Outlook on Precious Metals, Gold, Silver: JP Morgan, BoA Merrill Lynch , Morgan Stanley , Goldman Sachs, Citi

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Precious Metals to Shine :: Edelweiss, link

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How to invest in silver:: Business Line

Unlike gold, which is available in the form of exchange traded funds, you can buy silver only from a bank or a jeweller. Silver coins from banks are expensive as they include charges for the tamper-proof packing and an assay certificate.

A 50-gm silver coin of 24 carat purity from HDFC Bank costs Rs 3,220, but the same coin from a jeweller costs Rs 2,500 in Chennai (as of January 14). Jewellers levy casting charges (around Rs 1,750/kg) apart from a 1 per cent sales tax.

Buying silver in the form of jewellery or artefacts is, however, far more expensive than buying coins. These suffer a making charge of 10 per cent or more and a melting charge of 15 per cent upwards at the time of resale, which lowers effective returns.

You can buy silver in the commodity futures exchange too, but the contract sizes are large. The smallest contract in silver (silver micro) is traded in units of 1 kg and delivered in minimum lots of 30 kg.

The initial margin one would have to pay when taking a position is 5 per cent - Rs 2,200. This apart, you will pay brokerage, STT, stamp duty and exchange levy, working out to another Rs 200-250. If you don’t intend to take delivery, you can roll over the contract, but the mark-to-market margins can be significant.

There is no silver ETF in India. Buying silver in the electronic spot market is also ruled out with the National Spot Exchange shut. The only other option for investing in silver is to buy silver ETFs listed in the US market. For this you need to first open an account with a stock broker who offers a platform to invest in global stock markets.

However, remember that silver doesn’t offer the haven qualities of gold because of its industrial character.

Chirag Mehta, Fund Manager-Commodities of Quantum Mutual Fund, says “Silver isn’t a good investment option for the layman. Half of global silver demand originates from industrial uses. Thus, it has a tendency to move with equities and perform badly when things turn difficult. In terms of return characteristics, silver is half copper and half gold. It is a risky bet compared with gold.”

Yellow or White?:: Business Line

In the investment sweepstakes, silver has always been regarded as the poor cousin of its more glitzy relative — gold. Therefore, can silver deliver in a year where gold is out of favour?

Gold and silver move in a lockstep with a correlation of 0.8-0.9. But, in times of an economic recession, silver behaves more as a commodity rather than as a precious metal. Take, for instance, the white metals’ behaviour in 2011. That year, though gold did well (up 11 per cent), silver prices corrected (down 9 per cent) tracking industrial metals. Silver’s correlation with gold dropped to a low of 0.3 that year. The year 2008 is also a case in point. In 2008, when the US economy slipped into recession, gold closed the year with a 1 per cent return, but silver dropped 3 per cent.

However, in good times of the economy, silver prices rise faster than gold on industrial demand. In 2012, economic revival hopes saw silver surge out of the gate with a 5 per cent return even as gold made only a 2 per cent return. Copper gave a return of 4 per cent that year.

2013 was an unusual year — havens didn’t do well and industrial metals too faced heat. But now it looks like assets that play on global economic recovery may again do well. Silver may move in the direction of industrial metals.

Technically, the white metal could go as high as $24.25/ounce. MCX Silver (Rs 45,136/1000 gm) can go to Rs 49,000 and if volumes support even rise to Rs 51,420. However, one risk that stays is the failure of economic recovery. If this happens, silver would have lost more than gold at the end of the year, but it would have fallen less steeply than copper.

Silver lining your portfolio:: Business Line

Technicals: Gold (Rs 30,734), Silver (Rs 49,709), Crude Oil (Rs 6,045), Natural Gas (Rs 227.3) :: Business Line

Gold-silver ratio signals a bearish outlook :: Business Line

Short-term outlook for silver mixed :: Business Line

Silver is mainly used in making jewellery, coins and utensils. It is also used in the electrical and electronics sector.

The Reserve Bank of India’s provisional data show that silver imports dropped by 61 per cent to $1.98 billion in 2012-13 from $5.08 billion in 2011-12. Imports could fall further as the Government has increased the Customs duty for silver to 10 per cent from 6 per cent last month. The Ministry of Mines expects annual silver demand to double and surpass 6,000 tonnes by 2016-17.

Data from the Silver Institute as of 2012 show that Mexico is the world’s largest producer followed by China and Peru. India holds the 13th place. Global production increased by 4 per cent in 2012 to 787 million ounces (Moz) from 757 Moz in 2011.

In this week’s dissector we take a look at the future of global silver spot price and India’s Multi Commodity Exchange (MCX) futures price.

LONG-TERM VIEW

The spot price has closed higher by 1.4 per cent this week at $23.85 a troy ounce and the MCX benchmark contract is at Rs 54,940 a kg , up by 3.25 per cent for the week.

The global spot price of silver is in a strong downtrend since recording its record high of $49.8 in April 2011. Crucial resistances are at $25, $26.2 and $27.5. A decisive break above $27.5 is required for the long-term downtrend to reverse. Below $27.5, one should not be surprised to see another fall to $16-15 levels in the coming months. On the contrary, if $27.5 is broken decisively, then it can rally to $32-35. However, the possibility of a rise to $32-35 levels looks less probable.

MCX futures are currently witnessing a corrective rally after a sharp fall from Rs 73,600 in April 2011 to Rs 38,536 in June 2013. This corrective rally is facing resistance in Rs 59,500-60,500 region and is keeping the overall downtrend intact. If the pull back from this resistance level continues, then there is a danger to see a fall to Rs 41,000-40,000.

An eventual break below Rs 40,000 can test levels of Rs 26,000-25,000 on its way down. If the support at Rs 40,000 manages to hold up, then a broad sideways range between Rs 40,000-60,500 can be seen for some time. On the upside, the chances of an immediate break above Rs 60,500 are less. But a breach above this level, can test new highs surpassing the earlier high of Rs 73,600.

MEDIUM-TERM VIEW

The medium-term outlook is looking weak with a “grave stone” reversal pattern on the MCX contract’s weekly candle chart. Resistance is at Rs 56,100, and then at Rs 60,000-60,500. Having said this, the contract can fall to Rs 45,500-44,000 while it remains below Rs 56,100.

Although an intermediate break above Rs 56,100 cannot be ruled out, chances for the contract to breach Rs 60,500 look bleak.

SHORT-TERM VIEW

The short-term view for the MCX contract is mixed as the current price hovers between the support region of Rs 53,000-52,000 and the resistance zone of Rs 57,300-57,500.We will have to wait for a break either below Rs 52,000 or above Rs 57,500 which would give the direction for the short-term.

A breach below Rs 52,000 can take the contract lower to Rs 49,000-48,000, while a break above Rs 57,500 can take it higher to Rs 60,000-60,500.

Commodities Strategy Silver: A Less Than Glittering Outlook  Citi

Commodities Strategy
Silver: A Less Than Glittering Outlook
 Long run upside potential for the silver price is limited — Given the extent of the
April fall in the silver price, a stronger rebound would still be expected. However, we
believe that any price moves back towards a $27-28/oz level will represent renewed
selling opportunities. Looking further forward, after nearly a decade of rising silver
prices, we expect the combination of growth mine supply, and sluggish demand to
continue to keep silver prices under pressure, though volatility will remain a
characteristic of the market.
 Muted silver industrial demand growth is expected — We believe that cuts in Feedin-
Tariffs, industry consolidation due to overcapacity and reductions in silver use during
the manufacturing process will cause silver demand from the photovoltaic industry to
fall sharply over the next three years. Our view is that this will place a drag on silver
industrial demand and we forecast it to grow at modest rates of 3.5% in 2013, 3.9% in
2014 and 3.7% in 2015.
 Silver mine supply growth to continue — We expect that total mine supply will
increase by 8 million ounces in 2013, 17.9 million ounces in 2014 and 20.7 million
ounces in 2015. Our view is that this rise will be due to increased production of silver
as a by-product of gold.
 Investor interest is required to absorb the excess metal — Citi expect that silver
demand from photographic applications will continue to decline (due to the rise of
digital technology) and silver jewellery fabrication growth will slow (due to weaker
demand from the Western world). This places the burden on investors to pick up the
slack and absorb the excess metal. However, this looks to be a challenging assumption
given April’s effective shattering of the ‘safe haven’ gold myth and the associated
negative impact on silver, gold’s poor relation. Institutional investors are increasingly
favouring the equity-related US growth/low inflation outlook over gold/silver.

India Gold and oil prices – Major silver linings? :: Barclays Capital

India
Gold and oil prices – Major silver linings?
The drop in commodity prices, particularly in gold and crude oil, if sustained, could be
a major positive driver for India. The immediate and most visible impact would be on
the current account balance, which could improve by nearly 1% of GDP in FY 13-14, on
our estimates. A reduction in oil under-recoveries would also reduce the necessity for
domestic fuel price hikes, which contribute over 25% to current inflation.
Crude oil and gold are the two major commodity imports for India, and both have increased
significantly in recent years. India’s oil imports are typically sticky and not very sensitive to
price. The surge in gold import demand in recent years, on the other hand, has remained
mostly speculative in nature. This means that in the case of a downward trending price, not
only would the gold import bill likely decline, volumes could also decrease.
We examined the potential change in India’s net import bill in light of the recent drop in
prices of these two commodities, under the assumption that there will be no change in
oil/gold import volumes due to price change. Given the observed price-demand
relationship in recent years, we believe this is a conservative assumption.
We estimate that if gold prices remain flat at USD1400/oz, and Brent crude remains at
USD100/bl, India’s net import bill for these commodities could fall by nearly USD7bn and
over USD13bn, respectively, given our flat volume assumptions. This would result in net
savings of around USD20bn on the current account deficit, lowering it to USD66bn
(around 3.2% of GDP) and bringing it below our baseline estimate of over USD85bn
(4.1% of GDP). We have also not factored in any drop in other metal prices, such as
copper/palladium/silver, which could increase the benefits to the current account.

Silver may find support at Rs 41,000/kg ::Business Line

   

Dissector: Silver in a short-term downtrend :: Business Line

Investing in silver : Business Line

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Investors can bet on silver through the spot commodity market.

Now, suppose one would like to bet on silver for the long term, how can one invest in it?

With silver-ETFs not available in India, investors may choose to bet on silver in the spot commodity market where investment is allowed in electronic form.

The National Spot Exchange of India provides an online platform to buy silver in demat form.

On a daily basis 500-600 units (50,000-60,000 gm) of e-silver are traded on the exchange's platform. The exchange provides counterparty guarantee in terms of quantity and payment. Indian investors have the option of investing in silver in the physical form — bars/coins too. Physical investment brings with it problems of safe-keeping and related charges. But, when bought in the electronic form, from National Spot Exchange (NSEL), the investor is assured liquidity and also lower investment cost.

One unit of e-silver is equal to 100 gm of silver. Units of e-silver can be purchased online through an account with any of the authorised trading members of NSEL. The purchased units are credited to the buyer's de-mat account. Trading of these units can be done online as in equities. However, investors are given an option to take delivery of the units they hold.

What drives silver prices? : Business Line,

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Silver's increasing industrial demand has helped its price rise at a faster rate than gold.

As a long-term investment, silver has delivered even more stellar returns than gold. The return on silver over three, ten and twenty years' time frame has been higher than gold.

Yet, silver lagged gold in the fiscal year ended March 2012, managing only a 0.1 per cent gain while gold vaulted 33 per cent in rupee terms.

The slowdown in silver price gains recently is explained by three factors. For one, silver's fundamentals are linked more closely to growth in the global economy because it is being used increasingly as an industrial metal.

Two, gold is more established as a ‘haven' investment than silver. And three, silver's relationship with industrial metals is getting stronger.

Silver price may surge to Rs 1 lakh per kg: Bombay Bullion Association (ET)

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The price of silver could surge to Rs 1 lakh per kg mark this year in the wake of international economic situation, Bombay Bullion Association (BBA) on Tuesday said. "The silver currently ruling at Rs 57,000 per kg, is likely to go up further and might go up to Rs 1 lakh per kg this year due to the global economic crisis," Bombay Bullion Association (BBA) President Prithviraj Kothari told reporters here on the sidelines of a function. The prices of silver in India have more than doubled in the last two years. This will affect silver imports, which may witness only marginal growth to around 5,000 tonne this year compared to about 4,800 tonne in 2011, he said. "In 2011, we imported about 4,800 tonne of silver, which was 70 per cent higher than that of 2,800 tonne during 2010. This year the silver imports may be around 5,000 tonne," Kothari said. Talking about gold, Kothari said, gold imports are likely to be similar to that of last year. India had imported 966 tonne of gold in 2011, according to the World Gold Council report. Gold prices are likely to move in the range of Rs 26,000-35,000 per 10 grams this year due to the current economic crisis, he said, adding internationally gold is likely to be traded in the range of USD 1,600-2,200 an ounce this year. Talking about platinum, Kothari, who is also the director of RiddhiSiddhi Bullion, said he expects the prices to rise more than gold. In the international market, gold was trading at USD 1,740.88 an ounce and platinum at USD 1,670.50 an ounce today. India annually imports 10-15 tonnes of platinum which is mainly used in the auto industry.

Outlook positive for gold and silver as investment avenues ::ET

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Precious metals-based investment instruments performed better as compared to other asset classes in the last few years. The investment-led demand has been one of the key drivers of precious metals' prices in this recessionary phase in many developed countries.

The prices of precious metals have gone quite a bit, and investments in precious metals have yielded better returns than any other instruments over the last few years.

Analysts say the outlook for precious metals is still attractive in the medium term due to uncertainty in the global economies, and more expectations of monetary easing across the world. Investors can add precious metals to their portfolios cautiously by buying in small quantities at regular intervals.

Outlook for gold

Traditionally, gold has been an international currency and investors across the world buy gold as an investment. The demand for gold has risen over the last few years. It is mainly 'safe haven' demand from large global investors and hedge funds who aim at safeguarding their investments amidst global economic uncertainty.

High liquidity and soft monetary policies of central banks across the world, to boost economic activity, further channeled money to gold-based instruments. This resulted in higher prices of gold.

There was some weakness in the price of gold towards the second half of last year due to tightening of liquidity . However, the announcement by the US Federal Reserve last week that it will maintain its soft monetary policy for the next couple of years added to the positive sentiments on gold.

Analysts believe gold prices will remain firm in the short to medium terms, driven by the soft monetary policies in the global markets coupled with economic uncertainty in the European markets.

Individual investors can invest in gold, purchasing it from reputed dealers. Investors can also invest in eunits of gold or gold-based mutual funds. Gold-based mutual funds offer systematic investment plans (SIPs) for smooth and gradual investments.

Outlook for silver

Silver also comes under the precious metals category. Basically, the demand for silver comes from three major components - industrial demand, jewelry demand and investment demand.

The demand from the industrial and jewelry sectors has been quite stable, and growing at a good rate since the last few years.

However, it is the investment and speculation-led demand that has driven the prices of silver up sharply in the recent past. The investment demand for silver has increased exponentially over the last few years, and as a result, silver has significantly out-performed gold in the recent past.

Price volatility remains quite high in silver. As a result, silver attracts more speculative activity. The price of silver also started going up after the announcement by the US Federal Reserve of its continuing soft monetary policy. Analysts believe silver can break previous records if it catches the price momentum in the short to medium terms.

Commodity Corner: Why are gold and silver falling?:: Business Line

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The euro-zone's sovereign default risks and the interlinked banking crisis should have spurred gold prices on safe-haven buying. But from the high of $1,921.15/ounce in September, gold price has fallen by 13 per cent as the crisis in Europe escalated. Silver has also had significant price correction. We explain the reasons for the correction and also what rupee depreciation means to Indian gold and silver investors.

WHY IS GOLD FALLING?

The rally in gold price has happened at a breathtaking pace. Between September-2010 and September-2011, the metal has rallied 52 per cent. So, profit-booking could be an explanation for the current correction in price of gold. It is also possible that investors are setting off losses in their equity portfolio with profits in the yellow metal. What is also interesting to note with gold is that this metal which was moving in tandem with dollar in 2010 has broken its ties with the greenback. While dollar has inched up from 75.9 in September to 79.6 now, gold has dropped 13 per cent to $1,675.93/ounce. This just means that the strengthening dollar is eroding demand for gold as an alternative investment. The long positions that were built in gold on expectation of higher inflation in the US on a third round of money printing (QE3), is also being wound up now.

SILVER'S STORY

Silver that is a low-value bet compared to goldhad a spectacular rally between 2008 and 2010. It moved from $14.8/ounce in beginning of 2008 to $30.7/ounce by end-2010 giving a return of 107 per cent even as gold moved only 69 per cent higher. Silver was backed by a strong growth in industrial and ETF demand in this period. The metal touched a high of $49.79/ounce in April this year. But since then silver has been giving tough time to its investors with very volatile price movements. In just two weeks post traversing the all-time high, silver slipped to $32.5/ounce and gave investors the first jolt. From May lows silver managed to climb to $44.25/ounce in August but couldn't sustain there for long. The metal is at $31.10/ounce currently, down 29 per cent from highs of August. Factors that are weighing on gold are weighing on silver too now.

The greenback's strengthening has weakened demand for silver. A Bloomberg report states that the US Mint has sold 984000 ounces of silver coins so far in November and at this pace the month's sales will be down 73 per cent from a year earlier. With Asian and European countries in trouble, silver's industrial demand too has been hit. Also, as the CME group (manages trades in COMEX) has increased margins on silver futures contract sharply, a large amount of winding-up is happening now say market observers.

IMPACT OF RUPEE

As gold started correcting post traversing $1,921.15/ounce, spot prices of the metal in India hit a new high (at Rs 29,123/10 gram on November 16), thanks to the fall in rupee. Rupee has corrected very sharply against the US dollar in the last one year. Rupee is at 52.26 now down from 45.76 a year earlier, a 14 per cent correction. The depreciation in rupee though has made gold purchases costly for Indian investors, the returns for those who held gold in their portfolio last year has magnified.

From end-October last year, gold in dollars has appreciated 26 per cent. In MCX, the most active contract in gold is at Rs 28,430/10 gram now, up from Rs 19,713, a 44 per cent return. Similarly, silver has also given higher returns for domestic investors. If rupee manages to gain value against dollar in coming weeks and given that weakness persists in gold for some more time, Indian investors will see gold price coming down.

Commodity Corner: Why are gold and silver falling?:: Business Line

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The euro-zone's sovereign default risks and the interlinked banking crisis should have spurred gold prices on safe-haven buying. But from the high of $1,921.15/ounce in September, gold price has fallen by 13 per cent as the crisis in Europe escalated. Silver has also had significant price correction. We explain the reasons for the correction and also what rupee depreciation means to Indian gold and silver investors.

WHY IS GOLD FALLING?

The rally in gold price has happened at a breathtaking pace. Between September-2010 and September-2011, the metal has rallied 52 per cent. So, profit-booking could be an explanation for the current correction in price of gold. It is also possible that investors are setting off losses in their equity portfolio with profits in the yellow metal. What is also interesting to note with gold is that this metal which was moving in tandem with dollar in 2010 has broken its ties with the greenback. While dollar has inched up from 75.9 in September to 79.6 now, gold has dropped 13 per cent to $1,675.93/ounce. This just means that the strengthening dollar is eroding demand for gold as an alternative investment. The long positions that were built in gold on expectation of higher inflation in the US on a third round of money printing (QE3), is also being wound up now.

SILVER'S STORY

Silver that is a low-value bet compared to goldhad a spectacular rally between 2008 and 2010. It moved from $14.8/ounce in beginning of 2008 to $30.7/ounce by end-2010 giving a return of 107 per cent even as gold moved only 69 per cent higher. Silver was backed by a strong growth in industrial and ETF demand in this period. The metal touched a high of $49.79/ounce in April this year. But since then silver has been giving tough time to its investors with very volatile price movements. In just two weeks post traversing the all-time high, silver slipped to $32.5/ounce and gave investors the first jolt. From May lows silver managed to climb to $44.25/ounce in August but couldn't sustain there for long. The metal is at $31.10/ounce currently, down 29 per cent from highs of August. Factors that are weighing on gold are weighing on silver too now.

The greenback's strengthening has weakened demand for silver. A Bloomberg report states that the US Mint has sold 984000 ounces of silver coins so far in November and at this pace the month's sales will be down 73 per cent from a year earlier. With Asian and European countries in trouble, silver's industrial demand too has been hit. Also, as the CME group (manages trades in COMEX) has increased margins on silver futures contract sharply, a large amount of winding-up is happening now say market observers.

IMPACT OF RUPEE

As gold started correcting post traversing $1,921.15/ounce, spot prices of the metal in India hit a new high (at Rs 29,123/10 gram on November 16), thanks to the fall in rupee. Rupee has corrected very sharply against the US dollar in the last one year. Rupee is at 52.26 now down from 45.76 a year earlier, a 14 per cent correction. The depreciation in rupee though has made gold purchases costly for Indian investors, the returns for those who held gold in their portfolio last year has magnified.

From end-October last year, gold in dollars has appreciated 26 per cent. In MCX, the most active contract in gold is at Rs 28,430/10 gram now, up from Rs 19,713, a 44 per cent return. Similarly, silver has also given higher returns for domestic investors. If rupee manages to gain value against dollar in coming weeks and given that weakness persists in gold for some more time, Indian investors will see gold price coming down.

18 July, 2011: Equity Buy/Sell (Technical View) IFCI research,

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Equity Buy/Sell (Technical View)

Ø  The  We have already mentioned quite a few scrips for medium term investments.

Ø  Investors are advised to continue to watch out for accumulation, esp. in Kotak Bk., Lupin, L&T, SBI, HDFC etc, Also, Bajaj Auto > 1435, NIIT Tech > 212, Rajesh Exports >112 look good.

Ø  The following are for the short term :

o   Ashok Leyland > 52 ;                      

o   Hotel Leela > 45 ;            

o   Jet Air > 513.

COMMODITIES :

Ø  Gold and Silver have taken a little breather on Friday's trade which is healthy after a huge rally from 21600 to 23100 in the case of gold and 49500 to 58600 in sliver.

Ø  We reiterate that the medium/longer term trend is bullish.

Have strict stop losses

Risk flight hits gold; Greece likely to dominate the market  HSBC Research

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Risk flight hits gold; Greece likely to dominate the market
 Bullion slide continues as markets remain focused on
Greece, the EUR and risk; if an agreement appears close on
Greece, a recovery in risk assets would be gold-friendly
 Further EUR weakness may undermine gold but the selloff
may encourage emerging markets demand around
USD1,500/oz, notably but exclusively from India
 The slide in PGMs is making both platinum and palladium
attractive but buying interest may be hard to generate