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Yellow Metal At Rs 18,220, Silver At Rs 30,140New Delhi: The dream run of gold and silver is continuing. Price of gold closed above Rs 18,000 per 10 gram on Wednesday in Indian markets, after crossing $1200 per ounce in the international market on Tuesday.In the Mumbai market, standard gold price closed at record Rs 18,220. In Delhi, price of pure gold (99.9 purity) spurted by Rs 270 per 10 gram to close at Rs 18,310. Price of silver ready (.999 fineness) rose by Rs 690 per kilo to Rs 30,140 as against Rs 29,450 on Tuesday.At the same time, price of silver has also crossed Rs 30,000 per kg —an all- time high— on Wednesday. Despite rising prices, bullion traders said, there is a good demand from investors as they expect prices to rise further. A senior merchant banker said the apprehension over weakening of dollar and fresh demand from central banks world over are adding shine to the precious metals. The gold price in the international market is quoting at a record high of $1212 per ounce. Silver has also touched an all-time high of $19 per ounce. In the developed markets like Japan, Europe and the US, large funds are investing in gold in the expectation of further increase in prices. The expectation of price rise got further credence from the decision of RBI and Sri Lankan central bank to buy gold from IMF. RBI's decision to buy 200 tonnes of gold in the second fortnight of October at an average price of $1,045 per ounce has made it richer by $1.07 billion. Investors have taken it as a trend. If more central banks buy gold to diversify their reserve portfolio, prices of the yellow metal will move up further. In the last one year, investment in gold has yielded a return of around 35%, which is very attractive, considering most of the other assets have depreciated in the last one year. On Wednesday, investment interest in gold remained firm, with SPDR Gold Trust's holdings, the world's largest gold-backed exchange-traded fund, rose further. However, with rising prices, interest of retail buyers declined in gold. A bullion merchant said sales of gold ornaments and jewellery have reduced significantly. However, some analysts cautioned that if price continues to rise, the central banks might start selling the yellow metal, leading to sharp fall in prices. So, small investors should not invest their large part of savings in gold.   |
LONDON: Gold demand fell 34 per cent in the third quarter as high prices weighed on investment flows and led to a slump in jewellery buying in But speculation in gold futures and expectations for more official sector bullion buying are keeping prices elevated despite a dearth of physical demand, according to the WGC's investment research manager Rozanna Wozniak. "For most of last year, the buying was very physical," said Wozniak. "(Now), it seems to be more financial market-driven, by some of those other less visible instruments -- derivatives, futures, over-the-counter transactions." "In terms of why it is happening, we have had some good news coming out from thecentral bank sector, as well as the fall in the U.S. dollar," she said. "That says something about potential future demand." A 200-tonne gold purchase by India's central bank pushed gold prices sharply higher in early November. Prices hit a record above $1,150 an ounce on Wednesday as momentum buying pushed prices through key technical resistance levels. But high prices have pressured physical offtake this year as consumers shied away from the metal, even as large investors and central banks bought gold as a portfolio diversifier. Indian jewellery demand tumbled 42 per cent to 111.6 tonnes in the third quarter from a year earlier, though it inched up from extremely low levels earlier in the year. In the Middle East, jewellery buying was down 34 per cent at 69 tonnes. Greater China, however -- which comprises China, Hong Kong and Taiwan -- saw a 10 per cent rise in overall demand to 128.6 tonnes, while jewellery demand rose 7 per cent. Chinese consumers have seen less of an impact on local gold prices from currency fluctuations, and their economy has been more resilient than many. The market also remains relatively immature in terms of consumer buying, Wozniak said. "The Chinese market was regulated for some time, so the Chinese consumer is still very much in the process of accumulating (gold)," said Wozniak. INVESTMENT SLIPS Investment demand for gold also slipped from high levels in the third quarter of 2008. Retail investment in products such as coins and bars was down 31 per cent year-on-year, while ETF inflows tumbled 72 per cent to 41.4 tonnes. Levels of ETF buying were exceptionally high in the third quarter, the World Gold Council said, with a dip in prices boosting interest in gold in all its forms. Total gold supply edged down 5 per cent in the third quarter, meanwhile, the WGC said. Mine production rose, but a dearth of sales from central banks -- which turned net buyers of gold in the quarter -- and producer dehedging cut into total supply. Central banks bought 15 tonnes of gold in the third quarter, their second straight quarter as buyers. In the third quarter of last year, they sold 13 tonnes of gold. Supply of recycled gold to the market rose 31 per cent to 283 tonnes, but was still significantly down on the 569 tonnes it hit in the first quarter of 2009 as prices powered through $1,000 an ounce. "Scrap does tend to come in waves, and it appears that for another wave, we would need a higher price to generate it," Wozniak said. |
The stability and growth shown by gold ETFs have been remarkable when compared to equity funds. However, it remains to be seen how long the gold rush will last, says Dhirendra Kumar, CEO,Value ResearchFor many of us who have been investing in financial instruments, the relentless rise of old poses a problem because we have no easy framework in which to think of gold. Till as recently as a couple of years ago, gold lived in a completely different world from stocks, funds and debt products. There was no easy way of investing in gold except for buying it as jewellery or coins and bullion trading was a mysterious world that was inhabited by a different set of species altogether. Gold investing was very much an out-of-sight and out-of-mind phenomena. Since then, the arrival of commodity exchanges, Gold Exchange Traded Funds (ETFs) and gold stock funds has made it trivially easy to invest in gold without having to worry about purity and physical security. Just as important is the fact that these have made gold easily comparable to other investments. When an investor looks at fund performance data onvalueresearchonline.com or any other mutual funds portal, he can't help comparing the returns of goldbased investments with equity-based ones. Since about 2005, gold's returns make it looks like a great investment compared to anything else. And it's not just the returns, but the stability when compared to equity that the investor notices. The steepest fall in gold since 2005 has been the 20 per cent it lost from March 2008 to October 2008. When I talk to gold's new found fans, I find that there are two more factors that make them like gold, if only at a sub-conscious level. One is the simplicity of decisionmaking. Gold is gold and that's all there is to it-all the ETFs deliver identical results. Unlike an investor in equity or equity-backed products, there aren't hundreds of choices. Secondly, most Indians seem to come mentally pre-configured with a propensity to view gold as an ideal vehicle for safe long-term investing. At an intellectual level, many of us have bought into the logic of why gold doesn't make sense. However, we are a gold-coveting culture and have descended from generations who have lusted after gold. It takes very little to convince us that gold is a great investment, even though the long-term evidence is decidedly patchy. Today, the value of gold is increasingly driven by the demand and supply of paper gold on financial markets. It is a financial asset and is clearly subject to the same volatility as other financial assets as investor interest flows in or out. We could well be in a gold bubble which is just as ephemeral as the stock or oil or real estate bubbles were. However, it is undeniable that many investors have started buying gold-backed securities of one kind of another as short-term trading opportunities. In the mutual fund space, there are actually two distinct kinds of gold-related funds available. One is the straightforward Gold ETFs. These closely track the price of gold itself and deliver profits and losses that mirror investing in physical gold. The others are a couple of equity funds (one from AIG and the other from DSP BlackRock) that actually invest not in gold but in foreign gold-related stocks, like gold mining and processing companies. Interestingly, these funds seem to act as sort of highbeta versions of the gold price itself. Over the last one year, gold has gained 44 per cent but these funds have gained more than twice that. Will the gold run last? If you look around, you will see as many cheerleaders as sceptics. As for me, I'm almost certain that one of the two groups will turn out to be correct! (Catch Dhirendra Kumar discuss this portfolio in Investor's Guide show on ET Now)   |
Washington/New Delhi:More than 18 years after New Delhi pawned 67 tons of gold to Western banks to tide over a balance of payments crisis, the Reserve Bank of India (RBI) has bought thrice that amount of gold from the International Monetary Fund (IMF) to diversify its assets.The Washington DC-based IMF on Monday announced the sale of 200 metric tons of gold to the RBI, saying it represented almost half of the total sales volume of 403.3 metric tons that was approved by the Fund's executive board in September. "I strongly welcome this transaction with the RBI,'' IMF MD Dominique Strauss-Kahn said. "It is an important step towards achieving the objectives of the IMF's limited gold sales programme, which are to help put the Fund's finances on a sound long-term footing and enable us to step up muchneeded concessional lending to the poorest countries.'' For India, the purchase, apart from signalling that its economy has come a full circle, is a way of spreading its assets which are said to be currently over-weighed with foreign currency, mainly in the form of sovereign US Treasury bonds. In other words, it is a hedge against a falling dollar. India is the world's largest private gold consumer, but the government's holding of gold as an asset is modest. Even so, the latest purchase puts it at No 10 on the list of top 10 gold-holders in the world. Of India's current foreign exchange reserves of nearly $285 billion, foreigncurrency assets account for more than 90% ($268.3 billion), followed by gold ($10.3 billion), IMF's Special Drawing Rights ($5.2 billion) and a reserve position in the IMF of $1.59 billion. While India's current gold holdings, accounting for just 3.7% of the assets, are said to be historically low, buying 200 tons in addition to the 358 tons it already holds is expected to bump up the gold reserves to more than 6%. Gold buy doesn't mean snubbing dollar: FM Washington/New Delhi: The RBI's move to buy 200 metric tons of gold from the IMF has been prompted by the u n s t e a dy dollar, and countries like China, Russia and Brazil have already gone this route. Commenting on the purchase, finance minister Pranab Mukherjee said, "It doesn't mean we don't prefer the dollar any more or like gold any better.'' Recalling the embarrassment of 1991, when India was forced to mortgage a part of its gold reserve, he said when the RBI recently asked whether it should invest in gold, he told the central bank it could do so to bolster the reserve. An RBI statement said the purchase of gold was made as part of the bank's foreign exchange reserves management operations. The IMF said the transaction, which is in the process of being settled, involved daily sales that were phased over a two-week period during October 19-30, 2009, with each daily sale conducted at a price set on the basis of market prices prevailing that day. Officials said the total sales proceeds were equivalent to $6.7 billion at an average gold price of $1,045 per ounce. India's gold trauma occurred in the summer of 1991 when, faced with dwindling foreign exchange reserves and a possibility of a default on payments, the government hocked 47 tons of gold to the Bank of England and 20 tons of gold to the Union Bank of Switzerland to raise $ 600 million. The move helped tide over the balance of payment crisis, and also kick-started the reforms process when the next Prime Minister, P V Narasimha Rao, appointed Manmohan Singh as the finance minister.   |
In the mad Diwali rush for gold, a sobering fact is that one could be stuck for good with bars and coins that banks sell. They cannot be re-sold to banks. For those who buy them for investment purposes, to make money in a rising market, this is a deterrent.
If these bars and coins must be sold back, for whatever reason, the only easy option is to go to the neighbourhood pawnshop or jeweller, in which case, shortchanging is guaranteed. Another option is to find a non-banking financial company (NBFC) that buys gold.
Few gold buyers know that Reserve Bank of India (RBI) rules allow banks to sell gold, but not buy it back from customers.
"We only sell gold coins for a fee... We are not allowed to trade or take positions in bullion. A customer (who buys from a bank) has to go to the open market if he wants to sell it," V Krishnaswamy, general manger at Indian Overseas Bank, said.
Buying of gold from banks, both government public and private sector entities, reaches a peak during the Diwali season, especially on the occasion of Dhanteras.
Those in gold trade and promotion say the RBI policy creates difficulties for the average buyer. "Customers often end up at the doorstep of small jewellers, who offer lower rates," Ajay Mitra, managing director of the India chapter of the World Gold Council, told Financial Chronicle.
Most banks, including State Bank of India, ICICI Bank and HDFC Bank, have been very aggressively promoting the sale of gold coins and bars.
The NBFCs that do buy or sell gold are few and far between, but they do not buy coins originally sold by others, among them is the Muthoot group of Kerala.
"We only sell gold coins. Since banks do not buy back gold coins, we don't think it is prudent for us to do so. Customers need to tap the open market to sell them," V J Matthew, chief executive officer of the precious metal division of the group, said.
Another south-based NBFC, Mannappuram Finance, also accepts gold from customers, but only those who have bought it from them. This company, too, does not accept gold coins bought from banks.
"We sell gold coins and also buy back at market prices, but only from our customers. Our primary focus is on developing our own gold coin business," V K Joshi, the company's assistant general manager, said.
Most jewellers will give new ornaments in exchange for old ones. But the exchange always takes place at the huge discount on the price of the old jewellery. Tanishq, a big organised jeweller, accepts bars and coins back from customers who have originally bought them from it – but this is done at a discount on the market price.
"In buying back gold coins and bars, the company has a policy of deducting 5 per cent from the market price," said N Vidya Sagar, Tanishq's business manager for the northern region. The company does not buy coins and bars that have been originally bought from other sources.
The price of gold coins differs from bank to bank. A 24-carat, 10 gm gold coin at State Bank of India costs Rs 17,518, inclusive of all taxes; at HDFC Bank it will cost Rs 17,606. The market price of gold as on Monday stood at Rs 15,930 per 10 gm.
GREENER PASTURESSpot prices of agricultural commodities have zoomed in the last two years & so have stocks of cos involved in these products. Aman Dhall guides youARE YOU the one who buys grocery and food items for your family on a daily basis and that too from a mandi? If the answer is 'yes', then you must have shared at some point in time the agony of rising prices and how it's eating into your savings with your friends or colleagues or with family members. But how many of you have ever utilised this very market knowledge of daily bargains with wholesalers to invest in commodity futures or stocks of companies that are involved in the manufacturing of commodities? Chances are there'll be very few who would have had an answer in affirmative. Commodities are considered risky yet rewarding investments, if done with proper due-diligence. Over the last two years, spot prices of agricultural commodities have sky-rocketed in India and with that the stock prices of companies involved in that too have shot up.To help you with your investments in commodity-based stocks and commodity futures, here's a low-down on what makes better investment sense in the current scenario. GAZE AHEAD Less than normal monsoons have paved the way for a bumper season for the agricultural stocks on Dalal Street. These stocks have soared by over 45% on an average since June 1. With the demand scenario still buoyant, analysts believe commodity prices won't come down significantly and commodity stocks will remain steady, stable and inch upwards. "The gains,however, may not be as high as they were during the last few months," says Sudip Bandyopadhyay, CEO of Reliance Money. Despite the monsoons picking up in the later half of the season, analysts don't see any reversal in fortunes of these stocks unless there is an uncertainty on the forecast for the next crop season. If there is a slight fear of a dull season ahead, the rally might well continue, they argue. International agricultural production too has remained on the lower side so far. "This trend can continue for some more time. Yet it is advisable that only those with a healthy risk appetite enter these stocks on declines," says Ashish Kapur, CEO of Invest Shoppe, a Delhi-based broking firm. WATCH FOR CYCLE For starters, trading in commodity futures is considered a leveraged position. Commodity prices move purely on the demand-supply scenario. So, financial discipline most often than not decides the outcome of your trades. Factors such as rainfall levels, sowing-harvesting cycle, government polices and macro economic outlook decide the direction in which the commodity prices move. Analysts hold a mixed outlook for agricultural commodities for the next few months. While they are bullish on some commodities, there is a bearish attitude too for others. For instance, they expect Guarseed prices to move up due to deficient rains in Rajasthan and Haryana during the main sowing period from June to August. But on the contrary, they see soybeans prices remaining subdued with good production prospects in India and the US. Analysts are bullish on the prospects of commodities such as coffee, rice and sugar. "Coffee has a longer gestation period as compared to tea. So the production of coffee is quite less as compared to its substitute, tea," says Kapur. On the other hand, rice demand is anticipated to grow as consumption depends on two major factors — population and income, both of which are growing in India. Moreover, due to drought in some rice growing parts of the country, the production of non-basmati rice is expected to decline. Sugar story is no different. The prices have moved up smartly in domestic as well as global markets. "Demand has grown from various countries, including Brazil. India, one of the exporters of sugar, could well become a net importer of sugar, if the shortage continues," points out Kapur. DIVERSIFICATION GAIN As a thumb rule, you should remember that the price of a commodity and its corresponding stock price doesn't have a direct co-relation. There are a multitude of other factors such as management quality, cash flow situation and overall market confidence, in addition to the commodity prices, that help arrive at the stock price, and thus is the difference in the level of returns. "However, if other things were equal, the commodity prices do form the most important factor in pricing commodity shares," says Jayant Manglik, president of Religare Commodities. Given that the current period is the peak harvest season, market experts are against investments in the agri commodities. Buying commodity stocks, they say, makes better sense as not only does one get better returns when the trend of a commodity is rising but one also pays the whole amount purchasing a share and hence is not leveraged. "High volatility in commodity prices means only those who have capacity to pay the margin calls on time gain from the uptrend. That's why buying stocks is considered a better option," explains Dilip Bhatia, director and head of Kotak Commodities. Sensitivity of commodity prices to news flow in the short run is another drawback. On the other hand, stocks have a diversification benefit. You have the option to buy stocks of companies which have exposure to more than one commodity. aman.dhall@timesgroup.com  |
The beauty of gold lies not only in its glitter, but also in its ability to make you happy in bad times. Its glitter pierced through the gloom of the financial slump with the yellow metal emerging as the safest investment the world over. A day before Lehman's bankruptcy, an ounce of gold could be bought at $784. Three days later it hit $922 in global markets. In India, the per 10 gram price of gold correspondingly jumped from Rs 11,640 to Rs 13,541.As the financial crisis deepened, nervous investors bought gold to preserve their wealth. By February 19, 2009, prices went up to $ 1007/ounce (Rs 16,090/10gm). It softened in last week of February 2009 as global macro economic factors started showing positive signs and money started chasing stocks again. After a slight dip, prices have come back to peak levels of around $1,000/- ounce and Rs 16,000/10gm at present. Investors today view gold as a hedge against high inflation and a weak dollar.While Indian gold consumption is low, prices are soaring because of globaltrends. Even if we assume that privately held gold in Indian households has remained stagnant at 15,000 tonnes in the last one year because of slackening demand, the value of this holding has gone up from $ 378 billion then to $ 482 billion now, factoring in the change in dollar rates. Thank Lehman Brothers for this cool 27% gain of $104 billion. At today's rates, Indians with gold are richer by Rs 6 lakh crore. "People tend to buy gold whenever there is uncertainty in the financial markets. Gold offers liquidity, convenience and value addition," says Ajay Mitra, MD, World Gold Council (India). Private gold holding in India is around 15,000 tonnes, according to WGC—the highest in the world. Compare that with the US government holding of just 4,000 tonnes.  |
