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Gold and Silver

Sensex moves smartly near 25% from just above 8k to near 10k in March 2009..Is this sustainable ?

In thirteen trading days from an intraday low of 8047 on March 6,2009,the Sensex is once again kissing 10000….moving up near 25%

Getting a lot of calls…basically to make some sense of this rally

Is this the beginning of the recovery and have we seen the Bottom of 8000 for the Sensex and the October 27,2008 low of 7697 will not be tested ?


Is this just a Pullback rally and we shall see the Sensex breach 8000 again in 2009 ?  

I hold the view that the macro pains have yet to unfold in their entirety…This rally is a strong counter- trend and a powerful one at that…. we shall see such bounces on oversold markets…Maybe the Bottoms may not  be tested for a while…but they will

In fact even on October 27,2008 when the Sensex touched a intraday low of 7697,it swung back sharply within just three days to close at 9788 on October 31,2008 !…and it had begun October at levels of 13000 !

If you think the WORST MUST BE OVER ,then think again !…Sensex at 11 and 12 multiples may appear cheap against the 25 + Multiples we had in January 2008….With Earnings slowing down,we’ll probably see single digit P/E,trailing and forward, on the Sensex in 2009 and that would sustain for some time

The Dow took 25 years to regain it’s 1929 High…It did so in 1954 !…Our wait for the Sensex to regain 21000 should not be so long !…Right Now I see Stressed Prices but not Distressed Prices on our Bourses…..These will come in 2009 itself and give you some great buying opportunities.    

Ask an Investor who got into Unitech at Rs 500 in January 2008,whether he’s excited with this rally !…he may be too shell shocked anyway to respond !

The poor Bloke saw a 95% erosion to Rs 25 in just over a year….he now needs to get a 1900 % surge to recover his loss of Rs 475…so if Unitech has gone up 40% from Rs 25 to Rs 35 how does this matter to him !….so don’t live under delusions and the phony excitement being generated by experts and TV Anchors on the Stock Channels of this “big” 40% gain in Unitech

These swings require you to have a Traders Mentality to capture opportunities…and that’s a tough ask….I thought Investment was about Investment !…not Trading or Speculating ! 

So what do you do to recover from being Hit last Year in Equity ? Some Thoughts….

  • Just Holding on to your Equity Portfolio may not work as some scrips may have seen permanent erosion…so review and reposition…believe me taking a real loss than sleeping everyday with a notional one is a big relief !
  • Save/Hold/Generate Cash to capture greater opportunities ahead 
  • Hedge your Portfolios against declines…the volatility is just too unnerving
  • If you must Trade then do so with strict stoploss
  • Use upswings to exit some holdings to create cash to later capture scrips at distress prices to reposition your Equity Portfolio 
  • Be prepared to adopt a tactical,rather than strategic, approach to capture great opportunities
  • Get some significant Gold exposure in your Portfolio…Physical or through ETFs
  • Ensure proper Asset Allocation to suit your Risk Profile and be disciplined in the rebalancing exercise when predetermined allocation ranges are breached

You’ll be deafened and confused by the divergent views and the cacophany being generated on the channels and the print media by a host of Experts and TV anchors read more

Interesting Spectrum of Rates of Gold Coins across a few Banks Today

Retail and Small Investors need to feel and touch tangible Gold…They assign more safety to Tangible Gold than Exposure to Gold in other ways…Also they can commit smaller amounts to buy a few grams of Gold

So it was was with some interest and curiousity that I again reached out to a few Banks today to gauge what they had to Offer in Gold Coins…Check out the results below



Rate in Rs and inclusive of 1% Tax        NA: Not Available

Details of Purity and Motifs Stated

Coin Shape is Round, unless otherwise specific shape stated





2.5 gms


5 gms


8 gms


10 gms


20/50/100 gms




Union Bank







Bank Logo on Coin &

.995 Purity




Bank Logo/God Motifs & .999 Purity




Bank Logo/God Motifs & .999 Purity






Bank of Baroda










Bank Logo & .999 Purity














Heart Shaped, .995 Purity



9783 Combo


Bank Logo, Ganesh/Lakshmi

Combo Motifs &

.999 Purity




Bank Logo/God Motifs & .999 Purity





20 gms    :   37340

50 gms    :   92855

100 gms   : 184968


Bank Logo/God Motifs & .999 Purity


Clearly Union Bank is the Cheapest…In fact 8 gms category allows us to compare apple for apple…ICICI Bank has always been known to be more expensive than PSU Banks…their today’s rate for a .999 Pure Gold Coin of 8 gms is Rs 15020,that’s over 9% more expensive than the Rs 13744 quoted by Union Bank and just under 7% more or nearly Rs 1000 more than the Rs 14045 quoted by Bank of Baroda 

These Coins are Imported and the Surge in Gold Price and the 20 % Rupee Depreciation in 2008 has clearly impacted rates too

ICICI Bank has a wide variety of Coins available…It’s 5 gms Combo offer of God Ganesha and Goddess Lakhsmi Motifs ( Each a 2.5 gms coin in a single packing ) is a very popular purchase and the Bank prices it higher than a Plain 5 gm Gold Coin Offer 

The underlying Gold Price for .999 purity for 10 gms is Rs 15700 today…so even the Union Bank Offer today,the  cheapest of the three banks,of Rs 17192 is 10% higher

And if you dare to extrapolate the ICICI Bank rate of Rs 15020 for 8 gms and it’s  rate of Rs 37340 for 20 gms ,you will arrive at a computation of bewteen Rs 18750 to Rs 19000 for a 10 Gms Coin !….that’s 20% higher than the underlying !…Gosh !

You’re paying a high Premium when you buy Gold Coins from Banks…for surety of Gold Content,weight,purity and therefore better resale values

When you purchase Gold Coins from Jewellers,you get .995 purity…..but you run the risk of Gold Content not really being as stated….It has been reported that Gold Coins turn out to be actually Silver !…and many have some Iridium too !…so you may be paying for Gold,but getting shorted really ! so when you buy from Jewellers ,insist on a Bill and check that the Standard Gold Hallmark is there on the Coins…currently the Television Channels are running Government Ads to highlight this !

International Price of Gold is US $ 976/oz….Now this is a Troy Oz and is 31.1gms…A regular Oz is a weight measure for Food etc and is 28.35 gms…Thus for Gold this translates to Rs 15691 /Ten grams read more

Sudden Fall in Equities soon !? I can Sense and Feel it…Better Hedge Equities Right away

As Wall Street slaps Washington,Dalal Street will damn Delhi too….It’s been perceived as a STIMU-LIE Package in both countries

Yesterday the DOW teetered more towards the Edge clsoing at 7466,the lowest in six years

It’s just past 2.30 pm in Mumbai and the Sensex and Nifty are struggling to stay over 8800 and 2700 respectively

I can sense and feel that soon,the Dow may just plunge 500 to 1000 points in a Day soon…we will follow as we too will test October 2008 Lows

This Intuition or gut feel is strongly supported by weakening macros fundamentals in USA particularly and the world over in general…The IMF has already stated that it expects many more countries to come to it for Bail-Outs

I was watching the classic Movie ‘Sea Biscuit’ last night on Star Movies…What a parrellel !…The Movie is about a Champion Horse and Horse Racing and is set in the times when America was devastated by the Depression of 1929…The Wealthy became Poor,literally overnight,and lost their Homes and All their Assets….they took to the Highways and settled in poorer conditions….It’s happening allover again,I daresay ! 

If disinclined to sell off equities at these low levels,atleast exercise prudence to fully hedge your equity portfolio right away

You can do this in Three Ways

  • Sell off All or Part of Equities…Hard Call at these Low levels already as Heavy Loss sitting in Portfolios…but it will give you Capital to Grasp Greater Opportunities ahead
  • by committing appropriate additional Funds and Investing in negatively or less positively correlated Investments to Equity…Silver and Gold as Alternative Investments run at the top of my mind  or
  • Go Short in Index or Specific Stock Futures or buy Protected Index or Stock Puts…by shorting Futures ,you are locking in the current value of your equity portfolio…so if the Market fall,so will the value of your portfolio…but this fall will be offset by the gains you make on your Futures Contracts that you shorted… buying Protected Puts,you pay the Premium to insure your Equity Portfolio from any Fall,while keeping the upside potential alive…this would seem the best strategy,if you need protection from significant downside,but don’t really have such an intense feeling or sense like I do that this will happen suddenly and soon…It is better to pay a 2%-3% Premium to protect from a 15% to 20% potential downside from here…The OPTIDX Nifty PE with Strike Level of 2700 and Market lot of 50 has a premium of Rs 47 and Rs 142 respectively for Feb 26,2009 and March 26,2009 contracts…You’ll be paying Rs 2350, that’s under 2% costs, on a contract Value of Rs 135000 for a week’s hedge and a high Rs 7100,under 5%  cost, for a month’s hedge…the underlying Nifty is 2717 and it’s just past 2.30 pm
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    Continue to GO for GOLD !

    Ever since I was convinced that USA stood for Unintelligently Searching for Answers,I have been convinced that ‘Gold’ has to be in your Portfolio

    Check this blog of mine on October 23,3008 where the Title warns whether the US $ will become Tissue paper ! and the Blog concludes with me recommending to Go for Gold

    Gold has soared to US $ 976/oz and in India it’s crossed a record Rs 15500/ten grams and close to Rs 18000 for a Ten Gram Gold Coin of 99.99 purity…Just about 18 months ago,a similar coin was quoted below Rs 11000 !

    With an explosion of CDOs and CDSs defaults in Trillions of Dollars expected this Year to further crash Global Economies,the US Dollar is poised to decline significantly against major world currencies

    Gold was given a US $ 35/oz value in 1944 when the Bretton Woods Agreement came about and where Gold was the World Standard and Reserve Currency.In 1971 this Agreement was abandoned and the US Dollar became the World Reserve Currency….Adjusting for Inflation Gold should now have quoted at US $ 2200/oz !

    Dollar goes Down,Gold Goes UP…that’s the simple equation really

    Gold is marching towards US $ 2500/oz in the next two years ….Reason to be bullish on Gold are many

  • Demand swells…Contrarions have been buying Gold for some time now…Public are now seen climbing on to this ‘Gold Rush’ bandwagon…Huge Demand is seen not only in USA but even in China and India…The World Gold Council has reported that in Q 3 ended September 30,2008,Over US $ 6.5 Billion was spend on 232.1 Tonnes of Gold Coins and Bars….highest in Ten Years and up 121% from the previous year…This figure will get even more pronounced this year…Infact since July 2008,the US Mint has stopped selling the American Eagle Gold Coins as there is a shortage and a huge pent up demand 
  • There have not been any huge Gold Discoveries in Recent Times
  • Other Asset Classes,especially Equity,are being decimated and further decimation is indicated as the crisis deepens and widens…await the CDO’s and CDS’s Derivatives default Explosion…. and in times of such crisis and great uncertainty,Investors are turning to Safety and Gold
  • Gold Exchange Traded Funds are creating Demand for Millions of Ounces of Physical Gold 
  • US Dollar is declining in Value and Gold has already defacto become the World’s Currency.In fact ,since 1971,the Dollar has depreciated over 95% against Gold ! and over even lost over 90 % of it’s purchasing power against Hard currencies like the Swiss Franc and the DM,before the Euro came about.A Rising Dollar in the Longer term !? Unlikely…Scenario of Lower Interest rates and Trade and Budget Deficits will continue to put pressure…would you believe it that USA has never had a Trade surplus since mid 1970s ! 
  • Gold cannot be printed like Currency Notes…so Gold as an asset does not create any liabilities…it holds it’s monetary value over time
  • The more USA resorts to printing Currency to fund it’s crisis…in other words more the bail-outs, more Inflationary Pressures will be seen and the US Dollar will decline further in Value. M 3,that measures Currency in circulation, has shown an average 8% annual growth rate in the last 15 years ! USA,to avoid Defaulting on Sovereign Debt,would have no option but to print more currency. 
  • Unlike 1930s and 1970s,the World Stage now has major Global Players other than just  USA…the Demand for Gold will be stronger 
  • Since 2005 all World Currencies have been depreciating against Gold 
  • If Conflicts escalate in the Middle East,Afghanistan and other sensitive global pressure points,Gold will simply surge
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