Will it really fall further or it will bounce back?

GOLD

5 REASONS WHY GOLD PRICES FELL

AROUND 8%
SINCEJAN-END
On the National Commodity and Derivatives Exchange
(NCDEX) , gold prices declined to Rs 25,545 per 10 grams on
August 12 from Rs 27,640 per 10 grams on January 30 this year.

Gold losing safe-haven appeal: Despite all the global economic

uncertainty, Golds safe heaven thesis is not really playing out.
Gold prices have remained relatively muted in response to the
Greek debt crisis which is a surprise. The risk of contagion is quite
high and under normal circumstances the price of gold would be
propped up by the uncertainty.

Dollar strengthening and Euro weakening: An added factor

is that the dollar is rising because of the revival of the
American economy, which is bringing the prospect of higher
interest rates. That is bad news for gold. Higher interest rates
increase the opportunity cost of holding zero-yield assets: the
money tied up uselessly in bullion could be earning a return if
invested in treasury bills or other debt.

Expectation of US Fed Tightening starting from September

2015: Yellen confirmed in last meeting that rates will rise this
year, but it is her view that waiting too long would mean rates
would have to rise at a faster pace later. She prefers to start
earlier to allow for a more gradual rate path. As a result, every
FOMC meeting this year including Septembers is a live
meeting at which the central bank could raise rates

Chinese appetite for gold mellowing down: The central

Peoples Bank of China (PBoC) announced last week that
bullion holdings rose to 1,658 tonnes as of the end of June,
from 1,054 tonnes in April 2009. Despite the tonnage increase,
Gold now accounts for 1.65 per cent of Chinas total foreign
exchange reserves, against 1.8 per cent in June 2009. The
number was much less than the perception of China holding
more than 3,000 tonnes

ETF Selling gathers: ETF holdings have dropped

considerably from their 2012 record high of 2,900 tonnes
roughly falling by a third. Gold ETFs worldwide today hold
approximately 1,730 tonnes of gold.

DEMAND AND SUPPLY (GLOBAL)

Global supply of gold is exceeding

demand for the past four quarters in a
row. In the quarter ending March 2015,
global demand for gold stood at 1,079
tonnes vis a vis the same time last year
at 1,090 tonnes. Supplies for the
quarter ending March 2015 stood at
1,089 tonnes visavis 1,093 tonnes
thesame time last year.

WORLD GOLD SUPPLY & DEMAND

IN TONNES

FACTORS TO WATCH BEFORE INVESTING

Factors that should be looked before

investing in gold are US Monetary policy,
Dollar index movement, investment and
physical demand, oil prices and inflation
and demand from consuming nations like
India and China.

WHY NOW IS A GREAT TIME TO BUY GOLD

With golds recent decline to below

$1,100 an ounce, today is one of the best
times to own gold. Three reasons for
owning gold at todays prices.

Global gold mining production to

decline over the next several years
Recent PricewaterhouseCoopers
surveyof global gold mining executives
shows that 60% of them expect gold prices
to continue to decrease (gold miners who
are bearish on the precious metal tend not
to invest in new exploration &
development projects); moreover, 87% of
the global mining executives surveyed
expects costs to fall further or stay the
samerelative to that of 2014.

Global monetary policy outlook is still highly

uncertain, despite a stronger U.S. dollar
The year-over-year increase in U.S.
inflation (as measured by the Consumer Price
Index) remains tame at 0.1%, this is primarily
due to the recent decline in energy
prices. Leading indicators of U.S. inflationsuch
as the tightening job market, increased
bank/credit lending, and higher minimum wages
are all pointing to higher inflation in 2016.

Chinese and Indian gold demand will

reboundOver the last decade, gold demand from
China and India have risen by over 60%;
collectively, the two countries now account for
around 50% of global gold demand, up from just
33% a decade ago. By far the most important
drivers of gold demand in China and India are
income levels and urbanization, as both Chinese
and Indian consumers have a strong affinity for
gold jewelry.

GOLD ARE IN THE FORM OF :

CONCLUSION
Since Gold is priced in dollars on
international markets. This means that
when the dollar rises investors have
less buying power and commodities
become more expensive, "muting demand
and sending commodity prices lower.
Essentially, if the dollar increases so does
the nominal value of any asset quoted in
dollars.
Finally we will have to wait to see if the
dollar weakens further; if it does, we would
expect the metals (Gold) to pick up.