Skip to main content

Gold price likely to soften even more

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

The April trade deficit statistics caused some panic. Crude imports of course, continue to be by far the largest import item. The second largest remains precious metals. Crude imports were up 4 per cent compared to April 2012, rising to $ 14.1 billion. Gold and silver (mainly gold) were up 138 per cent to $ 7.5 billion. Therefore, out of a total import bill of $ 42 billion, the combination of crude and precious metals contributed well over 50 per cent.

 

These are very different types of goods. Crude is a necessary good. While theres plenty of speculative activity in crude, its difficult for an Indian individual to speculate in crude in any meaningful volume.

 

Crude demand isn't very elastic with respect to price.

 

Demand is also strongly correlated to economic activity. Crude prices in April 2012 were about 10 per cent higher than in April 2013. The rise in the April 2013 crude bill is due to higher imports in terms of quantity.

This is a positive signal. Higher crude consumption suggests economic activity is picking up. Incidentally, crude prices have softened in May 2013 as well, in comparison to April 2013. The gradual, long overdue rationalisation of diesel subsidy is also proceeding. So there are positive aspects to the oil import scenario.

Gold and silver are entirely different. Silver does have significant industrial usage in electronic applications, for example, but it is primarily an investment. Gold is almost entirely an investment asset, seen as a substitute for hard currency.

 

These are not necessary goods. Both metals, especially gold, have negative correlations to economic activity. People buy gold when they cannot see more productive ways to use cash - gold after all, earns no interest. Demand is driven by fear of inflation or currency weakness. There is also seasonal demand in India. Weddings and festivals like Akshay Tritiya absorb 500- 600 tonnes a year in terms of demand. Indian imports have exceeded 850 tonnes per annum in the past three years – the excess over wedding demands is largely speculative.

 

Gold has dropped in price significantly in the past six months and there was a sharp drop in mid- April. Prices have continued to soften into May though jewellers are reportedly paying premiums to restock inventory.

There has been a surge in Indian demand as a result of lower prices and due to the Akshay Tritiya festival ( May 13).

 

January saw over 100 tonnes of gold imports. April also saw the 100 tonnes mark exceeded. Given fears of RBI putting curbs on banks importing gold, May could well cross the century mark. Incidentally Chinese imports have also shot up.

 

Investment assets like gold have interesting demand- price relationships. First, demand can often climb when price goes up and momentum traders chase the asset. Demand can also rise on a price dip if investors think the price correction is temporary.

 

But if investors believe that the price has collapsed completely, demand can also evaporate. In the Indian context, physical demand will probably account for 600- 650 tonne any how. But the excess over that could disappear if there is a big bear market in gold.

 

Right now, investors believe that prices could climb back again and this is one reason why demand is strong in both India and China. Another reason is that Indian investors ( and Chinese as well) have tended to lose money chasing financial assets in the past two or three years. Inflation has eroded the value of debt and few domestic investors have made money in the equity markets.

 

Ironically, the interest rate cycle has clearly changed and there is every reason to believe that equities and debt will give good returns over the next two years. Since May 2012, the RBI has cut the policy rate by 125 basis points. Despite its cautious public statements, the central bank is likely to continue cutting rates through FY 2013- 14. That should boost returns for debt funds and it should also mean positive returns for equity. If growth picks up, so should earnings.

 

Gold is a high- risk speculative bet at 26,000- plus. It could indeed bounce back above 30,000 again as many enthusiasts expect. It could also fall further and the downside could be much more. There is a global economic recovery, gold will fall. Prices are in fact, more likely to soften than to harden, given the trend through the past six months.

 

At the risk of repeating myself, if you buy gold at these prices, you must be prepared to set a loss limit and sell if theres a further catastrophic decline. Very few investors seem to see it as just another asset with specific characteristics, but that is all it is.

 

If you buy gold at current prices, set a loss limit and sell if there is a further decline

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

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