0 comments Posted by Nse at Friday, January 28, 2011

US crisis inquiry points to widespread failures

 

is Gold Still a Safe Haven?

0 comments Posted by Nse at Friday, January 28, 2011

is Gold Still a Safe Haven?

Over the past 2 weeks, gold has seen its biggest two day drop since February of 2010. What bull market goes up in a straight line?
But, what triggered this drop?
It's simple. If investors believe their future with gold is good, then they will buy gold. If investors believe their future with gold is full of warnings than they will not run to the precious metal.
What are examples of "warnings? We see plenty of those and we have plenty of worries to keep even the most experienced investor awake at night. Some examples are: quantitative easing, sovereign debt, currency wars, EURO ZONE problems, and a housing market where 1:7 mortgages are in foreclosure; also inflation, deflation, hyperinflation, etc.
Has the ECB done enough to fix its ongoing debt crisis? Is the US Economy truly on the mend? We are seeing a very weak stance coming out of the ECB to strengthen the recovery fund and the US housing market is still in the critical zone. Further, we have a chance of soaring inflation.
Inflation soaring? Really? Consider this for a moment.
Investors of US debt are growing closer to a breaking point that could force a major selloff of Treasuries causing yields to rise sharply. This would make it expensive for the US Government to borrow to spur a sluggish economy.


If that happens, inflation could soar. Investors would then flock back into gold, as a safe haven. We have already received signals from China that it intends to reduce their holdings of US Treasuries. If you think that will cause a mild inflation risk, you are in for a rude awakening.
When inflation is growing in the double digits (hyperinflation), it has a single cause. It occurs when a government cannot borrow money because its debt has risen so much that investors believe they will never be paid back close to what they spent.
Is the run towards gold over? I think not. With volatile currency markets, US debt worries, etc, etc, investors still need a safe haven.

 

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Dollar weakens, gold finds support

0 comments Posted by Nse at Thursday, January 27, 2011

Gold

The weakening dollar is likely to strengthen precious metals and commodity prices. Gold found support at $1320, evidenced by the long tailtwo days ago. Twiggs Momentum (21-day) remains below zero, warning of a correction; only recovery above the declining trendline would negate this.
Spot Gold

 

0 comments Posted by Nse at Sunday, January 16, 2011


Inflation – (Wholesale Prices)
Food
Non Food
Fuel
Mfg.
3 months
6 months
1 year
2 years
The price index of a basket of primary food items in wholesale markets across the country. Frequency: Weekly. Base year: 1993-94. (economic research)
Inflation
CPI - AL
WPI
CPI - IW
3 months
6 months
1 year
2 years
The retail price index of a standard basket of goods and services typically consumed by agricultural laborers. Frequency: Monthly. Base year: 1986-87. (economic trends)
Growth in Money Supply
3 months
6 months
1 year
2 years
Rate of growth of total money stock in the economy at a particular point in time. M3, used here to denote money supply, comprises currency with the public, demand and time deposits with banks and other deposits with the RBI.. Frequency: Fortnightly. (Indian economic research)
Growth in Non Food Credit
3 months
6 months
1 year
2 years
Growth in credit by scheduled commercial banks towards non-food items, includes priority sector loans, industrial credit, trade credit, consumer loans etc. Frequency: Fortnightly. (indian economic trends)
Growth in IIP
Cap. Goods
General
Cons. Goods
3 months
6 months
1 year
2 years
Measures the growth in production of capital goods in the economy. Frequency: Monthly. Base year for index: 1993-94. (economic research firm)
Commodities
Gold
Crude
1 week
1 month
3 months
1 year
Daily closing price of gold in Mumbai. (economic research)

 

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Emerging Economy

0 comments Posted by Nse at Sunday, January 16, 2011


Emerging Economy

10th January 2011
  Indian Economy Next Quarter
Growth momentum to continue, estimated around 9% in 2011-12.
As predicted, inflation data will trend down slowly over the coming quarter.
Inflationary pressures persist, remain top priority for 2011.
Food and commodity prices on up trend globally, domestic structural constraints worsen the situation for India.
Rate hikes to continue, as RBI shoulders burden of inflation control.
  India : Kal, aaj aur kal
Let us begin with the good news. Economic growth in India continues to present a happy story. Even if we take the highly volatile IIP, which has consistently shown lower growth since the peak of 15% growth in the Jan-March 2010 quarter, manufacturing is expected to turn in a 9% growth in 2011-12. The service sector is expected to grow by close to 11% next year, as trade, transport, communication, hotels, finance etc. are all set to continue their robust growth. Apart from all the usual indicators of production and economic activity, the improvement in the hiring indices across all sectors is a pointer to firms turning back to their expansion plans. Salary hikes are also on the way up, not yet to the peaks seen during the boom years, but significantly higher than the past year.
Now for the bad news. Though all inflation indices show falling inflation rates, as we, at Indicus, have been saying for the past two years, inflation is not on its way out. This will not be news to the households who are grappling with high price spikes in basic food and fuel goods, nor will it be news to companies who feel the pinch coming in back again through inputs and commodities, nor will it be news to the RBI whose eagle eye is forever trained on inflationary pressures – it will however probably be news to the government, who has been seemingly unaware of the omnipresent pressure points in the system. Take the ongoing onion spike as a perfect example of apathy – when un-seasonal rains hit crops, is it really so difficult to predict and take appropriate action against impending shortfalls in supply? Emerging onion short supply was well-known months back, corrective action could very easily have been taken then. Why did we not? And why does this happen repeatedly?
Now going ahead, crude oil prices have moved up, again a trend that has been on the cards for a few months now, cement, steel and other commodities have pushed up as well while prices in the auto sector and consumer durables are now set to factor in these rises in input prices.
To make matters worse, it is not just domestic prices but global food and commodity prices that are trended up. Whether it is sugar or iron ore, the story is the same, we are to expect higher prices ahead. Now in such a situation, is it feasible to look forward to a benign inflationary environment in 2011? We anticipate consumer price inflation to stay (at best) around the 8-9% range in the year ahead.
Clearly there are structural issues at play here that need to be dealt with, especially when it comes to food – anticipating the implications of erratic weather, higher productivity, better storage, processing, market reforms, the list is long and well known. There are of course other reasons lending a hand to inflationary pressures, as we have said all along, the higher fiscal deficit necessitated by the crisis is one of them, government programmes that have boosted rural incomes through higher MSPs is another and so on. And then there is all the cash floating around as high government expenditures on infrastructure and social spending brings with it the baggage of what has always euphemistically been termed ‘leakages’.
So the economy is heating, though thankfully it is under some control. But the RBI has a tough job ahead. Of course, a better fisc and efficient food management could make its life easier, but the government is either unwilling or unable to oblige.
Sumita Kale and Laveesh Bhandari
10th January 2011, Indicus Analytics
Sumita Kale is Chief Economist, and Laveesh Bhandari is Director, Indicus Analytics. They can be contacted at sumita@indicus.net andlaveesh@indicus.net
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   Economic Growth
IIP growth turned in at 10.8% for October over the previous year, manufacturing grew by 11.3%, mining by 6.5% and electricity by 8.8%.
Infrastructure sectors grew by 2.3% overall in November. Crude oil at 17.7% and finished steel at 4.4% were the two highest performing sectors, while cement production was less by 11.6% compared to previous November.
In December electricity generation grew by 4.34% over last year, according to provisional estimates by CEA.
HSBC Markit composite PMI showed expansion at a slower pace in December, the index stood at 58.9 compared to 61.3 as both manufacturing and services had slower increases in activity.
In October, telecom subscribers grew by 18.84 million, taking total telecom density to 62.51%.
Auto sales continued with good growth in December. Maruti Suzuki India's total vehicle sales rose 17% over the previous year, Bajaj Auto rose by 10%, Hero Honda Motors' by 33%, TVS Motor Company's by 42%, Tata Motors sales increased by 30.63% while Ashok Leyland's total vehicle sales rose 23.86%.
Area sown till 24th December under the rabi crop has risen by 2.7% for all foodgrains over the previous year, however there is a drop in area under rice, jowar and lentils. Similar rise in oilseeds sowing, except for decline in groundnut, sunflower and safflower.
Air passenger movements rose by 10.7% in October over the previous year and freight by air rose by 22.9%, compared to 22.8% and 17% in October 2009 respectively.
Cargo at major ports rose by just 1.1% in the period April-December 2010, compared to the previous year with significant fall in traffic at New Mangalore and Ennore ports.
Read:The story behind the PMI data
Read:IMF pegs India’s GDP growth at 8.75%
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  Inflation
WPI inflation for November stood provisionally at 7.5%, while CPI IW and CPI AL indices turned in inflation at 8.33% and 7.14% respectively.
However weekly estimates of WPI show primary food articles’ inflation up at 18.32% for the week ending 25th December. The 52 week average inflation was highest for eggs, meat and fish at 31.03% and milk at 24.57%.
In December, the FAO food commodity index rose to its highest level since 1990, surpassing the 2007-08 highs, wheat is at a 28 month high while sugar at a three decade high.
Crude oil prices have risen over the past month, ending 15% higher in 2010 over the previous year. Global commodities in general are on the up trend once again.
Read: Inflation pressures rise in emerging Asia
Read: High agri commodity prices a concern: FAO
  Interest Rates
Yield on the 10 year gilt benchmark moved up marginally, averaging 8.109% in December.
Yields are expected to be in the 8-8.5% range over the first half of this year as the RBI is expected to continue raising rates cautiously to deal with the inflationary pressures.
Similar scenarios are expected in rates across Asia as inflation stays as the main concern for central banks.
With Eurozone inflation stepping across the 2% ceiling for the first time in two years, the ECB is expected to raise rates this year, sooner than expected.
Read: China central bank says inflation a priority
Read: ECB rate hike likely sooner than expected
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  Exchange Rates
Exports during November were valued at $ 18.895 billion, 26.5 % higher in dollar terms (22.3 % higher in rupee terms) than the previous year. Imports were valued at $ 27.796 billion, up by 11.2 % in dollar terms (7.5 % in rupee terms) over the previous year.
Oil imports during November were valued at $ 7.725 billion, 2.31 % higher than the previous year, while non-oil imports were estimated at $ 20.071 billion, 15.05 % higher than the previous year.
The trade deficit for April - November, 2010 was estimated at $ 81.674 billion higher than the deficit of $ 68.375 billion during April –November 2009.
The rupee moved in the range 44.67 and 45.7 to the dollar in December.
With a net investment of $ 29.361 billion in equity and $10.112 billion in debt markets in India, capital inflows helped curb a fall in the rupee as the current account deficit widened.

 

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