GOLD INVESTORS BE CAUTIOUS!

                                        - Mr. Prithviraj Kothari : MD, RSBL(Riddisiddhi Bullions Ltd.)

                                 

On Friday, Gold prices were moving between small gains and small losses as the markets were quite calm as investors reined in their trading activity ahead of a long weekend in U.K. and the U.S. Spot gold was down 0.2% at $1,291.32 during trading hours where as silver was 0.3% lower at $19.391 an ounce. 

Through the week gold prices were held in a tight range between around $1280 and $1315. 

Gold prices remained low this week on strong dollar and the remarks released by the FED of a positive US economic recovery but with the Ukrainian elections Sunday, news out of the region may finally give the gold market the catalyst it needs to break through.

The market has been pulled between good news and bad news and this is what is given gold that pull and push. The big question and the reason why we are stuck in this range is the uncertainty about where to go next and need to determine what themes should be the overall driver for this sector at the moment. 

Global monetary factors in particular continue to favour gold.  In addition, geopolitical risk remains high, particularly as the Ukraine elections approach, and, longer-term, Russia and China cosy up, a significant long-term global game-changer to which Washington appears oblivious.

• Holdings in exchange traded products backed by physical gold continue to hit new 4½ year lows while physical demand may receive a boost from pent up Indian demand later this year when import restrictions are expected to be eased by the new government.
• In India, the government has just authorized seven more private agencies to import gold, thus easing gold import restrictions, which will lead to lower premiums and a rise in gold demand as the wedding and festive seasons will start in August. The easing out of the 80:20 rule is still a drag, however the relaxation to include the trading houses should be seen as a positive development. 
• The record high premiums that were being charged in the market have and will continue to drop drastically as supplies will be good. The premiums have fallen from record highs to nearly $40 which is expected to reduce to $25 as the time passes by. Usually 30-35 Tonnes of gold is imported, but With this rule relaxation, supply is expected to increase to  60-70 tonnes
• In Europe, the ECB is expected to ease monetary policy in the 5 June meeting as inflation is too low and economic growth is too slow at 0.2 percent in Q1
• According to a recent Bloomberg/CME Precious Metals Conference, the East holds the key to gold’s outlook. With China printing its money faster than mining its gold, consumers will continue to demand gold to protect them against inflation

To sum it up, gold prices have got glued to the $1300 level and until we see a critical shift in market dynamics such as correction in the equities market or some statement from the Fed or some escalation in crisis, we continue to see gold in this range.

Gold has been moving in this sideways pattern for over a month and has formed a wave like pattern.

Now what we need to watch for is more important-

• We will keep an eye on Ukraine’s 25 May presidential vote, 
• The U.S. April durable goods orders and March housing prices on 27 May, 
• The U.S. Q1 GDP second release and Japan April CPI and industrial production on 29 May, 
• The Philadelphia Fed President Plosser’s (FOMC voter) speech 
• The April U.S. Core PCE Price Index on 30 May. 

As per the current market trends gold is expected to range between $1272- $1310 in the international market and Rs.27,000- Rs.28,500 in the domestic market.

On the other hand silver is expected to move between  $18.85- $20.20 and Rs.39,500- Rs.41,500 in the international and domestic markets respectively.

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- "MODIfying India"

http://www.riddisiddhibullionsltd.blogspot.in/2014/05/modifying-india.html