India International Gold Convention Gold Outlook. Arvind M G. Senior Analyst, Foretell Business Solutions Pvt. Ltd.

Transcription

1 India International Gold Convention 2007 Gold Outlook Arvind M G Senior Analyst, 25 August, 2007

2 Agenda Overview - Commodity cycles and Gold cycles. Is Gold losing it s shine? Supply/Demand Rising rupee, what it means to Indian jewellery community in the coming months or years. Outlook for the rest of 2007/

3 Overview of Commodity cycles and Gold cycles Commodities Cycles 1st bull from 1823 to 1838 took 15 years 2nd bull from 1848 to 1865 took 17 years 3rd bull from 1878 to 1918 took 40 years 4th bull from 1929 to 1950 took 21 years 5th bull from 1963 to 1980 took 17 years 6th bull from 2001 to?????? years Gold Cycles 1 st bull from 1971 to 1975 took almost 3 years. 2 nd bull from 1976 to 1980 took almost 4 years. 3 rd bull from 2001 to as of now 7 years. Longest in the last three decades. Source :- Courtesy of Marc Faber Ltd 3

4 Gold Bull cycles from 1969 to 2007 Source: - Foretell research team, Bangalore 4 Mar-69 Mar-71 Mar-73 Mar-75 Mar-77 Mar-79 Mar-81 Mar-83 Mar-85 Mar-87 Mar-89 Mar-91 Mar-93 Mar-95 Mar-97 Mar-99 Mar-01 Mar-03 Mar-05 Mar-07 Up 525 % in 15 Quaters Up 190 % in 26 Quarters present bull market longest in three decades Up 279 % in 11 Quaters Period QoQ Spot Gold in $ terms

5 Is Gold losing it s shine? Till date gold in $ terms has yielded just more than one percent Doest it mean in the coming years that gold may lose it s shine as an alternative asset??? Factors likely to drive gold prices :- Supply Demand 5

6 Supply Gold is mined every across world except Antarctic In 2006 South Africa gold production lowest since 1970 Australia has lost its position as the world's second-largest gold producer % Share of total mine production (1970) 9% 5% 4% 1% % Share of total mine production (2006) 3% 3% 11% 7% 6% 8% 14% 67% 10% 10% 27% 11% 4% SA Former USSR Other Canada USA Australia SA Russia Other Canada USA Australia China Peru Indonesia Ghana PNG Source: - Foretell research team 6

7 CBGA-2 Sales 2000 tons sold under CBGA-1 ending in In China has bought 205 tons, In the same period Russia sold 24.3 tons & Brazil has sold 45 tons India s gold reserves stood almost standstill till date Under CBGA-2 so far total reported selling is tons BRIC* nations except Russia others countries reserve stood almost standstill *BRIC Brazil,Russia,India & China 7

8 Demand- Monthly Indian Gold Demand from It s evident from the chart, we Indians buy more gold during the off season January-04 February-04 March-04 April-04 May-04 June-04 July-04 August-04 September-04 October-04 November-04 December-04 January-05 February-05 March-05 April-05 May-05 June-05 July-05 August-05 September-05 October-05 November-05 December-05 January-06 February-06 March-06 April-06 May-06 June-06 July-06 August-06 September-06 October-06 November-06 December-06 January-07 February-07 March-07 Monthly Gold Demand in US $ millions Mumbai Spot Gold Rs/kg 5000 Period MoM Source: - RBI, Foretell research team 8

9 NY listed ETF s continue to drive the prices Mar-07 8-Mar Mar Mar Mar-07 5-Apr Apr Apr Apr-07 4-May May May May-07 4-Jun Jun Jun Jun-07 2-Jul Jul-07 Tons In Trust 17-Jul Jul Jul-07 7-Aug Aug Aug-07 Period March-August Spot Gold In $ per ounce streettracks Gold Shares Spot Gold Source: - Foretell research team

10 US continue to drive the market Period of double-digit inflation GOLD DISCOUNT RATE FED FUND RATE 18.5 Gold In $ per ounce Heavy Central Bank sales Fed Fund & Discount Rate Period of lose money Period *Discount rate is an eligible depository institution is charged to borrow short-term funds directly from a Federal Reserve Bank **Fed Fund rate at which a depository institution lends immediately available funds Source: -Foretell research team 10

11 Dollar Index likely to continue downward trend Source: -Foretell research team 11

12 International Gold Vs Dollar Index Source: -Foretell research team 12

13 US Politics Vs Gold Gold In $ per ounce After Republican party (ruling party) took over power, we notice dollar index has been falling. For the last two years dollar index has been trading between 90 to 80 levels Dollar Index R 1904-R 1908-R 1912-D 1916-D 1920-R 1924-R 1928-R 1932-D 1936-D 1940-D 1944-D 1948-D 1952-R 1956-R 1960-D 1964-D 1968-R 1972-D 1980-R 1984-R 1988-R 1992-D 1996-D 2000-R 2004-R R-or-D "R"- Denotes Republican party (ruling party) "D" - Democratic Party(ruled in 1996) Period Source: - Foretell research team 13

14 Rupee Impact on domestic gold prices Source: - Foretell research team 14

15 Appreciating Indian Rupeewhat it means to Indian Jewellery Community Given India's growth story, Indian rupee is likely to surge Should Indian Jewellery community start thinking seriously about hedging in the exchange? 15

16 Impact assessment Rupee likely to appreciate till levels If International gold trades at $ 700 MCX Gold likely to be in the range of Rs 8500 to 8700 per kgs At what level MCX gold likely to trade 16

17 Outlook Prices immediately looks sluggish in the medium term - between $ A probability that prices may test lows $ Before gold starts it s next up leg towards $ 740 As we approach towards the end of 2007 Prices likely to head rapidly higher till $ in the up coming quarters of

18 Acknowledgement To the entire research team at Foretell for putting up this presentation. Also to Mr. G Srivatsava for giving me this opportunity to present this Outlook. 18

19 Disclaimer There is significant risk in trading leveraged instruments. Foretell or its employees are not responsible for any loss suffered or gained made based on the material contained in this presentation 19

20 Thank You