Bullion Update

Thursday| September 5, 2013

Bullion Update

Angel Commodities Broking Pvt. Ltd.

Reena Rohit Chief Manager Non-Agri Commodities and Currencies reena.rohit@angelbroking.com (022) 3935 8134

Anish Vyas Research Analyst Non-Agri Commodities and Currencies anish.vyas@angelbroking.com (022) 3935 8104

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Bullion Update
Thursday| September 5, 2013

Weaker Rupee the catalyst to sharp rise in gold prices

How strongly currency movements affect commodity prices can be clearly seen in the adjacent chart. Prices of gold in dollar terms over the year have slipped almos almost 17 percent, , while on the MCX, the yellow metal has clocked gains to the tune of 7 percent. Rupee depreciation has been a key factor that led to sharp rise in prices in the Indian markets. The risk to the downside in Indian gold prices remains when the Rupee reverses course. Hence, when measures by the Indian central banker begin to show results, gold prices may not be able to sustain gains.

Gold, Silver - Ytd Performance (%)

7.0 7 2 -3 -8 -13 -18 -23
Spot Gold ($/oz) MCX Gold (Rs/10gm)

(6.9)

(16.7) (22.6)

Spot Silver ($/oz)

MCX Silver (Rs/10gm)

Source: Reuters, Angel Research

In case of silver as well, prices on the MCX have benefited from Rupee depreciation as in dollar terms the metal has slumped almost 23 percent, whereas, MCX silver prices have declined only around 7 percent. The last month to has seen sharp gains in precious metal prices on the MCX due to Rupee weakness. While other factors like a bounce back in holdings of SPDR Gold Trust and the iShares silver Trust ETF also added some positive sentiments, the gains in India Indian n gold and silver prices were phenomenal.
Gold, Silver - August Performance (%)
29.7 30 25 20 15 10 5.5 5 0 Spot Gold ($/oz) MCX Gold (Rs/10gm) Spot Silver ($/oz) MCX Silver (Rs/10gm)

17.1

18.5

Source: Reuters, Angel Research

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The chart above shows the percentage percentage-wise wise price performance of gold and silver in Dollar and Rupee terms. MCX Gold prices have jumped more than 17 percent in the last month, wh while ile Spot Gold prices have increase only around 5.5 percent. Silver prices on the MCX gained around 30 percent during August13 and increase in silver prices in dollar terms was restricted to 18.5 percent. Rupee depreciation has hence played a crucial role in overall price performance of precious metals over the year.

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Bullion Update
Thursday| September 5, 2013

ETF bounce back supports gold price rally

Change in SPDR Gold Holdings (%)
0.0 (2.0) (4.0) (6.0) (8.0) (10.0) (12.0) (14.0) Jan-13 Feb-13 Mar-13 Apr-13 May-13 13 Jun-13 Jul-13 Aug-13 (5.5) (0.7) (1.7) (2.6) (4.3) (6.1) (4.3)

YTD fall in holdings to the tune of 32 percent

(11.7)

The adjacent chart shows that overall in 2013, each month has witnessed a decline in ETF gold holdings of the SPDR Gold Trust. However, in the month of August13, the decline was much less than that since the start of the year. ETF holdings fell only about 0.7 percent in August13 as against a fall of more than 4 percent during the months of June13 and July13. On a year-to-date year basis, holdings of the SPDR Gold Trust have slipped around 32 percent and continue to show a long-term bearish picture.

Average prices of gold in Dollar and Rupee terms both, witnessed a bounce back in the month of August13. What contributed to positive sentiments in th the e international markets was the slowdown in decline in ETF holdings. While the trend in SPDR ETF gold holdings is showing a long-term long declining th trend, if seen closely the data shows that on the 8 August13, holdings had slipped to a low of 909.33 tonnes. From thereon, a reversal was seen with holdings rising to 921.03 at the end of the month month; however, month-on-month, month, ETF gold holdings show a decline.
Spot Gold Average Monthly Prices ($/oz)
1700 1650 1600 1550 1500 1450 1400 1350 1300 1250 1200 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun Jun-13 Jul-13 Aug-13
25000 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13

MCX Gold Average Monthly Prices (Rs./10 gms)

31000 30,684 30,158 30000 29000 28000 27,620 27,179 26,593 26,806 29,543 30,316

1,671 1,626 1,593

1,485 1,416

Average prices in dollar terms rise around 5 percent, while MCX gold prices rise more than 13 percent in Aug'13

8 percent Rupee depreciation supported sharp gains

1,342 1,287

1,353

27000 26000

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The average prices of gold on the MCX jumpe jumped d sharply to Rs30,316/10 gm and prices during the month of August13 touched a high of Rs35,074/10gm 35,074/10gm on 28th August13, when the Rupee depreciated sharply and tested an all-time time low of 68.93. Currently, gold prices on the MCX near-month month contract are hovering around Rs32,670/10gm 32,670/10gm as a reversal in the movement in the Rupee led to downside pressure on prices.

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Bullion Update
Thursday| September 5, 2013

Positive manufacturing data boost silver prices

Spot Silver Average Monthly Prices ($/oz)
32 30 28 26 24 22 20 18 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun Jun-13 Jul-13 Aug-13 25.2 23.0 22.1 21.1 19.7 31.1 30.2 28.8

MCX Silver Average Monthly Prices (Rs./kg)

60000 58000 58,672 56,243 54,287

Average prices in dollar terms rise around 5 percent, while MCX gold prices rise more than 13 percent in Aug'13

56000 54000 52000 50000 48000 46000 44000 42000 40000 38000 Jan-13 Feb-13

47,324 44,056

Jump of Rs7600 in avearge silver prices due to Rupee weakness

42,605 40,839

48,412

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Manufacturing data from the advanced economies came on the positive side and this factor boosted boos prices of overall industrial metals. Silver, being a precious and an industrial metal, also took cues from rise in manufacturing data and witnessed a sharp rally. The overall increase in average silver prices in Rupee terms was Rs7600 and in percentage terms, average MCX silver prices jumped a whopping 13 percent. Rupee depreciation also contributed to the increase in silver prices as compared to gains in dollar terms. However, over the year, average silver prices on the MCX have fallen from Rs58,670/kg in Jan13 to Rs48,400/kg in August13, 13, marking a fall of almost 18 percent in terms of average prices. Internationally too, silver prices have declined from a monthly average of $31.1/oz in Jan13 to $22.1/oz in August13. The scenario in case e of holdings in the iShares Silver Trust is different from that in case of gold. Year-to-date, date, holdings are up around 5 percent and during months of July13 and August13, holding increase around 5 percent and 2 percent respectively. The months of April13, 3, May13 and June13 witnessed declines but over the year, holdings have seen a rise. This indicates improvement in economic scenario of advanced economies could eventually support demand for industrial metals, thus in turn increasing demand prospects for the same.

Change in iShares Silver Trust Holdings (%)

6.0 4.0 2.0 0.6 0.0 (2.0) (2.3) (4.0) (4.4) (6.0) Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 (0.9) 5.2

2.9

2.5

YTD holdings have increased around 5 percent

1.7

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Bullion Update
Thursday| September 5, 2013

News and Developments

China on course to overtake India in gold consumption Gold consumption in China increased 54 percent for the first-half of 2013, thus putting the country in race to become the worlds largest gold consumer consumer. . The increase in consumption is at a time when demand is witness contraction in other nations nations. Data by the China Gold Association showed that Chinese gold consumption reached 706.36 metric tons in the first six months of 2013. Purchases of Gold-bar surged 87 percent to 278.81 tons, while jewelry gained 44 percent to 383.86 tons tons. Currently, the worlds top consumer of Gold is India but the country is going through a host of restrictions ions on gold imports and this in turn could affect the overall annual demand scenario. Gold jewelry exports fall 70 percent in July July- GJEPC The GJEPC (Gems and Jewelry Export Promotion Council Council) said that exports of gold declined by 70 percent during July13 on the back of non non-availability availability of gold in the form of raw material. However, Howev silver exports surged 184 percent to $109.69 million million. The total gems and jewelry exports declined 17 percent to $2.49 billion, , with gold exports falling to $441 million from $1.5 billion a year ago. Expectations of restart of gold imports by the next week are doing rounds in the market. Gold demand fall 23 percent during second second-quarter WGC World gold demand during the second second-quarter declined 23 percent on a year-on-year year basis. Physical gold demand during the same period was 856 tonnes, down by 12 percent as compared to a year ago. The major reason for fall in demand was the gold ETF outflows, however this was offset due to record demand for gold bars and coins due to lower prices. Demand for gold backed ETFs fell by more than 400 tonnes on the back of selling by hedge funds and other investors amid fears of a QE taper. Jewelry demand during the second second-quarter quarter was up 37 percent at 576 tonnes from 421 tonnes in the same period last year. . It touched the highest level since third third-quarter of 2008. Additionally, bar and coin demand grew by 78 percent globally and marked a quarterly record of 508 tonnes. When considered under the segment of consumer demand, the WGC said that jewelry demand and bar and coin investment together rose 53 percent as agains against the same period last year. Central banks stood as net buyers of gold for the tenth consecutive quarter, with purchases of 71 tonnes. Gold premiums in India could rise GJEPC Forecasts by the GJEPC show that gold import premiums in India could witness a sharp rise in the coming months. The association feels that the passion for gold in India could lead to increased demand for the yellow metal during the festival season. The GJEPC expects that the fees paid by jewelers to banks and other importers could rise ise by at least 40 40-50 percent in the coming months.

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Bullion Update
Thursday| September 5, 2013

Risk of QE taper fades as markets concentrate on geopolitical risks

We have entered the month of September13, the most crucial in terms of the world financial markets as the Federal Reserve is expected to take a call on whether to begin the pullback in bond purchases this month or not. However, despite these concerns we h have ave seen a bounce back in gold prices. Part of the rally was supported due to recovery in gold ETF holdings and the rest of the upside was seen on account of heightened geopolitical risks in Syria.

Stance of the Federal Reserve to be muted...

Considering the ongoing Syrian crisis, the Fed may hold back its decision of the QE taper in this months meeting that is scheduled on the 17th and 18th September13. While economic data from the US is positive and supports the Feds stance of pullback, the likelihood is that the worlds largest central bank will prevent sentiments from weakening further by taking this stance amid the geopolitical worries. Once these worries settle and as world market sentiments stabilize, the Fed would most likely move forward with the e QE taper by the end of this year.

Positive trend in gold expected.

With expectations of no pullback of the quantitative easing program by the Federal Reserve in its September13 meeting, , post the FOMC monetary policy review, gold prices are likely to trade higher. While the Rupee has appreciated in the recent trading sessions, the likelihood of the currency depreciating over the short-term term is high as overall measures and actions by the central bank are not expected to have an immediate impact on the Ru Rupee. Taking cues from a weaker Rupee and overall positive trend in the international markets, gold prices are expected to trade higher in the near near-term.

Technical Levels
Commodity Spot Gold ($/oz) MCX Gold (Rs./10 gms) Spot Silver ($/oz) MCX Silver (Rs./kg) Trend Up Up Up Up Supoort 2 1300 30000 19.8 46500 Support 1 1355 31700 21.7 51000 CMP 1393 32600 23.48 55000 Resistance 1 1445 33800 25.6 60000 Resisitance 2 1500 35300 27.3 64000

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