SONE pe ZANJEER!

 Few of my images from an interview cum panel discussion on a special show named “Sone pe Zanjeeer” aired on CNBC Awaaz on 27th October. It was a special story covering gold, its side effects and alternate ways of reducing fiscal deficit rather than levying high import duty on gold.

It was my call that the government must introduce gold bond schemes in the market. This is the best way to get the household gold into the market. This gold in turn will be borrowed and lent. This will in turn balance the economy. 

          In 2010, 1006 tonnes of gold were imported where this figure dropped to 933.4 tonnes in 2011.

Levying import duty on gold will surely reduce imports and balance the deficit but it will also encourage illegal channels of getting gold into India. Hence the government should execute other alternative modes like gold bonds etc rather than levying high import duties on gold.

GOLD FAILS TO BREACH THE $1800 MARK

Last month gold was at an 11 month high. It increased by almost $65 in September following the Fed’s announcement of QE3 launch.

However this week there were mixed sentiments from the market. In the beginning of the week, Gold gained support from ETF buying. Gold holdings with SPDR ETF hit record high level last week and rose for the eleventh consecutive week. Also supporting gold price were the continuing labor problems in South Africa. As per latest reports, mine workers have rejected revised pay offer by gold companies. Tensions could rise in coming days as mining firms may prepare to carry out more mass firings if the strikers don’t return to work. Meanwhile, central banks have continued to take measures to support their economy. 

But Gold failed to breach the $1800 mark.  Spot gold was down 1.2 per cent at $US1720.90 an ounce in late New York trade, after hitting a low of $US1715.79, which marked the cheapest price since September 7.

Gold also notched a near 2 per cent decline this week, its biggest weekly drop in about 4 months. The metal has so far failed to trade above $US1800 an ounce this year.
Gold fell over 1 per cent to a one-month low on Friday, its biggest daily drop in more than three months, hit by technical selling and tumbling US equities on economic uncertainty around the world.

The yellow metal has also been hurt by positive economic data coming out of the US, which means a quicker end to QE3 than expected. QE increases gold's allure as a hedge against inflation amid currency depreciation.

Gold also shrugged off the largely better-than-expected Chinese numbers - third-quarter GDP growth at 7.4 percent on the same quarter of last year was in line with most forecasts but a drop from 7.6 percent in the second quarter.

Moreover, weakening performances from companies like Microsoft etc resulted in a fall in equity markets which in turn showed its reflection on gold.

In other precious metals, silver was last at $32.37-32.42 per ounce, down 45 cents on Thursday’s close, platinum at $1,628.75-1,638.75 was down $9.75 and palladium was $4.20 lower at $636-642.

Now, focus will continue on major economies. For US, focus will be on US economic data and comments from Fed officials. Fed has already announced additional asset purchases which are supportive for gold however economic numbers will give an idea as to how long the bond purchases will continue. For euro-zone, focus will be on development in Spain, Italy and Greece. Market confidence is shaky as regional economies remain under pressure however continued measures by European leaders will limit downside.
Traders are now worrying that without a clear catalyst to push prices higher, gold will continue to drift lower in the coming weeks.