Archive for February, 2008

Buy Gold and Play Safe!

Monday, February 11th, 2008

After the rate cuts by the Fed, the prices of gold are touching the sky. It has become one of the most valuable assets after the U.S dollar. As the U.S dollar is already weakening and the prices of other commodities also falling, Gold is the only metal that is going strong. Also, the dollar index, which tracks the performance of the greenback against six other major currencies, declined 0.6% at 75.125.

Gold futures set a new record $942.20 an ounce on Wednesday, when the Federal Reserve had cut the fed funds rate by 50 basis points to 3.0%. This shows that the Federal Reserve is open for more cuts, indicating it’s concerned about the economic outlook.

With the love season in full swing, people are likely to purchase Gold for their loved ones. The owners of the Gold Companies like D’damas have confirmed that they are expecting a surge in the jewllery sales during Valentine’s Day season by 17-18% this year. This is not restricted to just India but overseas as well.

People are attracted for buying more of gold because it is seen as an alternative asset against U.S dollar. And, in the present circumstances, where dollar is facing a slump, bullion is ready to take its place without any deliberate effort. People see it as a safe and secure investment.

Inflation and improbability require insurance. Gold is an insurance against all odds. If you possess gold, it is considered as a safe option. Even if its prices go down, you don’t need to dispose it off because it is bound to rise again. And you can then make a profit by selling it at a higher price.

On the other hand, the demand of Gold has suffered due to lower imports amid high prices. The reason being that the U.S economy is seeing a set back.

The future of Gold also lays in the hands of the US CPI inflation data, which will determine the change in prices. If the dollar still goes down, then gold is likely to be benefited and will rule the market.

In addition, the prices of the base metals and oil are also lower comparatively. Platinum stands at 1783, while Palladium at 421. Silver went down at 16.76. Gold being at the zenith, 904.

Bullion is rocking and is meant to reign unless the dollar makes a comeback. So, buy Gold  and play safe.

Will the US economy fall into a recession?

Monday, February 11th, 2008

The past year has been very crucial for the U.S Dollar. In Jan, where its rate in terms of Indian Rupee was 44.2, it sunk to 38.4 by the end of the year. Also, if we look at the other currencies of the world, the U.S Dollar has become weaker comparatively. For instance, the price of Australian Dollar and Euro did not change much over the year.  Infact, there was an increase in the Canadian dollar, even if it was a small one. Leaving British pound being as an exception, all other currencies were not affected as U.S Dollar.

It hasn’t happened overnight though. Everybody’s aware of the falling price of the U.S Dollar in the foreign exchange market.

The consumer demand has slowed down over the year. And its continuous dropping rate has made the trade analysts wonder if the U.S economy will fall into a recession. Because if it does, it will not be a surprise to anyone. But if it really does, then where does the U.S dollar stand? This is a fateful question whose answer is dreaded by everyone.

The U.S market is seeing a slump in all the areas whether electronics, furniture, clothing. According to a news agency, 2007 has been the worst year for the U.S retailers since 2002. The growth in the labor market already retarding, it might lead the U.S economy into a recession.

Before going further, let’s find out what recession actually means.
Recession is a decline in a country’s gross domestic product (GDP) for two or more consecutive quarters of a year. Following this definition, we can say that the US economy is still safe from being descended into a recession. The reason being that in the last two quarters; its GDP growth was quite satisfactory. There has been just one bad quarter and the first quarter for 2008 has started, so it’s too untimely to judge the future of the US economy.

In this regard, the Federal Reserve has a big role to play. It has the power to determine
whether US economy will land in a recession. Traders were looking up to the Fed to help them out in this time of crisis. In a little more than a week, the Federal Reserve has lowered the interest rates by a total of 125bp, which is more than all of the rate cuts that they had made last year.

At present the US dollar is yielding only 25bp more than Switzerland’s Franc, which means that once the Fed lowers the rates again in March, as expected, then the US dollar will be tied with the Franc as second lowest yielding currency.  
 
In the meantime, there has been a huge hike in the price of Gold, thereby weakening the price of US dollar all the more.

What will the year 2008 bring in for the US dollar is still uncertain. Will the price of US dollar decline all the more in the Foreign Exchange market or will it fight with the current situation and emerge as a superpower as always. Well for this, we will just have to sit and watch.

Australian currency is doing average in the Foreign Exchange market

Monday, February 11th, 2008

Australian Trade Minister, Simon Crean, is insistent on making India a member of the Asia-Pacific Economic Cooperation (APEC) forum so that the group holds all the region’s major economic and political powers.

He will be visiting India and meeting our Trade Minister Kamal Nath to talk about the Doha Round of meetings. The Doha Development Round is doing well to bridge any kind of gap that exists between the countries thereby permitting free trade.
Hopefully, the discussions between both the trade ministers will lead in a better rapport between the countries and will fetch great benefits to India.

Furthermore, the trade minister of Australia is quite interested in investing lump some in India. Crean believes that India has lot of potential to develop. He is certain about the future course of the Indian economy and has indicated this confidence by doubling their investment in India (almost two billions).

If we have a look at the recent times, there has been a huge rise almost 63 per cent in the Indian students seeking admission in the Australian Universities making India the second-largest country of origin for overseas students in Australia. The country has welcomed them with open arms. The students are even willing to settle down there itself by becoming citizens of Australian origin. On the other hand, some are ready to move to Australia on immigration grounds, by fulfilling couple of formalities that are needed.

In addition, nowadays Australia has become the favorite holiday destination for Indians. People prefer to travel to Australia, since it’s far more economic compared to other countries. Also, unlike other countries; the Australian embassy doesn’t delay in issuing the visa if the documents are valid and appropriate.

The Australian Government is quite cooperative and has also granted permission for organizing lot of international events and concerts. The celluloid is no exception. There has been an upsurge in the film shootings taking place in Australia, unraveling the untouched spots of this beautiful country.

Crean is quite satisfied with the trade relationship that the countries share with each other. There is a rapid growth in the Australian imports in India and vice-versa. India stands as the 4th biggest market for Australia where exports are concerned. Merchandise exports to India grew from 7.3 $A Billion in 2005-06 to 10.1 $A Billion in 2006-07. The major exports being Coal, Gold, Copper Ore, Wool, Horticulture, etc. The reason for this expansion is obvious, the increasing Indian population in the country.

Meanwhile, lots of Australian companies are coming to India and are quite keen to collaborate with us on the economic front as well as in food and technology. We can see examples like Leighton Contractors, Orica, Macquarie Equities; many branches of the Tata Group, Linfox, and KPMG are working with their Indian and Australian partners across many sectors of businesses.

Also, the Australian currency is doing average in the Foreign Exchange market also. It has remained stable in comparison to U.S dollar which is falling down constantly.