Gold has again proven its core investment qualities as a store of value, safe haven and portfolio diversifier and this has struck a chord with nervous investors. Gold price continued to trade near a seven- month high of over the $1,000-mark last Friday, as it consolidated gains before tackling new peaks.
Majority of precious metal analysts say that amid the global economic slowdown, gold prices may continue to remain bullish during this week on continued buying by investors and fund houses, including Exchange Traded Funds (ETF). Gold prices in the London market have risen sharply by nearly 11% over the past seven weeks, on the back of strong investment demand, while the yellow metal gained about 5% during the last week as investors seek an alternative to stocks and bonds.
"Gold prices have touched $1,000 an ounce on Friday as major funds are going long in gold while taking short positions in currency trading. I think price may continue to rule higher and likely to see $1,033 an ounce in the international market.
One can also see a major correction after reaching that level," Bhargav Vaidya, a leading bullion analyst told FE. In the domestic market, prices have also shot up in 2009 from a low of Rs 12,767 per 10 gram to a recent high of Rs 15,706 per 10 gram.
Local prices on Friday firmed at Rs 15,600 per 10 gram in the middle of the wedding season, with scrap meeting most of the little demand.
"There is no new fresh buying of gold jewellery. Import of gold also remained negligible in the current month. I think gold prices may continue to rule higher on sustained buying by investors," said Prithaviraj Kothari, a leading bullion dealer and managing director of Riddhi Siddhi Bullion Ltd.
It is interesting to note that the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust said its holdings hit a record 1,028.98 tonne last week. Investment in silver ETFs has also been strong, with holdings of the world's largest, the iShares Silver Trust, jumping nearly 3% to a record 7,873.75 tonne last week.
"The outlook for gold remains positive as economic turmoil prevails and investors keep buying gold due to its safe haven appeal. The latest deteriorating economic signs included last Thursday's close of the US Dow industrials index at its lowest in more than 6 years. Gold has decoupled from the dollar. The powerful negative correlation between gold and dollar is very evident visually as the dollar surged against other currencies but gold held its own way," Debjyoti Chatterjee, analyst with MAPE ADMISI Commodity Research said.
"I anticipate that gold, as a unique asset class, will continue to play a vital role in providing stability to both household and professional investors around the world," Aram Shishmanian, CEO, World Gold Council, said. (Source: Financial Express)
Sunday, February 22, 2009
Saturday, February 21, 2009
Crude oil above $35 amid grim economic news
Markets shrugged off a steady barrage of grim U.S. economic news to push oil prices above $35 a barrel Thursday, with a drop in the dollar encouraging investors to buy crude.
A report by the Fed predicting a sharper economic contraction and raising forecasts for unemployment was offset by a 1.1 percent drop in the dollar against the euro, to $1.2667. Oil tends to rise when the dollar drops as investors use the commodity as a hedge against inflation.
Light, sweet crude for March delivery jumped by $1.23 to $35.85 a barrel by midafternoon in Europe on the New York Mercantile Exchange. The contract on Wednesday fell 31 cents to settle at $34.62.
The March contract expires on Friday, and traders switched their focus to the April contract, which rose 62 cents to $38.03.
Besides the boost oil prices received from the drop in the dollar, the economic news was gloomy.
The Federal Reserve on Wednesday confirmed what many investors already suspected — that the U.S. economy has significantly deteriorated in the last few months.
The Fed said it expects the economy will contract between 0.5 and 1.3 percent this year. Its previous forecast from November had a 0.2 percent contraction as the worst case scenario.
The Fed also said the unemployment rate will likely rise to between 8.5 and 8.8 percent this year, higher than its previous forecast of between 7.1 and 7.6 percent.
The current global economic slump began in 2007 with a crisis in the U.S. sub-prime mortgage sector, and the housing market continues to buckle under the weight of surging foreclosures.
A report from the Commerce Department on Wednesday said construction of new homes and apartments plunged 16.8 percent in January from the previous month, to a seasonally adjusted annual rate of 466,000 units, a record low.
"The housing data suggests the recession is even worse than we thought," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "We need to see the housing market stabilize because consumer sentiment is very much correlated to it."
Investors are skeptical that a $787 billion stimulus bill signed this week by President Barack Obama will spark a quick recovery. The White House on Wednesday said the government will spend $75 billion to help prevent millions of Americans from losing their homes.
The program would provide incentives to mortgage lenders to help borrowers reduce their payments in an effort to counter a souring housing market at the core of the economic crisis.
While a number of analysts said the program might limit the hemorrhaging in housing prices, the market's cool reception seemed to show how much investors have lost confidence in government bailouts.
Crude investors are also concerned a jump in oil inventories is reflecting a steep drop-off in demand.
Analysts expect crude stocks will grow by 3.5 million barrels when the Energy Department releases inventory data for the week ended Feb. 13, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Inventories have risen more than 30 million barrels in the last six weeks.
"Inventories are the focus now," said Moltke-Leth. "If they rise again, it will put more downward pressure on crude."
Net crude oil stocks rose to a 20 month high for the week ended February 6th. It was the eighteenth weekly increase out of 20.
"Bottom line, nothing has changed," said energy analyst Stephen Schork. "There is no way to construe the current fundamental picture anyway other than bearish."
The Organization of Petroleum Exporting Countries has struggled to bolster prices as output cuts fail to keep up with falling demand.
Venezuelan Oil Minister Rafael Ramirez said Wednesday the group may cut production again at a meeting on March 15, on top of the reduction of 4.2 million barrels a day announced since September. Ramirez said the 13-member cartel would like prices to rise to $70 a barrel.
"OPEC is looking very weak right now," said Moltke-Leth said. "There's a lot of chatter from them, but the market isn't really listening."
Moltke-Leth said prices will likely fall to about $32 a barrel, which would test the 10-year average price.
"$32 and a half is a significant line in the sand," he said. "It's a key support level, and I expect the market to test how strong it is."
In other Nymex trading, gasoline futures rose 2 cent to $1.09 a gallon. Heating oil gained 3 cents to $1.17 a gallon, while natural gas for March delivery jumped 4 cents to $4.25 per 1,000 cubic feet.
In London, the March Brent contract rose 99 cents to $40.54 on the ICE Futures exchange.
(source: Associated Press writer Alex Kennedy in Singapore)
A report by the Fed predicting a sharper economic contraction and raising forecasts for unemployment was offset by a 1.1 percent drop in the dollar against the euro, to $1.2667. Oil tends to rise when the dollar drops as investors use the commodity as a hedge against inflation.
Light, sweet crude for March delivery jumped by $1.23 to $35.85 a barrel by midafternoon in Europe on the New York Mercantile Exchange. The contract on Wednesday fell 31 cents to settle at $34.62.
The March contract expires on Friday, and traders switched their focus to the April contract, which rose 62 cents to $38.03.
Besides the boost oil prices received from the drop in the dollar, the economic news was gloomy.
The Federal Reserve on Wednesday confirmed what many investors already suspected — that the U.S. economy has significantly deteriorated in the last few months.
The Fed said it expects the economy will contract between 0.5 and 1.3 percent this year. Its previous forecast from November had a 0.2 percent contraction as the worst case scenario.
The Fed also said the unemployment rate will likely rise to between 8.5 and 8.8 percent this year, higher than its previous forecast of between 7.1 and 7.6 percent.
The current global economic slump began in 2007 with a crisis in the U.S. sub-prime mortgage sector, and the housing market continues to buckle under the weight of surging foreclosures.
A report from the Commerce Department on Wednesday said construction of new homes and apartments plunged 16.8 percent in January from the previous month, to a seasonally adjusted annual rate of 466,000 units, a record low.
"The housing data suggests the recession is even worse than we thought," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "We need to see the housing market stabilize because consumer sentiment is very much correlated to it."
Investors are skeptical that a $787 billion stimulus bill signed this week by President Barack Obama will spark a quick recovery. The White House on Wednesday said the government will spend $75 billion to help prevent millions of Americans from losing their homes.
The program would provide incentives to mortgage lenders to help borrowers reduce their payments in an effort to counter a souring housing market at the core of the economic crisis.
While a number of analysts said the program might limit the hemorrhaging in housing prices, the market's cool reception seemed to show how much investors have lost confidence in government bailouts.
Crude investors are also concerned a jump in oil inventories is reflecting a steep drop-off in demand.
Analysts expect crude stocks will grow by 3.5 million barrels when the Energy Department releases inventory data for the week ended Feb. 13, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Inventories have risen more than 30 million barrels in the last six weeks.
"Inventories are the focus now," said Moltke-Leth. "If they rise again, it will put more downward pressure on crude."
Net crude oil stocks rose to a 20 month high for the week ended February 6th. It was the eighteenth weekly increase out of 20.
"Bottom line, nothing has changed," said energy analyst Stephen Schork. "There is no way to construe the current fundamental picture anyway other than bearish."
The Organization of Petroleum Exporting Countries has struggled to bolster prices as output cuts fail to keep up with falling demand.
Venezuelan Oil Minister Rafael Ramirez said Wednesday the group may cut production again at a meeting on March 15, on top of the reduction of 4.2 million barrels a day announced since September. Ramirez said the 13-member cartel would like prices to rise to $70 a barrel.
"OPEC is looking very weak right now," said Moltke-Leth said. "There's a lot of chatter from them, but the market isn't really listening."
Moltke-Leth said prices will likely fall to about $32 a barrel, which would test the 10-year average price.
"$32 and a half is a significant line in the sand," he said. "It's a key support level, and I expect the market to test how strong it is."
In other Nymex trading, gasoline futures rose 2 cent to $1.09 a gallon. Heating oil gained 3 cents to $1.17 a gallon, while natural gas for March delivery jumped 4 cents to $4.25 per 1,000 cubic feet.
In London, the March Brent contract rose 99 cents to $40.54 on the ICE Futures exchange.
(source: Associated Press writer Alex Kennedy in Singapore)
Gold breaches Rs 16,000 level in futures trade
NEW DELHI: Breaking all previous records, gold prices on Saturday surged to a new peak at Rs 16,349 per 10 gram in futures trade, as traders
increased their exposure in the precious metal following melting stock and forex markets. The metal, which had been on a record-setting spree for the last one week, spurted to an all-time high of Rs 16,349, by adding 2.55% on the Multi Commodity Exchange, as funds preferred to park their funds in gold amid deepening global recession. The August contract for gold climbed 2.55% to touch Rs 16,349 per 10 gram. It clocked two lots. The bullion market received a major booster from the firming global trend as the gold in the US markets surged to 1,007.20 dollar an ounce last night. "Funds around the world indulged in picking gold as a safe investment during current financial turmoil," said Galipelli Harish, head of research with Karvy Comtrade. The firmness was also witnessed in spot market as gold prices climbed much close the market expectations of Rs 6,000 per 10 gram in all domestic bullion markets. In Delhi, the metal traded at Rs 15,750, in Chennai at Rs 15,775 per 10 gram, respectively. Buying by jewellers and retail customers almost dried up at existing higher levels, said a Delhi-based jeweller Rakesh Anand. (Source: PTI)
increased their exposure in the precious metal following melting stock and forex markets. The metal, which had been on a record-setting spree for the last one week, spurted to an all-time high of Rs 16,349, by adding 2.55% on the Multi Commodity Exchange, as funds preferred to park their funds in gold amid deepening global recession. The August contract for gold climbed 2.55% to touch Rs 16,349 per 10 gram. It clocked two lots. The bullion market received a major booster from the firming global trend as the gold in the US markets surged to 1,007.20 dollar an ounce last night. "Funds around the world indulged in picking gold as a safe investment during current financial turmoil," said Galipelli Harish, head of research with Karvy Comtrade. The firmness was also witnessed in spot market as gold prices climbed much close the market expectations of Rs 6,000 per 10 gram in all domestic bullion markets. In Delhi, the metal traded at Rs 15,750, in Chennai at Rs 15,775 per 10 gram, respectively. Buying by jewellers and retail customers almost dried up at existing higher levels, said a Delhi-based jeweller Rakesh Anand. (Source: PTI)
India's 2008 gold imports down 14 pct on year - WGC
India's gold imports in 2008 fell 14 percent to 660.2 tonnes as higher gold prices and volatility hurt demand, the World Gold Council said on Wednesday.
"The combination of gold's safe haven appeal and extreme uncertainty surrounding other asset classes should see consumers continue to take advantage of any dips in the price (in 2009)," the industry group said in its review.
On Wednesday, gold futures on the Multi Commodity Exchange scaled to a record high of 15,617 rupees per 10 grams on safe haven buying and a weak rupee.
The contract gained more than 28 percent in 2008 as deepening global financial turmoil spurred safe haven buying. (Source: reuters)
"The combination of gold's safe haven appeal and extreme uncertainty surrounding other asset classes should see consumers continue to take advantage of any dips in the price (in 2009)," the industry group said in its review.
On Wednesday, gold futures on the Multi Commodity Exchange scaled to a record high of 15,617 rupees per 10 grams on safe haven buying and a weak rupee.
The contract gained more than 28 percent in 2008 as deepening global financial turmoil spurred safe haven buying. (Source: reuters)
Monday, February 16, 2009
Gold braces for Rs 16,000, demand may dip
Gold is expected to coast to price levels of Rs 16,000 per 10gm after last week’s stretch of record-making highs, as the heavy safe-haven buying overseas showed the peak has yet to come, analysts and traders said.
But prohibitive prices might also crimp retail demand in the gold crazy country, bruising imports further, traders and an analyst said. “If the rupee continues to trade around 48.50-48.70 and investment continues to flow into bullion, there are fair chances for India’s gold prices spiking to at least Rs 16,000 by next couple of months,” said Pradeep Unni, senior research analyst, Richcomm Global Services, Dubai.
A median forecast of a Reuters poll of 14 banks and brokerages in early January saw gold at Rs 12,900 per 10 gm by the end of the quarter to March. But the global economic downturn is resetting prices of the world’s favourite safe haven bet. “The price-level of Rs 16,000 would be a possibility in the next two months’ time,” said Amrut Deshmukh, senior technical analyst, Way 2 Wealth Securities, Mumbai. Brokerage Anand Rathi, one of the respondents in the poll, sees gold touching Rs 15,500 by March-end.
The benchmark April contract on the Multi Commodity Exchange (MCX) was 0.55% higher at Rs 14,709 per 10 gm at 3.51 pm, after hitting an all-time high of Rs 14,824 on February 12. The contract has gained 7.1% so far in 2009 as investors sought safety in the precious metal amid a deepening global recession and financial turmoil. In 2008, gold soared to its year-high of Rs 14,320, up 35.1% from its 2007 close, before falling to Rs 11,290 on October 24. Gold has gained more than two times since 2004.
“If any investor is long, then it is advisable for him to book profits at Rs 16,000 in a couple of months,” Deshmukh added. “Gold may touch Rs 16,000 looking at the current trend and the way things are on the economic front,” said Pinakin Vyaas, chief manager - treasury, IndusInd Bank, Mumbai, adding, “but may not sustain at these levels.”
Demand might also recoil if gold does see never-before-levels, said traders and analysts. “Such high prices may result in severe shelving of retail demand especially under the current economic conditions,” said Richcomm’s Unni.
Purchases are to fall for the second month in a row with no imports so far in February because of high prices, the head of a trade body said. “We have not witnessed much physical movement even during the wedding season either due to cost or low purchasing power,” said IndusInd’s Vyaas. (Source: Reuters)
But prohibitive prices might also crimp retail demand in the gold crazy country, bruising imports further, traders and an analyst said. “If the rupee continues to trade around 48.50-48.70 and investment continues to flow into bullion, there are fair chances for India’s gold prices spiking to at least Rs 16,000 by next couple of months,” said Pradeep Unni, senior research analyst, Richcomm Global Services, Dubai.
A median forecast of a Reuters poll of 14 banks and brokerages in early January saw gold at Rs 12,900 per 10 gm by the end of the quarter to March. But the global economic downturn is resetting prices of the world’s favourite safe haven bet. “The price-level of Rs 16,000 would be a possibility in the next two months’ time,” said Amrut Deshmukh, senior technical analyst, Way 2 Wealth Securities, Mumbai. Brokerage Anand Rathi, one of the respondents in the poll, sees gold touching Rs 15,500 by March-end.
The benchmark April contract on the Multi Commodity Exchange (MCX) was 0.55% higher at Rs 14,709 per 10 gm at 3.51 pm, after hitting an all-time high of Rs 14,824 on February 12. The contract has gained 7.1% so far in 2009 as investors sought safety in the precious metal amid a deepening global recession and financial turmoil. In 2008, gold soared to its year-high of Rs 14,320, up 35.1% from its 2007 close, before falling to Rs 11,290 on October 24. Gold has gained more than two times since 2004.
“If any investor is long, then it is advisable for him to book profits at Rs 16,000 in a couple of months,” Deshmukh added. “Gold may touch Rs 16,000 looking at the current trend and the way things are on the economic front,” said Pinakin Vyaas, chief manager - treasury, IndusInd Bank, Mumbai, adding, “but may not sustain at these levels.”
Demand might also recoil if gold does see never-before-levels, said traders and analysts. “Such high prices may result in severe shelving of retail demand especially under the current economic conditions,” said Richcomm’s Unni.
Purchases are to fall for the second month in a row with no imports so far in February because of high prices, the head of a trade body said. “We have not witnessed much physical movement even during the wedding season either due to cost or low purchasing power,” said IndusInd’s Vyaas. (Source: Reuters)
Govt rules out slapping limit on sugar stocks
New Delhi: The government on Monday ruled out imposing limit on stocks of sugar a trader can keep, amid speculations that such curbs might be slapped to check possible hoarding and contain the price rise.
“There is no plan to impose stock limits (on sugar) as of now,” food and agriculture Minister Sharad Pawar said on the sidelines of a conference in New Delhi.
Sugar prices in India, the largest sugar producer after Brazil, have risen dramatically this season, starting October, due to a projected 32% decline in the output to 18 million tonne, prompting the government to allow millers to import duty-free sugar and sell in the domestic market.
Trade sources were anticipating curbs on stocks, keeping in mind the general elections this year. According to the ministry of consumer affairs, retail prices shot up to Rs 25 at a few major cities as on February 13 from Rs 20 in the beginning of the 2008-09 season. (Source: Press Trust Of India)
“There is no plan to impose stock limits (on sugar) as of now,” food and agriculture Minister Sharad Pawar said on the sidelines of a conference in New Delhi.
Sugar prices in India, the largest sugar producer after Brazil, have risen dramatically this season, starting October, due to a projected 32% decline in the output to 18 million tonne, prompting the government to allow millers to import duty-free sugar and sell in the domestic market.
Trade sources were anticipating curbs on stocks, keeping in mind the general elections this year. According to the ministry of consumer affairs, retail prices shot up to Rs 25 at a few major cities as on February 13 from Rs 20 in the beginning of the 2008-09 season. (Source: Press Trust Of India)
Negative growth to continue in gem & jewellery sector: GJEPC
Mumbai: The gem and jewellery sector will continue to witness the negative growth in the next few months, in the absence of major incentives in the Interim Budget presented by the UPA government on Monday.
The Interim Budget for 2009-10 which was presented in Parliament, extended the period for concessional finance to exporters hit hard by the recession in major global markets. Earlier, the interest subvention of 2% could be availed of till March 2009.
“The interest subvention of 2% on pre- and post-shipment credit for certain employment-oriented sectors, textiles (including handlooms and handicrafts), carpets, leather, gems and jewellery, marine products and SMEs was extended beyond March 31, 2009 to September 30, 2009 involving an additional financial outgo of Rs 500 crore,” said finance minister, Pranab Mukherjee who presented the Interim Budget in the Lok Sabha on Monday.
The domestic gems-and-jewellery industry is going through a difficult phase on the back of softer demand from key export markets such as the US and Europe and, to a lesser extent, Asia.
Reacting to the Interim Budget speech, Vansant Mehta, chairman, Gem and Jewellery Export Promotion Council (GJEPC) told FE: “We expected an increase in the subvention rate to 4% from the current 2%. For the short-term period, we don’t see any growth in the next few months. I think the gem sector will continue to witness negative growth in the next month also.”
Export of gems and jewellery from the country for the month of January 2009 registered negative growth and declined by 33.94% in dollar term and 20.32% in rupee terms. “There was nothing in store for the gem and jewellery exporters though, as against the expectations of an official rescue package for the sector that could have eased service tax refunds and exempted them from fringe benefit tax for a certain stipulated period,” said Anand James, a senior analyst with Geojit Comtrade.
“In the Interim Budget, the government has totally neglected the issue of unempolyment in the sector.
The current condition is bad involving the lives of 8 lakh workers employed in the cut and polished diamond sector and 15-20 lakh workers employed in the gold jewellery sector,” Mehta said. (source: Financial Express)
The Interim Budget for 2009-10 which was presented in Parliament, extended the period for concessional finance to exporters hit hard by the recession in major global markets. Earlier, the interest subvention of 2% could be availed of till March 2009.
“The interest subvention of 2% on pre- and post-shipment credit for certain employment-oriented sectors, textiles (including handlooms and handicrafts), carpets, leather, gems and jewellery, marine products and SMEs was extended beyond March 31, 2009 to September 30, 2009 involving an additional financial outgo of Rs 500 crore,” said finance minister, Pranab Mukherjee who presented the Interim Budget in the Lok Sabha on Monday.
The domestic gems-and-jewellery industry is going through a difficult phase on the back of softer demand from key export markets such as the US and Europe and, to a lesser extent, Asia.
Reacting to the Interim Budget speech, Vansant Mehta, chairman, Gem and Jewellery Export Promotion Council (GJEPC) told FE: “We expected an increase in the subvention rate to 4% from the current 2%. For the short-term period, we don’t see any growth in the next few months. I think the gem sector will continue to witness negative growth in the next month also.”
Export of gems and jewellery from the country for the month of January 2009 registered negative growth and declined by 33.94% in dollar term and 20.32% in rupee terms. “There was nothing in store for the gem and jewellery exporters though, as against the expectations of an official rescue package for the sector that could have eased service tax refunds and exempted them from fringe benefit tax for a certain stipulated period,” said Anand James, a senior analyst with Geojit Comtrade.
“In the Interim Budget, the government has totally neglected the issue of unempolyment in the sector.
The current condition is bad involving the lives of 8 lakh workers employed in the cut and polished diamond sector and 15-20 lakh workers employed in the gold jewellery sector,” Mehta said. (source: Financial Express)
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