RSBL Gold Silver Bars/Coins

Thursday, 28 February 2013



Let me first list down the important highlights of the budget with regards to the Bullion, Gems and jewellery Industry:

1. FM has announced to levy Commodity transaction tax (CTT) of 0.01% on all non-agro commodity trades such as Gold, Silver, non-ferrous metals and crude oil.

2. To prevent harassment to passengers, the government has proposed to increase the limit of duty-free import of jewellery via passenger baggage to INR 50,000 for males and INR 1,00,000 for females. The rule has been amended for Indian passenger who has been residing abroad for over a year or a person who is transferring his residence to India.

Budget 2013 has been neutral

          India's greatest worry is current account deficit and when you need more than $75 bln this year and next year to fund current account deficit, I was expecting that a Duty hike is on the cards. Fortunately that is not the case. The government has neither imposed any restriction nor has it hiked the import duty on gold.

I did expect CTT tax to be introduced. But CTT tax will only add INR 300 per kilo of Gold. Though a nominal amount, but unnecessarily added on a common man’s purchase of Gold.  I feel this should have been introduced only when Options product had been established in the commodity’s exchange along with Tax structure that is currently applicable while trading in Equity markets. This would create a level playing field between the stock investor and the commodity exchange investor

Increasing the Duty free limit on gold for a passenger coming to India (conditions already given), is a positive move undertaken by the government, as it will definitely help in curbing the imports to some extent and reduce the pressure on forex.

I was expecting some announcement on the R&D front, new financial instruments to extract Gold lying in India so as to increase CAD, but these were missing.

On a scale of 1 to 10, I would personally rate this budget as 6.

Monday, 25 February 2013


Gold looses glitter and silver loses its shine. Precious metals were moving on a see saw all week and then the blood bath of prices had swept the markets. On the exchange gold plummeted to a low of INR 29,100 while silver dropped down to INR 53,100. In the physical market gold and silver were being traded at INR 29,400 and INR 54200 respectively.

Investors, traders and the whole market in general stated different reasons for this crash.
Within a fortnight gold crashed by almost 1000 rupees. But Thursday set a recovery stage for gold. Some weaker U.S. economic data did help to lift gold prices, as the weaker-than-expected Philadelphia Fed business survey worked against notions the Federal Reserve will soon end its major bond-buying program. The other reason that helped gold to bounce back on Thursday from a seven-month intra-day low, was the physical buyers in Asia picked bargains a day after the market was rattled by concerns the U.S. Federal Reserve could scale back its monetary stimulus. This created some positivity in the market.

But before the Fed released its minutes the precious metals markets had already plunged down sharply as rumours swirled that a large commodity hedge fund had been forced to liquidate its holdings, the largest gold-backed exchange-traded fund, New York's SPDR Gold Trust reported its biggest outflow in 18 months on Wednesday, coinciding with the price drop

Gold seemed to know what would come later on Wednesday, as short dated put buying, was followed by a push lower, to trigger a first round of sell stops below the 1600 USD level around midday. Technical inspired selling joined the sell off and as seen from the release of global ETF holding numbers, large long liquidation took place. Around the European lows of 1580 in the afternoon, as so often happens when commodities do a large move, rumours started to make the round that a large commodity fund would be in trouble
A panic selling behaviour was seen in the market.

Spot prices reached a low of $1,554.49 on Wednesday, their weakest since July. They slid 2.6 percent on Wednesday after Federal Reserve minutes suggested the bank may wind down its ultra-loose monetary policy sooner than expected.

It had since reversed course to post a rise of 0.2 percent to $1,565.06 Thursday evening. It fell 2.6 percent on Wednesday, posting the biggest daily drop in a year. 

Quantitative easing tends to support gold, as it keeps interest rates low while stoking fears of inflation. Tumbling prices attracted buying interest in the physical markets overnight in Asia, with analysts and traders reporting high volumes traded on the Shanghai Gold Exchange.

Gold has been caught up in a sandwich between hopes of central bank easing which enhances its inflation-hedge appeal and expected recover of the economy which hollows its safe haven status.

As far as the current outlook is concerned, Gold is expected to move in the range of 28,500. However, one can take a call to buy at this dip as gold is expected to move in the range of 29,500-33,000 rupees in the long run.

Wednesday, 20 February 2013


1. Government had increased import duty on Gold before the budget. The government's move to hike the customs duty from 4 to 6 percent will have a loud impact on the Bullion sector. The hike sums up to around INR 60,000 (approx) per kilogram of gold. To be clear, with this duty hike a difference of 7 percent between the international and domestic price of the yellow metal is evident. Due to this, the increase in duty on the actual price of gold is being passed on to the retail consumers by the jewelers. This may also lead to rise of illegal channels and malicious activities with respect to importing gold and related products like jewellery etc., in the country. In turn it will lead to an increase in unemployment among the skilled artisans of the country (around 1-2 million families depend on this sector to earn their livelihood) as well the businesses of local jewelers across the country. 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. 

Hallmarking for jewellery 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.

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 1 - 3 tonnes worth of Gold. 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 which have put the industry on a fast track and made it a pillar industry in many of the country's gold producing areas. China's gold output increased 11.66 percent from a year earlier to hit a record high of 403.05 tons in 2012, confirmed by China Gold Association (Source: This data showed that it is the largest producer for the sixth straight year. 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.'

I feel FDI is extremely important with regards to Research and Development. R&D is costly but with the help of FDI we can surely work out the way to get the most out of it. FDI will help in strengthening our rupee and in turn reduce the depreciation of our currency.

2. 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.

3. Commodity exchange have now completed almost 9 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. I understand that Government is thinking of introducing CTT tax, like the one in the equity market. CTT 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. Gold Deposit Schemes are offered by banks in which investors deposit gold for a period of certain 3 years earning a fixed rate of interest.  Currently that has been reduced to 6 months. 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. The government should harness the existing reserve of gold in our country rather than turning towards imports and implementing this alarming hike on customs duty. Hiking the duty on imports will in no way, curtail the demand, as the precious metal has always been regarded as one of the best investment options for social security. 

6. 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. 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. As of now Gold Loan is allowed up to 180 days which implies, a jeweler has to rollover his/her position twice in a year and that in turns leads to increase in imports. If the loan period is extended to 360 days, one cycle of loan will be reduced. A direct effect will be reduction in imports.

8. Currently, NRI’s are allowed to bring 1 Kilo of Gold while arriving in India. Earlier this was 10 Kilos. I feel this cap should be raised back to the earlier levels or even more. This too will help in reduction of imports and reduce the Forex pressure.

9. Indian Government does allow export of Gold in form of Jewellery. Export of Gold in form of bars etc should be allowed through banks to avoid money laundering. Moreover the exports should take place at the international market prices only (there is a value addition of 3%+, as per law, which should not levy in this case). Once the exports from India are allowed, there will be a direct effect on Gold price. Over the years, India has purely been an importer. With Exports, I expect the International price would reduce by $100-200 and provide the necessary reduction in India's Current account deficit. On exporting Gold, the refund of Duty should take place in cash or license form.

Sunday, 17 February 2013


Today we scan and analyse the main highlight of the World Gold Council 4th Quarter Report 2012 - It states that demand for gold increased in the 4th quarter despite rising prices and economic slowdown.

Let's see WHY and HOW..........

Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises (including investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest). The gold market is subject to speculation as are other markets, especially through the use of futures contracts and derivatives.

Today, like most commodities, the price of gold is driven by supply and demand as well as speculation. However unlike most other commodities, saving and disposal plays a larger role in affecting its price than its consumption.

The World Gold Council released its Gold demand analysis for the 4th quarter of 2012. In 2012 total demand reached an all-time high of $236.4 billion; although on a tonnage basis it declined by 4per cent to 4405.5 tones. Global ETF demand increased by 51% compared to 2011. 

One important trend to be noted worldwide is that this annual demand for gold was coming from central banks and institutional investors. Central Banks added 534.6 tons to their reserves. In the fourth quarter of 2012, gold demand in tonnage terms declined by 4% wherein demand from the above mentioned parties had offset the consumer demand.

Chinese demand was flat year-on-year, reflecting the impact of economic slowdown. However looking at Q4, total demand was up 1% on the previous quarter to 202.5ton. Jewellery demand was 137ton up 1% on Q4 2011 and investment demand was 65.5ton, up 2% on the previous year. These increases may reflect the fact that the economic slowdown in China appears to have been shorter than expected.

During 2012 we saw gold touching its life time high in the Indian market. Adding to this, the government also increased duty on gold first to 4% and then to 6% in January 2013.

Interesting to note was that Indian full year demand was only down by 12% on the previous year, with a strong performance in the last quarter, where 261.9 tons meant an increase of 41% over the last quarter the year before. Demand for jewellery was up 35% year-on-year and the expected duty increase in 2013 was the reason for the strong imports at year end. 

Similarly, during Diwali (the biggest gold buying festival) there was an increase in gold demand in terms of value but simultaneously a drop of almost 30-40 per cent in terms of volume. The main reason behind this was the rising prices of gold. Rising prices meant that though demand for gold will go up in rupee terms but the denominations in which they are purchased will shrink.

For example, in November 2011 the price of gold per 10 grams was around INR 28000 however in November 2012, with the same amount you will be able to buy only 9 grams of gold given that price at that time was INR 31000 per 10gm.

But then India is also enjoying growth, the accompanying urbanization and a rapid increase in the size of the middle class. As this process progresses, dependence on the poorer agricultural sector diminishes and the gold market deepens and widens its demand shape. The Hindu family tradition that favors gold so much does not diminish with this process. Just as life insurance to the developed world stays in place with greater wealth, so gold retains its attractiveness with the Indian community. After all, since the year 2000, who can argue with the performance of gold? We expect that, as prices find support at higher prices, new and bigger demand will appear in this particular gold market

As gold and silver prices rise just like a thermometer measuring global financial uncertainty and instability, more and more investors are entering these markets for the first time, not for profit per se, but for protection against such fears and in an attempt to preserve the wealth they have. These investors come from the entire spectrum of investors across the length and breadth of our world

This is the quintessential reason why demand for gold will rise as gold prices rise.

China and India remain the world’s gold power houses, and by some distance, despite challenging domestic economic conditions. In India, consumer sentiment towards gold remained strong despite measures aimed at curbing demand, reaffirming gold’s role in Indian society. In an underdeveloped financial system in India, gold has an important role to play

Notwithstanding the predicted economic slowdown in China, investment demand was up 24% in Q4 on the previous quarter and jewellery consumption held steady at 137.0t.
Central banks’ move from net sellers of gold, to net buyers that we have seen in recent years, has continued apace.  The official sector purchases across the world are now at their highest level for almost half a century.

Despite the turbulent macroeconomic climate throughout the year, as well as the regional uncertainties affecting India and China, the two largest gold markets, annual demand was 30% higher than the average for the past decade

To give a brief on the past week turmoil:
RSBL Spot Gold price has plummeted from a high of INR 30,800 (Approx.) to INR 30, 100(Approx.) in the past week while Silver has plummeted from a high of INR 59300 to 56950 (approx).

Thursday, 7 February 2013


Precious metals and to be precise - Gold, has been trading in a tight range since the last couple of weeks, underpinned by a series of US economic releases and renewed optimism over global growth that has reduced investor appetite for the yellow metal. The outbreak of positive reports has lifted the US equities as well. Optimistic global economic outlook usually diminishes the bullion’s safe haven appeal and makes it cheaper.

In the near future gold is expected to range between $1651- 1700 and any of the side breakouts would create a new range for the yellow metal. Silver too is expected to range within a mild negative bias. Close above the reaction high crossing at 32.485 are needed to renew the rally off January's low. Close below last Monday's low crossing at 30.745 is the next downside target.

Gold Prices floated above $1670 per once Wednesday morning. Gold traded in a tight range of $ 1675 and weakened to $1670 area. This was due to the prevailing uncertainty in the Euro zone. However, I do not expect a very high or very low range for gold thus remaining neutral and would advise to look to trade according to the direction of the market. Gold price remains stuck but technically, it is setup to rise but bouts of profit taking capped upside movement. 

Moreover Gold has lost its shine as investors are moving to other conventional assets like equity that have recently shown strong performances. Safe-haven assets have performed fairly poorly as expectations of growth have improved. A lot of those debt-related risks have for the time being faded into the background. Safe haven assets have disappointed investors and traders and have not met the expectations of growth. In that kind of environment, there is no significant motivation for gold prices to rise on the basis of investment demand.

Meanwhile platinum and palladium held near 17 month highs due to rising industrial demand that raised confidence in growth outlook and also concerns over the supply outlook from South Africa and Russia. We believe part of the latest rally in platinum (and palladium) was spurred by the Swiss customs data which indicated that in December, Switzerland remained a net exporter of platinum (456,973 oz) for the fourth consecutive month and also a net exporter of palladium (432,650 oz)
Technically, a breakout on gold prices may come sooner rather than later. A break higher to $1685 gives a bullish signal to retest previous high of $ 1697. Should that fail, the bears will be in total control to push it back down to $ 1625. The MACD is rolling flat but stochastic showing more bullish attitude. It is a matter of time before prices breakout from this potentially bullish ensign.
Gold support is at $1,663 and $1,656. Resistance is $1,682 and $1,693. Silver support is at $31.50 and $31.32, resistance is at $31.99 and $32.30.
Platinum support is at $1,712 and $1,686. Resistance is at $1,738 and $1,760. Palladium support is at $756 and resistance at $777.

Tuesday, 5 February 2013


The prices of precious metals showed a downward trend on Thursday, though they were under the green range on Wednesday. On Thursday, the price of gold decreased by 1.15% to $1,660.6; Silver price also fell by 2.54% to $31.34. 

The main reason behind this was the release of China’s manufacturing PMI report. It stated that China's PMI inched down to 50.4, which means that the development and expansion in China has caught a slow pace, which in turn means that the demand for gold from China will reduce.

However, most traders and investors were more interested in the nonfarm pay roll report that was released on Friday. Gold and silver prices went up after the release of US payroll data.  Gold, silver and equities were all moving on a higher note on Friday.

The U.S. employment rose again by lower than many had anticipated – according to ADP the non-farm payroll rose by 192k – during January: according to the latest U.S. employment report, which was published on February 1st by the Bureau of Labor Statistics the number of non-farm employees rose by 157,000. The main sectors that grew during January were in Retail trade, construction, health care, and wholesale trade.

 One likely reason that affected Gold and Silver is that the Federal Reserve is unlikely to make any changes to its very accommodative monetary policy with that news. The Fed has set actual goals for the unemployment rate – 6.5 percent – and quantitative easing is expected to continue until the unemployment rate hits that figure. 

Other data showing improved US factory activity and better consumer confidence data also set the prices upwards. Spot gold was up 0.6 per cent a $1672.61 an ounce retreating from an earlier high of 1681.70.

The metals went low in a sell off position after St. Louis Fed President James Bullard said that the US Economy will show a better performance this year, which will put the central bank in a position to slow or halt its massive bond buying.

As per the MCX india site, almost 4.7 tons of Gold is already in their warehouse. This is a huge amount of Gold that is sitting idle with fewer takers. Technically, for the past 4 weeks the metal has been stuck within a $1643 to $1695 trading range. These long periods of sideways consolidation typically result in a break in the next direction of the trend. We are starting to think the market is building a base considering that 3 of the past 4 weeks have been up weeks. A close back above $1695 would bring in fresh buying looking for a return to October highs.

Going forward the factors that will affect the Gold Price are:

  1. Easing Eurozone stress and better financial conditions 
  2. Growth momentum & Stimulus program in US,
  3. Indian Government policies 
  4. Strengthening of Indian rupee against Dollar