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Gold - Can’t stay away from it for long Overall RATE RATE (2.00)

Many contend that gold has lost its shine. After making life-time highs of sub $1900 per oz., it is now trading almost 30% lower at nearly $1330 per oz. A question then that often crops up in the financial world is whether we still need to invest in gold. If so, how and where do we buy it? Gold has always been a traditional object or instrument of investment, especially in the Indian sub-continent and therefore, no one can really stay away from it.


Gold reminds me of the following quote made by Warren Buffet: ‘Gold gets dug out of the ground in Africa, or some other place. Then we melt it down, dig another hole, bury it again, and pay people to guard it. It has no utility. Anyone watching from Mars would be scratching their heads.’ I am pretty sure that the elders of our household, who I assume would have 20%-30% of their net worth in the form of gold at any given point in time, would perceive such a statement with anger or would probably be amused by it.


Let me first apprise you of the price of gold in Indian markets. The prices naturally, are governed by the laws of demand and supply, but does this hold true for gold as well? We do not produce or mine enough gold. Hence, to meet our domestic requirements, gold  needs to be imported. When we import gold, we have to pay for it in US Dollars. It pressurizes the economy as the dollars move out while purchasing this gold. Well, one may very well argue that dollar amounts move out for other purposes as well. However, what real industrial utility does gold have? Gold in fact has very limited industrial utility. Most of it goes into bank lockers or into some form of ornaments. Hence, economists state that the money invested in gold, in the real sense is blocked. If this money rolls into the system, it would be much better for the economy.


Having said this, the question still remains whether one must invest in gold. If so, how and where do I buy it? The best way to do this is to buy an ETF (Exchange Traded Funds). ETF is the best and simplest way to invest in gold in the long run. An ETF is like a share, listed on the stock exchange and can be bought and sold like a stock. One unit of ETF is roughly equal to the price of 1 gm of gold. There are 5-6 gold ETFs listed on the exchange, with good liquidity. Your broker will be able to assist you further with this.


How you buy is probably more important. The best way to buy gold ETF on any exchange is to buy using the SIP method. SIP stands for Systematic Investment Planning. A monthly or a weekly SIP ensures that you are buying at all prices. SIP is very effective when one wants to invest and remain invested for a time span of more than five years. In such a long time frame, when you invest on a monthly or a weekly basis, you have a good average rate.


A good investment is the one that is useful when you need it. Remember not to place all your eggs in one basket. A diversified portfolio is always better than putting all your savings in one instrument. For any further queries, please feel free to get in touch with our team.


Written By: Sumeet Jain, CMT
Sr. Analyst 


Written by : blog admin

Gold- Thumbs Down Overall RATE RATE (0.00)

Fundamental on gold

Gold prices lost steam in the previous month after the FOMC announced a third $10 billion slash in quantitative easing, bringing down its monthly bond purchases to $55 billion. Gold prices had a knee-jerk reaction after Fed Chair, Janet Yellen said the Fed would probably end its bullion friendly bond-buying programme this autumn, and could start pushing interest rates higher around six months later. The US non-farm payrolls grew up to 175,000 against market forecast of 149,000 in February. In the previous month,the figure was 129,000. China's first domestic bond default wobbled the foundations of financial market and hit investors' interest, hurting demand from the world's largest bullion consumer. China Gold Association said that Chinese demand might fall by 17% YoY in second quarter of 2014. 

The Euro weakened after data that showed that growth in Germany slackened in March, raising the potential for more monetary easing from the European Central Bank. Data from the Eurozone as a whole plunged compared with February. Earlier during the month, gold prices reached near six-month highs, on persistent, political tensions between Russia and the West over Ukraine along with the ongoing worries of economic slowdown in China. Sanctions by G-8 countries over Russia ignited speculations of serious supply crunch for the yellow metal, which may hit the market as Russia is among the top five gold producing nations in the world. Indian gold imports fell by more than70% in the final quarter of 2013 from 255 tonnes in the year-ago period and are expected to be half the usual levels at 500-550 tonnes in 2014, if new import rules are maintained, a top trade body official said. Furthermore, India's Finance Minister, P. Chidambaram indicated that curbs could be revisited only after the final current account deficit numbers, which are expected to be published early June.

CFTC Gold Report

Market traders in large futures cut back on their overall bullish hedges in gold futures last week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on March28.

The non-commercial futures contracts of Comex gold futures, traded by large speculators and hedge funds, totaled a net position of 117,317 contracts in the data reported for March 25. This was a change of -19,497 contracts from the previous week’s total of 136,814 net contracts recorded on March 18.

The previous week’s total on March 18 had been the highest level of gold net positions since February 5, 2013, when large speculators’ positions equaled 137,465 contracts.

Over the weekly reporting period from Tuesday, March 18 to Tuesday, March 25, price of gold fell from approximately $1,359.00 to $1,311.00 per ounce, according to gold price data from the MarketWatch. 

Last 6 Weeks of Large Trader Non-Commercial Positions



 Technical on Gold


The above figureis of a gold daily chart. It has broken major support of Rs 28200/10grms on MCX division. RSI Indicator was diverging the latest uptrend in the price. MACD Indicator has moved below the centered line. As per the channel, drawn Gold prices may find support at Rs 25500-25000 in the short term where it will touch the lower channel line.

International Spot Gold weekly chart


International Spot Gold weekly chart

International gold failed to move above $1430. It may find support at $1180.

Atthe MCX level, strengthening rupee has helped keep gold price under pressure. RSI has broken the 45 support level. MACD indicator is going to break the centered line. Indicator suggests weakness in prices.

Elliott Wave Count on Gold Weekly Chart:

A major analyst said that the Bull Run of gold is over. Therefore, we may assume that 32450 level in Nov 2012 was the last Bull Run high and after that, correction has started.

As per my Wave count, labels a, b, c in red suggests Corrective Expanded Flat of the Elliott wave principle. As per the Wave count and price extension, price should go up to minimum of Rs 25538 (123.6%) and Rs 22580(161.8%), with the time horizon of next 6-8 months. To conclude, technically, we can say “GOLD THUMBS DOWN”.


Written by : blog admin

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Today’s Poll
Will Nifty Hold 8500 Level till Diwali?

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