Gold ETFs sizzle with 28% gains in one year

Yellow Metal Prices Set To Go Up Further Chennai: If you are one of those who had put money into gold exchange traded funds (ETFs) a year ago, the yellow metal has not only turned out to be a great asset protector but also a solid wealth generator. Gold ETFs have turned in stellar 28% gains in the last one year when the other 26 fund categories—including debt, hybrid and equity—have struggled to break the average 20%-mark.      What's made them a safer option is that all gold ETFs have same returns (since all the ETFs are tracking the same commodity) while there is a huge divergence in the other fund categories—sometimes 40-50%—between the best and worst schemes. With gold (as an asset) assuming significance after the world went into a slump, ETFs, which track the metal price, rose in tandem as stocks fell. The gains logged by gold ETFs come in a period when equity funds focussed on banking and FMCG have delivered around 18-19%, GILT (medium and long-term) schemes have given 13% returns, monthly income plans posted 12% gains and sensex gained a mere 9%, data from fund tracker ValueResearch shows.      Currently, there are five gold ETFs, such as Gold Benchmark ETF, Kotak Gold ETF, Quantum Gold, Reliance Gold ETF and UTI Gold ETF with more than 1 year history. SBI MF launched its Gold ETF in April this year. With Chinese consumers buying gold aggressively—coupled with the onset of the festive season in India—experts say gold prices will go up further.      "For the last 15 years, the dollar has depreciated while gold prices have inched up. For the record, gold has delivered 16-17% compounded annual growth rate (CAGR) for the past 9 years. If high crude prices continue to push inflation, it will make gold more attractive as an inflation hedge,'' Amar Shah, head, research (commodities), Angel Broking, said.      In New Delhi, gold is trading at around Rs 15,200 per 10 grams. Investors have clearly identified gold as a part of their asset allocation strategy, feels Krishnan Sitaraman, director, Crisil Fund Services.      "Gold's allure lies in the fact that it has proven its mettle during downturn. Gold ETFs are have a direct correlation with prices. While gold may not repeat its stellar performance like that in 2008, it's a must for every investor now,'' he said.

Paddy farmers in for a special bonus

Farm Ministry Plans To Give Incentives Due To Rising Production Costs And Drought THE government may announce a bonus over and above the minimum price paid to paddy farmers for the next season starting October.      In his meeting with a delegation of Akali Dal and BJP MPs and MLAs from Punjab, led by state chief minister Parkash Singh Badal, food and agriculture minister Sharad Pawar said the government would definitely do something to give relief to paddy farmers.      Mr Pawar said he was aware of rising cost of production due to drought and the matter of giving incentive would be seriously looked into at the time of procurement of paddy.      The Centre, on August 20, increased the minimum support price for 2009-10 season to Rs 950 per quintal for average quality, and to Rs 980 per quintal for higher grade. In 2008-09, the government procured  paddy at Rs 900 per quintal for fair average  quality and at Rs 930 for higher grade. This included the bonus of Rs 50 per quintal  over and above the MSP.  The delegation demanded that the Centre release Rs 3,000 crore to revamp the canals in Punjab to increase the crop production.      Updating Pawar about farmers' problems, Punjab chief minister requested the Union minister to send a central team to assess the drought situation instead asking farmers to shift to other crops.      Punjab deputy chief minister Sukbhir Singh Badal said farmers were expecting more paddy MSP and are disappointed with the current hike of Rs 50 per quintal. He requested that the Centre should increased the paddy MSP to Rs 1,350 per quintal for common variety and Rs 1,400 per quintal for higher grade.      In addition, the Centre should announce a bonus of Rs 100 per quintal because of higher cost of production following deficient monsoon. He demanded a central assistance of Rs 1,420 crore to Punjab as the state has already purchased power at higher price to save the crop.  BOOSTER DOSE  The govt, on August 20, raises the minimum support price for 2009-10 season to Rs 950 a quintal for average quality, Rs 980 a quintal for higher grade  Food minister Sharad Pawar on Wednesday said the govt would announce more reliefs for paddy growers  The relief is expected to be over and above the MSP paid to paddy farmers from October

Drought impact: Gold buying may slump in rural markets

DIP IN AGRI PRODUCTION MAY KEEP BUYERS FROM JEWELLERY SHOP GOLD demand in India, the biggest market for the yellow metal, may fall by around 20% in the rural markets due to drought situation, according to industry estimates. Already, gold imports have been lower by 56% in 2009, and experts say, dip in agriculture production may keep rural buyers away from jewellery shops during the upcoming festival season.      India's gold imports slumped by 65% to 7.8 tonne in July when compared with the same period last year. For the period from January to July, India imported about 71.6 tonne, which is 56% lower than the same period last year.      According to Anagram Capital research analyst Renisha Chainani, while demand in India is falling, that in China is increasing and may compensate for lower buys in India. Gold prices will remain higher and will keep rural consumers, who account for 60-70% of total gold consumption in the country, away from the jewellery market, she said. Gold prices that were in the range of Rs 11,250-12,000 per 10 gm in August 2008 rose to more than Rs 15,000 per 10 gm in August 2009.      "The huge decrease in gold imports can be attributed mainly to higher prices.      Typically, rural gold sales fall whenever there is a fear of insufficient rains as it leads to a squeeze on farm incomes. When people do not have money enough for buying essentials, why would they buy gold," Ms Chainani told ET.      She added that prices of gold will not come down as global markets continue to be bullish for the precious metal. "Even European Central Bank (ECB) could sell only 140 tonne of gold this year against 350 tonne till September, 2008," she said.      Diwali season usually spurs huge gold buying from rural buyers as crop season ends in September-October. However, this year, the trend will not be sustained and might reverse. "Drought will decrease purchasing power of consumers. On the other hand, prices of essential commodities typically go up during a drought-hit year. It was seen earlier that rural people sell gold to fight drought. We believe that this year, farmers will sell gold in significant volumes," said Gujarat Jewellers' Association secretary Shantibhai Patel. He added that higher gold prices have hit the demand but will give relief to people who will be forced to sell gold.      However, World Gold Council (WGC) believes that there will not be any significant impact of drought on the gold demand. "There is a revival in the demand. Richness of rural areas has been increased significantly in recent years. Moreover, these areas are now not dependent only on agriculture. The situation is different in each state. We believe that the demand for gold will remain unchanged from last year," said WGC (India) director Dharmesh Sodah.

Cotton output may fall if dry spell lingers

SO FAR NO CROP DAMAGE SEEN DESPITE INADEQUATE RAINS, BUT THINGS COULD TURN WORSE COUNTRY'S cotton economy is keenly awaiting a fresh spell of rains in the next one week. If there are no rains in next 5-7 days, the cotton production in Gujarat, the top cotton producing state, may drop to 70-75 lakh bales from 93 lakh bales last season.      So far, despite scanty rains, there is no damage done. On the contrary, the acreage under cotton cultivation has risen. With almost 96 lakh hectares already coming under cultivation, cotton has witnessed a reord acreage. Last year, the figure stood at 93.7 lakh hectares. It is estimated if there are further spells, the acreage under cotton cultivation might go up to 98 lakh hectares. The present increase in acreage is mainly in states of Gujarat, Maharashtra, Punjab and Karnataka.      A round or two of rains in Gujarat and Maharashtra, the leading producers of cotton in the country, may again take the cotton production to above 3 crore bales (1 bale is 170 kg) for the forthcoming marketing season, with Gujarat contributing about 1.1 crore bales.      The cotton acreage in Gujarat has gone up to 25.5 lakh hectares, up from 23.5 lakh hectares during last kharif. Farmers have sown the short staple variety during the past few days. In an event of another round of rains, the figure will swell by 20-25,000 hectares. According to sources, about 6.5-7 lakh hectares is already under cultivation of short staple variety of cotton. Maharashtra has 33 lakh hectare under cotton cultivation, against 31.5 lakh hectares in the previous year. Cotton acreage has increased from 12.5 lakh hectares a year ago to 14 lakh hectares in Punjab, while in Karnataka, it has increased from 4 lakh hectares to about 5 lakh hectares.      However, the crop is passing though a critical phase and badly needs more spells of rains. "The output may be low in spite of higher acreage, if it doesn't rain in about a weak," said Dinesh Shah, of Gill and Company, a leading cotton broker in the country. "At present, the crop is showing some signs of deterioration, but absence of rain may lead to heavy losses," he added.      "So far the crop situation is good, but it still needs more rains. Timely and adequate rains may result in production of about 3.2 crore bales in the country and 1.1 crore bales in Gujarat," said Arun Dalal, a cotton broker.      Irregular rains in previous kharif season resulted in decreased acreage, as a result of which the production decreased to 93 lakh bales from 1.17 crore bales in the previous year in Gujarat. "If the situation persists, this could be the lowest output in the past four years," said Sardarbhai Patel of Raghuvir Gining mill.      After the introduction of Bt cotton, Gujarat has witnessed a continuous rise in production with the last year being an exception. Lack of rains has sustained high prices. However, with enough carry forward stock, further rise in prices is unlikely. At present, the spot price is in the range of Rs 22,800-23,000, while the forward contracts for December and January delivery are quoted at Rs 23,500-23,800, say sources.  Peru drops safeguard duty on Indian yarn  MUMBAI: Indian cotton yarn exporters would not have to pay an additional duty for exporting their products to Peru as the South American nation has decided to drop duty on import of cotton yarn. The efforts made by the Cotton Textiles Export Promotion Council (Texprocil) and diplomacy by the Indian embassy have led to the Peruvian authorities deciding not to impose any safeguard duty on import of cotton yarn into that country. Shipments of cotton yarn from India would now continue without any encumbrances. "Being the largest supplier of cotton yarn to Peru, with a share of over 80% in total Peruvian cotton yarn imports, Indian cotton yarn exports would have been severely impacted in case the safeguard duties were imposed," Texprocil chairman VS Velayutham said in a statement here. Exports of cotton yarn from India reached a level of $94.45 million during 2008, recording an impressive growth rate of 73.62%. On account of the safeguard duty, imports of cotton yarn from India during January-June 2009 recorded a sharp decline reaching a level of $24.79 million. It may be recalled that aggrieved by the economic downturn, cotton yarn producers in Peru represented by Sociedad Nacional de Industrias (SNI) filed a complaint with the National Institute for the Defense of Competition and Protection of Intellectual Property, claiming that rising imports of cotton yarn were causing a threat to the domestic cotton yarn producers in Peru.

Gold is trading above $940 level Thursday

Thursday morning gold flat above $940 an ounce, upheld by light physical buying as investorsviewed the currency market for clues on the bullion's direction.

Spot gold stood at $941.90 an ounce at 4:00 GMT, almost flat from New York's notional close of $941.55. Bullion hit a 3-week low below $930 per ounce Monday. But precious metal pricesface short-term resistance around $950 per ounce, traders consider. Some of them even said a decisive fall below $940 could trigger a rush of fund liquidation.

Doubts about an emergent global economic recovery had recently encouraged investors to sell riskier assets and pile into safe-haven bets including the dollar and US Treasuries. However dollar's weakening this week fuelled investors' tolerance for such riskier assets as stocks and commodities. 

A lack of direction in gold prices has recently kept many long-term investors away, resulting in a market driven mainly by speculative fund positions. Meantime, the currency market on Thursday has failed to provide any clues on the direction of gold.

World gold demand fell by 9% in the second quarter as rising prices and the impact of the global recession curbed jewellery consumption, according to a report by the World Gold Council. 

US gold futures for December delivery GCZ9 were at $944.00 an ounce. The contract on Wednesday settled up $5.60 at $944.80 on the COMEX division of the New York Mercantile Exchange.

The SPDR Gold Trust's holdings stood at 1,065.49 tonnes as of August, 19, unchanged since August, 11, that mirrored lacklustre interest by long-term investors. 

At about 4:09GMT the other precious metals was quoted as much as: 

  Metal Last Change Pct chg YTD pct chg Turnover

 Spot Gold 942.00 0.45 +0.05 7.03

 Spot Silver 13.92 0.13 +0.94 22.97

 Spot Platinum 1233.50 -1.00 -0.08 32.35

 Spot Palladium 271.00 1.00 +0.37 46.88

 TOCOM Gold 2869.00 20.00 +0.70 11.50 32131

 TOCOM Platinum 3764.00 64.00 +1.73 41.93 8490

 TOCOM Silver 424.40 5.40 +1.29 32.92 142

 TOCOM Palladium 834.00 13.00 +1.58 51.64 78

TOCOM prices are in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices are in $ per ounce.