RiddiSiddhi Bullions Ltd

CORPORATE/BULLION

 'GOLD HANGS AROUND THE FISCALL CLIFF'-Mr. Prithviraj Kothari, MD,RiddiSiddhi Bullions Ltd  

Nov 12, 2012

Gold slid 2% in heavy last fortnight, breaking below $US1690 an ounce for the first time in about two months as an encouraging US nonfarm payrolls report lowered expectations for economic stimulus provided by global central banks. Gold slid to an eight-week low as the dollar jumped after data showing higher-than-expected US job creation

However, last week opened with an upsurge movement for gold. Gold was up by almost 400 rupees and was seen trading at INR 31,100 on Monday. Predicting an Obama win on November 6th resulted in onside upward movement for gold and silver.

On Tuesday, the most powerful man of the World was re elected: US President Barrack Obama. As we see him march towards his second term, we expect the commodities market to march upwards too.On Wednesday, gold prices spent some time weaving in and out of positive and negative territory, rising to as high as $1,733 and falling to as low as $1,703. They had climbed nearly $32 on Tuesday, before the election results.In a five-day long rally, gold prices regained Rs 32,000 per 10 gm level after six-week in the national capital on Friday on sustained buying by stockists to meet the rising festive demand amid a firming global trend.

The seesaw effect in gold prices is very much related to gold’s positive reaction to U.S. debt worries, with weakness from Europe sitting on the other side of the seesaw holding a very, very heavy key to the U.S. dollar.Obama has always been the markets favorite. His win will bring in positive sentiments for the market. Romney was considered as a threat to the market as he did not believe in the policy of printing currency to accelerate the economy.

This would have inevitable resulted in the dollar strengthening short term, which would have a reverse correlation the price of gold, as the dollar strengthens the price of gold often declines.Nonetheless, gold will be touching the roof in the days to come. Re election of Obama means that FED chairman Bernanke continues his term and hence the monetary measures remain more or less unchanged

Gold had rallied to an 11-month high above $1,795 an ounce on October 5 after the US Federal Reserve announced a third round of aggressive economic stimulus in September. Gold prices then drifted back to nine-week lows around $1,672 due to uncertainty over the policy impact of the US election.

Analysts and investors were already shifting focus to the fiscal challenges facing Mr. Obama in his second term. Obama’s top priority now is to rectify the fiscal cliff.Gold and Silver jumped near to higher levels of the month following supportive festival demand ahead of Diwali.

The festive season has seen heavy buying by stockists and retailers. The recent dip in prices has pushed the demand for gold even further.Considering a further hike in prices, people have started buying gold and hence this festive season the demand has been much better than expected.