Tuesday, August 30, 2016

Gold Update August 30, 2016


  1. Wrong analysis. If you are saying Gold will go below 20000 means eventually Rupee will appreciate. How is it possible.

  2. Anonymous,Why Rupee cannot appreciate? In fact Rupee has exhibited enormous strength against the dollar.Soon the dollar will depreciate..there are global signs for it...Yellen's rate hikes not withstanding.Multi national funders to the Elections are unhappy with dollar appreciation.Rupee versus Dollar is currently in wave 4.After wave 5 which is likely to be a weaker wave Rupee will correct against the dollar.It could be a prolonged correction.In other words Rupee stands to appreciate.This could be the scenario after a year.

  3. With Fed rate hikes in the US, the dollar will strengthen - not the other way about. After a rate hike, the immediate reaction is for the stock market to go down. But after a couple of weeks, it will start to rally. If the Fed raises interest rates, that means they think the economy is doing well. If the economy is doing well, the dollar with strengthen. As a result, gold will go down. This is the logic. The dollar has been strengthening the past year as it anticipates the Fed interest rates hikes in advance, which will only start after the election.

  4. Suren, I accept that if Dollar strengthens, Gold will go down. My statement is also the same...only the time points are different.
    Difference is if Fed hikes rates, Dollar may not necessarily go up.While the classic theory is on the lines mentioned by you, the difference is that the market does not agree with the Fed on the US Growth cycle yet. It is of the opinion that the Fed is wanting the reverse the effects of QE and hence increasing rates. In any case Fed is also finding it difficult to raise rates that fast.
    Coming back to the timelines,
    Immediate trajectory of the Dollar is lower.
    Immediate trajectory of Gold is higher
    Immediate trajectory of Rupee is lower.
    In the medium term ( say six months from now)
    Rupee may depreciate
    Dollar may appreciate
    Gold may seek lower levels.
    My remarks were pertaining to the immediate term.I shall post charts of all three as an illustration.