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)
Monday, 30 November 2009
Saturday, 28 November 2009
Why Dubai is caught in a debt trap
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!
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!
Tuesday, 17 November 2009
India's vegetable oil imports surge 37% in 2008-09
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.
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
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).
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
Warren Buffett’sBerkshire 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.
Sunday, 8 November 2009
Scrap gold sales zoom in India over IMF gold deal
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.
“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
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.
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.
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