Buyers of Gold - Consider waiting!

Gold jewels play an important role during festive season in India, and buying gold is regular habit prevailing in the country as the prices of precious metals is in a locked in period for a few months before the festivals arrive at.

In the events of 2014, the market scenario expected this year is unconventional as gold is trading below Rs. 28,000 per 10 grams in refraction to global trading at $ 1,280 per ounce.

Despite the prevalent rates, a commodity analyst said, "Gold is correcting its price in the market with consolidation to the global prospects. Opportunities for buying gold at a lower price are still to come."

Though there is no fixed price for gold trading, researchers pinpoint it at between the trending level of $1,180 and $1,200 per ounce which is the production cost now.

One of the factors which will play an important role in balancing gold prices is strengthening of interest rates in US. Though, gold price is falling in the market, analyst are expecting "hardening in US fed interest rates" which will add more pressure on price of yellow metal to decline in trade.

In simple terms, one can understand it through economical law of demand which shifts from lesser attractive investment to higher one because of its higher value or revenue. In market concern, when secured financial asset that is US bank accounts and bonds will return higher on investments after which investors will switch from safer havens of gold to financial tools. Hence, price of gold is likely to fall on increasing interest rates in US.

In global markets, crude oil is trading higher than its prior levels injected since tensions evoked in the middle east. In the last month, price of Brent crude dropped down from $111 per barrel to $100.89 per barrel. Whenever oil prices drop it is popular trend that price of gold will slip as there is an indication of deflation in the market overview. 

Gold is struggling in the weakening market now where we are expecting a correction in the price. A Mumbai based asset management company's founder said, "If anyone is planning to purchase gold in a month or two, it is better to wait for some time.” However, there is a blinking warning that it is important to wait but be careful it is not too long, i.e. until the last day when the demand starts rising.

In case of gold jewelry purchase consumers should hold them as long-term securities because small changes in the price of metal are unable to pay off the making charges which amount to 15 to 20 percent of total price.



Decorative Paint stock on the Bulls

Paint manufacturing shares are posting in growing revenues which is citing commencement of bull run in the sectoral industry following the hiking stocks of paint companies' on BSE. Stocks of top paint manufacturers including Asian Paints, Kansai Nerolac, and Berger Paints are performing over the highest expectations of market analyst starting last month and will probably continue the trend in the coming time.


Kansai Nerolac premiered first in the market as the shares of the decorative paint industry set a new life time high in July. Asian Paints and Berger Paints followed the league as their stocks marked fresh heights on the stock exchanges as early investors chipped in to buy equities for medium to long-term gains. 

Painting industries growth is standing on pillars of strong demand and recovery in sectoral growth. The companies backed up with high demand destined to grow as their key pillar, demand of paints is generally higher during the festive season, on the way to Indian markets.

The industry advocates a profitable investment as falling of crude oil prices is another profit jumping news. Crude oil produces titanium oxide which is a key ingredient in production cycle of plastic paints. 

In the first quarter of FY 2014-15, the three major companies in painting producing sector reported higher revenues pushed up by growth in volumes of sales. Industrial recovery followed country's economic growth where companies worked up to regain exploding market share.

Kansai Nerolac headed the industrial sector as it captured 45 percent of total revenues. Berger paints and Asian paints shared 20 percent each of the total profits flourished in the segment. Nerolac is leading Indian markets and standing among the top three positions in the world decorative and painting industry.

Berger is walking on the strategic motive to capture premium paying audience by creating higher brand equity value in the market over the previous year. The company bought out the market share under influence of small dealers unable to touch Asian Paints brand loyalty customers. 

Asian paints is gaining on its strong position in the market which is consistently paying off its bills. The company nurtures on its key strength of strong pricing power due to consumer loyalty and trust.

It's expansion plan in the vertical of providing home accessories like modular kitchens and faucets did not produce estimated results according to some opposing analyst lower than optimistic analyst who are supporting the group. 

Overall, the company is making a small investment compared to its large variant of working capital of 3.5 percent. Therefore, the company is still joyous on its return from painting vertical. 

Economists are looking at the sector with blue eyes hoping to see further growth in the market of decorative paint companies who are launching new products. Key strength backing up the market growth enlisted is availability of premium products, regular demand of product and consumers high purchasing power.

Asian Paints is trading over 32 times FY-16 predicted profits, Berger Paints over at 27 times, and Kansai Nerolac up at 24 times, against their previous averages at 30 times, 20 times and 25 times, respectively. All paint companies are gaining after they prospects of growth improved in the market.


Unstable power stocks pull down market indices

Power sector stock dragged down Nifty and Sensex by 0.5 percent each though metal stocks pillared the pressure and kept Nifty 2 points above 7900-level and Sensex at 26,442.81.

Major power generating companies shares like Tata Power, Reliance Power and Adani Power lost out in the trade on Tuesday. Tata Power shed 3 percent, Reliance Power lost 4 percent and Adani topped the losing rate with 6 percent downfall.

The losing struck Adani and Tata after Supreme Court launched a stay order to stop compensatory tariff benefits to the companies under Appellate Tribunal's argument.

Two of the power majors gained approval from Central Electricity Regulatory Commission to gain favorable tariff charges in their Gujarat plant set up in Mundra Power Plant in February end.

Government of India (GOI) signed an approval allowing the companies to extend the charges of power supply over the existing rates set by State power distribution utilities. The additional charges over the normal rate of power supply meant to compensate the companies as profits are now on hold.

Companies are paying for high costing coal, imported to India to produce power. Tata and Adani requested GOI for collecting compensation over the prices to repay their expenses. Appellate Tribunal received a challenging report from the state distribution authorities which opposed the action.

Supreme Court decided to put a hold on the order and asked Appellate Tribunal’s court to take a decision at the earliest possible remark.

The unattributed stoppage in the hike of prices brought down the cited growth in companies' profit and earnings per share. 

Tata Powers biggest project Mundra ultra-mega power plant having an installed capacity of 4,000 MW accounts for more than half of its total power producing capacity is affecting its entire power sector vertical. The plant commissioned in FY 2012-13 is struggling to keep up as the cost of imports of coal, its major source from Indonesia rose invariably after the country changed export laws in 2011.

Before supreme court's declaration imposing a stop on its previous dealing allowing power companies to collect compensatory amount, Tata Power planned to collect Rs 690 crore for recovering losses in Mundra plant in the previous fiscal. Company did not account for the amount in the planning until they received the final put orders. Therefore, Tata Mundra project recorded accumulated net loss of Rs 260 crore in the year ending 31 March 2013. 

In Adani Power, Mundra plant is holding 4,620 MW capacity, which faced similar problems of recovering over primary costs. The company recorded aggregate loss of Rs 291 crore in the same time period. In case of Adani, the company recorded the loss after considering the compensatory amount offered of Rs 1,013 crore including an accumulated amount of Rs 830 crore for losses recorded at the end of last fiscal.

If supreme court decides to cancel the move then Adani will have to move down its profits, i.e. report a higher net loss further losing market shares.


USD fall equals Gold price decline

Gold continues to fall; investors expect drowning prices.

Precious metal commodity, specifically Gold future positional exchanges contracts fell in early morning trade in European markets on Monday. Commodity traders and investors are holding in their bets expecting strengthening of the economy backed by interest rate jump in the US.

World's most dominant reserve currency, USD picked up on the market cues after US Fed Chairperson Janet Yellen read out the analytical discoveries of the Jackson Hole two-day meeting on Friday. US dollar poised expanding gains to cross over 13-month highest record.

At 0820 hours GMT, Gold futures with a delivery quote of December exchanged at $ 1,278.0 for one troy ounce in New York on Comex, lowered at 0.17 percent from its previous trading between $ 1,276.1 and $ 1,280.8 for a troy ounce. In the bird eye view, the yellow metal reported a fall of 2 percent in previous week of August.

Precious white metal, Silver which is highly traded in India with a delivery option in September shed 0.21 percent coming down to $ 19.418 per troy ounce. Palladium tumbled 0.44 percent valuating at $884.80. Platinum was the only precious metal which gained as buyers continue to buy, at 0.22 percent trading at $ 1,421.60.

News from Singapore precious metal analysis, the reporter commented, "Buyers are still there in the market but it is not the right time to trade. Smart investors are holding in their cash until the prices fall further and record higher gains for them."

Yellen in her speech on Friday cited a pre-mature rise in the interest rates if US economy fails to perform to analytical estimates. A macroeconomic expert talked about the economy stating, "It is the strict measures listed on US monetary policy which are forcing the price of precious metals especially gold down."

Fed's Chairperson gleamed with confidence on positive outcomes from the economy which boosted USD's value in the basket of world currencies. ECB President Mario Draghi supported European economy quoting "Quantitative Easing is coming to Europe" which would mean lowering value of the consolidated currency, i.e. euro over the support of US dollars.

US dollar values form an essential base for pricing of gold in the world markets. All the dollar denominated commodities like gold have a direct proportion equation with USD, i.e. if US$ rises the commodity rises and vice-versa.

The simple analytical judgment is an eye opener for investors who can now project the futures of gold, with economic data which will decide the value of US currency.


India's gold premium likely to come down to $3

Gold premium in Indian market will amount between $3 and $4 additionally to prices of the precious metal in London, where the world's gold benchmark price declares, Head of India's largest gold refinery said on August 21. 


On yearly comparison it is a positive sign as in the last year premiums on Indian gold doubled because of rising demand. In the Financial Year 2014-15, gold's demand moderated over the year bringing down the overall price of the commodity in the market. The credit of weakening gold demand in Indian market is attributing to the import restrictions which are going to continue in the current fiscal.

India faced a widening trade deficit problem which continued over the last few years as the country stood as the biggest importer of gold. High trade deficit posed a serious problem and threatened the economic growth of the country, therefore Indian government along with the central banking authority RBI imposed 10 percent charge on import of gold.

Along with an increase in import duty, another measure to curb down trade deficit is compulsory export of one fifth of accumulated bullion imports in the trade. India imports 70 percent of oil from the middle east which tops the list of importers before gold which is useful as the world's currency.

Such strict actions on inflated the price of gold is making the commodity an unattractive investment as the premiums climbed to $ 160 per ounce. Premium refers to the difference in global benchmarked price of a commodity or stock under the local prices of the commodity in the country. Premiums are representative of demand and supply of a country's market.

Managing Director of the top Indian refiner, Rajesh Khosla said, "A decline in demand is citing a fall in premiums in the yellow metal price to average from $3 to $4 per ounce over the world's benchmark price, which is more than 50 percent reduction in price from last year's premium, which stood between $7 and $10."

Khosla supported the restriction and quoted, "Quantity of gold imports restrictions is going to stay." He explained that India is a country where demand for gold is never-ending and therefore, it is essential to control it. The reason behind importance of restriction in India is the country's insufficiency to provide funds for allowing unlimited free import of gold.

Alliance of India's MMTC Ltd and Swiss refiner PAMP gave birth to MMTC-PAMP, a gold refinery company which closed down its functioning in August 2013 after the Indian government and RBI launched policy of controlling gold imports.

Looking at the concern of refineries in India, the government alloted special licenses to these companies to buy in 15 percent of licensed quantity subscribed to them, i.e. 150 Kilograms.

The World Gold Council said, "Continuation of import restrictions means that gold demand in India will amount to 850-950 tonnes in FY 14-15, bringing down previous year's record of 974.8 tonnes."