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Berita Semasa 9 Ogos 2013 ...

Gold trends indicate possibility of $1500 by end-2013

Perhaps, I may reserve the technical view on gold to a later day but some overview on technicals may be appropriate at this time. The Kitco charts for one year gold based on closing New York prices show a continous downard slope or in technical terminology a descending channel. It would require sustained break above $1400 to push prices higher to $1500 and later $1600 levels.

Photo Courtesy: BigStockPhoto

When it comes to Gold, just about everyone on the street is an expert. Last week, when I went to buy from the local grocer, he was also eager to know how the markets are faring but only that he himself had a view on gold and equities in general. But much of it has been gathered from hearsay or �and not from any meaninful analysis of the markets.

As I have noted yesterday, gold bulls are cautiously returning but not many are venturing into any wild guess for the simple reason that they have often failed to accurately gauge market sentiments.�

I am not overly bullish on gold but there are some indications already to show that gold could move higher.
- India's Finance Minister P Chidambaram has said that gold imports could fall to 845 tons this year due to import restrcitions.Lesser gold flow into a market which has an insatiable appetite for it, could signal further upward pressure on prices. �Indian market is witnessing a seasonal weakness and hence prices are bound to go up until it attains a peak during Diwali festivities, wedding season.

-China's demand is witnessing a surge which could continue to provide support for gold, so is some buying by Central banks.

- Physical demand continues to overpower any distortions created in the market by the derivatives, according to Mark Mobius of Templeton Investments.

-Jeff Nichols, precious metals economist in an analysis has already mentioned about the possibility of staflation in US economy generating a bullish scenario for gold.

Perhaps, I may reserve the technical view on gold to a later day but some overview on technicals may be appropriate at this time. The Kitco charts for one year gold based on closing New York prices show a continous downard slope or in technical terminology a descending channel. It would require sustained break above $1400 to push prices higher to $1500 and later $1600 levels.

However the 30-day charts show a rising wedge which is a reversal pattern that shows up typically in a bear market. Rising wedge usually provides a low risk/high reward ratio but there are other aspects to be looked into including volume although targets are achieved quickly, according to technical experts.

Recent data from US Commodity Futures Trading Commission (CFTC) also indicate long positions by managed futures has increased by 5256 while short positions had fallen by 8257.

Meanwhile, the World Gold Council has published a new research report on the link between US interest rates and gold prices. It said that a normal rate of interest from 0-4% is not adverse to gold eventhough a low rate environment is more conducive for the metal.

Juan Carlos Artigas, Head of Investment Research at the World Gold Council said: While headlines have focused on the recent price moves, the long term drivers of gold including emerging market growth and central bank demand hold firm, particularly when combined with a likely reduction in supply from both mine production and recycling. Even with the highest rate of interest, the core value of gold is to balance out a portfolio. Most investors are under allocated; optimal levels are identified as between 2% and 10%.”

Hence, present trends including a possible threat of tapering of QE is not entirely negative for gold while some really positive factors are in the background providing firm support. Therefore, given a strong push above $1400 in next two months could see prices moving higher to $1550-1600 levels.

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Berita Semasa 8 Ogos 2013 ...

Normal interest rate environment is ideal for investing in Gold: WGC

Although the US market can lead investor behaviour in the short term, the gold market has become more diverse in both sectors and geographies in recent years. The long-term performance of gold is not solely tied to US sentiment and behaviour.

Negative interest rates environment supports gold investment demand while rising rates increase the cost of investing in it. However, a normal rate environment at 0-4% is not adverse to gold and in such a scenario investors could benefit by including gold in their portfolio, according to a new research paper titled 'Gold and US interest rates: a reality check'published by the World Gold Council.

The analysis shows that in a normal real rate environment:
Returns for gold are in line with the long term average of an annualised 6-7%.Volatility is significantly lower than during very high or low real rate environments.Correlation between gold and global equities is slightly negative, in line with its long-term average correlation of zero.Additionally, the impact of US real rates on the gold price appears to have reduced in significance. Although the US market can lead investor behaviour in the short term, the gold market has become more diverse in both sectors and geographies in recent years. The long-term performance of gold is not solely tied to US sentiment and behaviour. Emerging markets are now increasingly driving the long term view of gold. US physical demand for gold (including ETFs) accounts for less than 10% of the market, while emerging markets make up close to 70% of annual demand.

Juan Carlos Artigas, Head of Investment Research at the World Gold Council said:
“The US investor market clearly has a strong influence on gold due to the size of transactions and, to some extent, its effect on investor behaviour elsewhere, our analysis demonstrates that the inverse link between US interest rates and the gold price oversimplifies the issues currently at play.

“In the event of a return to a more normalised real rate environment in the US it is worth remembering �that investment demand is not the only arbiter of gold prices, nor does it originate solely in the US. A case in point is the unprecedented growth in Chinese gold consumption, which rose by 132% between 2007 and 2012 and looks set to continue even if economic growth were to slow to 5-6%.

“While headlines have focused on the recent price moves, the long term drivers of gold including emerging market growth and central bank demand hold firm, particularly when combined with a likely reduction in supply from both mine production and recycling. Even with the highest rate of interest, the core value of gold is to balance out a portfolio. Most investors are under allocated; optimal levels are identified as between 2% and 10%.”

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Berita Semasa 7 Ogos 2013 ...

Sharp decline in Gold, Silver prices as US dollar strengthens

Spot Gold fell to $1286.30 per ounce while silver fell to $19.26 per ounce. US Gold futures for October delivery has fallen to $1285.6 per ounce after closing on Thursday trade at $1310.8.

Gold prices have crashed by more than $34.30 in the past twenty four hours as strength in US dollar and rising bond yields reduced the appetite for safe haven investments in Gold.

Spot Gold fell to $1286.30 per ounce while silver fell to $19.26 per ounce. US Gold futures for October delivery has fallen to $1285.6 per ounce after closing on Thursday trade at $1310.8.

US gold futures have On daily charts, a V-shaped recent recovery in prices from $1200 levels to $1348 levels has been temporarily reversed but markets could still witness a bounce back to $1350 levels soon, according to Sreekumar Raghavan, Chief Commodity Strategist at Commodity Online Group.�An RSI of 43 indicates a bearish trend for the near term�

At India's Multi Commodity Exchange (MCX), gold futures for October delivery fell 1.8% to Rs 27445 per 10 grms after closing at Rs 27934 on Thursday trade. "Rupee weakness continue to support gold prices in India and recent RBI directive on import of gold has also added to the uncertainty during a period of seasonal weakness in the yellow metal," Sreekumar Raghavan added.

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Berita Semasa 6 Ogos 2013 ...

The 200 tons of Gold that saved India

However, not many people may have forgotten the fact that it was the nation's gold reserves that helped tide over a balance of payments crisis in 1991 when the nation had to phyically ship its reserves of gold to London to stand collateral for an International Monetary Fund loan failing which there would have been a default on loan payments.

India's love for Gold is giving sleepless nights for India's Finance Minister Palaniappan Chidambaram and his reign has seen the maximum number of measures being taken to curb the insatiable appetite for gold in the country. Import duties were raised from 2% to 8% and the Reserve Bank of India (RBI) has put in place a number of measures to curtail gold imports.

The Reserve Bank of India continues to hold $21.55 bn in gold reserves as per latest weekly update issued on Friday and central bank buying in various countries continue to support gold.�

However, not many people may have forgotten the fact that it was the nation's gold reserves that helped tide over a balance of payments crisis in 1991 when the nation had to phyically ship its reserves of gold to London to stand collateral for an International Monetary Fund loan failing which there would have been a default on loan payments.�

This crisis ulitmately served as a turning point for the Indian economy which went steadfast in its path of liberalisation extending invitation to a number on foreign industries to set foot on Indian soil. In my interactions with some RBI economists a few years after the crisis was solved, they pointed out that the crisis was single handedly solved by the RBI.�

After Independence, the Nehruvian era thought that the nation's soverignity should be protected on the economic front too and there were huge investments to build dams, factories and scientific establishments. Self reliance was the motto and the economy was more or less shut to global trade.�

According to former India Minister for external affairs, Shashi Tharoor, the balance of payments crisis brought to the fore dangers of remaining aloof from global trade. In his book Pax Indica, India and the world of the 21st Century (Penguin, 2012), " It was only after a world class balance of payments crisis in 1991, when our government had to physically ship its reserves of gold to London to stand collateral for an International Monetary Fund laond, failing which we might have defaulted on our debt, that India liberalised its economy under our then Finance Minister Manmohan Singh."

"The amount of gold possessed by the women of the household has often been seen, in Indian culture, as a guarantee of the family's honour. Surrending the natation's gold to foreigners betokened a natinal humiliation that old protectionism could not survive. Since then, India has become a poster child for globalisation..," writes Tharoor in this engrossing book.

Even as India continued to open up its economy to global trade and investment, the love for gold hasn't subsided as yet although China might become the top consumer of the yellow metal this year, according to World Gold Council estiamtes. The RBI had also bought 200 tons of gold from IMF in 2009 and may be periodically buying or selling gold to maintain a balance of its forex and other reserves.

Apart from official gold reserves, Indian households, temples and religious establishments continue to hoard gold, seeing it as the ultimate preserver of wealth in difficult times.

IMF update on gold holdings
Meanwhile, Barclays Research quoting latest IMF data on gold holdings by various countries stated that Russia added 0.3 tonnes of gold to its reserves in June (38.7 tonnes in H1 13), to take its holdings to 996.4 tonnes, alongside the Ukraine adding 2.5 tonnes (3.4 tonnes in H1 13), taking its holdings to 38.9 tonnes, while Kazakhstan added 1.4 tonnes in June, to take its reserves to 130.9 tonnes (15.6 tonnes in H1 13). Excluding Turkey (which shows gold additions due to accepting gold in its reserve requirements from commercial banks), net buying so far in H1 13 trails H1 12; thus, despite lower prices, additional buying has not been reported to make up for the shortfall created by net disinvestment. Separately the latest weekly ECB statement revealed gold holdings were unchanged across the Euro-system banks during the week ended 19 July.�

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Berita Semasa 5 Ogos 2013 ...

FOMC Meet on Wednesday unlikely to give stimulus to Gold prices

In its weekly report, Barclays said its economists do not expect any change in its policy stance at the FOMC meet of 31 July and the $85 bn per month purchase rate to remain steady.

Gold continues to remain bearish although a short covering rally sparked by more-dovish-than-expected comments from the US Federal Reserve, weak dollar and US treasuries provided the much needed support for gold last week. However, growth in ETF holdings continued to remain muted although silver ETFs witnessed increased inflows this year, according to Barclays Research.

In its weekly report, Barclays said its economists do not expect any change in its policy stance at the FOMC meet of 31 July and the $85 bn per month purchase rate to remain steady.

"Gross shorts have been scaled back, and on a positive note, prices' trading above $1300/oz neutralises the minimum amount of cash negative ETPs. Flows stabilising would bode well for gold; however, even above $1300/oz, they remain negative. We continue to believe prices are unlikely to maintain their upward momentum in the seasonally weak period for demand unless US macro data deteriorate, driving further short covering-led support."�

Price forecasts: Q3 13:$1200/oz, 2013: $1393/oz�
Technical strategy: Bearish -Near-term topping signals against the 1350 area in gold point to a move back in range toward targets in the 1260 area.�-Resistance: 1350, 1372, Support: 1300, 1270.�

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Berita Semasa 4 Ogos 2013 ...

The Golden Wealth of the erstwhile Indian Maharajas

Indian maharajas seems to have possessed huge quantities of gold, silver, pearls and diamonds as was evident from the revelations regarding SreePadmanabhaswamy Temple in the South Indian state of Kerala.

Picture Courtesy: Victoria and Albert Museum

The news about the two daughters of former Maharaja of Faridkot, Harinder Singh Brar, getting their rightful claim on his assets after a two decade old legal fight over a forged will, have hogged the news headlines in Indian newspapers this week.

The Maharaja has left behind a rich legacy of property and assets valued at $4.4 bn (Rs 20,000 cr) and that includes �a palatial Faridkot House on New Delhi's Copernicus Marg, a royal palace complex and a fort in Faridkot, a fort in Mani Majra area of Chandigarh, vintage cars (including a Rolls Royce), an aerodrome in Faridkot spread over 200 acres, properties in Hyderabad and Delhi and gold and Jewellery worth nearly Rs 1000 cr with Standard Chartered Bank in Mumbai to name a few.

Indian maharajas seems to have possessed huge quantities of gold, silver, pearls and diamonds as was evident from the revelations regarding SreePadmanabhaswamy Temple in the South Indian state of Kerala. The temple under the administration of the erstwhile, Travancore Royal family is estimated to have gold,diamonds, gems, silver, gold coins worth $22 bn contributed by devotees and the royal family from time to time.

Maharaja Ranjit Singh had a golden throne for state ocassions although he used to sit on the floor otherwhise. He owned some of the most fabulous jewels of the Mughal emperors,

Indian maharajas even like to have custom made jewellery designed by European gold smiths. Maharaja Bhupinder Singh of Patiala gave opulence a new definition with his brocaded coat full of diamonds. The younger generation who inherited the rich legacy of the former rules continue to hold to those prized possessions.

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