geo-political economic crisis, inflation and demand for gold from India and China.

Lets jump straight to the key takeaways:

Greece: The mounting Greek Funding crisis is positive for gold, but its influence could be partial as there is still a chance the two sides can tangle through to come to another short-term agreement.

Polls have stated that the exit out of the Euro is opposed by the Greek people and European leaders, the current deadlock signals prolonged and painful negotiations ahead, with a possible extension of the June 30 deadline on the horizon.

But after Monday's emergency meeting, news have floated that the negotiations between Greece and its creditors have taken a positive step forward. Not much details have been provided yet but the upcoming meeting on June 24th-25th will give the answer as to where this is all going.

Till that time the Bulls and the bears will not allow to have a dramatic impact on Gold price.

US Economic data: Data on Thursday showed that U.S. initial jobless claims fell by 12,000 to 267,000 last week, pointing to ongoing strengthening in the labor market.

A separate report showed that factory activity in the U.S. mid-Atlantic region expanded at the fastest rate in six months in June.

Data also showed that showed that U.S. consumer prices increased at the fastest rate in more than two years in May, climbing 0.4% after a 0.1% gain in April. But economists had forecast an increase of 0.5% and inflation was still well below the Fed’s 2% target.

U.S. economic data as that will have a major impact on forecasts for when the Federal Reserve will hike rates. Positive data that supports a September rate hike will be positive for the U.S. dollar and negative for gold.

Interest Rate Hike: The economic data affects the dollar which in turn affects the interest rate hike. Fed Chairman Yellen also wants to see stronger consumer spending and a higher labor participation rate and wage growth before lifting rates. 

Gold is expected to remain caught in a tug of war between the U.S. dollar and safe-haven demand as Greece’s repayment deadline quickly approaches. Gold ended its second consecutive week in positive territory; the market managed to hold on to most of its gains from Thursday’s 1.5% rally.

There are ample amount of prospects for the market players to adjust their interest rate expectations as there is a slew of economic data including housing sales data, durable goods numbers, along with preliminary manufacturing data due to be released. Markets will also receive the final gross domestic report for the first-quarter, although this is now backwards looking, some economists warn that any major revision will impact annual economic growth projections

On the domestic front, Government of India is planning to issue Sovereign bonds linked to the bullion price in an effort to divert an estimated 300 tonnes of annual demand for Gold bars and coins. The provision of a 2 percent interest rate and use of the bonds as collateral are among the the key take away points that would attract the investors.

• 24th June:  Germany IFO business climate index, the U.S. final Q1 GDP and Euro Group Meetings
• 25th June: U.S. core price index 

Summing it up, a dramatic move in precious metals is expected in the coming days!

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1170- $1220 an ounce	Rs.26,250- Rs.27,700 per 10gm
SILVER	$15.60- $17.00 an ounce	Rs.36,000- Rs.39,000 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 -

"Bulls and Bears to Clash"

http://riddisiddhibullionsltd.blogspot.in/2015/06/bulls-and-bears-to-clash.html

BULLS AND BEARS TO CLASH

                                              By Mr. Prithviraj Kothari, MD, RSBL

 

Over the past year and to be precise, lately, there has been a strong belief in the market that the U.S. is on it way of raising its rates. While evidence of continued improvement in the US economy is not gold-friendly and ultimately acts as an obstacle for the price rise in yellow metal.

Let’s have a quick glance to the important highlights during the last week:

Non farm payrolls data: 
       The most awaited or rather the most influential factor this week was the jobs report. The US created 280,000 new jobs in May, significantly above analysts’ estimates of 222,000 and the highest climb in jobs figures seen in months. US indicators have increased in importance at the moment as the Federal Reserve specifically identified US jobs data as one of the key factors on its decision when to raise interest rates from near zero.
      The unemployment rate was essentially unchanged at 5.5 percent. Private sector job growth has increased 63 straight months, a US record.

EUROZONE:
      In the Eurozone, French trade balance in April was a negative three billion, above forecasts of four billion, while German factory orders month-over-month in April was up 1.4 percent, beating consensus of 0.6 percent. With investor sentiment for gold so weak gold prices may well continue lower, but we do feel this is leading to a better buying opportunity and given developments in Greece and with potential for corrections in other asset classes, it may not be too long before the markets start looking for a safe-haven again.

DOLLAR:
    The dollar jumped to a 13-year high against the yen and gained against most major currencies, cutting the appeal of precious metals as alternative assets. The expectation of an interest rate hike has benefited the dollar and it has enjoyed a dramatic and sustained rally. 

GREECE: 
      Meanwhile in Greece, the country delayed a 300-million-euro repayment to the IMF until the end of June and bundling all the payments together, increasing the risk of a Greek exit from the bloc. 
      Prime Minister Alexis Tsipras reportedly rejected proposals put together by its lenders, arguing that any deal to unlock crucial bailout funds must be based on his own side’s conditions. But the two sides remain “very close” to agreeing a deal, after creditors supposedly proposed lower primary surplus goals.


Geopolitical Tension:
       Ukrainian troops and pro-Russian separatists on Wednesday fought their first serious battles in months and Ukraine's defense minister said an attempt by rebels to take the eastern town of Maryinka had been thwarted.

Post the US job data release, gold prices tumbled as the economy showed strong signs of recovery after a lackluster first quarter. Investors have been barring gold on signs that the economy has grown enough adhesion to damp the need for haven assets, encouraging worry that better progress will push policy makers to raise rates. 

It’s not possible to give a clarity to what exactly the price of gold is going to be tomorrow. Nor it is easy to take a buy call in Silver as the metal continues to follow gold with the risk to the downside. There are many factors that support and upper drive and a contrary lower drive for gold prices.

First, we think about international geopolitical tensions. Second, the uncertainty coming from Greece is still lingering in the minds of traders and captains of industry. Third, strategic or policy-related bullion purchases by central banks remain significantly high: After eight quarters of capital outflows from the ETF industry, the first quarter of 2015 saw a rebound in gold purchases.

However, two factors might hamper the bullion’s technical ascent, reducing the precious metal’s value over time. The first element comes from long-term charts: Gold is still in a long-term bearish trend, which has caused the precious metal to drop 30% in value from the peak reached during the summer of 2011. Second obstacle to higher gold prices: the strong US dollar and the historically negative correlation between the American currency and the yellow metal. To add Hedge funds and money managers cut net long positions in gold and silver during the week ended June 2, U.S. Commodity Futures Trading Commission data showed on Friday.

A stimulating clash awaits for bulls and bears in the coming months! But, as usual, the final word rests with the markets.

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1151 - $1191 an ounce	Rs.25,700 - Rs.27,300 per 10g
SILVER	$15.70 - $17.00 an ounce	Rs.36,500 - Rs.39,500 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 -

"Calmness before the big move in Gold and Silver"

http://riddisiddhibullionsltd.blogspot.in/2015/06/calmness-before-big-move-in-gold-and.html

RSBL: A VOLATILE WEEK WAITS FOR GOLD

                                                                  - By Mr. Prithviraj Kothari, MD, RSBL

The week was interesting for gold especially for gold traders and investors, as they enjoyed the doubts surrounding the dramatic and volatile moves which later kept the market wondering whether the yellow metal will be bullish or bounce back from its high prices.

Last Monday’s price action promised much, promptly reversing the previous Friday’s losses and surging back above the resistance level at $1190 per ounce to close at $1203.20 per ounce. This bullish sentiment continued into Tuesday, albeit on dropping volume with the price action just managing to breach the resistance at $1210 per ounce, thereby giving longer term investors hope this could be the start of some sort of retrieval.

However, Wednesday’s price action was unable to follow through, before Thursday’s dramatic move when the gold bears once again took control, sending gold prices hitting through the $1190 per ounce support region, accompanied by high volume and validating the move lower.

Friday’s price action followed through with further selling, but on lower volume as the platform of support in the $1174 per ounce region was duly tested before gold closed the week at $1174.50 per ounce. Spot gold was last at $1,171.70/1,172.60 per ounce, down $11.50 on the previous session’s close and around intraday lows – it struck its cheapest since March 20 at $1,170.20 earlier. 

The precious metals’ moves may have been worsened as parts of China, India and parts of Europe were absent for May Day holidays.

But there is a bullish sentiment for gold in the market. SPDR Gold trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.32 percent to 741.75 tonnes on Friday.

Currently, Equities seem to be in a bubble zone and are prone to devaluation. In such case there is a chance that both Wall Street and world stock markets will tumble down especially when there is clarity on signs that the Fed is beginning to tighten-up its current zero interest-rate policy – and this could be the spark that triggers a resumption of the long-term bull market in gold.  

Factors that support this bullish sentiments are-

• Persian Gulf Crisis
• Russian- Ukraine escalating tensions in Europe
• Greece default
• Increase in demand for gold as a safe haven appeal keeping in mind the above mentioned points

Thus yet another volatile week waits for gold as investors and traders prepare for April’s employment report on Friday. Volatility will be an important factor for the gold market next week and the ones that will be actively creating volatile situations are:
 

Employment Report: Currently there are expectations in the market that the U.S may have created 210,000 jobs in April. If it so happens then gold prices are expected to remain near the bottom end of their current range and if employment comes in above 200,000 then prices could fall below current support.

Other Data: Although the biggest data report will come at the end of the week, ahead of the employment report, markets will receive ISM non-manufacturing data on Tuesday and private company employment data from ADP Wednesday.

Britain: Apart from the key economic indicators coming in from U.S, there are chances that Britain’s federal elections on May 7 could have an impact on gold markets is the results show a majority for Conservatives, who have said that if they win they will hold an referendum on its membership to the European Union by 2017. Analysts have noted that a Britain’s exit from the EU could pose a threat to the euro, which would create safe-haven demand for gold prices. Currently polls show a close race between Britain’s federal parties.

Reassessment of economic prospects – and revised financial-market expectations of Fed policy – sometime in the next few months could support a spring-summer recovery in the price of gold, lifting the yellow metal up and out of its recent trading range.

  
Until that happens, gold prices will likely remain “range-bound” in the short term, perhaps through midyear or longer, trading mostly between a floor price of $1,175 and a ceiling around $1,225.  

As these boundaries are approached or briefly broached, technical traders will continue to step in as buyers or sellers, respectively, keeping the yellow metal’s price relatively stable within this range.  

Despite some disagreement among the voting members of the Fed’s FOMC policy-setting committee, the Fed will likely honor its pledge not to begin easing up on interest rates until the economy shows clear signs of a continuing and sustainable expansion. 

TRADE RANGE

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1163-$1207 an ounce	Rs.26,500- Rs.27,300 per 10g
SILVER	$15.73-$16.48 an ounce	Rs.35,000- 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 -

"RSBL: Friendly News ....But Gold Fails To Ignite"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-friendly-newsbut-gold-fails-to.html

RSBL: FRIENDLY NEWS....BUT GOLD FAILS TO IGNITE

                                                        By Mr. Prithviraj Kothari, MD, RSBL

  
The week has lot of gold friendly news: but unfortunately none of it supported gold. Be it the soft US data reports or the Greece Crisis or the weakening US dollar any many other news: Gold failed to benefit from any of them.

Any news failed to ignite gold prices leaving it range bound for the week untill the later part of Friday which did some new movement but downwards.

On Friday, the price of gold was down more than 1.5%, or nearly $20 an ounce, to as low as $1,176, the lowest price for the precious metal since late March. Gold ended lower on Friday as investors were more interested in next week’s monetary policy meet of the Federal Reserve. Investors believe that this meeting would give signals on Fed’s interest rate hike plans. The yellow metal was also impacted after some upbeat manufactured durable goods data from the U.S., even as the dollar continued to fluctuate.

US Data: 
          US weekly unemployment claims increased to 295,000 in April, higher than the forecast 288,000. US new home sales for March, meanwhile, came in at an annual rate of 481,000, which was 11.4 percent below the prior month’s reading and missed the 514,000 forecast. The recent soft data from the US could delay the Federal Open Market Committee (FOMC) from raising interest rates from near-zero levels until later this year. The Fed’s next meeting takes place on April 28.

            In some upbeat economic news, new orders for U.S. manufactured durable goods increased much more than expected in March, a report from the Commerce Department showed Friday.

Fed Interest Rate Hike:
             Soft economic US data has pushed the expected dates of interest rate hike even further. The run of weak US macroeconomic data has taken a June rise in interest rates by the Federal Reserve off the table and even a change in September now looks unlikely, according to the CME Group’s Fed Watch. Interest rates have been zero since December 2008 and now the members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise interest rates with most of them believing that the hike will come sometime in September.


US Dollar: 
           Weak data on U.S. jobless claims, manufacturing and home sales have hurt the dollar this week, boosting uncertainty over whether the Federal Reserve will conduct its first U.S. rate rise in nearly a decade in June or September.

Equities: 
           Gold fell on Friday, on track for a third successive weekly loss as strength in global equities diverted interest, though uncertainty over the timing of a U.S. rate rise pegged prices in a narrow range. World stocks hit all-time highs on Friday as corporate updates in Europe and a post-dot com-boom peak for the U.S. NASDAQ stoked investor optimism.
          Gains for equities are spurring investors to shun gold, with prices posting the biggest tumble in seven weeks.

Greece: 
          Gold prices dipped below $1,180 on the London spot market and on the Chicago Mercantile Exchange on Friday afternoon after some progress was made in Greek debt talks. Gold’s credentials as a safe-haven investment appear to have taken a hit on suggestions that Greece is closer to a bailout deal after a summit of Eurozone ministers in Riga. The country is running out of money – Athens is under pressure to accelerate reforms that would secure a deal before it defaults on its debts.
           Greece ordered state entities from municipalities to a fund meant for future generations to park idle cash at the central bank in a scramble on Monday to pay the bills. With IMF loan repayments due next month, Greece has been tapping into public cash reserves in temporary transactions.

Meanwhile Eurozone ministers are attended a summit again  to discuss Greece’s possible default on its debt obligations but positive headlines have been supportive of the single currency, which possibly reduced gold’s safe-haven appeal.

In other news, Russia have increased their Gold reserves by adding nearly 30 tons in April. The brings the country's total reserve to 1238 tons. Russia have steadily invested in Gold through the last nine months of 2014, to diversify reserves and protect Ruble illiquidity.

Now the market players have turned their attention to Wednesdays Federal Open Market Committee statement. Investors was looking out for some signs of tightening of monetary policy as the FOMC decides exactly when to start normalizing. That would raise the opportunity cost of holding non-yielding bullion, while boosting the dollar.

Despite the current stickiness within the range, I do feel that a bigger move is about to come. GDP and FOMC or even the Greece could be the next big catalyst not leaving the Geo-political tensions out of the way.

Whatever be the move, yellow metal will always be known for its safe haven appeal and as the countries are adding their reserves, it clearly indicates that Gold will never be out of picture.
 

TRADE RANGE:

METAL	INTERNATIONAL	DOMESTIC
GOLD	$1173- $1200 an ounce	Rs.26,500- Rs.27,500 per 10gm
SILVER	$15.40- $16.30 an ounce	Rs.35,000- Rs.37,000 per kg

“The primary purpose of this bullion blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

- Previous blog -
"RSBL:A Puzzled Market For Gold"

http://riddisiddhibullionsltd.blogspot.in/2015/04/rsbl-puzzled-market-for-gold.html

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