Gold sinks over $60 to lowest since July 2011 Prices hit by technical selling; silver drops 5.3%

By Myra P. Saefong and Carla Mozee, MarketWatch


SAN FRANCISCO (MarketWatch) — Gold futures sank Friday, poised to settle at their lowest level since July 2011, as recent cuts to price forecasts continued to hurt sentiment, prompting investors to lose confidence in gold as a safe-haven investment.

Gold for June delivery GCM3 -4.28%   extended losses after downbeat U.S. retail-sales data, dropping $67.30, or 4.3%, to $1,497.60 an ounce on the Comex division of the New York Mercantile Exchange, on track for a weekly fall of nearly 5%.

“It’s pure panic bedlam on enormous volume,” said Gene Arensberg, editor of the Got Gold Report.

Based on most-active contracts, prices haven’t settled at a level this low since July of 2011.

Gold also fell along with other commodities as the dollar rose on a weak batch of U.S. data and as the psychological impact of potential selling of the precious metal from Cyprus continued to take a toll.

Gold these days “does not seem to respond adequately to the current financial and geopolitical situation,” said Frederic Panizzutti, senior vice president at MKS Group. “The rumors yesterday about Cyprus possibly selling some gold from its Central Bank reserves had a psychological impact resulting in some selling despite the fact that the amount of gold being mentioned could easily be absorbed by the market.”

Cyprus remained in the headlines Friday amid speculation the government was going to ask for more bailout money, which rattled commodities and underpinned the dollar. The country denied it would seek more help.

But despite the troubles in Cyprus, which are usually supportive for gold as a safe haven, investors have focused on Goldman Sachs’s cut to its gold forecast for 2013 to $1,545 an ounce, down from a prior forecast of $1,610. And minutes of the latest Federal Reserve meeting showed members were at odds about when to stop quantitative easing.

“The speculative funds are near-record short gold futures, so it is easy to understand why Goldman would make such a call, but with the trouble heating up in Europe again, and bonds being bid higher today, the move in gold is somewhat counterintuitive,” said Arensberg.

Overall, gold investors have now created an illusion that the metal is no longer a safe haven and that more declines are in the offing, said Chintan Karnani, an independent bullion analyst based in New Delhi.

More pressure

Also weighing on the dollar-denominated metal Wednesday, the dollar got a bid after poor U.S. economic data. Retail sales dropped by the biggest amount in nine months, falling 0.4% as Americans spent less at gasoline stations and many other stores in March, and exceeding the 0.1% drop that was expected. Oil prices also fell after that data was released.

The dollar index DXY -0.0024%  , which measures the greenback against a basket of six major currencies, rose to 82.267 from 82.153 seen in North American trading late Thursday.

Other data showed producer prices falling sharply in March.

Silver futures down 0.63% on lower global trend

NEW DELHI:

 Tracking a weak global trend, silver prices moved down by 0.63 per cent to Rs 51,450 per kg in futures trade today as speculators offloaded their positions.

At the Multi Commodity Exchange, silver for delivery in May moved down by Rs 325, or 0.63 per cent to Rs 51,450 per kg in business turnover of 5440 lots.

Similarly, the white metal for delivery in July declined by Rs 313, or 0.59 per cent to Rs 52480 per kg in 342 lots.

Market analysts said speculators offloaded their positions in tandem with a weak global trend, that mainly pulled down silver prices at futures trade.

Meanwhile, silver fell by 1.18 per cent to $ 27.65 an ounce in New York last night.

Silver futures down on weak global cues

NEW DELHI:

Silver prices fell by 0.76 per cent to Rs 51,280 per kg in futures trade today as speculators offloaded their positions in tandem with a weak global trend.

At the Multi Commodity Exchange, silver for delivery in May month fell by Rs 394, or 0.76 per cent to Rs 51,280 per kg in business turnover of 18,304 lots.

Similarly, the white metal for delivery in July declined by Rs 397, or 0.75 per cent to Rs 52,285 per kg in 1,256 lots.

Market analysts said speculators offloaded their positions, tracking a weak global trend mainly pulled down silver prices at futures trade.

Meanwhile, silver lost one per cent to 27.37 an ounce in London.

The math gets skewed for large commodity traders

Monday, Apr 1, 2013, 6:01 IST | Agency: DNA

Vijay Bhambwani

CTT can change trend in volume growth as impact costs rise.

Today will see the advent of turnover tax (0.01% or Rs1,000 for every Rs1 crore of trade initiated) for the first time on all non-agricultural commodities.

Prima facie, the amount may seem negligible for a retail investor as his / her turnover intra-day is not sizable. But for high frequency traders, algo traders and arbitrageurs, the levy would cut into profits because of their modus operandi – which is to initiate trades in large to very large quantities and reverse positions on small profits or losses.

Their profit depends on the economies of large-scale exposure. Typically, the USP (unique selling proposition) of this type of trading is keeping costs down to the barest minimum. Brokers offer such traders deeply discounted rates of brokerage, while statutory charges are the only level playing field.

Ramping up volumes helps brokers too, since they command a higher component of the total exchange traded volumes, which, in turn, has its own perks.

For the markets and participants alike, there are tangible benefits as well – higher volumes invariably bring efficient price discovery mechanisms and wafer-thin impact costs.

Impact cost is one of the first things large players look for before deploying funds. It’s extremely critical as it is the difference in price between the best seller (or buyer) at a particular price point and the next best seller (or buyer).

If the impact cost is efficient, there will be ample buyers and sellers at every tick, thereby making large-sized trades an easy and inexpensive proposition. The market is then said to “have depth.”

On the other hand, if buyers (or sellers) are few and far between, accumulating large positions becomes a very expensive and undesirable exercise. It hits the take-home profit significantly.

Big players usually avoid markets with high impact costs. The commendable growth in the turnover of Indian commodity exchanges has been partly due to their cost efficiencies and partly due to the novelty factor.

With the imposition of the CTT, the cost efficiency may just take a hit as high frequency traders will face a hurdle in terms of a hit in their take home profits.

There is also another aspect to the timing of imposition of the CTT: in a trending market (bull or bear), price moves are relatively large and the percentage returns on a trade are higher compared with a non trending (sideways) market.

A trader can tweak the exit price to factor in such additional costs as the CTT.

Unfortunately, the CTT has been imposed in a market where price moves are constrained due to global fears and the markets are more unrelenting in yielding profits to the high frequency traders.

Now behavioural finance principles say markets tend to come to terms with shocks over a period of time, and the CTT will be no exception. However, the future rate of growth in turnover will be a worrying point.

There is also the factor of the parallel market trading system (called ‘dabba’ trading) wherein trades are routed through illegal and off-the-books and therefore non-exchange platforms. The parallel trading system is one of the most persistent one anywhere in the world, especially in Tier II and Tier III cities in India.

There are legitimate fears that the parallel systems may just get a boost from the imposition of the CTT, since such levies are unheard of in the illegal betting system.

If empirical evidence is anything to go by, we have seen the Nifty trading volumes shift to the Singapore markets (SGX) due to a more friendly margining system and pliable trading hours.

The revenue loss to the exchequer cannot be wished away. More importantly, the prospect of loss of future business – the most critical aspect close to the heart of any capitalist endeavour.

With the future of commodity market turnover being closely linked to the permission to institutions, NRIs and FIIs (Indian commodity exchanges are currently fairly closed trading markets), the CTT may prove to be a stumbling block since price discovery mechanism and impact cost analysis may lose efficiency.

As mentioned earlier, large players will want very high degree of efficiency in terms of impact costs before they deploy money in our commodity markets.

Bhambwani is the author of ‘A Traders Guide to Indian Commodity Markets’ – India’s first commodity trading guide and invites feedback on vijay@bsplindia.com

Free life time commodity Tips

http://www.dnaindia.com/money/1817666/report-the-math-gets-skewed-for-large-commodity-traders

MCX Silver likely to trade range-bound till US- non farm payroll data release

(Commodity News word): On the MCX, silver for March delivery traded with minor change in prices and is likely to trade range-bound for today's session till the release of US - non farm payroll.

For intra-day, silver may trade sideways to bearish till the release of US payroll data. Silver on MCX for March delivery has support at 57700, if the commodity falls below the range then it could see a test of 56900 level.

The resistance is now likely to be seen at 58700, a move above could see prices testing 59200 for the commodity.

“Those traders who are holding long position in silver for March delivery should maintain stop loss of 57700 for today. Intra-day traders should wait and watch till the release of US data before entering into short term trades,” said Amrita Mashar, Research Analyst at Commodity Online.

The demand for risk-on assets such as gold was dampened by the US jobless claims which came in higher than last week which resulted in profit taking also.

End-of-the-month position squaring, profit taking from short-term traders, and pre - Job data report positioning were the the major reasons for sharp fall in prices on Thursday.

Bullion prices are also affected by stronger than expected Chicago PMI in early trading session.

COMEX silver for March delivery was seen trading at $31.380 a gain of $ 0.029 or 0.09% as of 03.16 PM, IST. On India's MCX, silver for delivery on March 5 was spotted trading at Rs.57781 a fall of of 0.12%.

MCX Silver likely to trade range-bound till US- non farm payroll data release

(Commodity News word): On the MCX, silver for March delivery traded with minor change in prices and is likely to trade range-bound for today's session till the release of US - non farm payroll.

For intra-day, silver may trade sideways to bearish till the release of US payroll data. Silver on MCX for March delivery has support at 57700, if the commodity falls below the range then it could see a test of 56900 level.

The resistance is now likely to be seen at 58700, a move above could see prices testing 59200 for the commodity.

“Those traders who are holding long position in silver for March delivery should maintain stop loss of 57700 for today. Intra-day traders should wait and watch till the release of US data before entering into short term trades,” said Amrita Mashar, Research Analyst at Commodity Online.

The demand for risk-on assets such as gold was dampened by the US jobless claims which came in higher than last week which resulted in profit taking also.

End-of-the-month position squaring, profit taking from short-term traders, and pre - Job data report positioning were the the major reasons for sharp fall in prices on Thursday.

Bullion prices are also affected by stronger than expected Chicago PMI in early trading session.

COMEX silver for March delivery was seen trading at $31.380 a gain of $ 0.029 or 0.09% as of 03.16 PM, IST. On India's MCX, silver for delivery on March 5 was spotted trading at Rs.57781 a fall of of 0.12%.

India infrastructure sector outlook mostly negative, govt initiatives encouraging: India Ratings

(Commodity News World): India Ratings has maintained an overall negative outlook for Indian infrastructure projects for 2013, considering project companies’ continued weak credit profiles. However, some sub-sectors have a split outlook. The outlook for power projects remains negative while certain pockets in the transportation sector have a stable outlook. 

The agency observes that a range of recent policy initiatives announced by the government are encouraging and have kindled a sense of optimism among market participants. However, it believes that the process of addressing fundamental risks through concrete and sustained on-the-ground actions to repair damaged credit quality is likely to be protracted. The policy initiatives include a presidential directive to the state-owned Coal India Ltd to sign fuel supply agreements, financial restructuring of distribution utilities, constitution of the Cabinet Committee on Investments and the likely introduction of the Land Acquisition Bill in the ensuing Budget session of Parliament. 

India Ratings expects that in 2013 a number of projects are likely to default on their bank debt obligations. Alternatively, lenders might be compelled to approve forced debt restructuring packages. This is in view of their weak financial structures and multiple risks including construction delays, plant stabilisation issues and fuel supply constraints in the power sector and traffic under-performance in the transportation sector. Reduced sponsor capacity to extend support would also likely contribute to this phenomenon. In a majority of the agency’s rated infrastructure projects, sponsors have played a significant role in preserving the credit profile of their projects. Deterioration in sponsor’s profile will impair their ability to keep supporting projects that have a low economic value. 

Some of the macro-economic variables – a pick-up in GDP growth rate, abatement of inflationary pressures and the expected drop in interest rates – may turn favourable during 2013. This may result in cash flows of infrastructure projects experiencing some improvement though the ‘lag’ effect would imply that benefits are unlikely to accrue immediately.

India Ratings maintains a negative outlook for power projects. Many projects face protracted delays in completion – either because of technical issues such as longer plant stabilisation or due to slow land acquisition for plant area, constraints in developing railway and transmission infrastructure and delays in operationalising captive coal mines. Fuel shortage, off take risks and counterparty credit profiles are compounding the issues faced by these projects, making them vulnerable to ratings downgrades. 

Construction delays and traffic underperformance will remain the two most important rating drivers for toll road projects in 2013. Many projects exhibit stable characteristics with drastic rating downgrades averted only on account of expectation of continued sponsor support to fund cost overruns and/or bridge marginal revenue shortfalls in case of operating assets. The ratings of availability-based (annuity) road projects will be stable in 2013 because of low revenue risks and simple maintenance requirements considering the operator-cum-sponsor’s track record in the sector.

The regulatory clarity that has emerged from the recent orders on project costs and the levy of airport development fee has provided relief to airport credits. However, global economic uncertainties and slowing growth in India coupled with rising air fares have led to negative growth in domestic passenger enplanements; international passenger traffic has grown at a slower rate. The agency views this fall in passenger enplanements as cyclical and believes that it is unlikely that long-term forecasts would not be achieved, given the strong growth recorded over the last six-seven years