Commodity Trade Mantra

Equity Markets & Commodities up in Global rally, INR rises most in 3 years.

Equity Markets

Equity Markets & Commodities up in Global rally

The Un-expected really did happen: The EU summit surpassed all expectations by taking a significant step towards banking union & as a result, Equity Markets & Commodities rallied globally. Risk assets rose & Spanish and Italian bond yields dropped sharply after European leaders agreed on decisive emergency action to lower the spiraling borrowing costs of Italy and Spain and create a single supervisory body for euro banks by the end of this year, a first step towards a European banking union. EU leaders at the 2 day summit agreed that the euro-area rescue funds could be used for sovereign debt purchases without forcing countries to adopt extra austerity measures. Under pressure to prevent a catastrophic breakup of their single currency, euro zone leaders agreed on Friday to let their rescue fund inject aid directly into stricken banks from next year and intervene on bond markets to support troubled member states.

The deal was widely seen as a political victory for embattled Italian Prime Minister Mario Monti and his Spanish counterpart, Mariano Rajoy, over German Chancellor Angela Merkel, who had brushed aside any need for such emergency measures earlier this week. ECB President Mario Draghi endorsed the “tangible results”, which sent the euro sharply higher and cut Spanish and Italian bond yields.

The move paves the way for the European Commission, the EU’s regulatory arm, to augment its proposals on deposit insurance, capital requirements and how to handle failing banks. It also acknowledges concerns from the U.K. and Sweden that countries outside the currency area be free from mandates to join the ECB umbrella. Once Europe establishes a single banking supervisor, leaders said they may allow cash-strapped lenders to be recapitalized directly instead of through their home governments. This could break the link between banks and sovereigns that has plagued the euro area throughout the crisis and become a particular flash point for Spain’s bank rescue.

ECB might end up serving as an umbrella over national supervisors, rather than building a separate organization, EU officials said in the run-up to this week’s summit. EU members would need to decide how many banks to include and how the ECB would work with the European Banking Authority, which was created to help supervisors coordinate across the Euro-zone.

European shares rose, led by banking stocks buoyed by the prospect of moves to backstop the financial system. In an unthinkable key concession by EU paymaster Germany, the leaders agreed to waive the ESM’s preferred creditor status on lending for Spanish banks, removing a key deterrent to investors buying Spanish government bonds, who feared having to take the first losses in any debt restructuring. Despite the concessions by Berlin allowing euro zone rescue funds to be used more flexibly, questions remained about the conditions, size and supervision of any future aid for Spain and Italy.

ECB is widely expected to cut borrowing costs at its July 5 meeting, which takes place against a darkening economic backdrop. But internal resistance to the central bank reviving its bond-buying program remains high. The Euro may just get the necessary Booster leading Gold Prices higher too.

Indian Equity Markets & INR rise sharply: The BSE index surged 9.2% in June, its biggest monthly gains since January. The Nifty also added 2.52% to be at 5,278.90 points adding 9.6% this month. The Indian Rupee (INR) posted its biggest daily gain in 3 years after the government confirmed it will not impose retroactive taxes on foreign investors and as global risk asset rallied.

Nifty above 5275 has the potential to rise to around 5635 levels given the recent global economic boosters & expectations of more positive national developments.

Banks, infrastructure shares were leading the gains while some auto shares gained after announcement of reduction in petrol prices by 2.46 rupees per litre.  Prime Minister Manmohan Singh took charge of finance ministry on Tuesday and said will take steps to revive economic growth.Indiareleased draft rules on Thursday; guidelines to implement rules that target tax evasion but had provoked an outcry among foreign investors at a time when the country needs capital inflows. The Government said the general anti avoidance rules, or GAAR, would not apply retroactively, a big concern for portfolio investors. With the Prime Minister Manmohan Singh, who had ushered in economic reforms inIndiain the 1990s, taking charge of the finance portfolio, investors are hoping he will push some much awaited reforms and address concerns on tax issues. The rupee settled at 55.6050/6150 as per State Bank of India data, rising 3.1% over its previous close. It rose 2.7% on the week, its biggest weekly gain in over 3 years.

Gold Prices soften before the EU Summit.

Gold Prices

Gold Prices soften before the EU Summit.

On pessimistic expectations from the EU Summit starting today, Gold prices have already declined to around $1560 from the rises to $1640 seen in the last week triggered then by the Greece elections win by the Pro-Bailout party.

Gold and gold receivables held by euro zone central banks fell by 1 million euros to 432.701 billion euros in the week ending June 22, the European Central Bank said on Tuesday. Gold holdings fell because of sales by three euro zone central banks, consistent with the latest Central Bank Gold Agreement, the ECB said. Cash positions in Global investment portfolios again over 7%, back to levels not seen since the aftermath of the Lehman Brothers collapse.

The Equity Markets, Gold along with other Industrial Commodities are looking toward the EU Summit, slated to occur Thursday and Friday, for price direction clarity. Hopes for some sort of genuine efforts & results to handle the Euro-zone debt crisis are fading. Gold prices may lose further ground in the days ahead, as investors will likely conclude that there is more fiscal austerity in the cards as opposed to imminent easing.

Much has been said & only more to be said in the coming days but almost nothing has been done with almost no future hope for any constructive developments. As alerted for the week: Huge surprises, Shock waves & highly unexpected & un-predictable turn of events expected this week. Be prepared.

There might be positive surprises contrary to the pessimistic & “No Result” expectations & markets along with Gold & Euro may shoot strongly upside. But if in the case that the currently floating negative market expectations prove right, then there will be sharp meltdowns, especially in Euro, Gold, Silver & Equity markets of the emerging nations & the US. Europe has nothing much to lose as most of the big European players are already at rock bottoms & things couldn’t get worse for the already suffering.

If the downside is seen immediately after the EU summit outcome is announced as IS Expected , there could be a sharp upside in the waiting as barely within 4-5 working days later on the 5th of July, the ECB, is surely expected to cut its Benchmark lending rates by at least 25 Bps & that may then provide the much expected boost.

Whatever the out come, there is bound to be a lot of volatility, large movements & choppiness in the markets on 29 June & then from 1 July till the 5th of July.

Gold Price movement:  Current Movement range is $1540 to $1639. The level of $1540 has repeatedly been tested & may not hold onto its strength this time.

Downside Risk: Gold Prices will remain Range bound till above $1540 & till below $1652.50. A sustained breakthrough below $1540 on a closing basis may open grounds for Gold to further fall freely to 1441, $1315 –A Strong Support & a Potential Bounce up level. When below this level accompanied with strong momentum, Gold may decline possibly to $1243 & $1180 also & also then enters a strong Bearish Zone.

Upside Potential: Only a break in Gold Prices with sustained momentum above $1652.50 will trigger Bullishness & then rises to $1686.25, $1747, $1783 & $1819 may also be seen. The level of $1652.50 is now crucial in Gold for further yearly Bullishness. Our final long term Target of close to $2200 may soon be seen then.

Silver Price movement:  Current Movement range is $26.20 to $31.60. The level of $26.20 has been tested earlier & may not hold onto its strength this time.

Downside Risk: Silver Prices will remain Range bound till above $26.20 & below $31.60. A sustained breakthrough below $26.20 on a closing basis may open grounds for Silver to further dip to $24 – 22.60 strong support ranges & a Potential Bounce up level. Any strong momentum below this would make Silver fall freely to $19 & also enter a strong Bearish Zone then.

Upside Potential: Only a break in Silver Prices with sustained momentum above $32.05 will trigger Bullishness & then rises to $34.30, $36.10 & $37.54 may also be seen.  The level of $34.30 is now crucial in Silver for further yearly Bullishness & to cruise swiftly to New Highs above the $50 mark.

Central banks may have purchased about 150 tons of gold till now in 2012. Gold prices at lower level seems to attract official sector buyers and it’s very likely that further gold declines could be met with greater official sector purchases which could provide Gold with a strong flooring to bounce upside from. Russia’s gold reserves advanced by 15.5 tons to 911.3 tons in May this year and Turkey’s yellow metal holdings raised by 5.692 tons to 244.986 tons, as per latest International Monetary Fund’s (IMF) international finance statistics report. According to the IMF data, Ukraine and Kazakhstan also increased their holdings of the gold in May when the metal averaged $1,587.68 per ounce. Ukraine’s gold reserves rose by 2.1 tons to 32.7 tons and Kazakhstan boosted their yellow metal reserves by 1.8 tons to 100 tons. Mexico, Philippines and South Korea are among the other countries to have added to their gold holdings in recent months. Kazakhstan’s central bank, said it plans to raise the amount of gold it holds as part of its reserves to 20%.

Gold Prices swing amid EU uncertainty. India Gold Demand likely to weaken.

Gold Prices

Gold Prices swing amid EU uncertainty. India Gold Demand likely to weaken.

Gold prices are likely to remain volatile while trading volumes remain low & movements subdued as markets wait for the developments of this week’s European Union summit on debt issues that begins Thursday. This week’s European Union summit is the 19th since debt crisis broke out in early 2010.

Huge surprises, Shock waves & Highly unexpected & un-predictable turn of events expected this week. Be prepared.

Cash positions in Global investment portfolios again over 7%. Back to levels not seen since the aftermath of the Lehman Brothers collapse. The overall market sentiments are low & there are pessimistic views & expectations about the outcome of the EU summit if market talks are anything to go by, which have been largely formulated by the strongly opposed stand & hawkish statements made by the German Chancellor recently. Merkel said Living beyond means led to Euro Debt Crisis & that Europe will not have shared liability for debt as long as she lives, stating that it was economically wrong & counterproductive. German Chancellor Angela Merkel sought to bury once and for all the idea of common euro zone bonds to deal with the debt problems. Italian and Spanish bond auctions Tuesday fetched still-higher yields, which signal more negativity on the horizon. Adding to the European woes, Moody’s, downgraded credit ratings of over two dozen Spanish banks. Expectations for commodity demand are likely to soften, suggesting looser supply/demand fundamentals on the basis of recent soft Chinese, German and U.S. economic data plus continued European turmoil’s, although gold prices may benefit in the longer run owing to a rising probability of quantitative easing throughout the second quarter. Large QE or Bailout disappointments could take industrial Base Metals considerably lower. On an official request by Cyprus (5th Euro nation to request a rescue) for aid from EFSF or ESM, ECB said Cyprus government bonds (rated junk) are now ineligible as collateral in refinancing operations as they no longer meet minimum credit worthiness standards.

Any favorable outcome from the summit could trigger sharp rises for the Euro, Gold prices, Silver; Base Metals & the Equity Markets Globally. Sovereign-debt purchases by the European Central Bank, issuance of euro bonds and Euro-zone risk sharing along with Chinese monetary stimulus & the rising probability of (QE3) an outright U.S.balance sheet expansion are currently seen as sole market triggers for further upside momentum. German officials have hinted at further cooperation, including comments from the country’s financial minister suggesting the country could hold a referendum on EU integration.

Silver exchange-traded-product holdings are headed for their biggest one-month rise this year. Even though industrial demand remains fragile, Silver ETP flows have picked up this month and are up 293 (metric) tons, set to be the strongest month on record since September last year. This follows an inflow of 41 tons last month. Total silver ETP holdings as of Monday were 14,944 tons, the highest since May 3.

According to the International Monetary Fund, the central banks of Russia, Ukraine, Turkey and Kazakhstan boosted their official Gold reserves. Assets held under India’s Gold ETFs nearly doubled on YoY basis to $1.85 billion as on 31 May 2012 from $981 million a year ago. The number of Gold ETFs in India has increased to 14 since the product was first launched in early 2007.

Weaker Rupee weighing heavily on gold demand from India as traders also favor cash on concerns over further deterioration in the euro zone crisis. The fall in the Indian rupee, which hit a record low last week, has sent Gold prices in India soaring despite the weak global trend, limiting further imports.

A relatively dull start to India’s monsoon season could have a significant impact on gold demand in the world’s top consumer. A good harvest after a good monsoon is the ideal scenario for India’s gold market. A good monsoon ensures a healthy harvest size which generally means a rise in gold investment and jewelry demand after the substantially good harvest returns. A drought or a dismal monsoon in India would mean a large reduction in Gold demand in the world’s largest Gold consuming nation. Buying from rural areas accounts for about 60% of gold imports, and farmers depend on monsoon rains for better yields, production and profits. Farmers traditionally invest in Gold also due to a lack of modern banking & futuristic Investment facilities in rural areas. A low rainfall will also instigate sharp rises in agricultural commodity prices triggering higher inflation while having a negative impact on Gold prices. The demand for Gold remains subdued in Indian markets currently also due to the relatively high Gold prices as the Indian Rupee has depreciated against the US$ by over 30% in the year till now. Festive seasonal gold buying is yet far off which starts in India from August onward. The same oncoming festive season could potentially hike inflation due to demand for agricultural commodities if the rainfall remains dismal as seen till now. China’s retail jewelry market also remains lackluster, with no major festival in sight until early October.

RBI likely to impose curbs on Banks for Gold coins sale

Gold coins sale

RBI likely to impose curbs on Banks for Gold coins sale

The Reserve Bank of India (RBI) is likely to clamp down on gold coins sales by banks, amid rising bullion imports adding pressure to the current account deficit and weakening the rupee after allowing banks to sell gold coins for 4 years.

The Banking Regulation Act does not allow banks to trade in commodities and they play the role of a financial intermediary. This norm was relaxed in the pre-2008 era when the country saw a dollar influx that resulted in a sharp appreciation of the rupee. To sterilize dollar inflows, banks were allowed to sell gold coins, as they imported the yellow metal. The measure was temporary. “Banks were allowed to sell gold coins by importing it to fight the excess dollar flows. By the same logic, the measure should be reversed now as we are at the opposite end of the spectrum. It was a temporary measure, which unfortunately was made permanent by banks,” a top RBI official said.

In its recent interactions with bankers, the central bank sounded its discomfort over the practice of banks pushing gold coins sales and asked them to go slow. However, banks have not stopped the practice of incentivising their staff to push gold coins sales, as they earn a margin of Rs 100-150 per gram of gold sold.

Gold and silver imports were around $61.5 billion as of March-end — a growth of 44.4 per cent during 2011-12 as against 43.5 per cent in 2010-11. In 2011,India imported 969 tonnes of the yellow metal compared to 958 tonnes in the previous year, according to data compiled by the World Gold Council. In value terms, imports in 201-12 were around $60 billion. However, according to data released by the government, gold and silver imports in April and May 2012 came down sharply to $4.3 billion, compared to $9.2 billion last year.

RBI Governor D Subbarao had earlier said the central bank was looking into the issue of rising gold imports and formed a committee headed by an executive director-rank officer to examine the reasons.

Agro Commodity Futures at NCDEX -Turmeric, Chana, Jeera, Oil & Oilseeds Rise.

Agro Commodity NCDEX Futures

Agro Commodity Futures at NCDEX rise.

Turmeric futures at NCDEX were higher as bargain buying was seen for the fifth straight trading session due to slow sowing progress of new crop in major producing states along with strong demand by stockists at lower levels. Turmeric acreage in Andhra Pradesh and Tamil Nadu is likely to fall over 20% on lower price realization for the Farmers. Turmeric futures at National Commodity and Derivatives Exchange (NCDEX) likely to remain positive for the year as the production of the commodity in the country is estimated to be lower as the farmers suffered huge losses due to surplus output earlier.

Demand for quality Indian Cardamom in the global as well as domestic market has surged on the back of lower crop production prospects inGuatemala and forecast of lower rainfall over major growing areas inIndia affecting the crop production.

The prices of Oilseeds and its derivatives at NCDEX (include Palm oil, Mustard seed oil, Cottonseed oil and Soybean / Soy Oil) in Indian markets are quoting higher as rainfall this monsoon so far over India has remained below average & the falling rupee against the US dollar also caused the prices to jump higher as India imports more than 50% of the edible oil to meet the domestic demand. Dry weather in U.S has also raised the price of Oilseeds and its derivatives in the global exchanges like Chicago Board of Trade (CBOT).

Indian Jeera futures at NCDEX (Cumin seed) extended the gains for the third day on strong buying support lead by weak arrivals amid reports of fall in production in major producing nations. The total arrivals decreased to 7,000 bags from 10,000 bags, while demand was seen for around 15,000 bags. In international market, the major supplies are coming fromSyria andTurkey. Together they produced around 47000-49000 tonnes of Jeera . But in the current year due to erratic weather during the sowing period, the total production from these countries are likely to be restricted in the range of 33000 tonnes, down almost 30-35% from the last year.

NCDEX Chana futures expected to firm up further as the demand for chana is likely to increase during rainy season during lower availability of fresh vegetables amid lower arrivals in the market. Chana being a Rabbi crop, availability & production concern also pushed the prices of the commodity in the NCDEX exchange.

The global Pepper market was relatively dull and price remained steady, as inventory at source except Vietnam is limited. Harvest in Vietnam has now been reportedly completed, but farmers are not interested to sell pepper at lower price. In India, exports have been dull because of uncompetitive price due to much lower production and rupee depreciation. A marginal decrease was recorded in Lampung during the week. In Brazil, the prices remained steady and maintained at the same level for the last one month. Between January and May 2012 total export from Brazil was 9,376 mt which is lower by around 20% than the last year’s corresponding period. Over the couple of weeks, industry demand has picked up and the steadiness in price is expected to continue. Although the availability of Pepper from Vietnam and upcoming harvest in Indonesia is marginally better, Pepper prices will remain firm & steady since the demand is increasing.

INR, Equity markets slump after high start: RBI disappointed markets.

INR, Equity markets

INR, Equity markets slump after high start: RBI disappointed markets.

The Indian Rupee & the Equity markets sharply slumped after the much delayed announcements by RBI regarding measures to control the INR from depreciating. There were higher expectations to the announcements & the equity markets felt let down.

We had alerted early this morning: Huge surprises, Shock waves, highly unexpected & un-predictable turn of events should be expected of this week. Be prepared. That did prove right for the day & may prove even more accurate over the week’s events to come.

There were positive news from unexpected quarters & highly disappointing actions from where expectations were high for much bolder action.

Adding to the high start to the day was the announcement that, Moody’s Investors Service said on Monday it was maintaining a stable outlook for India’s Baa3 rating. It said slowing growth and higher levels of inflation were already factored into the outlook. Equity markets rise strengthened further on higher hopes,

Nifty July rose to 5224, close to the resistance level of 5230-75 range as alerted since a week now that selling pressure will build on rises above 5122 to 5230-75 range. Markets declined swiftly after the RBI announcements & Nifty July slumped to 5122.65 to close at 5133.65. There will be further declines as stocks tumble joining a global slump, on concern that the European Union summit will fail to produce any worthy outcome & tame the European crisis.

The Indian Rupee rose as high as 56.37 per dollar before the measures were announced but ended domestic trading at 57.01/02, edging back towards Friday’s record low of 57.32. Our expectation of a fall on a strong move below 56.35 to 58.60 is yet maintained.

The rupee has hit a succession of record lows this year in a slide that began in the middle of 2011. After the rupee hit another record low, Finance Minister Pranab Mukherjee said on Saturday that steps to arrest the slide would be unveiled on Monday, spurring rampant & very high market speculation. In a bid to check rupee’s free falling against the US dollar, the Reserve Bank of India (RBI) in consultation with the government has raised the FII investment limit in government securities by US$ 5 billion to US$ 20 billion. Besides, it also allowed Indian companies in manufacturing and infrastructure sector to avail of External Commercial Borrowings (ECBs) of up to USD 10 billion for repayment of outstanding rupee loans and for fresh projects with certain conditions. The enhancement of limit by US$ 5 billion in government securities came with a maturity of three years as against five years earlier.

Plan panel Deputy Chairman Montek Singh Ahluwalia has said more such measures as announced by RBI today are in the offing to revive growth momentum and boost inflow of foreign funds. He rejected the view that measures are inadequate as the markets did not react positively and rupee slid further immediately after the measures were announced by the RBI. RBI today relaxed investment norms for qualified foreign investors and allowed them to invest in the mutual fund schemes that hold at least 25% of their assets either in debt or equity or both in the infrastructure sector.

ECB announcements are unlikely to have any meaningful impact on the rupee level in the near-term. The steps were the latest by Indian policymakers trying to combat a loss of confidence in the economy, which slumped in the March quarter to its worst growth in nine years. Ratings agencies Standard & Poor’s and Fitch Ratings are threatening to downgrade the country’s credit rating to junk and foreign investors have exited as the government fumbled economic reform and raised the prospect of retroactive taxes. Economists have long said India needs to improve its economic fundamentals, including addressing its current account and fiscal deficits, to bolster the rupee.

Morgan Stanley estimates India’s current account deficit will widen to $72 billion by the end of June, from $49 billion a year earlier. That would put the current account deficit at between 4% and 4.5% ofIndia’s GDP. Inflation also remains stubbornly high, largely because of supply bottlenecks in the economy.

U.S. stocks tumbled, joining a global slump, on concern that a European Union summit will fail to tame a crisis which puts Standard & Poor’s 500 Index’s companies on pace for the first earnings decline since 2009.

Equities slumped as Chancellor Angela Merkel hardened her resistance to euro-area debt sharing, setting Germany on a collision course with its allies at a summit on June 28. Cyprus said it will seek a financial lifeline from the euro area’s firewall funds, becoming the fifth of the euro’s 17 members to seek a bailout. Greek Prime Minister Antonis Samaras consented to the resignation of his finance minister, Vassilios Rapanos. Billionaire investor George Soros warned that a failure by leaders meeting to produce drastic measures could spell the demise of the currency.

Reserve Bank of India & GoI to initiate steps on Indian Rupee free fall.

Indian Rupee free fall.

Reserve Bank of India & GoI to initiate steps on Indian Rupee free fall.

Stock, Currency & Commodity markets globally & specially more so in India expected to see a very high level of volatility this week in view of the past week’s huge fall in INR, (Indian Rupee) & the measures to be initiated to control further depreciation & as well due to the expiry of the derivatives contracts this week. On the global front, a key summit of the European Union is scheduled on 28 and 29 June, 2012, to discuss the ongoing European debt crisis. Any positive fallout from the EU Summit could influence prices of commodities, including oil. Any positive & productive steps taken by the government or RBI to prop up the economy could cheer up the markets which have been showing strong resilience the entire week. A strong & sustained further momentum above 5122 may push markets further up to a very strong resistance range of 5230 to 5275. 

The Indian Rupee- INR June futures hit 57.39 on Friday against the US$ rising towards our next target of 58.60 forecasted last month when our earlier target of 56.35 was achieved. For the Indian Rupee trade this week, US$/INR till above 56.98 will rise further to 57.70, 58.015 & then 58.60.

The Indian Rupee on Friday hit a record low of 57.32 against the dollar, posting its worst weekly fall (over 3%) in nine months, hurt by dollar demand from oil firms and gold importers. We will be able to take certain measures which will be announced on Monday, which will improve the market conditions; Finance Minister Pranab Mukherjee said on Saturday, after having discussed the situation with the central bank governor on Friday. Traders said the central bank likely sold $250-300 million dollars on Friday to rescue the Indian currency.

Any weakness by the Central Banks and / or the Governments in initiating strong concrete measures could trigger extremely negative sentiments & will cause massive further sell-offs.

Finance Minister Pranab Mukherjee, who has held the post since 2009, will step down on June 26, as he prepares to stand in July’s presidential election. Prime Minister Manmohan Singh will take over the portfolio until a cabinet reshuffle next month.

The Reserve Bank has bought 433 billion rupees of bonds from the market in the first quarter of the year that began April 1 to inject cash into the economy, about 33% of the amount it bought in the prior 12 months. The central bank will purchase 1.3 trillion rupees more of bonds in the remainder of the fiscal year, according to Nomura, while Barclays Plc predicts the amount will be 1 trillion rupees. RBI cut the benchmark repurchase rate by 50 basis points in April, the first reduction in three years. Gross domestic product (GDP) rose 5.3% in the first quarter, compared with 6.1% in the previous three months. Prime Minister Manmohan Singh’s administration plans to increase debt sales by 12% to a record 5.69 trillion rupees this fiscal year to bridge its budget deficit.

Indian Rupee (INR) tumbles to 57.30/ US$ in free fall.

Indian Rupee news update

Indian Rupee (INR) tumbles to 57.30/ US$ in free fall.

The INR, Indian Rupee today fell way past the psychological mark of 57 & hit a record low of 57.30, down Re 1 (almost 1.70%) from yesterday’s close on strong demand for the American currency from Oil importers and also on sustained capital outflows amid concerns over slowdown in global economic growth. The Indian rupee has depreciated over 30% in a year & nearly 3% so far this week, its biggest weekly fall since September 23.

As alerted earlier, the Indian rupee may decline to 56.35 from a recovery to 55 & slip further to 58.60 on sustained momentum below 56.35 levels. U.S.$/INR Jun Futures in an absolute free-fall plunged 1.70% to 57.38 against US Dollar from Previous Close of 56.41.

Equity Markets though have shown strong resilience the entire week. Given before on 7 June:  Nifty June Futures, till above 4914 may now remain positive & rises to 5113-5122 can be expected. A strong & sustained further momentum above 5122 may push markets further up to a very strong resistance range of 5230 to 5275. Selling pressure can be expected on all rises above 5122 till 5275.

BSE Sensex and NSE Nifty ended the day close to the days highs & had cut losses quite sharply as both benchmarks were marginally lower in afternoon trade, outperforming global peers. Metal stocks tanked quite steeply due to fall in price of commodities in international market yesterday.

Also surrounding the Indian rupee crash were global economic growth concerns, Moody’s downgrade of world’s 15 biggest banks and mounting worries over Eurozone debt crisis including the size of a bailout needed to save Spain’s banks.

RBI directed state-owned oil firms to buy half of their dollar requirement for oil imports from a single public sector bank. RBI feels that oil firms seeking a single quote for their dollar requirement, instead of present practice of floating enquiring with several public and private sector banks, would help check volatility and arrest the free-fall of the rupee. The three big state oil firms need about USD 8 billion every month for import of crude oil and some petroleum products like LPG.

Oil Secretary G C Chaturvedi said RBI has asked only the state-owned oil marketing companies to buy half of their daily foreign exchange needs from a public sector banks and the rest could be sourced through competitive bids from public and private banks. Private sector Reliance Industries and Essar Oil, who between them import over 40% of crude oil shipped to India annually, will continue to buy dollars as per their company policies.

With US $5 billion worth foreign currency convertible bonds (FCCB) issued by 48 companies set to mature in 2012, rating agency Standard and Poor’s (S&P) said that almost half of them would default on grounds of inability to raise funds for refinancing the instruments. At the time of issue, the companies had assumed that investors would choose to convert them into equity. And the companies had made no provisions for their redemption. However, investors don’t want to convert the entire amount now and this is going to cause trouble for the companies, according to S&P.

There is a higher chance of defaults because the interest rates have gone up in general and these were very low coupon bonds. The range would be at least 25% higher interest costs. The depreciating rupee will also add to the interest cost, if companies go for restructuring or refinancing.

Ratings agency Moody’s downgraded 15 of the world’s biggest banks on Thursday. Credit Suisse, which last week was warned about weak capital levels bySwitzerland’s central bank, was the only bank in the group to suffer a three-notch downgrade. Morgan Stanley, one of the most closely watched firms in the much anticipated review, had its long-term debt rating lowered by just two notches, one level less than had been expected. Other banks downgraded by two notches were: Barclays, BNP Paribas, Royal Bank of Canada, Citigroup, Goldman Sachs Group, JPMorgan Chase, Credit Agricole, and Deutsche Bank. Along with HSBC, ratings for Bank of America, Royal Bank of Scotlandand Societe Generale were also cut by one notch. Citigroup went beyond defending itself to blasting Moody’s for its treatment of U.S. banks in general, and then to praising institutional investors and the U.S. Congress for showing less respect for the agency.

In addition to the above & Eurozone crisis came more downbeat economic data, HSBC’s initial reading for Chinese manufacturing data, which dropped to a 7 month low. Also negative was the Philadelphia Federal Reserve Index which came in much lower than expectations. The U.S. dollar index was solidly higher Thursday on safe-haven buying as the Dollar bulls regained aggression. Comex Gold futures prices ended the session sharply lower and at a fresh three-week-low close Thursday. West Texas Intermediate (WTI) Crude Oil futures at the New York Mercantile Exchange fell to their lowest level since October, pressured by weak manufacturing data from China and the U.S., reminding market watchers that the global economy remains sluggish and ratcheting up fears it may slow further.

Movements in Gold Silver Prices Lackluster: A Potential Storm in the Brewing.

Gold Silver Prices

Movements in Gold Silver Prices Lackluster: A Potential Storm in the Brewing.

Gold Silver prices are currently trading range bound but precariously close to major support levels which have earlier triggered multi month rallies. Mid term charts indicate sharp & large upside rallies in Gold Silver prices but the longer term & more influential charts indicate weakening of the prices of these precious metals – though not for very deep corrections, as of now. Extremely Deep corrections will come much later on.

Traders not positioned for the fresh Gold Silver price movements may sorely miss the gains. Gold Silver Price movements have remained lackluster despite the recent state of financial disparity in Europe & all over the Globe in general. It’s probably the calm before the storm – as the saying goes.

Gold Price movement: As repeatedly alerted, on any negative news for Gold prices, sharp corrections, on momentum below $1630 to the ONCE very strong $1540 levels cannot be ruled out. The level of $1540 has repeatedly been tested & may not hold onto its strength this time.

Downside Risk: Gold will remain Range bound till above $1540 & below $1652.50. A sustained breakthrough below $1540 on a closing basis may open grounds for Gold to further fall freely to 1441, $1360, $1279 & then possibly to $1180 also.

Upside Potential: Only a break in Gold Prices with sustained momentum above $1652.50 will trigger Bullishness & then rises to $1686.25, $1747, $1783 & $1819 may also be seen. The level of $1652.50 is now crucial in Gold for further yearly Bullishness. Our final long term Target of close to $2200 may soon be seen then.

Silver Price movement: A decline below $28 could trigger declines to $27.55, $27.10, $26.74 & to a very strong support of $26.20 also.

Downside Risk: Silver will remain Range bound till above $26.20 & below $31.60. A sustained breakthrough below $26.20 on a closing basis may open grounds for Silver to further dip to $24 & any momentum below this would make Silver fall freely to $22.15 & to $19 also.

Upside Potential: Only a break in Silver Prices with sustained momentum above $32.05 will trigger Bullishness & then rises to $34.30, $36.10 & $37.54 may also be seen.  The level of $34.30 is now crucial in Silver for further yearly Bullishness & to cruise swiftly to New Highs above the $50 mark.

The world has been blowing negative news from all corners recently, from rating downgrades all around to debt re-payment defaults to bankruptcy & political instability. There can be a breather overdue for some time.

If the recent large bailouts & positive developments for economic improvisations as explained below (though temporary in nature) work out as expected, financial markets may rise. If an upside price movement is seen, then Silver may move upside first on its dual demand – as an industrial Metal & as Bullion investment. Silver price rises have lately been limited on continuing rises in mine supplies as Mining Companies are striving to capture prices that are yet high by Historic comparison. Gold may remain sideways up with a positive bias due to the Euro rising – in such a scenario. Gold will surge aggressively a bit later when huge negative developments occur as is obvious with so much of debt burdens (explained in my earlier posts).

China cut benchmark rates on June 7, while the European Central Bank could take Crucial action at its July 5 meeting. The Federal Reserve on Wednesday extended its latest monetary stimulus program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012. Emerging countries boosted IMF’s Emergency Funding to $456 Billion. Merkel and EU leaders reportedly agreed to allow 2 European rescue funds to buy back troubled bonds in Spain & Italy in a $950 billion deal. It will be the first time that bailout funds are directly used for Spanish debt. This move represents a sharp policy shift for Merkel, who strongly & repeatedly opposed using Euro zone’s rescue fund for the same earlier. Greece may get fresh bailout funds as the Samaras led pro-bailout party has recently won elections & also averted an exit from the Euro. Rising Inflation will remain cause for worry but will also eventually drive investors to safe heaven investments as a hedge against inflation, triggering upside for Gold later in the bargain.

Gold to eventually benefit from the soon-to-come QE3 & will remain a liquid safe haven in the event of financial fallouts, disruptive political climate from all around the Globe & will effectively hedge against currency devaluation and debasement. Central banks, the world’s largest holders of gold, may buy more of the precious metal this year than the purchases of 456 metric tons in 2011 as countries diversify their reserves, according to the World Gold Council. Central banks are expanding reserves for a third straight year as prices head for a 12th consecutive annual gain.

Turkey expanded its gold holdings by 29.7 tons in April, data on the International Monetary Fund’s website showed. Ukraine added 1.4 tons to bullion reserves, Mexico increased them by 2.9 tons and Kazakhstan’s gold holdings climbed by 2 tons, the data show. Emerging economies want to increase their holdings as gold has been relatively under-owned by them & keep buying gold regularly during economic turmoil.

Gold as an asset class: Gold is held in many forms, by numerous governments and billions of individuals. The willingness of all these parties to change gold for paper currency and vice versa is what determines the price of gold in relation to each different paper currency respectively. Not only is it incorrect to try and analyze the gold market as if it were the same as other commodity markets, there is no historical precedent for it either.

Prior to World War I, the world was on a gold standard and hence gold was money, not a commodity. Between World War II and 1971, the world was on a quasi gold standard, using the US dollar as its reserve currency while the US dollar was convertible into gold.

Thus, for our entire history up to 1971, gold was always thought of as money and not a commodity. As soon as governments ceased to determine the gold price by decree, its price increased from $38 an ounce to $850 an ounce. Was this increase due to a supply deficit? Of course not!

And when the gold price decreased from $850 an ounce to settle in a trading range around $400 an ounce, was that due to a supply surplus? No. The increase in the gold price from 1971 to 1980 was due to the massive inflation of US dollars that was never reflected in the gold price because the US Government arbitrarily set the price of gold. The ensuing decline was because the gold price overreacted, as investors scooped up all gold related investments in the belief that the gold price would never-ever decline again, much like today’s stock market investors.

The value of annual gold derivatives trading is twice as much as the total amount of gold that has ever been mined, and this figure is based on a conservative estimate of the ever rising size of the derivatives market. But only about 5,000 tonnes, or 4% of the total amount of physical gold, changes hands every year. It is obvious that the physical gold market is absolutely dwarfed by the size of the derivatives market for gold. It is logical and inevitable that the derivatives market, not the physical market, determines the price of gold.

The key to understanding the gold price is to understand what drives the price of gold in the derivatives market. Exchange rate prices are subject to the same supply and demand fundamentals as any other object of trade. An increase in the supply of dollars would cause its price to decline (the dollar devalues) while an increase in demand for dollars would cause its price to rise (devaluation of other currencies by comparison to the dollar). The United States has run a trade deficit for almost every year since 1970. A trade deficit means the United States imports more than what it exports and so, on a net basis, dollars move out of the country. This flow of dollars out of the United States, an increase in the supply of dollars, puts downward pressure on the price of the dollar relative to other currencies. Again, total supply must equal total demand, and so the US trade deficit has to be offset by an equal amount of net foreign investment. The total amount of net foreign investment, actually also covers net income receipts or payments as well as net unilateral transfers. The value of the dollar on foreign exchange markets is thus dependant on the demand for dollars to pay for foreign investments in the United States in relation to the supply of dollars as a result of the trade deficit. Therefore the willingness of foreigners to invest in the United States is critical to the value of the dollar. The relative size of net foreign investments into the United States versus the trade deficit gives an indication of foreigners’ willingness to fund the US’s trade deficit. It is therefore reasonable to assume that when worldwide conditions change, and the perceived risk outside the United States diminishes, a considerable amount of foreign capital will leave the US. This will cause the US dollar to decline and the dollar denominated price of Gold to rise.

The price of gold varies depending on which currency it is quoted in. Not just in absolute terms, but in relative terms as well. The gold price is specific to each individual currency. It has been shown that the gold price is far more sensitive to changes in foreign exchange markets than fluctuations in annual mine production or jewelry demand. This is due to the fact that gold is money; it always has been and still is today. Buy Gold and Gold stocks while the US dollar is abnormally strong and Gold is historically cheap in terms of US dollars for a large & sharp upside price swing which may again not last long enough, as seen in 1980 also.

Federal Reserve Twister expanded by $267 Billion Economic stimulus

Federal Reserve

Federal Reserve Twist’er expanded by $267 Billion Economic stimulus

The Federal Reserve’s Extra Twist will do very little to boost US Economic growth.

The Federal Reserve on Wednesday extended its latest monetary stimulus program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012 as policy makers lowered their outlook for growth and employment. The program, which was due to expire this month, will now run through the end of the year. The Federal Reserve has kept the main interest rate unchanged in a range of, 0 – 0.25% since December 2008. The Federal Reserve reiterated its expectation that rates would stay “exceptionally low” through at least last 2014. The Federal Reserve also sharply downgraded its forecasts for U.S.economic growth, saying it was prepared to take further steps to help the faltering recovery if needed.

The continuation of “Operation Twist” should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative, the FOMC said & also added that it is prepared to take further action as appropriate to promote a stronger economic recovery and sustain improvement in labor market conditions.

The announcement of the extension of Twist met with a mixed reaction in financial markets. Gold, Crude Oil & U.S. stocks see-sawed on knee jerk reactions, while bond prices briefly rose. The dollar fell against the euro and rose against the yen.

Markets & traders had latched onto a line of Strong Words in the June statement, saying the Federal Reserve is “prepared to take further action.” Based on these words, there were some expectations that the Fed would embark on a new quantitative easing program, a QE3, so the market was initially disappointed. But the Fed held out the prospect of QE. “Yes, additional asset purchases are among the things we would consider if we need to take additional measures to strengthen the economy,” Fed Chairman Ben Bernanke said during his quarterly press briefing.

After expanding its balance sheet by purchasing $2.3 trillion in government and mortgage-related bonds, the Fed launched “Operation Twist” last year with a pledge to swap $400 billion in securities. Some economists continue to expect another round of outright asset purchases given the heightened risks to the recovery.

It slashed its estimates for U.S. Gross Domestic Product this year to a range of 1.9% to 2.4%, down from an April projection of 2.4% to 2.9%. The unemployment rate will end the year at 8% to 8.2%, up from 7.8% to 8% in April. It cut forecasts for 2013 and 2014, as well. Policy makers foresee a weaker economy into 2014. The unemployment rate will end that year at 7% to 7.7%, up from a 6.7% to 7.4% in April.

Lowering long term rates and sucking Treasury’s out of the market may not have much more room to be effective anymore.

The Fed’s actions may influence the November presidential election. Unemployment and the economy are a central issue as Mitt Romney, the presumptive Republican nominee, challenges President Barrack Obama. QE3 expected to come conveniently after November Elections only – Fed can’t extend this Twist’er beyond 2012 because it’s going to be out of short-term securities.

Minutes from meetings of the Bank of Japan and Bank of England released on Wednesday suggests officials are poised to ease policy again. China cut benchmark rates on June 7, while the European Central Bank could take action at its July 5 meeting.

A New Gold Rush after a 150 years at Otago

Gold Rush

A New Gold Rush after a 150 years at Otago

The opening of three gold mines in Central Otago is being described as a new Gold Rush. The original Otago gold rush was a gold rush that occurred during the 1860s in Central Otago. 152 years later, New Zealand’s Otago is in the midst of a modern-day gold rush.

The price of gold has more than doubled in the last five years to more than $2000 an ounce. Glass Earth Gold chief executive Simon Henderson says that has enabled his company to shift into gold production, with two small mines already operating near Alexandra in central Otago.

Glass Earth Gold estimates it will earn $6 million from itsCentral Otagomines in the coming year. The mining companies now operate 24 hours a day. Glass Earth Gold has opened three mines in the region. Two mining operations are in full swing; and a third is expected to begin this week, bringing the workforce to 20.

Another company, L&M mining, meanwhile, has a large claim at Earnscleugh & in the last three years begun a 24-hour mine operation. Cold Gold Clutha is beginning dredging operations on theCluthaRiverjust below the Roxburgh Dam and Oceana Gold runs an open pit and underground mine at Macraes.

Central Otago Mayor Tony Lepper says it is exciting for the region to be experiencing a fresh gold rush. He said the growth in the gold-mining industry was fantastic & sees an increase in mining operations in the region as the New Zealand government had already signaled its encouragement of further mining opportunities. Gold-mining was a significant contributor to the Otago economy.

Meanwhile, a gold geologist says the company opening the mines in central Otago is pioneering a new approach to exploration.

Professor of geology at Otago University Dave Craw say Glass Earth’s approach is clever because the easier alluvial gold production near the surface is paying for a harder search for a big deposit. Professor Craw says it is likely there is another Macraes-sized deposit in Otago, but it is not certain that anyone will find it. The modern-day gold rush is pouring tens of millions of dollars into the Otago economy through exploration, jobs and local spending

The Central Otago Gold Rush (often simply called the Otago gold rush) was a gold rush that occurred during the 1860s in Central Otago, New Zealand. Constituting the country’s biggest gold strike, the discovery of gold in Otago led to a rapid influx of foreign miners – many of them veterans of other hunts for the precious metal in California and Victoria, Australia.

The rush started at Gabriel’s Gully but spread throughout much of Central Otago, leading to the rapid expansion and commercialization of the new colonial settlement of Dunedin, which quickly grew to be New Zealand’s largest city. However, only a few years later, most of the smaller new settlements were deserted again, and gold extraction became a more commercialized, long-term activity.

After the main gold rush, miners began laboriously reworking the goldfields. About 5,000 European miners remained in 1871, joined by thousands of Chinese miners invited by the province to help rework the area. There was friction not only between European and Chinese miners, which contributed to the introduction of the New Zealandhead tax, but also between miners and settlers over conflicting land use.

Attention turned to the gravel beds of the CluthaRiver, with a number of attempts to develop a steam-powered mechanical gold dredge. These finally met with success in 1881 when the Dunedin became the world’s first commercially successful gold dredge. The Dunedin continued operation until 1901, recovering a total of 17,000 ounces (530 kg) of gold.

The mining has had a considerable environmental impact. In 1920 the Rivers Commission estimated that 300 million cubic yards of material had been moved by mining activity in the Clutha river catchments. At that time an estimated 40 million cubic yards had been washed out to sea with a further 60 million in the river. (The remainder was still on riverbanks). This had resulted in measured aggradations of the river bottom of as much as 5 metres.

Gold is still mined by Oceana Gold in commercial quantities in Otago at one site – Macraes Mine inland from Palmerston, which started operations in 1990. Macraes Mine, an opencast hard rock mining operation, processes more than 5 million tonnes of ore per year and had extracted 1.85 million ounces (57,500 kg) of gold by 2004.

Inflation Rises will be Unavoidable Globally.

Inflation Rises

Inflation Rises will be Unavoidable Globally.

Inflation rises through a fresh upside wave in commodity prices, food prices, services and wages is definitely around the corner. The rises may initially be seen as growth but the naked reality may soon be realized. Inflation Rises are an obvious solution, likely to occur in the face of Serious Debt problems. Repeat Monetary Easing leads to excessive & a serious Debt Burden which is recovered through tough austerity measures & higher taxes imposed on the common man. To retain survival in the midst of high taxation & unemployment, wages, services & commodities are bound to rise in cost, triggering higher inflation rises.

I have repeatedly alerted since the mid of 2011 that, Taxes will be ruthlessly imposed with a view to alleviate the financial & social disasters of the time leading to the further lowering of living standards, a lot of homeless people and huge areas of vacant real estate. The impositions of more and more taxes will finally trigger large & violent revolutions. There will also be large waves of crimes triggered by the hard times.

When on a large or a global scale, rising living costs in the face of drastically lowered incomes, also trigger epidemics as health concerns get pushed to the back burner when daily needs & survival takes top priority. These epidemics trigger more expenditure & on such a massive global scale, when forced or circumstantial expenditure rises beyond all reasonable means, then Corruption, Revolutions & Riots are born.

Europe’s debt crisis is creating economic contagion and may be spreading to the already fragile Chinese and American shores. A deeper financial system collapse instigated through current economic, political and financial problems will likely remain & present worse problems for years. Any Euro-zone breakup may trigger more inflation as the creation of a new system & printing new money would incur heavy spending.

US Dollar’s expected sharp decline will add more to the Global Inflation Rises. U.S. QE3 undoubtedly is an assured event. It will be surely given a new dissembling name, a fresh acronym and remarketed as something other. An extension of the Fed’s so-called Operation Twist (ending in June) now may be a more realistic possibility. The scenario, post the November elections will be largely disappointing to those expecting a better future, due to the current politically driven dressing up of the economic statistics. It seems most unlikely that the U.S. economy can actually conjure up a healthy recovery in the face of a, yet very high unemployment rate, seemingly rising consumer spending, an extremely depressed housing sector with foreclosures yet continuing to rise, cutbacks in state and local government spending & a huge burden of private & public-sector debt. What aptly favors to the financially logically mind is that the politically motivated illusion of the dressing up of the economic statistics will not last long & sooner or later, an additional Federal monetary infusion- quantitative easing seems to be un-avoidable.

Rising incomes of the extremely large sized Middle class in the Emerging markets also contribute largely to the inflation rises on increased commodity demand. Services & Commodity prices rise as wages rise & thereby causing production costs to rise.

Emerging countries having sizeable reserves also turn into aggressive commodity buyers at all substantial declines which provide a solid support to these commodity prices when on the down slide triggered by lowered demand from the developed nations & this will avoid a global deflation that is usually the case in hard times.

Companies see higher Inflation rises despite having lower growth as employers would prefer to cut jobs & reduce their workforce than to cut salaries which de-motivates the employed leading to work-strikes & production shutdowns. This provides for inflation support also.

Higher unemployment will lead to Monetary easing repeatedly which in turn will lead right into the lap of Inflation rises. The US Fed has always favored the issue of unemployment over rising inflation. This stance of the US Fed, if implemented by other Central banks could potentially risk higher & faster inflation rises.

Unnecessarily large Quantitative Monetary Easing lead to a Realty Bubble in China & India where Real Estate prices have seen massive growth in Price terms in the last few years. The People’s Bank of China cut their interest rate last week due to concerns of a property crash and because of their slowing economy.

Ruthless acquisition & conversion of cultivation land meant only for agriculture to construction land to meet urban housing demand has drastically reduced the agro output & also the number of farmers who now are landless & also jobless. But Global food demand will always remain on the upside due to growing populations. These imbalances will also create acute food shortages leading to a sharp inflation rises.

Gold as potential Inflation Hedge: Gold would continue be a likely beneficiary from the ever increasing probabilities of never ending additional monetary easing and a disruptive political climate from all around the Globe. Central-bank representatives look for continued (Emergency Surgery) loose monetary policy around the world, particularly in the U.S. and Europe. Nations returning soon for more easing like Italy, Spain, Greece, The U.S., etc are clear examples that Monetary easing has not provided for the longer term benefit but has only proven to be an immediate relief provider- A Pain killer capsule & not a permanent cure to the problem.

Bad financial scenarios & rising inflation are generally seen as times to preserve wealth through Hedging against Inflation by investing in instruments which are known to be safe heaven against such situations, like Gold. Gold is liquid as well as portable & so the most preferred investment asset as a safe hedge against Inflation. But one tends to forget that these safe hedges only work when the negative situations may have a workable solution, though with some reasonable time lag.

But when the situations are of a more grave & dangerous nature & also on a global scale, these so called safe havens also lose value as they hold value only till demand is alive & preserved through more & consistent investments. The same is lost when demand falls due to unavailability of liquidity & more so when the same instrument turns back into the market to be liquidated to provide immediate means of survival. Gold too will see sharp declines as huge inflows are seen into the market through recycling / re-sale at the higher prices triggered due to the hedge demand against inflation created earlier. Gold will actually be sold (re-cycled) to overcome fiscal burdens & also for immediate liquidity to support life. Real estate prices would also crash due to lack of demand & liquidity, though liabilities (if created at un-realistic prices to acquire the properties) would remain higher than current asset valuations, adding pressure for liquidation of other assets.

Putting food on the table will be a more pressing concern than buying luxuries or gifts. Inflation & scarcity of food will be severely felt.

Large scale revolutions will surely be seen in almost all parts of the world but especially in the so-called developed nations. 2013 is the year when the pain really kicks in. The need for a transformation of existing state, business and banking structures will be strong, but nobody is going to use democratic methods to ask anybody for their point of view. There will be corruption and eventually the rooting out of corruption.

Bad times are not NEAR, they are almost HERE.

RBI stuns Markets, India’s outlook to negative from stable: Fitch Ratings

RBI stuns Markets

RBI stuns Markets, India's outlook to negative from stable: Fitch Ratings

The RBI defied widespread expectations to revive the flagging economy & disappointed the markets in a bid to tame the inflation by keeping the policy repo rate unchanged at 8% in its mid-quarter monetary policy. The repo is the rate at which, banks borrow from the regulator. Accordingly, the reverse repo rate at which, banks lend money to RBI stands at 7%. The cash reserve ratio (CRR) or the share of deposits lenders need to keep with the regulator too remains unchanged at 4.75%.

RBI said a rate cut now could “exacerbate” the country’s inflation, the highest among industrialized or BRIC nations. Bonds, stocks and the rupee fell after the decision and economists scaled back their expectations for future rate cuts.  Unless the government takes steps on fiscal adjustment, the RBI is not prepared to cut rates.

Fitch Ratings has revised India’s outlook to negative from stable. The news came in today at a time when the market was grappling with Reserve Bank of India’s unexpected stance – of not going with the popular expectation of a rate cut.

Fitch says the revision in its outlook is reflective of heightened risks that India’s medium- to long-term growth potential will gradually deteriorate if further structural reforms are not hastened, including measures to enhance the effectiveness of the government and create a more positive operational environment for business and private investments.

“A significant loosening of fiscal policy, which leads to an increase in the gross general government debt/GDP ratio, would result in a downgrade of India’s sovereign ratings,” Fitch said in a statement on Monday. The agency estimated general government debt forIndiaof 66% of GDP at the end of the most recent fiscal year, compared with a median of 39% for BBB-rated countries.

Credit rating agency Standard and Poor’s had warned last week that India may become the first among the BRIC (Brazil, Russia, India and China) countries to lose its investment grade rating, prompting an angry response from the government. It had cited slowing GDP growth and political roadblocks to economic policymaking as some of the factors that could lead to such an action.

The rating affirmation reflects India’s diversified economy and its high domestic savings which reduce reliance on foreign investors for private investment and fiscal funding. The Indian government is able to issue long-term debt at a low cost in its own currency.

Net external debt is very low and still high foreign exchange reserves of the Reserve Bank of India (RBI) provide a cushion against potential external shocks. The underlying drivers of the last decade of rapid economic growth remain in place – a fast growing pool of educated workers and an innovative private services sector.

Art Woo, director of Fitch Ratings says,India’s economic and fiscal prospects have weakened. “We became quite aware that the government is having a tough time improving the investment climate. It seems to be hindering growth prospects off late. So, that’s how we came about with the negative outlook,” he elaborates. The negative outlook, he says, more precisely means that over the next 12-24 months there is a probability or more than a likely chance that India’s ratings could be downgraded.

Finance Minister Pranab Mukherjee said on Monday Fitch has not taken note of recent structural reforms in the economy including the strengthening of public finances, after the rating agency cut its outlook on Asia’s third largest economy . “The concerns expressed by Fitch on the economic growth potential, inflationary pressures, and weak public finances are based on earlier data. Government has already taken note of such concerns,” Mukherjee said in a statement.

Fitch Ratings cut its credit outlook for India to negative from stable, nearly two months after rival Standard & Poor’s made a similar call, citing risks that India’s growth outlook could deteriorate if policymaking and governance don’t improve.

Greece Elections, Pro-bailout Party wins : No major gains except New Debt

Greece Elections

Greece Elections, Pro-bailout Party wins

Greece has been suffering under a heavy burden of painful austerity measures, high unemployment and a long-running recession. Syriza and New Democracy were effectively tied in the last official polls, in part because Syriza was seen as offering something new and different. Since May’s vote, Greece has been roiled by uncertainty and division, and the country must identify additional budget cuts by the end of June to be considered “compliant” with the terms of its bailout program.

A 50-seat bonus automatically given to the party that comes first would give a theoretical New Democracy-PASOK alliance 162 seats in the 300-seat parliament, enough for a majority broadly committed to the 130-billion-euro ($164 billion) bailout.

New Democracy, the pro-bailout party in Greece Elections, began talks to form a government on Monday after winning the election.

New Democracy’s Antonis Samaras said “Today the Greek people expressed their will to stay anchored within the euro, remain an integral part of the eurozone, honor the country’s commitments and foster growth. This is a victory for all Europe. I call on all parties that share those objectives to form a stable new government.”

Samaras said his party wants to remain in the eurozone and alter existing policies, including stringent austerity measures, to “achieve development and offer people relief.” His leading rival, Alexis Tsipras of the left-wing, anti-bailout Syriza, had called for the deal to be torn up.

Samaras said Greece would fully meet its commitments but added: “We will simultaneously have to make some necessary amendments to the bailout agreement, in order to relieve the people of crippling unemployment and huge hardships.”

And in a joint statement, European Commission President Jose Manuel Barroso and European Council President Herman van Rompuy said in a joint statement that they “support the continued efforts of Greece to put its economy on a sustainable path.” “Today, we salute the courage and resilience of the Greek citizens, fully aware of the sacrifices which are demanded from them to redress the Greek economy and build new, sustainable growth for the country,” the EU leaders said.

Syriza, which was projected to win 71 seats, would continue to demand “from the position of the opposition” that the bailouts be scrapped.

The situation in Greece is likely to be on the minds of world leaders as they meet in Mexico on Monday for the Group of 20 summit. Some experts argue that a potential Greek exit would be manageable, assuming the European Central Bank and European Union policymakers respond aggressively, while others worry that the pullout would cause chaos in financial markets and shock the global economy.

Greece faces years of more pain – no matter what the election results.

The crisis has merely been postponed to a later date, not necessarily been averted. Greek Businesses are shutting down by the dozen and the homeless are multiplying on the streets of Athens. Austerity measures have hit the poorest sections of society, sparing a few political and business elite widely seen as corrupt. Greek people now face another three to five years of pain at the least. Whichever way the Greek people would have voted in these elections, there would have been no easy options for the country. It was almost certain no one party would get a majority – even with the top-up seats given to the front runner.

In deep recession, crushed under its huge public debt and forced to slash public spending and hike taxes repeatedly, Greece is struggling to restore its near-bankrupt economy, and a new government could face new protests after taking office. Greece has enough funds only last for a few weeks without more aid but European partners have become deeply suspicious of the commitment of Greek politicians to implementing unpopular austerity measures. A coalition that won only 40% of the vote, would struggle to push through reforms in the face of deep public resentment of repeated rounds of tax hikes and pay and pension cuts. SYRIZA will be a very powerful opposition party and on the next elections, soon again – it will be even stronger, if not first.

Italian and Spanish borrowing costs rose strongly with yields on Spain’s 10-year bonds at dangerously high levels of over 7% with equivalent Italian debt over 6%.Spain’s banking sector may require 150 billion euros against a 100 billion bailout credit line.Spain’s bad loans rose highest in 18 years, 8.72% of total loans as €4.8bn of credit soured in April; for consumer loans 7.43%, mortgages 3.01%.

Equity Markets await Euro-zone, Greece news as debt crisis threatens.

Equity Markets trading

Equity Markets await Euro-zone, Greece news as debt crisis threatens.

Equity Markets around the World are collectively holding breath to see if a new government will be chosen this time by Greek voters or will they again end up in a deadlock as was seen in the May elections. The outcome is a mystery since there cannot be survey polls conducted for the last two weeks before elections as the same may get manipulated to influence the elections.

Our view: Greece may end up in a deadlock again.

Greek people may be torn between a temporary solution for immediate relief with monetary easing & a longer term easing but immediately painful, anti austerity measures and also risk the turmoil of exiting the Euro.

The week gone by: Nifty June Futures rose to 5145 as forecasted- Till above 4914, Equity Markets Futures may now remain positive & rises to 5113-5122 can be expected. A strong & sustained further momentum above 5122 may push markets further up to a very strong resistance range of 5230 to 5275. Selling pressure can be expected on all rises above 5122 till 5275.

Central banks intensified warnings that Europe’s failure to tame its debt crisis threatens to roil the world’s financial markets and economy as Greece’s election looms as the next flashpoint for investors. A victory by Syriza, the party that promises to renege onGreece’s end of the bailout deal, could speed the nation’s exit from the euro. Europe’s turmoil this week forcedSpainto ask for a bailout of its banks that may run as high as 100 billion euros ($126 billion), making it the fourth and largest euro-zone economy to seek aid.  Attention is turning toGreece, which votes a second time in six weeks after a May 6 ballot failed to yield a government. The Syriza party, led by Alexis Tsipras, is vying for first place in the opinion polls with a promise to abrogate the terms of the 240 billion-euro bailout from the European Commission, ECB and International Monetary Fund. That’s drawn warnings that it could cost Greece the aid it needs and ultimately its place within the euro. The vote will turn on whether Greeks, in a fifth year of recession, accept open-ended austerity to stay in the euro or reject the bailout conditions and risk the turmoil of exiting the 17-nation currency. World leaders, who gather for a summit in Mexico June 18, have said they’d prefer a pro-euro result, underscoring concern over global repercussions.

Spanish Prime Minister Mariano Rajoy made a plea on Saturday for greater political and fiscal union inEurope, urging Greeks to stick with the euro as they gear up for an election whose outcome will shape the single currency’s future. The euro zone could find itself scrambling to prevent a break-up if a radical left-wing party wins Sunday’s vote in Greece. Rajoy said he was convinced Greece would stick to its commitments and stay in the euro.

The week to Come: Equity Markets, Nifty June Futures have a resistance at 5122-40 levels & may decline from the last week rises again to 4825 & then 4465.

In case of a win by the pro-bailout party in Greece, Equity Markets will get the much needed boost & any momentum above 5122 may push markets further up to a very strong resistance range of 5230 & on further volatility to 5275. Selling pressure increase can be expected on all rises above 5122 till 5275 with a downside target towards 4825 & 4465. RBI is also expected to announce a rate cut next week. & China has already announced a rate cut.

On a pro-bailout party win in Greece added with some form of monetary easing by the US Fed, Gold may rise along with the Euro but commodities like Silver, Copper & other metals may rise sharply. In such a rare case positive scenario (amidst global pessimism) ONLY will Equity Markets break the crucial 5230-75 range with sustained momentum for a further jump to 5617. If not then, Equity Markets will again start the downslide from 5230-75 range.

There is so much turmoil in Europe right now; it’s hard to know where to focus. Greek voters will determine the fate of their currency on Sunday, and Spanish 10-year bond yields just hit a euro record high of 7%, the ominous level that prompted Greece, Portugal and Ireland to seek costly and humiliating sovereign bailouts. But amid all of this, Europe’s biggest problem may actually be Italy. The country is simply too big to bail. The 100 billion euro Spanish banking bailout announced in Madrid last weekend was supposed to bring calm to the markets and help lower borrowing rates across the continent. But the poorly constructed plan did not fool the markets – borrowing rates in Spain and in other eurozone countries went up instead of down. ECB has already bought up around 269 billion euros worth of Italian debt since launching its bond-buying program last year in an effort to blunt the rise in bond yields.Italy has major funding needs and will need to issue around 120 billion more euros in debt this year to cover its budget shortfall and make its interest payments on existing debt.

Selling State owned assets seems the only viable route for Relief from high cost & rising Debt. But where would the buyers come from amid a Global state of disparity & gloom?

Creating a fiscal and political union is the only way Germany will agree to share more of its balance sheet and credit with its eurozone partners. The creation of Eurobonds and the pooling of the eurozone’s existing debt will help to rebalance the market so that it isn’t so lopsided with the periphery debt-ridden and the core humming along.

European leaders are preparing for their own summit in Brussels on June 28-29 aimed at devising ways to better integrate the euro area. They will press for new efforts to boost the economy and improve lending conditions as well as seek “more specific building blocks” to link budget and banking policies, according to a draft document prepared for those talks.

Fed policy makers meet June 19-20 to review their economic projections & will discuss whether to do more to spur growth. Instead of an outright quantitative easing program – a QE3 now, the Fed may facilitate stimulus programs such as extending the Operation Twist, which expires this month.

The Thomson Reuters/University of Michigan index of consumer sentiment fell in June to 74.1 from 79.3 the prior month, which was the highest since October 2007. The gauge was projected to fall to 77.5. The Federal Reserve Bank of New York’s general economic activity index dropped to 2.3 from 17.1 the prior month.

Central-bank representatives look for continued (Emergency Surgery) loose monetary policy around the world, particularly in the U.S. and Europe. Nations returning soon for more easing like Italy, Spain, Greece, The U.S., etc are clear examples that Monetary easing has not provided for the longer term benefit but has only proven to be an immediate relief provider- A Pain killer capsule & not a permanent cure to the problem.

How much longer are Governments & Central Bankers going to take to understand the implications of these temporary painkillers?

All the bailouts eventually have to be paid up & by whom? The Taxpayer!

A time will come when no more monetary easing would be possible without taxing the common man on the street to beyond logical limits. Taxes will be ruthlessly imposed with a view to alleviate the social disasters of the time leading to the further lowering of living standards, a lot of homeless people and huge areas of vacant real estate. The impositions of more and more taxes will finally trigger large & violent revolutions. There will also be large waves of crimes triggered by the hard times.

Large scale revolutions will surely be seen in almost all parts of the world but especially in the so-called developed nations. 2013 is the year when the pain really kicks in. The need for a transformation of existing state, business and banking structures will be strong, but nobody is going to use democratic methods to ask anybody for their point of view. There will be corruption and eventually the rooting out of corruption.

Emergency surgery (Bail outs) methods for immediate relief but ending up in spiraling debt due to repeat requirements of more monetary bailouts, will prove to be the undoing for many governments.

The U.S.$ will also witness an extremely Massive downfall, contradictory to the extraordinary rises seen recently.

The insensitivity of nations to FOOD Shortages will be one of the major sources of unrest in the developing world in the coming period. Epidemics may soon follow in large waves.

Putting food on the table will be a more pressing concern than buying luxuries or gifts. Inflation & scarcity of food will be severely felt.

The awareness of the suffering of the underprivileged has scarcely begun. What we will see over the next few years is the extreme polarization of right-wing solutions. Finally by 2024, there will be little that remains of the autocratic structures that are currently being put in place to safeguard the banks and corporations whose survival is currently threatened.

Gold prices will swing amid volatility on Euro-zone & FOMC outcomes.

Gold prices

Gold prices will swing amid volatility on Euro-zone & FOMC outcomes.

Gold prices have been up for the entire week as forecasted for the week & have almost achieved all the given targets. Given for the week, Gold Futures for August delivery till above $1582.30 will rise further to $1606, $1621 & $1648, Gold prices topped at $1635.4 on Friday from $1583 on Monday.

Gold traders are bullish for a fourth consecutive week after hedge funds added to bets that prices will rally, exchange-traded products backed by the metal expanded and Europe’s debt crisis roiled markets. Speculators boosted net-long positions by 27% in the week ended June 5, the latest Commodity Futures Trading Commission data show. ETP holdings rose 21.07 metric tons valued at $1.03 billion since the start of June, halting a three-month retreat. Almost $5.7 trillion was wiped off the value of global equities since the end of March on signs of slowing growth, spurring speculation that policymakers will do more to shore up economies. Gold rose about 70% as the Federal Reserve bought $2.3 trillion of debt in two rounds of quantitative easing, or QE, ending in June 2012. Whatever the outcome in Europe, it will likely be supportive for gold prices. The possibility of QE3 or monetary easing in some other form in the U.S.would also be good for gold prices.

Central banks are also buying more metal after adding 456.4 tons last year, the most in almost five decades, according to the London-based World Gold Council, which predicts another 400 tons will be added in 2012. They increased their combined reserves for 14 consecutive months through March, the longest streak since 1964. Many countries said to have bought Gold have not actually “Bought Gold” but have got rid of US Dollars at the high levels seen currently & to diversify because gold is liquid and portable.

Fed policy makers meet June 19-20 to review their economic projections & will discuss whether to do more to spur growth. The Federal Reserve Bank of New York’s general economic activity index dropped to 2.3 from 17.1 the prior month. This greatly increases odds in favor of QE3 or other accommodative policies at FOMC meeting next week which can in turn be highly positive for Gold. The Fed announcing some kind of “balance-sheet move” at that meeting are yet about one in three.

The market rally this whole month has been largely predicated on the idea that someone, the Fed or the ECB, or maybe any of them will step into any action.

Fed policy makers meet June 19-20 to review their economic projections & will discuss whether to do more to spur growth. Instead of an outright quantitative easing program – a QE3 now, the Fed may facilitate stimulus programs such as extending the Operation Twist, which expires this month.

ECB may also opt for a rate cut by at least 25 basis points to a max of 50 BPS in its July meet.

Day Trading in most commodities in the week, especially Friday was directionless as alerted. Stops to the upside and downside have been triggered within very short time frames amid market nervousness ahead of the Greek election result and as the pending FOMC decision next week intensifies. Volumes have been low and moves seemed completely random as the market moved from highs to lows to highs.

Our view: Greece may end up in a deadlock again.

Whatever the outcome: Simple Gold Trading strategy for the week amid extreme Volatility.

There is a plethora of news & forecasts all over regardingGreece,Spain,Italy, the Euro-zone in general & the FOMC,UK, etc, but nowhere do you find some advice to cope up with this crisis. Most would advice to remain on the sidelines, watch & wait for the opportunity to enter when clarity arrives. But generally the opportunity will vanish by the time the clarity is seen.

Why worry of what may happen when you cannot change anything to help or be stressed regarding the outcome of a crisis beyond your control? The best solution is to be prepared for the Good & also the worst with strategic positioning to gain from whatever be the outcome.

Gold prices may most probably decline along with the Euro & then rise when FOMC declares some easing.

As also alerted earlier- the next week starting 18 June could set the tone for further direction in Gold prices. Only a break in Gold Aug Prices with sustained momentum above $1652.50 will trigger Bullishness & then rises to $1686.25, $1747 & $1783 may also be seen. The level of $1652.50 is now crucial in Gold for further yearly Bullishness.

On any negative news for Gold prices, sharp corrections, on momentum below $1621 to the very strong $1540 levels cannot be ruled out. Traders should now keep GTD Buy triggers (to add more volumes) above $1652.50 for upside targets as given & maintain current balance buy positions with GTC Sell triggers in Double the volumes (to exit current buy positions & also enter sell trades) as currently held below $1621 for targets of $1594, $1570 & $1540.

Silver July Futures above $28.09 will rise to $28.72, $29.08, $29.53 & on a break above $29.80 to $31.60. A decline below $28 could trigger weekly declines to $27.55, $27.10, $26.74 & to a very strong support of $26.20 also.

Sustained momentum in Silver above $32.05 will trigger Bullishness & then rises to $33.85, $36.10 & $37.54 may also be seen.  The level of $34.30 is now crucial in Silver for further yearly Bullishness.

In case of a win by the pro-bailout party in Greece & may be added with some form of monetary easing by the US Fed, Gold may rise along with the Euro but commodities like Silver, Copper & other metals may sharply rise. China has already announced a rate cut & the RBI is also expected to announce a rate cut next week.

Our View & Forecast:

Gold would continue be a likely beneficiary from the ever increasing probabilities of never ending additional monetary easing and a disruptive political climate from all around the Globe.

Central-bank representatives look for continued (Emergency Surgery) loose monetary policy around the world, particularly in the U.S. and Europe. Nations returning soon for more easing like Italy, Spain, Greece, The U.S., etc are clear examples that Monetary easing has not provided for the longer term benefit but has only proven to be an immediate relief provider- A Pain killer capsule & not a permanent cure to the problem.

How much longer are Governments & Central Bankers going to take to understand the implications of these temporary painkillers?

All the bailouts eventually have to be paid up & by whom? The Taxpayers!

There is hope & optimism all around immediately after some easing is granted but eventually all that fades away & a more fearsome reality hits hard. A time will come when no more monetary easing would be possible without taxing the common man on the street to beyond logical limits. Taxes will be ruthlessly imposed with a view to alleviate the social disasters of the time leading to the further lowering of living standards, a lot of homeless people and huge areas of vacant real estate. The impositions of more and more taxes will finally trigger large & violent revolutions. There will also be large waves of crimes triggered by the hard times.

Large scale revolutions will surely be seen in almost all parts of the world but especially in the so-called developed nations. 2013 is the year when the pain really kicks in. The need for a transformation of existing state, business and banking structures will be strong, but nobody is going to use democratic methods to ask anybody for their point of view. There will be corruption and eventually the rooting out of corruption.

Emergency surgery (Bail outs) methods for immediate relief but ending up in spiraling debt due to repeat requirements of more monetary bailouts will prove to be the undoing for many governments.

The U.S.$ will also witness an extremely Massive downfall, contradictory to the extraordinary rises seen recently.

The insensitivity of nations towards FOOD Shortages will be one of the major sources of unrest in the developing world in the coming period. Epidemics may soon follow in large waves.

 Putting food on the table will be a more pressing concern than buying luxuries or gifts. Inflation & scarcity of food will be severely felt.

The million $ question thus answered now: Do you now invest in Gold or in Food due to the expected shortages & inflation? Can Gold rise further when there will be so much of gloom & despair & so little to invest in terms of money and also in terms of interest when so much of negativity is going around. Gold will actually be sold (re-cycled) to overcome fiscal burdens & also for immediate liquidity to support life. And so the outlook that, Gold and silver inflows may increase from 2012 end or 2013 onward when there is absolute chaos. Till then Gold will remain on a majorly one way street called “Rise”.

The awareness of the suffering of the underprivileged has scarcely begun. What we will see over the next few years is the extreme polarization of right-wing solutions. Finally by 2024, there will be little that remains of the autocratic structures that are currently being put in place to safeguard the banks and corporations whose survival is currently threatened.

Gold demand on European crisis: Ride cautiously- Dangerous Curves ahead.

Gold demand

Gold demand on European crisis: Ride cautiously- Dangerous Curves ahead.

Gold demand has developed a stronger tone with the currently ongoing Global financial industry crisis. The ongoing European debt crisis is likely to mean more gold demand from investors and central banks. Fresh safe-haven Gold demand, added with some technical buying and short covering seen, as expected ahead of the much-anticipated elections in Greece on Sunday. Traders and investors are awaiting the Greek elections, to see how the New Greek government addresses the nation’s economic problems. Gold prices will undoubtedly be volatile as a result of the upcoming Greek re-election results and the market speculations of further US quantitative easing, but long-term investors continue taking advantage of dips in gold prices to further diversify into gold in lieu of depreciating paper currencies & thus keep the Bullions bullishness alive & gold demand further rising.

Gold Futures seen at $1626 till now, as alerted for the week, Gold Futures for August delivery till above $1582.30 will rise further to $1606, $1621 & then to $1648. A decline below $1578.70 could trigger weekly declines to $1567, $1540 & on further temporary volatility to $1526.50 also.

Early next week could set the tone for further direction in Gold Futures. Only a break in Gold Aug Futures with sustained momentum above $1652.50 will trigger Bullishness & then rises to $1686.25, $1747 & $1783 may also be seen. The level of $1652.50 is now crucial in Gold for further yearly Bullishness.

Weekend Greek elections and a Federal Open Market Committee meet could mean higher volatility for Gold next week.

A negative outcome in Greece would almost certainly see the nation leave the Euro-zone & then markets will most likely see gold crashing lower alongside the Euro. But a positive outcome could give a further boost to Gold demand with the Euro rising sharply. Next Week certainly will be full of huge movements & high volatility, more so at the start. The worst outcome for the Greek election would not be if Syriza wins, but if there is a deadlock again & if no Govt can be formed! Gold would then again lose momentum & may remain in a range bound trend with a negative bias.

It would certainly mean a double whammy if FOMC Chairman Ben Bernanke makes no hint at QE3 next week & could induce further selling from traders having long positions and see us trading back towards the $1,540 support zone.

I have repeatedly alerted of Gold Futures having very strong support at $1540 levels & major weakness in Gold Futures will ONLY commence on a sustained decline below $1540 on a Closing Basis, which in turn may send Gold Futures sharply down to $1270 levels also. Only a close below $1540 will indicate a strong bearishness for Gold Futures. But further declines in Gold below $1540 on a closing basis may be very limited.

Silver Futures seen at $29.09 till now, as alerted for the week, Silver July Futures above $28.09 will rise to $28.72, $29.08, $29.53 & on a break above $29.80 to $31.60. . A decline below $28 could trigger weekly declines to $27.55, $27.10, $26.74 & to a very strong support of $26.20 also.

Sustained momentum in Silver above $32.05 will trigger Bullishness & then rises to $33.85, $36.10 & $37.54 may also be seen.  The level of $34.30 is now crucial in Silver for further yearly Bullishness.

The ECB’s financial aid promised to Spanish banks has failed to have its desired effect till now. The sovereign-debt crisis can be expected to keep the markets on tenterhooks for quite some time yet and cause gold demand to pick up again, & not only among retail investors. As European uncertainty prevails, gold demand & upside price momentum has been further boosted as market expects more policy stimulus from major central banks. Gold demand is also currently boosted by the news that ICBC, the largest bullion bank in China, is expecting a 10% rise in investment demand in China, and Chinese economic growth has not collapsed as much as expected. Moreover, physically-backed ETPs holdings are still up year-to-date by 26 tonnes, private investors are increasingly demanding gold bars and coins, and central banks continue to invest in gold, reflecting the diversified sources of long-term gold demand. The central bank of Kazakhstan has announced intentions to buy 24.5 metric tons of gold this year to increase the proportion of gold in its foreign currency reserves to 20% from 15%. This year, the so-called official sector is likely to be an important demand source and thus the price-driver for gold & gold demand.

Fed FOMC meeting next week, at which timeU.S. monetary policy will be debated by Federal Reserve Board members. The gold demand in commodity markets also got a boost from the release of some fresh, weak U.S. economic data Wednesday morning, which bolstered notions the U.S. Federal Reserve will initiate another round of quantitative easing of monetary policy, which would likely be at least initially commodity-market-bullish. Federal Reserve will feel compelled to implement additional monetary easing should U.S. financial conditions tighten further. U.S. QE3 undoubtedly is an assured event. The Big question then is the timing, whether it would be slated for a Pre or Post Election launch.

Greece loses money fast: Fears that Greece will collapse financially and leave the euro have slowly drained Greek banks over the last two years. Central bank figures show that deposits shrank by about 17%, or 35.4 billion euros ($44.4 billion) in 2011 and stood 165.9 billion euros ($208.1 billion) at end-April. Bankers in Greece said up to 800 million euros ($1 billion) were leaving major banks daily over the past few days, and 10-30 million euros ($12-36 million) at smaller banks. Greeks pulled their cash out of the banks and stocked up with food ahead of a cliffhanger election on Sunday that many fear will result in the country being forced out of the euro. The last published opinion polls showed the conservative New Democracy party, which backs the 130 billion euro ($160 billion) bailout that is keeping Greece afloat, running neck and neck with the leftist Syriza party, which wants to cancel the rescue deal. Both parties say they want Greece to remain in the single currency but Syriza has pledged to scrap the bailout agreement signed in March which has imposed some of the toughest austerity measures seen in Europe in decades. The European Union and International Monetary Fund have warned that Greece, which has only enough cash to last for a few weeks, must stick to the conditions of the bailout deal or risk seeing funds cut off.

Chili July NCDEX Futures hit upper circuit twice in a week.

Chili July NCDEX Futures

Chili July NCDEX Futures hit upper circuit twice in a week.

Chili July NCDEX Futures at Rs.5310, have hit the upper circuit again today, twice within a week on strong demand and restricted arrivals. Chili July NCDEX Futures gained 4.04% yesterday & ended at Rs 5104. Some profits booking can be expected today but the rally may sustain in the coming days as speculators enlarge their long positions.

India is the largest producer and consumer of chilies in the world with a contribution of nearly 25 percent of the global output. The average production inIndiais estimated to be around slightly above one million tons per year. India is also a major exporter of chilies as it contributes nearly 33 percent of the total quantity of Indian spice exports.

Volumes and open interest in July contract had witnessed a surge last week on the back of lower prices.

Brazil Witnesses Record Soybean Exports in 2011-12

The 2011/12 soybean crop in Brazil continues to be sold and exported at a record pace. According to the Ministry of Industrial Development and Exports, the Brazilian soybean exports in May totaled 7.2 million tons, which surpassed the prior record of 6.1 million tons of exports in June of 2009. The May exports were 37% higher than in May or 2011 when soybean exports totaled 5.3 million tons.

The rapid pace of exports is coming after the 2011/12 Brazilian soybean production was severely curtailed by a crippling drought earlier in the growing season. End users have been scrambling to secure needed supplies before Brazil runs out of soybeans driving prices even higher.

From January through May, Brazil has exported 18.5 million tons of soybeans compared to the 13.5 million tons exported during the same period in 2011. The total value of the soybean complex exports (grain, meal, and oil) through May totaled US$ 3.84 billion, whereas at the end of May 2011, it totaled US$ 2.55 billion. More than half of Brazil soybean exports are destined for China.

Soybean July NCDEX Futures remained range bound yesterday with a high of Rs.3393 & an intraday low of Rs.3347. Trades have recorded a low of Rs.3354 as of now today.

Europe, Spain temporarily out of crisis, But is Bailout the Right way out?

Is Bailout the Right way out?

Europe, Spain temporarily out of crisis, But is Bailout the Right way out?

Performances & not failures merit a reward. But nations have been seeking a Bailout as if they are rewards for their grave errors. Right from 2008 when major US & other Banks & lenders across the Globe were on the brink of a major collapse due to the Sub-Prime realty lending, born out of greed, Bailout (from the Tax-Payers money) has been the most preferred support system or a reward  for their un-doing. Do they morally qualify for the same? What has led these lenders to collapse in the first place? OR do they need face their own created mess & be punished? Can Tax Payers money so easily be squandered away?

The most ironical part is that “Only the banks get rescued by the Tax Payers money, not the now-unemployed (probably previous Tax payers) or also the now homeless. Unemployment in the US & the Eurozone area have soared. Governments always seem ready to spring into action to defend the banks, but otherwise are completely unwilling to admit that its policies are failing the people who elected them & the economy at large which it is supposed to serve in the first place.

With an agreement to bail out Spain’s struggling banks, Europe again avoided financial chaos in a debt crisis that is in its third year. But Europe still faces far bigger challenges that threaten the Continent and with it, the world economy. What is more, the Spanish bailout will do little to address European banks’ addiction to the borrowed money they have depended on for their daily financing needs. Far harder to calculate are the costs if, after Greek elections, the new government reneges on the bailout Greece negotiated with its European lenders a few months ago. That could lead to a withdrawal from the euro zone, threatening that currency union, which has largely benefited more prosperous members like Germany. A breakup of the currency union would bring extremely high costs and risks that no one can really predict. Europe’s big fear is contagion—an infection of financial panic that could spread far beyond Greece. Italy is yet struggling with economic stagnation and escalating borrowing costs.

Bailouts though will strongly be denied by many, are the Best routes to increase Debt further rather than being the support for rises & growth as questionably perceived. The only positive attribute provided by the Bailout is the immediate, though temporary pain relief from the seemingly unavoidable dark pits of a faltering economy, triggered by foolishly taken hasty decisions, many a times out of greed. Repeat large Bailouts will lead to Only massive debt write downs, a collapse of the financial system and eventually to a deep global depression. The Bailout providers will be in for a bigger & an irrevocable shock – A major reason why Banks avoid providing loans to someone in a miserable financial position.

The only way out of a mess created by a large BAILOUT is a series of Never Ending more BAILOUTS.

A situation alike to: There will always be a heavy Hangover after a massive drinking session & so the Best way to avoid a hangover is to KEEP on DRINKING…..

Nations having availed massive Fund supports have been seen returning for more, prove this beyond any doubt.

The end to this may only arrive when the realization sinks into pro-active minds that “If a problem seems to have no solution, it may not be a problem, to be overcome, But it is a FACT – not to be solved, but to be coped-with over time”.

U.S. QE3 undoubtedly is an assured event. The Big question then is the timing, whether it would be slated for a Pre or Post Election launch. It will be surely given a new dissembling name, a fresh acronym and remarketed as something other & better than the earlier version, something on the lines of a new software version with No major new add-ons. The People’s Bank of China cut their interest rate due to concerns of a property crash and because of their slowing economy. Since markets for Chinese exports have been hurt by the economy in Western nations, the supply/demand balance may worsen. As such, commodity prices can continue to decline even as policy rates drop. In fact, this is exactly what has been happening historically. Europe’s debt crisis is creating economic contagion and may be spreading to the already fragile Chinese and American shores. A deeper financial system collapse instigated through current economic, political and financial problems will likely remain & present worse problems for years. Refer to my article– Economic Forecast 2012: 2013 is the year when the pain really kicks in….Something horrible, utterly large in Magnitude & size may be the requirement to wake up these policy makers from their Day dreams of a brighter & stronger tomorrow Based upon these Bailouts. Mind you, the same could just be lurking around the corner, waiting to lash out in large tsunami waves…

On June 28 and 29, European Union leaders will gather in Brussels to discuss, among other things, ways to forge closer fiscal integration. Despite calls from some leaders for shared oversight of budgets and deficit spending, no concrete proposals have been made. Even if Greece ends up with a government willing to try to live up to the terms of its 130 billion-euro bailout deal by meeting its payments and striving to narrow its wide budget gap, strong doubts remain whether any new leadership in Athens can fulfill those obligations. A lot of private money has already fled Greece, while it’s deeply depressed economy and dwindling tax revenues threaten to put the country even deeper in the hole.

Many proposals to push members of the European Union closer together would take years to carry out, too late to help ease current tensions. Mario Draghi, the president of the European Central Bank, said last week that it would help a lot if European leaders simply wrote a detailed plan for the future of the euro zone.

After hopes being dashed last week, regarding further QE by the Fed Reserve, the attention will now turn on the FOMC meeting, scheduled for June 19 and 20 for clues as to the likelihood of a fresh round of monetary easing.

Gold Futures at $1600 on Spain Rescue, Range bound for the week.

Gold Futures tips

Gold Futures at $1600 on Spain Rescue, Range bound for the week.

Gold Futures along with Silver, Crude Oil & Copper may remain volatile & generally range bound for the week. A few stray spikes & movements within the range may be seen on key Economic data announcements. Overall, the financial world will await the outcome of the Greece elections to be held this weekend. Thursday’s Chinese interest-rate cut may not be enough for a sustainable commodity rally.

Recent performance of Gold has not matched investor expectations due to a stronger dollar and US Fed Reserve giving no indications of further monetary easing. After the net redemptions suffered in May, ETP holdings have stabilized and recorded modest net inflows thus far in June. Holdings are up 7 tonnes.

For the week, Gold Futures for August delivery till above $1582.30 will rise further to $1606, $1621 & then to $1648. A decline below $1578.70 could trigger weekly declines to $1567, $1540 & on further temporary volatility to $1526.50 also.

Early next week could set the tone for further direction in Gold Futures. Only a break in Gold Aug Futures with sustained momentum above $1652.50 will trigger Bullishness & then rises to $1686.25, $1747 & $1783 may also be seen. The level of $1652.50 is now crucial in Gold for further yearly Bullishness.

I have Repeatedly Alerted of Gold Futures having very strong support at $1540 levels & major weakness in Gold Futures will ONLY commence on a sustained decline Below $1540 on a Closing Basis, which in turn may send Gold Futures sharply down to $1270 levels also. Only a close below $1540 will indicate a strong bearishness for Gold Futures. But further declines in Gold below $1540 on a closing basis may be very limited.

For the week, Silver July Futures above $28.09 will rise to $28.72, $29.08, $29.53 & on a break above $29.80 to $31.60 . A decline below $28 could trigger weekly declines to $27.55, $27.10, $26.74 & to a very strong support of $26.20 also.

Sustained momentum in Silver above $32.05 will trigger Bullishness & then rises to $33.85, $36.10 & $37.54 may also be seen.  The level of $34.30 is now crucial in Silver for further yearly Bullishness.

Silver is currently seen oversold on the weekly chart. Silver holdings in the iShares Silver Trust, the biggest exchange-traded fund backed by Silver, dropped 30.17 metric tons on 8 June 2012 to 9,669.08 tons.

Although Bernanke didn’t offer hints in the near-term, he said that “the central bank was ready to shield the economy if financial troubles mounted,” which suggests that the knee-jerk speculative sellers will be buying back sooner rather than later. After hopes being dashed last week, regarding further QE by the Fed Reserve, the attention will now turn on the FOMC meeting, scheduled for June 19 and 20 for clues as to the likelihood of a fresh round of monetary easing, which could potentially hurt the U.S. dollar and support gold vice versa. Important Read: Is Bailout the Right way out?

According to news reports Indian physical gold demand has weakened on end of marriage season & start of the monsoon season. Higher Gold prices have curtailed demand & are prompting more scrap sales in India. India’s demand has lowered but sizeable demand growth has been seen in Thailand, Vietnam, Malaysia, Indonesia & Middle East China. Hong Kong shipped 101,768 kg of gold to mainland China in April, up 62% on month. Iran imported a massive $1.2 billion worth of precious metals fromTurkey in April alone. Turkish exports of gold, precious metals, pearls and coins to Iran rose to $1.2 billion in April from a tiny $7,500 a year earlier.

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