BULLIONS MONTHLY REPORT April, 2019 BULLIONS PERFORMANCE (January 2019) BULLIONS (% change) PERFORMANCE (March 2019) (% change)) BULLIONS Source Reuters and SMC Research BULLIONS PERFORMANCE (January - March 2019) (% change) Source Reuters and SMC Research 1
Overview In the month of March, bullion counter ended sharply lower. Bullions prices went higher in first half of the month as safe haven demand and dovish stance by fed in recent fed meeting supported its prices but prices fell sharply lower in last week of the month on surge in greenback. Citing a more modest outlook for the economy, the Federal Reserve last month held interest rates steady and signaled it did not plan to raise rates at all this year and would increase them up just once in 2020, providing a road map for a sustained period of easy-money policy. The Fed also announced that it will end a campaign to shrink its $3.8 trillion balance sheet later this year, a move that should help keep a lid on long-term rates. With plunging stocks hammering consumer and business confidence and inflation subdued, Fed Chairman Jerome Powell and other policymakers made an abrupt turnabout, saying the Fed will be patient as it weighs future hikes. Overall gold traded in range of 31500-33007 in MCX and $1280-1322.90 in COMEX. Silver traded in range of $14.90-15.66 in COMEX and 37279-39168 in MCX. Uncertainty regarding Brexit kept the investors jittery Prime Minister Theresa May welcomed the European Union s decision to delay Brexit, saying that lawmakers in the British parliament now had clear choices about what to do next. The U.S. imposed sanctions against Venezuela s state-run gold mining company Minerven and its president, Adrian Perdomo, accusing them of illicit operations and propping up the government of President Nicolas Maduro. Outlook Bullion counter can trade with weak bias as stronger greenback coupled with lack of safe haven demand can keep prices downbeat. The U.S. dollar rose versus other currencies following more dovish soundings from central banks and renewed expectations that the European Central Bank will keep rates low for longer. Worries over global economic slowdown boosted the demand for U.S. Dollar as a safe haven rather than yellow metal. The Reserve Bank of New Zealand joined a growing list of central banks that have turned dovish amid signs of a slowing global economy, saying its next move in interest rates was likely to be a cut. Recent economic number released from the US showed homebuilding fell more than expected in February, while consumer confidence ebbed in March, offering more evidence of a sharp slowdown in economic activity early in the year. The U.S. third and final reading on fourth-quarter gross domestic product GDP came in at up 2.2%, which was right in line with the consensus forecast and compares to the last 4Q estimate of up 2.6%. Gold can test the downside levels of 31000 while facing resistance near 32600. Silver can test the lower level of 36500 while facing resistance near 39200. 2
Policy statement of FOMC meeting The US Federal Reserve surprised markets recently with a large and unexpected policy change. Federal Open Market Committee met in January indicates that the labor market remains strong but that growth of economic activity has slowed from its solid rate in the fourth quarter. Payroll employment was little changed in February, but job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Recent indicators point to slower growth of household spending and business fixed investment in the first quarter. On a 12-month basis, overall inflation has declined, largely as a result of lower energy prices; inflation for items other than food and energy remains near 2 percent. On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee s symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes. Asia Gold-China premiums ease as growth woes dent demand Gold premiums in China eased recently as worries about a slowdown in the world s top bullion consumer prompted some customers to hold off on purchases, while a price dip buoyed appetite in other Asian hubs. In China, premiums of about $12-14 an ounce were being charged over global benchmark prices, a slight reduction from the levels of $14-16 which were the highest since March 2017. The country s net gold imports in February via main conduit Hong Kong fell 13.6 percent from the previous month. However, gold premiums in the country have been on an overall upward trend recently, mainly due to gains in the domestic currency driven by hopes of a trade deal between the United States and China. 3
Highlights of WGC Gold demand trend report Central banks added 651.5tonnes to official gold reserves in 2018, the second highest yearly total on record. Net purchases jumped to their highest since the end of US dollar convertibility into gold in 1971, as a greater pool of central banks turned to gold as a diversifier. Annual jewellery demand was virtually unmoved: down just 1tonnes from 2017. Gains in China, the US and Russia broadly offset sharp losses in the Middle East. Indian demand was stable at 598tonnes (- 4tonnes). ETFs and similar products saw annual inflows of 68.9 tonnes down from 206.4tonnes in 2017. Stock market volatility and signs of faltering economic growth in key markets fuelled a global Q4 recovery, but Europe was the only region to see net growth over the year. Asia Gold-China premiums ease as growth woes dent demand Gold premiums in China eased recently as worries about a slowdown in the world s top bullion consumer prompted some customers to hold off on purchases, while a price dip buoyed appetite in other Asian hubs. In China, premiums of about $12-14 an ounce were being charged over global benchmark prices, a slight reduction from the levels of $14-16 which were the highest since March 2017. The country s net gold imports in February via main conduit Hong Kong fell 13.6 percent from the previous month. However, gold premiums in the country have been on an overall upward trend recently, mainly due to gains in the domestic currency driven by hopes of a trade deal between the United States and China. 4
Worldwide Major Central Banks are Accumulating Their Gold Holdings According to the World Gold Council central banks continue to buy gold even after last year s unprecedented accumulation. In 2018 central banks combined 651.5 tonnes of gold to their holdings. Even India has entered into this buying frenzy. India has entered into this buying frenzy. The Reserve Bank of India (RBI) has bought gold for the first time in nearly a decade, signaling that the metal could be in demand as a store of value when returns and capital values of fixed-income bonds are declining in a rising rate environment. The RBI added 8.46 metric tonnes of gold to its stock of holdings during the financial year 2017-18. According to the World Gold Council central banks continue to buy gold even after last year s unprecedented accumulation. In 2018 central banks combined 651.5 tonnes of gold to their holdings. 5
Gold Silver ratio Source Reuters and SMC Research Analysis: Gold silver ratio moved in range of 85.2 to 86.5 levels in the month of March. This ratio can move in range of 84.6-87.2 in the month of April 2019. 6
SPDR Gold trust ETF (SPDR Gold shares) Source Reuters and SMC Research Analysis: SPDR Gold Shares is one of the top ten largest holders of gold in the world. GLD is the largest ETF to invest directly in physical gold and has an extremely close relationship with spot prices at LBMA.SPDR Gold share ETF can move in range of $160-180 in near term. 7
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