Commodity Trade Mantra

Gold Prices Steady on Frenzied Physical Demand & Central Bank Actions

Gold Prices Steady on Frenzied Physical Demand & Central Bank Actions

Gold Prices Steady on Frenzied Physical Demand & Central Bank Actions

Gold Prices hold steady & daily movements on Exchanges remain range-bound as physical demand holds up and central banks keep easing, but recent stock-market strength reduces the safe-haven investor demand. The Gold Market is being buoyed by frenzied physical demand & sales globally. Gold gained additional support this fortnight from more easing & rate cuts by central banks from South Korea and Australia to India & Europe. However, continued gains in the stock markets continue to erode any safe-haven appeal of Gold investment, leading to range-bound price swings & uncertainty in the Gold Futures Markets. Gold Prices had initially weakened after better-than-forecast U.S. initial jobless claims but recovered quickly after Chicago Fed President Charles Evans said the recent pace of jobs gains needs to be sustained. Mr. Evan’s comments seem to have eased concerns earlier in the year of a premature withdraw or tapering of the Fed’s monthly $85 Billion Quantitative Easing.

The Reserve Bank of Australia cut to a record 2.75% this week, while the European Central Bank and Reserve Bank of India acted to ease last week. Although the Bank of Japan and the U.S. Federal Reserve refrained from changing policy at their last meetings, the BOJ doubled its monthly bond purchases in April and Fed policy makers last week raised the prospect of increasing their pace of bond buying above $85 billion a month. There was an unexpected reduction from Poland’s (POPERATE) central bank to an all-time low of 3%. The Bank of Korea unexpectedly cut its interest rates overnight to 2.5% from 2.75%, while the Bank of England left its monetary policy unchanged. The European Central Bank reported Thursday the Eurozone economy remains weak and could weaken further.

WGC joins India Post for India’s Akshaya Trithiya Gold Rush:

The WGC – World Gold Council said on Thursday that it has tied up with India Post and Reliance Money to offer a 7% discount to consumers for purchase of Gold Coins from over 970 – 1000 post offices to mark the auspicious occasion of the Akshaya Tritiya festival next week on May 13. Consumers can purchase 99.9% pure, Swiss-manufactured gold coins in denominations of one to 50 gm from the post offices until June 30. The Akshaya Tritiya festival is considered by India’s more than 900 million Hindus as the traditional & auspicious day to buy precious metals, especially Gold Bullion & Gold Jewelry. WGC India in statement said our partnership with India Post and their vast network of outlets, allows us to make pure 24 carat Gold accessible to a range of consumers across the country. Kalpana Tewari, Chief General Manager, Business Development, India Post, said the gold coins would bear the logo of India Post. “The World Gold Council, in partnership with India Post and Reliance Money, is offering consumers a price reduction of 7% on daily prices for the purchase of gold coins from India Post offices to celebrate the festival of Akshaya Tritiya,” WGC said in a statement. Commenting on the promotion, WGC India managing director Somasundaram PR said, “The additional discount coupled with the recent price drop in the yellow metal would be an “incredibly attractive opportunity” to buy gold during an auspicious period.”

Online Buying of Gold & Silver by Bullion India:

Bullion India today launched a unique platform, makes investing in small quantities of pure physical Gold and Silver online at the lowest possible price with the option of door-step deliveries or free storage. The company, that caters to the bullion investment needs, charges no commission or brokerage to the end clients. The bars, which are 24 carat pure, comply with international standards; and stored with professional security agency vaults with complete security and full insurance. In fact, Bullion India plans to introduce a Business Associate network initiative across Punjab in order to change the way people invest in these precious metals and also plans to open a delivery centre in Chandigarh. Ketan Kothari, Executive Director, Bullion India, said, “Bullion India is the best platform through which retail customers can own gold and silver bars in small denominations at the lowest prices. This is ideal for those who want to invest in the physical form because they can buy, sell, hold and ask for delivery these bars in a simple, easy and a convenient manner along with several advantages such as no storage fee, free insurance, no account opening charges and no brokerage. For more, read on the Financial Express

US Mint to launch Limited Silver Coins Sale:

The US Mint announced the limited sale of it’s five-ounce America the Beautiful silver bullion coins from May 13. Due to shortages, the Mint will distribute half of its inventory equally among its authorized dealers, and the other half based on each dealer’s volume of “America the Beautiful” coin sales in the past two years. Analysts said increased investor demand for physical Silver may be due to bargain hunting as silver prices are still off about 19% year-over-year while physical gold prices are down only around 8% during the same period, reported Bullion Street. The U.S. Mint is keeping its own stingy allocation process in place until it can boost delivery and meet demand. The Mint had actually been doling out more silver coins in recent months after suspending sales late last year. But with prices still unstable and the consumer market gobbling up all the gold and silver it can find, the Mint seems bent on preventing heightened interest from becoming a full-on run on its supplies.

China Economy at Crossroads adds confusion to Gold Prices:

China on Thursday reported its producer price index dropped more than expected in April, which suggests slowing production in China. Meantime, China also reported its consumer price inflation rate rose more than expected—up 2.4% versus expectations of a 2.2% rise, on an annual basis–which suggests China monetary officials could tighten monetary policy to ward off inflationary price pressures. Rising Inflation is positive for Gold Prices while Interest rate hikes, which are a natural tool to curb inflation, will tighten money market movement, which in turn is negative for broader investments. The Chinese people meanwhile, continue to accumulate physical gold leading to record Gold Imports for the month. According to reports in China, the Chinese have purchased 300 tons of gold worth more than $16 billion since the mid-April crash. Why are the Chinese so frenzied in their quest for gold? China strictly controls real-estate purchases; money could be saved in the bank but interest rates are low, and taking into account inflation, there are hardly any profits, but mostly losses; it’s been only a few years since the stock market slump, with investors losing much of their wealth. So, after gold prices fell, many people thought of gold as a last straw investment and now eagerly anticipate a future rise in value. They only want an investment outlet & that came on a Golden platter in April.

Gold positive – Monetary Easing to continue as Rate cuts fail to trigger Growth:

Global central bankers are poised to ease monetary policy even further after a wave of interest-rate cuts from India to Poland, reported Bloomberg. As Group of Seven finance chiefs gather in the U.K. today with monetary policy on their agenda, economists at Morgan Stanley and Credit Suisse Group AG are among those predicting policy makers will keep deploying stimulus amid weak global growth, slowing inflation and the need to thwart currency gains. “Most central banks in our coverage universe still have a bias to ease,” Morgan Stanley economists led by London-based Joachim Fels said in a report to clients yesterday. “Given this disposition, it doesn’t take much in terms of downside surprises in growth or inflation to tip the balance for more central banks to pull the trigger for more easing.” South Korea’s rate cut yesterday was the 511th reduction worldwide since June 2007, according to Bank of America Corp.’s tally, done before Vietnam and Sri Lanka today said they’re lowering their policy rates. While the liquidity has sent stock markets surging, it has yet to prove as effective in generating economic growth. With commodity costs in decline, the lackluster growth is also weakening inflationary pressures, forcing central banks to protect against further disinflation. JPMorgan Chase & Co. economists predict global inflation will fall to 2.3% in the current quarter, from more than 3% at the start of 2012.

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