Trade with Commodities

Commodities surge on Fed’s Move

2012-01-29T17:13:00.000-08:00

COMMODITY WRAP

Commodity prices shot up in sync with the rally across asset classes after the US Federal Reserve said that it would keep interest rates near zero levels until 2014 and hinted at a further economic stimulus. The dollar lost value and precious metals rallied. Gold has gained over 9% in January . Any price correction would be a good entry point given expectations of a strong rally. Base metals gained the most in four weeks as investors bet the expected liquidity would push prices higher in coming months. Copper & tin were the biggest gainers.

WHEAT
Wheat prices could not remain unaffected from the speculative buying on back of the Fed-induced stimulus. The Fed moves are likely to further weaken the US dollar — making American exports attractive. The US is a leading exporter of wheat. Hence, it was natural for speculators to buy into the commodity. According to US data, exporters sold 6,18,700 metric tonnes of wheat during the week ended January 19 — the highest quantity since September. Russia, a rival exporter, may impose a tax to limit exports if shipments exceed 24-25 million tonnes. The proposed move also strengthened bullish sentiment in the US wheat futures.

Import duty up: Gold, silver jewels get dearer

2012-01-17T19:34:00.001-08:00

New Delhi: Gold and silver jewellery are all set to cost more with the government increasing the import duty on precious metals from Tuesday.

    The customs duty on gold has been fixed at 2% instead of Rs 300 per 10 gram. Silver will attract 6% duty, instead of a specific duty of Rs 1,500 a kg earlier. Based on Tuesday's price, this will translate into customs duty of Rs 550/10 gram and Rs 3,163 for silver. What's
more, the levy will rise if prices of the metals go up. The import duty structure for platinum has also been changed.
    Branded jewellery makers say they will be forced to hike prices by 1% to 3%. While a minor raise is unlikely to result in the postponement of purchase decisions, it will help the government generate around Rs 600 crore additional revenue at a time when it is grappling with a tight fiscal condition. Continued uncertainty in the global economy and poor stock market returns are prompting people to bet on gold which is seen to be a safe haven in tough times.
Heavy Metals

• Customs duty on gold fixed at 2% from the earlier 300/10gm

• Silver to attract 6% duty against 1,500/kg, duty on platinum too revised

• The hike will make branded jewellery costlier by 1-3%

• Government will add about 600cr to its kitty with people betting big on gold'Gold duty hike will have minimal impact'
New Delhi: Jewellery makers say the hike in import duty of gold may not deter people from buying the yellow metal. The rising demand for gold is one of the main reasons for its price crossing the Rs 29,000 per 10 gram mark recently although it has retreated since then. On Tuesday, gold closed at Rs 27,925/10 gram in Delhi.
    "The higher cost will be passed on to the end-consumer. It will not affect the profitability of retailers," Gitanjali Export CEO Sanjeev Agarwal said. Orra CEO Vijay Jain said, "Gold prices have doubled in the last three years, but the demand is reasonable. The impact of an increase in customs duty will be minimal and in the short term." "We saw good demand for gold until last October. But November and December have been a little weak," said MMTC director (marketing) Ved Prakash.
    The impact on silver is, however, expected to be more pronounced. "The dynamics are a little different. But there will be no impact on investment demand," said Gnansekar Thiagrajan, director at advisory firm Commtrendz Research.

COMMODITY WRAP Gold, Silver and Crude Rise on Iran Fears

2012-01-08T20:18:00.001-08:00

Commodities like gold, silver and crude oil were impacted by the geo-political risk involving sanctions on Iran aimed to curb its nuclear programme and the continuing European sovereign debt risk. These factors have caused the three commodities to soar. Except for these main commodities, other commodities have logged mixed price movement. Among agri commodities, cotton, palm oil and soybean gained while wheat, rubber and soy oil dropped. Among the base metals, while tin and aluminium gained, copper, nickel and lead have dropped marginally.
SILVER
Precious metals posted the biggest gains among commodities in the first trading week of the year as investor appetite for gold and silver as safe havens started to rise again. Silver rose more than 5%, its biggest rise in over two months as eurozone worries resurfaced after the holiday break coupled with geopolitical concerns. After trading at a high of $35 per ounce in mid-2011, the price of silver corrected sharply to around $27 per ounce levels. Given its inverse relation with the US dollar, the price of silver is not expected to move up significantly from the current levels if the dollar remains firm.

Food inflation turns -ve, RBI may cut rates

2012-01-05T22:23:00.001-08:00

New Delhi: Food inflation turned negative for the first time in nearly six years in late December as prices of vegetables, potato, onion and some cereals fell sharply, prompting analysts to say the data provided headroom for the Reserve Bank of India (RBI) to cut interest rates and support growth.

    Data released by the commerce and industry ministry on Thursday showed food inflation, as measured by the wholesale price index, fell by 3.36%—sharply lower than the previous week's 0.42%. It stood at 20.84% in the same year-ago period.
    Finance minister Pranab Mukherjee said there was substantial improvement in the food inflation situation. "Food inflation has turned negative for the first time in the recent memory," he told reporters. Food inflation fell due to better supplies
New Delhi: Plunging to negative figures for the first time in six years, Thursday's data for food inflation showed vegetable prices fell by 50.22% yearon-year while potato prices declined an annual 34.01%. Onion prices which had shot up last year fell by 73.74% yearon-year. Wheat prices declined an annual 3.41%.
    But price of pulses firmed up an annual 13.85% during the week under review.
    C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said he expects the overall inflation to ease below 7% by end-March.Policymakers have been wrong-footed several times in the past two years while predicting the inflation trend.
    "We have to wait for December inflation figures to see if the non-food manufacturing numbers have also followed the same path. The December numbers will indicate when and how RBI will act," he told reporters.
    "The environment appears to be in favour of the Reserve Bank reversing its monetary policy stance," he said.
    Economists said the decline in food inflation was largely due to a statistical base effect but also showed that supplies had improved significantly.

Gold records biggest fall in two mths

2011-12-15T16:34:00.001-08:00

New Delhi: Gold on Thursday recorded its steepest fall in over two months and lost Rs 800 to Rs 28,140 per 10 grams, on frantic selling by stockists on weak global trend and sluggish domestic demand.

Gold had plunged by Rs 835 on October 5. Traders said selling pressure gathered momentum, as the metal in overseas markets dipped below $1,600 an ounce on deepening euro-zone debt crisis and boosting the dollar. In addition, reduced offtake on the domestic front due to the end of the marriage season also weighed on the yellow metal's prices here.
On similar lines, silver tumbled by Rs 3,200 to Rs 52,600 per kg, on fall in demand from industrial units and silver coin manufacturers. Gold in global markets, which normally sets the price trend on the domestic front here, tumbled by $54.40 to $1,576.50 an ounce and silver by 6.10% to $28.96 an ounce in New York last night. PTI

Is it time for commodity PMS? 15% is the fall

2011-10-30T21:46:00.000-07:00

that the Indian market has witnessed over the past year, with the AUMs of equity funds and ETFs falling by 0.62% in September this year. It's to deal with such uncertainties that investors are looking for alternative investment options, such as commodities, which are currently witnessing a rally. In fact, the AUM for gold ETFs increased by 7.9% in September. Does this mean that portfolio management services (PMS) for commodities have become inevitable? Shobhana Chadha spoke to financial experts and found they are unanimous on the need for portfolio diversification through commodities and introduction of advisory services. However, they differ on whether small investors should make use of the service.

Naveen Mathur Associate Director, Commodities, Angel Broking Yes, but...
Portfolio management services should be allowed only for those commodities whose prices are driven solely by the international markets. This will help avert the risk of prices being driven by large market players. In India, the prices of globally traded commodities, such as bullion, base metals and energy, mirror the international market prices and are not driven by the Indian demand-supply fundamentals. Hence, PMS in these commodities will not be risky. However, the reverse may happen in the case of commodities that derive their prices from domestic fundamentals. For instance, PMS in agricultural commodities may cause an upheaval. Inflation in agricultural commodities is a sensitive issue and, hence, the related segments involve massive government intervention. The fear of PMS funds driving the prices of essential commodities will increase such interference, which will significantly diminish the pragmatism of PMS in the segment.
Overall, PMS in commodities will help investors in the Indian market to diversify their portfolios judiciously and make the best of commodity investment. Commodities offer excellent returns, especially in times of high inflation and market uncertainty. As a result, they help the investors mitigate the impact of negative real returns or losses from other asset classes in their portfolios. The Indian investor is finally becoming mature as he has started regarding commodities as a potential investment option. The introduction of smaller contract sizes has helped even the small, savvy investors to benefit from trading in commodities. Convincing investors has not been difficult as they realise that diversification is the need of the hour.
If PMS in commodities is started, it is likely to be targeted towards investors who have not yet ventured in this segment and regard the futures market as a new concept. Small investors will surely benefit as they won't be involved in the day-to-day monitoring of the portfolio. Since it is difficult for them to read and research the complex commodities market, they can benefit from the expertise of an experienced manager handling their portfolio. The service will ensure that they derive the benefits of investing in commodities without the hassle of understanding the nitty-gritty of trading. There is also a likelihood of the PMS reducing volatility in the commodity market.

Naresh Pachisia
Managing Director, SKP Securities
Yes, but...
PMS for commodities should not have exposure to the futures market. The objective of such a service is to help investors meet certain financial objectives, and this may not be possible if they deploy funds in trading instruments like commodity futures. Though portfolio advisory services in commodities were allowed earlier, these were banned by the commodity markets regulator, Forward Markets Commission (FMC), in 2007. There was lack of awareness about commodity futures when trading was introduced, and as a result, investor participation was low. This resulted in low income for brokerage houses, some of which started packaging commodity futures trading as PMS to give a push to their own revenues. The move made the futures trading come across as more comprehensible to investors, since they were being given the impression that their commodity portfolios were managed by experts who understood the fundamentals of the asset class. Brokerage houses assumed discretionary powers from investors to take positions based completely on technical analysis. In short, there was an attempt to position actual trading as investing in people's minds. This was naturally imprudent and the FMC did a good job by banning it.
There is no doubt that commodities, especially those like precious and base metals and crude oil, can be a useful asset class for investors. They can exploit these as useful investment options since their prices are impacted by macro-economic factors. However, PMS for commodities should include investment products, such as demat holding and exchange traded funds (ETFs). The commodities market in India is in still evolving. Over time, spot market trading will gain popularity and ETFs in other commodities will be introduced. The commodity exchanges will also come out with more innovative investment products. While all this may take some time, this is what PMS for commodities should ideally constitute.
Commodities is a relatively risky asset class and it may not be advisable for small investors to put their money in these. They have the option of better asset classes to deploy the limited amount of investible funds to meet their financial goals. Ideally, they should only put in additional funds for investment in commodities.

Dharmesh Bhatia
Associate Vice-President, Research, Kotak Commodities
Yes
All globally traded commodities should be included in PMS for commodities. Even agricultural commodities, such as gram, soybean and other edible oils and pulses, should be included in the ambit of these advisory services. Separately, these should include all avenues of the commodities market—spot (physical), futures and options. Presently, options trading in commodities is not allowed in the country. However, once the Forward Contracts (Regulation) Amendment (FCRA) bill is approved, options trading could well be permitted. The FCRA Bill is currently awaiting the nod of the parliamentary standing committee. The bill seeks to empower the commodity markets regulator and allow several new commodity-related instruments. If all market avenues are allowed in the PMS for commodities,investment strategies can be implemented and even structured products can be introduced to cater to the needs of all types of investors. Portfolio managers can take positions in spot markets for the clients who want to be long-term investors. The aggressive investors, who are comfortable with the concept of speculating, can be made to take bets in the futures market. They can even hedge their risks through options. Restricting PMS to only a few parts of the market will reduce the scope of investment in commodities to primarily traditional items, such as gold and silver. Hence, the main purpose of including commodities in the portfolio—diversification—will not be achieved in a wholesome manner. Demat holdings and long-term bets are not possible in the case of agricultural commodities as they are perishable by nature. If investors want to include such commodities in their portfolios, they will have to take carefully analysed positions in the futures market, and this means that will need the support of portfolio advisers.
Even mutual funds and banks must be allowed to offer PMS as the commodities market is very small in India and needs more depth and liquidity for appropriate price discovery. The phenomenon is in direct contrast to that in the global markets, where the trading volume in commodities is at least four times the level of trading in stocks. Once more liquidity sets in, even small investors will be able to consider the commodity space as an investment option. In fact, they can do so even now, at least for the commodities whose prices are more trend-driven, such as base metals and edible oil complex, which includes castor oil, groundnut, sunflower seed and others.

COMMODITY WRAP Copper, Silver Steal the Show

2011-10-30T20:16:00.001-07:00

European leaders' agreement on bailout pushed nearly all commodities to their monthly highs. Besides this, positive data concerning the US economy also helped spur the bullish sentiment in the financial market. Precious metals, crude oil, base metals and agriculture commodities all witnessed a positive run-up in prices. Copper, followed by silver, was the top gainer among non-agriculture commodities. In the agriculture commodity basket, rubber, followed by cotton and palm oil, was the major gainer.
COPPER
Copper switched from being the largest loser in the last week to being the top gainer among the base metals pack this week. Consensus over containing European debt problem offered a relief rally in the red metal. The uptrend, nevertheless, seems to be more of a blip as the long-term price trend is likely to remain bearish due to weak demand-supply fundamentals. The weekly gain was curtailed following higher-than expected drop of 4% in Japan's industrial output for September when compared with the previous month. It was the first decline since the earthquake and tsunami in March.

Gold ETFs Dazzle Investors on Dhanteras

2011-10-27T22:24:00.001-07:00

Over 2,550 kg gold ETFs were traded on the day, 8.5 times more than last year

Gold exchange-traded funds (ETFs) witnessed record trading on Dhanteras, a day considered auspicious for buying the yellow metal. More than 2,550 kg worth of gold ETFs were traded on the exchanges this Dhanteras, taking the total value of trade to more than . 650 crore in a single day, nearly 8.5 times higher than last year.
The heavy buying was prompted by perception of gold as a hedge against inflation than mere festive buying, said experts. Buying was also boosted by the massive returns that investors earned from their gold investments last dhanteras.
Investors, who spent on gold on dhanteras last, year have seen their investment appreciate by more than 38%, much higher than returns from other asset classes such as equity or debt. However, experts said that a correction in gold prices can't be completely ruled out in the short-to-medium term, particularly if inflation starts easing. "It is difficult to predict the movement of gold over a shortterm period and the ongoing price spurt is clearly an outcome of global uncertainties, inflation and rupee depreciation," said Chaitanya Pande, head of fixed income with ICICI Prudential Mutual Fund. However, once inflation starts easing, gold can be expected to underperform, he said.
"But as gold is not correlated to other assets, it carries significant importance as a diversification hedge," he added.
Attributing the decline in rupee as one of the main reasons for the surge in gold prices, he said, "While dollar gold has appreciated by about 13% since July this year, appreciation in rupee gold has been about 23%." Concurring with this view, Lalit Nambiar, fund manager and head of research at UTI Mutual Fund, said, "Gold is appreciating as investors are losing trust in currency. With currencies getting debased globally, gold is gaining firm ground as an investment avenue as it retains value in real terms. Given the current scenario, we don't anticipate a bear case for gold."
bakul .chugan @timesgroup .com

Gold Rush a Speedbreaker in India’s Growth Story

2011-09-04T21:44:00.000-07:00

Savings of Indian households locked in yellow metal don't reach economy

The glitter of gold is taking the shine off India's growth story. According to World Gold Council, India's gold imports rose 60% in April-June 2011 from a year ago, as people snapped up the timetested hedge against inflation.

India has always been a huge gold consumer, but the yellow metal is now our second-biggest import, behind crude, up from fifth place in 2007-08. But, this fascination with gold could be a reason why growth seems to be flagging. Money locked up in the yellow metal effectively disappears from the economy to become jewellery or sits idle in bank lockers. "Money spent on gold is mostly wasted because it's only hoarded and simultaneously excluded from the financial inter-mediation system," said Abheek Barua, chief economist, HDFC Bank. As money has flowed into gold, India's household savings have moved away from productive financial assets, falling to 9.7% of GDP during 2010-11 compared with 12.1% in the previous year.
This shift away from financial savings can dent growth, but it's hard to say by exactly how much. "To the extent there is a shift from household savings in financial assets towards gold, which we know has been happening, it would lead to some loss in the GDP growth," said Indranil Pan, chief economist, Kotak Bank, "although it's hard to gauge the magnitude of the loss." Gold imports are up nearly half a percentage point of the GDP in the last three years, implying that much more of savings is getting locked up in an unproductive asset. That much of the gold is imported also worsens the current account deficit. The hunger for gold seems to have been triggered by increased risk aversion after the global financial crisis.
Surprisingly, the soaring prices of gold, now at three-decade highs, haven't driven buyers away.
Of course, national accounts do not consider gold as physical saving – gold imports are considered as consumption – but, as far as buyers are concerned, gold buying has a high savings consideration. "Gold is the preferred form of savings for people and there's nothing one can do about it. It is, therefore, important to make financial savings more attractive," said C Rangarajan, chairman, Prime Minister's Economic Advisory Council. The fact that India doesn't produce much gold but imports most of the stuff increases leakages from the economy. "If instead, the same money was spent on other assets like homes, the money would have circulated in the economy," said Sunil Sinha, senior economist with Crisil, a ratings agency.
Pronab Sen, member, Planning Commission, agrees with the argument that high gold imports are not good for the economy, but he doesn't feel it is material in the current economic environment. "Since investments aren't really taking off at the moment, to talk about this in terms of inadequate savings isn't necessarily true," Sen said. "This shift to gold could become a problem over time as household savings in productive assets fall, but not right away."

Forget Gold and Silver, Equities will be Your Best Bet for Wealth Creation

2011-06-25T22:40:00.001-07:00

Expert Take

Equities have lost a bit of their sheen recently, as the markets have been range-bound for quite some time. Many retail investors seem to have been attracted by gold, with the old wisdom thatgold is the best investment once again holding sway. In fact, some are now shifting to silver, following its meteoric rise even ahead of gold, doing the exact opposite of what the most successful investment sutra stipulates: buy low, sell high.

But let's dig a little deeper and see if there is any fundamental reason that will further fuel this rally in precious metals. In the case of silver, global production increased by more than 120mn ounces in the past six years. But, industrial demand increased by only 100mn ounces, while the demand from the photography segment actually declined by 100mn ounces due to digitalisation. Hence, there has been no increase in net genuine demand at all for silver! So, where did all those 120mn ounces of extra silver go? The large chunk has been absorbed by investors, with no reference to real-world demand-supply dynamics! (Source: The Silver Institute).
Since 1985, silver prices have exhibited an almost 95% correlation with gold prices. So, when silver disregarded its own demand-supply dynamics as well as its correlation with gold prices and its price rose by a gravity-defying 3x in the last eight months, it was only a matter of time before it retreated. Even at current levels, I would advise investors to tread with caution as silver prices are still outperforming gold by 80% from a one-year perspective. Let's look atgold. The noble metal has given an almost 20% return per annum over the last three years. With gold prices at all-time highs, one needs to be doubly sure of its underlying fundamentals. Not having significant industrial uses, gold 's value lies in its perception as a hedge against inflation, as a safe-haven investment — a perception ingrained since ancient times. But has the inflation hedge logic really worked in the past few decades? In fact, adjusted for inflation,gold has given negative returns since 1980. (Source: GFMS).
Even in absolute terms, gold has been known to stagnate for years and years before giving returns. Is it really a big surprise then that the modern financial systems have over the past several decades allowed people to invest in productive financial assets that accelerate GDP growth (case in point, China and now India)?
Naturally, equity investors have been able to enjoy a well-deserved share of this immense wealth-creation. Taken over a 10-year period, equity markets of BRIC economies other than China have given between 15% and 23% CAGR returns; China has given a similar return over a 20-year period!
Fresh equity capital raised by corporates, which drives real GDP growth, was averaging about 1.1% of global GDP in the years preceding the Lehman crisis. After touching a low of 0.5% in 2008, it has recovered to about 1% in 2010. Gold consumption – inherently an unproductive investment – on the other hand has more than doubled relative to the global GDP. It is only a matter of time when inadequate investments in productive assets lead to shortage, which, in turn, would boost corporate profitability and generate handsome returns for investors who enter into equities at the current modest valuations.
Indian markets will, in the next few quarters, start looking at FY2013 earnings and by then inflation worries are likely to be behind us and earnings growth is expected to be a healthy 18.5%. With valuations also attractive, FII inflows may also increase again, considering that India, even more than China, is today arguably the emerging economy with the strongest long-term prospects.
The fundamental fact is that investing in equities over a longer period gives investors the highest compounded returns amongst all asset classes. This is because the economy inevitably marches forward and in the face of five years of 12%-14% nominal GDP growth, the equity markets also inevitably do go up. Then the one-month downside risk of 10%-15% due to inflation or fiscal deficit or myriad such noises just become irrelevant. Moreover, if you invest regularly, then you will be able to average out these gyrations and on a compounded basis, over the long-term you can generate significant returns from equities.

Dinesh Thakkar
CMD
Angel Broking

Gold ETF Assets Jump Four-fold in Just One Year

2011-05-26T20:16:00.000-07:00

Launch of new fund offers and rise in yellow metal's value help in fund-raising

The growing acceptance of exchange-traded funds (ETFs) among retail and high networth individuals, launch of new fund offers and a rise in the value of gold have quadrupled assets under management (AUMs) of gold ETFs over the past year. AUMs rose to Rs 4,800 crore as on April 30, 2011, up 180% from a year ago when they were at Rs 1,171 crore even as gold jumped 33% to Rs 22,937 a tola (10 gram) during the same period.

"Gold has been accepted as an asset class and investing through ETFs is being increasingly viewed as a legitimate way to hold gold in demat form," said Devendra Nevgi, founder and principal partner, Delta Global Partners, a company that provides commodity research to overseas investors.
Two new gold savings schemes were launched during the period under review -- Reliance Gold Savings Scheme, which mopped up Rs 141 crore, and Kotak Gold Savings Scheme, which attracted inflows of a little over Rs 5 crore. Both these schemes invest into ETFs run by Reliance and Kotal mutual funds and contributed to net inflows into the funds. The gold schemes are in addition to the 10 gold ETFs, including the likes of Benchmark Gold ETF with AUM of Rs 1703.49 crore as on April 30, 2011, UTI Gold ETF (Rs 497.65 crore) and Reliance Gold ETF (Rs 434.38 crore). Gold demand has been boosted by a weak dollar and worsening sovereign debt of some Eurozone members as investors the world over flock to hard assets like bullion to protect themselves from the falling value of paper money.
"The metal has value as a portfolio hedge and ETFs add to the convenience of holding gold in demat form for existing equity market holders," said Suresh Nair, director, Admisi Commodities. "However, a fall in gold can expose investors to big losses. However, being long-only ETFs, an investor with a view that gold prices could fall can't short-sell gold ETFs here. I think commodity futures market scores over ETFs by allowing an investor to short-sell by paying a small margin," added the broker.
The disadvantage of a gold ETF is the tracking error, where the fund's net asset value might not accurately reflect the movement of the underlying asset. The tracking error arises out of cash held by ETF and expenses charged on managing the fund. Net inflows into the ETFs almost trebled to Rs 919 crore during January- April from a year ago, according to Association of Mutual Funds of India. Average gold price in Mumbai rose by 25% to Rs 20,937 a tola over the comparative period, exceeding returns from the Sensex,which generated a negative 11%, and fixed deposits of 9-9.5% by miles.

How long will gold shine?

2011-05-01T21:22:00.001-07:00

BULLION

Gold prices have touched an all-time high. It's still a good time to buy the precious metal as prices are expected to rise, though at a lower rate than in the past few years.

When ET Wealthcame out with a story on gold, 'Now is the time to pick gold' on 28 March, we had written about how the price of gold would reach 21,700 per 10 gm over the next two-and-a-half months. It's flattering to be proved right. But it has also been a humbling experience as we got our timeline wrong and underestimated the lure of the glittering metal. Exactly a month later, on 28 April, the price was 22,470 per 10 gm. And it continues to shoot upwards. The price of gold is touching new peaks and the boosters that are pushing it forward are firmly in place.
    The US economy continues to stumble and there doesn't seem to be any hope that it will find a firm footing soon. The Eurozone crisis virus seems to be spreading wider and faster, with no antidote in sight. The unrest in Middle East and North Africa is gaining momentum. Oil prices refuse to cool and production in Libya has almost come to a standstill. Iran, which currently holds the rotating presidency of Opec, is dithering over meeting before the fixed date of 2 June to discuss increasing the supply of oil and, hence, bring down the prices.
    The bleak international financial scenario is why investors are preferring to place their faith and money in a 'hard' asset rather than paper currency. It's also the reason new investors are streaming towards this asset, leading to an increase in its demand. China's appetite for gold is almost turning into a gluttony and central banks across the world are veering away from the weakening dollar and boosting their bullion reserves. "Gold is the only currency that cannot be printed and supplied. It's a mined product and the huge gap between demand and supply will continue to push up prices," says Lakshmi Iyer, head of products, Kotak Mutual Fund. "If the public debt in the US is not contained, the dollar will continue to depreciate. Gold will then become the proxy candidate and will be in high demand. Inflation is already on the rise in emerging markets, with oil and food prices going up, and it has now begun to inch up in the developed markets too," says Devendra Nevgi, founder and principal partner, Delta Global Partners. As higher oil and food prices drive up inflation, inflation-adjusted interest rates remain negative. So, investors don't lose out if they hold a non-interest bearing asset, such as gold.
Is it time to book profits?
It will be, but after more than a year. If you're interested in selling gold, be patient because prices are going to continue moving upwards. However, don't expect them to gallop as they did last year. "The price of gold will be up by 10% by the end of the year. The dollar is weak, global interest rates remain low and equities are lacklustre. So, investors are bound to flock towards gold," says Jayant Manglik, president, Religare Commodities.
    In a research report released recently, Goldman Sach's gold forecasts are $1,565 and $1,690 per ounce in six and 12 months, respectively, while Deutsche Bank's price outlook for this year is $1,571 an ounce. According to SMC Comtrade, the price in India is likely to touch 23,200 per 10 gm in the next 4-5 weeks.
    Other analysts predict that the rise could be much steeper. "The price will rise another $200 an ounce, reaching $1,700 by the end of this year, and it could surpass $2,000 an ounce in 2012," says Renisha Chainani, deputy manager for commodities research, Edelweiss Financial Advisors.
    As prices rise, it is possible that the demand for jewellery will taper down. However, the investment demand is unlikely to decline as the uncertain times are making everyone jittery. This is why as the price keeps rising steadily, so does the demand. "In the past few years, each time gold prices reached big round numbers—$1,000, $1,200 or $1,400 an ounce—buying interest abated a little. But now, even with the price at an all-time high of $1,500 an ounce, physical demand remains firm. Most consumers and investors believe gold will hold its purchasing power. After all, it can't be manufactured at the whim of a central bank," says Chainani.
    While most experts suggest that gold should form 10-15% of an investor's portfolio, others are more bullish. "Currently, you could increase your bullion holdings to 25% of your portfolio by starting a SIP in e-gold. When the situation changes, re-balance your portfolio," says Manglik.
What could bring down the price?
A few factors, such as lower oil prices, a rally in the global markets and stability in the Middle East and North Africa, could slow down the pace at which the price of gold is rising. However, the first sign that prices are going to come down is when interest rates rise. Most people prefer investing in deposits as they earn an interest on their money. On the other hand, gold lies idle and earns no dividend, coupons or rental income, unlike other asset classes. So, when interest rates rise, investors move towards fixed deposits (see graph above). This could lead to a fall in the demand of gold and, hence, a correction in its price.
    "A key indicator will be the improving health of the US economy and the strengthening of the dollar," says Manglik. However, a weak dollar is favourable for us as it makes dollar-priced gold cheaper in India. So the rise in price of gold in rupees will not be as high as in the international market.
    Also, as the price of gold shoots upwards, 'scrap' gold, the metal that is resold to jewellers, starts coming into the market. Though this increases the supply and may dent the price rise, the margin by which it does so is not significant.
    We would like to be right on target this time around, but just in case gold stumps us again, we're heading straight to the nearest jeweller.

Investors Buy Risky Papers to Cash in on Silver Rally

2011-04-17T23:03:00.000-07:00

Wealthy investors pool in over 400 cr to buy debentures linked to the metal's fortunes

any rich investors are buying risky, privately-sold papers to ride a stunning rally in silver which they hope will go on for a while even as some fear it's nearing a bubble.
At least three finance firms, a large bullion house and the portfolio management division of a venture capital fund are selling debentures and specially-designed instruments whose returns mirror the fortunes of silver.
According to market estimates, hundreds of well-heeled investors have put in more than 400 crore in such structured products, many of which do not offer a capital protection. Investors receive no fixed or guaranteed return and may end up losing a slice of their money if there is a crash in the price of silver. But if there is a surge in price, between 80 and 90% of the gains are shared with investors who in some schemes have to pay an upfront fee, similar to entry loads charged by mutual funds, to the seller of the debenture.
Since end-November, silver has risen 50% to 63,930 while gold is up by just 4% during the same period. As property prices looked shaky and stocks turned choppy, wealthy investors — known as HNIs or high net worth individuals in the financial market — found silver irresistible. Their counterparts in other parts of the world invested in exchange traded funds with silver as the underlying asset. But in the absence of silver ETFs — a product that is awaiting the capital market regulator's approval for the last two years — Indian HNIs snooped around for silver-linked instruments.
Financial intermediaries, bullion dealers and commodity exchanges were quick to sense the opportunity. Brokerages and other entities floated special purpose vehicles to sell fancy debentures while commodity exchanges began aggressively marketing silver futures and spot products.
RISING FOOD, CRUDE PRICES CAST A SHADOW Moving Towards Lifetime High
"Putting money in a 30-month or 40-month unsecured debenture with no capital protection is just like investing in stocks. It's no more or no less risky... It's up to the investor to take a call on whether silver will continue to rise. But investors must be confident of the credibility and competence of firms issuing such products," said Anup Shah, a chartered accountant whose firm Pravin P Shah & Co has advised some of the issuers. The money raised by the issuer is invested in silver. There are combinations of investment strategy where the fund manager may invest in physical silver or silver futures. The fund manager may also try to cash in on the arbitrage opportunities between the spot and futures prices. According to a broker, investors have to be careful because the commodity trading desks of some of the large brokerages are not as smart as their stock trading divisions. However, with silver crossing . 60,000 a kilo, many investors are insisting on silverlinked instruments that are less risky and promise to protect their capital, at least a large part of it. For capital protection products, around 80% of funds collected are invested into an instrument giving assured returns, say, an FD, of 2-3 years. "More than the magnitude, the speed with which silver has risen has attracted investor interest," said Jayant Manglik, president, Religare Commodities. "Since mid-June last year, silver on the overseas market has more than doubled to $42 an ounce and is moving towards its lifetime high of $50 tested thirty one years ago. Indian prices have reflected the move overseas......I feel investment rather than industrial demand, especially over the past four months, has been the prime driver of the rally," he said.
But even as a spiralling silver evoked memories of the silver bubble of the late '70s, engineered by Hunt brothers — sons of a Texas oil billionaire — and the dramatic crash of January '80, investors across the world bought silver. Besides the absence of ETF, another reason why complex debentures found takers in India is due to problems investors face in storing silver. While . 21 lakh can be parked in a one-kilo gold bar tucked away in a vault, silver of the same value will occupy an entire cupboard.
According to a well-known broker from an integrated financial services group, the average investment ticket size is around . 20 lakh, with each debenture priced at . 1 lakh. For many debentures, the underlying is the near month traded future in a comex. The product, which was launched last year, turned popular over the past three months during which silver has been moving rapidly towards its 1980 record price of $50 an ounce (31.10 gm). What matters to investors of such products is the availability of an exit opportunity when they feel the market is overheated.
Gnanasekar Thiagarajan, director of commodity research company Commtrendz, forecasts another $2 an ounce increase in silver to $45 in the near term after which it could witness a fall to $35. "The goldsilver ratio is hovering over 30, which has seldom been seen. My expectation is of a sharp correction once it tests $45. My reading suggests $35 is a strong support," said Thiagarajan. Over any 10-year period, the rise in gold and silver has been more or less equal. "Since gold has risen every year since 2001 and silver has relatively lagged gold for the greater part, the metal began to make up for the lag since the previous year, felt Manglik.
Also, since gold has become costly — prices are over . 20 lakh a kilo — it is leading to a shift in investor preference for silver which at around . 64,000 a kilo is relatively much cheaper," felt Manglik.

With metals, put the shine in your portfolio

2011-04-03T21:18:00.001-07:00

METALSPhysical route: It is impossible to take long-term positions in industrial commodities in the physi- form as it involves huge storage space. While it is possible to buy precious metals, such as gold, silver, platinum, etc, in the physical form (as they consume much less space), investors opting for this route have to face several other problems like the purity of metals, making charges and huge margins imposed by jewellers. Margin trading in commodity exchanges: Though investors can take positions in commodity exchanges by paying a small margin, it is not suited to long-term investors. This is because they have to roll over their position on a regular basis. Another problem is the tax treatment. Since there is no delivery of assets or securities, the gains will not be treated as capital gains but as speculative income. ETFs: Exchange-traded funds (ETFs) are another way of getting rid of the problems mentioned above. Since these are classified as securities, investors can also avail of a higher tax benefit. For example, the cut-off period for long-term capital gains is one year compared to three years for physical holding. E-commodities: This is the latest entrant on the block and takes care of most of the problems mentioned earlier. It is an investment product that allows you to hold commodities in the demat form on an electronic trading platform, set up by the National Spot Exchange. The product allows you to buy, accumulate, hold and sell commodities and also provide the option of physical delivery against the surrender of the product. Commodity experts believe that E-Series is the finest and the most feasible investment option for those wanting to diversify their portfolios in commodities. Metal mining companies: Though several investors use this route, the volatility in commodity stocks will be much higher than the underlying commodities. This also negates the purpose of investing in commodities—to diversify your portfolio.

Metal prices have risen sharply and analysts believe there is a lot of steam left in them. Here's what you need to know before adding this new asset class to your investment portfolio.

SHOBHANA CHADHA

    There is an increased investor interest in commodities currently because this asset class has outperformed other traditional assets. We are not talking only about gold, which has generated good returns over the past few years. While silver prices have more than doubled in the past year, copper has outperformed the Sensex during the same period.
    However, these spectacular returns should not be the only reason for investing in metals. The basic objective should be to diversify the investment portfolio by adding a new asset class. Since commodities are real assets (compared with others like stocks), they react differently to the changing economic situation and help you reduce the overall portfolio risk.
    Commodities also offer a hedge against inflation. High inflation results from the increasing commodity prices and the best way to shield your finances from the price rise is to have a direct stake in commodities. In this manner, the loss from the rise in overall prices will be nullified by the gains from the increase in commodity prices.
Is it worth investing now?
While the past performance has been spectacular, the moot question is, will metals continue to shine in 2011? Which metal is likely to give the best returns now? We reached out to industry experts and commodity analysts for answers. Most of them believe that there is still a lot of steam left in the metal pack. "The fundamentals remain strong for precious metals as well as base metals, and they can definitely form a part of a retail investor's portfolio," says Jayant Manglik, president, Religare Commodities.
Look beyond gold
While precious metals have rallied in the past two years because of the massive quantitative easing in the West, base metal prices have increased due to supply shortages and a recovery in global industrial demand. Analysts believe the demand for these metals will continue to be bouyant and are advising investors to look beyond gold. "The yellow metal has already seen a 10-year bull run and the world is expecting monetary tightening in the future, which may take away the shine of gold," says Vandana Bharti, associate vice-president, commodity fundamentals, SMC Global. "With global industrial production recovering and risks of sovereign crisis reducing, gold might underperform some other metals," says Devendra Nevgi, principal partner, Delta Global.
Silver/platinum
The case is stronger for metals such as silver and platinum which have industrial uses as well. "Silver and platinum are more reliable from the long-term perspective as there is an industrial as well as investment demand," says Bharti. In fact, it was the industrial demand for platinum that led to a spike in its price in 2010. The metal's versatility in industrial applications and increased preference for platinum jewellery indicate that the metal could rally in the coming months.
    Ditto for silver, which outperformed gold and other metals in 2010, generating returns of over 72% due to the rise in the investment demand by a whopping 184%, along with the rise in its industrial applications. "The demand for silver will continue to rise due to its ability to be a safe haven and growth in the industrial sectors in the advanced economies," says Naveen Mathur, associate director, commodities, Angel Broking.
Copper
Analysts suggest adding another lucrative metal to your shopping cart—copper. It prices are up because consumption is running ahead of supply, mine production is slow (growing at an average of 3.5% over the past five years), and China's insatiable demand. China's refined copper imports rose by 24% in 2010. "The copper story is expected to remain intact as the supply shortages are likely to continue," says Mathur.
Zinc
Commodity experts also expect that the recent tsunami in Japan and floods in Australia will put a further pressure on the supply of industrial metals. "The reconstruction should drive up the zinc prices. Right now there is surplus supply," says Maneesh Kumar, MD, Burgeon Wealth Advisors.
Tread with caution
While there is a near consensus that metals such as silver, platinum, zinc and copper are good investments, you should not ignore the risks. There can be a 10-15% correction in prices. "However, this will only be an opportunity," says Kunal Shah, head of commodities research, Nirmal Bang Securities.
    Bigger risks can come by way of monetory tightening by the developed world. Rising energy prices and inflationary concerns suggest that the easy monetary policy in the developed markets may not last long. For example, the short-term interest rates in Europe have already moved up on the expectations that the European Central Bank (ECB) may start raising rates after its April 2011 meeting. There is also a near consensus emerging that the US Federal Reserve may end the quantitative easing programme in June. So, expect a deeper cut in
    commodity prices once the US Fed starts monetory tightening.
How to invest in metals?

How to invest in E-Series

Demand for most packaged food products, which account for 70% of FMCG sales, either fell or remained stagnant during 2010

2011-03-24T22:30:00.000-07:00

FILLING UP SHOPPING BASKET

FMCG Riding on Price RiseComing amidst rising input costs, many local and regional players found it difficult to compete with established players on the pricing plank. This made several consumers shift from unbranded product to branded ones as the price differential watered down.

The double-digit sales growth in the consumer product may not be purely on account of growing demand, as widely perceived; it's price increase and popularity of premium products that are driving the value growth.
Data from India's largest household research firm IMRB that tracks consumption trends in several sectors reflects that while demand in most categories remained stagnant in 2010, sales growth was mainly on account of price hikes and the launch of premium products by most companies, which bring in higher revenues to marketers.
In the current inflationary market, this trend is likely to continue even in 2011.
"Coupled with price hikes, we are also seeing grammage reduction in several product categories now, which will negatively impact volume," says IMRB Insights Director Shweta Kulkarni.
Here, sales imply revenues realised, or value, and demand reflects the volume or number of units sold.
"However, there will be a reversal trend in foods, especially branded commodities as most companies have started to drop product prices," says Kulkarni.
Demand for most packaged food products, which account for 70% of FMCG sales, either fell or remained stagnant during 2010 due to inflation in basic items such as wheat and edible oil.
In the case of personal care products, volume growth was average but sales shot up because most companies increased prices and launched top-end products.
"We see consumers shifting to higher priced products, which helped companies increase sales by value," says Godrej Consumer Products MD A Mahendran. "There were also uptrading from local and regional brands to established brands in the personal care segment, which helped increase the consumer base in 2010."
Shampoos and skin-care products grew double digit in value terms despite stagnant volume growth.
All this helped companies report good revenue growth even though volume growth was much higher in 2009.
In 2010, total sales of the top eight consumer product companies in the BSE FMCG index grew 12% over 2009 to Rs 36,085 crore. The net profit growth was 12%.
Only home care segment reported higher sales and increased consumption. Companies including Hindustan Unilever, Reckitt Benckiser and Dabur launched more than a dozen new products in the segment.
"Innovation in product development, resurgence of modern trade and a boom in modern homes have been the key drivers of growth in the home care products market," Dabur's home care category head Rohit Prakash Gupta says.
However, established categories such as washing powder had higher volume than value growth due to price discounting as multinationals Hindustan Unilever and Procter & Gamble went for a price war.

Stock, Commodity Trades to Attract Uniform Levy

2011-03-23T21:47:00.001-07:00

Surplus budget retains standard VAT rate at 12.5%; state sales tax revenue expected to grow 26% from last year

The Maharashtra government has decided to levy a uniform stamp duty of 0.005% on all transactions in the stock and commodity exchanges, including transactions of securities, futures, delivery and non-delivery based transactions. This was announced by the state's finance minister Ajit Pawar in the annual budget presented on Wednesday.
Maharashtra's annual budget shows asurplus of . 58 crore and has a revenue target of . 1,21,503 crore for the fiscal 2011-12. The size of the annual plan has been set at . 41,500 crore. The budget has retained the standard VAT rate at 12.5%, while state sales tax revenue is expected to increase 26% from last year.
Though the finance minister did not specify the revenue projection from the 0.005% stamp duty levied on stock and commodity transactions, he said the move will simplify collection of duty on all such transactions. At present, stamp duty is levied at different rates depending on whether turnover is delivery-based, non-delivery-based, or proprietary. Brokers are required to pay 0.01% for the first category, 0.002% for the second and 0.001% for the third.
The state government has decided to make some amendments in the Bombay Stamp Act 1958 to increase the revenue from stamp duty by 31% in the state. Transactions of transfer of longheld tenancy rights of house property (extension of lease) will now be liable for stamp duty at market value.
The budget proposed to levy a new 5% tax on sale of telecast rights of various events, including cricket matches and entertainment programmes like award shows. It also proposed to increase the rate of tax on soft drinks to 20% from 12.5% and changed excise duty formula for country liquor, Indianmade foreign liquor, and beer in order to increase revenue. The minimum rate of excise duty will be increased to . 95 per proof litre for country liquor, . 240 per proof litre for foreign liquor, . 33 per bulk litre for mild beer, and . 42 per bulk litre for fermented beer. The budget has also proposed change in the VAT structure for liquor. Instead of charging 25% VAT at each stage with deduction for set-off, now 50% VAT will be charged only once at the sale stage based on the sale price of the liquor.
Some amendments for procedures were also proposed in the MVAT Act. These include amendments of revised returns, providing for deposits instead of advance payments for voluntary registration, changes to provisions of refund application to be filed by dealers making interstate sales, etc. The budget proposed stern action against those convicted in Hawala dealings, with two years imprisonment. The budget also proposed . 1,440 crore for providing basic infrastructure facility to the urban poor and . 2,500 crore for various infrastructure schemes under the JNNURM. It has proposed . 2,749-crore expenditure for building roads in rural areas, . 5 crore for construction of a floating jetty at Gateway of India, and . 162 crore for airport upgradation.
In order to promote air traffic in various districts, tax on aviation turbine fuel has been kept at 4% in all districts of the state, except Mumbai and Pune. This scheme of concession will continue till March 31, 2012. The film industry breathed a sigh of relief as the finance minister proposed to abolish the tax on copyright of Bollywood films.
The budget proposed a subsidy of . 2,500 crore to farmers for their electricity bills. Wheat, rice, pulses, flour, turmeric, chillies, tamarind, gur, coconut, cummin seeds, wet dates, fenugreek, and papad have been exempted from tax till March 31, 2012. Domestic liquefied petroleum gas (LPG) will also be exempted from state tax. The finance minister also proposed change in recovery procedure for sugarcane purchase tax. Instead of recovering the entire tax in the crushing season, the purchase tax will now be recovered every month from the sale proceeds.

MONEY TALK: Maharashtra CM Prithviraj Chavan (left) & deputy chief minister and finance minister Ajit Pawar (extreme right) with their colleagues at Vidhan Bhavan shortly after the presentation of the budget in the House.

Fly High With Commodities

2011-03-20T19:21:00.000-07:00

With equities showing no signs of a rebound, investors can turn their attention to commodities, albeit with caution.

While equity markets globally have not yielded impressive returns in recent times, commodities have more than made up for it. The Sensex has fallen 7% since the beginning of the year while the MCX Comdex, India's Composite Commodity Index, has risen 25% during the same period. In an environment marked by rising inflation, high interest rates, declining industrial production, governance issues and political turmoil, prospects of equities rebounding in the near term appear rather weak. Commodities, on the other hand, have had a splendid run since June last year. Base metals have risen almost 50%; gold was up 16% while silver rose 90%. Yet, the market is still bullish on commodities as an asset class.
    In the second half of 2010, asset classes across the board provided investors moderate returns, making up for the sluggish beginning at the start of the year. This rally was triggered by nascent signs of economic recovery in the US and Europe, and more importantly, by the US Federal Reserve's second stimulus package — Quantitative Easing (QE2). This additional liquidity triggered a spurt in equities, especially in emerging markets like India, reflecting in returns of 17% on the Sensex from June to February 2011. Interestingly, the MCX Comdex rose 30% during the same period outperforming the equity markets — a trend witnessed across the globe. The S&P 500 gained 11% while the S&P Global Commodities Index rose 14% in 2010.
    A key driver for global investors to flock to commodities was the printing of money in the US that saw the dollar lose value against several currencies, coupled with low interest rates in the West. Therefore, relative to other asset classes, commodities proved to be the safest bet, spurring investment. Second, this excess liquidity also led to high inflation, especially in emerging economies — further pushing up commodity prices.
    Strong demand from China and other emerging markets, coupled with supply constraints in Russia and South America on account of climatic adversities, added further impetus to the upward price movement. Commodities across the spectrum fared well. From the agricultural sector, cotton was the star performer, gaining 80%. Silver was the best performer among precious metals, mainly driven by its increasing inclusion in ETFs.
    Whether this trend in commodities will continue hinges on how geo-political issues pan out. The Middle East, North Africa tension has seen base metals correct from their February highs. The Japanese calamity has doused the rally in most commodities in view of the slowdown in demand. A further correction could be expected, but the medium-to-long-term outlook is positive. This is supported by the case for redevelopment in Japan after recent events.
For A Safe Landing
While commodities as an asset class offers good opportunity of making money, it also involves certain inherent risks. Investors need to be aware of them before they start trading
    In India, commodities exchanges provide only futures contracts for trading. Options, a safer alternative, is not currently on offer
    It is pertinent to understand the fundamentals of a commodity, just the way one studies the fundamentals of a company before investing in it
    Investors are subject to high leverage in commodity futures trading. Hence, one must always beware of overleveraging one's portfolio and not trade a contract that is considerably larger than one's risk appetite
    Price action in commodities can become very volatile, thanks to a variety of factors such as geo-political crisis, weather changes and calamities. Investors, therefore, need to be agile while trading.
    The philosophy of 'adhering to a stop loss' needs to be followed even more diligently while trading commodities ET Intelligence Group analyses trends in the most actively-traded commodities to help you cash in on investment opportunities.

In 2010, aluminium prices rose 8% y-o-y fuelled by the recovery in the US and Europe in the second half of the year. Compared with other base metals such as copper, tin and nickel, the rise was muted. The outlook for aluminium is positive as demand remains robust on back of growth in the packaging industry in India, China and Latin America and recovery in the transatlantic markets. However, large inventories are likely to keep prices range-bound in the near term.

Copper prices increased 31% y-o-y on the back of supply constraints, which are expected to continue through 2011, signalling further buoyancy in prices. It has corrected a little from record highs in early February. However, lower inventories and robust demand from India and China will restrict any drastic fall. The outlook on this base metal remains positive.

Corn prices have gone up 80% in the past one year. They are likely to correct in the short term, partly on account of a temporary decline in Japanese demand (Japan being the largest importer) and bearishness ahead of the South American harvest. The outlook is bullish in the medium term as Japanese demand has been delayed and not doused. However, investors cannot expect returns of the same magnitude as last year since the South American harvest is likely to be good this year.

Cotton has been the best performing commodity - yielding returns of more than 145% in last one year. There is an expectation of reduction in demand with prices remaining near all-time high levels. The global cotton production may outpace demand for the first time in seven years. However, the expanding Chinese imports may support demand for cotton. Prices of cotton are therefore likely to remain volatile given such demand-supply dynamics. In India, cotton is competing with food items for acreage. Since prices of food items have risen exponentially they are getting more acreage than cotton. So, while the demand for cotton is optimistic on back of rising consumption, the prices are likely to remain volatile as production is going to be uneven.

The demand-led uptrend in global crude oil prices since December 2010 was further accentuated in January onwards due to the political upheaval in Egypt and Libya. However, the rally was largely psychological rather than fundamental. The global oil inventories have remained higher than the 5-year average and spare production capacity with OPEC has been comfortable. As the political unrest spread across Bahrain and UN prepared to enter Libya the oil prices continue to remain high. However, the disaster in Japan and approaching low-demand June quarter are putting pressure on oil prices. Further, the International Energy Agency noted that high oil prices are dampening demand and lowered its 2011 demand estimate. Unless the geo-political tensions continue, oil prices are likely to drift lower in near term

Gold continues its unprecedented rise in 2010, gaining 30% over the previous year. On account of uncertainty of the global economic recovery and the euro zone debt crisis in the first half of the year, investors rushed to safe havens such as gold. Though these issues have subsided, gold as an asset class is still likely to yield positive returns as uncertainty regarding the pace of economic recovery in Europe and the US continues. In the near term, there could be a correction as the Japanese central bank is likely to continue selling the precious metal to inject yen into money markets in an effort to calm investors.

Silver has had a stellar year in 2010, outperforming gold and yielding returns over 80% against the previous year, driven by investment demand. In 2010, silver holdings in ishares ETFs rose 15% touching an all-time high. It would be prudent to book profits in silver at this point and wait for a correction. Given that the rise in silver is also linked to industrial metals, any correction in the latter could cause a dip in silver price.

Soybean oil futures prices have risen over 42% in the past one year. However, they have been trading sideways for the past three months. They are likely to remain weak in the short term due to advance in harvesting activities in South America, expectations of a higher supply of soybeans this year and present weakness in crude oil prices. Prices are also likely to weaken around May-June period on the back of fresh production of palm oil from Malaysia. However, they are likely to rebound later in the year. Edible oil prices are closely linked to energy prices due to their use in the production of biodiesel, an alternative to fuel. Hence, any major spike or correction in crude oil prices will have a similar impact on soy oil prices.

Global sugar prices touched an all-time high in February due to the Australian cyclone and remained volatile since then. According to the latest analyst estimates, raw sugar future prices are expected to see a correction due to better production in Brazil in May 2011. In the domestic market, sugar prices are expected to trade in the range of 28-30 per kg in the short term. They are likely to correct in the case of any upward revision in the sugar production estimates which currently stand at 25 million tonnes for the current sugar year (October 2010-September 2011) against the consumption of 22 million tonnes.

Among all the base metals, zinc was the only underperformer in the past year, yielding negative returns. This was primarily because for the fourth consecutive year, global output of refined zinc exceeded its usage. While the surplus is expected to be lower in 2011, its impact is not likely to see any major improvement in prices. So, while the rise in the price of zinc is on the cards, it may not be very significant.
crystal .barretto @timesgroup .com
(with inputs from Rajesh Naidu, Ramkrishna Kashelkar and Shikha Sharma)

High Volatility: Steelmakers will Switch to Monthly Deals

2011-03-13T21:04:00.001-07:00

High-value product suppliers of car industry may change method of agreements

Specialised steelmakers, who supply high value products to the car industry, could be the first to switch to monthly contracts from quarterly agreements to reduce risks arising from increased volatility.
While this would be the first time that a crucial supplier to the auto sector will be moving to a monthly cycle, it would also leave room open for frequent product price revisions, say people directly involved with the industry. Specialised steel includes high value alloy that accounts for about a fifth of the total cost of a car.
In fact, the alloy steel companies have raised prices by about 25% in the past three months and are planning to revise upward yet again in April. "These are uncertain times. Both the buyers and sellers are scared to stay locked-in for longer periods," said Niraj Bajaj, chairman and managing director of Mukand Ltd, the largest alloy steel player in India.
"While this (the monthly contract) is not healthy, we hope stability returns soon," he added.
Mukand, like Kalyani Steel, Mahindra Ugine, Usha Martin and other alloy steel makers supplies vital components to the car and two-wheeler industry and is a major driver and indicator of the price of cars.
In most other sectors, the switch to monthly is being strongly resisted. Typically, a quarterly supply contract gives companies enough flexibility to devise production schedules and study price outlook for coming months. A monthly system would however make such schedules go awry. This is the reason that industries such as metals and power, are resisting the move by miners to switch to monthly contracts.
Since February, major global miners such as BHP Billiton and Rio Tinto have been forcing steel mills to shift to monthly contracts to arrest volatility in prices of coal. Prices of the mineral has fluctuated violently in the past three-to-four months due to tight supplies on floods in Australia and growing demand from steel and power generating companies in China and India. Spot prices of coking coal last month touched record levels of $300 a tonne when contract prices were at $225, forcing miners to back out of contracts and disrupt supplies.
"After 40 years of working with annual supply contracts, in March last, the global order changed to quarterly. Only a year has passed and already they are thinking of changing to monthly, which is too soon," said a Mumbai-based commodity analyst who is familiar with the move by alloy steel players.
The influence of alloy steel makers is evident. Car makers have accepted the switch and are making preparations to adopt the new system. Maruti Suzuki, the country's biggest car maker is still on quarterly contracts, but wouldn't delay in making the jump. "Monthly contracts will make predictability higher and we can forecast better," said Mayank Pareek, executive officer (marketing and sales), Maruti. But the previous contracts also had scope for revisions. According to Mr Bajaj, the earlier contracts had provisions for revision in prices after every month. "The story on raw materials is similar for us too. Hikes in prices of iron ore, coal and other minerals have led to a cost push and we are forced to raise prices," said Mr Bajaj.
But along with raw material push, strong demand patterns too have contributed to the switch. When China emerged as the world's largest consumer of steel, its hunger for iron ore pushed up prices sharply and the annual contract system was replaced by the quarterly system. Increased volatility has again brought out similar demands.
The Indian alloy steel industry makes a total of 4 million tonnes annually, according to the Joint Plant Committee of the steel ministry.

Oil, Gold Flare Up as West Asia Boils

2011-03-07T20:22:00.001-08:00

Real worry for India is turmoil may spread to major oil producers such as Saudi Arabia

Global oil prices surged again while precious metals soared as tension in Libya and fears of unrest in Opec heavyweight Saudi Arabia spooked markets, mounting pressure on India, the world's biggest gold buyer and Asia's third-largest oil consumer.
Fears that oil-sparked inflation will erode the value of other assets encouraged investors to turn to gold, hoisting the precious metal to near-record levels as it glittered as a safe haven for investors in turbulent times.
As fighting in Libya raged, US crude climbed 1.5% to $106 a barrel while Brent crude rose by a similar amount to trade at about $118 a barrel. While Libya accounts for barely 2% of oil supplies, the real worry for India is the prospect that the turmoil may spread to major oil producers such as Saudi Arabia.
Oil companies in India said state-set diesel rates are 10 below market levels while petrol is about 3 below market rates. State-run oil companies are technically free to raise petrol prices, and they have done so nearly 10 times in the past year, but they are reluctant to increase prices, fearing retribution from the ruling party, which faces crucial elections in four states.
The central government has struggled to control inflation, which has become a rallying point for opposition parties. Key government allies, such as Trinamool Congress, have criticised any move to raise prices in the past, and with elections approaching, the government is likely to go slow on price hikes, particularly of diesel, kerosene and cooking gas, for a couple of months.
The government is hoping oil prices will retract to pre-crisis levels of near $80 a barrel.
Crude Threat Across Globe
BRENT CRUDE UP 1.5% TO $118 GOLD RISES TO 21,500

• Tension in Libya and fears of unrest in Opec heavyweight Saudi Arabia spook markets

• Fears of inflation eroding value of other assets encouraged investors to turn to gold

• India is the world's biggest gold buyer and Asia's third-largest oil consumer Govt Pins Hope On Oil Fall
Analysts and oil industry officials said it is hard to predict how oil prices would move. A Citigroup report said "nobody really has a clue as to how the crisis in the MENA (Middle East North Africa) region will develop, largely because no one saw it coming in the first place". "We think what is happening in the MENA matters and that markets are increasingly vulnerable, not because higher oil prices are an inflation threat in the longer term, but because they threaten growth."
Oil ministry officials said any decision to raise fuel prices will be taken by an empowered group of ministers. The government is expected to continue its existing policy of dividing the burden between upstream companies like ONGC, consumers and the government. This could upset the finance minister's fiscal calculations as the government has budgeted for a lower oil subsidy bill in 2011-12 compared with the current year.

Ban Futures Trading in Essential Commodities: Modi-Headed Panel

2011-03-02T20:48:00.000-08:00

Group suggests price stabilisation funds to fight inflation, ministerial-level co-ordination mechanism

A Working Group on Consumer Affairs headed by Gujarat Chief Minister Narendra Modi has recommended setting up of a price stabilisation fund and a ban on futures trading in essential commodities to fight food inflation. It also suggested a ministeriallevel co-ordination mechanism at the national and regional levels for policy formulation to evolve a single national agriculture market.
The group, which submitted its report to PM Manmohan Singh on Wednesday, gave 20 suggestions with 64 actionable points. The committee, with CMs of Tamil Nadu, Andhra Pradesh and Maharashtra as other members, was of the view that a price stabilisation fund set up by the Centre will help states in procurement and distribution of essential commodities in short supply.
On future trading, the group concluded that considering absence of strong linkages between spot and future markets, essential commodities should be kept out of the future market.
However, the government has been maintaining that there was no proposal to ban futures trading in essential commodities on the ground that no study has identified it as one of the reasons for increase in food prices.
Formed by the Prime Minister in April, 2010, in the face of soaring food inflation, the group also suggested liberalisation of agricultural markets to improve distribution from farms to consumer, increasing participation of organised sector and co-operatives in retailing to promote competition and priority lending to agri-market activities. It also recommended focusing on time-bound development of agri-marketing infrastructure including storage capacities in food deficit regions, cold chain and agro-processing besides unbundling of Food Corporation of India operations of procurement, storage and distribution. The group has recommended enlarging the scope of priority sector lending such that the agriculture marketing activities are made eligible and raising the ratio of priority sector lending to the agriculture sector further from the current level of 18%.
To minimise information "asymmetry" in the agri market, the report called for establishing a mechanism to collect and disseminate information to all stakeholders on production, import, stocks and overall availability of essential commodities besides extensive use of the Information Technology. This could be done by setting up a dedicated agency for it. It suggested preparation of a 10-year Perspective Plan for improving agri-infrastructure.

FIGHTING PRICE RISE: Modi (R) submitting report to PM Singh

Fwd: Edible oil, spices cause heartburn

2011-01-12T18:43:00.001-08:00

---------- Forwarded message ----------
From: <ways2invest@gmail.com>
Date: Thu, Jan 13, 2011 at 7:40 AM
Subject: Edible oil, spices cause heartburn
To: badru27.commodities@blogger.com

Mumbai: Onion and vegetable prices may be the focus of attention, but for weeks, the cost of common spices and cooking oil have been rising steadily. On Tuesday the price of a one-litre pouch of branded sunflower oil was selling for Rs 125 over Rs 110 last week. "Until then, it was the one-litre reusable bottle that sold for that rate. Those who preferred pouches would buy for Rs 110," says an Andheri retailer. "Now the bottle comes for Rs 135. Edible oil has becoming costlier by Rs 10-15."
    Two leading brands of groundnut oil have risen to Rs 80 per litre, up from Rs 65 two months ago, says Bombay Central retailer Premji Padamshi. At Colaba, storeowner Durgesh Chowdhury has a steady clientele of middle-class Bengalis who purchase up to five litres of mustard oil every month. "Loose mustard oil that cost Rs 66 per litre at Diwali is selling for Rs 78," he says. Even branded coconut oil is selling for Rs 116 per litre, ten rupees more than last month.
    The Apna Bazar store in Andheri guards its assets with care. Small pouches of cardamom, weighing 20 gm each, find pride of place near the cashier's counter rather than the crowded aisles of the supermarket. At Rs 23 per 10 gm, its cost works out to Rs 2,300 per kg, clearly one of the costliest spices and condiments selling in the country at this time.
    Causing parallel discomfort is the spiral in prices of condiments and spices, particularly those that are traded on the commodities exchange. "Cardamom is only good for windowshopping with an average rate of Rs 2,300 per kg," says Sanket Khamkar of G W Khamkar store in Lalbaug. "Turmeric has risen from Rs 140 per kg a year ago to Rs 340 per kg."
    Raising a flag over red chilli, retailers said that branded powder of the 'kashmiri' and 'bedgi' variety is selling for Rs 200-210 per kg, up from Rs 100-110 two months ago.
    Traders and exporters blame the commodity exchange as the "main culprit" for rising prices of turmeric, cardamom as well as red chilli. Trading food items on the exchange leads to artificial price rise by encouraging speculation, they say. "The cartel puts money into purchases at the beginning of the season and determine prices for the next few months," says another trader. "They have already declared that a crop shortage of red chilli will occur this year despite the fact that the arrivals are only expected end-February."
    Exporter Kirandip Singh Swani said that the commodity that was trading for Rs 45 on the wholesale market three months ago stood at Rs 85 on Wednesday. "There may be a marginal shortfall of 5-15% in production later this year but there is no logic in prices having doubled in such a short span of time," he says. Coriander may become the next casualty to speculation for it was trading at Rs 47 on the exchange Wednesday, up from Rs 20 two months ago.
Desperate housewives grow onions in Nerul Vijay Singh TNN
    Agroup of housewives in Nerul have found a way to combat the rising onion prices, by growing the bulb themselves. Most families do not have the luxury of space, but the housewives live in the SBI Housing Colony, which accommodates over 1,000 families in 87 blocks. They have adopted a part of the complex's garden for their farming activities.
    Annapurna Valika, president of the Anushree Mahila Mandal, the local women's group said the idea was made at the spur of the moment. "Last month, some members of our mahila mandal were discussing onion prices over tea. And then we realized there was nothing stopping us from growing onions ourselves," she said.
    It did not take long for the win to actualize their idea. Home maker Sanjivani Bangar and vice president of the women's group said they were forced to use a few sets of small new onions and even rotten onions because of the bad crop in the market. The women eschewed branded fertilizers and made their own manure from organic kitchen waste to enrich the soil.
    "The results were good; we harvested our first crop in 30 days," said Valika. The women could have given the crop another 15 days to mature, said professional farmers. But the Nerul housewives said they were satisfied with the harvest. The agricultural advisor was homemaker Uma Ghate who had experience and knowledge on onion farming. About six to seven homemakers at the colonly do most of the farm work. "Our yield was around 6 kg the first time round. We are expecting at least 8 kg in the second cycle,'' said Valika, adding that a few women can't stop themselves from trotting down to the farm to dig up an onion or two for their dinner.
    At the wholesale market, onions sold for Rs 25-35/kg. They retailed at Rs 60-70/kg. But for some women, the price no longer matters .

GARDEN CROP: Women at the SBI Colony, Nerul, tend to the onion farm

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(no subject)

2010-11-25T10:06:00.000-08:00

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(no subject)

2010-11-24T19:52:00.000-08:00

Hey Family!

Just wanted toelm12ov write yo9bel9u, and let yocru knof3w, ho6x9ow the deg0azree prov9hf4kgram I tried o73ut went.
Well, six weeks later, I graduated, finished & received my Masters Degr8jwfee with nom2 study required and %100 verifiable.

Yeah moosam, I knoelazselg98w yoxwelp6ifyu and Dad dof65subted it at first, but this turned ouuq6ut to898womf be %100 legit. This o8tn80swppoad4fqbrtunity was given to67 me because od7u4ussmf the protnqf8wnbfessio2f4itnal experience and previoddus cojgurse woa8f5oonrk I had accumulated.

I'm so1c excited moh5gjm and dad, this was a life altering o9p8bpppoazc2rtunity & fok2r oc97unadnce in my life I toz8wogui0k advantage owpibf it.

I already have joins9kzgqbs, that wozt3wwouldn't have given me a chance befoq726xgrre, nowonw they are calling ozhjsff the ho9yidpozysck! This really is a gosccwdsend.

Tell Susan and Co7v0yo6h0usin Jotjtgv0viey that they better hurry up and call that # I gave them the o5gther day.

Again these are the degre9jes they obxd7dffer, BA, BSC, MA, MSq8y97r2C, Mdg3vc6BA and Ph8y0yuttxD, and the number todgdelyoa1 call is 1-801-461-5023, tell them torbw3 leave a brief message with their name, the deg3yusree they are interested in and their day and evening phocnmg6ne numbers. They will coel3kwntact yopqsofu so3vsoujyz5pn after,

Anyway, much lozzfve, and tell the rest o1op3i95pf the family I said hellof2z41

Lob8ve,
You36mbelfur sor8n,

Johqts58athn

P.s.
Moy90xxdhm, why dopuujaun't yomykmhu send this email toru08r3t a few oko8f yof049ur friends? My probm12pfessow087z6qelr to0t0x1ld me that if we send ocxp04krver referrals the scho10opyl can give us a schos44larship.