USD REPLACING GOLD AS CURRENCY OF LAST RESORT

Gold and silver started off the week with little movement but coming Tuesday they both bounced back. The rally in bullion was inline with the rise in other commodities rates and U.S stock markets. Since the U.S markets were closed on Wednesday there was not much movement in the commodities markets. 
SPOT MARKET gold prices traded close to $1610 an ounce for most of Tuesday morning in London, after breaking through the $1600 mark during the earlier Asian session. Silver prices touched $28 an ounce for the first time in nearly two weeks, while stocks and commodities also gained after disappointing US manufacturing data led to renewed speculation that the Federal Reserve might launch a third round of quantitative easing, known as QE3. 

However, precious metals saw a decline post The Wednesday close.

Gold and silver prices declined following the ECB decision to cut interest rate by 0.25pp to 0.75% and deposit rates from 0.25% to zero. This news also adversely affected the Euro/USD. Moreover the growth in the US economy was seen at a much slower pace
Comex gold futures prices ended the U.S. day session modestly lower on Thursday in choppy trading. The sharply higher U.S. dollar index pressured the precious metals as did traders being in a bit of a “risk-off” mentality. Dollar`s rally of more than 1 percent on Thursday`s session, the biggest daily rise in nearly eight months. Unemployment claims reduced to 374K as compared to a forecast of 385K which showed positive signs in US job market though the Unemployment rate remained unchanged at 8.2%.
The wave of monetary decisions announced by major central banks sparked Fears in markets regarding the outlook for the global economy, which in turn triggered a sell-off in commodities and shares as investors resorted to safe haven assets, especially the U.S. dollar and yen.
In the physical market, demand is still lagging on lackluster buying from Asian countries. Bullion rates might continue to zigzag from gains to losses and basically move in the same direction as the major currencies pairs including Euro/USD.  


A stronger dollar can hurt demand for metals and other commodities by making them more expensive in other currencies.  Further, a stronger dollar detracts from buying of gold as a sort of alternative currency, and vice-versa.

RBI MIGHT BAN BANKS FROM SELLING GOLD COINS

Akshaya Tritiya, Diwali or Dhan teras….Banks will no longer give importance to these days for sale of gold coins.

RBI is considering banning banks from selling gold coins.

A central bank source argues that imports of Gold Bullion are exacerbating the Rupee's weakness against the Dollar, making a case for ending Gold Coins sales by banks. Banks were allowed to sell Gold Coins following a relaxation of rules on commodities trading aimed at sterilizing Dollar inflows, which saw the Rupee appreciate in the years before 2008. With the rupee depreciating 30% since August, and hitting a new low this week, at 57.16 to a dollar, the apex bank is looking to reverse the trend. At a recent meeting, bankers have been advised to go slow on gold coin sales.

India is the world leader in Gold consumption. Gold is seen as a safe haven for parking money given the present gloom in the financial markets. A bulk of its demand is met through imports which are putting stress on the current account deficit and the value of the rupee.

As per Government of India, Gold as an investment has 2 issues. Firstly, the investment is non-productive as gold is hardly used in industrial production and it has contributed to the high current account deficit of the country. Secondly, the foreign exchange reserve that is used to import gold reduces the availability of this resource to finance the import of other commodities.

Gold’s share in total import bill of the country has gone up from 8.1 per cent in 2001-02 to 9.6 per cent in 2010-11. The percentage share of gold and silver combined has risen from the 3^rd most imported commodity in 2000-01 to the 2^nd most imported commodity in 2010-11 behind only crude oil.

RBI wants to generate immense awareness amongst people to switch to other modes of investment. However, Some experts believe the RBI's attempt at market manipulation will merely increase the black market gold prices and speed up the decline of the Rupee when compared to other assets like gold and silver.

Rather than implementing new modes for curbing imports, the Government should promote Bullion export in the country as it does for the jewellery. When Bullion is exported, an extra 1.5% value charge is levied by the government on the exporters. Moreover to redeem Duty, the exporters have to pay around a percent to the banks. If a provision is created in this case, then we could see an increase in Forex reserves by the exports. Research & development is the key to the future of Indian bullion industry. India holds around 9% of the global gold reserves estimated at 14,000 tonnes but fails to generate wealth out of it due to weak investment in exploration and mining activities. As we know, India is one of the leading consumers of gold and could challenge the likes of China and South Africa in gold production provided the right policy decisions and enabling environment for gold exploration and mining is put in place.

Indian households have nearly 25,000 to 30,000 tonnes of Gold. Government should show an effective way to gain revenue by exporting it. Schemes like minimum tax scheme should be introduced wherein an investor is charged minimum tax to convert his/her unaccounted gold into an accounted one. By this the government treasury will also increase and the idle gold can be put to use. The other scheme can be a VDS scheme (voluntary disclosure scheme) by which the Gold /Silver can be brought to the market. Such ideas will have a win - win situation for all.

However, if this ban is imposed then, one person who will surely benefit with this action is the “common man”, as gold coins will become cheaper. Usually people who buy gold coins from banks are charged a margin on around 3% if this ban is imposed then customers will start buying from the bullion dealers and other jewelers who don’t charge such high margins. Hence coins will be available to them at comparatively low rates.

However this move is still in its planning stage and no decision has been taken so far.

PRECIOUS METALS REACTIONS POST FOMC MEET

The positive Greek Election results did give a boost to the equities market but there were mixed reactions from precious metals. Mainly because the entire market is waiting for the outcome from the Fed’s FOMC meeting.

The results of the Greek elections, in which the pro bailout party had won, didn’t seem to impress forex and commodities traders. All eyes in Europe continue to stare at Spain & Italy. In yesterday’s G20 meeting the leaders talked about the EU debt crisis and Spain’s soaring borrowing costs.

The G-20 meeting, held at Mexico continued for two days- 19^th and 20^th June. At the conclusion of the summit, leaders announced a U$430b firewall to give some stability to an increasingly unsettled global market. Safe-haven bids boosted gold as G20 leaders pressed Europe to do whatever it takes to combat Europe's crisis after a victory for pro-bailout parties in a Greek vote reduced the chances of a euro breakup but failed to calm financial market

The Federal Open Market Committee (FOMC), a committee within the Federal Reserve System, started its two-day policy meeting - there were growing expectations that it will look to ease policy further to stimulate economic growth in the country. Many expected the Fed to extend its long-term bond buying program through Operation Twist beyond its current June deadline – the result being a weaker USD. ‘Operation Twist' programme implies funding the purchase of long-term debt by selling short-term notes - which is set to expire at the end of this month.

Fortunately these anticipations proved true. In a bid to reduce unemployment and protect the expansion, Fed has decided to extend Operation Twist till the year end with a sum of U$267, but no announcements regarding QE3 plan have been made.

Immediately after the meeting, Gold saw a range of Rs. 30,075 to Rs. 30,155. Gold is now expected to move within 1580$- 1640$ and any movement beyond this range will bring about great volatility. Though gold reduced in dollar terms, rates in Indian market remained more or less the same because rupee appreciated against the dollar to a tune above 56.20. Ratings agency Fitch, meanwhile, lowered its outlook on India to negative from stable.

Moreover, demand remains soft in India due to the lack of auspicious buying periods over the next few months. For June, the Bombay Bullion Associations expects gold imports to fall to 20-25 tonnes from 55-60 tonne in the same month of last year due to high gold prices in the rupee.

The government has not intervened much to contain the rupee appreciation. Hence gold is expected to lie at these levels.

PROMOTE GOLD EXPORTS RATHER THAN WORRY ABOUT IMPORTS

Gold is always considered as a safe haven. Surrounding the current macro factors like Indian currency depreciation, Euro zone's debt problems, China’s economic slowdown & weak economic indicators from USA, Indian Gold prices are touching new highs to offset the risks in the world economies.

Government of India has introduced various measures to curb the imports of Gold.

Government’s point on Gold imports:
India imports most of its gold requirement. As per Government of India, Gold as an investment has 2 issues. The investment is non-productive as gold is hardly used in industrial production and it has contributed to the high current account deficit of the country.  Moreover, the foreign exchange reserve that is used to import gold reduces the availability of this resource to finance the import of other commodities.

Our point of view through which we can have a win-win situation:


Gold is always considered as a safe haven asset or to be precise a perfect hedge against any economic turmoil. Investing i.e. saving in gold is preservation and even addition of individual’s wealth. Savings is a way by which you expect returns over a later stage in life or during some emergency. So, calling gold investment a non productive one is not correct when we are talking about a shield for Indian people who are running the economy.


Research & development is the key to the future of Indian bullion industry. India holds around 9% of the global gold reserves estimated at 14,000 tonnes but fails to generate wealth out of it due to weak investment in exploration and mining activities. India is rich in mines but the R&D is so poor that we are hardly in position to extract much of its abundant resources.

To be precise the country produced and refined only a minuscule 2.46 tonne worth Rs312 crore in 2008-09, the latest period for which data are available. That’s less than 1% of the value of metallic mineral production in the country. 


On the other hand, China boosted its gold refining business after it gave companies a single-window clearance along with fiscal and infrastructure incentives. Today, the country produces and refines about 320 tonne (approx.) of gold annually, the most in the world.

I feel that if R&D is carried in an efficient way, production of the metal will increase. This will reduce dependency on imports and in turn help the government to increase the forex reserve.


 As the metal will be extracted locally, customers will be benefitted pricewise, due to local production. As we know, India is one of the leading consumers of gold and could challenge the likes of China and South Africa in gold production provided the right policy decisions and enabling environment for gold exploration and mining is put in place.


Indian households have nearly 25,000 to 30,000 tonnes of Gold. Government should show an effective way to gain revenue by exporting it. Schemes like minimum tax scheme should be introduced wherein an investor is charged minimum tax to convert his/her unaccounted gold into an accounted one. By this the government treasury will also increase and the idle gold can be put to use. 

The other scheme can be a VDS scheme (voluntary disclosure scheme) by which the Gold /Silver can be brought to the market.

Government should promote Bullion export to take place in the country as it does for the jewellery. When Bullion is exported, an extra 1.5% value charge is levied by the government on the exporters. Moreover to redeem Duty, the exporters have to pay around a percent to the banks. If a provision is created in this case, then we could see an increase in Forex reserves by the exports.


India believes in Gold investment and measures to promote such savings need to be issued by the government rather than curbing them. from Mr. Mukesh Kothari's excerpt

GOLD- UPS AND DOWNS

Last fortnight saw great volatility in gold, with gold reaching its life time high at Rs. 30,400 per 10gm in the physical market, then dropping again by almost 1000 rupees per 10 gm and then nearing back to its life time high.


Indian gold prices in the bullion market reached of Rs. 30,285 per 10 grams on Wednesday. On Wednesday, Indian gold prices rose by Rs. 270 to Rs. 30,285 per 10 grams and neared its previous record of Rs. 30,400 set on June 6. This is mainly due to Rupee weakness against dollar amid strong cues from the world markets. Gold rose on Wednesday morning trading, reflecting a slight softening of the US dollar and continued fears over the stability of the European periphery.


A rally on Tuesday afternoon pushed the metal through $1,600 to a high of $1,617.85. It was last near this level at $1,613.25/1,613.75 per ounce, up $2.53 on Tuesday's close.


Gold has outperformed other precious metals, leading to renewed speculation that it had regained its status as a safe-haven asset - its traditional role in times of economic uncertainty.


With China's economy slowing in addition to the euro zone's debt problems, the USA payrolls data added to worries of a global economic slowdown. The May employment report was quite weak, and it does raise the odds of Federal Reserve to launch another round of monetary stimulus to support the U.S. economy, known as "Operation Twist," at the its next policy meeting on June 19-20. The Twist program extends the maturity of the central bank's Treasuries holdings in a bid to bring down long-term borrowing costs like mortgage rates. The program is set to expire at the end of June.


On Domestic front, India is reeling under the pressure of depreciating currency i.e. Indian Rupee. A currency’s external value declines when their import weighs more than its general exports because it expands the trade gap and increases pressure on the economy as a whole. In the case of India, nearly 70 percent of its oil demand is met by imports. As a result, the plummeting currency will eventually increase import bill and will lead to a rise in oil prices and contribute to inflation. This in turn will lead to a rise in precious metals.


The Greek elections that were held on Sunday were expected to bring in more volatility, but then again the market is awaiting the FOMC meeting that concludes on 20th June.


Gold has an opportunity to re-establish its safe-haven status, particularly as concerns over sovereign debt, flat currency, counter-party risk and the desire to hold a hard asset have supported gold in the past.

GOLD CREST- INVESTORS ABANDONING THE YELLOW METAL

Gold has always enjoyed an edge over other metals in terms of its value and prestige, being the best investment option. Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises. The sudden surge in gold prices tends to create a standstill in the bullion market.

Last fortnight saw great volatility in gold, with gold reaching its life time high at Rs. 30,400 per 10gm in the physical market, then dropping again by almost 1000 rupees per 10 gm and then nearing back to its life time high.

As on Thursday, Indian gold prices in the bullion market created a new high of Rs. 30,450 per 10 grams.

With China's economy slowing in addition to the euro zone's debt problems, the USA payrolls data added to worries of a global economic slowdown. The May employment report was quite weak, and it does raise the odds of Federal Reserve to launch another round of monetary stimulus to support the U.S. economy, known as "Operation Twist," at the its next policy meeting on June 19-20. The Twist program extends the maturity of the central bank's Treasuries holdings in a bid to bring down long-term borrowing costs like mortgage rates. The program is set to expire at the end of June.

On Domestic front, India is reeling under the pressure of depreciating currency i.e. Indian Rupee. A currency’s external value declines when their import weighs more than its general exports because it expands the trade gap and increases pressure on the economy as a whole. In the case of India, nearly 70 percent of its oil demand is met by imports. As a result, the plummeting currency will eventually increase import bill and will lead to a rise in oil prices and contribute to inflation. Absence of Government decisions on various policy matters is creating a vacuum in India’s economic growth.

Such factors are paving way for new highs in Gold prices, as it is considered as a safe haven.

This uncertainty in price leaves the short term investors with a risk during making their investment decisions. As the market does its daily job of balancing fear and greed, it becomes increasingly apparent that fear predominates. Investors are abandoning anything with the slightest hint of risk.

On the other hand, an investor would buy the yellow metal at any point, if he/she has a futuristic goal. As also a domestic need for jewelery would trigger the purchase. Jewellers would in turn buy only during dips, preparing for the upcoming festive season. Thus bullion houses would witness lesser demand owing to the plummeting price of gold.

RSBL RECEIVES EPCES EXPORT AWARDS FOR THE BEST SEZ UNIT

RSBL has received the prestigious EPCES Export Awards for outstanding export performance during the year 2009-10 from the Category-II Product Specific SEZ-Other than MSME in the category Gems & Jewellery.

It was presented by  Shri Jyotiraditya M. Scindia, Hon’ble Minister of State for Commerce & Industry. It was moment of joy and pride not only for me but for the entire RSBL Family.

Its purely the combined effort and consistent support from my team, that RSBL has reached where it is today. I also thank the Export promotion Council for recognizing our efforts.

Another feather to the cap- 2012 has lots in store for us.

IS GOLD NO MORE A SAFE HAVEN ASSET?

Gold finished the session in New York smack bang in the middle of the range (1528-1552), just short of 1540, and it feels as though the market may have got itself caught a little short. After reaching a five month low (the market has fallen 3.40% in the four days prior to yesterday), it rebounded for the first time in 5 trading days on Thursday. The yellow metal continued to push higher in Asia on Thursday, gaining more than $10. Good selling on the futures exchange seemed to cap the market at 1550, but one gets the feeling there are stops lurking above and we may trade higher in the short term.

Bullion has erased the hard-fought gains made this year in a matter of sessions. It tumbled to a four-and-a-half month low on Wednesday to USD 1,527 per ounce. It had hit a record high of USD 1,920.30 per ounce in September last year.


However, on Thursday we saw the tables turn. Gold rallied more than 2.6 percent o n Thursday, its largest one-day gain since late January, as technical buy signals and new signs of a sluggish U.S. economy more than offset deepening despair over the euro zone.

After flirting with a bear market on Wednesday, down more than 20 percent from its September record, bullion rallied early after Philadelphia Federal Reserve data showed a contraction in factory activity in the U.S. mid-Atlantic region that rekindled some hope the Fed would plough more money into the system to stimulate the economy, traders said.

Technical buying also fueled gains after gold had nearly hit a key December low, trading just shy of key technical long-term support at the 100-week moving average of $1,515 per oz.
Psychologically and technically, $1,500 is the next big mark for gold


Greece is heading to new elections in June and uncertainty about its status in the euro zone remains high. Because of these concerns, investors are moving to cash, especially as every new headline seems to raise worries.

Paper currencies are in vogue right now, with the dollar bid up. Until people can use gold to buy their groceries or pay their mortgage, people are keeping cash on hand.


Right now, the gold market is in the middle of a battle between the paper traders and the holders of physical metal. We are seeing huge Chinese import stats for physical gold and robust demand elsewhere for physical metal. Overselling of precious metals created pressure resulting in a dip in gold prices.


Liquidation is taking place irrespective of market fundamentals. Jewelers don’t know what to do. Maybe when the price has stabilized at some levels, they will start to reenter the market

Increasingly risk-averse investors are taking refuge in the US dollar; its traditional inverse relationship with gold has been more prevalent in recent weeks. Despite its recovery, it remains vulnerable to a further drop after its longest stretch of losses in nearly five months.

Gold fell along with other more industrial commodities such as copper and crude oil, under pressure from an early rise of the dollar, which put silver on track for its longest stretch of consecutive daily losses in nearly four years. Fears a Greek exit from the euro zone would worsen the European debt crisis gripped European markets on Wednesday, sending shares and other riskier assets lower as investors shifted funds into safe havens like the U.S. dollar.


The prospect of improvement in physical demand for gold fro, the Indian jewellery sector took a knock on Wednesday with the drop in the rupee to a record low against the dollar, driven by the widespread risk aversion. Buying in India, the world’s largest bullion consumer, has emerged with the decline in the dollar-denominated gold price to 4 and half month low this week, but local dealers have said the weakness in the rupee could curb this. Definitely physical buying has gone up, although demand is not overwhelming.

GOLD IN A BUBBLE STAGE?

Gold surged to a high of 29770, quite close to its life time high of 29900.


Internationally gold reached an all time high of 1920$ in September 2011, by Wednesday noon gold reached 1662$ in the international market. Though gold is almost 150$ down from its high, the current rates in rupee terms have almost reached its life time high.


The main reason behind this is the weakening of the rupee as against the dollar. The 15% depreciation in the value of the rupee against the dollar since September 2011 is aiding the upswing in gold prices


Assuming that if gold would have crossed its life time high of 1920$ today, then gold would be selling at Rs.32000 in the Indian market.


Though Retailers have sold gold at 30,000 (life-time high), but the rates in the wholesale market have not crossed 29770. Jewellers and traders are not happy with this increase, as the demand has weakened despite of the festive and marriage season.


This Akshaya Tritiya, gold sales saw an increase of only 25%, which would have been much more otherwise. With gold prices shooting up day-by-day, marriage buying of gold seems to have taken a severe beating. Most jewellers are fully stocked after lower-than-expected sales during this season


The US Federal Reserve’s decision to keep interest rate unchanged, indication of a third round of quantitative easing measures, and renewed concerns over the financial health of the euro zone sparked by a downgrade of Spain’s sovereign debt have put the spotlight on bullion in the past few days.


The trading sentiment further bolstered as the mental in overseas markets climb for a fifth day for the best run since January as concern of deepening euro-zone debt crisis boosted demand for alternate investment. Analysts say the precious metal is likely to continue its rising streak at least for some more time.


Many even believe that gold is in a bubble stage. I doubt we are in a bubble stage. When you went to an investment conference in 1989, everybody owned Japanese stocks. And in 2000, everybody owned tech stocks. That is the bubble, when the majority of market participants own an asset. I think there are more people that own a tech company’s stock than gold.

In the long run, that central banks all over the world are going to print money because they know nothing else. The purchasing power of currencies will continue to go down. In other words, the price of gold and silver will move up in the long run.

GOLD BEHAVING MORE LIKE A RISKY ASSET THAN A SAHE HAVEN ASSET

Gold edged up on Wednesday after a successful Spanish debt auction eased fears about the euro zone debt crisis, but gains were capped as the euro remained under pressure ahead of a longer-term debt sale in Madrid later this week.

Gold was again little changed again in European trading on Friday morning, unable to find a strong direction and instead likely to replicate the recent volatile but rangebound trading pattern ahead of the weekend. 

Spot gold stood at $1,640.90/1,641.70 per ounce, down just 70 cents. It fell to its lowest since April 5 at $1,631.10. The metal has recently traded in volatile fashion in a tight band, unnerving investors - prices lost nearly one percent to a one-week low of $1,634.70 in the previous session after reaching its best in 10 days above $1,680 last week. 

Gold and silver continued to zigzag in recent days; even though both metals didn’t perform well during most of the month (so far). Their fall wasn’t sharp and they could change direction if there will be another speculative movement in anticipation for next week’s FOMC meeting.

Gold may have been undermined by news that the International Monetary Fund (IMF) raised its global economic forecast to 3.5 percent this year from its previous forecast in January of 3.3-percent growth.

The euro zone is still expected to shrink this year but at a slower pace of 0.3 percent than the previously forecast 0.5 percent. Meanwhile, developing economies such as China will grow even more this year, expanding at 5.7 percent versus its previous forecast of 5.5 percent. The US should grow 1.4 percent this year.

In addition, this morning's short-term bill debt auction in Spain went smoothly, with the country raising more money than anticipated at 3.2 billion euros.

This saw gold's safe-haven appeal fade, with investors looking to riskier assets such as equities, which rose today

On the physical side, an unexpected lowering of interest rates in India could lend some support to demand, which has been notably weak since its government introduced some changes to the import duty tax in March. This was despite the start of the spring wedding season and ahead of the auspicious Akshaya Tritiya festival that falls on 24th April. After Dhanteras,. The highest sale of gold is witnessed on Akshaya Tritiya.

Over in India, traditionally the world’s largest source of gold bullion demand, jewelers are reporting a 50% drop in sales ahead of next week’s Akshaya Tritiya festival – seen as an auspicious day in the Hindu calendar to buy gold.

According to a recent report, Perth Mint, which processes all of Australia’s bullion, decreased by 9.6% during March. This news might have been due to Jewelers strike in India during or a decline in demand for gold investments.

Either ways, if this trend continues, it may adversely affect gold’s performance in near future.

Gold has traded in volatile fashion in a tight band over the past two weeks, unnerving investors who have mostly preferred not to hold onto their positions. But short-selling has alternated rapidly with waves of safe-haven demand while macroeconomic conditions remain worrying. 

Gold price woes continue…

Gold continued its descent in Europe on Wednesday morning, extending Tuesday’s late sell-off to below $1,630 after the latest US FOMC minutes dampened hopes for more quantitative easing.Spot gold fell $16.80 to a fresh low since March 22 at $1,629.60 per ounce at one stage. It was last at $1,636.30/1,636.90, still down $10.80. 

Gold fell alongside other assets - global equities, energy markets and the euro - after the FOMC minutes reiterated that more monetary injection would only be needed if the economy worsened. Only two out of the 10 voting members supported a third round of quantitative easing (QE3) to stimulate the US economy, which, they agreed, was moderately improving.

Gold futures might have gotten knocked down again by Federal Reserve commentary, but analysts and traders suspect that the market will find some kind of footing before long.

They cite potential for bargain hunting after the recent sell-off and still-accommodative monetary policy, with short-term U.S. interest rates remaining at basically zero.

Gold has fallen sharply on other occasions this year following Fed policy communications. March13, the day this latest FOMC decision was announced, saw the spot market gold price drop 2% from the day’s high, while on February 29, gold fell nearly $100 an ounce after Fed chairman Ben Bernanke told Congress he saw potential inflationary pressures from rising gasoline prices.

Early in the year, gold rallied on growing ideas that the Fed would undertake further quantitative easing, with the June contract hitting a three-month high of $1,795.10 on Feb. 28. Further easing presumably would undercut the dollar and add to inflation concerns, which tend to help gold. Low rates also mean little so-called “carry cost” or the loss of interest earnings by holding a non-yielding asset such as gold.

Gold then came under pressure again in mid-March when Fed policy-makers met and their post-meeting statement was seen as more upbeat on economic prospects than previously was the case, reducing the likelihood of still-looser monetary policy. Gold got another lift in late March when Bernanke wondered about the sustainability of job-market gains, providing some fodder for those still looking for QE. But then came the FOMC minutes Tuesday showing policy-makers less keen on more easing measures.

Most markets are suffering from a hangover from the Fed. All of the base and precious metals are lower, as are many other commodities such as crude oil, as well as the stock market. The U.S. dollar has benefited, however. There is a definite risk-off day, and it’s not just gold.

An improving economic outlook is supportive for the US dollar, which in turn is weighing on gold due to the inverse relationship between the two assets. Additional monetary accommodation would be unequivocally bullish for gold because cheap money tends to debase the dollar and create future inflationary risk.

Moreover Indian physical demand has been light here. Most Indian jewelry shops were in the third week of a “strike” to protest higher import duties, and this loss of demand has been cited as a factor weighing down gold lately. 

The Indian strike situation will prove detrimental to the local physical market the longer it drags on, as a combination of reduced sales and falling gold prices will make it all the more harder for demand to pick up from where it left it

PM Defends Hike in duty

Finance Minister Pranab Mukherjee defended the government's decision to double import duty on gold saying that high imports were straining balance of payments and exchange rate of the rupee. India imported gold and silver worth $54.5 bln in Apr-Feb, accounting for 12.6% of total imports “The import of gold of such magnitude strains balance of payments and affects exchange rate of rupee through impacting supply-demand balance of foreign exchange”, said Mr.Mukherjee
 
I agree to the balance of payment issue that the government is facing via high imports of gold. But double duty is not the right solution to this issue. Gold has always been a popular investment destination for all types of investors, standing out as a tried and true safe haven that generally performs well in times of equity market turbulence, uncertainty as well as an alternative to fiat currencies that have occasionally come under pressure. In India, Gold is bought by almost all classes of society and such a duty will affect the imports and in turn the reserves. It will also lead to an increase in various other illegal modes of gold procurement so as to save the extra costs over it.

Indian households have nearly 25,000 to 30,000 tonnes of Gold. I would suggest Government of India to introduce schemes like minimum tax scheme wherein an investor is charged minimum tax to convert his/her unaccounted gold into an accounted one. By this the government treasury will also increase and the idle gold can be put to use. The other scheme can be a VDS scheme (voluntary disclosure scheme) by which the Gold /Silver can be brought to the market.

There are much feasible solutions available rather than imposing such duties

UNION BUDGET 2012-13- WE STRONGLY OPPOSE IT

Let me first state down the important highlights of the budget with regards to the Bullion, Gem and jewellery Industry-

· Gold import duty has been doubled to 4 per cent
· Excise duty on Branded and non Branded Jewellery has increased by one per cent
· 2 per cent tax on cash sales of over 2 lakh
· Excise duty of 1 percent on silver branded jewellery has been removed.

Budget 2012 has been a disappointing one. We strongly oppose this budget.

It will create a negative impact not only for the bullion and jewellery dealers but also for the common man.

The government had increased duty in December on gold and silver. This itself hampered the bullion business. An additional 2 percent increase of import duty on gold has worsened the situation, not only for bullion industry but also for the common man.
We can say that government has levied this duty on the common man. Increase in gold prices along with this increase in duty- how will the common man survive?
Gold is tradition, gold is culture. Gold is bought not only on auspicious occasions and weddings but also as an investment. Its is rightly said “save money to invest in gold”

To explain in layman terms,
1. Duty is variable.
2. Yesterday, if an individual would have bought 100gms Gold at 27,300/-(10gms quote) i.e. 2,73,000 for 100gms. The duty was 5,600. As per today’s declaration, the duty is almost double i.e. 11,200. Now the same gold quantity for the same price is valued higher by 5,600 i.e. 2,78,600 for 100gms.

Such moves of the government will create a slump in the market.

Moreover, Imports are expected to fall by 50% in the next 6 months.
This move will result in smuggling and opening up of other illegal channels to get gold in India.

I totally oppose this budget. The only positive point is the removal of excise duty on silver branded jewellery. But will that really help?
The next thing that can help our industry is that this extra revenue generated through increase in duty is used by government for creating new hallmarking centres, research and development in mining sector.
The Bullion, gem and jewellery industry needs to be more organized.

GST has been postponed to October. We insist the government to implement GST the earliest. If implemented, it is expected to provide a significant boost to investment and growth of the economy. GST will have a significant impact on almost all aspects of businesses operating in the country, including the supply chain, sourcing and distribution decisions, inventory costs and cash flows, pricing policy, accounting systems and transactions management. A flat 1% across India should be levied by the government, which would replace most indirect taxes currently in place.

With increasing competition from China, the government should have encouraged the development and promotion of BRANDED Jewellery in the International market, for the long term sustainable growth of the Gems & Jewellery Sector. However, the increase in excise duty will hamper the growth of this sector.



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PEACE PROTEST AGAINST THE UNION BUDGET

The Bombay Bullion Association along with all the bullion and jewellery dealers stood united against the Union Budget 2012-13. March 17,18 and 19 were declared bandh. We all protested against the duties levied tin this year's budget. We hope that some initiative is taken by the government and they take decision in favor of the common man .

Felicitated with 'Jain Ratna Award' by the Honorable President

                                          

I, Prithviraj Kothari would like to express my heartiest thanks to you, for sending me your wishes and beautiful flowers on 13th March 2012.

It gives me immense pleasure in seeing that with grace of god, my family, all good friends and colleagues, I have managed to reach to a level which I have dreamt of. Receiving this award from Hon President of India,Smt. Pratibhadevi Patil, is a great pride in itself.

I still wish and want to do good for the whole Jain Fraternity and take it to much higher peak of success in the years to come.I believe in determination and dreaming big each time.

Again thanking you for the best wishes and continued support you have rendered.

Volatility in GOLD.....WHY?????

SPOT MARKET prices for gold bullion hit a six-week low of $1682 an ounce Tuesday lunchtime in London – a fall of 1.8% from last week's close – as stocks, commodities and the Euro continued their recent slide and uncertainty hung over recent European agreements.

Gold futures haven't settled below $US1,700 since January 24, though prices moved below this level in intraday trade twice last week.

At the time, Federal Reserve Chairman Ben Bernanke's testimony to Congress, which hinted that a third round of monetary stimulus wasn't imminent, triggered a violent sell off that saw the contract lose $66 a troy ounce.

Precious metals came under heavy selling pressure on Tuesday… sentiment was dampened further by concerns that Greece might be struggling to reach the necessary participation rate of private bond holders to implement its debt swap

Markets were also spooked on Tuesday by a 0.3-percent drop in GDP in the Euro zone in the first quarter, which followed a downgrade in China's 2012 growth target to 7.5 percent from the longstanding eight percent earlier this week.

Market participants were awaiting the release of US ADP employment data, German factory orders and US oil Inventories ahead of the week's key data event - US non-farm payrolls.

However, Wednesday saw a shift in the downward movement. Market sentiments changes and gold jumped back.

A report stated that under the potential program, “The Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.”

Following the report, April Gold Futures contract traded a modest $16.00 range as physical buying reemerge. After trading as low as $1663.40 during Wednesday’s session gold closed at $1683.90 on Thursday as physical “bargain buying” along with a weaker U.S Dollar helped to fuel the rally. 

Reports that Greece’s PSI debt swap deal has been accepted by investors that hold 58% of the eligible bonds were seen as good news for the Euro and therefore pressured the U.S Dollar. 

Worries that Greece may not secure a deal with private creditors to cut its debt by the Thursday deadline spurred selling in shares, but pressure on gold was offset by a bounce in the euro and physical off take.

Gold regained some ground on Wednesday as jewelers in Asia snapped up the metal after prices dropped 2 percent in the previous session, while lingering fears about a possible Greek default sent investors scurrying to buy the dollar.

Real Gold Prices have risen sharply since over the last decade. Stocks, in contrast, have gone pretty much nowhere. Because over the last 102 years, and including dividends, the real return on US equities has typically been negative when gold was up, and positive when gold was down.

So owning some of both would seem the sensible, safe course, now weighting one or the other. Such a re-weighting would now be advisable if you think inflation is about to take off.

ETF's have Boosted Gold as an Investment Option

http://rsbl.co.in/goldetf.asp

Gold has always been a popular investment destination for various types of investors, standing out as a tried and true safe haven that generally performs well in times of equity market turbulence as well as an alternative to fiat currencies that have occasionally come under pressure. But the development of exchange-traded funds has given gold a tremendous boost in the investing world, and the combination of precious metals exposure and the exchange-traded structure has proven to be an extremely efficient marriage that is appealing to all types of investors.

Historically gold has been popular in India for holding it in the form of jewellery. But over the years there has been a lot of awareness in the general public over gold as a financial asset. The retail investors have started investing in gold online rather than holding it in physical form.

Gold ETFs have been a success story around the world and Indians are warming up to the idea of investing in it since they were launched in 2007.

Demand for physical gold in India is approximately 700 tonnes annually whereas gold ETF accounts to just 30 tonnes annually that's a mere 3 % of the total gold consumption.  But industry players suggest it could rise by at least 50 percent year-on-year.

The gold collections of ETFs have risen from 15 tonnes in 2010 to 30 tonnes in 2011 (an increase of 100%). The number of corporate portfolios under ETFs has also increased to 5,599 in 2011 as against 3,310 in 2010

A World Gold Council (WGC) report states that India imported around 960 tonnes of gold in 2011. As such, Gold ETF demand at 30 tonnes accounts for only about 3% of total Indian import demand. However, this percentage is expected to increase

Gold ETFs are open ended mutual funds that help you invest your money in gold which is 99.5 % pure.  Gold Exchange Traded Funds are also known as paper gold.  These are listed on the stock exchanges and investors are assigned units of the mutual fund where each unit often represents one gram of gold.
There are already a dozen other gold ETF products by different asset management companies, but, physical delivery is not offered to individual retail investors. Only market participant can take physical delivery of minimum 1 kg gold

However, for the first time, a new Gold ETF has been launched wherein, Indian retail investors in gold ETFs (exchange traded fund) will get a chance to take physical delivery for a minimum denomination of 10 grams.
Motilal Oswal along with RiddiSiddhi Bullions Ltd. Have launched , for the first time in the world, Gold ETF’s with physical delivery of a minimum of 10 grams, which can directly be purchased from an AMC or at the stock exchange.

MOSt gold shares, as they are rightly called, will be available across 22 cities and at a much lower price.
By taking physical delivery, investors will be able to buy pure gold much cheaper than available in coins and bar form with banks and jewellers who charge a premium of 6 to 17 per cent over the imported gold price.
As investors do that, they also get the benefit of essentially buying gold at spot prices, which today they cannot do in any other investment option, whether it's buying through physical gold option or buying through the electronic option. So typically, they end up paying a premium over spot prices
I believe, Gold ETF’s should make up atleast 5-10 % of an investor’s portfolio to give him balanced returns from all the available investment options.

Pre Budget Views & Suggestions

The most discussed topic this month is “THE UNION BUDGET” & how will it affect our commodity business.

Being a MD of RSBL and President of BBA, everyone has been asking about Pre budget expectations and suggestions. On my behalf, I would like to put forward following points:

1.        Import Duty:

Government had increased import duty on Gold and Silver before the budget. A two per cent customs duty on the value of gold imports will replace the flat Rs.300 per 10 grams that was being levied on the yellow metal earlier. Similarly, in the case of silver a six per cent customs duty on the value of the imports will be charged instead of the Rs.1,500 per kilogram that was being levied until now. The duty price is variable as per the delivery of the consignment. Due to this, the increase in duty on the actual price of gold is being passed on to the retail consumers by the jewellers. I expect that this budget will address this issue and a fix duty structure will be levied. The extra revenue generated from the increased duty should be used by the government for creating new hallmarking centers, Research & development in mining sector.

a.      Hallmarking is a great move by the government. It will ensure customer satisfaction by purity assurance. For this, the current need is to increase the hall marking centers at a faster pace so that the implementation is done in no time.

b.      Research & development is the key to the future of Indian bullion industry. India is rich in mines but the R&D is so poor that we are hardly in position to extract much of its abundant resources. To be precise the country produced and refined only a minuscule 2.46 tonne worth Rs312 crore in 2008-09, the latest period for which data are available. That’s less than 1% of the value of metallic mineral production in the country. On the other hand, China boosted its gold refining business after it gave companies a single-window clearance along with fiscal and infrastructure incentives, he said. Today, the country produces and refines about 320 tonne(approx.) of gold annually, the most in the world. I feel that if R&D is carried in an efficient way, production of the metal will increase. This will reduce dependency on imports and in turn help the government to increase the forex reserve. As the metal will be extracted locally, customers will be benefitted pricewise, due to local production.

2.        Clarity:

 Excise duty of 1% has been levied on branded Gold/Silver coins and small bars. I expect that there will be clarity on the definition of “branded goods”. Excise duty increase will hit the common man who is the biggest investor in these types of products. The products will be more expensive and in turn reduce his/her savings.

3.        Options:

 Commodity exchange have now completed almost 8 years in India. Introduction of Option product for this exchange is must. Those who have the exposure should be given an opportunity. It will be a boon for a bullion trader and jeweler. By using this instrument they can hedge their future position and in a way provide the necessary risk cover. An investor will also be highly benefitted from this instrument. He/she will get a chance to invest in a larger quantity of metal with a lower investment and reap benefits till the expiry date.

4.        STT Tax:

 I understand that Government is thinking of introducing STT tax, like the one in the equity market. STT tax should not be charged on bullion dealers & jewelers, as it will only increase the metal price and in turn increase the price for the customers. It should be charged onto speculators only.

5.        For Corporate Bullion Dealers:

 Gold Deposit Schemes are offered by banks in which investors deposit gold for a period of certain years earning a fixed rate of interest.  The depository scheme that the banks and MFs are enjoying should also be allowed to corporate, working for bullion industry. It will help to increase the gold reserves and in turn benefit the customers willing to deposit their idle gold.

6.         Schemes:

Indian households have nearly 25,000 to 30,000 tonnes of Gold. I expect that this budget would show an effective way to gain revenue by exporting it. I would suggest Government of India to introduce schemes like minimum tax scheme wherein an investor is charged minimum tax to convert his/her unaccounted gold into an accounted one. By this the government treasury will also increase and the idle gold can be put to use. The other scheme can be a VDS scheme (voluntary disclosure scheme) by which the Gold /Silver can be brought to the market.

7.        Tenure:

I expect an increase in Gold loan scheme period to extend from 180 days to 360 days and LC tenure from 90 to 180 days.

8.        Goods and Service Tax

Most importantly, GST implementation is a must. If implemented, it is expected to provide a significant boost to investment and growth of the economy. GST will have a significant impact on almost all aspects of businesses operating in the country, including the supply chain, sourcing and distribution decisions, inventory costs and cash flows, pricing policy, accounting systems and transactions management. A flat 1% across India should be levied by the government, which would replace most indirect taxes currently in place.

Any other suggestions are welcome. They will surely be put forward to create a better environment not only for bullion dealers or jewelers but also for the common man.

Gold Coins- A smart Investment Option For Women

According to a recent survey, more and more women are found to be the key   personalities while purchasing and making major family decisions. With an increase in the number of working women in the country, their disposable income is also on a rise. This gives the superwoman of today a better purchasing power and opens wider avenues for her to spend as well as invest. Gone are the days when every financial need was addressed by a man of the family. Today the matriarchal society speaks out loud on the investment front.

A decade ago, these decision makers of the household considered buying gold jewelery a smarter move, as gold has always been a proud asset that yields financial gains. But investing in gold in the form of 'jewelery' is now a story of the past. Buying, gifting and wearing gold jewelery may be an auspicious affair, but not a very favorable investment decision.

Gold when purchased in the form of jewelery is less pure and prone to damage involving wear and tear which depreciates its value. Moreover, it involves cost of high making charges and the jewelery may become out of fashion as and when newer designs flood the markets. Ornaments often contain additives likes stones etc which only increases the weight and not the value. Also liquidity is low , the wastage being high in jewelery. Gold due to its high liquidity is readily bought in the markets. However, gold jewelery has very few options as only selective jewelers buy it back as it yields a depreciated value.

Conversely, buying gold coins can be a smarter bargain. Gold coins are comparatively tensile and stay intact, so that their value would not lessen due to usage and wastage. They are available in the purest forms in the market, yielding profitable returns with the prices of gold rising high. Gold coin due to its standardization offers a larger platter of buyers to the seller when it is to be sold. Almost every dealer would want to purchase it at the market rate of gold at a given point of time.

For example, if a gold chain of 10gms and a 10gms coin was bought a year ago, the gold coin would yield more appreciation on liquidity as it is in the purest form, i.e. 24 Karat. Whereas, the gold chain which was bought at a higher price (including making charges) would yield the value for 22 or 23 karat purity of gold. Besides, the change in design trend and wastage due to wear n tear would also lessen the value of the jewelery.

As per our glorious Indian Tradition, even though it becomes mandatory for occasions like weddings and festivals to gift gold jewelery, our gen Y lady can now make a smarter move at such times by buying some amount of gold jewelery and a major chunk of gold coins. This gives equal justice to both the requirement of the moment as well as the motive for smart investment. Moreover coins can always be exchanged for buying jewelery as well as utilized for creating beautiful ornaments. So all you Gen Next Ladies, go ahead and make your Investment in the shining GOLD way more fruitful now by buying Gold Coins.

Gold taking center stage

Gold was stable in Europe on Tuesday morning, not straying too far from its Monday closing levels, with precious metals lacking both enthusiasm and definite short-term drivers.

Spot gold was up $2.10 to $1,722.50/1,723.30 per ounce. On the charts, the next resistance level is pegged at $1,740, while support stands at $1,721 and $1,715.

Among other precious metals, silver fell 13 cents to $33.53/33.57 per ounce - the metal reached its best since November 16 at $34.42 per ounce on Friday before consolidating lower along with the rest of the complex.

Platinum at $1,618/1,628 per ounce was down $3.50,

The Indian currency shot up to trade on Monday at 49.08 after hitting the high of 48.83 last week. The current value of rupee shows a rise of 8.23% from its lowest level in December.

Despite another postponed deadline in Greece, the dollar weakened against the euro on Tuesday, which sent precious metals rallying. The Greek Prime Minister’s meeting is being held so that the Prime Minster can obtain the political support for the austerity measures that would ensure cooperation from international creditors. Perhaps the optimism was owing to reports that the ECB was willing to contribute to a restructuring of Greek debt. However, this is subject to a successful conclusion to the current debt restructuring negotiations.

Being an election year in the U.S., it is not altogether unusual for indicators to be received in positive fashion. Historically, with few exceptions, the modern economy has performed well during election years. Yet what steers the boat has less to do with the performance during elections years than it does with common sense. The fiscal policies have been repetitive and aimed at sparking the engine, yet it must eventually run on its own accord. Market and fiscal trends are apt to change, sometimes violently.

Fiat currencies makes hard asset commodities, such as oil, gasoline and food cost ore as a result. On the other hand, gold benefits as it is held as a store of value. As other investments get punished, consumers become fearful and the prospect of business growth slows, gold is likely to take center stage

There is still no agreement on a restructuring of government bonds - and the euro zone will continue to cast a cloud over sentiment. Greece has postponed a decision on accepting new terms for a fresh bailout until today

In the current market environment, easing inflationary pressures could – contrary to conventional wisdom – turn out to be supportive for gold as it would open the door for further monetary easing in China