Gold, Gold, Gold Strength in the Indian Rupee has helped to drive Gold prices

Trading activity at the DGCX, in September, was very similar to the previous month as wary traders preferred to tread cautiously in the commodity markets in wake of increased price volatility that drove gold, crude oil prices and a few currencies to their highest levels in several decades.

Gold futures prices recorded a massive jump of nearly 10 per cent, climbing to their highest levels in almost 28 years while Euro jumped by 4.45 per cent to reach an all-time high against the US dollar. The prices of silver futures registered a big jump of 13.61 per cent during the month. A total of 68,558 contracts valued at $3.41 billion were traded in September.

Mumbai, Oct. 12 In recent times, returns on investment in gold in the domestic market have not kept pace with other asset classes. Lower returns on gold investment have disappointed investors. Rising international prices as reflected in high domestic market has resulted in a slowdown in physical consumption demand.

The stock market has rallied more robustly than many asset classes. Lot more investor interest is diverted towards it. Internationally, gold prices have risen too, reaching a 28-year high of $750 plus recently. Crude is also up around $80 a barrel. Wheat and other agri-commodities have rallied too for various reasons.

Interestingly, investment options now stand widened. Equities, energy and agri-commodities have appreciated much faster than gold has. Indeed, for a considerable part of this year, gold languished and failed to break critical upside barriers in the international market which sent negative signals to domestic investors.

Despite rising global gold prices, the domestic market bucked the trend since the rupee continued to gather strength steadily vis-À-vis the dollar. So, the landed cost of imported yellow metal in India was on occasions lower despite firmer overseas advices. Although gold prices in the domestic market remain range bound between Rs 9,500 to 9,600 per 10 gm, overall volatility in the gold market is keeping investors at bay, said leading jewellery company proprietor.

Investment in gold over the year has given modest returns of 9-10 per cent against usual expectations of 18-24 per cent, said Mr. Prithviraj Kothari, Director of Riddisiddhi Bullions Ltd. Last year most purchases of the yellow metal where contracted at Rs 8,800 per 10 gm.

Investors also don’t see a greater upside from the current price levels, even if prices where to reach Rs 10,000 per 10 gm, he added. Investors have diversified their investment into equity, real estate, and associated products which have given better yield. For jewellery retailers and wholesalers costing is an issue with limited appreciation in prices.

On average monthly demand in Mumbai this time round the year is around 35 to 40 tonnes. However there is hardly 100 kg demand a day of the yellow metal against average 1,300 kg a day, said Mr. Kothari.

Demand is slowing down for investment, although with people having earned handsome returns in the equity markets demand for fashion jewellery can be expect to pick up this seasons, he added.

Counters at banks that sell gold are bereft of commercial activity as investors are wary of purchasing the traditional safe haven commodity at higher levels as well amidst volatility, said an official from Axis Bank, adding that customers are waiting for some correction.

However there is no suggestion that the tradition and culture in gold is taking a turn.

Once there is profit booking even partial in the booming equity markets, money has to flow into the likes of bank deposits, gold, real estate, said Mr. Moses Harding, Executive Vice President of Indusind Bank.

Of the total traded volume (68,558 contracts) during September, gold futures remained in the forefront, contributing 42,323 contracts. The British pound contract led the table in the forex segment, accounting for a volume of 21,783 contracts out of a total of 25,692 contracts traded. Euro futures traded on the Exchange saw a rise of nearly 7 per cent over the previous month while the traded volume in the Indian Rupee futures leapt by 68 per cent.

Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.
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SENSEX GETS HIT HARD!!!!
The market snapped three-day rally and Sensex lost nearly 400 points for the day, as correction in Asian and European markets prompted traders here to book profit.

The market had made a sharp recovery from lower level in mid-afternoon trade from initial fall but the recovery proved short-lived and the market soon weakened again. Reliance Industries declined sharply from day's high. Most of the sectoral indices slipped into the red. European markets, which opened after Indian markets, were weak. Asian markets, which opened before Indian market, were subdued to weak.

The BSE 30-share Sensex ended down 395.03 points, or 2.1 per cent, to 18,419.04. It hit a intraday low of 18,336 in late trade. At day's low of 18,336, Sensex had declined 478.07 points for the day.

The Sensex had surged 1,323 points in last three trading sessions till Thursday.

The market had witnessed a recovery from lower level in early afternoon trade from an initial slide as political worries eased after Congress president Sonia Gandhi reiterated that she does not want early election. India's index of industrial production (IIP) data showed healthly growth in August 2007. Inflation eased a little bit. Both IIP and inflation data hit the market in early afternoon trade yesterday. Mid-cap and small-cap indices outperformed Sensex. Finance Minister P. Chidambaram yesterday said the economy can sustain a growth rate of 9 per cent, but the growth may dip below 9 per cent in case of some turbulence. Chidambaram said the steep rise in stock markets is cause for concern. The rally is being driven by large inflows of overseas funds, and the markets may cool down after some time, he added.

India's industrial output in August 2007 rose 10.7 per cent from a year earlier, higher than upwardly revised annual growth of 7.5 per cent in July 2007 due to mining, manufacturing and electricity production, data released by the government showed on Friday, 12 October 2007.

Manufacturing production rose 10.4 per cent in August 2007 from a year earlier, compared with provisional annual growth of 7.2 per cent in July 2007.

Elections are still far away and the government has one-and-a-half years to complete, Prime Minister Manmohan Singh said yesterday. The prime minister said if the India-United States civil nuclear deal does not come through, it will be a disappointment.

India's wholesale price index (WPI) rose 3.26 per cent in the 12 months to 29 September 2007, lower than the previous week's 3.42 per cent rise, government data released yesterday showed.

Capital goods stocks declined sharply in late trade. L&T (down 3.61 per cent to Rs3,360.75), Bhel (down 3.3 per cent to Rs2,341.35) and Suzlon Energy (down 4.5 per cent to Rs1,698.10) edged lower. BSE Capital Good index was the major loser from the sectoral indices on BSE.

Realty stocks witnessed heavy selling. DLF (down 5.76 per cent to Rs865.65), Indiabulls Real Estate (down 2.7 per cent to Rs634.85) and Unitech (down 0.77 per cent to Rs 339.85) edged lower. BSE Realty index was the second highest loser from sectoral indices on BSE.

Banking stocks lost ground as strong IIP data for August 2007 dashed hopes of a near term rate cut by RBI. ICICI Bank (down 3.37 per cent to Rs1,053), State Bank of India (down 4.23 per cent to Rs1,862.30) and HDFC Bank (down 1.76 per cent to Rs 1,430.85) edged lower.

Auto stocks declined. Tata Motors (down 3.41 per cent to Rs802.10), Bajaj Auto (down 2.96 per cent to Rs2,542.30), Maruti Suzuki India (down 1.95 per cent to Rs1,096.80) edged lower.

Cipla declined 3.3 per cent to Rs184.75.