Market Sentiment Bullish

Generally in my blog, I have mentioned about how gold has been behaving, or the=e weekly outlook for gold etc. But in this blog I have mainly picked 4 factors that I personally believe will influence gold prices in the near future. It has been a good year for gold so far and investors believe that gold is here to stay.

A positive sentiment in the market is supported by the following factors-

Weak US dollar - We have always seen that gold is inversely related to the dollar. This relationship has proved to be fruitful strong and table for gold over a period of time. Gold has a tendency to rally when dollar weakens. Sometimes there has been strange behavior where gold and dollar both have declined together. But the situation was different at that time. It happened in an environment when US real yields rose, which depressed gold prices, while real yields elsewhere rose more than US real yields, pushing the US dollar lower. These situations are exceptional. If the US dollar weakens or strengthens in tandem with interest rate spreads than gold prices move in the opposite direction. If the US dollar weakens because of unfavorable spread movements, but US yields still move higher, gold prices will suffer versus the US dollar because gold doesn’t pay interest.

So keeping the exceptions apart, gold prices generally move opposite to the dollar. And in the near term, since dollar is expected to weaken, gold prices are expected to move higher.

Fed -When we mention dollar, we can’t forget to make note of the Fed as time and again dovish comments from Fed have influenced the dollar and furthermore the yellow metal.  The Fed to remain on hold, and other major central bank to hike less and/or later. Less hawkish central banks are a positive development for precious metal prices in general and for gold prices in particular. Moreover we expect the 10 year US Treasury yield and US 10y real yields to decline slightly. This should support gold prices.

Chinese economy - After the US, it’s the Chinese economy that stands second in influencing the yellow metal. The developments in the Chinese Yuan reflect the expectations for the Chinese economy and the US-China trade conflict.  With trade at war, China won’t sit quiet; it may continue to take some actions to strengthen its economy.these measure along with a possible US-China trade deal will support the yuan and gold prices.
Adding to it, we have seen that lately China ah been piling up its gold reserves. China is one of the leading consumers if gold and rising demand will surely push gold prices high.

Optimist sentiment - the technical picture of gold prices still looks positive. Despite the recent sharp decline in prices, prices are still above the 200-day moving average at around USD 1,250 per ounce. We are confident that prices will stay above this level. It is possible that prices drop towards this level and test it, but this would be an opportunity to position for higher gold prices. A sudden short-term rally in the US dollar or a temporary spike in 10y US Treasury yields (not our base scenario) could trigger profit taking on existing net-long gold positions. Later in the year we expect the positive momentum to build and gold prices to rally more strongly.

Has the scenario changed for gold

Last week, gold prices had a chance to close at their highest since the middle of July. The fundamental backdrop was a combination of declines in the US Dollar and local front-end government bond yields. Since gold is priced in USD, a weaker greenback makes the precious metal relatively more expensive. As for the latter, when bond yields decline, the non-interest bearing asset looks comparatively more appealing.

Though markets have shown a drastic behavior in the past 10 days, things still good for gold. Though gold has been down almost 4 per cent for the year till date, last week was fairly positive for the yellow metal. No doubt equities have outperformed gold so far but any rally in gold prices and any further weakness in U.S equities will see a reverse behaviour thus gold outperforming stocks in the near future.

The Fed has already appeared to express doubts on the future pace of tightening, although the markets do not anticipate it holding off on the likely 25 basis point interest rate increase at the FOMC meeting in just over one week’s time.  Although a further sharp fall in U.S. equities in the coming week might, just, cause the Committee to change its mind.  It is likely to be under pressure from President Trump to keep interest rates, and thus the dollar, down given his tariff impositions seem to be having the effect of increasing the dollar index and, ultimately, putting up the cost of manufactured goods to the U.S. consumer.

The volatility in equities and dollar was influenced buy the ongoing trade war between China and U.S which appears to have backfired rapidly on the greenback.

The arrest in Vancouver of China’s Huawei Technology’s CFO and the company founder’s daughter in Canada has potentially inflamed the trade relations again.

In the bigger picture, The Fed is in a dilemma over a few factors that don’t fall under its control but will play an important role in the growth of the US economy which will further  influence any decision related to rate hike-

Immigration - President Donald Trump's crackdown on immigration, which translates into fewer workers, especially those willing to take lower-wage jobs, and therefore higher wages

Wage- state-level minimum wage boosts that amount to government-mandated wage inflation.
Truck driver shortage- the countrywide truck driver shortage, which has become "a major reason for all sorts of companies to raise prices  in order to make their customers eat higher shipping costs
Trade war- is the United States' trade dispute with China, further escalated this week by the arrest of the CFO of Huawei, one of China's most important companies. While Trump and China's president seemed to agree to a ceasefire over the weekend, the arrest makes the odds of a good trade deal most unlikely.

All four of these ongoing issues directly affect the Fed's policy, and that's what's putting this independent entity in a bind when it comes to planning for the year ahead and maneuvering other major, economy-altering changes like the rise of workplace automation.

The Fed is simply helpless and can’t do anything about the above mentioned trends. Just in case they won’t work in its favour then rate hike might be delayed which will surely push gold prices high.

Speculators are currently neutral for gold. They don’t believe it will dip neither they have faith in its upside potential. Though markets feel that chances if it going lower are high.
But if we see the long run, gold looks attractive.

Gold prices for the year have decline but look positive in the coming two years. A lower dollar, lower US Treasury yields, a recovery of the Chinese Yuan and higher jewellery demand will result in the upward trend.

Drivers for Gold

The past few trading days have seen the gold price hovering above and below the $1,200 mark in the light of a stronger dollar and a lack of Chinese data due to the nation’s Golden Week holiday this week.  Every time the gold price has nosed above $1,200 it has been taken down a few dollars again.
There were important key events that occurred during the week.

Let’s have a look at all that has been affecting gold - 

US Economic Data - Data on Wednesday showed that U.S. service sector activity accelerated to a 21-year high in September and another report showed that private sector hiring increased at the fastest pace in seven months in September.

US Dollar - Gold prices inched down on Thursday as the dollar strengthened on positive U.S. economic data. Rising U.S. Treasury yields were also cited as headwind for the precious metal.
The dollar hit an 11-month high against the yen and stood tall against other its peers on Thursday, boosted by a spike in Treasury yields following upbeat U.S. data and comments from Federal Reserve Chairman Jerome Powell that were seen as hawkish.

Rupee at an all time low - Rupee was at an all time low of 73.34 on Wednesday, which further spikes gold prices in spite of a global down fall. Increased buying by the world’s second-biggest gold consumer would support global prices that have traded near $1,200 an ounce since late August, but also widen India’s trade deficit and add to pressure on the Indian rupee.  Rupee is consistently falling and we don’t know how much it will fall further. It is prompting investors to hedge their risk with exposure to gold.

Domestic gold prices - Gold prices crossed the Rs 32,000 per 10-gram mark on Wednesday at the bullion market as fresh buying by local jewellers ahead of the festive season pushed up prices. Positive global cues also supported the price move. Prices of the yellow metal surged by Rs 555 to reach Rs 32,030 per 10 gram.

Demand for gold - Traders in India,  said that they are building up inventory ahead of Diwali and Dhanteras next month. Also, globally sentiments for gold improved after US and Canada reached an agreement to salvage a North American free trade deal. India’s gold imports may rise in the fourth quarter as investors seek alternatives to faltering equity markets and a plunging rupee. Traditional buying will also rise during the festival season, said several sources involved in the market.

Meanwhile we expect the gold price to continue hovering around the $1,200 mark, give or take a few dollars.  There does seem to be an appetite to take it higher, but every time it does so it seems to be knocked back.

What will probably drive gold in the following few months -
• Positive or negative U.S economic data
• Any news on Chinese gold demand which will surface once the Chinese Golden Week holiday ends
• Euro zone trials
• Italian Debt Situation
• Brexit negotiations
Keeping the above events in mind, a mixed bags of reactions is expected from the markets for gold.

Gold May Regain its Safe Haven Status

In January, precious metal prices peaked. Since then they have fallen substantially by 9% (gold prices).

In recent weeks, the sell-off has accelerated. There are several reasons for this price weakness.

Trade War - a looming trade war between the US and China has weighed on prices, especially cyclical precious metals such as platinum and palladium.

US Dollar - Rising U.S. Fed rates and rising real interest rates – up 20% from the start of the year as measured by 10-year bonds — are supporting the dollar. While the dollar remains strong, gold is being depressed.
To some effect, the metals markets are experiencing the same depressing impact on prices.
 The recovery of the US dollar is negative for all precious metal prices.

Euro - a downshift in expectations about the euro zone economy has been a negative for precious metals.

Global Markets - weakness in emerging markets has lowered all precious metal prices as well. More recently the substantial fall in the Yuan has accelerated the decline in precious metal prices. Yuan weakness reflects the heightened trade tensions between the US and China and nervousness about Chinese corporate bond defaults. China is a crucial consumer of precious metals. So fears of lower Chinese demand are negative for prices.

But this may not be the end as markets believe that this downfall may continue. The US dollar is expected to strengthen further due to strong economic data and ongoing Fed Hike.

Furthermore, markets look negative for gold as the 10y US Treasury yields is expected to rise.
Gold and other precious metals are highly sensitive to these issues and hence analysts believe the gold, in the near-term, is expected to fall.

In addition, trade tensions between the US and China will probably linger on and there may be more volatility in the Chinese Yuan in the near term. These are also negatives for precious metal prices.
Finally, it is likely that concerns about Italy will return if Italy’s fiscal balance will get into focus again later in the summer. This will weigh on the euro but also on platinum prices as the euro zone is an important market for platinum

In such an environment, holding gold is seen as a cost, not an opportunity. Although market turnover has been high, the bulls have not been in evidence and prices have remained depressed.
BUT HOPE STILL PERSISTS.

Though precious metals are expected to fall, hope still prevails over the factors that support gold prices.

U.S. - By the end of the year US dollar and 10y Treasury yields are expected to peak. Which further pours in the thought that it might pull down from its peak? Lower US growth could result in a downward adjustment in demand.

Moreover, we expect the fall in the Chinese Yuan to come to an end as Chinese authorities will probably intervene to calm sentiment. We find it hard to imagine the Chinese authorities letting the Yuan drop in an uncontrolled manner. However, in the near-term, Yuan weakness may yet continue. In addition, our base case scenario is that a significant escalation of the trade conflict is averted. This should support all precious metal prices.

We expect gold prices to bottom out between USD 1,200 and 1,250 per ounce and silver prices between USD 15.2 and 15.6 per ounce. We see these levels as an opportunity to position for higher gold and silver prices next year.

If sentiments were to change and, for example, growth was to slow in the U.S. in reaction to trade concerns, then gold could make headway. But while the dollar is king, gold will remain lackluster despite rising tensions.

In the near term, we expect weakness in gold to persist, before investors flock to gold’s safe haven status in light of the ongoing trade and geo-political tensions – and the attendant negative consequences that might ensue

As dollar strengthens, the yellow metal weakens

Spot gold was up 0.1 percent at $1,318.52 past week, not far from a low of $1,315.06 hit in the previous session, it’s weakest since March 21.

The metal was on track to finish the week down more than 1 percent for its second consecutive weekly decline and the biggest weekly drop in four.

The strength of the U.S. dollar - combined with the weakness of the euro zone currency after (ECB chief) Mario Draghi’s speech - is pushing down the yellow metal.

The dollar hit a 3-1/2-month high against a basket of currencies on higher U.S. yields while the euro was hampered by a dovish tone from the European Central Bank. On Wednesday the benchmark 10-year Treasury yield reached its highest since January 2014 at 3.035 percent. A rise in U.S. bond yields pressures gold by reducing the attractiveness of non-yielding bullion, which is priced in dollars.

Thursday’s trading started on a weak footing, but most of the metals ended the day in positive territory, which suggested dip buying and support are features of the market. Precious metals prices were little changed on Thursday morning, with gold and silver prices off by 0.1% – with the former at $1,316.54 per oz. Meanwhile, the platinum group metals were both up by 0.1%.

Gold continued losing ground through the early NA session and is currently placed at fresh 6-week lows, around the $1312-11 region.

After Friday's corrective bounce, resurgent US Dollar demand was seen as one of the key factors weighing heavily on dollar-denominated commodities - like gold at the start of a new trading week.  Gold prices retraced upward in what looked like a correction after higher and sent the yellow metal to a one-month low.

Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off. This rise in the dollar seems to be weighing on gold and is likely to be a headwind for metals’ prices generally.

Recent increases in geopolitical tensions and rising commodity prices, especially oil, seem to have spurred inflationary concerns that have led to stronger bond yields and in turn that has lifted the US dollar, with the dollar index at 90.97. This has broken above the previous peak at 90.94 from March 01.

At their summit on Friday, North Korean leader Kim Jong Un  and South Korean President Moon Jae-in declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the "denuclearisation" of the Korean peninsula.           

North Korean leader Kim Jong Un and South Korean President Moon Jae-in on Friday declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the “denuclearisation” of the Korean peninsula.

The signs of detente in the North Korean conflict are ... contributing to the lack of solid demand for gold as a safe haven at present

Further as tensions o the Korean peninsula eased, the European shares rose after a positive session among Asian stocks overnight. The dollar index rose 0.2 percent on Monday, 30th April, holding just below its strongest since mid-January.

Gold fell at the start of this week, pulling back towards last week's more than one-month low as easing tensions on the Korean peninsula boosted appetite for assets seen as higher risk, such as stocks, and lifted the dollar.
   
The metal slid 1 percent last week on the back of a stronger dollar and a rise in Treasury yields to above 3 percent, which weighed on interest in non-interest bearing assets. On Thursday, it hit its lowest since March 21 at $1,315.06 an ounce.

That has left it on track to end April down 0.5 percent, erasing all the previous month's gains.
Spot gold was down 0.4 percent at $1,316.15 an ounce during trading hours.
   
Meanwhile, the Fed’s favoured PCE inflation gauge is expected to put core price growth at a 13-month high of 1.9 percent.

The latter would put the Fed within a hair of at least ostensibly meeting its dual objectives. Policymakers aim for inflation of 2 percent to be sustained in the medium term – abating the significance of a single month’s reading – but another sign of steady progress may reinforce the case for tightening.

Gold may return to suspicion, if this materializes as the prospect of higher rates sustains the US Dollar, undercutting demand for non-interest-bearing and anti-fiat assets.

   

A turbulent week for gold

It was certainly a turbulent week for the yellow metal, as the combination of political uncertainty and U.S. rate hike expectations attracted both buyers and sellers. Though there was lot of volatility in the market, the precious metals continued to hold a well-defined range after turning sharply from key support last week and prices struggled to hold on to the early March gains.

On Friday, gold managed to pare some of its early losses to fresh weekly lows but held in negative territory through the mid-European session.

Gold prices extended losses into a third session on Friday as the dollar strengthened against the yen on hopes of easing tensions between the United States and North Korea and ahead of U.S. non-farm payroll data later in the day.

U.S. President Donald Trump said on Thursday he was prepared to meet North Korean leader Kim Jong Un for the first U.S.-North Korea summit, marking a potentially dramatic breakthrough in nuclear tensions with Pyongyang.

A combination of diverging factors has failed to provide any meaningful drive and has led to subdued/range-bound price action. The rampant watchful sentiment around European equity markets was seen lending some support to the precious metal's safe-haven appeal and helped bounce off lows.

However, a follow-through US Dollar buying interest, supported by a goodish pickup in the US Treasury bond yields might continue to keep a lid on any further meaningful up-move for dollar-denominated commodities - like gold.

Investors were glued to the keenly watched US monthly jobs report, which was expected to influence Fed rate hike expectations and eventually provide some fresh impetus for the non-yielding yellow metal's near-term trajectory.

Once data was released there was lot of upheaval in the market.

• A strong jobs report on Friday offered some support to gold prices with U.S. Non-Farm Payrolls (NFP) topping expectations with a print of 313K for the month of February.
• A strong read on labour force participation also highlighted underlying strength in the employment sector with a print of 63% (highest since September). 
• Despite the job gains however, wage growth remained sluggish a downward revision to last month’s average hourly earnings accompanied by a miss in February at just 2.6% y/y (previously 2.8% y/y). 

The release is unlikely to alter the Federal Reserve’s expectations for three rate-hikes this year with gold finding solace into the close of the week.

Gold prices ended higher Friday, erasing their loss for the week, as monthly data revealed a strong rise in U.S. jobs, but disappointing growth in wages.

The U.S. dollar weakened in the wake of the employment data. Gold and the greenback often move inversely as a weaker dollar can raise the appeal for investors using other currencies to buy the precious metal.

The latest snapshot of the U.S. labour market showed strong job growth and a higher participation rate, with the nation adding 313,000 new jobs in February. But the 12-month increase in pay slipped to 2.6% from a revised 2.8% in January.

The jobs numbers initially sent gold lower, but also the wage growth data was not too robust at 2.6% and this has allowed traders to buy the dip and/or keep their long positions heading into the weekend.

Markets had braced for a stronger wages reading after an inflation scare within this report a month earlier helped sink stocks. Rising inflation could add pressure on the Fed to speed up its rate rises, which could strangle the stock market. Gold, in turn, although impacted negatively by higher interest rates, could attract hedging demand against too-hot inflation.

Overall, however, the jobs report kept the Federal Reserve on track with interest-rate hikes this year.
The U.S. dollar had tumbled to 16-month lows against the safe-haven yen late last week as fears of a trade war rattled markets after Trump announced his plan for imposing tariffs on imported steel and aluminium.  This being said, the markets seem to be bearish for gold at the present moment
   
One could make the argument that if nothing changed in the world, but simply the free market was able to determine the gold price, that it would be well north of $1900 per ounce. Now factor in what is going on in the world, just how fragile the dollar-based economic system is at this point, and the likelihood of more quantitative easing, and owning gold makes more sense than ever.

Winter demand good for gold but prices likely to fall

Gold prices were hovering near multi-week highs for most investors outside the US Dollar and Euro on Thursday, as the Bank of England followed the Federal Reserve's widely expected "no change" decision by raising UK rates off an all-time record low as analysts and traders had forecast.
However in Friday, Spot gold was down 0.2 percent at $1,267.01 per Ounce and touched a one-week low of $1,265.16 over positive economic data and central bank decisions.

The past week was a significant week for central banks. The Bank of England raised interest rates for the first time in ten years, the Federal Reserve indicated that a December rate hike may happen and President Trump named Powell as his choice for leader of the Federal Reserve.

But still uncertainty prevails as there is no surety that how economies will manage when the central bank support is withdrawn. Moreover none of the financial centers have managed to meet inflation targets which they were all so vocal about.

Adding to the uncertainty is the issue that three of the world’s four most important central bank chiefs are nearing the end of their terms and may be well replaced. The rally in the gold price and fall in the dollar is just the first indication with how markets feel about such changes.

Gold held steady on Monday, but hovered near a one-week low hit in the previous session, as largely upbeat U.S. economic data reinforced the prospects of another rate hike by the Federal Reserve next month.

U.S. jobs growth accelerated in October, although wage growth was tepid, adding to the Fed’s assessment last week that “the labor market has continued to strengthen”, with the sluggish wage data doing little to change expectations.

JP Morgan Chase & Co on Friday raised its forecast on the number of U.S. interest rate increases by the Federal Reserve next year to four from three as the October payrolls data reinforced the view of a tightening domestic labor market.

Markets are increasingly confident the Fed will hike interest rates in December, which has weighed on the precious metals complex,

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

The Federal Reserve looks likely to raise interest rates, and that should bring up the value of the US dollar in general. If that’s the case, then gold could roll over a bit. Ultimately, this is a market that will continue to be just as mixed up as many others are right now, as we do not know with any type of certainty that the Federal Reserve is going to do one thing or the other.

Analysts said the yellow metal could also find support after U.S. President Donald Trump, who kicked off a 12-day Asia trip, looked to present a united front with Japan against North Korea.
Moreoverdemand for gold is likely to rise not only in the domestic market butinternationally too.
While we see the onset of the wedding season in India, normally winter is also a good time for gold globally with men buying their significant others jewellery for Christmas and lots of New Year’s Day marriage proposals

This rise in demand is expected tousher in renewed interest for bullion in coming week.

Gold expected to cross $1375 mark

Gold prices have risen to the highest level since November last year as investors shift away from risky assets in the wake of geopolitical uncertainty.

Futures for the yellow metal rose to $1,303.90 per ounce, while spot gold remained just below $1,300 per ounce.

A market that was once worried about the nuclear war has now moved on a host of other factors that are creating concerns for various market players.

Let’s have a look at the various factors that created jitters in the market in the past week.

Barcelona Attacks - Heightened terror fears added to the risk off sentiment after at least 13 people died when a van plowed into pedestrians in Barcelona. The terror attack was a reminder of lingering geopolitical risks, with nerves still raw after last fortnight’s escalation of tensions on the Korean peninsula.

Investors fled into German and U.S. Treasury bonds and bought gold for the third day in a row, as the appeal of such top-notch assets grew further due to this deadly attack.

US Data - The global risk-off mood accelerated overnight on Trump "stability concerns", coupled with fallout from the Spain terrorist attack and lingering North Korea tensions.

Data released showed that Jobless claims for the week ending Aug. 12 came in at 232,000, versus expectations of 240,000. The Philadelphia Fed Index, gauging overall manufacturing conditions, came in at 18.9 for August, compared with consensus estimates of 18.5.

Industrial production grew 0.2% on the month in July, slipping below estimates of 0.3%.Concerns that Trump’s stimulus is in peril spiked following speculation that his top economic advisor, former Goldman COO Gary Cohn, was set to resign roiled markets on Thursday until reports that he’d opted to stay on board steadied the ship, however the weak dollar and dialling back of US Federal Reserve (Fed) monetary tightening expectations has given a modest lift to the precious metals, which stood up high.

US Dollar - The dollar was pulled lower on Wednesday as traders grappled with the prospect that the Federal Reserve might not raise interest rates again this year following the release of the Fed’s July meeting minutes.

The U.S. dollar retreated against haven currencies like the Swiss franc and the Japanese yen Thursday, following a day of negative headlines.

Earlier on Thursday, the greenback was propped up by weakness in the euro EURUSD, -0.0850% following the release of dovish minutes from the European Central Bank’s last meeting. The U.S. unit also remained stable as initial jobless claims and the Philadelphia Fed Index came in better than expected, but was weaker than the prior period, while industrial-production data missed expectations.

FED comments - The metal started its rise from $1268 on Thursday afternoon after the release of Fed minutes from the July FOMC policy meeting, according to which policymakers grew increasingly concerned about the sluggish inflation numbers. Whilst also on Thursday US President Donald Trump fell out with business leaders over his response to the recent turmoil in Charlottesville.
This followed a mixed session on Thursday in which gold strengthened a little while the rest of the complex was under downward pressure in spite of a friendlier macro backdrop (i.e. lower US real rates, equity losses) due to the release of dovish US Federal Open Market Committee minutes on Wednesday and dovish Fed speech.

Geo political uncertainty - Gold’s status as a safe-haven asset has seen investor demand surge during periods of heightened risk. In recent times, however, President Trump's combative style has seen safe-haven buying reach a sustainable high level. With tensions around North Korea and Iran rising, this is unlikely to subside any time soon.

Gold Supply - political uncertainty has been impacting investment in supply. In fact, global mine supply has fallen in 2017. According to World Bureau of Metal Statistics, gold production is down 2% y/y in the first five months of the year. Production in May alone was down 3.1% y/y. Growth in mine output is at its lowest point since the financial crisis, with risks only getting greater

Although Gold failed to break above $1300/oz today (Friday), it remains in position to do so because of its renewed strength in real terms. As long as the US$ index does not rally hard, we expect Gold to break above $1300 and reach $1375. The gold stocks as a group have been lagging recently but in the event of a Gold breakout, we foresee significant upside potential as the group could play catch up.

TRICKY WEEK FOR GOLD: RSBL

By Mr. Prithviraj Kothari, MD, RSBL

Following a 3 year trend, gold is once again on a decline, losing 9.8 percent of its value this year.

Gold, which touched a five-year low last week, was little changed during the start of the week, Prices fell on Thursday as a stronger dollar reduced the appeal of the metal as an alternative asset.

Gold futures remained lower on Thursday, after data showed the number of people who filed for unemployment assistance in the U.S. rose to the highest level in five months last week, but remained in territory usually associated with a firming labor market.

The U.S. Department of Labor Said the number of individuals filing for initial jobless benefits increased by 13,000 last week to 282,000. Analysts expected jobless claims to hold steady at 269,000 last week.

The dollar index, which measures the greenback’s strength against a trade weighted basket of six major currencies, was up 0.4% to 97.72. Dollar priced commodities become more expensive to investors holding other currencies when the greenback gains.

On Wednesday, gold eased up $1.20, or 0.11%, in familiar trading range, as market players braced for the first U.S. rate hike since 2006 next week. While investors widely expect the Federal Reserve to raise interest rates at its December 15-16 meeting, they anticipate the pace of increases to be gradual amid concerns over tepid growth overseas and divergent monetary policies between the U.S. and other nations.

Gold declined further on Friday and was headed for the seventh weekly drop in eight weeks as investors positioned for a looming U.S. rate hike.

If the Fed raises rates, gold will witness immense volatility. A robust dollar was limiting interest in gold. The greenback rose for a second session on Friday, extending a rebound from a one-month low on expectations of a rate hike.

A higher dollar makes greenback-denominated gold more expensive for holders of other currencies.  Weakness in oil was also hurting bullion. A slide in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.

 A strong U.S. nonfarm payrolls report last week cemented expectations of a rate hike at the Federal Reserve’s policy meeting on Dec. 15-16.

Traders have been restrained to stride into the market before the Federal Open Market Committee (FOMC) convenes next Tuesday and Wednesday.

Gold has witnessed obstinate gusts, as dollar, real rates; commodity prices and volatility have all not motivated investors to increase their exposure to the yellow metal.

The approaching Fed rate hike, has been one of the most influential factors that has put a block in the price rise of gold. And if any such hike is announced then gold prices might fall to $950 in the near future.

Recently hawkish Fed member statements have essentially turned the meeting into a guaranteed launch of the US policy normalization.

Industry watchers are largely expecting the US Federal Reserve to lift its federal fund rate next week for the first time in almost a decade after positive US payrolls data in the recent months.

The first hike in nearly a decade is expected to dent demand for gold, a non-interest paying asset.

Gold is going nowhere as investors expect trading within tight ranges before next week’s Federal Reserve meeting, where policy makers are forecast to raise interest rates for the first time since 2006.

Traders are expecting that borrowing costs will be increased at the Federal Open Market Committee gathering on Dec. 15-16, a decision that would dank the appeal of bullion because it doesn’t pay interest. Gold has swung between gains and losses the last two weeks as Fed Chair Janet Yellen, along with Fed Bank of St. Louis President James Bullard, have said the pace of tightening will be gradual.

Now the market waits impatiently for the Fed with one week to go.

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 Bounces Back: RSBL"

http://riddisiddhibullionsltd.blogspot.in/2015/12/gold-bounces-back-rsbl.html 

DISAPPOINTING WEEK FOR GOLD: RSBL

                                                                                     By Mr. Prithviraj Kothari, MD, RSBL

 

Gold has always been considered a commodity and a currency. But currently it has lost its appeal as both. At present it is not sought after in either form.

Investors are selling the metal from gold-backed funds at the fastest pace in four months. Holdings in exchange-traded products declined 17.6 metric tons this week to the lowest since 2009, data compiled by Bloomberg show.

This year gold has plunged 8.3 percent. Gold’s appeal has been curbed due to high borrowing costs. This in turn doesn’t pay interest or generate yields like other current income generating assets including equities. Moreover, a projection of an interest rate hike in September is influencing gold in losing its sheen.

A strong dollar and expectations that the US Federal Reserve will hike their interest rates by the end of the year triggered selling pressure on gold and took prices to their lowest point since April 2010. The US greenback rallied to a three-month high following comment from the Fed Chairperson last week, which eased gold’s appeal as a safe haven. Huge selloffs witnessed in Chinese futures market and breaking the key technical support of $1130 has ignited liquidation.

Earlier, spot gold tumbled to a fresh five year low of $1,077.50. 

The gold market has some pretty big hurdles to cross as prices hit fresh five-year lows early Friday. Although a late-day rally helped push prices back to around $1,100 an ounce and cut gold’s loss to only around 3% from Monday. Gold prices bounced back after touching a 5-year low earlier in the trading session as the dollar flattened on poor US housing data.

The gold price recovered from its earlier lows during Friday sessions, but sentiment surrounding the yellow metal remained poor as it continued to trade under $1,100 per ounce.
Spot gold was last at $1,082.90/1,083.70, but off the fresh five year lows it hit earlier when gold tumbled to just $1,077.50.

               

But there many analysts in the market who still believe that gold prices will rise. On the other side there are some who believe that gold will no longer be accepted as a commodity or a currency.
The current volatility has created new waves in the market that has disowned gold from many investors list. Let’s view the reasons behind the bull v/s bear sentiment.

This week’s volatility sparked as we saw important data coming in from various economies
U.S. - better-than-expected US jobs data sparked the move lower. After an optimistic US weekly unemployment reading was released, market participants wondered how that would affect next week’s Federal Open Market Committee (FOMC) meeting. Further hints that the Fed is on track for a September rate hike could present downside risks for gold especially given current momentum.

China- Chinese Caixin Flash China General Manufacturing PMI came out at 48.2 against a forecast of 49.8. The number was below the psychologically important 50 level for the first time in 15 months. This created disappointment in the market for gold.

Eurozone- in the Eurozone, EU flash services number disappointed at 53.8, though the manufacturing number was as expected at 53.8. EU flashes services number disappointed at 53.8, though the manufacturing number was as expected at 53.8.

Although there is improving market sentiment among some analysts who say gold is oversold and are expecting to see a modest technical rally, there is still a strong bearish undertone among retail investors.

• Gold has fallen by 7.9 percent year-to-date compared with base metals, which in aggregate are down 15.6 percent and energy commodities which in aggregate are down 9.7 percent
• Even though gold is down this year, it remains a relative outperformer against the bulk of commodities
• Expectations that further data coming in from US maybe under expectations, which again sends positive signals for gold.

More volatility is likely next week as the market will switch its attention to the US FOMC meeting.


 Next week, the focus will be on the FOMC meeting – further hints that the Fed is on track for a September rate hike could present downside risks for gold especially given current momentum.
Investors are bailing on gold on expectations the Federal Reserve will soon raise interest rates as the economy strengthens.
All eyes will be on the Federal Reserve, the U.S. dollar and economic data next week; and, according to analysts, any weakness could be positive for the gold market

- Previous blog -
"Gold Keeping Investors Perplexed: RSBL"
http://riddisiddhibullionsltd.blogspot.in/2015/07/gold-keeping-investors-perplexed-rsbl.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: 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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