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1. Bullion Monthly14th December 2016

2. Bullion Monthly14th December 2016
Outlook
Gold: In the near term, gold prices are expected to be under pressure as we are nearing the end of
2016 and it is expected that the US Federal Reserve will hike its interest rates in Dec’16 meeting. Further,
liquidation of gold holdings in the SPDR gold trust since the month of July is leading to a strong case for
lower gold prices hinting towards weak investment demand for yellow metal.
Moreover, dollar index trading above 100-mark and likely to increase further if Fed hikes its key rates
which will summon for correction in the gold prices. Besides, recent growth policies of the Trump
government with regard to infra spending and tax cuts in different sectors will be added on boost to the
economy, thereby affecting the safe haven appeal for the commodity.
However, sharp downside in prices will be cushioned due to constant low and negative interest rates by
major global central bankers coupled with political, economic and policy uncertainty across the globe, are
generally positive signs for gold.
We advice investors should allocate at least 8-10 percent of the portfolio in the yellow metal as extreme
change (downfall) in the global economy (especially Euro Zone and China) at large will be driving factor for
run up in gold prices but it will be possible in the long-term.
For the month of October, Gold prices in the international market are expected in range of $1060/oz to
$1220/oz and on the domestic front, prices are estimated in the range of Rs.26,350/10 gms to
Rs.28,600/10gms.
Silver: Silver prices will decline in tandem with gold prices and has witnessed correction in the
gold/silver ratio in recent time, which measures the number of silver ounces needed to buy an ounce of
gold, to its lowest in more than a year around 68.
However, rise in base metal prices will lead to upside in industrial activity and cushion sharp fall in the
silver prices. White metal prices will get support due to constant surge in sales of silver coins which shows
that demand for silver is rising.
For the month of October, Silver prices in the international market are forecasted in range of $16.20/oz
to $19.0/oz and on the domestic front, prices are anticipated in the range of Rs.38,250/kg to
Rs.44,800/kg.

3. The above chart shows that Non farm employment
figures in the US shrunk to the lowest level of
24,000 in May’16 but managed to recover to
292,000 in Jun’16.
However, in the month of Jul’16 and Aug’16 it
again fell to 275,000 and 167,000 levels to current
level of 177,000 in Nov’16 which shows that
employment scenario remains stable and it is
estimated that US Federal Reserve will hike its
interest rates in near term meeting.
The above factor led to strength in the dollar index
which led to negative movement in the yellow
metal prices.
Bullion Monthly14th December 2016
Gold prices came under pressure and plunged
around 8 percent in Spot and around 7.8 percent
in Comex. On the MCX, gold prices also declined
by more than 5 percent but depreciation in the
Indian Rupee cushioned sharp fall in the
commodity as compared to international
markets.
The major reason for downside in the prices was
due to uncertainty surrounding the election
results in the US, weak investment demand,
crackdown by the government on high value
notes, stronger dollar index.
US had high uncertainty as the candidature of
Trump and Hillary left markets in a panic mode.
Donald Trump, who represented the Republican
Party, claimed to make major alterations in the
American policies. Mr. Trump spoke about
renegotiating the terms of North American Free
Trade Agreement to get a better deal for the
economy.
The real estate tycoon had branded China as a
currency manipulator who devalues its currency
in order to take advantage of the United States.
Mr. Trump emphasized on the need to build a
wall along the US-Mexico border and temporarily
banning all immigration from countries with a
history of terrorism.
Source: Bloomberg
Source: Bloomberg
Source: Bloomberg
-8.01% -7.79%
-5.23%
-9.00%
-8.00%
-7.00%
-6.00%
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
Spot Gold ($/oz) Comex Gold ($/oz) MCX Gold (Rs./10 gms)
Gold Performance in Nov'16 (%)
600
650
700
750
800
850
900
950
1000
SPDR Gold Holdings(Metric Tons)
265
84
251
273
228
277
150 149
295
280
271
168
245
208
123
24
292
275
167
191
161
177
0
50
100
150
200
250
300
350
US Non Farm Employment Change ('000)

4. Spot and Comex silver prices plunged
sharply around 7.8 percent and 7.4 percent
respectively, while MCX silver prices have
declined by around 5.5 percent during the
same time frame.
The drop in silver prices was seen in line
with decline in gold prices and profit
booking seen at higher levels.
However in contrast, all the base metals
have moved positive with copper and lead
being the highest gainer with an increase of
around 21 and 15 percent respectively.
On the other hand, speculative interest in
the metal has fallen. As on 29th Nov 2016,
money managers were net longs in silver at
around 42841 contracts.
While on the other hand, net longs stood
around 49060 contracts as on 1st Nov 2016,
a fall of around 7000 contracts indicating
liquidation in the counter.
Bullion Monthly14th December 2016
Coming to Gold-silver ratio, it has dropped
to around 68 levels in beginning of Dec’16
from around 71 levels in the end of
Oct’16.
Gold-silver ratio represents the number of
silver ounces it takes to buy a single ounce
of gold. At present, it takes around 68
ounces of Silver to buy an ounce of Gold.
Hedge funds have been the happiest lot
for most of this year. However, they have
liquidated their long positions last month.
As on 29th Nov’16, net longs in gold stood
at around 103392 contracts when
compared to 1st Nov’16, wherein, they
were net longs at 172532 contracts.
Source: Bloomberg
Source: Bloomberg
60
65
70
75
80
85
Gold SilverRatio -7.84%
-7.38%
-5.45%
-9.00%
-8.00%
-7.00%
-6.00%
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
SpotSilver ($/oz) Comex Silver ($/oz) MCXSilver(Rs./kg)
Silver Performancein Nov'16(%)As shown in the previous chart, the investment
demand dropped when compared to that of
last month with a plunge in the SPDR gold
holdings. Holdings have declined around 6.23
percent or 58.79 tonnes to 883.86 tonnes in
November.
However, on the year till date, holdings have
increased around 241.49 tonnes or a surge of
around 37.59 percent.

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Bullion Monthly14th December 2016
www.choicebroking.incustomercare@choiceindia.com
www.choicebroking.in
Anish Vyas
Digitally signed by Anish Vyas
DN: cn=Anish Vyas, o=Choice Merchandise
Broking Pvt. Ltd, ou=Sr. Research Associate,
email=anish.vyas@choiceindia.com, c=IN
Date: 2016.12.14 12:13:12 +05'30'