General Information on Equities, Commodities & Global warming

India is now the elephant in the room

2011-09-19T11:57:00.001+05:30

New economic numbers from India, the latest forecasts for the country’s voracious appetite for gold, iron ore and in particular coal and its plans for a sovereign wealth fund to look at mining deals abroad mean that the GVK-Rinehart tie-up could be the first of many.

The India Planning Commission recently released its preliminary forecasts for the country’s 12th five-year plan from 2012 – 2017 and The Economic Times quotes Montek Singh Ahluwalia, deputy chairman of the Planning Commission as saying India’s economy is expected to grow 7.5% – 8% over the next five years even if “we just carry on doing a little bit of progress at the pace we have managed at the last few years.” The official Indian government target is 9%.

The Financial Express reported the Planning Commission last week proposed that India should set up a sovereign wealth fund with an initial corpus of $10 billion, mainly to invest in energy and mining assets abroad.

The Planning Commission forecasts India’s coal demand to go up to 1,000 million tonnes by 2017, necessitating over 200 million tonnes of imports: “The domestic output is unlikely to exceed 750 million tonne leaving more than 200 million tonne shortfall to be met from imports. Even this assumes that the domestic output will be able to increase by over 200 million tonne from current levels.” The Planning Commission said the demand for coal rose by about 8% a year during the 11th plan.

India’s steel demand is likely to jump by over 70% to 113 million tonnes by 2017 after growing by 36 million tonnes per year, with the infrastructure sector projected to witness investments worth $1 trillion. India’s total steel demand stood at 65.61 million tonnes during the last fiscal year.

Last month the World Gold Council said despite a higher gold price, Indian demand grew 38% during Q2 2011 compared to the same period of 2010. This growth is likely to continue, due to increasing levels of economic prosperity, high levels of inflation and forthcoming key gold purchasing festivals.

The Economist reported on China and India’s “contest of the century” this way: As recently as the early 1990s, India was as rich, in terms of national income per head. China then hurtled so far ahead that it seemed India could never catch up. But India’s long-term prospects now look stronger. While China is about to see its working-age population shrink, India is enjoying the sort of bulge in manpower which brought sustained booms elsewhere in Asia. It is no longer inconceivable that its growth could outpace China’s for a considerable time.

courtesy : http://www.mining.com/2011/09/18/india-is-now-the-elephant-in-the-room/

Jhunjhunwala’s portfolio consists mainly of mid-cap stocks while the Sensex is composed of large caps

2011-06-28T17:26:00.001+05:30

Over the past five quarters between January 2008 and March 2009, 48-year-old Jhunjhunwala’s portfolio of publicly traded stocks, of firms in which he owns at least a 1% stake, has underperformed the benchmark index. His portfolio has dropped at least 60% in value, according to data from exchanges, while the Bombay Stock Exchange’s (BSE’s) benchmark equity index Sensex dropped around 52% over the same period.

The Sensex has climbed back about 45% since, while Jhunjhunwala’s concentrated portfolio, which has largely been kept undisturbed, gained only about 15% over the same period.

Jhunjhunwala, the founder of proprietary trading firm Rare Enterprises—named using the first two letters of his and his wife Rekha’s names—twice declined to speak for this story. Most of his portfolio picks are held under this firm, by himself and in the name of his wife.

The most visible, albeit minor, changes made by Jhunjhunwala to his portfolio indicate a trend towards defensive sectors. He purchased an additional 0.65 million shares in software firm Geometric Ltd, where he now owns a 7.27% stake, and 0.3 million shares of Agro Tech Foods Ltd, in which he held a 7.8% stake at the end of December. He also purchased 0.17 million shares of Karur Vysya Bank Ltd and 0.13 million shares of drug maker Lupin Ltd.

On the other hand, he has cut his exposure to Hindustan Oil Exploration Co. Ltd, selling 1.4 million shares during the quarter ended March. Jhunjhunwala also sold about one million shares of Hyderabad-based Nagarjuna Construction Co. Ltd. He reduced the ownership in Pantaloon Retail (India) Ltd by 0.43 million shares and in Titan Industries Ltd by 0.12 million shares. Apart from large investments in a concentrated portfolio and smaller investments in a larger portfolio of listed firms, Jhunjhunwala owns sizeable chunks of equity in several closely held entities through his private equity and venture capital- style investments.
According to data published at the end of December, he owned at least a 1% stake in 31 firms, valued at about Rs1,466 crore.

And at the end of March, he owned at least 1% in 27 companies traded on BSE that declared their latest shareholding details. Some of his portfolio stocks, including the pharmaceutical services provider Bilcare Ltd, pharma firm Zenotech Laboratories Ltd, publisher Infomedia 18 Ltd and water treatment firm Ion Exchange India Ltd, are yet to update shareholding details.

Jhunjhunwala’s holdings in at least a dozen non-listed entities include the 16% stake in Diwan Rahul Nanda’s Tops Security Ltd, New Delhi-based A2Z Maintenance and Engineering Services Pvt. Ltd, Dharti Dredging and Infrastructure Ltd, Inventurus Knowledge Solutions Pvt. Ltd, Maneesh Pharmaceuticals Ltd, Nandan Biometrix Ltd and Concord Biotech Ltd, among others.

To be sure, Jhunjhunwala’s portfolio consists mainly of mid-cap stocks while the Sensex is composed of large caps.

And, despite the beating his portfolio has taken during the downturn, people who have worked with this whisky and cigar aficionado vouch for the soundness of his overall strategy.

“He has tonnes of patience and the temperament that makes him a rare stock market investor,” says Alok Agarwal, a Mumbai-based funds adviser who owns at least 2% in Aptech Ltd, a venture he started to provide computer education. At the end of March, the Jhujhunwalas held a 31.7% controlling stake in Aptech, valued at around Rs123 crore.

It is this so-called temperament that, starting with Rs5,000 in 1985 when the Sensex was trading at 150—on Friday it closed at 11,876.43—has allowed him to achieve almost cult status with investors in a country where only 3% of the 1.2 billion population invests in equity markets.
His investment strategy, followed closely by many individual investors, involves maintaining a steady portfolio of stocks with a long-term view while committing smaller amounts to the high-beta activity of equity trading such as day trading that tends to be highly volatile.

And to be fair to Jhunjhunwala, he is reported to have said that comparing him to Buffett is an insult to the chairman of Berkshire Hathaway Inc., who also happens to be one of the richest men in the world and has famously willed away almost all of his fortune to charity.

Sebi bars 197 FIIs, 342 sub-accounts from market

2010-10-02T16:04:00.001+05:30

Market regulator Sebi has barred 197 foreign funds, including those managed by global financial conglomerates like HSBC, Deutsche Bank and Standard Chartered, and 342 sub-accounts from further trading in stock market.

These entities have been barred from fresh trading with immediate effect for non-disclosure of holding structure to the regulator, Sebi said in a circular.

"With effect from October 1, 2010, FIIs (foreign institutional investors) and sub-accounts that have not complied with the above mentioned requirements will not be permitted to take fresh positions in cash and derivatives market while they can retain their current positions or sell off/ unwind," Sebi said.

Stock market barometer Sensex, however, did not respond to Sebi's move and rallied 376 points, or 1.87 per cent, to close at 20,445.04 points. Earlier in April, Sebi had sought detailed information from FIIs on their holding structures and account holders, a move apparently aimed at curbing routing of Indian money back into the country through overseas entities in order to avoid paying taxes.

Sebi had asked the FIIs to disclose by September 30, whether it is a protected cell company, segregated portfolio company or multi-class share vehicle satisfying broad-based criteria set by the market watchdog.

Funds of Citicorp Trustee Company, Standard Chartered, ABN Amro Bank and Bank of New York are among the entities that have been banned from taking fresh positions in the market.

Also sub-accounts of Aberdeen Asset and Abhudhabi Investment Authority were among the 342 non-compliant sub-accounts.

Investing and the 'rule of 72'

2010-10-02T15:48:00.000+05:30

As an investor, the dream is to grow the money invested over years. Investors specifically look for opportunities that double their money or even earn more than double.

But usually investors are told the annual rate of return that they can earn on their investment. No broker, no investment advisor ever tells them how many years will it take for them to double their money from a specific investment.

However, there is a simple tool by which you can calculate when this event would take place. If you know the rate of return that you can earn from an investment, you can easily find out how long would it take to double your money.

This tool is called the 'rule of 72'. Very simply, this rule states that:
Number of years to double your money = 72 divided by Rate of return

So if an investment earns a return of 10% per annum, the number of years in which your money would double in it will be 7.2 years (72/10).

This is the 'rule of 72' that you need to understand when you make your investments. Obviously this rule would only favor those who are invested for a longer period of time. The reason for this is that only risk free investments like fixed deposits and bonds can give steady rate of returns year after year. Since these investment options are less risky, the rate of return from them will be lower too.

If we look at stock markets, the returns are much higher. However, so are the risks. No one can predict the exact return that the investment in stocks can give each year. While an investor may earn 30% or more in a good year, in a bad year the same investor may end up losing over 50%. Thus the annual returns are not predictable.

So, does this mean that the 'rule of 72' cannot be applied to stock markets?

No, it can be applied! The idea is not to try and take one year's gain as the rate of return that the stocks can give us each year. Obviously this is not possible. Instead, it would be better to use a longer period of time like 4-5 years to get a more probable rate of return.

For instance, if a stock has generated an average annual return of 20% over the previous 5 years, then you can use this 20% return as a basis to find put when your money would double if you were to invest in this stock. Using Rule 72, it would be 72/20 or 3.6 years. However, you would have to remember that this 20% is not guaranteed. Therefore, 3.6 years is just a rough approximation of the time period. Also, the P/E of the stock also comes into the picture here. It helps if the P/E is not way out of line with respect to historical trends and is expected to remain stable over the next few years. It is only in such cases that the rule of 72 is likely to take us as close to the right answer as possible.

Clearly then, while this rule does help us understand our investment period better, we must remember to apply it carefully. For the correct application of the rule, the rate of return has to be calculated with utmost care. Being over-optimistic or over-pessimistic will just result in losses.

It's time to end Dabba trading

2010-09-05T21:28:00.000+05:30

A parallel system of futures trading in commodities, operating outside recognised commodity exchanges, better known by its colloquial epithet Dabba, has been thriving unchecked and is believed to be now generating bigger trading volumes than the regular exchanges.

This is chiefly because curbing this mode of trading is proving difficult under existing rules governing commodity futures. The Forward Markets Commission (FMC), the main regulator of this sector, in its present avatar does not have adequate powers to directly intervene in Dabba trading.

Nor can the commodity exchanges do much to stop it, though the Dabba operators are known to be using the prices discovered at the exchanges to settle their unwritten deals. Couple of indirect measures taken recently by the FMC, such as imposition of a relatively more deterrent penalty regime for erring brokers and barring sub-brokers from commodity trading, seem to aim, in part, at thwarting the Dabba operations, but they have failed to stop the racket.

The FMC has now sought information on inactive members of commodity exchanges in the belief that many of them may be involved in this illegal business. It remains to be seen if a mere weeding out of inactive members would stop the Dabba trade.

Those involved in the Dabba mode of futures trading find it financially attractive as they do not have to put in margin money or pay transaction fee to the exchanges. But they do not have any safeguards against default since the deals are without bona fide contracts.

This apart, since many of the brokers in the Dabba trade often hedge their personal risks through recognised brokers dealing on regular exchanges, the repercussions of defaults in Dabba trading can spill over to the valid futures trading as well.

Perhaps empowering the commodity futures regulator can help. It is, therefore, unfortunate that the process of amending the archaic Forward Contracts Regulation Act, 1952 for providing more teeth to the regulator, initiated two years ago, has not yet been taken to its logical end.

The Bill to amend this statute was not only drafted and formally approved by the Union Cabinet, but was also hurriedly enforced through an Ordinance in 2008. It aimed at converting the FMC into an autonomous, statutory regulator for commodity futures with full powers to act against unlawful practices and introduce futures trading in options, derivatives and intangibles like carbon credits. But, surprisingly, the Ordinance was allowed to lapse.

Unless this Bill is revived and enacted into law, it may be difficult to deal with Dabba trading. An amendment of the law is needed also to achieve the main objective of reintroducing futures trading in commodities.

Options trading in commodities will allow farmers to hedge their risks by giving them the right, but without any obligation, to sell their stocks at a future date. The government must take steps to this end and get the commodities regulator to put a lid on Dabba trading.

Brazil has revolutionised its own farms. Can it do the same for others?

2010-09-05T21:22:00.002+05:30

IN A remote corner of Bahia state, in north-eastern Brazil, a vast new farm is springing out of the dry bush. Thirty years ago eucalyptus and pine were planted in this part of the cerrado (Brazil’s savannah). Native shrubs later reclaimed some of it. Now every field tells the story of a transformation. Some have been cut to a litter of tree stumps and scrub; on others, charcoal-makers have moved in to reduce the rootballs to fuel; next, other fields have been levelled and prepared with lime and fertiliser; and some have already been turned into white oceans of cotton. Next season this farm at Jatobá will plant and harvest cotton, soyabeans and maize on 24,000 hectares, 200 times the size of an average farm in Iowa. It will transform a poverty-stricken part of Brazil’s backlands.

Three hundred miles north, in the state of Piauí, the transformation is already complete. Three years ago the Cremaq farm was a failed experiment in growing cashews. Its barns were falling down and the scrub was reasserting its grip. Now the farm—which, like Jatobá, is owned by BrasilAgro, a company that buys and modernises neglected fields—uses radio transmitters to keep track of the weather; runs SAP software; employs 300 people under a gaúcho from southern Brazil; has 200km (124 miles) of new roads criss-crossing the fields; and, at harvest time, resounds to the thunder of lorries which, day and night, carry maize and soya to distant ports. That all this is happening in Piauí—the Timbuktu of Brazil, a remote, somewhat lawless area where the nearest health clinic is half a day’s journey away and most people live off state welfare payments—is nothing short of miraculous.

These two farms on the frontier of Brazilian farming are microcosms of a national change with global implications. In less than 30 years Brazil has turned itself from a food importer into one of the world’s great breadbaskets . It is the first country to have caught up with the traditional “big five” grain exporters (America, Canada, Australia, Argentina and the European Union). It is also the first tropical food-giant; the big five are all temperate producers.

The increase in Brazil’s farm production has been stunning. Between 1996 and 2006 the total value of the country’s crops rose from 23 billion reais ($23 billion) to 108 billion reais, or 365%. Brazil increased its beef exports tenfold in a decade, overtaking Australia as the world’s largest exporter. It has the world’s largest cattle herd after India’s. It is also the world’s largest exporter of poultry, sugar cane and ethanol. Since 1990 its soyabean output has risen from barely 15m tonnes to over 60m. Brazil accounts for about a third of world soyabean exports, second only to America. In 1994 Brazil’s soyabean exports were one-seventh of America’s; now they are six-sevenths. Moreover, Brazil supplies a quarter of the world’s soyabean trade on just 6% of the country’s arable land.

No less astonishingly, Brazil has done all this without much government subsidy. According to the Organisation for Economic Co-operation and Development (OECD), state support accounted for 5.7% of total farm income in Brazil during 2005-07. That compares with 12% in America, 26% for the OECD average and 29% in the European Union. And Brazil has done it without deforesting the Amazon (though that has happened for other reasons). The great expansion of farmland has taken place 1,000km from the jungle.

How did the country manage this astonishing transformation? The answer to that matters not only to Brazil but also to the rest of the world.

An attractive Brazilian model

Between now and 2050 the world’s population will rise from 7 billion to 9 billion. Its income is likely to rise by more than that and the total urban population will roughly double, changing diets as well as overall demand because city dwellers tend to eat more meat. The UN’s Food and Agriculture Organisation (FAO) reckons grain output will have to rise by around half but meat output will have to double by 2050. This will be hard to achieve because, in the past decade, the growth in agricultural yields has stalled and water has become a greater constraint. By one estimate, only 40% of the increase in world grain output now comes from rises in yields and 60% comes from taking more land under cultivation. In the 1960s just a quarter came from more land and three-quarters came from higher yields.

So if you were asked to describe the sort of food producer that will matter most in the next 40 years, you would probably say something like this: one that has boosted output a lot and looks capable of continuing to do so; one with land and water in reserve; one able to sustain a large cattle herd (it does not necessarily have to be efficient, but capable of improvement); one that is productive without massive state subsidies; and maybe one with lots of savannah, since the biggest single agricultural failure in the world during past decades has been tropical Africa, and anything that might help Africans grow more food would be especially valuable. In other words, you would describe Brazil.

Brazil has more spare farmland than any other country. The FAO puts its total potential arable land at over 400m hectares; only 50m is being used. Brazilian official figures put the available land somewhat lower, at 300m hectares. Either way, it is a vast amount. On the FAO’s figures, Brazil has as much spare farmland as the next two countries together (Russia and America). It is often accused of levelling the rainforest to create its farms, but hardly any of this new land lies in Amazonia; most is cerrado.

Brazil also has more water. According to the UN’s World Water Assessment Report of 2009, Brazil has more than 8,000 billion cubic kilometres of renewable water each year, easily more than any other country. Brazil alone (population: 190m) has as much renewable water as the whole of Asia (population: 4 billion). And again, this is not mainly because of the Amazon. Piauí is one of the country’s driest areas but still gets a third more water than America’s corn belt.

Of course, having spare water and spare land is not much good if they are in different places (a problem in much of Africa). But according to BrasilAgro, Brazil has almost as much farmland with more than 975 millimetres of rain each year as the whole of Africa and more than a quarter of all such land in the world.

Since 1996 Brazilian farmers have increased the amount of land under cultivation by a third, mostly in the cerrado. That is quite different from other big farm producers, whose amount of land under the plough has either been flat or (in Europe) falling. And it has increased production by ten times that amount. But the availability of farmland is in fact only a secondary reason for the extraordinary growth in Brazilian agriculture. If you want the primary reason in three words, they are Embrapa, Embrapa, Embrapa.

Meet the world's largest exporter of roses

2010-07-31T12:25:00.002+05:30

He is the world's largest exporter of roses. His company has leased 3,000 sq km of land (that is five times bigger than Mumbai, which is 603.4 sq km in size!) in Ethiopia. Here is his amazing story...

After completing his engineering and MBA, it was but natural for Sai Ramakrishna Karuturi to join his family business. A three-year stint and he realised that he wanted to explore new pastures and not stick to his father's business.

After toying with various options he finally settled for floriculture -- he decided to cultivate and export roses.

But cultivating flowers in India is an expensive affair. After a chance meeting with a former colleague he moved to Africa, where the seeds of his fortune were sown.

With 15 per cent of the global market in his grasp, Karuturi, today, is the world's largest exporter of roses.

Three years ago, he added agriculture to his bandwagon. Today, his company Karuturi Global Ltd has 3,000 sq km of agricultural land in Ethiopia (that is 5 times the size of Mumbai!) and 239 hectares of land for rose cultivation.

The company's turnover in 2009 was Rs 650 crore (Rs 6.5 billion).

Here's his story in his own words:

The beginning

Since I come from a business family, entrepreneurship was the only option open to me. My father, though he is 76 years old, still runs many businesses, including power transmission. It was like I was in a business school from age three!

After I completed engineering, I went on to do MBA in the United States. While my father taught me the essence of business, the management degree added a structured dimension to the existing knowledge and taught us all about supply chain and marketing.

I came back and joined the family business and worked with my father from 1990 to 1993.

Starting own enterprise- the flower business

In 1994, I zeroed in on the flower business. I was immensely influenced by management guru Michael Porter's theory of 'Sustainable Competitive Advantage'. I was looking at any business that has sustainable competitive advantage from India into the global market.

I never looked at a business that supplied into India or into a particular region. I wanted to start an enterprise that would sustain itself globally. I was looking at a variety of businesses and the flower business appealed to me the most.

When I visited Israel, I perceived the enormity of the flower businesses, and it left a mark on me. I fell in love with this business, and my passion for it has not dimmed in all these years.

I started with a shoe-string budget of Rs 133,000 which was what I had in my bank account then. Bank loans were easy to get for this sector and many others were also getting into the business with crores of rupees. Then, my father gave me a seed capital of Rs 50 lakh (Rs 5 million). I approached IDBI and they sanctioned Rs 5 crore (Rs 50 million).

I completed the project by 1996. I bought around 28 acres of land in Doddabellapur, 40 km from Bengaluru, and built a couple of green houses.

Mind you, I did not import them. I got my green houses built on the footpaths of Bengaluru, literally. They were designed by the Indian Institute of Science. I bought steel from the market and got it fabricated at a roadside workshop. We made it at a third of the cost at which our competitors were importing it.

When our competitors were importing rose shrubs at Rs 80 per plant, I got them from the local nurseries. They wanted me to import the basic bud wood so that they could make the varieties here in Bengaluru itself. I got them imported from Germany and Holland and it cost me only Rs 5 a plant.

The building block of our success started with frugality and the Indian way of stretching the rupee thin. Our capital and revenue costs were kept very low.

I built this business on very strong foundations of keeping costs low and that has helped us reach where we are today!

Moving to agriculture

Three years ago in 2007, we decided to buy land in Ethiopia for agriculture. Today, we have 3,000 sq km of land which is 5 times the size of Mumbai, and it makes us one of the world's largest landlords! I never thought of becoming a landlord, much less one of the world's largest. That was not a goal at all.

We harvest rice, maize, vegetables, palm oil, and sugarcane. We produce about 5 million tonnes of rice which we export to many countries. That is about one per cent of the world's rice production and 20 per cent of the traded volume in the global market.

We also hope to be a significant player in the maize, sesame, soya and sorghum markets. Palm oil also will be produced in around 100,000 hectares and we will be one of the top five palm oil producing companies.

We have already been rated by UNCTAD (United Nations Conference on Trade and Development) as a member of the 25 largest transnational corporations in agriculture. I want to be ranked among the top 5 and make every Indian proud that one of their own has reached the heights, not in IT but in agriculture.

Future plans

Though horticulture is the main driver of our business, in the next 24 months, agriculture will be twice as big as horticulture.

We expect incremental revenues from agriculture to go past $600-700 million and I don't see horticulture revenues going past $200 million (it is currently $150 million).

My target is to take this company to the billion-dollar club by 2015. So, the next five years' journey is going to be very enjoyable and fulfilling.

Advice to entrepreneurs

My advice to young entrepreneurs is that there is no substitute for hard work and passion. If you are passionate about your work, you can excel in it. You cannot just be passionate and not be hard working; they go hand in hand.

Cadbury India’s share valuation issue heats up

2010-07-13T18:19:00.000+05:30

Chocolate and confectionery maker, Cadbury India has rejected the 30% premium recommended by the court-appointed valuer Ernst & Young on share valuations fearing that it might jack up the share prices further upwards.

The company had informed the Bombay High Court about its objection with the 30 per cent premium recommended on share valuation of Rs.1340 suggested by earlier valuators was not acceptable to them. Earlier, valuators Bansi Mehta & Co and SSPA & Co had suggested per share valuation at Rs.1,340.

Cadbury is considering to buyback 2.5% shares owned by minority shareholders, who were not satisfied with the offer made by the company and felt the valuation was low and did not offer value for money at such low rates.

Following to the minority shareholder’s appeal in the Investors Grievances Forum to oppose low valuations, the court appointed Ernst & Young as fresh valuers.

In the latest development the Bombay High Court has asked counsel of both sides to give their submissions on the matter on Wednesday.

According to Investors Grievances Forum (IGF), Cadbury has 8,088 shareholders in the country and abroad. Of them, 800 are minority non promoter shareholders.

Tax exemption allowed in bonds of IFCI, IDFC, LIC and NBFCs

2010-07-09T23:22:00.000+05:30

The deduction will be in addition to the deduction of rupees one lakh allowed under sections 80C, 80CCC and 80CCD of the Act.

The Central Government has specified bonds to be issued by (i) Industrial Finance Corporation of India (IFCI); (ii) Life Insurance Corporation of India (LIC); (iii) Infrastructure Development Finance Company Limited (IDFC); and (iv) a Non-Banking Finance Company (NBFC) classified as an infrastructure finance company by the Reserve Bank of India; as “Long-term Infrastructure Bond” for the purpose of section 80CCF of the Income Tax Act, 1961.

Investment in these bonds up to Rs20,000 will be eligible for deduction from the total income of the assessee. The deduction will be in addition to the deduction of Rs1 lakh allowed under sections 80C, 80CCC and 80CCD of the Act.

The tenure of the Bonds shall be a minimum of 10 years with a lock-in period of five years for an investor. It will be mandatory for the subscriber to furnish permanent account number to the issuer for investment in the bonds.

India’s 9.5% growth to push gold sales

2010-07-08T22:03:00.000+05:30

Gold demand in India is all set to soar in the coming months as the International Monetary Fund has predicted a very high 9.5 per cent growth for the country in 2010.

According to IMF, India’s growth will accelerate to about 9.50 per cent in 2010 as robust corporate profits and favourable financing conditions fuel investment, and then settle to 8.50 per cent in 2011.

The 9.5% growth is set to give people more money to buy gold and jewellery. Large domestic demand bases in India, China, and Indonesia, which contribute substantially to Asia’s growth, could also provide the region a cushion in the event of external demand shocks, the IMF said.

This means, India and China will lead the world in growth and will have a bigger say in the market especially in bullion. If Indians and Chinese buy more gold, that will make a huge impact on the gold prices in global level.

As Asia’s strong recovery from the global financial crisis continues, despite renewed tension in global financial markets, world growth is projected at about 4.50 per cent in 2010 and 4.25 per cent in 2011.

Noting that economic activity in Asia has been sustained by continued buoyancy in exports and strong private domestic demand, the IMF has revised gross domestic product (GDP) growth forecasts for the region upward for 2010, from about 7 per cent in the April WEO to about 7.50 per cent.

For 2011, when the inventory cycle will have run its full course and the stimulus is withdrawn in several countries, Asia’s GDP growth is expected to settle to a more moderate but also more sustainable rate of about 6.75 per cent.

In China, given the strong rebound in exports and resilient domestic demand so far this year, the economy is now forecast to grow by 10.50 per cent in 2010, before slowing to about 9.50 per cent in 2011, when further measures are taken to slow credit growth and maintain financial stability, the IMF said.

In a separate Global Financial Stability Report Update, the Fund noted that despite generally improved economic conditions and a long period of healing after the failure of Lehman Brothers, progress toward global financial stability has recently experienced a setback.

India Gold makes historic surge to Rs.19,050

2010-06-01T21:23:00.000+05:30

India 24 carat gold hit Rs.19,050 per 10 grams in Delhi Spot markets making the latest historic high fuelled by weak rupee versus dollar and strong demand.

Reports suggested that pure gold hit a new historic high of Rs.19,050 per 10 gram in the Delhi spot market on Tuesday on weak rupee versus dollar and good demand, analysts said.

Rupee was trading weak at Rs.47.1600 per $1 versus Rs.46.36 previously. India, the largest consumer of gold in the world meets most of its demand through imports. A weak rupee makes importing cost of gold costlier, thus driving prices higher.

Tuesday, gold futures on MCX also surged with the near-month contract hitting a new record high of Rs.18,762 per 10 gram.

Most active MCX August contract also hit a contract high of Rs.18,787 per 10 gram. Meanwhile, MCX June contract was trading at Rs.18,722 up 1.67% from the previous close.

Meanwhile, gold stocks on the Bombay Stock Exchange (BSE) witnessed steep rise on Tuesday, June 01, 2010. Leading jewellery makers including, Rajesh Exports Ltd (BOM:531500) gained by over 2% at Rs.87.05 today. Surana Corporation Ltd (BOM:531102) ended the day at Rs.67.90 up by close to 4.5% on the BSE.

How US banks created the credit bubble

2010-05-26T12:55:00.000+05:30

Apart from the tiny fraction of the US population that understands economics, everyone was content while the private-sector credit bubble was inflating. The Fed chairman was hailed as a "maestro" for keeping interest rates at artificially low levels and thus ensuring that the prices of most investments -- especially high-risk investments -- remained on upward paths, while politicians of all stripes were happy that the market for home mortgages was the greatest 'beneficiary' of the Fed-sponsored inflation of money and credit.

Actually, politicians didn't leave much to chance, in that regulations were passed to encourage the provision of mortgage-related credit to anyone with a pulse and government-sponsored enterprises (Fannie Mae, etc.) worked tenaciously to increase both the supply of and the demand for mortgages.

The banking industry played its part to the hilt by inventing new ways to expand credit (think: Residential Mortgage-Backed Securities and Collateralised Debt Obligations), but it is important to understand that the banks would not have had an incentive to create these new credit-related products unless there existed huge demand for such products. The demand came from large investors -- hedge, bond and pension funds, for example -- that were desperately searching for yield in a world where yields had been kept artificially low by various central bank and government manipulations.

The main problem with credit bubbles is that they result in a massive transfer of resources to activities that would not be economically viable in the absence of the artificially low interest rates and the monetary inflation. Consequently, although they temporarily create the feeling of prosperity, they deplete real savings and lessen the economy's long-term growth potential.

The recession or depression that inevitably follows the bursting of a credit bubble is caused by the ill-conceived investments made during the bubble rather than by the bursting of the bubble itself. Think of it this way: once the bubble bursts and the supply of new credit is curtailed, a light is suddenly shone upon the terrible mistakes that were made during the bubble.

During the giant credit bubble that ended in 2007, the banking industry made more than its fair share of investing errors and was thus eventually left with enormous holes in its collective balance sheet. Some of the largest US banks should have gone under, which would have resulted in the holders of bank equity losing all of their money and the holders of bank bonds losing most of their money.

It would NOT, however, have resulted in bank depositors losing any of their money or in the cessation of the traditional banking businesses (the taking of deposits and the making of loans). Unfortunately, the government deemed that the banks were "too big to fail", and arranged for hundreds of billions of dollars to be siphoned from the rest of the economy to prevent the large banks from collapsing. Note that the banks were not actually "too big to fail". They should have failed, and the US economy would be in far better shape today if they had.

Further to the above, the banks certainly played a role in creating the current mess, but it was a supporting role. The lead roles were played by the government and the Fed. However, now we have the ridiculous situation of US policy-makers passing legislation that grants themselves greater power and crimps the activities of the banks, with the stated aims of mitigating the risk of another financial crisis and preventing banks from becoming "too big to fail". If they are serious about mitigating the risk of another financial crisis then they should pass legislation that abolishes the Fed and severely crimps the activities of the government.

The attacks on the banks are nothing if not predictable. Throughout history the ends of giant credit bubbles have invariably been followed by periods of recrimination, when politicians looked around for someone other than themselves to blame. In the current case the banking industry is the most logical target because it is blatantly obvious that the large banks have profited handsomely at the expense of taxpayers over the past 18 months. But isn't it bizarre that the finger of blame is being self-righteously pointed at the banks by the very same people who arranged or approved the gargantuan wealth transfer from taxpayers to banks?

Fifty years on: Gujarat PSEs yield gold for investors

2010-05-24T15:47:00.000+05:30

The day marks the golden jubilee year of the formation of the state of Gujarat, which was separated from the erstwhile state of Bombay Presidency on the 1st May 1960. Ever since its formation as a separate state, Gujarat has been thriving to be on the forefront of numerous socio-economic platforms, then let it be agriculture, industries, services or civil society. Gujarat has successfully marked its significance not only domestically but internationally too.

Tracking the golden jubilee celebrations of the 50 glorious years of its existence, Gujarat has emerged as the only state in India to have some of the large public sector enterprises listed on the bourses and yielding heavy returns for the investors. As many as six state PSEs are on the public listings and have witnessed significant appreciation of the stock prices over the years.

The six PSEs, namely Gujarat Mineral Development Corporation (BOM:532181) (GMDC), Gujarat State Petronet Ltd (BOM:532702) (GSPL), Gujarat State Fertilizers & Chemicals Ltd (BOM:500690) (GSFC), Gujarat Alkalies & Chemicals Ltd (BOM:530001) (GACL), Gujarat Narmada Valley Fertilizers Company (BOM:500670) (GNFC) and Gujarat Industries Power Company Ltd (BOM:517300) (GIPCL) have emerged as the Navratna companies for the state and the investors.

GMDC, a mining major operates in two segments, mining and power. The company produces lignite, bauxite, calcined bauxite, fluorspar and manganese ore. GMDC is one of the prominent mining and mineral processing companies in India. The company stocks have appreciated by 159.5% in past one year from Rs.54.50 to Rs.137 in the recent trades on the Bombay Stock Exchange (BSE). Meanwhile, the benchmark index, Sensex has surged by 98.5% over past one year to the current level of 17,558 points.

GMDC has been consistently giving dividends to the investors over the years. The company has posted a net profit of Rs.71.19 crore for the quarter ended December 31, 2009 as compared to Rs.74.71 crore for the quarter ended December 31, 2007. Total Income has increased from Rs.262.88 crore for the quarter ended December 31, 2008 to Rs.282.03 crore for the quarter ended December 31, 2009.

Gujarat’s largest caustic chlorine maker, GACL made a history in the state’s chemical sector when the company joined hands with European chemical major, Dow Europe GmbH for setting up an environment-friendly chloromethane plant at Dahej with an investment of Rs.600 crore. The project is underway and expected to be commissioned in early 2011.

In past one year, GACL stocks have gained 57% from Rs.82.70 in the early May 2009 to Rs.117.20 in the latest trades on BSE. The company has a market capitalization of Rs.8.61 billion as on Friday, April 30, 2010.

GSPL, is a pioneer in developing energy transportation infrastructure and connecting natural gas supply basins and LNG terminals to growing markets. The company stocks have yielded robust returns for the investors as the stock price has appreciated by over 138% YoY to Rs.95.30 in recent trades on BSE.

GSPL is a future hope for the industrial growth in Gujarat as the company is developing some of the key industrial infrastructure projects like gas grid development. The company has commissioned various pipeline projects across the state.
Gujarat is once again at an advantage as the state has one of the world’s largest single-stream ammonia-urea fertilizer complexes at GNFC. The company has developed much beyond plant food through a process of horizontal integration. Chemicals/petrochemicals, energy have already been added to the company’s kitty.

GNFC stocks have appreciated by 78.66% over past one year to the current level of Rs.120.15, giving heavy returns to the investors in the long run. The company has the market capitalization of Rs.18.67 billion as on 30th April, 2010.

Another fertilizer and chemicals major, GSFC has been leading fertilizers provider to the agriculture in India. The fertilizer products include urea, ammonium sulphate, di-ammonium phosphate, ammonium phosphate sulphate and traded fertilizer products. GSFC also manufactures some of the speciality chemicals for the industrial purposes, that include caprolactam, nylon-6, nylon filament yarn, nylon chips, melamine and polymer products. Initially, with the equity structure, comprising of 49% of State Government participation and 51% of Public and Financial Institutions, today the Government’s involvement has come down to 38.4%.

The company stock prices have swollen to Rs.259.90 on 30th April 2010 rising 131% over past one year with company’s market capitalization soaring to Rs.20.71 billion.

In order to attain self sufficiency in power generation to provide good quality and uninterrupted power to the state industry and agriculture, Gujarat, over past several years, has been emphasizing on developing larger power generation capacities. GIPCL is a step in this direction. The company, however, has the total generation capacity at 5560 MW at its two power plants located in Vadodara and Mangrol.

Presently, two units of 125 MW SLPP phase II expansion project with expansion of lignite mines is underway and the project is expected to be commissioned in the current fiscal. The state government has consented to allot 500 MW expansion Phase-III to GIPCL. The site selection, environmental clearances and other formalities are in the advance state of progress.
The company stocks gained by 97% over past one year leading the company’s total market capitalization to Rs.17.92 billion as on 30th April 2010. The company stocks ended the last trading session at Rs.118.50 on BSE.

Looking at the robust performance by the state PSEs has proved that despite being public sector enterprises, the companies have flared well in comparison to other PSUs in the country. Surprisingly, no other state has achieved such significant milestone in the field of industrial development.

Gold sale profit to hit $5.1 billion : IMF

2010-05-24T15:38:00.000+05:30

The IMF said Sunday it expects to record a profit of $ 5.1 billion from the sale of gold in the financial year ended April 30, 2010.

In a statement, the International Monetary Fund, which sold gold to member countries including India last year, said gold sales is a part of the multilateral lending agency’s new income model, mainly aimed at increasing its resources to lend to low-income countries.

The net income in the 2010 financial year (ended April 30) would include “gold profits estimated at about SDR 3.5 billion ($ 5.1 billion) from part of the limited sale of the fund’s gold,” according to the IMF.

SDR or Special Drawing Rights is an international reserve asset created by the IMF to supplement its member countries’ official reserves. The value of SDR is based on a basket of four key international currencies -- the euro, Japanese yen, pound sterling and US dollar.

In its mid-year review, the IMF had estimated that its profits from gold sales would be worth about SDR 3.25 billion.

This projection has now been raised to SDR 3.5 billion.

The IMF sold 212 metric tons of gold in October-November, 2009. Out of the total, India purchased 200 tonnes at an estimated cost of $ 6.7 billion.

“The gold sales, a central element of the fund’s new income model, will fund an endowment and also increase the fund’s resources for lending to low-income countries...,” the agency said in a recent statement.

Meanwhile, the IMF is expected to report a net operational income of SDR 365 million (about $ 534 million) for financial year 2010, compared to earlier estimates that pegged net operational income at SDR 290 million (about $ 424 million) at the beginning of the year.

“This improved outlook is primarily attributed to higher than expected earnings on the fund’s investment portfolio, which is made up largely of fixed-income securities, and lower net administrative expenditures, in SDR terms, reflecting movements in the US dollar/SDR exchange rate,” the statement noted.

Investment strategies for uncertain times

2010-05-19T12:42:00.000+05:30

A situation where earnings growth is rising and projected to continue rising, while share prices are falling, is unusual.

We can see it happening now, and it could continue, given the panic in Europe.

Normally, one would expect long-term investors to be happy at the chance to invest in profitable businesses at lower prices.

But, little about the current situation is normal.

The last time there was a crisis of these dimensions in 2008, it triggered a 15-month bear market that knocked more than 50 per cent off index values.

What is the real benefit?

More pertinently, it retarded Indian GDP growth by at least 1.5 per cent and had an adverse effect on earnings over a two-year period.

Several things may go wrong with the current projections for India if the European situation gets worse.

Indian exports, which are still depressed, could spend a further indefinite period in the doldrums.

Second, Indian businesses looking to tap overseas finance (notably real estate and telecom) will run into reluctance.

Third, domestic consumer spending itself could drop if white-collar increments are frozen.

Lastly, there might be an absolute hard-currency collapse and that would have consequences that are impossible to assess.

So, should Indian investors be buying under the circumstances?

For regular returns

On balance, I'd say yes.

The absolute currency collapse is not very likely to happen and, under other circumstances, the Indian economy will continue to recover gradually, if not at the rates that were optimistically projected before the Greek tragedy.

But, any buying should be very cautious and done in staggered fashion.

Here are some possible sign posts.

Prices could drop or remain depressed for several months.

Hence, slow systematic buying strategies will yield better returns by lowering average price of acquisitions.

Above all, don't commit funds that you'll need to touch for several years. If the index is down another 20 per cent, a year down the line, you want to be able to reduce your average cost of acquisition rather than be forced to sell out to cover other expenses.

Declare the correct investment details

Second, avoid companies that are heavily dependent on exports or on debt infusions.

In the first case, the reasons are obvious - export growth will be slow or negative. Debt will also be very hard to come by and expensive as well. Expansion plans everywhere are likely to go on hold.

Third, look for attractive valuations with regards to the current balance sheet, rather than strong growth prospects.

A low-debt company that is available cheap (in terms of a low current PE, PBV, etc) is less likely to suffer dramatic erosion in valuations.

Fourth, don't expect further stimulus packages from the Government of India - it doesn't have the resources.

Uncertainty in equities, bull phase soon

2010-05-19T12:16:00.000+05:30

Global financial markets continue to be driven largely by the sovereign debt issues facing Greece and other European countries but uncertainty clouds the market even as a bull trend is likely soon, according to Bob Doll, Vice Chairman and Chief Equity Strategist for Fundamental Equities at BlackRock, a premier provider of global investment management, risk management and advisory services.

In his weekly commentary, he said that stocks continued to face high levels of volatility last week as a strong rebound in prices early on gave way to renewed weakness by week’s end. Overall, markets did manage to post gains, with the Dow Jones Industrial Average rising 2.3% to 10,620, the S&P 500 Index advancing 2.2% to 1,136 and the Nasdaq Composite gaining 3.6% to end the week at 2,347. Following these gains, stocks moved back into positive territory for the year.

The events in Europe also serve as a reminder that the world appears to be entering a period marked by higher taxes and increased regulation. "In the United States, we expect Congress will act at some point to perpetuate the Bush-era tax cuts for those making under $200,000, but will increase tax rates on higher-income earnings and on capital gains and dividends."

From an equity market perspective, the initial relief over the creation of the rescue plan (which drove markets sharply higher on Monday) eventually gave way to skepticism as investors continued to question European governments’ ability to repay their debt. More broadly, investors have grown increasingly concerned about the potential for contagion, fearing the credit issues could affect other markets. At this point, it is difficult to say whether the rescue program will result in a recovery
in confidence levels, but the scope and size of the plans are encouraging, Bob Doll said in his commentary.

The plans do not address the underlying fundamental issues facing Greece and other countries, which will still have some difficult decisions to make in terms of managing their balance sheets. In the short term, however, the immediate liquidity risks should be contained. On balance, it appears investors are awaiting more details and markets still need to be convinced that the plans enacted by the European Central Bank and other policymakers will work.

Looking ahead, there appear to be three possible directions that the European debt crisis could take. The first, and most pessimistic, would be something similar to what happened in late 2008, when the global financial system entered a free fall after the collapse of Lehman Brothers. We think such a scenario is unlikely, as there are several important differences between the credit crisis of 2008 and the events of today. Namely, credit risks involving governments are significantly more transparent
than those surrounding subprime loans and collateralized debt obligations were a couple of years ago; the broader global economy is firmly in recovery mode; inflation levels are low; the banking system as a whole is in better shape; and global policymakers are highly attuned to the downside risks. The second scenario would be a longer-term continuation of a volatile trading range as the competing crosswinds of economic growth and increased liquidity battle against deteriorating credit
conditions and widespread uncertainty. This has been the case for the past several weeks, and this backdrop will continue.

The third scenario would be a victory by the bullish forces that could result in a renewed rally for risk assets. "We do expect to see this result at some point—such was the case after the January/ February downturn. The fundamental uncertainty surrounding credit issues, however, could make the current trading range persist for longer.

One of the spillover effects of the European sovereign debt crisis has been the appreciation of the US dollar versus the euro. The rising dollar has been a source of concern for some investors, since a stronger dollar could have negative implications for US corporate profits. While the trade-weighted value of the dollar is still below its average level of the past several years, the weaker euro could present a risk for US stocks, as could weaker levels of European economic growth.

Another question prompted by the current crisis is what impact all of this will have on the Federal Reserve’s decisions regarding US interest rates. "We had expected that, with the resumption of jobs growth, the Fed would soon signal that it was nearing a change in its forecast, paving the way for an increase in interest rates by the end of the year. That forecast is now looking more uncertain, implying that the Fed is likely to keep rates on hold for a bit longer. An extended period of excess global
liquidity should provide a tailwind for stocks, commodities and other risk assets," Bob Doll said in his commentary.

"On a relative basis, US markets have benefited from the uncertainty, as investors have continued to view the United States as a higher-quality haven for their assets. We expect that this trend will continue, which makes US stocks more attractive than those of other developed markets."

Highlights of RBI's FY11 Annual Policy Statement

2010-04-20T22:36:00.000+05:30

* Hikes reverse repo, repo rate, CRR by 25bps each
* Reverse repo, repo rate hikes with immediate effect
* CRR hike effective from Apr 24
* CRR hike to impound 125 bln rupees from banks
* FY11 GDP growth projection at 8.0% with upside bias
* March end inflation projection at 5.5%
* FY11 banks' credit growth projection at 20.0%
* FY11 banks' deposit growth projection at 18.0%
* FY11 money supply growth projection at 17.0%
.
STANCE
* Hike in policy rates, CRR to help contain inflation
* Hike in policy rates, CRR to anchor inflationary expectations
* Measures to sustain recovery process
* Govt borrow needs, private credit demand will be met
* Hikes to align policy tools with evolving state of econ
* To closely monitor macro events, prices; take warranted steps
* Econ firmly on recovery path, industrial growth broad based
* India economy resilient, recovery consolidating
* FY11 econ growth to be higher, more broad-based vs FY10
* Lower policy rates can complicate inflation outlook
* Lower policy rates also impair inflationary expectations
* Despite 25bps hike in rates, real policy rates still negative
* Need to normalise policy rates in calibrated manner
* Inflationary pressures "accentuated" in recent period
* Inflation getting increasingly generalised
* Capacity constraints to re-emerge as econ growth rises
* Must ensure demand-side inflation does not become entrenched
* FY11 fresh govt bond issuances 36.3% higher vs FY10
* FY11 fresh govt bond issuances "a dilemma"
* Policy considerations demands liquidity be curbed
* Govt borrow needs supportive liquidity conditions
* Need to absorb liquidity without hurting govt borrow plan
* To respond swiftly, effectively to inflationary expectation
* To actively manage liquidity, ensure private credit demand is met
More

NIA:IMF SDRs are inflationary, buy silver-gold now

2010-04-19T22:52:00.000+05:30

The International Monetary Fund (IMF) has issued new Special Drawing Rights worth approximately $300 bn which shows that inflation is a major problem the worldover, according to National Inflation Association (NIA). Perhaps, thisis the right time to buy gold and silver. NIA said that SDR's may not become the new world reserve currency. In a set of 10 questions and answers on precious metals, inflation and crude oil, it addresses key issues of interest to US and global investors.

1) How much over spot is a good price for silver and gold?
A good price for a 1 oz silver coin like an American Eagle or Canadian Maple Leaf is 12% over spot, and a good price for a 1 oz silver bar is 6% over spot. For gold, a good price for a 1 oz gold coin like an American Eagle or Canadian Maple Leaf is 4% over spot, and a good price for a 1 oz gold bar is 2% over spot. The larger premium for silver compared to gold indicates a shortage in the physical silver market.

2) Now that GATA has blown the doors off the LBMA ponzi scheme, and we know there is only 1 oz of silver for every 100 oz represented on paper, why hasn't there been a panic to dump paper and go into physical? What will it take to trigger a short squeeze?

We don't believe there is only 1 oz of physical silver for every 100 oz represented on paper. Most likely, there is 1 to 3 times more paper silver than physical silver. This is still a major problem that will ultimately result in a major silver shortage and short squeeze, once a large number of COMEX holders begin to demand physical delivery of silver. This is a topic that we will be covering extensively in our new documentary coming out next month.

3) If the silver market is controlled by JP Morgan and others, how does the little guy stand a chance of making money?
The manipulation by JP Morgan through naked short selling is providing an opportunity for normal everyday investors to purchase silver at dirt-cheap prices. Without JP Morgan's naked short selling, it's possible silver would already be well above $30 per ounce right now.

Remember, JP Morgan is not manipulating silver up, they are manipulating it down and the manipulation can't last forever. When investors around the globe call for physical delivery of their silver, there will be a shortage of physical silver and JP Morgan will be forced to cover their naked short position, causing silver prices to explode to the upside.

NIA believes silver will eventually see the biggest short squeeze in the history of all commodities.

4) What is the best way to respond to the overused and baseless argument that we needed the stimulus package or else the U.S. economy would've crashed and we would've had another Great Depression?

The stimulus package didn't stimulate the economy but it actually stifled it because we needed to go deeper into debt and borrow the money that was used on projects that added no production to our economy. The jobs that were created were temporary but we still owe the debt. We will need to print the money to pay the debt back, which will ultimately lead to hyperinflation.

Our country does not have access to unlimited financial resources. The money that we borrowed for the stimulus package took away from the money that could've been borrowed by a small business, which could've invested the money into building a factory that would've produced goods and generated real wealth for decades to come.

Our economy needed to enter a recession in order to clean out the toxic assets and imbalances. Today, all of the toxic assets still exist on the balance sheet of the Federal Reserve and the economic imbalances that caused the last crisis have grown larger than ever before.

Instead of going through a steep recession, we will now be forced to eventually endure a hyperinflationary Great Depression. Remember, when there is a boom created by cheap credit, there must eventually be a bust. There is no way around it. All the government has done is push the real collapse down the road while making the eventual outcome a lot more devastating.

5) Why do you not like investing into Real Estate? Isn't it smart to buy Real Estate that is cash-flow positive and then use that cash-flow to purchase precious metals?

Real Estate that is cash-flow positive today, might not be so in the future. In our opinion, it will be impossible for landlords to increase their rents at the same rate as inflation. If you are a landlord, your real cash-flow will diminish over time.

During periods of high inflation, preserving ones purchasing power becomes a lot more important than generating cash-flow. We believe Real Estate will continue to decrease in real value because Real Estate is not very liquid and prices are still at artificially propped up levels. Those who own Real Estate will do poorly compared to those who own precious metals.

6) Do you believe the discovery of many large oil shale deposits in the U.S. will drive down oil prices?

There are several major shale deposits in the U.S. that contain large amounts of oil and natural gas. The cost of extracting oil from these formations is very high and we doubt it will have much of a damper on oil prices. Although it is cheaper and easier to extract natural gas from these formations, we believe the existence of these shale deposits is already factored into our current low natural gas prices. We expect to see many vehicles convert to run off of natural gas in the future, which could lessen the demand for oil, but it will take many years for these conversions to take place. We believe $100+ oil is inevitable due to increasing demand from China and India, and the Federal Reserve's monetary inflation.

7) Do you believe Special Drawing Rights (SDRs) being issued by the IMF will accelerate the U.S. into hyperinflation? Are SDRs being setup to become the new world reserve currency?

From 1970 to 1981 the IMF issued $30 billion worth of SDRs, and gold and silver prices soared to record real highs. The IMF recently issued approximately $300 billion worth of new SDRs. Certainly, this shows that inflation is a major problem around the world and now is the time to own gold and silver.

We don't believe SDRs are being setup to become a new world reserve currency. It would be much more beneficial to China for them to allow their own currency to become the reserve currency.

8) I am considering a career in the military. With the coming collapse, will the military offer me and my family any type of security or will the hyperinflation affect the military as well?

We don't think the U.S. government will be able to afford the military it has today for much longer. Our military needs to be scaled back immediately if we want to prevent hyperinflation. During hyperinflation, the army will most likely be used mainly to protect government officials. Those who are left in the military will demand to be paid in gold, until our gold reserves are completely depleted.

9) I work at Disney Orlando as a server. I make about $300 a day on average. My seniority is rather high. What will happen to my job when the economy collapses?

We can't picture Disney World in Orlando ever closing its doors and going out of business. Certainly, your wages will decline in purchasing power and workers will demand higher nominal wages. Disney will have to increase admission fees and if visitors can't afford them, Disney will layoff employees. Hopefully your level of seniority will ensure your job safety.

The good thing about Disney World is many Asian visitors and foreign tourists come each year. We might see the percentage of foreign visitors increase in the years to come and make up a larger percentage of Disney World's theme park revenues.

10) If the government imposes a value added tax, how will that affect inflation?

We believe Americans are already taxed to the hilt and any additional taxes will have the effect of reducing tax revenues. We need to move the discussion in America away from taxes and towards inflation. It is impossible to fund our current level of government spending and pay back our national debt through taxation. It will all be paid through massive monetary inflation.

India cuts US debt holdings by over $1 bn in Feb

2010-04-16T23:30:00.000+05:30

India slashed its holdings of American debt by a little over USD 1 billion in February while China, which is locked in a currency row with the US, trimmed the holdings by USD 11.5 billion during the same period.

According to the US Treasury Department, India has slashed its holdings to USD 31.6 billion in February, while it was at USD 32.7 billion in January.

China, which is also the largest holder of US Treasury bonds, has cut its holdings to USD 877.5 billion in February, one of the lowest levels in nearly nine months.

In January, China's holdings stood at USD 889 billion. Both the US and China are locked in a row over the issue of revaluation of Chinese currency yuan. In recent months, American authorities have been stepping up pressure on the latter to revalue yuan.

Going by official statistics, China has been trimming its holdings continuously since October last year, when the same was at USD 938.3 billion.

Meanwhile, India's holdings have come down by more than USD 10 billion since June last year. At that time, India held Treasury bonds worth USD 42.2 billion.

As per the Treasury data, Japan held bonds worth USD 768.5 billion, making it the second largest holder of American debt after China.

Among the BRIC (Brazil, Russia, India and China) nations, the second largest holder of American debt is Brazil, followed by Russia and India.

As in February, Brazil held Treasury bonds to the tune of USD 170.8 billion, while Russia held American debt worth USD 120.2 billion.

The US economy grew 5.6 per cent in the last three months of 2009, shrugging off the adverse impact of the financial meltdown.

Sugar production: This season, it is under-estimation

2010-04-05T22:15:00.000+05:30

If 2008-09 was a year of the Centre and the industry both overestimating the country's sugar output, the 2009-10 season is turning out to be just the other way round.

At the start of the 2008-09 sugar season (October-September), the Centre reckoned production at 220 lakh tonnes (lt), assuming Uttar Pradesh (UP) to contribute 70 lt and Maharashtra 61 lt. As the season progressed, these were pared, first to 205 lt, 62 lt and 57 lt and then to 188 lt, 59 lt and 51 lt, respectively. Even right up to August, the Centre maintained production to be in the 150-155 lt range. However, when the season ended, the final all-India number came to 145.38 lt, while being 40.64 lt for UP and 45.78 lt for Maharashtra. And predictably enough, the Union Food and Agriculture Minister, Mr Sharad Pawar, laid the blame for this divergence of nearly 75 lt between initial and final estimates on the industry.

At the Indian Sugar Mills Association's annual meeting on December 22, Mr Pawar even threatened to penalise factories for “late and incorrect reporting” of their production figures to the Sugar Directorate. This time though, it is quite the opposite. On November 6, the Food Ministry convened a meeting of State Cane Commissioners and based on their inputs, production for the 2009-10 season was pegged at 146.14 lt. This included 47 lt from Maharashtra and 39.60 lt from UP.

While the Centre stuck to this internal estimate (while publicly proclaiming a 160 lt figure), the industry put it a tad lower at 140-145 lt. By January, the consensus within the trade was a production of below 140 lt, with some even venturing a sub-130 lt number. All that was enough for sugar prices to hit the stratosphere, as ex-factory realisations surged by about Rs 10/kg between Christmas and mid-January. But since then, prices are back to – actually lower than – where they were and, worse, seemingly headed further down. The trigger, again, is production, which is now seen to top 170 lt (according to Mr Pawar), with the National Federation of Cooperative Sugar Factories expecting it even higher at 180-185 lt. The way output estimates have been revised upwards – and may well be revised further – is better captured by looking at just Maharashtra and UP.

Maharashtra mills were originally anticipated to crush just 410 lt cane, which, on an average 11.5 per cent recovery, would have yielded slightly over 47 lt of sugar. But as on March 31, crushing for the ongoing season had touched 531.11 lt, with corresponding sugar production of 60.81 lt. The latest projection of total crushing and production for the season are 560 lt and 65 lt, respectively.

Likewise with UP which looks set to produce 50-52 lt, against the initial sub-40 lt estimate. In both States, it appears mills simply did not account for the possibility of higher cane yields due to farmers taking extra interest in their crop this time. “We failed to gauge the grower's enthusiasm for applying more fertilisers and other inputs in view of remunerative cane prices, just as we last time underestimated his anger and indifference on not being paid adequately and in time”, a UP miller admitted.

Gold ETFs: prudent investment or paper dream?

2010-04-05T22:00:00.001+05:30

Almost all market and bullion analysts in the recent years harped on a new investment option — the Gold Exchange-Traded Funds (ETFs). Till a decade ago, there were no easy options to invest in gold like the equities market. Realising this, innovative people brought out the gold ETFs to make gold investment easy for investors. The development of the gold ETF market in 2003 changed the way people invested in bullion.

Now, gold ETFs are an efficient way to invest in gold without dealing with the troubles of holding the physical metal.

Gold ETFs are traded just like shares of stock. You can buy and sell a gold ETF just as easily as shares of any company. And they trade on major stock exchanges including New York, London, and Sydney. However, some gold ETFs buy and hold the physical bullion, while others invest in futures contracts.

But when the gold ETFs came into the market, nobody anticipated a fraud will spoil the image of ETFs within 10 years of its existence. So, last week, when the Commodity Futures Trading Commission (CFTC) heard a case regarding manipulations in bullion market by gold cartels, the gold ETF scam hit the investors like a bolt from the blue.

Now, the gold ETFs’ image is at stake. Soon, investors are set to question the credibility of the gold ETFs. The reason is the facts emerged during the CFTC hearing.

The whistle-blower in this biggest gold fraud was Andrew Maguire, an experienced precious metal trader in London. In an riveting interview (which is available on the internet all over the world) with GATA director, Adrian Douglas, Maguire describes a new dynamic impacting gold. The fact is that, there is a huge short position in the market.

The CFTC hearing confirmed what GATA has been saying all along, that the gold market is being manipulated. And, how? The gold cartel has accumulated a huge short position and the huge short positions are ‘naked’, which means these positions are not hedged. There is 100-times more paper-gold outstanding than physical gold.

So, if you are buying ETFs, be sure that there is no gold guarantee for your piece of paper which offers you the ownership of some specific quantity of the yellow metal. In reality, it is just a piece of paper which you bought paying huge sums.

Recently, the World Gold Council reported that the world’s total gold ETF market grew 85% relative to 2008.

During the hearing Adrian Douglas of GATA said: I would just like to make a comment. We are talking about the futures market hedging the physical market. But if we look at the physical market, the LBMA, it trades 20 million ozs of gold per day on a net basis which is 22 billion dollars. That’s 5.4 Trillion dollars per year. That is half the size of the US economy. If you take the gross amount it is about one and a half times the US economy; that is not trading 100% backed metal; it’s trading on a fractional reserve basis. And you can tell that from the LBMA’s website because they trade in “unallocated” accounts. And if you look at their definition of an “unallocated account” they say that you are an “unsecured creditor”. Well, if it’s “unallocated” and you buy one hundred tonnes of gold even if you don’t have the serial numbers you should still have one hundred tonnes of gold, so how can you be an unsecured creditor? Well, that’s because its fractional reserve accounting, and you can’t trade that much gold, it doesn’t exist in the world. So the people who are hedging these positions on the LBMA, it’s essentially paper hedging paper.

Bart Chilton uses the expression “Stop the Ponzimonium” and this is a Ponzi Scheme. Because gold is a unique commodity and people have mentioned this, it is left in the vaults and it is not consumed. So this means that most people trust the bullion banks to hold their gold and they trade it on a ledger entry. So one of the issues we have got to address here is the size of the LBMA and the OTC markets because of the positions which are supposedly backing these positions which are hedges, but it is essentially paper backing paper.

So the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the real physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for real physical gold that can not be met from their own stocks.

Gold industry in India to cross $26 billion by 2012

2010-03-31T18:36:00.000+05:30

Gold is driving the gems and jewellery export orders from India. According to the Investment Commission of India, exports are likely to grow to US$ 25 billion by 2012. Following are some of the India government steps to boost gold trade in the country.

India Government Initiatives
The Indian government has provided an impetus to the booming gems and jewellery industry with favourable foreign trade policies:

• 100 per cent foreign direct investment (FDI) in gems and jewellery through the automatic route is allowed

• The government has lowered import duty on platinum and has exempted rough coloured precious gem stones from customs duty

• Rough, semi-precious stones are also exempt from import duty

• Duty-free import of consumables for metals other than gold and platinum up to 2 per cent of freight on board (f.o.b) value of exports

• Duty-free import entitlement for rejected jewellery up to 2 per cent of f.o.b value of exports

• Import of gold of 18 carat and above under the replenishment scheme

• Setting up of SEZs and gems and jewellery parks to promote investment in the sector

• In May 2007, the government abolished import duty on polished diamonds

• The government has raised the limit value of jewellery parcels for export through foreign post office from US$ 50,000 to US$ 75,000 and the time period for re-import of branded jewellery remaining unsold has been extended from 180 days to 365 days

• The export of coloured gemstones on a consignment basis has been allowed. The government has announced a series of measures to help gems and jewellery exports in the Foreign Trade Policy 2009-14.

• It has been decided to neutralise duty incidence on gold jewellery exports, to allow duty drawback on such exports

• In an endeavour to make India an international diamond trading hub, it has been planned to establish "Diamond Bourses"

• A new facility to allow import of cut and polished diamonds on a consignment basis for the purpose of grading/certification purposes, has been introduced

• To promote export of gems and jewellery products, the value limits of personal carriage have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions. The limit in case of personal carriage, as samples, for export promotion tours, has been increased from US$ 0.1 million to US$ 1 million.

The Road Ahead
• The Indian gems and jewellery sector is excepted to cross US$ 26 billion by 2012, driven by availability of a huge base of skilled labour and improving lifestyle, according to a new report called "Indian Gems and Jewellery Market - Future Prospects to 2011", by RNCOS, published in September 2009.

• According to the same report, the Indian gems and jewellery sector is expected to grow at a compound annual growth rate (CAGR) of around 14 per cent from 2009 to 2012.

• According to industry experts the consumption of diamond jewellery in India is expected to touch US$ 6.41 billion in 2012.

• State-run National Mining Development Corp (NMDC) plans to produce close to 100,000 carats of diamonds from the Panna diamond mines in Madhya Pradesh by 2010-11.

How global warming can lead to increased violence in human beings

2010-03-21T22:35:00.000+05:30

A new research has shown that as the earth's average temperature rises, so does human "heat" in the form of violent tendencies, which links global warming with increased violence in human beings.

Using US government data on average yearly temperatures and the number of violent crimes between 1950 and 2008, the researchers estimate that if the annual average temperature in the US increases by 4.4 degree Celsius, the yearly murder and assault rate will increase by 34 per 100,000 people - or 100,000 more per year in a population of 305 million.

While the global warming science has recently come under fire, the main premise behind the Iowa State researchers' research paper is irrefutable.

"It is very well researched and what I call the 'heat hypothesis'," Anderson said.

"When people get hot, they behave more aggressively. There's nothing new there and we're all finding the same thing. But of the three ways that global warming is going to increase aggression and violence, that's probably the one that's going to have the most direct impact - even on developed, wealthy countries, because they have warm regions too," he added.

The ISU researchers analyzed existing research - including an update on a study Anderson authored in 1997 - on the effects of rising temperature on aggression and risk factors for delinquency and criminal behavior.

In addition to the "heat hypothesis," they report that rising global temperatures also increases known risk factors for the development of aggression in violence-prone individuals, such as increasing poverty, growing up amid scarce resources, malnutrition and food insecurity.

They contended that one of the most catastrophic effects of climate change will be food availability, producing more violence-prone individuals in the process.

"While there is some link between temperature and aggression, really the effects (of climate change) are going to be more indirect if those temperature changes affect the amount of food we can produce, coupled with population growth," said Matt DeLisi, an associate professor of sociology and director of ISU's criminal justice program.

"Then where the real damage will be done is malnutrition, because that sets in motion these other developments (risk factors) that then lead to crime," he added.

The researchers cited ecomigration, civil unrest, genocide and war as the third way global warming is going to increase violence.

They report research finding that rapid climate change can lead to changes in the availability of food, water, shelter and other necessities of life.

Such shortages can also lead to civil war and unrest, migration to adjacent regions and conflict with people who already live in that region, and even to genocide and war. (ANI)

Why gold is a commodity and a currency

2010-03-13T12:40:00.000+05:30

1. Is gold trading as a commodity, a currency, or both?

2. I believe the answer is: Mainly as a currency, but the fact that aprox 70% of mined gold usually goes into jewellery cannot be ignored.

3. Another fact is that gold seasonals dictate a possible intermediate top in late December. This time it topped in early December.

4. The gold price has been “ruled” by the massive head and shoulders pattern on the weekly chart (Gold Weekly Chart), so the usual late sept/early oct hard sell off not occurring is most likely a function of the action of two factors: a. The hedge fund momentum buying, trying to milk the technical chart pattern. b. The action of Barrick acting in the comex open market buying futures contracts to cover off their hedge position.

5. Theme “numero uno” for me continues to be: Hold the amount of gold you can be comfortable with should price either decline to $700 or rise to $1400. If you bail on current holdings if gold moved towards $700 or started buying crazily as it rallied towards $1400, you likely are positioned very very badly, here and now. Your gold holdings become a crapshoot, rather than an ultra solid investment in the world’s lowest risk market.

6. If gold were to leap $50 in the next second, you should have an overall feeling of comfort regarding your core positioning, and the same should be true should it receive a $50 spanking. How you feel has a lot to do with how you act. Really work hard at getting your holdings into your “comfort zone”. You can then “let that gold flying fish” get away if price spurts suddenly, and if it tanks suddenly you don’t wonder about hitting the sell button. It takes more work and patience than many think to get to that “sweet spot” but it’s a CRITICAL task if you want to do not just well in the market, but have a balanced life.

7. Sammy the bull notes that many major mkts often make significant lows in the mid march timeframe. That’s only a week away from today’s date.

8. I would add that gold as I write this has dropped $30 from the recent highs at $1145, to $1115 this morning, the fact is that $30 of weakness must be bought.

9. How much to buy? If you look at what I term the Liquidity Flows reports, the COT reports, you will see that the banksters typically add in the range of 5000 contracts to an existing 150,000 contracts position. That equates to a 3% addition to their position. Sometimes, they add more into $30 of price weakness, sometimes less, but it isn’t a double of their position, and it isn’t none. They are responding to price calmly, rationally, and modestly.

10. If you look at how most investors operate in the market, they might buy a position in a stock at price A, then do a 2nd buy at lower price B, then maybe a 3rd but more uncomfortable buy at a lower price C. Now they are players in the market at 3 price points. Unless you are a professional trader, I’ll bet you spend 99% of your time at prices below 2 of your 3 price entry points, and most likely below all 3. Most investors don’t even use 3 buy points, they use just one!

11. The head and shoulders pattern on the gold weekly chart has been shown a zillion times in the gold community. The problem has been when it’s time to take action, few have.

12. The breakout upside was viewed as potentially false. That cost them $200 an ounce. Then came the “demands” for a pullback exactly to the neckline. What’s the difference between buying 1050 and 1020, or 980 for that matter? I don’t see any major difference.

13. Sadly, at 1045 the banksters went to work and gold investors put on a classic lemmings show, with their “the banksters say gold is a bubble, so it is, sell everything now!” clown act. And the banksters went on the buy.

14. Gold soared a hundred dollars an ounce from 1045. We’ve retraced about a third of that as of this morning. Once again, gold investors are losing their focus, losing sight of what is happening on the weekly gold chart, the chart that continues to literally rule gold’s price here and now.

15. Price has corrected in a clear parallel down channel and last week closed upside. If you look closely at the red supply line I’ve drawn in, you can see price could correct to anywhere around the 1100-1115 area and create a classic pullback from that breakout.

16. Aggressive options traders should consider using weakness over the next week to take action on gold with longside bets.

17. Seasonally, the upmove that occurs classically from the mid march area (but don’t bet big money that price must bottom in mid march, this is the market and anything and everything is possible) is followed by a significant but choppy upmove.

18. Price can then decline to a lower low or least a significant low.19. Again, given the fact that gold is being ruled technically by the head and shoulders weekly chart bull continuation pattern, price declines are likely to be reasonably shallow.

20. The technical indicators on both the gold bullion weekly chart and the gold stocks GDX weekly chart are showing the market attempting to make a bottom. The daily charts show a short term top. Here’s a look at the GDX. GDX Weekly

21. Notice in particular the short term 4,8,9 time series of MACD has given a buy signal. Usually, that is followed by the other series, including the 12,26, 9 flagship.

22. Looking at the daily chart GDX Daily Chart you can see the exact opposite picture in the technicals, with sell signals being generated on the lead MACD series.

23. What if price doesn’t stop after a shallow sell off, but instead blows back down into the parallel channel and starts taking out lows? After all, this is the gold market, and the charts, in the final analysis, are just lines in the sand drawn at whim by the banksters dangling the funds around on puppet strings to buy and sell to create the charts with their actions. Well, first off, we’re already more than blessed with how this massive head and shoulders has continued to play out in a picture-perfect action of price.

24. So if price were to do something “anti-pattern” that shouldn’t be taken out of context, so long as price has not violated the right shoulder low, which is at $860. Secondly, even if price did violate 860, I’m a gold buyer of that weakness. There is nothing I see in the current sell-off to indicate anything other than the usual over-leveraged fundsters on the bail at the hands of the banksters who I’ll give you 99.999% odds are on the buy today with their largest buys right into today’s lows. The question is, what are you doing in the gold market into today’s lows?

Courtesy: www.gracelandupdates.com

Bio-fuels: Road not taken!

2010-03-13T12:30:00.000+05:30

Even as the ministry of new and renewable energy (MNRE) has set its eyes to develop coordinated R&D projects for second generation bio-fuels, the ground reality of the nascent industry of bio-fuel suggests that more of the encouragement for private investment is required in order to meet the desired goals of creating alternative energy sources.

In a recent statement, the union minister for new and renewable energy, Dr. Farooq Abdullah had mentioned that the government has initiated steps to expedite promotion and development of bio-fuels such as bio-ethanol and bio-diesel.

The government is said to be considering a regulation which would make it mandatory for all oil companies to sell diesel with 20% blend of bio-diesel for retail market by the year 2017. But looking at the pace of development on the R&D and investment front, only a marginal part of the fixed percentage seems to be achievable. The blame goes to sluggish approach of the government to attract required investments for projects.

“Our diesel demand is growing rapidly and considering this exponential growth in demand over the years, there will be a need of about 16 million metric tonnes of bio-diesel in 2017 to meet the prescribed regulation of 20% blending with normal diesel. But looking at the current scenario of investments happening in the industry, it would be very difficult to meet the set targets,” said CS Jadhav, Director, Marketing Nandan Bio-Matrix Ltd – a company that is currently operating into bio-diesel manufacturing from Jatropha cultivation. “Looking at the current pace of capacity generation, it seems that we would hardly be able to meet the blending requirements of even 3.5%,” told Jadhav in an interaction with Commodity Online.

Nandan Bio-Matrix is one of its kind cases in India, who has a vertically integrated value chain. The company operates through seed to oil integration. The company has tied-up with the Bharat Petroleum Corporation Ltd (BPCL) for bio-diesel refining and marketing in Uttar Pradesh. The project is believed to start yielding output in next 1-2 years.

The company has joined hands with Gujarat-based group to set up a joint venture entity, Vitale Nandan, which operates in Rajasthan and Orissa besides its home state, Gujarat. “Gujarat has been on the forefront for giving land for jatropha cultivation. We are planning to set up plantation on about 20,000 hectares of land. But initially we will start off with about 4,000- 5,000 hectares of land,” said Rituraj Pathak, director of the company. The company has already procured the land and will soon start commercial cultivation on it.

“We have successfully completed our field trials, which was done in association with Dantiwada Agriculture University in Gujarat. Now we are looking to expand our plantation in states like Rajasthan and Orissa. We are expecting bio-diesel production of about 2,000-5,000 gallons in next 3-5 years, with our revenues rising ten folds during this time.” Pathak mentioned.

Industry experts have expressed their apprehensions about the success of government initiatives to address the need of the growing industry. On one hand, it has set target of 2017 and on the other presently, there are only a few organized players to cater to the vast market in India.

The Minister’s statement to develop coordinated R&D projects on second generation bio-fuels such as production of ethanol from agricultural wastes / residues and bio-diesel from algae, barely mentions the directions for investors. He said in the Lok Sabha, “The National Policy on Bio-fuels is aimed at accelerated promotion and development of bio-fuels such as bio-ethanol and bio-diesel.”

The oil marketing companies (OMCs) have been directed to sell five per cent ethanol blended petrol in the entire country except North-Eastern States, Jammu & Kasmir, Andaman & Nicobar Islands and Lakshdweep. However, Bio-diesel is currently not being marketed commercially for blending with diesel as the bio-diesel industry is still at nascent stage of development. Hence, the government is emphasizing more on extensive R&D through different Scientific Agencies on feedstock development, conversion processes and production of ethanol mainly from sugarcane molasses and bio-diesel from Jatropha.

Experts are of the opinion that right mix of policy backed by incentives, will prove a booster for the industry. Many private equity firms are waiting to offload funds for the future blue-chip ventures. Tatas and Reliance have already expressed their readiness to park their funds in this promising sector. Australian renewable energy major, Mission Biofuels Ltd is also considering venturing into this field.

Courtesy :
Vora is a Special Correspondent, Commodity Online News Service

Central Banks bet on gold reserves

2010-01-22T22:51:00.001+05:30

In 2009, almost all central banks showed an increased love for gold. In the recent past, Russia’s central bank addded 800,000 ounces of gold to its reserves last month, increasing its holdings of the metal to $22.4 billion.

The bank’s gold reserves climbed to 20.5 million ounces from 19.7 million the previous month. And, India’s central bank also purchased gold in 2009 to increase its foreign reserves.

With the Reserve Bank of India (RBI) purchasing 200 tonne gold in two phases from the International Monetary Fund (IMF) in November 2009, the central bank’s gold holdings have increased from 357.75 to 557.75 tonne.

RBI held about 357.75 tonne, forming about 3.7% of the total foreign exchange reserves in value terms as at the end of September 2009. Out of this, 65.49 tonne is being held abroad since 1991 in deposits or safe custody with the Bank of England and the Bank for International Settlements.

Currently, RBI holds gold reserves worth $18.3 billion which is 6.33% of the country’s total forex reserve. Gold reserves held by India stood at $10.32 billion as on September 2009. Interestingly, India’s gold reserves have been rising steadily from $9.2 billion in May 2008 and touched $9.6 billion in May 2009, after falling to $8.57 billion in September 2008.

The country’s total foreign exchange reserves stood at $284.3 billion.

Talking about investment pattern for foreign currency assets which were worth $264.4 billion at the end of September 2009, RBI said $148 billion was invested in securities, $111.3 billion was deposited with other central banks, BIS and the IMF and $5.1 billion was parked in the form of deposits with foreign commercial banks placed with the external asset managers.

A small portion of the reserves has been assigned to the external asset managers (EAMs), with the main objective of gaining access to and deriving benefits from their expertise and market research.

The rate of earnings on foreign currency assets and gold, after accounting for depreciation, decreased from 4.82% in July 2007-June 2008 to 4.16% in July 2008-June 2009.

Gloomy days are history for India's auto sector

2010-01-11T22:22:00.001+05:30

Indian automobile sector ended up the year 2009 with high optimism as the industry sales showed a robust growth during the last month of the calendar year 2009.

According to a recent announcement made by the Society of Indian Automobile Manufacturers (SIAM) the automobile sales in India for the month of December 2009 stood at 1,000,500 units, showing an increase of 67.5% against the low base of 597,622 units in December 2008.

The growth is believed to be the highest so far in 2009–10, followed by the growth of 46% recorded in November 2009.

“A combination of factors like the three fiscal stimulus packages, low interest rates on vehicle financing made possible by PSU banks, cash infusion from the sixth pay commission and new models from manufacturers have helped December sales to rise,” says Pawan Goenka, President of the Society of Indian Automobile Manufacturers and President of Mahindra & Mahindra, at the ongoing Auto Expo 2010.

The rise in automobile sales would create repercussions on the metals industry, as the industry had faced one of the worst phases in the late 2008 and early 2009. Credits drying up and order deferments had put the metal companies in a fix. However, the times changed with government fiscal stimulus packages taking off well and industry once again started pounding.

On the stock exchanges, auto stocks posted heavy returns. On the Bombay Stock Exchange (BSE), the sectoral index, BSE Auto index gained significantly during the calendar year 2009. Since the start of the year, BSE Auto index surged from 2448.40 points to 7435.83 points through the year.

Leaders in auto sector, Tata Motors Ltd (BOM: 500570) gained 409.38% during the year 2009 on the BSE, Bajaj Auto Ltd (BOM: 532977) yielded 369.41% returns from 1st January 2009 to 31st December 2009. Mahindra & Mahindra Ltd (BOM: 500520) and Maruti Suzuki India Ltd (BOM: 532500) posted returns worth 307.08% and 205.36% respectively during the said period.

The 68 per cent rise in December 2009 sales was made possible by the sustained growth in cars and utility vehicles (50 per cent), continued growth in medium & heavy commercial vehicles on a low base last year (248 per cent), and in two-wheeler sales (67 per cent) last month.

Sales of large commercial vehicles, termed medium and large trucks and buses, rose for the fifth consecutive month. The December rise was an impressive 248 per cent, in which the industry sold a record 24,037 units. This is the highest growth posted by the CV industry for this year. The fourth quarter of 2009 was a low base in sales of large Cvs, when it dipped between 50 and 70 per cent. Industry executives say the high growth will continue even in the first quarter of 2010, on the back of buying before the new emission norms get effective in April. Total sales of CVs, (including light CVs) was 48,614 units.

Sales of three-wheelers, on the back of good demand for passenger carriers, grew by 83.7 per cent, at 34,993 units. Two-wheeler sales for December, led by Hero Honda and a resurgent Bajaj Auto, rose by 67 per cent, enabling manufacturers to sell 767,796 units.

Sales of passenger vehicles in December grew by 50 per cent, with the industry selling 149,097 units. November sales growth was the highest, at 67 per cent.

Global tea prices likely to ease in 2010: FAO

2010-01-09T23:05:00.001+05:30

The global tea prices are expected to dip in 2010 from a record high in the previous year as the weather patterns are observed normal in the major tea producing countries of Asia and Africa, said UN’s Food and Agriculture Organization.

The drought driven by weak weather condition in India, Sri Lanka and Kenya, had impacted the production badly amid increased demand, which led to a spurt in tea prices in 2009.

However, the global consumption surged sharply between 2007 and 2009 by 3.4% against the production. The concern is that tea producers could over-react to the current high prices by planting more crops, threatening an over supply in the market, FAO said.

The fact that demand for tea remained robust, despite the global recession, supports the assertion that tea consumption is “habit forming” and is relatively price inelastic for most blends except higher priced quality teas.

In addition, the share of household income spent on tea purchases is relatively small. Supply response to high tea prices has been delayed as it requires investment decisions that have long-term implications: it takes at least three years before a tea bush can be harvested.

Higher tea prices have not affected the consumer in developed countries because of intense competition in the beverages market.

BSE Sensex turns 25: The climb from 549 to 17467

2010-01-08T23:25:00.000+05:30

The Bombay Stock Exchange (BSE) Sensex, the barometer of India’s stock market fortunes, has entered its silver jubilee year. It was launched on January 2, 1986 with 30 most actively traded stocks of that period, with 1979 as the base year. Today, the 30 stocks on the BSE Sensex, account for around 1/5th of the market capitalization of the Bombay Stock Exchange

There are more than 4,700 companies listed on the BSE, making it the biggest stock exchange in the world on the basis of number of listed companies. But not all stocks are actively traded. Even fewer are significant pointers of the trends in the market and the economy.

At the launch of the Sensex, the Bombay Stock Exchange had said that "the absence of an index number of equity prices to reflect the general trend of the market was felt for a long time by investors and also by newspapers who do not compile their own index numbers”.

What is Sensex?
The Sensex is a value-weighted index and is calculated based on a free-float capitalization method. This is a variation from the earlier market capitalization method, as instead of using a company’s all outstanding shares, only the shares that are readily available for trading are used. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and institutional investors. This method was introduced w.e.f September 1, 2003, to serve

The calculation of SENSEX involves dividing the free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips etc.

From its early days in 1986, the Sensex has traveled a long way and has increased by nearly 35 times to the present. On the first day of trading on April 1, 1986, the Sensex had closed at 549.43. It opened its silver jubilee year trading at 17,467.

Composition of the Sensex
The composition of the index too has undergone change many times as only 11 of the original 30 companies continue to be part of the Sensex.

In 1986, Sensex comprised – ACC, Bombay Dyeing, Ballarpur Industries, Ceat Tyres, Century Spinning, Food Specialities (now Nestle), Great Eastern Shipping, GSFC, Glaxo, Gwalior Rayon (now Grasim), Hindustan Aluminium (now Hindalco), Hindustan Lever,(now Hindustan Unilever) Hindustan Motors, Indian Hotels, Indian Rayon, ITC, Kirloskar Cummins, Larsen & Toubro, Mahindra & Mahindra, Mukand, Pieco Electronics (now Philips), Premier Automobile, Reliance Industries, Siemens, TELCO (now Tata Motors), Tata Power, Tata Steel, Voltas, Zenith.
The present composition comprises ACC, BHEL, Bharti-Airtel, DLF, Grasim, HDFC, HDFC Bank, Hero-Honda, Hindalco, Hindustan Unilever, ICICI Bank, Infosys, ITC, Jaiprakahs Associates, Larsen & Toubro, Mahindra & Mahindra, Maruti Udyog, NTPC, ONGC, Reliance Communications, Reliance Industries, Reliance Infrastructure, State Bank of India, Sterlite Industries, Sun Pharma, TCS, Tata Motors, Tata Power, Tata Steel, Wipro.

The changed composition in itself narrates the new dimension acquired by the Indian corporate sector. India’s pre-eminence in the IT world is highlighted by the presence of its big three IT-ITES companies – TCS, Infosys and Wipro. There are five Public Sector entrants, unlocking the hidden opportunities thanks to the policy of disinvestment. While presence of three Reliance companies reflect on corporate splits, the inclusion of Bharti-Airtel, DLF, Jaiprakash Associates and Sterlite signify the arrival of new corporate giants. Making way for the new entrants are the bigwigs of the yester years – viz : Bombay Dyeing, Century, Hindustan Motors, Premier Automobiles , Great Eastern Shipping etc. A cursory look at the Sensex companies of the past and the present clearly defines the sun-rise and sun-set sectors of the Indian economy. The new composition also indicates the decline of over-bearing presence of Mumbai headquartered companies, which accounted for over 75 per cent in 1986.

SENSEX Over the Years
It took more than two years for the Sensex to cross the four digit mark. On July 25, 1990 the Sensex for the first time closed at 1001 points. It began to pick up momentum, with a slew of economic liberalization measures announced in 1991 by Dr.Manmohan Singh, the then Finance Minister of India. A market friendly budget of 1992-93 and expectations from a liberal import-export policy helped Sensex surge past 4,000 mark by March 1992, before the Harshad Mehta scam hit the market. Y2K coincided with the information technology boom, and the Sensex crossed 6000 in the year 2000.

Around 2005, Foreign Institutional Investors became active on the stock market and the Sensex crossed the 8,000 mark on September 8, 2005. February 7, 2006 was a golden letter day for the Bombay Sensex, as it crossed the 10,000 mark and closed marginally above. Little more than a year later, Sensex doubled again and breached the 20,000 mark on October 29, 2007. It touched 21,078 on January 8, 2008. Then the signs of global recession began to surface and the US sub-prime crisis hit the market hard, when several Foreign Institutional Investors began off-loading their holdings. It has now begun to stage a comeback.

Importance of Indices
It is often stated that the stock market indices play an important role in gauging the economic health and progress of a country. It all began with the construction of Dow Jones Transportation Average in 1884. Today, across the world we have several stock market indices. Notable among them being – the S & P Global, Dow Jones, FTSE, Hang Seng and Nikkei. Despite their overwhelming popularity with the investors, they have also been targets of criticism on many counts. There are plenty of incidences of rigging, corporate corruption, artificially over-valued stocks, conflict of interest of research firms, which cause volatility in stock markets and dent the images of indices as ‘true and fair’ reflectors of company’s health.

Yet, Stock Markets and their indices continue be important. Stock markets provide the much needed liquidity in the economy. The two stock market indices from India, the BSE Sensex and NIFTY have helped put the Indian Capital markets on the world map. The growing presence of Foreign Institutional Investors is integrating our markets with the global markets. Let the march continue. (Courtesy: Press Information Bureau)

The Best M&A Deals of the Decade

2010-01-02T13:27:00.001+05:30

The past decade has certainly been tumultuous for mergers and acquisitions. As we went into the new millennium, the U.S. economy hit the peak of the dot-com bubble and M&A activity reached $1.2 trillion. Of course, this is when Time-Warner (TWX) agreed to a whopping $182 billion merger with the now-independent-again AOL (AOL).

However, M&A activity quickly evaporated with the arrival of a recession, the exposure of major corporate scandals and the 9/11 attack. It wasn't until 2004 that dealmaking picked up: with cheap capital, a growing economy and the emergence of private equity, M&A peaked again at $1.2 trillion in 2007, with about $794 billion coming from private equity transactions.

Then, of course, the M&A market plunged again because of a credit crunch and severe recession. In fact, deal activity still remains fairly light, although some signs hint at a resurgence, such as seen recently by the Exxon-XTO megadeal.

So, in the midst of all this, what were the best deals of the decade? Like anything of this sort, these choices are highly subjective and will probably result in a good amount of disagreement. But here are my picks:

JPMorgan (JPM) buys Bear Stearns and Washington Mutual:
Jamie Dimon became the chief of JPMorgan in 2006, which was the result of a merger with Bank One. Unlike his peers, he understood that patience can be an M&A virtue. As a result, he focused on building his capital base and bolstering risk management.

When the financial system went into a tailspin, Dimon had the firepower to capitalize on the opportunities. For relatively little money, JPMorgan purchased Bear Stearns and Washington Mutual, deals that helped Dimon to expand his investment banking footprint as well as his deposit base (especially in big markets like California and Florida). And yes, he got attractive government support in these transactions.

News Corp. (NWS) buys MySpace:
Launched in 2003, MySpace quickly turned into a phenomenon. As social networking became the "next big thing," it also promised to be a strategic asset for the rapidly changing media business. Yet, MySpace had a problem: the website was stuck in a complicated structure from its parent company, Intermix. But News Corp.'s Rupert Murdoch saw this as an opportunity to pluck the asset at a bargain price of $580 million (in 2005). He was also able to outmaneuver the dealmakers at Viacom (VIA), who failed to read some key documents.

By 2006, MySpace snagged a $900 million advertising deal with Google (GOOG).

While it's true that MySpace has lost it luster to Facebook, the fact remains that the site is still a formidable force and has critical synergies with the traditional media assets of News Corp.

Equity Office Properties sells to the Blackstone Group (BX):
When it comes to buying cheap commercial real estate, Sam Zell is the master. Actually, his nickname is the "Grave Dancer." Then again, he has had lots of practice. Back in 1976, Zell founded Equity Office Properties and built an empire through savvy acquisitions. By 2006, the company had 600 office buildings across 16 states.

But Zell realized that the markets were getting frothy. So why not sell out at the top? That's what he did when he agreed to a $35 billion buyout deal from the Blackstone Group. Unfortunately, Zell's next deal was not so promising. He bought Tribune Co., which eventually went bust.

eBay (EBAY) buys PayPal:
eBay's M&A track record has been spotty, as seen with the problems with its acquisition of Skype and even its attempted purchase of Craigslist. Despite this, the company pulled off a stellar deal with the $1.5 billion purchase of PayPal.

eBay had already tried to build its own e-payments solution, but it was too late. PayPal was becoming the category leader and also had some powerful technologies, especially with fraud detection. Now, PayPal is a key to eBay's growth and is gaining lots of ground in foreign markets. In the latest quarterly report, the payments division recorded $688.1 million in revenues, which was a 15% increase over the prior year's results. There are about 78 million active users on the platform.

The Commodity -- Winners of 2009

2010-01-02T13:15:00.001+05:30

Commodities as an asset class competed well with others and some of them gave reasonably good returns to investors including gold which rose 26%

The holdings of world’s largest gold backed exchange traded fund, SPDR Gold Trust (GLD) reached a high of 1,134 metric tonnes in June 1 this year and presently hovers at 1,134 MT.

Copper has risen to 15 month high in New York on declining inventory and growing demand. The Chilean strike is contributing to supply tightness. Copper for March delivery added as much as 1.4 percent to $3.3395 a pound, the highest price since September 2008. Futures more than doubled this year as China imported record amounts of the metal in the first half. Copper for April delivery on the Shanghai Futures Exchange gained as much as 2.3 percent to 59,180 yuan ($8,665) a ton, the highest price for a most-active contract since Aug. 28, 2008. It closed at 58,530 yuan, Bloomberg reported

Most agricultural commodities including rubber, sugar, cocoa, turmeric and pepper witnessed a bullish sentiment on fall in production and rising demand. Tight supplies and low investment by West African producers drove cocoa futures prices on the ICE market in New York to a 30-year high of $3,510 per tonne on December 16.

Turmeric futures surged by 254.95 to reach 13971 in November 17 this year due to erratic rainfall in main sowing areas and production fell to 41 lakh bags. Guar surged 73% at NCDEX to Rs 2872 per quintal on delayed and below normal monsoon.

n India rubber prices in spot and futures market have already doubled in a year due to lower production globally and rising demand from automobile industry. The spot market prices have surged above Rs 140/kg for RSS 4 while last year the prices were close to Rs 60 levels. The crude oil rally has also enhanced the appeal of natural rubber over its petroleum-based substitute, synthetic rubber.

Rubber futures in Tokyo have almost doubled this year as China, the world’s largest consumer, led a recovery in demand under the government’s stimulus measures that boosted the nation’s car sales to a record.

Garlic prices in China rose 1500 percent since March this year while wholesale ginger prices rose 85% in China as a three-year drop in prices forced farmers to turn to more profitable crops resulting in supply shortage this year.

Ginger prices continue to soar on short supply, with the retail price moving up to Rs 100 a kg. International prices have also shot up to $1,800-$1,850 per tonne, according to news reports..

Soybean futures in India surged by 65% in April to Rs 2819 but fell 32% by September on higher global seeds production. Sugar prices have reached a 28/1/2 year high and is already up 165% this year on tight supplies in India and Brazil.

Production of agri-softs are concentrated in a small group of developing nations mostly in tropics where bad weather, political instability, credit shortages and inability of farmers to respond to higher prices often create supply shortages.

Why America banned gold ownership in 1993

2010-01-02T11:45:00.000+05:30

For 5,000 years man has sought gold. It has been said that as much as three-quarters of the earth’s land surface was first explored because of man’s insatiable desire for gold.

Since the dawn of time, one of the major uses for gold was as adornment. It made (and still makes) spectacular jewelry. But very quickly, gold began to assume its primary role – that is, as a reliable and predictable store of value. In other words, as money.

Man’s desire for gold has been surpassed only by his stupidity at trying to manipulate money. There are numerous historical examples of the terrible consequences of this folly. Some historians believe that it was not Attila the Hun who caused the fall of the Roman Empire. Rather, it was the debasement of the gold and silver coinage, through plating, clipping and counterfeiting.

The world then settled into a long period of economic stagnation which we now know as the Dark Ages. This was followed by the Renaissance and the Age of Enlightenment. However, there was nothing enlightened about one “advancement” during this period – the invention of paper money. This was a new twist on man’s age-old effort to manipulate the quantity of money. The results have been disastrous.

The French Revolution in the late 1790s has been linked to a failed debasement of the French franc. History is riddled with the bodies of paper currencies. The errors of the past are repeated again and again.

Sooner or later, almost all governments succumb to the temptation of currency debasement. Like drug addiction, once begun it is hard to stop. Paper currencies make this easy (and computer entries make it easier still). Most governments refuse to stop the flood of fiat currency, even when they know the result will be the debasement (and ultimately the collapse) of their monetary system.

And here comes that lust for gold again. The search for gold fueled the discovery and exploration of North, Central and South America. In the United States, “manifest destiny” did not just happen. It was fueled by the California gold rush in the mid-1800s and in Alaska later that century. The chase was on worldwide, with the world’s largest gold discovery taking place in South Africa in the late 1800s.

So we have this interesting and complicated series of events overlapping - a quest to find more gold and man’s attempt to manipulate money. Throughout the past two centuries, gold and paper money have competed for the primary monetary role.

When I started in the business in the late 1960s, the dollar was as “good as gold.” The U.S. had emerged from two world wars as the strongest economic power on earth. We had accumulated the largest gold stockpile in history. The result was a stable dollar that everyone in the world, it seemed, preferred to their own currency.

With the system working so well, government just couldn’t leave well enough alone.

In 1933, FDR banned gold ownership for U.S. citizens. Millions of gold coins were confiscated and melted down. The ban lasted for 42 years, with the right to own gold finally restored in 1975. It has taken many years for some Americans to recognize the essential role gold should play in a portfolio. But still, most Americans do not appreciate gold as an asset class.

I can remember the collapse of the London gold pool in 1968. A gold buyer at that time was generally an immigrant from Europe, many of whom remembered the German hyper-inflation of the 1920s. The Reich Mark had failed and another paper money experiment bit the dust. Gold prevailed. That was a classic example of gold working in a crisis.

But, we don’t have to look back that far to see how gold can be the ultimate money. Back in the 1970s, I was a CEO of Deak-Perera (Washington), Inc. in Washington, DC. They were the premier foreign currency exchange company at the time, with outlets in virtually every major gateway city and airport in the U.S.

When the flood of refugees from Vietnam began pouring into the United States, the State Department asked Deak-Perera to become the exclusive foreign exchange/precious metals dealer at the various refugee camps. We would eventually purchase literally tons of gold from refugees, many of whom arrived with all their worldly possessions jammed into a suitcase or small bag. Some people presented stacks of piasters, Vietnam’s former currency. We had to tell them that their paper money was absolutely worthless.

Others had been wise enough to put their trust in gold. Many refugees clutched small golden wafers, called taels, which were popular throughout Southeast Asia. When they presented their taels, we were able to exchange their gold for U.S. dollars on the spot. Their foresight gave them the wherewithal to begin a new life in the United States.

The lesson is clear: In a monetary crisis, gold is the very best insurance you can have. This is true whether it’s the gradual erosion of purchasing power, as we are seeing now with the U.S. dollar, or the sudden, catastrophic plunge of a currency due to economic, social or political unrest which has occurred many other times in many other countries.

Gold works. It has before, it will again. Make sure you heed this lesson of history.

Glen O. Kirsch is Executive Vice President of Asset Strategies International INC

Aluminium: Doom to boom in 2010

2010-01-02T10:56:00.000+05:30

Aluminium has been the worst performer among base metals in 2009 and investors will never forget the setback they suffered by putting their money in aluminium in the previous year. But, there is no guarantee that the scenario will remain the same in 2010.

But, like any other base metal, China holds the key to the aluminium prices. If Chinese demand soars the prices will climb up and India’s aluminium producers are set to cash in on that.

Long term prospect of aluminium is bright as China is still in the middle of completing urbanization and its metal intensive growth is likely to continue for many years to come.

About 65% of aluminium consumption is in the east and middle south China. The urbanization of North West and south west has great potential for aluminium demand in the coming years.

In the short term, overcapacity, plenty of inventories and reopening of smelters due to return to profitability will cap any upswing in aluminium prices.

However, the current average cost of the Chinese smelters is $2,000 and is rising further due to increase in bauxite and alumina and coal and power prices. These cost push factors provide a strong floor for aluminium prices.

LME aluminium is expected to trade between $2,000 to $2,400 in 2010.

Indian aluminium producers are best placed with captive bauxite, alumina, power and are insulated from across the board cost increases to a large extent.

In the pure aluminium space, the top company will be India’s Nalco. It is one of the cheapest aluminium producers and has volume upside of 30% in both aluminium and alumina due to brown field expansion.

Aluminum has been the worst performer among the base metals this year with returns close to 47% only.

Enam, a leading brokerage and research house has come out with its latest report on China’s aluminium sector and its outlook saying that aluminium demand in China is expected to grow by 15% in 2010 on the back of revival in construction and auto segments.

How the markets fared in 2009?

2009-12-26T09:00:00.001+05:30

2009 will go down in history as one of the best for Indian equity markets, after 1993 and 1999—this year, they have emerged among the top-four performing markets in the world.

It was the calm after the storm, and a much-needed one at that. After the carnage witnessed in 2008, 2009 saw the global equity markets calming down and the Indian markets made the most of this, becoming one of the top four performers in the world.

Foreign institutional investors played their part. They pumped in nearly USD 17 billion over the year. Of this, nearly USD 7 billion came from QIPs, USD 3.3 billion came from IPOs, and over USD 3 billion came from ADRs and GDRs.

Helping the India markets along were sectors like metals, automobiles, and technology.

Girish Paranjpe, ED and Joint CEO, Wipro, said, “We have demonstrated that we are a very resilient sector and we are able to manage demand fluctuations and manage margins very well. That should be a matter of great satisfaction for investors in this sector.”

The tech index rose 130%, and the auto index rose 200%, but both these performance were eclipsed by the metals index, which surged 230% over the year.

Jindal Steel & Power led the way, gaining nearly 380% followed by Sterlite, which rose 225%, SAIL which rose 205%, Hindalco, which rose 200%, and Tata Steel which gained 180%.

And 2010 should be a good year as well.

Naveen Jindal, Executive VC and MD, JSPL, said, “There is going to be huge demand for steel as per capita steel consumption is still quite low in India—its almost 14th of Chinese steel consumption. Steel prices are depressed as of now but I feel we are concentrating more on reducing our cost of production also but it is a temporary phase.”

The banking sector also bounced back smartly from 2008's drubbing. Most banking stocks gained around 100% each in 2009 but walking away with the honours are IndusInd Bank with a 270% rise, Central Bank, up 240%, and Yes Bank, with a 233% rise.

Yes Bank says this has been on the back of a strong business performance.

Rana Kapoor, Founder, MD and CEO, Yes Bank, said, “We have been deriving approximately 48-50% from non interest income sources which are fairly well diversified across treasury, across advisory, transactional banking and branch banking.”

However, not all sectors had a ball. Some heavyweights like HUL, Idea, and DLF posted just modest gains. The telecom sector took the worst beating, as tariff wars kept investors away.

Over the year, Reliance Communications fell 20%, and Bharti Airtel was down 10%.

Akhil Gupta, MD, Bharti Enterprises, said, “On telecom, surely the price wars have some pressure on the tariffs but what we mean is that they must be sustainable tariffs for everybody to grow in this business.”

CEOs are confident that 2010 will be a good year, after all, they have survived the upheavals in late-2008, and the uncertainty of 2009. But analysts are not so gung-ho. They say that while 2009 has given strong returns to the brave, 2010 may not see a sustained bull run, as markets consolidate.

Silver’s smart run to continue in 2010

2009-12-21T22:07:00.000+05:30

Till now, market analysts have been going ga-ga over the rise and rise of gold prices but silver has been shining better than gold in 2009 and this trend is set to continue in 2010 also.

Driven by demand from auto sector for silver-zinc batteries which are used in ‘smart automobiles’ and an array of portable electronic devices, the silver’s shining story will continue in the coming year also.

Silver ready (.999 fineness) prices are hovering around Rs 27,850 per kg in the Mumbai bullion market.

Demand for silver in the coming year is expected to rebound to normal levels in 2010 as the emergence of key new markets for silver would help to boost prices further.

Also, re-stocking of inventories for more of silver’s traditional uses will be a powerful demand driver in the near-term.

Silver prices are mainly driven by the fact that traditional industrial end-users of silver, such as the global electronics industry have in recent weeks begun to replenish severely depleted inventories.

During the financial crisis, silver inventories had run down sharply and it may take approximately six-months to fully rebuild the inventories to normal levels, Singh said.

An important factor to understand in the case of silver is that demand from the industrial sector tends to be quite inelastic. This means that buyers have few options and have to pay at prevailing prices.

Finally, India loses top gold buyer status

2009-12-21T21:57:00.000+05:30

Finally, it is almost certain that India will lose its numero uno status as world’s biggest gold consumer to China.

Since many years India has been ruling the world as the top consumer of the yellow metal but this year and increased surge in demand from China and a fall in gold jewellery sales in India due to high prices have caused India losing the top slot.

China’s rapidly growing economy and investment demand could see it add gold to the long list of commodities where it is the world’s largest buyer.

The story this year is mostly about falling demand in India — down by more than half in the first nine months of this year through September.

Gold’s record-breaking run, which has lifted prices 28 per cent this year in rupee terms, saw Indians cashing in on jewelry and gold bars, while the weakest monsoon in nearly 40 years hurt incomes in the rural sector that is the bedrock of consumer purchases.
In contrast, China’s demand was up 8 per cent in the same period. China could be buying gold as they are not sure what the value of their currency would be against the dollar. But gold is not intrinsic to them as it is to Indians.

Metals consulting firm GFMS projects that China’s gold demand will total 432 tonnes this year, and that India’s will total 422 tonnes.

A severe monsoon and record prices were behind the drop in Indian consumption this year, while loose liquidity in China has driven a buying spree across a range of resources.

India’s growth rate is catching up with that of China, and appears to be entering the early stages of the high-growth era that China saw from 1992 to 1993, giving consumers more purchasing power.

The extent of the fall in purchases could be building pent-up demand that might lead to a big correction.

Analysts in India said the drastic fall in demand must not be taken to mean India’s appetite for gold fell to the same extent.

A lot of consumers recycled old jewelry to buy new jewellery, the analysts said, while others sold gold bars to profit from high gold prices.

India’s total demand may have fallen by only 5 per cent to 10 per cent, when taking into account the recycled gold.

When Indians get used to new price levels, their traditional affection for gold might revive consumption, as there is a huge latent demand in India that could explode if prices make a significant correction.

In the long run, China might still overtake India. Economic and social indicators point to its greater affluence and spending capacity.

In the last decade, India’s gold imports remained capped under 800 tonnes despite a rising population and per capita income.

In rural markets, Indians are buying luxury goods such as automobiles and televisions, while the picture is different in rural China.

China is stepping up efforts to extend consumption in rural areas, including the newly wealthy people who are trying to own top brand gold for social status purposes.

Eight techniques to go by for ETF investments

2009-12-20T22:40:00.000+05:30

Nearly a year after the worst financial crisis emerged, which caused exchange traded funds (ETFs), stocks and the overall financial markets to crumble, many investors are rethinking old strategies and are eager to get back to portfolio construction.

According to Jonathan Burton for MarketWatch, when it comes to portfolio construction, the following lessons shall be learned (a few of our own ideas have been thrown in for good measure, too):

-Diversification isn’t dead. Burton states that true diversification comes from allocating assets to different classes, like stocks and bonds, and not allocating assets between just stocks.

-Asset allocation works and a mix of stocks, bonds, cash and alternative investments affects total return more than the individual investments you choose.

-Market-timing doesn’t work, while periodic rebalancing reduces risks and helps one prepare for the unexpected.
-Save as much as you can and don’t overextend yourself.

-Buy and hold no longer works the way it should – we suggest watching the trend lines.
-Educate yourself about what your portfolio holds, what is going on in the world and how this can affect the returns on your portfolio. This is becoming increasingly important as the economy becomes a global one.

-Have a stop-loss. Don’t ride something to the bottom hoping that it will come back.
-Have patience. We all make mistakes. Use those errors as opportunities to do better next time

A contrarian view on gold rally

2009-11-30T23:03:00.001+05:30

Few investments elicit as much emotion, irrationality, and frenzied buying, as does gold. Unlike investments in interest-bearing securities and common stocks, an investor invests in gold because he hopes that companies or governments will fail. Even oil, an asset prone to the volatility similar to that of gold, conforms to more supply-demand-like dynamics. Oil provides the fuel necessary for consumer-oriented societies. During prosperous times, demand—and the price—for oil will increase. During slack periods, demand—and the price—for oil will decline: under normal conditions, anyway. Gold's industrial demand, on the other hand, accounts for only a small percentage of its market value. A gigantic increase in jewelry buying would be required to rally gold prices, absent investment demand.

Still, gold pushers always insist that it's a good time to buy gold. Why? is the big question. I am in the business of buying and selling gold. As a professional coin dealer it comes with the territory. Thus, you would think I should be ecstatic when the rising price of gold makes the headlines every day. But I'm not. In fact, I am probably one of the most reluctant gold traders in the country—unless the gold is in the form of a rare coin struck at the Carson City Mint, that is. The reason for my reluctance to trade in gold bullion (Krugerrands, Maple Leafs, American Eagles, etc.) is I hate to see people buy things like it out of fear. And that's what so many people are doing these days.

Yet, gold's price rise this year has not come as a result of herds of physical buyers exhausting stockpiles of the yellow metal. It has been due to the weakness of the U. S. dollar and not gold's strength. In many ways, gold's landing in the limelight is reminiscent of the scenario we faced in late 1979 and early 1980. Jimmy Carter, a Democratic president, met with scornful disapproval, and the currency market constantly clobbered the dollar. Oh yeah, the U. S. faced military conflict in the Middle East, thanks to the Iran hostage crisis—what else is new?

Strangely though, inflation and interest rates were at opposite ends of the spectrum from where they are at in 2009. In comparing the two time periods—separated by 30 years—gold's day in the sun in 1979-1980 made more sense: inflation fears were justified.

In 2009, however, fear of inflation is just that: fear. For inflation has not ignited yet. With the Fed's printing presses working overtime, inflation might come roaring back in the future: but first we must see all the tricks the U. S. government has up its sleeve. In the meantime, arsonists such as Dr. Marc Faber, David Einhorn, John Paulson, Paul Tudor Jones, Peter Schiff, and Glenn Beck, have been pouring vats of gasoline on the tinder that surrounds the fragile, recovering world economies.

Einhorn and Paulson shrewdly made their fortunes by taking advantage of the economic turmoil brought on by financial institution's irresponsible investments in subprime mortgages. Now, they want to parlay their winnings by betting that inflation will rise again with a vengeance and deliver the knock-out blow to the United States. Their hedge funds, and others like them, have bought paper contracts that represent over 800 tonnes of gold. These new gold bugs have been very public about the positions they have taken. Their vocalness has fuelled the fire that has sent gold prices soaring.

If they are right, these hedge fund managers will add billions more dollars to their already bulging bank accounts. Gold's only purpose at the present seems to be as a medium to determine if these high-level investors will pad their portfolios, or if the U. S. government and the Fed can pull off a hail-Mary play to keep our country from slipping into the abyss.

Today, gold is the "hot tip" everyone is hearing about. Everywhere you turn, someone is encouraging you to get in on this "sure thing" When Obama fails to impress or someone in his administration—or at the Fed—says something that sounds stupid, the fear reignites, causing more people to jump on the gold bandwagon.

But if the past is any indication of the future, gold's overblown reputation for gauging the government's performance during tumultuous times will be exposed for the false panacea it is. Gold's glitter will not deliver us from evil. In the short-term, it might make men like Einhorn and Paulson wealthier, and it might give people who are disappointed with the United States something to rally around. But in the long run, gold will prove to be a disappointment.

It might not be wise for me to oppose the stand taken by such successful investors as David Einhorn and John Paulson, but I predict that gold will soon fall to its pre-October 2009 level of $950 to $1,000. By then, Einhorn and Paulson will have probably already cashed out and taken their profits. I won't feel sorry for them either way. But I will feel sorry for the Average Joes and Josephines out there who bought into this current wave of euphoria.

(Courtesy: ExpertClick.com)

Why Dubai is caught in a debt trap

2009-11-28T12:56:00.000+05:30

What is the essence of the Dubai request for debt payment delay (a technical default)?

1. Will an implied Dubai Federal Guarantee of the debt of state owned corporations be honored in Dubai and elsewhere?

2. How many more financial problems are there out there hidden in plain view in the West as well as the Middle East?

3. Will the Middle East see to the bailouts of its own problems or is there a stampede of camel trains into the desert, devoid of cell phones and Mercedes?

4. Will this event cause other developing market country debt to default in a domino effect?

In terms of gold this event is further proof that paper and promises are NOT the stuff money is made of anymore.

Those that will come out of the woodwork to call a top in the gold price have little experience in what a top looks like in gold. Let me assure you the action of today contained zero evidence of a top.

The USA has become a giant FDIC and will have to finance in strange ways (QE) to meet its obligation prior to June of 2011.

Other than transitory technical factors there is nothing whatsoever positive in a collapse anywhere for the US dollar. When the snow falls here on the east coast of the USA the dollar will come under more pressure and fall much further.

The major immediate financial problem, hidden in plain view, is that 2009 financial entity earnings are CASHLESS. They are more than 75% due to the permission of FASB (Financial Audit Standard Board) who sold their souls to the financial sector to again mark up toxic paper to values self determine by the financial institution. The profits of their trading is toxic paper mark up accounting.

The inviting conclusion is the over the top greed in plain view by financial institutions is their own knowledge of the cashless nature of their earning and the fact that the junk is marked up now as much as one can do without either starting a riot or doing time. Therefore the earning prosperity is behind them, nothing is fixed and that makes this year the last opportunity for a long time to cash in for themselves.

Dubai has reminded us that there has been NO cure to the systemic financial problems of the West and those like Dubai that not only tried to mimic the West, but overdo them in a garish manner.

You can be sure that the US Fed and the ECB are chasing the sheiks into the desert today like Lawrence of Arabia in an attempt to get them to pay up and support their own problem. That means more international QE, as the Fed is not in the mood to tank a $12 trillion dollar bailout operation over an $80 to $110 billion dollar failure of a stupid and garish real estate project in Dubai. This concept would contain the domino effect, putting it off until later in 2011.

Conclusion:

The dollar will not reverse out of the bear market it is in, nor will gold top here and now. In fact the bear market in the US dollar and the bull market in gold is not only alive and well but in terms of price, young.

Enjoy your weekend and stop looking at the markets!

India's vegetable oil imports surge 37% in 2008-09

2009-11-17T19:21:00.001+05:30

Import of vegetable oil during oil year 2008-09 (Nov.’08 to Oct.’09) jumped by 37% to 86.6 lakh tons from 63.1 lakh tons for the same period of last year. Import of Vegetable Oils during October 2009 is reported at 667,276 tons compared to 826,848 tons for Oct.’08 i.e. down by 19%, according to Solvent Extractors Association of India (SEAI).

The overall import of vegetable oil including vanaspati has increased by 23.5 lakh tons (37%) during the oil year over the previous year. The main reasons for sharp increased in imports of vegetable oil and its impacts are:

a) Increase in per capita consumption of edible oils with rise in Income.
b) High price elasticity – lower price has boosted the demand and consumption of low priced oils like palmolein.
c) Zero import duty on crude edible oil and very nominal duty on refined palmolein have favoured the import over domestic oils at the expenses of Indian oilseed producers and crushers.
d) Govt. schemes like mid-day meals, subsidized oil and unemployment scheme also boosted the demand.
e) Depreciation of dollor v/s. rupee by 5% has made import more cheaper.
f) Disparity in domestic seed crushing leading to poor capacity utilization and accumulation of stock.
g) The profit margin of oilseed processors have deteriorated severely in new season and many plants are operating at much lower capacity to minimize the losses.

Quarterly Review:
It is surprising that even during peak domestic crushing season (Nov – April) import has not reduced and average import per quarter is nearly 20.0 lakh tons, SEAI said.

Import of Edible Oil:-
The total import of edible oil during November 2008 to October 2009 is reported at 81.83 lakh tons compared to 56.08 lakh tons last year and 47.15 lakh tons in 2006-07.

The import of edible oils is up by 46% compared to previous year. Import of Crude Palm Oil has increased to 51.87 lakh tons from 40.44 lakh tons and RBD Palmolein jumped to 12.40 lakh tons from 7.31 lakh tons in previous year. Import of palm products including CPO and RBD Palmolein has increased to 65.35 lakh tons from 48.09 lakh tons last year i.e. up 36%. Soybean oil import has increased to 9.90 lakh tons from 7.59 lakh tons. Sunflower oil import jumped to 5.90 lakh tons from 27,000 tons . Rapeseed oil import reported at 46,000 tons after a gap of 5 years.

Import of Refined & Crude Oil Ratio:-
Import of refined oils (RBD Palmolein) has sharply increased from just 126,000 tons in 2006-07 to 12.4 lakh tons during 2008-09, thanks to lower duty coupled with reduction in international prices, pushed the import of refined oils. Refined oil represents about 15% of the total edible oil import which was just 3% in 2006-07.

Import of Palm & Soft Oil Ratio:-
In view of nil import duty on CPO and 7.5% on RBD Palmolein (effective duty is only 4 to 5%), palm oil products import during November 2008 to October 2009 has further increased to 65.35 lakh tons compared to 48.09 lakh tons last year. The import of soft oils also increased to 16.48 lakh tons from 7.99 lakh tons in previous year.

Import of Non-edible Oils:
Import of Non-edible oils during November 2008 to October 2009 is reported at 459,599 tons compared to 647,685 tons during the same period last year i.e. down by 29%, due to higher import & domestic refining of CPO, leading to better availability of P.F.A.D. & C.P.S.

India’s gold obsession wows world

2009-11-17T19:02:00.000+05:30

India’s golden move as far as International Monetary Fund’s (IMF) gold buying has won the country accolades from across the globe. Several countries and analysts have praised the move and opined that the Manmohan Singh-led government has displayed its strength before the world that India is a country to reckon with by bagging the 200 tonnes of IMF gold earlier this month.

The move by India caused a stir in the bullion market and the gold prices soared to $1130 per ounce in the markets on Monday.

And many analysts have expressed their views that the yellow metal will cross $2,000 per ounce in the coming months.

There is another story behind the India’s move. In 1991, India’s socialist government had secretly shipped 67 tonnes of gold to the Bank of England under a deal with the IMF to avert a balance-of-payments crisis. At that time the country was criticized for the move and the government faced a lot of embarrassment in the global media.

But the same media is praising the country for its recent move to buy the 200 tonne IMF gold.

The surprise move by the Reserve Bank of India pushed the government’s gold holdings to the 10th largest in the world from the 14th.

According to an interview appeared in Canadian Press, Himadri Bhattacharya, executive vice-president at Tata Capital in Mumbai, said, “to the outside world, it signals a show of strength and display of quiet confidence.

The former RBI official doesn’t believe the gold purchase, worth $6.7 billion, was the outcome of any strategic thinking or vision on the part of the authorities.

“It just happened,” Bhattacharya told Canadian Press. The country’s insatiable appetite for gold has made it the largest retail market for the metal, consuming more than 700 tonnes in 2008 alone.

While there are no authentic estimates on how much gold is in the country, Bhattacharya told Canadian Press gold held by Indian households and other private groups would be close to 25,000 tonnes.

In India, gold is the most favoured gift for any occasion. It gives apparent financial security outside an economic system controlled by private interests and centralized, government authority.

Banks, governments and currencies may come and go, but gold will still be gold.

Clever marketing by the WGC and numerous retail schemes enticing consumers have played a major part in boosting the demand for gold in India in recent years.

Also feeding the situation are new jewelry stores that have sprung up in cities small and big across India, said the Canadian Press report.

Experts have also noticed a subtle change in buyer attitudes. It’s not just jewelry anymore. Consumers are going for bullion.

Till a few years ago, the gold ornaments bought by Indian families on the occasion of family marriages and festivals were for both adornment and investment purposes.

The distinction between adornment demand and investment demand was blurred. Now, India is a well-defined and well-entrenched market for retail investment products - gold coins and gold ETFs (exchange-traded funds).

Buffett Raises Berkshire’s Wal-Mart Stake, Adds Exxon, Nestle

2009-11-17T18:01:00.000+05:30

Warren Buffett’s Berkshire Hathaway Inc. took stakes in Exxon Mobil Corp. and Nestle SA, betting on the world’s biggest oil and food companies.

Berkshire held about 1.28 million Exxon shares and 3.4 million American depositary receipts of Nestle at the end of the third quarter, the Omaha, Nebraska-based company said in a regulatory filing yesterday. The stake in Irving, Texas-based Exxon would be worth about $95 million, based on yesterday’s stock price, while the Nestle holding would be valued at $161.5 million. Berkshire also raised its stake in Wal-Mart Stores Inc., the largest retailer.

“Berkshire is increasingly looking for companies that are world-leading brands,” said Tom Russo, partner at Gardner Russo & Gardner, which holds shares in Berkshire and Vevey, Switzerland-based Nestle.

Buffett is drawing down Berkshire’s cash hoard to invest in some of the world’s biggest firms as credit markets improve. The $2.23 billion spent on stocks in the three months ended Sept. 30 is the most in a year and allowed Berkshire to add a stake in insurer Travelers Cos. and increase its holding of Wells Fargo & Co. Buffett agreed this month to take over Burlington Northern Santa Fe Corp., the No. 1 U.S. railroad, for $26 billion.

“They are all very unique and strong franchises,” said Mohnish Pabrai, founder of Irvine, California- based Pabrai Investment Funds, which owns shares in Berkshire and San Francisco-based Wells Fargo. “The equity bets are tending to be ones which can be held for a very long period of time.”

Stocks Rally

Berkshire, whose U.S. stock portfolio was valued at $56.5 billion at the end of the third quarter, is benefiting from the biggest rally in the Dow Jones Industrial Average since 1933. The addition of Exxon and New York-based Travelers gives Berkshire equity stakes in 11 of the Dow’s 30 companies.

The 113-year-old Dow has surged 59 percent since March 9, the steepest run-up over the same number of days since 1933, according to data compiled by Bloomberg. Travelers, which was added to the Dow this year, has gained 58 percent over that period, while Exxon is up 15 percent to give the firm a market value of about $353 billion.

“Exxon has probably the lowest cost structure in the industry, which I know is attractive to Buffett,” said Philip Weiss, a senior analyst at Argus Research Corp. “No matter where oil prices go, Exxon always fares better.”

Stock picks by Buffett, the second-richest American, are watched by mutual funds and individuals looking for clues about his investment strategy. Berkshire’s biggest stockholding is an investment in Coca-Cola Co. worth about $10.7 billion. The firm’s holding in Walmart rose 90 percent in the third quarter and is valued at about $2 billion.

Long-Term Advantage

“Buffett buying more indicates that Walmart has a long- term competitive business advantage,” David Katz, who oversees $1.2 billion, including Walmart shares, at Matrix Asset Advisors in New York, said by telephone. “This fits exactly into what Warren Buffett likes: growth businesses where you’re not paying a lot.”

Walmart, based in Bentonville, Arkansas, increased profit 3.2 percent in the quarter that ended Oct. 31 by reducing inventories 4.1 percent and boosting revenue 1.1 percent to $99.4 billion. It is accelerating efforts to curb expenses amid falling food prices and the worst U.S. unemployment rate in 26 years, Chief Executive Officer Mike Duke told analysts Nov. 12.

“A terrible market or a terrible economy is your friend,” Buffett said at a forum in New York last week, when asked whether the stock market rally was unwarranted, given the recession. “It’s a terrible mistake to look at what’s going on in the economy today and decide whether to buy or sell stocks.”

Wells Fargo

Berkshire, already the largest shareholder in Wells Fargo, increased holdings of the bank by 3.6 percent to 313.4 million shares in the third quarter. The biggest-U.S. home lender has more than tripled from lows in March. Buffett has said he told students that month that if he had to put all his net worth into one stock, Wells Fargo “would be the stock.”

Berkshire continued to cut its holdings in No. 2 U.S. oil refiner ConocoPhillips, trimming its stake about 11 percent in the three months ended Sept. 30. A decline in the value of the stake contributed to Berkshire’s worst quarterly loss in at least two decades in the first three months of 2009. Buffett called the investment a “major mistake” after building the shares with oil prices near their peak last year.

Berkshire showed no stake in Eaton Corp., the Cleveland- based maker of circuit breakers and fuel pumps. Buffett’s company held 2 million shares three months earlier. The firm cut holdings of NRG Energy Inc., the second-largest power producer in Texas, by 17 percent to 6 million.

WellPoint, SunTrust

Berkshire reduced its stake in WellPoint Inc., the largest U.S. health insurer by membership, by 3 percent to 3.39 million shares. The stake in Atlanta-based SunTrust Banks Inc. was cut by 3.9 percent in the three months to 3.07 million shares.

Berkshire disclosed a stake of 3.63 million shares in trash hauler Republic Services Inc.Will Flower, a spokesman for Phoenix-based Republic, said the investment was “a good fit” with Berkshire’s strategy. Exxon spokesman Rob Young, Wal-Mart’s John Simley, Travelers spokesman Shane Boyd and Eaton’s Hilary Spittle declined to comment.

The filing omits information about some transactions because Buffett is permitted to keep them confidential for now. The U.S. Securities and Exchange Commission sometimes allows companies to withhold data from the public to limit copycat investing while a firm is building or cutting a position.

Berkshire disclosed that it had a stake in Exxon as of June 30, a holding not announced in the second-quarter report. Buffett’s reported portfolio doesn’t list stocks he’s not required to disclose, including non-U.S. holdings.

Scrap gold sales zoom in India over IMF gold deal

2009-11-08T13:43:00.000+05:30

Bullion traders in India are afraid of gold price these days. The big news of India buying 200 tonnes of gold from the International Monetary Fund (IMF) sent the yellow prices to dizzy heighs this week. Gold traders say the record jump in prices has sent the bullion market across the country to silence.

“There is no buying happening at these high gold prices. Customers are coming to jewellery shops to sell old gold, not to buy new gold ornaments and gold coins. Everyone feels that this is a market to sell, not to buy,” says Sanjeev Srivastava, a gold trader in Mumbai’s Zaveri Bazaar.

According to Srivastava, scrap gold sales are zooming in India thanks to the record price rise in yellow metals. "At least 10 tonnes of scrap gold must have been sold in the Mumbai bullion market this week. People are cashing in on the bull market in gold," he said.

But Srivastava, who used to supply at least two tones of gold to various jewellery shops across India, says jewellery chains are holding on to the old stocks as there is hardly any buying happening. “Only parents whose daughters’ marriage are fast approaching are the ones who are buying gold these days. Gold investors are keeping away from the bullion market as the prices are very high,” he sadded.

Gold prices touched a record 16,677 rupees per ten grams this week in Mumbai markets. On Friday, strong rupee and dull buying pulled down gold prices a little bit to 16,567 per ten grams.

Karan Khan, another bullion dealer said that gold buying will pick up during the wedding season in India which is expected to last till December end. “By that time, I feel gold prices might fall from the record prices that we are seeing these days,” Khan told Commodity Online.

On Friday, the Indian rupee strengthened to its highest in more than a week as currency traders sold dollars on gains in the local sharemarket and watched the US dollar movements.

Gold prices in the Indian bullion market have been going up this week on the big news that the International Monetary Fund (IMF) has sold 200 tonnes of gold to the Reserve Bank of India (RBI) for $US6.7 billion.

In April this year, IMF decided to sell 403.3 tons of gold as part of a plan to shore up its finances and lend at reduced rates to low- income countries. In the last few months, there have been reports that China and India could be the suitors to purchase the IMF gold. India has jumped into the fray by buying almost half of the IMF gold at about $1,045 an ounce.

Dubai-based bullion analyst Mark Robison says everyone expected China to buy the IMF gold in the first phase. “It is a surprise that India has jumped in the first place to purchase the IMF gold. India is the largest marketplace for gold in the world. I think by buying IMF gold, India has shown increased interest in diversifying out of US assets as the dollar loses value against other currencies,” Robison told Commodity Online.

China is the world’s biggest gold producer. In April, China increased reserves of gold by 76 percent to 1,054 tons since 2003.

In fact, IMF has kick-started the gold selling plan by selling the first tranche of the yellow metal to India, the largest consumer of gold in the world. The gold sales were conducted daily over a two-week period from Oct. 19-30, to "give some protection to short-term fluctuations in the market".

The sale is part of an agreement struck in September among IMF member countries to sell 403.3 tonnes of the fund's gold stocks to diversify its sources of income and to increase low-cost lending to poor countries.

Commodity Trends:Gold shines so does gold guinea

2009-11-08T13:21:00.001+05:30

The National Multi-Commodity Exchange has launched gold guinea contract that enables retail players to take part in the futures contracts. The contracts will be for a minimum of 8 gm. NMCE has signed an agreement with the Muthoot Group o facilitate the futures trade in the guinea contract system.

The much awaited minimum support price for wheat turned out to be a dampener as markets were expecting Rs 1180 to Rs 1200 per quintal for the current year’s crop which has halted the rally in wheat futres.The Rs 1,100 rate, approved by the Cabinet Committee on Economic Affairs (CCEA), represents a Rs 20 rise over the MSP of Rs 1,180 a quintal for the 2008-09 crop.

Meanwhile, annual food price inflation inched up to 13.39% in the week ended October 24 from 12.8% in the week before. Weakest monsoon rains in last seven years and floods in parts of the country have hurt farm output and pushed up the food prices. : India’s economic growth in the ongoing fiscal could fall to 5.5% in the ‘worst-case scenario’ of a sharp decline in agriculture sector performance, the Planning Commission has projected. This is much lower than the 6.3% growth in the national income estimated by the Plan panel on the worst case assumption that agriculture growth will fall by 2.5%.

Gold
The Dollar Index had weakened sharply and at the same time gold prices have gained phenomenally. Prices of gold are expected to rise further and this has initiated the move by the RBI to diversify the foreign-exchange holdings. A weaker dollar could diminish the value of India’s foreign exchange reserves and hence this could lead to further accumulation of gold by the RBI. This move will help India’s central bank to hedge its downside risk on the foreign exchange reserves front. India’s gold holdings have dropped from over 20% in 1994 to just 4%. We feel that the RBI could move forward to accumulating more reserves as gold is expected to shine for the years to come. Also, gold is traditionally considered as a safe-haven investment.
This development could be positive for the gold market and the yellow metal could test new highs in the coming months. What can further add to the upside in Gold prices is the move by Russian and Chinese central banks to purchase the yellow metal. Technically after Gold prices crossed the high of $1,033/oz which was first made in March 2008, prices have continued trading higher. The metal is in a secular bull trend and the dollar index is in a secular bear trend. This further indicates that a weaker dollar could continue to support an upside in gold prices as it makes the metal look attractive for holders of other currencies. Investment demand for Gold is also expected to rise on the back of higher ETF and HNI demand. This rise in investment demand will help to compensate for the decline in consumer demand for jewelry and fabrication on the back of high Gold prices. We expect gold prices to remain firm in the near-term as the trend remains up. We expect MCX December gold prices to trade in the range of Rs 16,150 – Rs 17,105 per 10 gram in the coming week.

Copper
On a year-to-date basis, Copper prices have risen more than 100% and are currently trading at $6,595. Copper prices are cushioned by supply worries despite rising inventories. Though the bulls are heavily reliant on the weaker dollar for a rally further, the red metal has support in terms of labour disputes. We expect copper prices to trade with a positive bias but a sharp upside will be capped on the back of weak unemployment rate from the US. Support factor: Talks to end the strike at Chile’s Spence copper mine have failed and risks for a strike at Peru’s Antamina mine are rising as wage negotiations have come to a standstill. Hence, copper prices could trade higher next week. Workers at BHP's Spence mine in Chile have been on strike since October 13 with still no resolution in sight. Peru's Compania Minera Antamina is hopeful that a deal can be reached. However contract proposals are under revision before wage negotiations continue next week. We expect MCX November Copper prices to trade in the range of Rs 304 – Rs 317 per kg in the coming week.

Crude Oil
Oil prices touched a high of $81.06/bbl this week as a decline in inventories coupled with optimism that fuel demand will increase helped support upside. The US Energy Department weekly inventory report showed this week that oil inventories declined, thereby giving hopes of a rebound in demand. In the coming week, oil prices will take cues from the US economic data, dollar movement and crude oil inventories. The bulls will entirely depend on the movement in the dollar in the coming week. We do not expect the dollar to trade with sharp weakness in the coming week as technically, the index has weakened sharply and hopes of a pullback of stimulus measures by the US Federal Reserve in the coming year may also protect a sharp downside in the currency. Oil prices will continue to face resistance above $80/bbl levels in the coming week. We expect November crude oil prices to trade in the range of Rs 3640 – Rs 3900 in the coming week.

Soybean
Soybean (NCDEX December contract) futures opened the week at 2273 levels then witnessed a sharp rally towards 2347 levels and managed to close with a gain of 3% in the last week as compared to previous week. Prices surged on account of lower production estimates and better export figure of oil-meals in the month of October also provided support to bulls in the market. As per the 47th All India Convention of Kharif oilseeds by Central Organization for Oil Industry & Trade (COOIT) held at Indore on 1st November 2009, Domestic soybean production estimates declined to 85 lakh tonnes for this year from 89 lakh tonnes last year.

Domestic Kharif Oilseeds crop is estimated at 136.5 lakh tonnes for the year 2009-10 against 150.30 lakh tonnes last year (2008-09). Overall oilseeds yield has reduced to 780 kgs during current kharif crop from 815 kgs/ha last year. Higher export figures of oil-meals in the month of October also added bullish market sentiments. As per the Solvent Extractors' Association, India's oil-meal exports during October doubled to 3.10 lakh metric tons from 1.53 lakh metric tons a year earlier. However, oil-meal exports in the first seven months of the fiscal year (April to October) declined to 15 lakh tonnes from 27 lakh tonnes a year earlier. India exports oil-meal mainly to the South East Asian countries. NCDEX December Contract shall find strong support at 2270/2230 and resistance at 2400/2450.

Chana
Chana futures gained almost 7% in the last 2 weeks on the concerns of lower acreage under Chana in Rajasthan and firm prices of Kharif Pulses. Farmers in Rajasthan have so far completed sowing of Chana on 2.2 lakh hectares, down 39 percent during the same period last year. Rajasthan is the second largest Chana producing state in India and contributes almost 15% of the total acreage under Chana. The prices of Kharif Pulses are ruling high due to lower output estimates. According to the first advance estimates, Kharif Pulses output is expected to decline to 44.2 lakh tonnes against 47.8 lakh tonnes produced last year.

The government hiked the Minimum Support Price (MSP) of Chana by Rs 30 per quintal at Rs. 1760 per qtl as sowing for the Rabi season has begun. Chana prices are likely to remain firm in the short term (2 weeks) and could recover further by Rs. 100 per qtl on good demand for cheaper substitute and on lower acreage under Chana. However, in the medium term, no major upside is expected in the Chana prices as India is having huge stocks of Chana from the last year’s bumper harvest. NCDEX December Contract shall find strong support at 2660/2590 and resistance at 2770/2800.

Pepper
The bull-phase for pepper isn’t over as prices rose 7% this week although pepper futures have fallen on profit taking and selling pressure towards weekend on availability of cheaper pepper reported from other major origins. The November contract at National Commodity and Derivatives Exchange lost Rs 275 to close at Rs 14798 while December contract lost Rs 274 to trade at Rs 14990 on Friday. The November contract had traded at Rs 15300 plus levels and December close to Rs 15600 levels this week but has fallen on reports of cheaper prices for Brazil, Vietnam and Indonesian origins. Indian origin is being quoted at $3,350 per tonne while Brazil is being quoted at $3000 thus capping the bull run in pepper spot and futures. On Friday, Spot pepper fell by over 13 rupees and ended at 14,991.8 rupees per 100 kg in Kochi, a major trading hub in Kerala. The prices were ruling at 15100 levels at the beginning of the week.

Next week, there could be a reversal of trend with prices climbing back to Rs 15100 levels as global stock and demand continues to be mismatched. Major Europe, US consumers need 15,000 tonnes monthly while total availability as of now is 45000 tonnes. Supply situation is expected to ease only by February when Vietnam harvest begins.

Wheat
Wheat futures witnessed two weeks of volatility aided by pre-dominant bullish sentiments as makets awaited the government announcement of minimum support price for wheat and on Tuesday November futures at National Commodity and Derivatives Exchange rose to Rs 1443 per quintal but thereafter profit taking and lower than expected support price hurt market sentiments. Towards weekend, the November contract ended lower at Rs 1425 per quintal. Farmers were expected a support price of Rs 1180-2000 per quintal while the announcement fell far short at Rs 1100 as against prevailing support price of Rs 1080. Delay in release of buffer stock into open market aided bullish sentiments and kept prices from falling. The government paid farmers 1,080 rupees per 100 kg for the 2009 harvest. Some traders said they had expected the support price to be raised to 1,180 rupees and hence are expecting the government to offer a bonus above the support price to boost acreage and procurement.

India aims to raise wheat output by 2 million tonnes this year to 82.58 mn tonnes, India’s Agriculture Minister Sharad Pawar said recently.

The delay in release of 3 million tonnes for a 6-month period beginning October has also supported the recent rally in wheat. As on October 1, India had 28.18 million tonnes of wheat stocks, while the buffer norm was 11 million tonnes. At the beginning of the new marketing year in April 2010, stocks are estimated at 10 million tonnes. Wheat futures will go range-bound on inadequate support price and hopes of rise in rabi output.

Gold: Where is it headed? How will it perform?

2009-10-22T22:17:00.000+05:30

Gold prices are ruling above $1000 per ounce and there is no bull stops for the yellow metal even after Diwali in India.

Market analysts are still clueless about the future of the metal as a prediction of gold’s future course is almost impossible at present.

Still most of the analysts favour one thing that the metal will continue its bull run for some more time.

Some analysts said the Asian Financial Crisis in 1997-98 resulted in an accumulation of forex reserves over the last decade. After amassing forex reserves in US treasuries, many Asian economies and export-oriented countries have exhausted their appetite for US debt.

The slow divestment from US treasuries to gold and other precious metals will impact the price of gold. An increasing proportion of forex reserves is being held in gold as countries realise that this could also be a sensible hedge against a slumping US dollar.

Certain other sections of the market said gold, like most other commodities, is a dollar-denominated asset. Any significant movement in the US dollar directly impacts the price of gold.

The commodity bull market cycle will considerably impact the long-term price of gold. Commodity cycles usually last 15-20 years and this one, which started in early 2000s, will peak between 2017 and 2020. Prices of steel, copper, sugar and oil have risen significantly from the early 2000 and will continue to do so steadily for another decade or so.

The supply-demand equation of an asset is what determines its price in the marketplace. Like many other commodities, the supply of gold will always be constant and increase slowly as mines become operational and new technologies to unearth gold are invented.

But the demand for gold can surge if there is a sudden perception of weakness in a currency, the economy or the stock market. New highs in gold prices clearly reflect that demand for gold is rising and will continue to.

The Indian festival season could give a temporary impetus to gold prices and help sustain the bullish run. Although not a driving factor in the long-term price of gold, the appetite of the common man for gold in countries such as India and China does impact the price.

Commodity Trends: Gold rallies, copper in pressure

2009-10-19T22:05:00.000+05:30

The National Multi-Commodity Exchange of India (NMCE) has launched 11 new futures contracts in agricultural commodities and gold for January, February and April 2010 delivery. The futures contract in gold, cardamom, copra and guargum will expire in January 2010 delivery, it said. The three contracts, rape mustard seed, rubber and sack, will close in February next year, while the rest four contracts - castor seed, isabgulseed, pepper and one kilo gold contracts - will expire in March 2010, it added.

The Centre has fixed wheat prices between Rs 1,379.7 and Rs 1,728.23 a quintal for sale from the stocks it is holding in the open market. According to a note sent by the Food Ministry to the Food Corporation of India (FCI), tenders will be floated for sale of wheat between October and December in each State/FCI region and depot-wise bids would be invited. Seven days notice will be given to bidders.

Kerala has become the top producer of cashew nuts in the country thanks to the initiative under the National Horticulture Mission. It presently produces 6,100 tonnes (more than 50 per cent of the national output) with a productivity of 685 kg/ha. And additional area of 1,035 hectares under new planting and rejuvenating cocoa plants in 680 hectares is being undertaken under the National Horticulture Mission scheme.

The BSE, NSE, MCX, forex, bullion and commodities markets are observing a holiday on Monday on account of ‘Bhaubeez’. The Bombay Stock Exchange's main index closed at 17,326.01 points in the Moorat trading session on Saturday. The Nifty closed flat at 5,141.80

Gold
Benchmark December Gold futures at MCX rallied this week to Rs 16048 per 10 gms before settling to a modest figure of Rs 15831 at close of trade on Friday. Higher prevailing prices failed to lift retail market sentiments on ‘Dhanteras’ the biggest gold buying festival in the country. Weaker rupee helped gold climb from a fall towards weekend as weaker rupee makes the dollar-quoted asset expensive.

Rupee witnessed up and down movements on choppy trade on Friday as domestic shares failed to provide a clear direction, while dollar demand from importers and mostly lower Asian units also weighed on sentiment. Profit taking at current levels could bring down MCX gold contract to Rs 15600 levels before stabilizing.

In USA, gold futures ended higher on Friday on strong investment buying and worries about financial sector following quarterly loss posted by Bank of America. At Comex, December gold futures rose 90 cents at$1,051.50 an ounce after recording a high of $1072 on Wednesday. Gold rose to new peaks above $1,070 levels per ounce on Wednesday as the greenback continued to slide against a basket of six currencies, although there were worries that the metal may have become overbought.

Analysts pointed out that gold’s recent rise was fuelled by currency worries rather than inflation. Oil rally towards $78 raises inflation concerns that supports gold, Pull back is likely in gold prices as open interest is staying above 500,000 lots in Comex. Meanwhile, silver is looking for direction from gold with spot silver prices at $17.41.

Gold is likely to show weakness on eroding jewelry demand and might decline to $1025 and toward the psychological $1000 mark.

Base Metals
US copper futures traded lower towards weekend on firmer dollar and fears about increasing supply and fall in near term-demand for base metals. Copper is facing pressure from the extended gains in dollar versus the Euro. COMEX copper warehouse stocks went up 135 short tons on Thursday, bringing total levels to 56,852 short tons.

Stronger rupee weighed on sentiments during mid-week at MCX where its November contract showed weakness. However, eventually weaker rupee did not harm the contract as optimism on the global economy and strong demand from China helped sustain prices at Rs 291 levels.

MCX Copper futures are likely to be range-bound at Rs 287-295 next week and face resistance at Rs 297 levels. The October Zinc contract at MCX ended marginally up at 93.90 while lead for October delivery was also marginally up at Rs 101.65.

Energy
Bullish sentiments prevailed in US crude futures market and on Friday it extended gains for the seventh straight session and closed a the highest level in a year, lifted by a late rally. Other in the oil complex including heating oil futures recorded 11-month highs. On Nymex, November crude settled higher at $78.82. The contract gained 9.42 percent the highest since October 2008. Unexpected steep declines in US gasoline and distillate inventories helped support the oil rally. Rising oil prices also lifted US energy shares even as financial sector was down on Bank of America’s reported quarterly losses. October Futures for crude oil at India’s MCX traded at Rs 3610 on close of session last week.

Soybeans
Soybeans recovered towards weekend tracking gains in global markets but was checked by likely rise in arrivals in the next few weeks. The benchmark December palm oil futures on Bursa Malaysia Derivatives Exchange ended at 2,178 ringgit a tonne, up 3.17 percent.Palm oil and soybean are related commodities and their prices often move in tandem. In US, soybean advanced as dollar fell to 14-month lows and crude oil rose to a high above $78 per barrel.

Increased market arrivals could put pressure on prices in the days ahead. Madhya Pradesh and Maharashtra will witness increased arrivals putting downward pressure on prices. Soybeans October Contract at MCX rose marginally to Rs 2082 while November contract rose to 2092

Pepper
India pepper futures ended slightly higher on Friday buoyed by spot demand but gains were limited by the Brazilian crop, analysts said. Markets remained volatile, absence of selling pressure and the speculative activities helped prices to rise marginally.

Pepper futures market on Wednesday witnessed a sharp fall on bull liquidation due to shortage of time for carrying forward before the maturity of the October contract on the 20th. Add to this there were reports of decline in prices in Vietnam and Indonesia. The domestic demand also failed to pick up as expected.

October contract fell by Rs 315 a quintal on NCDEX to close at Rs 13,690. November and December dropped by Rs 276 and Rs 265 respectively to close at Rs 13,867 and Rs 14,040 a quintal.

Spot markets continue to to be dull and will resume in full swing after Diwali holidays from October 23. The Brazilian crop capped gains as it continues to sell at a discount to Indian prices, they added. Spot pepper rose by over 7 rupees and ended at 13,966.35 rupees per 100 kg in Kochi, a major trading hub in Kerala. October contract at National Commodity and Derivatives Exchange rose from Rs 13743 to Rs 13777, a gain of 0.23% while November contract rose to RS 13978 from 13920 on Thursday. a gain of 0.34%. In the near term, the market looks set for a correction but the medium term prospects are still bullish.

Chana
India’s Chana futures have showed bullishness last week due to the ongoing festivals and firm prices of kharif pulses which supported chana prices. Improved demand in spot markets especially from North India has helped improve market sentiments. October contract at National Commodity and Derivates Exchange rose to Rs 2,294 while the November contract gained 1.19% at Rs 2,390. In the Delhi spot market, the price rose by 36 rupees to 2,325 rupees per 100 kg. Demand for pulses usually goes up during the country's peak festival season from August to October.Upside gains are being held back due to ample stocks and a likely rise in acreage limited the rise.

Rising aluminium recycling and climate change

2009-10-07T21:50:00.001+05:30

Bauxite makes up 8% of the earth’s crust, it is the third most abundant element in nature. The ore from which aluminum is produced is bauxite. More than 130 million tons of bauxite are mined each year. It has been estimated that we have enough aluminum to last us 400 years.

Bauxite has to be processed into pure aluminum oxide (alumina) before it can be converted to aluminum by electrolysis. Four tons of bauxite are required to produce two tons of alumina which in turn produces one ton of aluminum at the primary smelter.

Smelting is one of the most destructive processes to our climate. Fabrication encompasses several industrial processes: rolling, casting and extrusion.

Aluminum is then formed into products. The major outlets for aluminum products are in transport, building and construction, packaging and engineering. The real impact on the environment, its carbon footprint or greenhouse gas emissions, can only be judged from the life cycle perspective. What we're interested in here is the lifecycle of one aluminum can.

Once our can is used, we certainly hope it is recycled. Recycling is a major consideration in continued aluminum use, representing one of its key attributes. More than half of all the aluminum currently produced originates from recycled raw materials, a trend that is on the rise. In view of energy constraints, we have a huge stake in the collection of available aluminum and developing the most efficient scrap treatments and melting processes.

Aluminum can be recycled over and over again without loss of properties. Aluminum recycling benefits present and future generations by conserving energy and other natural resources.

Recycling just one soda can saves enough electricity to run a laptop computer for over 10 hours.

Recycling saves up to 95% of the energy required for primary aluminum production which avoids greenhouse gas emissions used in the process. Increasing demand for aluminum and the long lifetime of many products mean that, for the foreseeable future, the overall amount of primary metal produced from bauxite will continue to be greater than the volume of available recycled metal.

The life cycle of an aluminum can from mining to recycling is 60 days. Think of how many beverage and food cans you use during the next 60 days.

Global aluminum recycling rates are high, approximately 90% for transport and construction applications and about 60% for cans. In 2004, the United States only recycled 45% of cans.

I think we can do better than 45%, after all, it's something we all can do. (Courtesy: PRLog)

The health benefits of wearing silver jewelry!

2009-10-07T21:47:00.001+05:30

Silver Jewelry is very nice-looking, but also it’s a very healthy jewelry. Do you know much about how much silver is needed to our bodies? It’s a highly important element for balancing other elements in our body. It keeps our blood vessels elastic. It is really important for bone formation and healing, skin formation and repair.

Silver Jewelry is very good to wear with autumn-colored clothes. Yellow, beige colors signs of soon to come winter, which always brings spring after it. Try also wearing silver beads with black t-shirt or any other dark top.

Since the dawn of civilization people used silver because of its unusual strengths. Wise people engraved prayers on silver stones or silver plates to deliver a strong message to other worlds. Is it believed that silver stimulates energy flow to itself, so when silver jewellry is on body – it helps to accumulate more energy. It also seemed to help with avoiding lethargic tendencies and as a result of wearing it you may feel re-vitalized and stronger. It helps you to concentrate your thoughts.

As you might have already read – silver is absorbed through skin and has pain-relief effect, that’s why silver bracelets are so popular. It’s not an urban legend – this has medical background and some proofs from Eastern countries, where people know many things from past. Knowledge slowly fades away in nowadays if it has no big commercial value, but Eastern countries cherish comprehensive historical facts. So in a talk with a lady from East – there was a confirmation that silver jewellery has strong effect on people suffering from arthritis. Silver (especially magnetic jewelry) is known to increase blood circulation and reduce pain in muscles. Many people suffering from arthritis will not leave home without a bracelet.

Besides silver bracelets you can find some silver beads, strings, and earrings. Most of them are amazingly beautiful and not expensive, since silver isn’t a precious metal. Despite it’s dollar value – it’s very precious to our health.

Wearing silver jewelery you might notice green stains on your skin under the place of contact with silver. Don’t panic. It’s all right, it will come off in a day or two – it’s just silver entering your body. It usually happens in warm days. If you want to avoid it – paint inside a bracelet with a transparent nail polish, but as you might figure out – it prevents health benefits of silver too. These stains aren’t known to do any harm for you. There are recommendations to wear silver jewelry while you are sleeping, which time for our body to rest and to restore, that way you can wash it’s traces in morning.

Silver jewelry, like many other metals is known to tarnish over time. To clean jewelery, made from silver – just put it in a small solution of lemon or limejuice with a dash of salt, it will shine as new. Alternately you can keep it in silver jewelry box, preventing from continual air exposure, which causes silver jewelry to tarnish.

If you are still not convinced that silver bracelets are a great way to help your health – well – go to the nearest pharmacy and continue to buy pilling helping pharmaceutical industry to grow and sell you even more.

After all – it’s not always about how it works – sometimes it’s about how it looks – and 925 silver jewelry is sometimes amazingly beautiful. Try to find some and you’ll be amazed too!

(Courtesy:PRLog)

Commodity Trends: Gold holds steady, metals fall

2009-10-06T22:36:00.002+05:30

India’s growth rate is expected to clock 6.4 to 7% in 2009-10 as most Asian economies are expected to rebound from the financial crisis which is positive for both equity and commodity markets. Commodity exchanges in the country have already witnessed their combined turnover rise by 32.92 per cent till September 15 this fiscal over the same period last year, even as bullion trade dipped marginally, the commodity market regulator Forward Markets Commission (FMC) said.
BSE Sensex has climbed above !7000 levels for the first time since May 2008 on hopes of better quarterly earnings, banking, infrastructure stocks.

Poor demand in consuming countries have led to 20% fall in India’s coffee exports while global sugar prices are rising on Nagging worries over the impact on sugar supplies from top producer Brazil due to persistent and excessive rain, combined with expectations of further demand by Mexico, the US and India, have fuelled bullish sentiments in sugar.

According to data released by the Coffee Board, for the crop year ending September 30, 2009, India’s coffee exports stood at 1,81,069 tonnes as against 2,27,779 tonnes in the previous year, a decline of 20.5 per cent.
Export earnings were Rs 1,978 crore for the year, down over 17 per cent compared with the previous year. Unit value remained flat at around Rs 1 lakh per tonne.

Precious Metals
After initial weakness followed by marginal gains gold bounced backed to regain $1000 on Wednesday and managed to stay close to the $1000 mark as dollar retreated over news of deeper than expected US job losses in September. In the global market, gold rose above $1000 on Friday while in India prices dropped by Rs 50 per 10 gms at Rs 15,590. Earlier in the week, crude oil rally and geopolitical tensions supported dollar’s upward moves.

Gold prices are in for weakness as lower oil prices curbs demand for safe haven investments. Easing inflationary pressures does not augur well for gold. December Gold futures rose $3.60 at $1004 an ounce in the comex division of New York Mercantile Exchange. In the near to medium term, inflationary pressures and trends in dollar are major factors affecting bullion prices. The gold-to-oil ratio hs risen to 14.40 towards weekend from 14.17 previously. Spot Gold had risen to $ 1006 per ounce on intra-day trading on Tuesday.

The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, said its holdings stood at 1,095.327 tonnes as of Oct. 1. As of Sept. 30, it was up 1.22 tonnes from the previous business day. MCX December gold had strong support at 15452 and ended with a profit of RS 63 at Rs 15598. However, the trend looks downward while global prices are likely to hover close above $1000 mark next week.

Base Metals
Base metals face downside pressure on the back of bad economic news coupled with Chinese holiday. Copper prices ended the week on a negative note, losing almost 2% the last week. Poor US unemployment figures coupled with a long holiday in China kept the world’s largest copper consumer away. US non-farm payrolls revealed a loss of 263,000 jobs in September, while the market had braced itself for a lesser decline of 179,000 jobs.

The unemployment rate, however, met expectations at 9.8 percent. US carmakers watched sales drop 23.3 percent year-on-year to 721,378 vehicles in September, leaving the market reeling after the cash for clunkers incentives program ended in August. Though we have witnessed a downside in copper prices due to absence of China we feel that prices could rise by the end of next week as investment funds could buy ahead of return of the Chinese players in the market. Trading in the Shanghai markets will commence on 9th October, which is a Friday. Factor that could prevent a sharp upside by the end of next week in base metals could be a stronger dollar which has now found some strength on the back of poor US economic data.

Economic data from the US has raised concern that the situation still remains bleak. Overall, the employment scenario is still disturbing and the rally in base metal prices ahead of actual economic improvement may be threatening from the short-term perspective. We hold the view that, the slight improvement that is being witnessed in the economic data across the globe is mainly linked to the stimulus and other financial measures. If economies were left aside without stimulus measures, we could not have witnessed this change in economic figures. Hence, the rally in base metals remains under threat of a correction as demand needs to show strong improvement. Prices have raced ahead of their fundamentals; hence profit-booking at higher levels cannot be ignored. In the coming week, copper prices are expected to find support at 281.35/276.85 and face resistance at 294.50/303.15.

Energy
Crude oil prices gained a whopping 6% in the last week despite inventory data showing a rise. Crude oil supplies gained 2.8 million barrels to 338.4 million. Distillate stockpiles, which include heating oil and diesel, rose 323,000 barrels to 171.1 million. That’s a sixth weekly increase even as refinery output and imports dropped. Gasoline inventories fell 1.7 million barrels to 211.5 million in the week to Sept. 25. Oil prices received support on the back of weakness in the US Dollar Index in the early part of the week. However, the dollar index strengthened by the end of the week as bad economic data from the US lowered demand for higher-yielding and riskier investment assets and raised demand for the low-yielding dollar.

Oil prices touched a high of $71.39/bbl last week but closed below the $70/bbl mark as the dollar showed strength on Thursday and Friday. The decline in oil prices on Friday was after an economic report that showed that the US jobless rate increased to a 26-year high in September, boosting concern that fuel demand will take time to rebound. Economic concerns still persist and prices could face resistance around $70/bbl levels as demand scenario is not expected to improve significantly. In the coming week too, we could witness a rise in oil inventories and that could add pressure on oil prices. If the dollar strengthens on the back of rise in demand for low-yielding currencies then that will also add pressure on the downside. In the coming week, we expect oil prices to find support at 3212/3080 and face resistance at 3445/3540 levels.

Soybean
Soybean (NCDEX November contract) futures moved in a range of 2005-2051.50 levels during the last week. Soybean prices fell slightly lower on account of harvesting pressure of new crop in Maharashtra and Madhya Pradesh during the last week. Lower export demand of domestic soy meal and globally soybean production is estimated higher as compared to last year provided support to bears in the market. However, it recovered slightly on lower sowing acreage this year as compared to last year by Ministry of Agriculture and lower production estimates to 97 lakh tonnes this year from 108 lakh tonnes last year as per the Soybean Processors Association of India (SOPA). Domestic kharif oilseeds area so far been covered on 172.21 lakh hectares against 181.34 lakh hectares during corresponding period a year ago, as on September 24, 2009.The area under soybean is reported down at 95.90 lakh hectares against 96.24 lakh hectares a year ago, groundnut at 44.22 lakh hectares vs 51.95 lakh hectares in the corresponding period last year. In the coming week, prices are expected to trade lower on account of harvesting pressure in major producing states like Maharashtra and Madhya Pradesh. Prices have strong support at 1945/1910 and resistance is seen at 2060/2115 levels.

Chana
Chana prices witnessed a bearish trend in the last one month due to tremendous pressure from the government to curb the rising prices. Also, huge stocks of Chana supported the bearish market sentiments. Futures prices of Chana which surged 2.5% during the initial days of the last week on improved demand ahead of festival season erased the early gains and settled lower during the weekend due to adequate supplies in the markets. During the last week, October Chana contract traded in the range of Rs.2281-2353 per qtl.

Chana production stood at around 7.05 MMT up from the 2007-08 final estimates of 5.75 MMT. Also, it is expected that the acreage under Chana in the coming Rabi season will be more due to higher moisture level. Thus, overall sentiments in Chana remain bearish in the medium to long term. However in the short term, Chana prices will remain firm due to good demand ahead of festival season. Also, higher prices of other Pulses would support the sentiments in the short term. NCDEX Chana November contract is having strong support at 2335/2300 per qtl and resistance is seen at Rs. 2415/2455 per qt.

Black Pepper
Black pepper market was very volatile in the beginning of the week as bear operators were at centre-stage aided by higher crop arrivals from Brazil and Indonesia. On Tuesday October contract declined by Rs 48 on NCDEX to close at Rs 13,995 a quintal. November and December dropped by Rs 50 and Rs 14 respectively to close at Rs 14,160 and Rs 14,301 a quintal.
Pepper futures market on Thursday went up in the forenoon on bullish reports based on the earthquake in Indonesia and buy calls from expert analysts.

It dropped in the afternoon on sell calls to close below Wednesday’s closing. Profit booking at the end of the day also led to fall in prices although firm trend was visible due to robust spot demand, low stocks and reviving exports. India’s pepper is quite competitive as its ASTA Grade at $3000-3050 is cheaper than Vietnamese offering. Spot pepper rose by nearly 5 rupees and ended at 14,193.75 rupees per 100 kg in Kochi, a major trading hub in Kerala.
Fundamentals remain bullish on reviving exports, low stocks and robust spot demand. Decreasing price gap with leading global producers of the spice has led to export interest trickling back to India. Demand for spices usually goes up during August to October, the country's peak festival season.

Rubber
Weak to steady trend was visible in rubber spot markets in the country and this was also reflected in domestic futures at NMCE as the traders look for definite direction before making trades. RSS 4 grade was quoted at Rs 107.50 on extremely dull volumes. Tyre sector demand also looks dull, traders said. The October futures for RSS 4 closed at Rs 108.15 (108.21), November at Rs 109.09 (109.02), December at Rs 110.70 (110.96) and January at Rs 112.50 (112.19) a kg on National Multi Commodity Exchange (NMCE).

Rubber declined as global equity markets dropped and U.S. auto sales slumped in September, eroding optimism that demand may grow for the commodity used in tires and gloves.

At TOCOM, rubber futures turned weak tracking Japanese equity market on unexpected drop in US manufacturing data, increasing jobless claims and declining September auto sales. Martch delivery rubber lost 3.8 yen at 198.6 yen a kg before closing at 200.8 yen although initially the contract had gain as much 2.7% in the week. Fundamentals for rubber continued to be steady to weak as data on automobile sales and economic recovery is not yet positive.

Wheat
Weakness was visible in India wheat futures on hopes of higher output. Agriculture Minister Sharad Pawar recently said that the extended monsoon season augors well for winter-sown crops such as wheat as soil moisture is set to improve.The winter sowing season starts next month. The October futures contract NWTV9 on National Commodity and Derivatives Exchange fell to 1,222.6 rupees per 100 kg on Thursday.On Sept. 1, India had 30.1 million tonnes of wheat stocks, up from 23.2 million tonnes a year earlier. At the beginning of the new marketing year in April 2010, stocks are estimated at 10 million tonnes.

This week, CBOT wheat has rebounded an reports that US farmers are likely to go slow on sowing due to falling prices. CBOT Wheat has dropped 25% this year due to abundant supplies and falling export demand from USA. However, towards weekend, the bounce could not be retained and fell to $4.39 a bushel on large world supplies and spillover pressure form other markets. Canada has also raised it s wheat production dampening market sentiments.

The importance of strategies for ETF investors

2009-10-06T22:31:00.001+05:30

When it comes to investing, you have many options when it comes to exchange traded funds (ETFs), stocks, bonds, futures or options, but one thing is certain: a sound strategy is more important than anything else.

During the worst financial crisis in the past 70 years, you may have watched your nest egg dwindle to half of what it was – or even more. Now that financial stability is slowly starting to emerge and millions are trying to pick up the pieces, it’s important to keep in mind that the best financial advice is completely worthless if it is not followed, states Greg Salsbury of Investment News.

Were you one of the ones who lost their cool when the markets were at their worst? If so, read on for some tips about how to do better the next time the markets go topsy-turvy:

You now know this: do not allow emotions to drive investment decisions. Often, people think that their gut feelings will enable them to cash in on the next Google . Fear makes them sell too quickly. Exuberance makes them buy without fully examining the pros and cons.

It is important to stay diversified. This allows investors to reap the rewards of gaining exposure to high performing sectors and industries while not banking on the performance of one or two stocks. A good portfolio has exposure to bonds, domestic equities and foreign equities. ETFs enable investors to gain broad exposure to a growing number of asset classes and sectors.

The third artery to building a good retirement portfolio is education. It is vital to know what your portfolio holds, economic conditions, both macro and micro, which could potentially hinder your holdings, and know what your choices are. After all, you control the destiny of your portfolio.

Have an exit strategy. Don’t hang on, hoping against hope that a position will come back. Instead, a stop loss will help stop the bleeding when a trend winds to a stop. Investors who had a stop loss that had them out between October and March were able to sit out a good chunk of the market’s downturn.

Have an entry strategy, too. There are many out there, including a trend following strategy, which uses the 200-day moving average as a guide. It is easy to use and enables investors to tuck their emotions away. The key to employing a strategy is to use it. Don’t rationalize your way out of it when the signals say you should act.

For a better understanding of the trend following strategy, take a look at our new book on trend following. There’s $4 trillion on the sidelines, but the average investor doesn’t believe we’re in a recovery at this point. Investors don’t typically buy until there’s a full recovery, but if you waited until that point, you would miss a sizable portion of potential gains.

C02 capture: Siemens-E.ON project raises hope

2009-09-28T11:37:00.000+05:30

E.ON and Siemens are putting a pilot CO2 capture plant into operation at the E.ON power plant Staudinger in Grosskrotzenburg near Hanau. The two companies are thus pushing further ahead with the development of a process geared toward climate-friendly coal-based power generation.

A lab-proven process is to be employed under real operating conditions at the power plant’s hard-coal-fired Staudinger Unit 5. The pilot plant will be operated with part of the flue gas from Unit 5. E.ON and Siemens intend to run the pilot plant until the end of 2010. The results achieved and the operating performance of the pilot plant will serve as the basis for large-scale demonstration plants, which are scheduled to start operation in the middle of the next decade.

In the future, too, it will not be possible to meet the rapidly growing power demand without using fossil fuels such as coal and natural gas. “The challenge is to attain a significant reduction in the CO2 emissions associated with the combustion of fossil fuels. In this context CO2 capture and storage technologies will be of decisive importance,” said Michael Suess, CEO of the Fossil Power Generation Division of Siemens Energy. “These technologies are available but they have to be tested for deployment in large plants, developed further and brought to market readiness. The pilot plant in the Staudinger power plant will bring us a decisive step forward here,” added Suess.

“As a major contribution toward climate protection E.ON is planning industrial-scale CO2 capture and storage for coal-fired power plants starting in 2020. Operation of this new plant together with Siemens as part of our pilot fleet is an important step in this direction,” said Bernhard Fischer, Member of the Managing Board of E.ON Energie AG and E:ON’s CTO. Fischer added: “With the post-combustion process we are focusing on an highly promising CO2 capture technology, which can be backfitted in existing power plants.”

The project is being sponsored by the German Federal Ministry of Economics under the terms of the COORETEC Initiative. It is part of the federal government’s 5th Energy Research Program “Innovation and New Energy Technologies” and promotes research and development in the field of low-CO2 power plant technologies.

With the post-combustion capture process developed by Siemens more than 90 percent of the CO2 is removed from a power plant’s flue gas using special cleaning agents. One of the advantages of this technology is that it can be combined with the well-known and further developed steam power plant process. In the CCS pilot plant at the Staudinger power plant the cleaning agent’s long-term chemical stability and the efficiency of the process are now being put to the test under real power plant conditions. In parallel, the technology will be further optimized in terms of energy consumption. Our process is characterized among other things by good environmental compatibility, comparatively low energy consumption and only very low loss of the cleaning agent used,” said Suess.

The technology for CO2 capture from the flue gas of power plants is part of the Siemens environmental portfolio with which the company earned revenues of nearly EUR19 billion in fiscal 2008, That is, equivalent to about a quarter of Siemens’ total revenue and makes Siemens the world’s leading provider of eco-friendly technology.

The Siemens Energy Sector is the world’s leading supplier of a complete spectrum of products, services and solutions for the generation, transmission and distribution of power and for the extraction, conversion and transport of oil and gas. In fiscal 2008 (ended September 30), the Energy Sector had revenues of approximately EUR22.6 billion and received new orders totaling approximately EUR33.4 billion and posted a profit of EUR1.4 billion. On September 30, 2008, the Energy Sector had a work force of approximately 83,500.

E.ON is one of the world’s largest investor-owned power and gas companies. Its roughly 93,500 employees generated just under EUR87 billion in sales in 2008.

(Courtesy:Webwire)

New record set in solar module energy conversion

2009-09-28T11:31:00.000+05:30

With the heightened investment in R&D in solar energy as a means to reduce carbon footprint and climate change, several new technologies are being developed to make solar energy one step closer to cost effectiveness with conventional energy sources.

The Energy Research Centre of Netherlands has reported 16.45 energy conversion for a full sized solar module, the highest ever recorded so far. Royal DSM N.V., the global Life Sciences and Materials Sciences company headquartered in the Netherlands, said that that its KhepriCoat anti-reflective coating system has contributed immensely to this world record..

The world record of 16.4%, achieved by the Energy Research Centre of the Netherlands (ECN), was verified by global certification and testing organization TÜV. The previous record of 15.5% from 1998 was broken by an impressive 0.9 percentage point.

The new record efficiency of 16.4% means a substantial step in the ongoing quest to bring solar energy closer to "grid parity", the point at which solar energy is equal to or cheaper than conventional electricity. This would make it broadly accessible to both industrial and residential users without state and/or government subsidies. The successful utilization of DSM’s KhepriCoat anti-reflective coating confirms its performance leadership and will contribute to the speed of implementation of anti-reflective coatings in the rapidly growing solar energy market., Royal DSM company said in a press release.

Due to an ever increasing demand for generation of sustainable energy, solar power will play a critically important role in future energy supply. To enable these developments, innovative companies like DSM are constantly working on technology breakthroughs that allow a significant cost reduction in solar systems, the release added.

One such breakthrough has been the development of DSM’s KhepriCoat anti-reflective coating on solar glass, which offers the best performance in terms of light transmission, durability and flexibility. Application of the coating to solar glass sheets has shown an increase in light transmission of around 4%, leading to a transmission rate of approximately 96% for wavelengths in the 400nm - 1200nm range.

Commenting on the new record, Paul Wyers, manager of ECN Solar Energy, said: “The added value of anti-reflective coatings in improving the efficiency of solar modules is significant. We were glad we could make use of the latest technology in this field to set our world record. Our cooperation with DSM helped us achieve a premium conversion efficiency of 16.4% on a full-size solar module, which is a huge leap from the previous record.”

It may be recalled tha tRoyal DSM N.V., the global Life Sciences and Materials Sciences company had recently regained its number one position in the chemical industry sector in the Dow Jones Sustainability World Index. In 2007 and 2008 it ranked amongst the top leaders in the sector.

DSM innovations are helping to address some of the world’s most pressing issues such as climate change, energy consumption and the need for a balanced food and water supply, the company said. Khepricoat is the second commercial product in DSM’s Functional Coatings program, which focuses on applying DSM’s proprietary coating technology platform to various applications. (Courtesy: Webwire)

STT mopup rises 11% to Rs 3,530 cr on bullish market

2009-09-28T10:28:00.001+05:30

Buoyed by a resurgence in the stock market, collection of security transaction tax (STT), a tax levied on every transaction on stock

exchanges, rose 11% between April 1 and September 25, over the year-ago period, according to figures compiled by the Income Tax (I-T) department.

According to I-T officials, there is a distinct possibility STT collection will continue to grow for the rest of the financial year.

STT generated Rs 3,530 crore as against Rs 3,173 crore collected during the corresponding period last fiscal. During the first two months of the current year collection dipped 24.7% to Rs 795 crore, against the comparable period.

The fall was a continuation of the slowdown in STT collection that began mid last year as the local stock market felt the tremous of a global financial meltdown. By December last year, STT collection was Rs 4,455 crore, about 32% lower than the December 2007 figure.

But things began to look up since July ‘09. Since big bourses like National Stock Exchange (NSE) and Bombay Stock Exchange(BSE) are based in Mumbai, the city alone accounts for over 95 % of the STT collection.

Introduced in 2004-05, STT is paid by the buyer as well as the seller in a security transaction. The objective of the tax was to partly offset the revenue loss arising from the removal of long-term capital gains tax and the reduction of short-term capital gains tax from 30% to 10%.

However, the tax was opposed by brokers and investors. However, the draft tax code which has been recently announced by the government, has proposed the removal of STT and imposition of a tax on capital gains.

Indications are that STT collection, which is proportionate to the trading volumes in the stock market, will continue to grwo. While the figures for the first week of September ‘09 showed only a marginal improvement over the corresponding period last year, the collection has surged within a fortnight.

A higher trade volume has also pushed up the corporate tax collection from brokerages by 20% to Rs 580 crore.

Finally, IMF to sell 403 tonnes of gold

2009-09-19T23:44:00.000+05:30

Finally, the International Monetary Fund (IMF) is selling its 403 tonnes of gold after months of speculation over the sale and its presumed impact on markets.

IMF said in a statement the sales would be in a volume strictly limited to 403.3 tonnes, with these sales to be conducted under modalities that safeguard against disruption of the gold market.

The IMF said the decision was a central element of a new income model for the institution that had been approved by the executive board in April 2008.

The Group of 20 developed and developing countries decided at their April summit in London that the money raised by the gold sales should allow the IMF to offer favorable conditions on loans to the poorest countries.

The IMF said the sale of gold will also increase the fund’s resources for lending to low-income countries, a strategy that won board backing in July.

The amount of gold is one-eighth of the current holdings of the Washington-based IMF, one of the world’s biggest holders of the precious metal.

The IMF did not state the value of the gold to be sold but based on the current bullish market price for the metal, it is estimated that the sale would fetch 13 billion dollars.

Under the approved plan, the IMF would offer to sell gold directly to central banks or other official sector holders if there were to be interest from such holders.

The IMF said such transactions would redistribute official gold holdings without changing total official holdings.

Under the fund’s Articles of Agreement, all gold sales must be conducted at market prices, including direct sales to official holders.

Also the gold sales could be conducted on-market in a phased manner over time, and such onmarket gold sales will not add to the announced volume of official sales, it said.

Lessons from 1929 crisis and its relevance now

2009-09-16T22:46:00.001+05:30

A man’s errors are his doorway of discovery- Present economic meltdown, a learning curve-Robin Trehan

We’ve all heard the saying “those who don’t learn from the past are condemned to repeat it”. Could the Great Depression happen again or did America learn its lesson?

In order to answer this question fully, one must have an understanding of the factors that caused the stock market crash of 1929 and the subsequent economic disaster.

Most economists, including Federal Reserve Chairman Ben Bernanke, agree that the primary catalyst for the Great Depression hinged on poor policy-making by the Federal Reserve. The Reserve made the unfortunate decision to reduce the money supply during a time (the summer of 1929) when the nation’s economy was going through a severe recession. In an ill-advised attempt to preserve the worth of the American dollar during the subsequent financial crisis, the Federal Reserve increased rather than decreased the Federal funds rate. This course of action proved disastrous, causing widespread failure of banks. People lost their confidence in financial institutions and ran on the banks, demanding their deposits be returned to them in cash form. The consequences were disastrous and the Great Depression began.

Many people feel that in view of the current situation, America could once again suffer a massive economic disaster on the scale of the Great Depression. This is not surprising when one takes into account the problems that have been plaguing the nation, including market decline, mounting national debt, bank failures, widespread foreclosures and massive unemployment.

This point of view, while understandable, does reflect a worst case scenario mentality. The government has tried to learn from the mistakes of the past and craft a response that will minimize the damage rather than exacerbate it. For example, rather than increase the Federal funds rate, the Federal Reserve has cut it to extremely low levels. Other recovery measures include bailouts, rebate checks, etc.

These tactics are by no means a quick fix and many question their efficacy. However most experts feel that these efforts will, at the very least, preclude a catastrophe on the scale on of the Great Depression. Recovery may be slow and there may be setbacks, but there’s no reason to assume that the sky is falling to a the degree it did during the Great Depression. A man’s errors are his doorway of discovery.As Winston Churchill “Don't take 'no' for an answer, never submit to failure. Do not be fobbed off with mere personal success or acceptance. You will make all kinds of mistakes, but as long as you are generous and true, and also fierce, you cannot hurt the world or even s”

Climate change,developing nations most vulnerable

2009-09-16T22:42:00.000+05:30

Climate change could cost nations upto 19% of their GDP by 2030 with developing countries most vulnerable.

A report from the Economics of Climate Adaptation Working Group said that cost effective adaptation measures already exist that can prevent between 40 and 68 percent of the expected economic loss with even higher levels of prevention possible in highly target geographies.

The report, titled "Shaping Climate-Resilient Development", offers a comprehensive and replicable methodology to determine the risks that climate change imposes on economies. It provides a set of tools for decision makers to adopt a tailored approach for estimating these costs based on local climate conditions, and for building more resilient economies. These tools do not include estimates or measures for emissions reduction, which would need to be examined separately.

By determining a location's total climate risk - calculated by combining existing climate risks, climate change and the value of future economic development - and using a cost-benefit analysis to create a list of location specific measures to adapt to the identified risk, the Working Group was able to evaluate current and potential costs of climate change and how to prevent them. The methodology was tested in localities within eight different countries (China, United States, Guyana, Mali, United Kingdom, Samoa, India, and Tanzania), which together represent a wide range of climate hazards, economic impacts, and development stages.

The working group estimated expected economic loss for the eight different case study regions leveraging natural catastrophe risk modeling techniques assuming current GDP growth estimates, under three different climate change scenarios - today's climate (assuming that there is no additional impact from climate change); moderate climate change (based on the average forecast of climate change for the particular hazard in the location studied); and high climate change (based on the outer range of the climate change considered possible by 2030). The methodology is applicable in any setting where society must consider risk. For example, in Florida the report estimates an annual expected loss of $33 billion from hurricanes - more than 10 percent of GDP - under a high climate change scenario.

Overall findings from the eight case studies showed that easily identifiable and cost effective measures - such as improved drainage, sea barriers, and improved building regulations, among many others - could reduce potential economic losses from climate change for all regions. In fact, most could deliver economic benefits that far outweigh their costs - with adaptation measures that on average cost less than 50 percent of the economic loss avoided.

In Maharashtra in India, researchers evaluated the loss associated with drought, which amounts to 30 percent of the state's food and grain production - even without climate change. This loss would severely impact the 15 million small and marginal farmers. By 2030, a significant drought could lead to a countrywide agricultural loss of more than $7 billion, and impact the income of ten percent of the population. With droughts historically occurring every 25 years, extreme climate change could change that to once every eight years.

The case study determined a number of measures that could protect crop production and farmers' incomes in Maharashtra including expanded drip and sprinkler irrigation, drainage construction, improved soil techniques, and crop engineering. In fact, Maharashtra can eliminate much of its expected drought loss by 2030 through low-cost measures with benefits that often exceed their cost.

The ECA Working Group was formed in September 2008 under the initiating sponsorship of the Global Environment Facility in coordination with UNEP to develop a framework to assist in the design of climate-resilient economic development strategies. Swiss Re, a leading global reinsurer, was a lead contributor to the research. McKinsey & Company, a global management consulting firm, drove the analytical execution and contributed to the fact base of the report. Sponsorship and key guidance was provided by ClimateWorks, an international network of foundations focused on achieving low-carbon development; the European Commission, which focused on developing a practical methodology to assist adaptation in the most climate vulnerable countries; the Rockefeller Foundation, which brought its deep experience of building climate resilience in developing countries; and Standard Chartered Bank, a global bank with a strong emerging market footprint.

(Courtesy: PRNewswire)

India’s gold imports rise by 300% in August

2009-09-16T22:38:00.000+05:30

Is India’s gold market headed for a bigger demand boom? It seems so as the gold imports witnessed nearly a three-fold jump during August at 21.8 tonnes as compared to the previous month on rising investment demand with the onset of festival and marriage season.

The import of the precious metal was 7.8 tonnes in July this year. According to analysts, people are probably waiting for prices to come down from the Rs 15,000 per 10 gm level, with reports suggesting a further rise in prices.

However, in August 2008 the imports were much higher at 98 tonnes just before recession was officially declared and the domestic demand slipped.

Gold imports have been sluggish so far this year and were at 81.2 tonnes during January-August 2009, compared to 261 tonnes in the same period last year.

In January, only 1.8 tonnes of gold was imported followed by no imports during February and March due to lack of demand on high prices following recessionary pressures.

Earlier, gold imports had touched 20 tonnes in April, on account of ‘Akshaya Tritiya’, a festival considered auspicious for buying gold.

The import of the precious metal is likely to go up for the next 2-3 months as people will invest their money in the yellow metal for better returns.

However, by the end of the year the trend is likely to decline. The rise in imports can be attributed to jewellers wanting to stock up before the beginning of ‘Diwali’ demand.

With a bullish trend in gold there is also a rise in investor demand at higher levels giving rise to the import of the yellow metal.

Cryogenic Carbon Capture to curb global warming

2009-08-31T22:36:00.000+05:30

As the whole world tries to combat global warming and climate change through technology interventions much of the recently popularized carbon reduction technologies were dismissed as too expensive to implement including carbon capture and storage (CCS) systems in coal-fired power plants.

However, a firm here called Sustainable Energy Solutions has come forward with an innovative carbon capture technology that is claimed to be energy efficient and cost effective than any competing process.

The technology, known as Cryogenic Carbon Capture (CCC), offers a more practical and cost effective solution to carbon capture than any existing technology. CCC was developed in response to a growing demand in the energy industry for a cost effective, retrofit carbon capture technology. Over the last year, a significant amount of compelling research has been done to validate the technology's potential,a press release said.

"The high costs and energy demands of carbon capture technologies have long been concerns." Explains Richard Boardman, Energy Security Initiative lead for the Idaho National Laboratory, which includes evaluation of carbon capture and reuse options for fossil energy systems. "Cryogenic Carbon Capture helps solve both of these problems by providing a scientifically sound system that is both more efficient and more cost effective relative to competing processes."

Benefits of Cryogenic Carbon Capture:
Energy Efficiency-The Cryogenic Carbon Capture process is substantially more energy efficient then alternative processes. Studies conducted by the US Department of Energy estimate competing carbon capture technologies' energy requirements to be over 30% more than the CCC estimates. CCC demonstrates these clear energy and operational advantages while also capturing 99% of the CO2. Alternative technologies typically capture around 90% of the CO2.

Lower Capital Costs- Cryogenic Carbon Capture is a true bolt-on technology that is easily retrofitable to nearly any existing process, thus leveraging existing infrastructure. When integrated in new plant constructions, CCC is able to replace other chemical treatments (including SO2 and Hg removal), offsetting a significant percentage of a new installation cost.

Installation Advantages-CCC requires less water, and supports energy storage options more easily than other systems.

Sustainable Energy Solutions was founded in 2008 in response to the development of Cryogenic Carbon Capture by Dr. Larry Baxter, professor of Chemical Engineering at Brigham Young University. Since its inception, SES has filed several patents on new technologies. These technologies help further SES' larger goal, which is to conceptually develop and scientifically validate solutions to problems within the energy industry on the regional and global scale. (Courtesy: PRWeb)

Some common mistakes forex traders commit

2009-08-30T13:05:00.000+05:30

The Foreign Exchange Market has made a lot of traders rich but also made some leave without a single penny with them. It could be gold mine to many but even a trading expert nor the best trading robot could be guaranteed of success in this volatile environment, but one thing is for sure, a single mistake will make you lose in this merciless game. Educating yourself not just of how to trade in the forex market but also identify the common mistakes traders commit can prevent you from losing your trades. You are the captain of your own trading positions therefore avoiding these hindrances depends on you.

One common and big mistake traders commit is over trading. Some traders who have been consistently winning becomes over confident and greedy about how much they could get if they make many trades at once. Also other traders would use too much leverage by making bigger trades than their account balance. But like what I said the market is a fast changing market and what have happened before could be different in a few minutes from now.

There are still chances that the market may move against your trading position even if you have been winning constantly in your past trades. It will result to large losses if this happens. You'll end up with nothing and eventually close your trade. Be patient enough by investing the right amount, the amount that you can afford to lose. Be thankful if you have been consistently winning but don't be too greedy by taking advantage of an unstable market. It's better to win little by little than to lose a lot.

Other traders are impatient to wait for the right time to trade. There are times that they find their intuition correct and because of their long and careful analysis they missed one great opportunity. The next time they felt the urge to place a trade they would rather follow their instinct rather than a careful analysis. This is a very risky move. Most of the time if we don't study the market carefully we end up losing our trades. It is okay if you lose a trading opportunity there will always be a lot that will come. Better wait for the safest time to trade than to involve yourself into greater risks.

As a good trader you must develop the right discipline and learn to control your emotions. Do not lose your concentration after a certain loss learn from it instead and move on or better yet invest only the amount that you can afford to lose. In this way it will less likely affect your trading decisions.

(Courtesy: PRWeb)

Commodity Trends:Are we in for shortages in 2010

2009-08-09T13:37:00.000+05:30

Commodity shortages are likely next year as output of metals and agricultural products potentially rises too slowly to match revival of demand, according to a Goldman Sachs Group study. The Reuters/Jefferies CRB Index of 19 commodities has added 17 percent this year, driven by energy and metals prices. Limits on production growth and swelling demand in developing nations will keep driving prices higher and probably curb usage in industrialized countries like the U.S., Goldman Sachs said.

Meanwhile, in India scanty rains are a cause for concern in some major crop growing regions and Finance Minister Pranab Mukherjee hinted that it would be damaging for economic growth which had begun to look up due to stimulus measures.

India's exports fell for ninth month in a row. Commerce Ministry said, exports in June dipped 27.7%. Imports also dropped by 29.3%, reflecting slowdown in domestic consumption and mainly because a 51% decrease in oil import.
As fall in imports is steeper than that in exports, the trade deficit in June 2009 has contracted to $6.2 billion from $9.1 billion in the same month of the last financial year. Exports dipped to $12.8 billion in June from $17.7 billion in the same month last year

A few major developments related to commodity exchanges last week. It was announced that commodity bourses such as MCX, NCDEX and NMCE can now hold equity stake in one another as the government has allowed cross-holding in national level commodity exchanges that have completed five years. The new guidelines on equity structure issued recently by the consumer affairs ministry, the stock and commodity exchanges can hold a maximum equity of up to 15% in commodity bourses that have completed five years.

Forward Markets Commission (FMC), India's commodity market regulator, has asked national-level commodity exchanges to ensure at least 10 percent of their stake is owned by government companies. Total stake by state firms, banks and warehouses together should be at least 26 percent, while only the original promoter of the exchange can hold upto 26 percent, it added.

The guidelines were aimed at better governance, transparency and investor confidence in the markets. Volumes in India's commodity futures, one of the fastest growing in the world, rose 29 percent in 2008/09 financial year ending March to 52.49 trillion rupees.

Precious Metals
The Bullion pack traded higher for the past week with Spot Gold trading above $935 levels. Silver prices also moved in tandem with gold prices trading higher. The sharp fall in the Dollar Index (the USD pegged against 6 major currencies) supported the rally in the bullion pack as assets traded in USD dollar terms appreciate in value terms when the Dollar weakens. A further sustained fall in the USD would lead to a sharp rally in the bullion pack. Investment/Fabrication demand shall continue to play a crucial role in coming weeks. Also, broad-based buying was also witnessed across the commodities pack is currently being witnessed as risk appetite of global investors is on the rise, which has been pressurizing the USD. Higher crude prices and overall improvement in sentiments have been supportive for the bullion pack. Spot Gold shall meet with resistance around $975 - $980 zone, and further trading above this level would lead prices towards the $1000 mark. Domestic gold prices breached the Rs.15,000 mark last week. For this week, we expect prices to trade higher with resistance seen at 15070/15220 whereas support is seen at 14750/14590.

Base Metals
The Base metals pack last week rallied sharply on the back of improving global economic sentiments & weakness in the US Dollar. In the last few days, the base metals market has been running on a very optimistic note due to a steady stock market recovery but, with only moderate seeds of consumer demand. The market also seems almost immune to any negative data. Despite slower summer physical conditions evidenced on the back of rising inventories and falling cancelled warrants, prices are witnessing an uptrend. However, we feel that base metals could come under pressure as prices are racing ahead of their fundamentals. Hence, prices may be due for a correction this week on account of profit-booking. Copper, the leader of the base metals pack, shall have crucial support around 281/273 levels whereas resistance is seen around 297/305 levels for this week.

Soybean
Soybean (NCDEX Sep contract) futures opened the week at Rs 2334 a quintal, and surged more than 5% during the last week as compared to previous week on account of short covering and strong movement of soybean futures at Chicago Board of trade (CBOT). Better demand from solvent extractors amid tight supply led to spurt in prices. Traders are resorting to hoarding, as there is a growing concern in respect with the paucity of rainfall.

Moreover, market participants are anticipating that the government may declare a drought. As per IMD report, the rainfall for the week to August 5 was 66% below normal. As per Agriculture Ministry of India, area covered under domestic kharif oilseeds is 141.79 lakh hectares till July 31, 2009, as compared with 144.66 lakh hectare during corresponding period a year ago. In this respect, area under Soybean is reported up at 90.74 lakh hectare against 87.75 lakh hectare a year ago. As per Brazil’s crop supply agency, soybean crop estimates for 2008/09 was about unchanged at 57.13 million tonnes compared to record 60.02 million tonnes in 2007/08. In the coming week, prices are expected to move higher on account of lower soybean stocks and better demand from solvent extractors. NCDEX September Soybean prices has a support at 2350/2300 and resistance is seen at 2510/2550 levels.

Chana
Chana futures gained over 5% during the last week due to weak rainfall in key pulses growing areas, which have led to the speculation that the Kharif output would be lower in the coming season. September contract recovered from its low of Rs. 2475 per qtl levels and settled at around 2600 levels on Friday. Chana output in Rabi 2008-09 stands at around 70 lakh tonnes. Thus, there are huge stocks of Chana or gram in the domestic markets. Despite this, Chana prices are not able to sustain at the lower levels due to the soaring prices of other Pulses.

Delayed monsoon and thereby delay in the sowing of Kharif Pulses like Tur, moong and Urad has led to the speculation that there might be supply shortage in the coming months. Chana is the only pulses crop which is such available at such lower prices. Thus, sellers are not ready to sell Chana at the current prices, thereby restricting the supplies. On the other hand, demand is vibrant from the processors and millers ahead of the festive season. The government measures to control the rising pulses prices might pressurize Chana prices to some extent. However, any significant decline should be treated as a good buying opportunity. We expect September Chana contract to trade in the range of Rs. 2530-2700 per qtl in the coming week.

Pepper
Spot pepper prices at Kochi surged due to buying by the stockists and increase in the pepper parity of various origin. There are reports that the pepper crop in Brazil is expected to be lower due to heavy rains in Para state, which is major producing area of pepper in Brazil. Fresh arrivals of pepper in the Brazil will commence in the month of September. Vietnam has lower stocks of pepper to sell, as it has already exported around 65000 tonnes of pepper from its fresh crop of 110000 tonnes during this year. Thus it would not aggressively sell pepper. Indian pepper in the international market is quoting at $3075/tonne (C&F). Strong demand from the overseas and domestic market is expected in the coming days. Pepper futures have touched a high of Rs.14,750/qtl, breaking an important resistance level of Rs. 14,400/qtl. Prices may trade in sideways to upward trend in the coming days. Technically prices may have a strong support at 14,400/3,800 levels. Resistance may be seen at 15080/15,600 levels.

Rubber
Rubber spot market witnessed weak to mixed trends throughout the weak despite bull rally in TOCOM futures. Absence of quantity buyers in main marketing centres was responsible for sudued sentiments. Spot prices which had improed to Rs 101 in the beginning of the week later weakened to Rs 100.

The physical rubber prices were weak on Thursday. According to observers there were no quantity buyers in the main marketing centres to keep the market firm though the domestic and international futures were in a bullish mood. Sheet rubber declined to Rs 100 from Rs 100.50 a kg on buyer resistance.

The August futures for RSS 4 firmed up to Rs 102.10 (101.28), September to Rs 99.73 (98.66), October to Rs 97.05 (96.63) and November to Rs 97 (96.52) a kg on National Multi Commodity Exchange (NMCE) on Thursday.
Despite rising imports, prices of natural rubber have remained buoyant throughout the past few months on the back of a shortfall in the global production.

The import of rubber by tyre companies has touched about 79,573 tonnes during April to August 4, 2009 as compared to 24,264 tonnes during the same period of the year-ago period, growing at a rate of 228%. Stocks of natural rubber now stands at 1.8 lakh tonnes, against 1.2 lakh tonnes during the same period of last year. Lower exports also added to the stocks.
Despite such a major increase in import and stocks, the rubber price has not seen a downturn. After hovering around Rs 98 to Rs 99 per kg in the past one month, the price touched Rs 100 per kg-mark on August 1. On Thursday, the price stood at Rs 100 per kg.

AT TOCOM, prices slipped 2.5 percent on Friday after reaching a nine month high on Tuesday, booking its first weekly decline in five weeks, on speculation a U.S. jobs report may revive concern that worsening unemployment will curb consumer spending and cap demand for the commodity. Investors are cutting long positions on doubts about fall in spending.
January-delivery rubber fell as much as 4.8 yen to 191 yen a kilogram ($2,003 a metric ton) on the Tokyo Commodity Exchange before settling at 191.9 yen. The decline was fast as investor resistance was stiff above 200 yen.
Rubber gained 21 percent in July, the most since December 2006, and have jumped 44 percent this year as global equities rallied and exporters, including Thailand, curbed shipments. Rubber is expected to exhibit weakness and range-bound trading close to Rs 100 levels is likely next week.

Crude Oil
Crude oil began the week on a rosy note and hit a one-month high of $71 on Monday as positive Chinese data and firm equities signaled economic recovery and higher energy demand. US Crude hit a intra-day high of $71.95 before settling at $71.50.

Brent crude was getting close to resistance levels and continued support from equities were required to stabilize prices.
On Friday, Crude oil fell below to$71 per barrel on the New York Mercantile Exchange after attaining a 5-week high although equities fared well in Wall Street. Light, sweet crude traded lower, losing $1.01 to reach $70.86 per barrel. Heating oil prices lost 0.0163 cents to $1.9145 per gallon. Reformulated gasoline prices fell 0.0524 cents to $2.003 per gallon. Natural gas prices lost 0.0866 cents to $3.70 per million British thermal units.

The dollar gaining against euro reduced the appeal of commodities, a forecast showing a weaker Atlantic hurricane season offset an upbeat US job report. The U.S. National Oceanic and Atmospheric Administration (NOAA) said that it now expects a near- to below-normal hurricane season, as the effect of the El Niño weather pattern continues to develop. Meanwhile US weekly employment data was supportive and prevented sharp fall in oil prices. The four-week average of new claims dropped to 555,250, the lowest level since January.

Oil Futures have so far gained 59% this year. The speed of the oil price surge in recent times also made it susceptible to correction. In the near term, weakness is likely in the oil segment with possibility of prices declining to $60 and then rebounding.

Central banks globally hold 29,697 tonnes of gold

2009-08-09T13:35:00.000+05:30

While it was widely expected, the Central Bank Gold Agreement CBGA2 has been rolled over into a CBGA3. Under the new agreement announced on Friday morning, signatories won’t be allowed to sell more than 400 tonnes of gold.

This restriction is 100 tonnes a year less than the 500 tonnes a year under CBGA2. In total, the sales will not exceed 2,000 tonnes in five years. Signatories to the agreement includes the 16 Eurozone central banks, the ECB, the Swiss Central Bank, and the Swedish Central Bank. While the immediate impact might be limited, we view the long-term impact of CBGA3 as positive for gold.

"We doubt that the 400 tonnes restriction on selling is a binding restriction. Many central banks are likely to decrease their selling of gold under CBGA3. For example, the SNB has already indicated it has no intention of selling any of its 1,040 tonnes of gold any time soon. Under the CBGA2, there was a declining trend in gold sales. In 2004/05, 497.2 tonnes of gold were sold," says a commodities research report from Standard Bank.

In 2008/09, only 136 tonnes were sold (refer to figure). At least for the next year, we expect central bank gold sales to be limited, the report said.

There are indications that the IMF’s 403 tonnes of gold could be accommodated under the CBGA3. The IMF indicated this already a few weeks ago and, should this happen, we would view it as gold-supportive, especially if the IMF sells most of its gold in under two years.

This could limit total sales a year by other signatories substantially, and reduce gold supply to the market. The rolling over of CBGA2 could be an reflection that central banks globally might be less willing to sell gold. These central banks hold a total of 29,697.9 tonnes. Signatories of CBGA2 holds 11,991.6 tonnes.

Crude Oil May Climb to $95 in Early 2010: Technical Analysis

2009-08-08T23:52:00.000+05:30

Crude oil may reach $95 a barrel by early next year after rising to a seven-week high this week, according to technical analysis by Auerbach Grayson.

Oil is set to reach $83 a barrel, which corresponds with the 38.2 percent Fibonacci retracement of the range generated by the September contract’s high of $145.96 on July 14, 2008, and the low of $44.28 touched on Feb. 18. The next target of $95 would be a 50 percent retracement.

“The oil market is in a strong position for a further move to the upside,” Richard Ross, a technical analyst at Auerbach Grayson, a brokerage in New York, said in a telephone interview. “There was a 70 percent pullback from the peak last summer to the trough. A 50 percent retracement brings you right to $95.”

Crude oil for September delivery fell 3 cents to $71.94 a barrel yesterday on the New York Mercantile Exchange. Futures topped $70 on Aug. 3 for the first time since July 1, which was a breakout from a ‘symmetrical triangle formation,’ Ross said.

“We were able to break out on the upside Monday and more significantly, we broke out and held those gains,” Ross said. “This shows the ability of the oil market, along with equities, to shrug off bad news and focus in the good news. This is a good sign for technicians.”

The Fibonacci sequence was identified by Italian mathematician Leonardo Fibonacci in the 13th century. The ratio between the numbers, about 0.618, is known as the golden mean, and is also used by technical analysts to find levels of resistance and support.

IMF gold sale under new central bank pact only

2009-07-30T22:40:00.000+05:30

The International Monetary Fund (IMF) has stepped up lending to low-income countries to combat the impact of the global recession.

According to an announcement on its website, IMF said it has declared a new framework for loans to the world’s poorest nations, including increased resources, a doubling of borrowing limits, zero interest rates until the end of 2011, and more flexible terms.

The IMF’s executive board approved the package of measures that will sharply increase the loan resources available to low-income countries. The resources — including from the planned sale of IMF gold — are expected to boost the IMF’s concessional lending to up to $17 billion through 2014, including up to $8 billion over the next two years.

And, the planned sale of 403 tonnes of IMF gold will take place within a new European central bank gold pact currently being negotiated.

The IMF has provisionally agreed to sell the gold to raise resources for increased lending to poor countries.

A deciding vote by the fund’s 186 member countries is expected before IMF meetings in Istanbul in October, and requires the support of 85 per cent of the membership.

The sales would probably occur all the time within the central bank agreement and could take two to three years before sales are completed.

Negotiations on the new Central Bank Gold Sales Agreement will also be finalized by October. The current 5-year agreement expires in September.

The IMF holds 103.4 million ounces (3,217 tonnes) of gold, which had a market value of about $12 billion as of March 31.

In order to meet the financing needs of the low-income countries during the global crisis, some of the proceeds of those sales will be used to help provide new subsidy resources for the concessional lending to those countries.

Resources linked to the gold sales will be used to help fund concessional lending to low-income countries in the following ways. First, windfall profits when the gold sales take place can be used for the subsidy resources.

Windfall profits would derive from gold sales at an average price in excess of $850 per ounce — that is the price assumed in the new income model as necessary to fund the model. Second, to the extent that the realized windfall profits fall short of the required contribution, the remaining amount will be generated through investment income from the endowment funded by the gold sales.

In addition, the IMF announced zero interest payments up to the end of 2011 for all concessional loans to low-income members and lower interest rates on a permanent basis thereafter. A new set of lending instruments will underpin this increased support.

India’s IT Inc joins effort to reduce carbon footprint

2009-07-27T22:54:00.000+05:30

India’s consumption of desktop PC and notebook PC are rising at a rapid rate, according to IDC’s World Wide Quarterly PC Tracker for 4Q08,4.1 mn more desktop PCs and 2.4 mn more notebooks will be in use in India by 2009 . This amounts to approximately 47 mn units by 2010.

IT industry is a major contributor to green house gas emissions as much of the power in desktop PC is wasted as heat.E ven servers which are typically more efficient than desktops still waste 30 to 40 percent of the power utilized. One of the prominent reasons behind wastage of power is that desktop PCs have default setting of sleep or hibernate mode when inactive for a sustained duration however, in about 90 percent of systems this functionality has been disabled. This results in higher energy consumption and an increase in electricity usage. In addition, IT users have lack of awareness about the power saving features which are already available in their computers.

Thererfore, nine major organizations in India have joined the Climate Savers Computing Initiative (CSCI), that was launched in 2007 in USA by major IT companies in USA. It was started with the aim of bringing efficiency to the computer’s power delivery thus reducing energy demand and greenhouse gas emissions. The India chapter was launched by Dell, Intel, HP,Google WWF, TERI, CII-ITC Centre Of Excellence For Sustainable Development, MAIT and NASSCOM joining hands with the aim of driving energy efficient practices in every-day computing.

CSCI global campaign, a non-profit group was started by CSC, Dell, Google, HP, Intel, Lenovo, and Microsoft. CSCI is a nonprofit group of eco-conscious consumers, businesses and conservation organizations promoting adoption of smart technologies in everyday business and personal computing which can improve the efficiency of a computer’s power delivery and reduce the energy consumed when the computer is in an inactive state.

“In next 3 years, the Climate Savers Computing Initiative will cut greenhouse gas emissions in an amount equal to planting around 4800 sq.km. of trees -- a significant step in reducing the emissions affecting our planet,” said Rahul Bedi, Director Corporate Affairs - South Asia, Intel and first Chairman of CSCI India Chapter.

The nine founding members of CSCI India pledged to reduce carbon emissions by 4 million tons and reduce 50% in energy costs through efficient computing in next 3 years. “We believe that CSCI India will play a crucial role in supplementing green ICT innovations and solutions. CSCI’s goal to achieve a 50 percent reduction in power consumption by computers and reduce 4 million tons of carbon emission over next 3 years can be a potential supplement towards India's low carbon growth,” said Ravi Singh, co-chairman of CSCI India and CEO & Sec. General of WWF India. The reduction in energy and power are the fiscal points to ensure sustainable growth for both the ICT sector and meeting country’s bigger objectives under the National Action Plan on Climate Change that involves ICT solutions.

“With the projected increase in the numbers and extent of usage of IT equipment, it is essential that this industry becomes fully conscious of the implications of these developments for increased energy consumption. It is, therefore, imperative that industry takes the lead in bringing about innovation that would ensure high levels of efficiency in the operations of IT equipment through its entire life cycle”, said Dr R K Pachauri, Chairman, Inter-governmental Panel on Climate Change (IPCC) and Director-General, TERI, in a message on the occasion of the launch. While complementing the opportune launch of CSCI chapter in India Dr Pachauri lauded the efforts and expected that “the industry, including the associations and leading think-tanks, will move along the path of designing and producing equipment which would ensure efficient use of energy."

Jairam Ramesh, India's Minister for Environment and Forests said, " India is committed to bringing about a reduction in its global carbon footprint and welcomes the CSCI initiative. The Government of India is looking to the IT industry to drive impactful and tangible change both through the use of IT across various industries as well as within the industry through the adoption of energy efficient products.

Starting January 2010, it will become mandatory for certain products to carry eco labelling. In the first lot 4 products – refrigerators, air conditioners, distribution transforms and florescent lamps will be covered. By mid next year 3 more product lines (colour TVs, LPG Stoves and electric motors) will need to carry the mandatory eco labelling. IT industry should also work with the Bureau of Energy Efficiency to device similar eco standards."

Dr Ajay Mathur, Director General, Bureau of Energy Efficiency (Ministry of Power) said, "we look forward to a close partnership with the CSCI initiative of the IT industry to work not only within the industry, but also with the channel and the user community to adopt eco-friendly products and practices. We are already working towards developing a labelling system that will enable end users of computers to make an informed choice in favour of energy efficient systems.

(IndiaPRWire)

Commodity Trends:Outlook positive on equity rally

2009-07-26T22:43:00.000+05:30

Globally stock markets are rallying raising hopes of economic recovery India’s BSE sensex has now overcome the 15,000 mark wile Do Jones industrials climbed above 9,000 for the first time since January. This trend was also now visible across several key commodities including gold, basemetals, pepper and wheat whose prices showed buoyancy and intermittent volatility.

Though the prices of select mass consumption food items such as pulses, fruits, potatoes and rice continued to rise week-on-week, the high base effect kept the wholesale price index (WPI)-based annual rate of inflation below zero for the sixth consecutive week. Weak progress of monsoon has prompted the India Government to stop all exports of non-Basmati rice and wheat, and bear half of the subsidy on diesel offered to farmers by the states.
Allaying fears of shortage of foodgrains, Pawar said, "Stock position is quite comfortable. We have sufficient stock position for 13 months in our kitty."

Precious Metals
The bullion pack traded higher during last week with Spot Gold breaching the $950 mark, on the back of weakness in the US Dollar against other major currencies. The Bullion pack continues to closely track the movements in the currencies markets. Investor interest from exchange traded commodity funds (ETFs) whose demand for gold increased 540 percent between the first quarter of 2008 and the same quarter in 2009 is also likely to be supportive of gold prices. Investment side demand is showing some signs of revival but the jewellery/fabrication demand continues to remain tepid.

The Bullion pack rally now appears to be stalled as Spot Gold is unable to trade consistently above the wall of resistance around $955 - $956 levels as we are witnessing profit booking along with reluctance of bulls to build fresh long positions around these levels. The bullion pack though continues to close consistently above their 10-Day Moving Average indicating that the short-term uptrend remains intact. The Dollar Index (DX) is currently trading around 78.60 levels, very close to its recent low of 78.33 on June 2nd, which is acting as short-term bottom. Trading below this level would lead to a sharp weakness in the USD, in turn supportive for the bullion pack.

Base Metals
The uptrend in base metals has continued on the back of a strong bullish momentum. Nickel and Aluminum have already reached their best levels this year and Copper is not far off from the nine-month highs that it set on Thursday. The rally in base metals indicates that sentiments have improved significantly and are bullish and widespread. Asian equity markets gained in today’s session as wider financial market trends provided a robust backdrop. News of supply constraints have risen this week due to shutdowns at two of Chile’s biggest mines. This factor is supportive for copper prices. Copper price are rising on the back of this news.

Base metal prices could remain upbeat but may come under selling pressure by the end of the week as 1) profit booking after higher prices could come in and 2) prices may come under pressure as we approach the weekend and funds may liquidate their positions prior to the weekend. However, the overall trend is expected to remain bullish on the back of better-than-expected corporate results. The global economy is on its road to recovery but the pace of improvement could be slow. The Federal Reserve Chairman has indicated that the pace of the economic decline in the United States has slowed down significantly and the final demand of production has shown tentative signs of stabilization. But the labour market continues to look weak and the unemployment rate could rise going forward. The currency and equity markets play a crucial role in determining price direction.

Crude Oil
Crude Oil prices rose to three week high in the last week, as surging equity markets amid better earnings reports and weaker dollar against major currencies supported oil prices. NYMEX September crude oil prices rose above $67 per barrel. Rally in oil prices came despite energy data is showing weak demand. Meanwhile OPEC has decided to trim shipments by 1.7 percent in the four weeks ending Aug. 8. OPEC will reduce its exports to 22.39 million bpd from 22.78 million bpd. It is the sixth consecutive drop reported in oil exports.

Crude Oil prices continue to take cues from trend in the equity markets. Recent strong earnings results of corporate have boosted equity market confidence and helped oil prices to gain. But inventory data has shown that gasoline and oil products stocks are at record high levels amid weak demand. Despite US driving season is underway demand for gasoline continues to remain tepid. Although OPEC is deciding to reduce oil exports, it will do little to balance the market. CFTC will have three hearings in next couple of weeks on curbing speculation activity in energy commodities and outcome of this event can impact oil prices. We believe that oil prices are having resistance near $70 mark in the near term and if prices close below $62 levels then can head towards $58 per barrel level. MCX August Crude Oil can get support around Rs3160/3050 levels, whereas resistance is seen at Rs.3325/3380 per barrel.

Climate Changes Could Cause Worldwide Crisis, says Report

2009-07-26T22:38:00.000+05:30

Citing their report that climate change "…will aggravate existing problems such as poverty, social tensions, environmental degradation, ineffectual leadership and weak political institutions" in some countries, members of the National Intelligence Council say that a possible worldwide crisis looms in our near future.

Thomas Fingar, chairman of the National Intelligence, testified this week before the House Select Committee on Energy Independence and Global Warming. Though the 58-page report itself is classified, Fingar released some of the report’s dire predictions, including the fact that global disease may spread as refugees from low-lying coastal countries try to flee disaster conditions.

Fingar added that potential host countries may not be equipped to handle the possibility of millions of desperate refugees, and the fragile political systems in place may give way under the pressures caused by a global humanitarian crisis.

The report, called "National Intelligence Assessment on the National Security Implications of Global Climate Change to 2030" consisted of input from retired military personnel, from the United Nations’ Intergovernmental Panel on Climate Change, and all 16 United States’ intelligence agencies.

The report emphasized that while climate change by itself will not cause a worldwide destabilization, the effects of global warming will cause a series of worsening situations that all contribute to political collapse and human crisis.

"Climate change alone is unlikely to trigger state failure," said Fingar. "But the impacts will worsen existing problems - such as poverty, social tensions, environmental degradation, ineffectual leadership and weak political institutions."

Fingar stated that the most affected countries will be in the Middle East, sub-Saharan Africa, and central and southeast Asia.

Of Africa, Fingar says, "Without food aid, the region will likely face higher levels of instability, particularly violent ethnic clashes over land ownership."

Some areas of Africa may see their agricultural output decrease as much as 50% by 2020.

In addition, the report states that as many as 50 million more people than today could suffer from hunger by the year 2020, and 1.2 billion might face "water stress."

Fingar emphasized that while the United States may not feel the initial effects of global warming as keenly as some other nations, a worldwide crisis would eventually make itself felt even in comparatively prosperous nations like America. "The United States depends on a smooth-functioning international system ensuring the flow of trade and market access to critical raw materials, such as oil and gas, and security for its allies and partners," said Fingar. "Climate change and climate change policies could affect all of these with significant geopolitical consequences."

Reaction to the report ran predictably along party lines. Republican House committee member Darrell Issa (R-Ca) called the report "a dangerous diversion of intelligence resources."

But Democrat Committee Chairman Ed Markey told reporters, "Human beings all over the planet face death or damage or injury if we do not act."

By Buzzle Staff and Agencies
Published: 6/27/2008

Fragile monsoon hits major corn, sugarcane region

2009-07-26T22:32:00.000+05:30

India’s Agriculture minister Shard Pawar on Friday said country’s monsoon rains remain weak in major corn and sugarcane producing areas.

Speaking in Parliament, Pawar said Bihar, the country's leading corn producer, and Uttar Pradesh, which normally produces more than half of India's sugarcane, received less rains than average so far.

India’s Meteorological department has forecast only scanty rain in these regions in the next three days, and from July 26 it has predicted widespread rains only in northeastern India and the west coast.

India's cotton, corn and oilseeds sowing was almost normal despite deficient monsoon rains this year, but sugarcane planting had dropped by 122,000 hectares from a year ago.

The June-September monsoon rains began with an exceptionally dry phase in the first five weeks, but rainfall has improved in the past two weeks in most parts of the country.

Total rainfall in India was 15 percent above normal in the week to July 22, but was still 19 percent below normal for the June -July

U.S. Stocks Rally, Dow Tops 9,000 for First Time Since January

2009-07-23T23:05:00.001+05:30

U.S. stocks rose, sending the Dow Jones Industrial Average above 9,000 for the first time since January, as EBay Inc., Ford Motor Co. and AT&T Inc. posted better-than-estimated results and home resales increased more than forecast.

EBay rallied 9.7 percent as its earnings signaled consumers’ appetite for online commerce is starting to recover. Ford jumped 9.9 percent after topping analyst estimates by paring expenses and adding market share. AT&T added 3.2 percent as new customers of Apple Inc.’s iPhone bolstered profit. D.R. Horton Inc. led homebuilders higher after sales of existing homes increased for a third straight month.

The S&P 500 advanced 2.3 percent to 975.64 at 11:41 a.m. in New York, the highest intraday level since Nov. 5. The Dow Jones Industrial Average gained 181.98 points, or 2.1 percent, to 9,063.24. The Nasdaq Composite Index surged 2.3 percent for a 12th straight gain, its longest streak since 1992. Benchmark indexes for Asia and Europe also rose.

“It’s been a good earnings season, given the backdrop that was there,” said Sarah Hunt, a money manager who helps oversee about $6 billion for Purchase New York-based Alpine Mutual Funds. “When you look at some of the estimates, they are expecting a better second half.”

The S&P 500 has rallied 10 percent since July 10 as earnings topped analysts’ estimates at 75 percent of the 158 companies in the index that reported results, including Caterpillar Inc., Intel Corp. and JPMorgan Chase & Co. Profits have fallen 25 percent on average from a year ago, according to data compiled by Bloomberg, less than the 33 percent drop forecast by analysts as of July 17.

‘Doing Well’

“Relative to the estimates, it looks like they are doing well,” said Stephen Wood, who helps manage $136 billion as chief market strategist for North America at Russell Investments in New York. “Part of that is an expectations game. Analyst estimates tend to lag, so some of that is a catch-up.”

EBay climbed 9.7 percent to $21.34 as the company forecast revenue in the next three months will be $2.05 billion to $2.15 billion. Analysts had estimated $2 billion.

Ford increased 9.9 percent to $7.01. The only major automaker to shun a U.S. rescue reported a second-quarter loss, excluding some items, of 21 cents a share. The average estimate of analysts surveyed by Bloomberg was for a loss of 50 cents.

“Ford looks like it’s improving its balance sheet, and its cash position looks pretty good,” said Hayes Miller, who helps manage $38 billion at Baring Asset Management Inc. in Boston. “Not only do we not have a potential for bankruptcy, but it looks like it’s improving itself at a quicker pace than Chrysler and GM.”

AT&T Climbs

AT&T added 3.2 percent to $25.64 after reporting second- quarter earnings, excluding some items of 54 cents a share, beating the average analyst estimate by 5.3 percent.

All 13 companies in a gauge of homebuilders advanced after sales of existing U.S. homes rose 3.6 percent in June to an annual rate of 4.89 million, the National Association of Realtors said in Washington. Economists in a survey had forecast an increase of 1.5 percent.

3M Co. gained 6.1 percent to $68.62, the biggest advance in the Dow, after the maker of Post-it Notes and Scotch Tape reported second-quarter profit excluding some items of $1.20 a share, beating the average analyst estimate by 28 percent. The company also raised its 2009 earnings forecast.

Fifth Third Bancorp, Ohio’s largest lender, gained 15 percent to $8.07 after reporting second-quarter earnings of $1.15 a share, compared with a loss of 37 cents a share a year earlier.

McDonald’s, Qualcomm Slump

McDonald’s Corp., the world’s largest restaurant company, sank 4.3 percent to $56.33, the biggest drop in four months. Second-quarter revenue declined more than analysts projected on slowing consumer demand and a stronger U.S. dollar.

Qualcomm Inc. declined 4.2 percent to $46.41 after the company forecast fourth-quarter sales that fell short of some analysts’ estimates, raising concern that handset demand is still slowing. Separately, South Korea’s antitrust regulator said it plans to fine the world’s biggest maker of mobile-phone chips a record 260 billion won ($208 million) for anti- competitive practices.

CIT Group Inc. slid 17 percent to 72 cents. Advisers to bondholders that rescued CIT with a $3 billion loan said creditors should push the company into Chapter 11 bankruptcy after a debt swap next month, according to a person familiar with the matter.

World' first double-page weather spread launched

2009-07-23T23:03:00.000+05:30

Weather Underground, the Internet's first weather service, has helped to create history with the launch of The San Francisco Chronicle's new double page weather spread in its Sunday edition.

The Hearst Corporation-owned newspaper recently announced that it was to become the nation's first high-definition newspaper thanks to new state-of-the-art presses. Weather Underground was chosen to develop a new weather service that takes advantage of the presses' reproduction quality and color capabilities, displaying the Bay Area's diverse microclimates using detailed maps, graphs and diagrams.

The double page spread in Sunday's edition features a detailed map of the entire Bay Area including a forecast of the infamous fog layer that greets Bay Area residents most mornings. Other new features include a weekly summary of earthquake activity and a more detailed map of the city of San Francisco itself. The Chronicle also exploits the extra space on the large maps to highlight local events that are taking place that day enabling readers to plan their Sunday activities alongside the weather forecast.

"This new spread represents the biggest commitment that any newspaper has ever made to weather reporting," commented Alan Steremberg, President and co-founder of Weather Underground. "The move reflects the high value of weather content within the newspaper industry and all media. Weather Underground is honored that a newspaper with the stature of The San Francisco Chronicle is utilizing our weather technology."

Weather Underground's chief meteorologist Shaun Tanner adds: "Pioneering new weather services for our media clients is a core business goal of Weather Underground. The Bay Area is home to some of the most diverse microclimates in the United States and this groundbreaking service allows us to provide readers with the most localized forecasts available.

(Marketwire)

IndiaMART.com unhurt, records 40% growth

2009-07-14T00:10:00.001+05:30

IndiaMART.com, India's largest online B2B marketplace, reports an impressive growth of 40 percent in revenues for 2008-2009 despite an economic downturn. The growth in revenues has also been backed by a robust 52 percent growth in supplier registrations.

"Our numbers speak for themselves, While the whole world is busy hiding behind words like recession and economic downturn to conceal their poor performance, our teams have strived hard to keep the winning streak going,'' said a beaming Dinesh Agarwal, CEO and Founder of IndiaMART.com.

Agarwal feels the steep rise in registrations is clearly indicative of recessionary pressure on entrepreneurs to make do with show string marketing budgets, which naturally pushes them to seek online marketing as the most credible and effective option. As the market leader, IndiaMART is always keen to take on path breaking initiatives to sensitize SMEs about online marketing and adoption of technology through events, trade shows and conferences.

IndiaMART.com has been ranked India's No. 1 online B2B marketplace by the Internet and Mobile Association of India (IAMAI) in its recent study done on Information, Communication & Technology (ICT) usage among Micro, Small and Medium Enterprises (MSMEs). The independent market research, with special focus on online B2B marketplaces, accords over 85 percent preference for IndiaMART among B2B suppliers who go online, and who were interviewed by IAMAI. The study also states a 60 per cent market share for IndiaMART.com in India.

IndiaMART.com received its first round of private equity investment from Intel Capital earlier this year. Bennet Coleman and Co Ltd, publishers of The Times of India and The Economic Times, also have a stake in IndiaMART as a private treaty partner.

IndiaMART.com is India's largest online B2B marketplace connecting global buyers with suppliers through business directories, online product catalogs, buy-sell offers, industry specific marketplaces, printed media and trade shows participation.

(Courtesy: PRLog)

Gold demand surges as production hits 84-year low

2009-07-12T13:16:00.001+05:30

The United States is immersed in exploding debt. The U.S. Federal Debt is now more than $10.2 trillion… and the number is growing by over $1 million every minute. This debt is a significant part of the inflationary tsunami that is sending the dollar into a steady downward spiral.

When the dollar is weak, which it has been in recent years, gold goes up.

And as the government pours over $8.5 trillion dollars of liquidity into the market and it filters down, there could be inflation of the type we have not seen since the early 80’s – and once that happens… gold could rally past $1,000… past $2,000… even soaring past $6,000 an ounce.

Remember… in the 80’s when inflation was 18%? Well if that happens again, some experts believe gold could soar as high as $6,000 an ounce.

And just when inflation was starting to surge – from 1975 to 1980 – precious metal stocks soared – Bankeno Mines from $1.25 to $430, handing early-in investors a 34,300% gain, Azure Resources from $.93 to $440 – a 47,211% gain and Wharf Resources from $.40 to $560 – an incredible 139,900% gain.

That five-year period was one of the biggest financial opportunities for investors in history.

And now we’re at the same crossroads... with inflation rising... the dollar falling... and the world in turmoil... and you’ve been handed another once-in-a-lifetime opportunity to invest in gold stocks which are poised to make double-, triple-, even quadruple- digit gains.

Just listen to what two of the brightest and most knowledgeable moneymen think about the weakening dollar:

Warren Buffett advises you to “build an ark” to protect against the fallout from the falling U.S. dollar.

Professor Kenneth Rogoff, a former head researcher at the International Monetary Fund, warns of a potential 40%+ drop in the greenback’s value.

With the threat of global inflation fueled by soaring energy and food prices, it isn’t just the U.S. Federal Reserve that is likely to take action in an effort to stabilize rates. The entire world is now aware of the financial crisis, since the U.S. credit problem has spread to the broader global markets.

Central banks all over the world will have to coordinate efforts to mitigate the problem… continuing to inject liquidity into the global system.

Because of this, many economic experts believe we’re headed for inflationary times. And gold has always been a safe asset to protect your wealth against inflation.

Thing is, right now is the perfect opportunity for you to put your “toe in the water” ahead of the enormous gains that gold and gold resource stocks will bring in the next year…

Upward pressure on the price of gold will be driven by the current economic uncertainty surrounding the U.S. economy, increasing inflation and the strong demand for gold overseas.

Fact of the matter is, holding dollars has not been a “good idea” for several years now.

Foreign investors are slowly making that realization and are actively looking for investments that are appreciating, not depreciating.

Gold fits the bill.

With the steady decline of the stock market, not to mention the U.S. dollar, now is the best time to own something of real substantial value – GOLD.

Fact is, with the weak dollar, other countries are in the process of diversifying their dollar holdings – buying gold to get out of the dollar… And as gold’s popularity increases during this volatile time, you’ll see prices of gold and gold related stocks continue to soar upwards.

According to Mining Weekly… Dr. David Davis, a Senior Gold Analyst at Credit Suisse Standard Securities states…

“Between 2007 and 2010, supply-and-demand dynamics will undergo irreversible change, caused by a decline in global mine and official sector supply and increased demand from China and the investment community.”Gold Demand Surges Worldwide… While Gold Production Hits 84-Year Low

The economic fundamentals for gold are favorable. Production of gold from South Africa, United States, Australia and Canada, has dwindled every year over this past decade.

These countries, which combined, produce two thirds of the global gold through the 1980’s, now produce less than half of the gold mined today.

Meanwhile, physical demand for gold has been going through the roof. Much of the recent explosion in demand can be attributed to retail investors in India, China and other parts of Asia where the appetite for gold investments are soaring.

India, for example, is experiencing an 80% growth in gold investment following a loosening of trade and market restrictions.

And let’s not forget China… home to 1.3 billion people.

China, which has the fastest-growing economy in modern history, is undergoing major changes in the way it handles gold.

Private gold ownership has been outlawed for generations. But in 2002, the Shanghai Gold Exchange opened and started free trade in gold for the first time in the nation’s history.

Even more recently, China legalized gold investment by private citizens.

Considering the high savings rate in China, gold is a logical investment. It’s estimated that the equivalent of US $36 billion in Chinese private investment could move into gold in coming years.

Plus, the Chinese government is moving to increase its low gold reserves. Given these recent developments, China alone could consume 40% of the world’s entire gold production for years to come.

The worldwide monetary policy and global supply-and-demand for gold have already ignited a powerful rally that’s virtually certain to carry gold to much higher price points.

So now is the perfect time for you to jump on board the gold market rally…

Courtesy: Smart Profits Research

How India Budget affects commodities

2009-07-06T18:42:00.000+05:30

Union Finance Minister Pranab Mukherjee has announced several commodity-friendly measures in the budget including withdrawal of Commodity Transaction Tax. (CTT) apart from the stated objective of raising agricultural growth to 4% by substantial increase in plan allocation and capital formation and increase in infrastructure investment to more than 9% of GDP.

These measures are expected to boost the agri-commodities, metals, cements and chemicals industries in the medium to long term and also add further impetus to stimulus packages already announced to boost growth.

”A very positive sign for Indian commodities market. Being in the nascent stage of development, abolition of CTT will reduce transaction costs in commodities trading, thereby the burden will come down and participation in these markets shall increase.CTT was to be introduced in the last budget and was causing concern in the growth of the Indian commodities market. This news of abolition of CTT has brought in great relief,” according to Dinesh Thakkar, CMD of Angel Broking.

Anjani Sinha, Director, MCX, said, “The Budget is visionary and good for the commodity markets, for which the government should be applauded with highest intensity. It will stimulate huge investment in the warehousing sector since the uncertainty of commodity market viability with respect to the cost of transaction (CTT) has been removed and now it will be at par with top 25 global commodities exchanges which constitute 99.99% of the world’s exchange traded commodity derivative volume. This announcement will put Indian commodity market ecosystem at par with international exchanges with respect to cost of hedging, thereby fulfilling the government’s vision of making Indian commodity derivative market competitive on a global canvass”.

National Rural Employment Guarantee Act that provided employment to 4.47 crore households in 2008-09 has got a further fillip with allocation for the scheme raised to Rs 39,100 cr, a whopping increase of 144%. To increase the productivity of assets and resources under NREGA, convergence with other schemes relating to agriculture, forests, water resources, land resources and rural roads is being initiated, Finance Minister said.

The Budget has restored an eight percent Centre Excise duty on manmade fibre and yarn making ito on par with cotton sector. The Minister has also reduced the customs duty on wool waste and cotton waste used in cheaper varieties of textile articles such as blankets and rugs to 10% from 15%.

Gold Bars, Silver
Customs duty on gold bars have been hiked to Rs 200 per 10 gm from Rs 100 while other forms of gold excluding jewellery will be levied at the rate of Rs 500 per 10 grams against existing rate of Rs 250. Silver will charged at Rs 1000 per kg as against existing Rs 500.

One mega handloom cluster each in West Bengal and Tamil Nadu and one powerloom mega cluster in Rajasthan have been announced..The minister said that the earlier tow the two mega handloom clusters at Varanasi and Sibsagar and two mega powerloom clusters at Erode and Bhiwandi are under successful implementation..These will generate job opportunities and income. The government also intends to add new mega clusters for Carpets in Srinagar (J&K) and Mirzapur (UP).

Financial inclusion
As a result of financial inclusion initiatives by scheduled commercial banks -3.3 crore no-frill accounts were opened. To develop banking network in unbanked or underbanked areas, a Sub-committee of State Level Bankers Committee will identify such areas and formulate an action plan to bring them under banking network within 3 years, the Minister said. A budget allocation of Rs.100 crore during the current year as one-time grant-in-aid has been made to ensure provision of at least one centre/Point of Sales (POS) for banking services in each of the unbanked blocks in the country.

The RBI has announced a further relaxation in its Branch Authorisation Policy. Scheduled Commercial Banks are now allowed to set up off-site ATMs without prior approval, subject to reporting.

Exports
The adjustment assistance scheme to provide enhanced Export Credit and Guarantee Corporation (ECGC) cover at 95 percent of badly hit sectors have been extended to March 2010.

The allocation for Market Development Assistance Scheme provides support to exporters in developing new markets has been raised by 148% to Rs 124 cr. The interest subvention scheme of 2 percent on pre-shipment credit for seven sectors—textiles including handlooms, handicrafts, carpets, leather, gems and jewellery, marine products and small and medium exporters has been extend till March 31, 2010.

Micro, Small and Medium Enterprises (MSMEs) have been affected by the slowdown in exports and the indirect effect of the global crisis on domestic demand. To support this them credit flow will be ensured by providing a special fund out of Rural Infrastructure Development Fund (RIDF) to Small Industries Development Bank (SIDBI), Pranab Mukherjee said. This fund of Rs.4,000 crore will incentivise Banks and State Finance Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing 50 per cent of incremental lending to MSEs during the current financial year.

Nutrient-Based Subsidy .
To ensure balanced application of fertilizers, the Government intends to move towards a nutrient based subsidy regime instead of the current product pricing regime, Pranab Mukherjee said. It will lead to availability of innovative fertilizer products in the market at reasonable prices. This unshackling of the fertilizer manufacturing sector is expected to attract fresh investments in this sector. In due course it is also intended to move to a system of direct transfer of subsidy to the farmers.

Agriculture
The one-time bank loan waiver of nearly Rs.71,000 crore to cover an estimated 40 million farmers was one of the major highlights of the last Budget. This scheme has been extended to 31 December 2009. A task force will be set up to study the problem of indebtedness among Maharasthra farmers due to credit availed from money lenders and therefore not coming under the loan waiver scheme.

Finance Minister had made an additional Rs.1,000 crore allocation over Interim BE for the Accelerated Irrigation Benefit Programme (AIBP), marking an increase of 75 per cent over the allocation in 2008-09(BE). The allocation for the Rashtriya Krishi Vikas Yojna (RKVY) is also being stepped up by 30 per cent over Budget Estimates of 2008-09.

Agriculture has been the mainstay of our economy with 60 per cent of our population Agriculture credit flow was Rs.2,87,000 crore in 2008-09. The target for agriculture credit flow for the year 2009-10 is being set at Rs.3,25,000 crore. To achieve this, the Minister has proposed to continue the interest subvention scheme for short term crop loans to farmers for loans upto Rs.3 lakh per farmer at the interest rate of 7 per cent per annum. Thereby effective interest rate for farmers will come down to 6%. An additional budget allocation of Rs 411 crore over interim budget is being made.

Power
Allocation for Accelerated Power Development and Reform Programme (APDRP) has been increased to Rs 2,080 crore, an increase of 160% over interim budget. Minister also announced reduction of the basic customs duty on permanent magnets - a critical component for Wind Operated Electricity Generators - from 7.5 per cent to 5 per cent

Government will evolve a blue print for long distance gas highways leading to National Gas Grid facilitating transportation of gas across the country.

India Infrastructure Finance Company Limited (IIFCL) set up as a special purpose vehicle for providing long term financial assistance to infrastructure projects will be strengthened to fulfill its mandate, the Minister said.

Bio-Fuel
In order to encourage the use of this environment friendly fuel and augment its availability in the country, Government will reduce basic customs duty on bio-diesel from 7.5 per cent to 2.5 per cent - at par with petro-diesel. Biodiesel obtained from vegetable oils and used for blending with petro-diesel, is currently exempt from excise duty. From now on petro-diesel blended with bio-diesel will also be exempted from excise duty.

Key Features of India Budget 2009-10

2009-07-06T18:36:00.000+05:30

Key Features of India Budget 2009-10:

• The government to abolish to the controversial Commodity Transaction Tax (CTT) in line with recommendation of Economic Advisory Council of Prime Minister.

• Branded jewellery exempt from excise duty. Duty on gold re-imposed. Customs duty hike on gold and silver. Tax exemption holiday for gems, jewellery and textiles.

• Target for agriculture credit raised to Rs 3,25,000 crore (Rs 3250 billion) in 2009-10 from Rs 2,87,000 crore. Incentives in interest rates to farmers to pay back agriculture loans in time. Additional allocation of Rs 1,000 crore for accelerated irrigation project.

• Allocations for highways being stepped up by 23 per cent. Indian Infrastructure Financial Corporation Limited to evolve financing mechanism for giving increased support to infrastructure projects.

• Indian Infrastructure Finance Company Limited will re-finance commercial bank loans upto 60 per cent in critical projects through public private partnership to the tune of Rs 1,00,000 crore (Rs 1,000 billion) to raise investment in the sector.

• Allocation for urban poor for provision for housing and basic amenities to be raised to Rs 3,973 crore (Rs 39.73 billion) in the current year. Allocation for Jawaharlal Nehru Urban Renewal Mission increased by 87 per cent to Rs 12,887 crore (128.87 billion).

• Central assistance for storm-water drainage project increased to Rs 500 crore (Rs 5 billion) from Rs 200 crore (Rs 2 billion) in the Interim Budget.

• Income Tax returns to be made simpler.

• Banks and insurance firms to remain in public sector. Rs 100 crore (Rs 1 billion) to be given as one time grant in aid to expand banks in unbanking areas.

• Export Credit Guarantee scheme extended till March 2010.

• Growth rate in 2008-09 dipped to 6.7 per cent from average 9 per cent growth in previous three fiscal years. Pranab said he intends to make pre-budget consultations with state finance ministers an annual affair.

• Fiscal deficit grew from 2.7 per cent to 6.8 per cent of GDP. Total fiscal stimulus during 2008-09 amounts to Rs 1,86,000 crore (Rs 1,860 billion).

• India infrastructure finance company IIFCL is given greater flexibility; used to take care of asset liability mismatch and free up capital for financing new projects; can facilitate incremental lending to infra sector

• IIFCL will finance 50% of projects; involving total investment of Rs1 trillion, public investment in infra to get a big boost. Asked my colleagues in the state governments to remove policy bottlenecks

• Budgetary allocation to highways and railways being stepped up by 23%; railways Rs15,000 crore. JNUURM allocation up by 87%.

• Scheme for urban poor housing to Rs3,973 crore; Rajiv Gandhi Awas Yojana; slum free India. Mumbai drainage allocation up

• Accelerated power development and reform progamme: Rs2,080 crore / 160% increase in allocation

• Natural gas: long distance highway to facilitate a national gas grid

• Agriculture: Rs2.87 trilliion to Rs3.25 trillion; interest subvention scheme for farmer; govt shall pay an additional 1% subvention to those who paid their loans on time — Rs411 crore over the interim budget

• Farm loan waiver covered 40 million farmers; six months extension on account of delayed monsoon. Maharashtra loan waiver coverage review; a task force. Accelerated irrigation development programme:75% increase in allocation

• Kautilya advice: return to frbm targets at the earliest after the negative effects of the global economy are overcome. Medium term perspective await the 13th FC.

• To bring fiscal deficit under control need institutional controls; will cover subsidy, expenditure and disinvestments

• Fertilizer subsidy: a nutrient based subsidy scheme as opposed to product based scheme; unshackling of fertilizer manufacturers will ; direct transfer of subsidy to the farmer

• Oil and petroleum subsidy: Three-fourths of our oil consumption is met through imports. Task force

• Direct tax reforms: asked the department to work on saral-2 form. We need a tax system that generates revenue on a sustained basis. More reforms spread over 5 years.

• Disinvestment: people participation; banks/insurance to remain in public sector; recall of nationalization/socialist credentials; 40 years ago on this day.

Railway budget 2009-2010: Imp Points

2009-07-05T22:45:00.001+05:30

Here are the highlights of the railway budget 200-2010 presented in parliament Friday by Railways minister Mamta Banerjee.

No increase in passenger fare and freight tariff

budget to have inclusive growth and expansion of railway network to every corner of the country

Plan outlay of rs.40,745 cr. proposed for 2009-2010, passenger amenities get high priority, to get 119% increase

Traffic receipts during 2008-09 increase by 11.4 % while freight loading grew @ 5% Special trains for perishable farm produce, facilities for transportation of rural craft.

Works for 7 new lines, gauge conversion of 17 lines and doubling of 13 lines to be taken up.

Faster parcel services proposed on three routes

Tatkal scheme to be made passenger friendly

Railway tickets to be made available through post offices and ‘mushkil aasaan’ mobile vans

Concession for press persons increased to 50%

Monthly ticket of rs. 25/- for unorganized sector/poor under ‘izzat’ scheme “only ladies’ emu trains at Delhi, Kolkata and Chennai

‘Yuva trains’ from rural hinterland to metros at concessional fare

12 new point-to-point ‘duranto’ trains

57 new trains, extension of 27 trains and increase in frequency of 13 trains and air-conditioned double-decker trains proposed

50 stations to be upgraded to world class stations

Long distance trains to have on-board doctors and infotainment services

Handicapped and aged persons to have more amenities

Special trains to ferry perishable agro products and rural handicrafts

Special fund for the development of north east railway

Quazigund-Anantnag line to be completed by next month

6560 railway staff quarters to be constructed and group‘d’ employees to get scholarships for their girl child

Railways to come out with while paper on financial status and vision-2020 document

Commodity Trends:Hopes high on CTT removal

2009-07-05T21:22:00.000+05:30

The Railway Budget and Economic Survey 2008-09 have raised hopes of a reformist budget from Finance Minister Pranab Mukherjee on Monday. The Survey has favoured regulation of the commodity futures market by the Securities and Exchange Board of India (Sebi), lifting of ban on futures trading of rice, tur and urad, extension of spot commodity trading in electronic form to agricultural markets by involving APMCs and complete removal of the commodity transaction tax (CTT).

Since Commodity Futures also are part of the financial market, it should be regulated by SEBI, according to the Survey. The Survey hints at removal of commodity transaction tax (CTT) which was vehemently opposed by the industry when the concept was introduced in 2008 budget but not yet notified.

Last week, among the major exchange-related news include MCX launching futures in gasoline. There were also reports that Universal Commodity Exchange has approached the Forward Markets Commission (FMC) to set up India's sixth national level commodity exchange which is promoted by IT entrepreneurs.

Meanwhile, state-run MMTC Ltd, the country’s biggest importer of gold, said it will import 150 tonnes of the yellow metal during the 2009-10 fiscal, the same quantity it imported last fiscal.

Precious Metals
The overall Bullion pack was under pressure last week with Gold continuing to trade sideways whereas Silver witnessed a sharper fall. Weak US economic data and sharp fall in US stock markets made investors rush towards the safe refuge of the US Dollar. Earlier in the week, reports that China has asked to debate proposals for a new global reserve currency at next week’s Group of Eight summit in Italy had supported the Bullion pack. Further, holdings in the world's largest gold-backed exchange-traded fund (SDPR) have been falling in the past few weeks as growing optimism about the global economy saps investors' appetite for the safe-haven asset. Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,120.55 metric tons.

Spot Gold continues to trade in the range of $912 - $948 zone. Overall, gold has benefitted from persisting worries that heavy government borrowing could boost inflation. Physical demand from India has been weak with imports down 50% year-on-year in the first half of this year compared with the first six months of 2008, as per the Bombay Bullion Association. For the week, we expect Spot Gold prices to have immediate support at $920/$908 whereas resistance is seen at $944/$958. Spot Silver prices shall find support at $13.00/$12.70 whereas resistance is seen at $13.65/$13.95. MCX August Gold has support at 14350/14260 whereas resistance is seen at 14580/14710. MCX Sep Silver shall find support at 21220/20750 whereas resistance is seen at 21950/22410 levels.

Crude Oil
Crude Oil prices pared early gains and tumbled in the last week, reaching to their lowest level in one month and marking its third successive weekly loss, as bearish weekly inventory data and relatively strong dollar against major currencies exerted pressure on oil prices. Oil prices are also taking cues from equity markets and weak global equity markets dented risk sentiments in the market and weighed on oil prices. NYMEX May Crude Oil futures ended the week 5.10% lower than the previous week to close at $65.63 per barrel, the lowest closing level since 3rd June.

Crude Oil prices are facing downward pressure once prices reach above $70 mark, as recent economic data is still mixed and raising concerns in the mind of investors with regard to early economic recovery. With unemployment rates are at multi year high, consumers are unlikely to expedite consumption in the near term, which can certainly curb the energy demand. Global risk sentiment is on the edge and if equity markets peak off, then we can see fall in risk appetite, which can potentially reduce demand for higher yielding assets like commodities.

Weekly inventory data in US is showing that energy demand in world’s largest oil consuming nation is still more than 5% less than last year. Despite US summer driving season is underway, gasoline demand is not picking up, which is certainly not a positive sign. Traders will also have to look out for trend in dollar, as rising dollar can also weigh on oil prices. Rising geopolitical tension in the Nigeria is the only possible factor which can lend support to oil prices. Due to above mentioned factors; we expect that oil prices can face resistance near $70 levels and it can eventually head downwards towards $60-61 levels.

Soybean
Soybean (NCDEX Aug contract) prices opened the week at Rs 2550/quintal, initially fell sharply on account of lower export demand of soy meal from global livestock industry. However, it could not sustain at lower levels and prices moved slightly higher after making a low of 2462 levels and finally managed to close at 2490 levels on account of short covering, value buying, lower stock of soybean and delayed monsoon in major growing areas also provided support to bulls in the market.

Oil meal exports declined to 1,97,593 metric tonnes in June 2009, down 33% as compared to 2,95,204 metric tonnes in June 2008. While, during the first three months of financial year (April-June, 2009) total oil meal export was 6,14,528 metric tonnes, down 57% on corresponding period last year. India exported 1,09,923 metric tonnes of soy meal, 58, 805 tonnes of rape/mustard seed meal, 12580 tonnes of rice bran meal and 16046 tonnes of castor meal in June 2009.

Plantation of soybean has started during the first week of July in major producing state (Madhya Pradesh). Area covered under kharif oilseeds is 6.63 lakh hectares, down by 65% as compared to 19.23 lakh hectares in corresponding period a year ago, due to delayed monsoon this year. Domestic area under soybean is reported lower at 1.63 lakh hectare compared to 8.11 lakh hectare in the corresponding period a year ago.

USDA’s planted Acreage Report released on Tuesday, which shows soybean acreage number was only 77.43 million acres, about 500,000 acres below trade expectations. However, this was still up from 76.024 million acres on the USDA’s March 31st report, it is largest soybean acreage number on record. In the coming week (NCDEX Aug Soybean), prices are expected to move range bound with a support at 2450/2350 and resistance is seen at 2550/2620 levels.

Black Pepper
Black Pepper prices in the spot markets quoted in the range of Rs.12,500 – Rs.12,900/qtl in the past 15 days. Prices witnessed strength in the beginning due to poor monsoon rains and supportive sentiments that production could reduce in the year 2010 but declined at the end of the previous week. Indonesia fresh crop arrivals have started and they are offering it at lower levels at $2,325 a tonne (f.o.b).

Pepper prices in the international market of Indian origin are being quoted at higher levels of $2,750/tonne. Pepper imports in May showed a substantial increase into the nation. Imports of black pepper were 2,265 tonnes (May) through the Kochi port alone against export of 1,750 tonnes. Demand from the overseas and domestic continues to be lackluster. Prices at the futures after making a high of Rs.13,150/qtl dipped to lows of Rs.12,188/qtl. Prices may dip further if the support level of Rs.12,130 is breached and may touch Rs.12,050/qtl and thereafter Rs.11,600/qtl. Prices may find resistance initially at Rs.12,540/qtl and thereafter at 12,890/qtl.

Rubber
Rubber is witnessing steady to mixed trend in domestic and overseas markets. Buyer resistance is visible which is not allowing prices to go beyond Rs 98-102 range. July Futures in NMCE concluded the weekend session at Rs 96.69 while the August contract traded at Rs 93.47.

In the early part of the week, Rubber exhibited weakness and quantity buyers stayed away from spot markets. Major consumers seemed comfortable with imports rather than buying from domestic markets. The Automotive Tyre Manufacturer’s Association has urged the government bring down the customs duty on natural rubber from 20 to 10% on par with finished rubber products which is levied at 10 %.

Weakness was visible in Asian rubber futures despite the fact that International Tripartite Rubber Council members Thailand, Indonesia and Malaysia announced a decision to remove 9,15,000 tons from the market in 2009 to bolster prices. At TOCOM a steady to high trend was visible in rubber futures while Shanghai technical selling led to decline in prices.
Rubber is likely to witness steady or range-bound trading as there is no bullish factors alive with China buying the only saving grace while US and European markets appear quiet.

Base Metals
It was a rather dull weak for base metals although some recovery was visible during weekend on Chinese data.Copper exhibited weakness on concerns of a weakening US labour market. Payrolls in the U.S., the second-biggest consumer of copper after China, declined by 467,000 in June. The jobless rate climbed to 9.5 percent, the highest since August 1983. This has raised concerns about demand for industrial metals falling.
Copper for three-month delivery slid $65, or 1.3 percent, to $4,970 a metric ton. Analysts expect weaker demand and rising inventories to pull down prices to $4000 in July-September period.

Towards weekend there was a gain from economic data from China which indicated that official purchasing manager’s index for June rose to 53.2 from 53.1 in May, the fourth straight month in which the manufacturing sector has showed signs fo expansion. Nickel prices gained more than 8% to $16,600. The week ahead, expect choppy trade with some profit booking as most of the commodities are trading higher compared to fundamentals.

Last week, MCX August copper prices opened the week at 246.50 initially moved higher and as expected found good resistance at 250.45 levels. Later prices fell sharply lower breaking the initial support marginally made a low of 239.25 and finally ended the week with a loss of Rs.3.8 to close at 241.85. This week market is expected to find good resistance in the range of 243.50-245.50 levels and then strongresistance is seen at 249.50-250.50.

(With analytical inputs from Angel Commodities, Mumbai)

Fortunoff diamond auction:73% recovery achieved

2009-07-02T23:39:00.000+05:30

SimplexDiam Inc. announced a 73% recovery on Fortunoff's loose diamonds. Said CEO Yogesh Madhvani, "We knew we'd attain a tangibly better recovery than the competition, that's why we took the project. One has to remember that this isn't a going-out-of-business sale, it's an auction to the trade. These aren't certified stones, they're 70 pointers down. Both the bidders and the estate seem quite happy with the result."

Madhvani and his team are in fact no strangers to record breaking auctions. In May of 2008 he and his team were a hair's breadth away from winning $17,000,000 of diamonds, at auction, of the LID diamond inventory, only to lose it in the combined bidding. Consensus Advisor's Chris Ellis has credited them with being integral to the auction's process and success

Returning to Fortunoff, let's put the achievement in perspective: Recent wholesale auctions have recovered between 35% and 55% of wholesale cost. Retailers usually pay 20% markup on loose diamonds under 70 points. In other words, retailers own the loose diamonds at 120 cents on the wholesale dollar. Doing the math, this means that Simplex recovered 87.6% (73% of 120 cents) on wholesale cost as opposed to the 35%-55% one normally sees. We can't find a trade auction in recent recorded history that's even within 25 points of this number.

Says VP of Finance, Shail Madhvani: "This is a high watermark. Still, I must say we have faith in our math. We've been meticulous about keeping data over the years and using it to improve results. It's this data that has made it possible to build lots that will be most attractive to potential bidders. Intelligent selection, based on multiple variables, allows us to maximize value for the bidder and the estate. It has taken us decades to understand the secondary market this well. We still work hard each time to improve our models."

SimplexDiam Inc. values and purchases diamonds and fine jewelry. They have functioned as a stalking horse (reserve bidder) in the LID Deal, guaranteeing, in partnership, over $20,000,000. They served as a bidder and winner of the Friedman's, Whitehall, Colibri, and Christian Bernard residual jewelry inventories. Most recently they performed as an auctioneer of loose diamonds for the Fortunoff Estate in bankruptcy. They are also winners at many major retailers' quarterly jewelry auctions and provide services to small jewelry retailers and pawn shops by valuing and purchasing closeout diamonds and jewelry they acquire from individuals and diamond traders. Additionally, their going-out-of-business division. (PRWeb)

India Shining as economic growth records 6.7%

2009-06-23T23:41:00.000+05:30

Finally, the country has managed to record a 6.7 percent growth in financial year 2008-09, despite the global economy still in the throes of a deep recession. This has been vindicated by the official figures released recently. This growth rate, though, much lower than the 9 percent rate that we have been clocking for the previous four years, is nonetheless, well above the 6 percent growth that was being projected by some analysts. Some prophets had even predicted only a 5% growth in the last financial year. The Central Statistical Organization had pegged the GDP growth rate at 7.1 percent.

The actual growth rate is certainly in the range that the RBI had projected: 6 to 5.7 %. Our Prime Minister Dr. Manmohan Singh too had been emphasizing that the growth rate would be in the range of 6.5 to 7. That is precisely what has happened.

In a way, this growth has been somewhat unexpected. It has largely been possible by the strong 5.8 % growth in the last quarter of the financial year. The reasons for this have been the effects of huge Government spending on social programmes and construction, pumping liquidity into the market through special packages and by lowering of interest rates. Government consumption too increased by 22 percent.

The most encouraging news is the performance of the core sector which has sent clear signals of an economic recovery. In April 2009 growth rate in the core sector of infrastructure doubled to 4.3 percent, against 2.3% in the same month last year when the economy was booming. The output of cement in April went up by 11.7% compared to 6.9% in the same month last year. Steel grew by 1.6 percent against a decline of 0.6 % in April last year. Coal production grew at an impressive 13.2 percent compared to 10.4 % in the corresponding period last year. So was the case with electricity generation which jumped up by 6% in April against 1.4 % in the same month, last year.

Not less important is the increase in the collection of direct taxes by 16.88 % in May this year. In fact the collections have shown a positive growth since February this year. This will help the Government to keep the fiscal deficit under control, which could well cross 5% of the GDP against the limit of 2.5 % fixed earlier. The deficit could well be about 10 % if the state budgets are also taken into account. The actual position in this regard will, however, be known when the Finance Minister presents the budget next month. May month’s collection figures are particularly encouraging as there had been a shortfall just a month earlier.

As a result of this economic scenario, coupled with the installation of a stable Government at the centre, the financial market is also jubilant. The stocks are rising and the sensex is hovering in the 15,000 area, double than what it was less than 6 months ago. Mutual Funds too are, as a consequence, looking up.

The picture certainly would have been much better, had we not slowed down in two important sectors: manufacturing and agriculture. A sluggish manufacturing sector, which grew at just 2.4 percent during 2008-09 against 8.2% in the previous financial year, was a dampener. Similarly, agriculture, which accounts for 20 % of the country’s GDP, recorded just 1.6 % growth in the last financial year against 4.9 % in the previous financial year.

What came as a booster was the growth in the service sector: 13 % growth in the community services, 9% in transport and communications sector and a 7.8% growth in financial and other service sector. All this happened at a time when the US economy contracted by an annualized rate of 6.2 % and the Japanese economy by 12.7 %. This only proves the resilience of Indian economy. To some extent it is also due to the fact that Indian economy is more inward looking as it opened up only after 1991. It thus depends more on the domestic demand. In sectors where it looks more on the foreign markets like the textiles, the effect of global meltdown has been more pronounced. The country recorded a 33% fall in exports in March this year, leading to fall in incomes and unemployment in this sector.

President Pratiba Devi Singh Patil’s recent address to the joint sitting of the two houses of Parliament has now laid the future roadmap for the Government. It aims at pushing ahead with the economic reforms, pursuing the disinvestment and promoting Foreign Direct Investment which will also take care of the financial constraints of the Government. It also envisages increased public spending. But while doing so, care will be taken of fiscal prudence so that the widening gap in fiscal deficit is kept in check.

Liquidity in the banking sector will also be improved to make way for better access to funds by the stake holders. The Reserve Bank of India has already asked the Government for a comprehensive review of the interest rate regime to nudge the banks into reducing their lending rates which they are reluctant to do. The Finance Minister Mr. Pranab Mukherjee too has clearly pointed out to the banks that they have not so far adequately reflected in their lending rates, the reduction in key rates by the RBI. But they have now agreed to take a fresh look at the issue.

Fortunately, inflation too is under control which provides additional leg space to the Government to take fiscal and monetary measures to push up growth. The current financial year will not be without challenges and the growth rate may continue to be around the existing level. The Prime Minister told the Parliament the other day that he was confident that the country would record at least 7% growth in the current fiscal as well. But if all work together, it is possible to raise it to 8-9 % “even when the world grows at a lower rate” the Prime Minister said. These are words of satisfaction indeed. A high rate of 35% of our GDP being the savings determines the money that can be deployed for development works, though heavy public spending does carry a cost in terms of increasing fiscal deficit which has already crossed 6.2 %.

The larger picture that emerges thus is of hope, confidence and optimism on the economic front. (Courtesy: Press Information Bureau)

IMF Gold Sale: WGC welcomes US approval

2009-06-21T19:37:00.000+05:30

The World Gold Council (WGC), the apex global body on gold, has welcomed the US Congress approval to the gold sale plan from the International Monetary Fund (IMF).

Last week, the US House of Representatives approved an agreement to allow US members of the IMF board to agree the proposed $13 billion sale of 400 tonnes of IMF gold to shore up its finances.

In a statement, Aram Shishmanian, the WGC's chief executive welcomed the US Congress approval to the IMF gold sale plan. "We are pleased to see that the IMF's plan to sell gold in a structured and non-disruptive manner has gone through due political process without problem, which is a credit to the responsible behaviour of all parties involved in the process," said the statement.

WGC said the IMF gold sale will not constitute any net addition to the amount of gold the market is already expecting from official sector sources as a whole, and therefore we anticipate zero market impact. We believe this announcement, if anything, will lead to positive sentiment among market participants as it clarifies that there will be no net addition to overall gold supply.

Shishmanian said: "In these times of financial instability, gold's universal role as protector of wealth has come to the fore, not least as a crucial part of reserve asset portfolios. The fact that these sales will effectively rescue the IMF from a difficult situation regarding its own finances is proof of gold's unique investment characteristics, long-recognised by central bankers and institutional and retail investors alike."

Given the IMF's status as "a lender of last resort", the WGC believes it is imperative that the organisation continues to hold large gold reserves and acknowledges the IMF's public declarations that: "The IMF should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies."

The US approval to the IMF gold sale plan has been tied to the Military Supplemental Bill which covered additional funding for the Iraq and Afghanistan conflicts for the U.S forces.

While the bill itself does not specifically tie the IMF sales to an orderly sales programme, the IMF has stated publicly that any such sales should be made in co-ordination with current and future Central Bank Gold Sales Agreements whereby signatories have to agree to limit total annual sales to less than a specific volume (currently 500 tonnes).

How many times did IMF sell gold since 1950?

2009-06-07T19:15:00.000+05:30

The International Monetary Fund (IMF) holds 103.4 million ounces (3,217 metric tons) of gold at designated depositories. The IMF’s total gold holdings are valued on its balance sheet at SDR 5.9 billion (about $8.7 billion) on the basis of historical cost. As of March 31, 2009, the IMF's holdings amounted to $94.8 billion (at then current market prices).

A portion of these holdings were acquired since the Second Amendment of the IMF’s Articles of Agreement in April 1978, amounting to 12.97 million ounces (403.3 metric tons), with a market value of $11.9 billion as of March 31, 2009. As noted below, this part of the Fund’s gold holdings is not subject to restitution to members.

The IMF acquired the majority of its gold holdings prior to the Second Amendment through four main types of transactions. First, it was then prescribed that 25 percent of initial quota subscriptions and subsequent quota increases were to be paid in gold. This represented the largest source of the IMF's gold. Second, all payments of charges (i.e., interest on members' use of IMF credit) were normally made in gold. Third, a member wishing to purchase the currency of another member could acquire it by selling gold to the IMF. The major use of this provision was sales of gold to the IMF by South Africa in 1970-71. And finally, members could use gold to repay the IMF for credit previously extended.

The IMF's policy on gold today
The Second Amendment to the Articles of Agreement in April 1978 eliminated the use of gold as the common denominator of the post-World War II exchange rate system and as the basis of the value of the Special Drawing Right (SDR). It also abolished the official price of gold and brought to an end the obligatory use of gold in transactions between the IMF and its members. It furthermore required that the IMF, when dealing in gold, avoid managing its price or establishing a fixed price.

The Articles of Agreement now limit the use of gold in the IMF's operations and transactions. The IMF may sell gold outright on the basis of prevailing market prices, and may accept gold in the discharge of a member's obligations at an agreed price, based on market prices at the time of acceptance. These transactions in gold require an 85 percent majority of total voting power. The IMF does not have the authority to engage in any other gold transactions—such as loans, leases, swaps, or use of gold as collateral—nor does it have the authority to buy gold.

The Articles also provide for the restitution of the gold the Fund held on the date of the Second Amendment to members of the Fund as of August 31, 1975. Restitution would involve the sale of gold to this group of members at the former official price of SDR 35 per ounce, with such sales made to those members who agree to buy it in proportion to their quotas on the date of the Second Amendment. A decision to restitute gold requires support from an 85 percent majority of the total voting power. The Articles do not provide for the restitution of gold the Fund has acquired after the date of the Second Amendment.

The IMF's policy on gold is governed by the following principles:

• As an undervalued asset held by the IMF, gold provides fundamental strength to its balance sheet. Any mobilization of IMF gold should avoid weakening its overall financial position.

• The IMF should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies.

• The IMF has a systemic responsibility to avoid causing disruptions to the functioning of the gold market.

• Profits from any gold sales should be used whenever feasible to create an investment fund, of which only the income should be used.

How and when the IMF used gold
Outflows of gold from the IMF's holdings occurred under the original Articles of Agreement through sales of gold for currency, and via payments of remuneration and interest. As noted, since the Second Amendment of the Articles of Agreement, outflows of gold can only occur through outright sales. Key gold transactions included:

• Sales for replenishment (1957-70). The IMF sold gold on several occasions to replenish its holdings of currencies.

• South African gold (1970-71). The IMF sold gold to members in amounts roughly corresponding to those purchased from South Africa during this period.

• Investment in U.S. government securities (1956-72). In order to generate income to offset operational deficits, some IMF gold was sold to the United States and the proceeds invested in U.S. government securities. Subsequently, a significant buildup of IMF reserves prompted the IMF to reacquire this gold from the U.S. government.

• Auctions and "restitution" sales (1976-80). The IMF sold approximately one third (50 million ounces) of its then-existing gold holdings following an agreement by its members to reduce the role of gold in the international monetary system. Half of this amount was sold in restitution to members at the then-official price of SDR 35 per ounce; the other half was auctioned to the market to finance the Trust Fund, which supported concessional lending by the IMF to low-income countries.

• Off-market transactions in gold (1999-2000). In December 1999, the Executive Board authorized off-market transactions in gold of up to 14 million ounces to help finance the IMF's participation in the Heavily Indebted Poor Countries (HIPC) Initiative.

Between December 1999 and April 2000, separate but closely linked transactions involving a total of 12.9 million ounces of gold were carried out between the IMF and two members (Brazil and Mexico) that had financial obligations falling due to the IMF. In the first step, the IMF sold gold to the member at the prevailing market price and the profits were placed in a special account invested for the benefit of the HIPC Initiative.

In the second step, the IMF immediately accepted back, at the same market price, the same amount of gold from the member in settlement of that member's financial obligations. In the end, these transactions left balance of the IMF's holdings of physical gold unchanged.

Courtesy: Reproduced from the International Monetary Fund web site

Making money on agri-commodities uptrend

2009-06-07T19:08:00.001+05:30

Global food prices are climbing higher along with energy and precious metals. In May, the Reuters/Jefferies CRB Index, which tracks 19 raw materials including corn, crude oil, and gold, surged by 14 percent — its biggest monthly gain since 1974!
What’s behind this move? Simple: The U.S. government’s massive spending is killing the dollar and setting off inflation. At the same time, China’s massive economy is still growing like crazy. And the insatiable Chinese demand for all kinds of resources looks set to continue despite the global recession.

In last week’s Money and Markets column, I explained how you can trade gold with ETFs. Today we’re going to look at the ways you can play the uptrend in agricultural products — without using futures or options.

Method #1: Buy Individual Agricultural Companies
One way to invest in rising food prices is to buy the stocks of companies in the “agribusiness” sector. You’ve probably heard of companies like Archer Daniels Midland (ADM), John Deere (DE), Monsanto (MON), and Tyson Foods (TSN).

Of course, individual stock picking takes a lot of time and research. What if you just want to get broad exposure to the whole group?

Method #2: Buy Agribusiness Stock-Based ETFs!
For instance, take a look at Market Vectors Agribusiness ETF. The ticker symbol is MOO, and it has all the companies listed above plus a few dozen more — including many non-U.S. stocks that are hard to access otherwise. PowerShares Global Agriculture (PAGG) is another ETF covering this space. Either MOO or PAGG will give you a good cross-section of agriculture-oriented stocks from around the world.

Of course, stock based ETFs — while great — only provide “indirect” exposure to the underlying grains and agricultural products. What if you want direct access to the commodities themselves?

Method #3: Use Commodity-Focused ETFs and ETNs
You can now buy your way into the grain markets just as easily as you buy a stock — without the stress of leveraged futures and options. For instance, PowerShares DB Agriculture Fund (DBA) tracks an index of four key markets: Corn, wheat, soybeans and sugar. With these in your pocket, you’ll be ready to profit as inflation sends worldwide food prices through the roof.
The iPath Dow Jones-AIG Agriculture Total Return Sub-Index ETN (JJA) is similar to DBA but is a little more diversified, adding coffee, cotton and soybean oil to the mix.

The last broad-based, commodities ETF I want to discuss today is Elements Linked To Rogers International Commodity Index — Agriculture Total Return (RJA).

RJA follows an index of 20 agricultural commodities developed by legendary investor Jim Rogers. It includes all the major markets plus several smaller ones: Canola, orange juice, oats, rubber, live cattle, lumber, cocoa, and more.

What about Single-Market Agriculture Funds?
If you want to zero in on one or more individual commodity markets, such as coffee or sugar, there are now easy ways to do that, too. Several firms offer ETF-like products that do this for you. If it’s coffee you want, iPath has an ETN that tracks java prices. The ticker is JO. There are others for livestock, cocoa, and sugar.

However, I suggest that most people stay away from individual commodities, for two reasons:
First, the risk is very high. Unless you’re very confident in what you’re doing, or you’re getting the guidance of a bona fide commodities expert, you’re probably better off leaving these laser-focused investments out of your portfolio.
Second, these funds are fairly new and tend to have low trading volumes, which implies they are not very liquid. That means you may get hurt by higher transaction costs.

In other words, it’s far better to follow the major trends with one of the more diversified, agriculture securities I’ve mentioned earlier.

Another thing to keep in mind is that many of the commodity-tracking vehicles are ETNs, not ETFs. That means you are exposed to the issuer’s credit default risk. (See my February 6, 2009, Money and Markets column to learn why ETNs may be riskier than they look.)

I’m not trying to scare you away from ETNs, of course. Far from it — I use them myself. I just want you to be aware of what you’re getting into.

Bottom line: If we’re entering a major inflationary trend, food prices could go much, much higher. And the exchange-traded products that hold commodities and/or agricultural companies could shoot up as well.

By Ron Rowland