I must apologize to my readers for not writing a Blog last week. I would reply to all your queries via the content in this blog. My sole intention was to to see some developments in Greece as it was like a never ending tussle between Athens and its creditors. It was taking Gold and Silver to rallies which was purely news based.
Over a period of time we have seen some factors being very crucial for gold compared to the others. US dollar, Fed’s interest rate hike and the Greece crisis have been major drivers for gold prices apart from Geo-political economic crisis, inflation and demand for gold from India and China.
Lets jump straight to the key takeaways:
Greece: The mounting Greek Funding crisis is positive for gold, but its influence could be partial as there is still a chance the two sides can tangle through to come to another short-term agreement.
Polls have stated that the exit out of the Euro is opposed by the Greek people and European leaders, the current deadlock signals prolonged and painful negotiations ahead, with a possible extension of the June 30 deadline on the horizon.
But after Monday’s emergency meeting, news have floated that the negotiations between Greece and its creditors have taken a positive step forward. Not much details have been provided yet but the upcoming meeting on June 24th-25th will give the answer as to where this is all going.
Till that time the Bulls and the bears will not allow to have a dramatic impact on Gold price.
US Economic data: Data on Thursday showed that U.S. initial jobless claims fell by 12,000 to 267,000 last week, pointing to ongoing strengthening in the labor market.
A separate report showed that factory activity in the U.S. mid-Atlantic region expanded at the fastest rate in six months in June.
Data also showed that showed that U.S. consumer prices increased at the fastest rate in more than two years in May, climbing 0.4% after a 0.1% gain in April. But economists had forecast an increase of 0.5% and inflation was still well below the Fed’s 2% target.
U.S. economic data as that will have a major impact on forecasts for when the Federal Reserve will hike rates. Positive data that supports a September rate hike will be positive for the U.S. dollar and negative for gold.
Interest Rate Hike: The economic data affects the dollar which in turn affects the interest rate hike. Fed Chairman Yellen also wants to see stronger consumer spending and a higher labor participation rate and wage growth before lifting rates.
Gold is expected to remain caught in a tug of war between the U.S. dollar and safe-haven demand as Greece’s repayment deadline quickly approaches. Gold ended its second consecutive week in positive territory; the market managed to hold on to most of its gains from Thursday’s 1.5% rally.
There are ample amount of prospects for the market players to adjust their interest rate expectations as there is a slew of economic data including housing sales data, durable goods numbers, along with preliminary manufacturing data due to be released. Markets will also receive the final gross domestic report for the first-quarter, although this is now backwards looking, some economists warn that any major revision will impact annual economic growth projections
On the domestic front, Government of India is planning to issue Sovereign bonds linked to the bullion price in an effort to divert an estimated 300 tonnes of annual demand for Gold bars and coins. The provision of a 2 percent interest rate and use of the bonds as collateral are among the the key take away points that would attract the investors.
- 24th June: Germany IFO business climate index, the U.S. final Q1 GDP and Euro Group Meetings
- 25th June: U.S. core price index
Summing it up, a dramatic move in precious metals is expected in the coming days!
|GOLD||$1170- $1220 an ounce||Rs.26,250- Rs.27,700 per 10gm|
|SILVER||$15.60- $17.00 an ounce||Rs.36,000- Rs.39,000 per kg|