Skip to main content

Investing in precious metals is tricky

 

IT TAKES two to tango but a bunch of ill-informed commodity analysts to create hype around contango. Investors in precious metals must avoid the drove of commodities analysts as there are few signs of intelligent-life.


   Despite the tall claim that India is no longer a price taker for gold but a price setter, the claim does not cut much ice. We are all clueless of the happenings in the international market. Price and investment hype have come at a time when internationally one large market maker is sitting with the largest concentrated-position in the gold market in history ('short'), while the other large entity is sitting with the largest concentrated-position in the history of the silver market (also 'short').

 


   They are investing in commodity which has become genuinely 'scarce', due to the manipulation of the market. The explanation of "hedging" by gold and silver mining concerns is even more amusing. Miners sell forward their future output, essentially selling naked, sometimes going out as many as several years. Then they cover part of their short position through purchases of call options. One can hedge physical gold, but can one hedge gold locked up in ore deposits!


   In an Indian scenario a buy-and-hold strategy has become the profit-making proposition for many. The gold market has always been a contango market. This means that the gold spread has always reflected the carrying charge, the opportunity cost of carrying gold, most of which is foregone interest. The reason a large contango is rare is because it's too easy to profit from it.


   In the technical jargon of the futures markets, the basis is the spread between the nearest futures price and the cash price in the same location, but a strange phenomenon has manifested itself. Rather than remaining constant, the basis as a percentage of the rate of interest has been vanishing and now has dropped to zero. Has anyone checked the Indian "basis"? What about physical delivery still a chimera or is it quality certification issue which ensures that this remains a chimera.


   Growing numbers of investors are being drawn towards this market of buying precious metals. With festival and marriage season about to start. Gold, gold, gold...everyone may say...let us collect gold by which we shall remain wealthy... The banks, exchanges, analysts, brokers, mutual funds are misguiding people who seek to protect their wealth.


Gold is a cleverly designed trap. This trap has caught the middle class, upper-middle class, and upper class, totally off guard. Hundreds of thousands of hard-working people will invest their savings in gold, believing that the risk is nonexistent, and that their wealth is protected against severe market fluctuations and hyper-inflation.


Gold had lost nearly eight seven percent of its investment purchasing power between 1980 and 2000. That was during the best period for growing businesses in the twentieth century. It is often said "Buy facts and sell fiction" but how does one distinguish which is the fact and what is the fiction at a time when analysts are manipulated and there are hardly any facts apart from the rumors. And what if the entire gold futures turn towards "backwardation"? Will that be a fact or fiction?

 


Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now