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Sunday, 17 March 2013

INVESTORS BEING LOYAL TO GOLD

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





Gold was set for the first back to back weekly advance since January, as investors weighed prospects for more stimulus against improving U.S. economic data. Silver, platinum and palladium headed for weekly losses.

Gold and silver moved away from the weekly gain and slightly declined on Wednesday. This decrease corresponded with the drop of leading currencies against the USD such as Euro and Aussie Dollar. The US Retail Sales report published on Tuesday also showed that economic activity in US grew as retail sales rose last month by the highest rate in months. This could be the reason behind the restrained drop in bullion prices.

The US federal budget report too stated that the fiscal deficit so far in 2013 is 15% lower than in 2012. This too is an indication for a downturn in financial risk of the US economy.
This decline in prices moves an investor away from Gold, as they do not consider gold to be a safe haven asset in such situation.

Stronger U.S. economic data like the lower Jobless claims, higher industrial production etc, recently, has lead to the selling pressure for gold. But again, it can be argued gold prices have held up fairly well in the wake of that stronger U.S. data.

Many investors still believe that there is still upward scope in gold and it is more sensible in being loyal to it. Counting quantitative easing measures in key economies and lurking risks in the euro zone are amongst the favorite reason to own gold as gold is always considered a hedge against inflation and economic distress

Looking at the Asian markets, gold demand was quite calm as most people have already made their purchases last month when gold prices dipped considerably.

However, importers now expect a rising demand for gold once the fiscal year ends and the festival of Holi onsets in India. Holi, Gudi Padwa and Akshaya Tritya are considered to be very auspicious days t buy gold and all these festivals are lined up for the month of March and April.

Bullion market participants will be watching the Federal Reserve's policy meeting next week. A hawkish tone would further hurt investors' interest in gold, but Asian buyers would make purchases if prices drop near February's levels.

Till then one needs to find answers to the following
Will the Euro crisis resurface after months of blissful peace?
A positive takeaway on gold is whether the good US economic data will continue to get better after sequester?
Can central banks continue to contain inflation after the rampant money printing programme?

The current situation seems to set gold as a better alternative should all of the above negative economic sentiment resurface. Gold prices have come down considerably and left an upside gap despite all the negative sentiments it has been receiving. 

We are not gold bugs at all just a humble observer who wish to share our views on why holding some precious metals is important.

“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 -
"Is the gold cycle about to turn???"

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