GOLD CONTINUES TO GLITTER...

The Uncertain times, we are living in, is reinforcing that Gold as the Best Investment Option in times of Distress. Gold Share indices have nearly doubled from October 2008 lows, though Gold has been up by 35%. The strong investment interest in gold has been fueled by concerns about the falling health of the US financial system. US President Obama's stimulus package is not enthusing many.
In these times of tight liquidity, many were pleasantly surprised when Gold Major Newmont's $1.5 billion deal sailed through quite easily, indicating renewed interest in Gold Companies.

The increasing printing and supply of US Dollar will only make the Dollar depreciate further making Gold all the more attractive. Gold's limited supply, rising demand is only adding fuel to the fire. And with the Marriage Season on in India, the World's Largest consumer of Gold, Gold seems to be only on one direction, up.

GOLD FUNDS ARE A GOOD OPTION :
Instead of buying Gold Directly with its associated quality risks, you have the option of Buying Gold through Gold ETFs. Here you do not face the problem of either Storage Risk or Quality Risk as the Gold is bought and sold in Paperless Form. And moreover, it is tax efficient too.

Apart from Gold ETFs, you have the option of investing in Gold Equity Funds like AIG World Gold Fund and DSPBR World Gold fund, which invests in stocks of Gold Mining Companies worldwide. These Funds, however, tend to be more volatile compared to Gold as their fortune also depends on the Equity markets. And, as they invest overseas, they also face Currency Risk. Thus, invest in these Funds, only if you ready to ride out volatility. These Funds are for Medium Risk-Medium Return type of Investors. For others, there is always Gold ETFs like UTI Goldshare, Reliance Gold, etc.

Best of luck,
Srikanth Shankar Matrubai,
Bangalore

Visit http://goodfundsadvisor.blogspot.com for Mutual funds
visit http://equityadvise.blogspot.com for Stocks and Shares

Gold: The Glitter Is Back

Our oil-rich friends in the Middle East are scared. How do I know? Because they are buying gold like crazy!

First, we got the news that Saudi investors spent $3.47 BILLION on gold in a recent two-week period. On a ratio-to-GDP basis, that's like investors in the U.S. spending $131 BILLION.

Why are they doing this? The only explanation I've heard is that the Saudis are turning to gold as a safe haven in the midst of the global financial crisis. And since the financial crisis kicked into high gear in August ... something must be scaring them quite a bit more right now.

Second, Reuters reports that Iran is converting some of its foreign currency reserves to gold. Iran has $120 billion in foreign currency reserves ... there's no details on just how much was shoveled into the yellow metal.

Third, gold dealers in Dubai reported running low on gold during the recent Indian holiday, the Festival of Lights, a traditional time for Indians to buy gold. More than 50% of the population of Dubai originally comes from India. And about 20% of the world's gold is traded in Dubai.

The world is in the grip of economic hard times — over 40 countries are officially in a recession. Japan just joined that unhappy club. And the euro-zone nations are already there. We also know that the forces moving the market now seem to be deflationary, not inflationary. That means the value of the U.S. dollar is going up, and the price of gold is trending lower.

But could our friends in the Middle East be thinking beyond the current deflationary spiral? Gold is traditionally a hedge against calamity. So I ask again, what are the oil sheiks afraid of?

While gold prices are going lower in the short-term as deflationary forces tighten their grip, there are also longer-term forces that are quite bullish for gold ...

Chinese investors' demand for gold is rising. Investment demand hit 38.4 metric tonnes in the first nine months of this year against 24 tonnes for the whole of 2007.

Demand for gold jewelry in China reached 241.6 tonnes in the first nine months of 2008, compared with 302 tonnes for all of 2007, when gold jewelry demand grew by 26%. China is the world's second-largest gold consumer.

Sources in the Indian market and preliminary data on Indian imports point to a strong revival in Indian jewelry demand during this year's third quarter.

In South Africa, gold mining output plunged 17.7% in September compared to a year earlier.

Global mine production of gold declined by 4% year-on-year in the second quarter to 590 tonnes, bringing output in the first half the year to 1,133 tonnes, 6% below the same period a year earlier.
Still, this long-term good news is cold comfort when prices are trending lower in the short-term. So it must be other things driving the Saudis and Iranians into gold.

There are plenty of good reasons people might want to buy gold. Sure, deflation is putting downward pressure on gold ... on paper. But just try buying physical gold anywhere near the paper price.

Pricing in a Government Default?

While gold is traditionally a haven of safety, that's not how it played out over the past couple months. Instead, we saw risk-adverse investors dump gold along with other asset classes and flee to the safety of cash.

Maybe the mighty dollar has more upside. But remember that the U.S. dollar is backed by "the full faith and credit of the U.S. government." Do you have a lot of faith in the U.S. government? I'd say the faith of the world has been shaken by recent events.

And apparently I'm not the only one who thinks that. Take a look at my next chart, which shows the 10-year credit default swap spread on U.S. Treasuries — a form of insurance contract against issuer default.

The cost of insuring against a U.S. government default is soaring. And similar trends exist in the bond markets of Germany and Britain.

I think this is because investors are pricing in the massive bailouts that central banks are throwing at their markets. For instance, the U.S. bailouts will add enormously to our country's already staggering national debt.

According to CNBC data, the cost of all the bailouts that have been going on for months has now hit a total of $4.2 TRILLION!

In fact, Morgan Stanley recently estimated that the 2009 fiscal deficit in the U.S. would reach 12.5%. That's more than twice the previous record of 6% set in 1983.

As a percentage of GDP, the U.S. national debt should pass 70% next year. That's lower than the 122% at the end of World War II. Yet we aren't fighting World War II, are we? That ended rather abruptly — this crisis won't. And the odds are our fiscal picture will get worse, not better.

Under the circumstances, maybe investors in Saudi Arabia and Dubai may just be ahead of the curve. Maybe having some gold — the ultimate safe haven against troubled times — is the right thing to do.

I'm not saying the U.S. government is going to default ... I'm saying the possibility of that happening could be priced in more ways than one. And that's the kind of environment where gold could really shine.

Consider Buying Gold on Dips ...And Hold for a Wild Ride



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Bullish View on GOLD continues.....

For thousands of years, gold has been valued as a global currency, a commodity, an investment and simply an object of beauty. A growing number of financial advisors are speaking out about the benefits of owning gold. Gold can be a good tool in developing a strong portfolio and reaping greater profits.
In an attempt to understand what is happening to the gold market and where it is heading in the near future, this interview gave me a lot of insight and thought it could be useful to you. Keyur Shah, Associate Director, World Gold Council (WGC) had this to say…..
Taking the long term perspective, will gold continue to stand as a safe haven for investments?
Gold has always been a time-tested safe asset class giving a reasonable rate of return in the long run. This intrinsic quality of gold gets highlighted during turbulent economic times such as now. At present amongst all asset classes, gold is the best performer. Hence, most analysts say that 10%-15% of ones portfolio should be allocated to gold.
What solution would you suggest against high volatility in gold market?
Price volatility is now market reality and one cannot wish it away; however it will not adversely affect investors with a long term view.
What is your take on gold exchange traded funds (ETFs)? How do you think ETFs affected gold prices?
While ETFs have taken off very well in western countries, in India it is growing at a slow rate. This could be because of cultural mindset of Indian consumers who would rather touch, feel and control their own gold instead of owning it in dematerialized form. It’s a myth that ETFs affect the gold price. Data shows that a major portion of investors in ETFs are sticky retail investors with a long term view.
Where do you think the Indian gold market is likely to head in the next few years?
In the past few years, India has been consuming an average of 700-800 tons per annum and we expect the same trend to continue and even improve especially in the light of current economic meltdown at a global level (consumer confidence in gold becomes stronger during such turbulent times).
What is WGC’s role in the promotion of consumption of gold jewellery in India?
India is the world’s largest consumer of physical gold and a very mature/ time-tested gold market. In India, WGC promotes consumption of gold jewellery via long-term strategic (brand building, development of youth segment, retail transformation) and short-term tactical (shopping festivals, promotion of festive occasions) activities.
What kind of a demand graph can we look forward to as we are nearing 2009? What factors will trigger a northward trend in the demand for gold?
While we are yet to collate the October-December 2008 figures, as per the last report released by us, India witnessed a 29% year-on-year rise, in tonnage terms, in the July-September 2008 period. Looking forward, we believe the uncertainties in the financial markets will continue, therefore driving investors towards gold because of its safe haven characteristic.




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EXTRAORDINARY OUTLOOK FOR GOLD

Dear All,
I received an interesting article on Gold today morning from Kotak Mutual Fund and you have to read it. It is very very interesting.
The damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.



This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.



Find below an extremely interesting link which details why gold prices have been depressed and why dollar has been outwardly biddish despite deteriorating fundamentals. All along the article are very interesting snippets from industry veterans and analysts on their outlook on the current happenings and its impact on gold going forward..

The link is :
https://www.golddrivers.com/dispatches/tgdrall/ShowArticle.aspx?id=b0c7762f-5e47-4e99-b621-5581b484c167

So a good moment to get in gold stocks now?

According to Frank Veneroso, a well known gold market strategist, yes, he recently said:

I think gold might have a very explosive upside in the current environment. Gold stocks are now extremely cheap relative to the price of gold with the commodity bust, gold mining costs are falling. I think money managers should now be buying gold stocks.

So, dear investors,, can you ignore investing in DSPBR World Gold Fund or AIG World Gold Fund?. Obviously not.
Think again and invest at least a portion of your investible surplus is Gold Funds.
Best of luck,
Srikanth Shankar Matrubai


Also visit my other blog goodtravelplanner.blogspot.com, http://buycall.blogspot.com and http://indiahotelstariff.blogspot.com/

BUY GOLD NOW BEFORE IT BECOMES EXPENSIVE

Dear all,
The Global Financial Crises we are witness to today is unprecendented and many Economies, (even Developed ones) are on the brink of an looming impending Recession. In response, Central Banks, with US leading from the front, are pumping in tonnes and tonnes of money by printing more and more Dollars. But the disaster waiting to happen is, that this Oversupply of Paper Currency is not backed by any Real Assets such as Gold. Which means, that the Currency that the US Govt is pumping is only a Paper churned out from Printing Presses.
What this creates is, that Gradually the Confidence in US Dollar will reduce and its VALUE too decrease (Remember Zimbabwe?).


This is where a proxy currency such as "GOLD" holds intrinsic value, since the supply of it is limited and which is not in control of any Central Bank. Gold has a unique characteristic of "storage value", vis-à-vis paper currencies. Paper currencies tend to lose value over a period of time due to inflation (loss of purchasing power) caused by over supply as it leads to a situation where more and more currency is required to buy the same amount of goods.
Another shocker is that the Gold Reserves held by US, UK and other Developed Countries on threshold of depression has fallen considerably. While the ratio of Gold to Currency was 141.2 tonnes to 1bn$ in circulation, now it is ONLY 10.7tonnes to 1bn$ in circulation. This shows that More paper Currency is in circulation backed by Less Gold. To correct this analomy, the US needs to increase its Gold Reserves by MORE than 13 times!!!!
This will only Fasten the process of Falling Confidence and Faith in the US Dollar and hasten the image of Gold as the Saviour to protect over the Long Term.
Citigroup, in a recent report has said that gold will touch US$ 2,000 per ounce. That's 2.5 times the current price of the yellow metal at US$ 800. The firm believes the measures taken to tackle the financial crisis will not stabilise the global economy. Instead they will lead to a painful depression. As per the bank, the financial system has tripped beyond recovery, towards depression. In this scenario, there will be a flight towards gold. In fact, according some reports, China plans to add nearly 6 times its current gold reserves of 600 tonnes in a move away from foreign paper currencies.


With the financial crisis not over yet and the recession looming large, central banks would continue to inject more and more money into the financial system. Thus the debasement of the currencies will continue making Gold more and more attractive as a hedge against the dwindling purchasing power and the loss of faith and confidence in paper currencies.

Gold is seriously undervalued.

Buy gold before it gets expensive.

On where to invest, you can visit http://goodfundadvisor.blogspot.com/2008/12/dspbr-and-aig-world-gold-funds.html
http://goodfundadvisor.blogspot.com/2008/09/buy-gold-now.html
http://goodfundadvisor.blogspot.com/2008/09/is-dspml-world-gold-fund-good-buy.html
Best of luck,
Srikanth Shankar Matrubai


Also visit my other blog goodtravelplanner.blogspot.com, http://buycall.blogspot.com and http://indiahotelstariff.blogspot.com/

DSPBR AND AIG WORLD GOLD FUNDS - BEDAZZLING BEAUTIES

The equity market has finally seen a ray of hope and so have equity-linked mutual funds (MFs). After staying in negative territory for months on
Gold
end, the trailing one-month returns of most schemes have finally entered the positive zone.

While a majority of the equity schemes generated one-month trailing returns in the range of 1-6 % as on December 17, ’08, there are a few schemes whose returns are as high as 10-11 % for the same period.

However, the biggest gain during this period has been observed in the case of world gold funds. Currently, there are only two such funds in the country — DSP BlackRock World Gold Fund and AIG World Gold Fund — and both these funds have shown an outstanding recovery. While the former’s one-month trailing returns stand at a handsome 43%, the latter has managed to generate 35.2% during the same period.

These gains can be attributed to the outstanding recovery seen in the stock prices of gold mining companies across the globe. Over the past one month, the stocks of many of the gold mining companies in which these gold funds invested have generated high returns ranging from 48-70 %. These include stocks like New Crest Mining, Barrick Gold Corp, Newmont Mining, Lihar Gold and Randgold Resources, among others. The FTSE All Gold Mines Index and S&P 500 Gold Index have both returned about 65% during the period.

Gold funds are different from gold exchange-traded funds (ETFs) and should not be confused with the latter. Gold funds are MFs that invest primarily in the stocks of companies that are actively into mining of gold and other precious metals like platinum, silver and also diamonds. Gold ETFs, on the other hand, invest solely in pure gold. Since gold funds invest in equities of gold mining companies, their correlation with the equity market is much higher than that with gold bullion, and hence, they are known to move in tandem with the equity market.

Both gold and equity have gained momentum in the past month, despite the commonly known inverse relationship shared by these two asset classes. While on the one hand, the BSE Sensex has gained about 12.7% since November 18, ’08, on the other hand, gold prices in India have risen about 10% since then. If one were to analyse the returns on a global scale, international gold prices have gained about 17%, while the Dow Jones has increased about 5% over the same period. Hence, it is interesting to see these two asset classes moving in sync with each other, even though they had a high negative correlation over the past one year, at -0 .5.
While it has not been long since the first gold fund was introduced in India, its performance over the past one year throws up some interesting
Gold
trends. The country’s first gold fund gained immensely in the beginning of the current calendar year, when equity markets across the globe had begun to slide.

Gold funds and gold ETFs had both gained immense popularity then, as they were among a handful of products which generated positive returns in a highly negative terrain. However, the financial crisis that gripped markets across the globe also enveloped gold funds, indicating that gold funds are influenced more by movements in the equity market than by gold prices.

However, the two gold funds in India are not active schemes, but rather the feeder funds. Thus, instead of investing directly in stocks, these funds invest in mining companies through another fund, which is the parent fund incorporated outside India.

While DSP BlackRock’s gold fund is more than a year old in India, AIG’s fund was launched in the current calendar year and has just completed about six months. However, the parent funds of both fund houses are more than a decade old. While BlackRock Global Funds — World Gold Fund was launched in 1998, AIG PB Equity Fund Gold was initiated way back in 1992.



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