HALLOWEEN HANGOVER FOR GOLD

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

The Halloween fever seems to have caught hold to gold too as we saw some tricks and treats for the yellow metal.

There were mixed sentiments in the market as the much awaited Fed meeting concluded on the 30th Oct. The Federal Reserve has offered a bundle of surprises this week due to which gold and other precious metals fell on Thursday.

The US Central bank stated that it will keep buying $85 billion in bonds a month for the time being.  The Federals Reeves October policy statement further confused the market as some believe that there is soft growth seen for US while some believe that the situation may worsen.

On Thursday, a sharp rise in the dollar index  broadly pressured commodities after data showed business activity in the U.S. 

Spot gold was down 1.4 percent at $1,323.69 an ounce during the trading hours.

The Fed's comments about the U.S. economy continuing to expand at a moderate pace and lower-than-expected inflation weighed down on gold.

The expectation of Fed tapering further down the road has already been factored into the gold market, and its comment about moderate growth and no inflation triggered some selling.

Moreover as the month ended we saw people shedding off their positions which led to decline in gold prices.

The Fed wants more evidence that the economic progress and growth of the labour market is sustainable. hence they haven't hurried a lot and kept the pace of the QE unchanged for the time being

The U.S. latest weekly jobless claims decreased 10,000 to 340,000 compared to the expectation of 338,000. In Europe, the October inflation rate fell to an almost four-year low of 0.7 percent compared to an expected 1.1 percent, opening the door for the ECB to ease monetary policy further

Nonetheless the Fed has still left open the possibility of tapering open in December or January. This resulted in a decline in gold prices.

However, the market detects a slightly hawkish tone by the Fed, who has left open the possibility of tapering in December or January. As a result, the U.S. stocks and the gold prices got beaten down while the dollar surged. 

Meanwhile, Fed officials continue scratching their heads on what they could do to avert a potential hyperinflation in the near future without damaging the recovering economy.

Gold surged more than 4 percent when the Fed Open Market Committee released its previous policy statement on Sept. 18. Some analysts said the support from U.S. monetary stimulus will eventually fade. 

The market is again divided into two sets of believers- some say that there are hopes of recovery ahead while some say that is going to be a long hard road ahead as the world economy plod along the edge of recession, deflation and then a small recovery. 

While in the Indian markets, the Festival of lights did add much brightness. The demand for gold has not been  as impressive as last year.

Gold sales during India’s festive season have slumped to half their usual levels this year 

India is known as the world’s biggest consumer of gold and sales  traditionally peak around Diwali, the Hindu festival of lights, which is seen  as a particularly auspicious time to buy.    

Diwali has been calm. Sales are down 50 percent compared to last year. There's no demand because prices have soared so much, the economy is slow and inflation is high.

Moreover scarcity of gold has resulted in life high premiums being charged. However, as the 8o 20 policy has been introduced, this demand supply gap will soon be filled and won last much. in fact it will tackled post Diwali.

Gold is expected to trade in the range of Rs.29,500- Rs.31,500 this week.

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Is it the calmness before a gold thunderstorm"

http://www.riddisiddhibullionsltd.blogspot.in/2013/10/is-it-calmness-before-gold-thunderstorm.html

IS IT THE CALMNESS BEFORE A GOLD THUNDERSTORM??

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

Gold has always been the most favourite metal in its class as it has given tremendous returns since the past 12 years. In fact it has history of 12 years of gains which is why it enjoys the status of a safe haven asset.

But this year gold has fallen almost 20 percent over issues that the Fed would start tapering its easy money police by cutting its $85 billion monthly bond purchases. This has fuelled gold's appeal as a hedge against inflation.

The Fed who first stated that they may begin tapering n September, later released a statement that it might cut its easy money policy if the economic data released is positive and meets certain levels of growth.

The metal, however, has rallied about 8 percent in less than two weeks as disappointing U.S. economic data and lingering budget uncertainties in Washington increased gold's safe-haven appeal.

The recent trend in gold and its volatile reaction to the most recent economic release show the market is still heavily data-dependent for price direction.

After the US shutdown and the temporary delay of the Debt ceiling, the market believes that the worse is yet to come and that US has still not started walking on the path of recovery. these actions will further delay the Feds bond tapering act.

And that will be beneficial for gold and silver.

Bullion was headed for a 1.7 percent gain on the week, having hit four-week highs on Thursday as it benefited from weaker-than-expected U.S. non-farm payrolls data earlier in the week. 

Gold broke the $1350 level for the first time in more than a month as it rose 1 per cent on Thursday. All these upward movements were justified with the expectations that the Federal Reserve will continue its monetary stimulus due to disappointing US jobless claims data,

Bullion prices rallied after the number of Americans filing new claims for unemployment benefits fell less than expected last week. The jobs data bolstered expectations the Fed will not start to rein its stimulus program until well into next year.

Gold inched up slightly on Friday as disappointing U.S. economic data reinforced expectations that the U.S. Federal Reserve will keep its stimulus intact well into 2014.

Spot gold was up $4.62, or 0.34 percent, at $1,351.16 an ounce during the day, hovering below its highest level since Sept. 20 of $1,351.61.

Bullion eked out gains even as the dollar recovered from a nearly nine-month low against a basket of currencies. Other reasons cited for this gain in gold prices was technical buying and a two month high in the open interest for US gold futures

Some players think that gold is poised to rise into an upcoming Fed meeting as economic data isn’t thought to be strong even to alter the Fed’s decision to delay tapering. While the Nonfarm payroll report released earlier this week was considered old news, the government shutdown is thought to have added to the slowing in the US. 

Seeing gold stand up in the face of adverse currency market action was also seen as a positive by some traders . 

An issue that might provide gold with some support early next week is the prospect of a platinum strike in South Africa next week.

The gain in spot prices has further deterred physical demand in most Asian countries. 

In India, premiums were at a record high of $120 an ounce as dealers struggled to meet demand amid tight supplies.

Diwali is just round the corner and demand for gold in India is expected to soar (though it will be just half of last years demand).

However, dealers are struggling to get supplies and thus paying hefty premiums to fill in the gap.

Indian sellers have struggled to source supplies for domestic use for almost three months, since the central bank introduced a rule that required 20 percent of all imports be re-exported. 

   

In fact premiums are elevated and are expected to rise further... and the expectation is that they (stocks) are likely to run out completely around November at a time when the demand will be the highest on account of Diwali

The primary purpose of this blog (Prithviraj Kothari's view on Bullion Markets- MD,RSBL (Riddisiddhi Bullions Ltd.)) is to educate the masses of the current happenings in the Bullion world.

- Previous blog -

"Financial calamity avoided or the worse is yet to come??"

http://www.riddisiddhibullionsltd.blogspot.in/2013/10/financial-calamity-avoided-or-worse-is.html