Saturday, February 15, 2014

RBI tightens gold import norms under 80:20 scheme.

RBI tightens gold import norms under 80:20 scheme.
Seeking to restrict gold imports, the Reserve Bank today said nominated banks and agencies will not be allowed to import the precious metal in excess of their entitlements in first or second lot under the 80:20 scheme.

"Import of gold in the third lot onwards will be lesser of the two-- five times the export for which proof has been submitted or quantity of gold permitted to a nominated agency in the first or second lot," RBI said in a notification.

The government under the 80:20 scheme had in August 14, 2013, allowed nominated agencies to import gold on the condition that 20 per cent of the inward shipment will be exported. The permission to import the next lot would be given on fulfilment of export obligation.

In view of the representation being received by the RBI and the Finance Ministry, the central bank has said that the quantum of the third lot import would be five times the export from the previous lot subject to the condition that it would not exceed previous entitlements.


In case of advance authorisation (AA) and duty free authorisation (DFIA) for gold import issued before August 14, 2013, RBI said the 80:20 rule will not apply for units in Special Economic Zones (SEZs), Export Oriented Units (EoUs), Premier and Star Trading Houses.

"The imports made as part of the AA/DFIA scheme will be outside the purview of the 80:20 scheme. Such Imports will be accounted for separately and will not entitle the nominated agency/banks/entities for any further import," RBI said.

To contain rising gold import, which was 162 tonnes in May, the government had hiked import duty on gold thrice in 2013 taking it 10 per cent. Besides, the RBI also came out with certain restrictions, including the 80:20 scheme for imports. The gold imports came down to 19 tonnes in November. 



Tuesday, February 11, 2014

Base metal demand to remain 'reasonably strong', says JP Morgan

In the research report published Friday, leading investment bank JP Morgan forecasts that the base metal demand from China should remain ‘reasonably strong’ in 2014, although down from 2013. The demand growth will be boosted by recovery in developed markets, says the research report.
JP Morgan estimates the global copper usage growth to decline to 5% in 2014 as compared with the 10% in 2013. Also, the global aluminum usage growth is expected to decline to 8.2% from 11.5%. According to the report, the global manufacturing sector may continue to grow with strong momentum. However, the Chinese base metal demand will remain lower when compared with 2013.
With regards to copper, the huge mine supply growth has lead to high stocks of copper concentrates in 2013. The conversion of these stocks to refined copper is the key. There are probably high chances that China may witness production ramp-up following the New-Year holidays.
Meantime, the copper inventory levels continued to wane in Europe. The copper stocks in LME-registered warehouses fell 2,225 mt on Friday to touch 308,025 mt. 
Also, Port Strike in Chile has considerably reduced the shipments, thereby keeping the premiums at reasonably higher levels.

Saturday, February 8, 2014

DJ-UBS Commodity Index Is In Breakout Mode. Dollar Index To Struggle.


Let's take a look at the dollar/commodity correlation. It's no secret that the U.S. dollar index has an inverse correlation to the commodity markets. Figure 1 below shows that well. This reveals a monthly chart of the DJ-UBS Commodity index (in black) with an overlay of the U.S. dollar index (in red).
DJ-UBS Commodity Index Is In Breakout Mode. Dollar Index To Struggle.

Despite widespread expectations, really for months now, that the U.S. dollar would rally strongly, the U.S. dollar index has been stymied be resistance at the 81.50 area. Meanwhile, the DJ-UBS commodity index has formed a double bottom reversal pattern (seen on the weekly chart) in Figure 2 below. The index is testing the breakout point right now and this will be an important zone to watch.
DJ-UBS Commodity Index Is In Breakout Mode. Dollar Index To Struggle.
Bottom line? The U.S. dollar has struggled. Commodities, as an asset class, are trying to rally off a weekly double bottom, and gold has been one of the top five commodity performers of January. If the U.S. dollar index remains stymied by resistance in the 81.50 area and that weekly double bottom on the commodity index chart confirms—that would be bullish news for gold and commodities.

Dow Jones Index 1929 And 2014 Graph. Will History Repeat Itself ?

Dow Jones Index 1929 And 2014 Graph. Will History Repeat Itself ?

Dow Jones Index 1929 And 2014 Graph. Will History Repeat Itself ?

Dow Jones Index 1929 And 2014 Graph. Will History Repeat Itself ?

Monday, February 3, 2014

Interim budget surprise: Gold import curbs may be relaxed

Interim budget surprise: Gold import curbs may be relaxed
If the current political indicators are anything to go by, the interim budget to be presented on February 17 may spring some surprises.
Normally, no significant tax proposals or economic policy decisions are announced in the interim budget, but this time round, expectations are that gold import curbs may see some relaxation and additional sums allocated for certain social sector welfare programmes.
This, however, will not be against the convention, as there is no constitutional restriction on the Government. Besides, various measures such as hiking the import duty to 10 per cent or the 80:20 schemes are executive decisions and no Parliamentary approval is required. Expectations on a possible announcement on gold gathered momentum after National Advisory Council Chairperson Sonia Gandhi asked the Centre to look into the matter.
Current account
This was followed with the Finance Minister P Chidambaram expressing confidence that by the end of the fiscal year the Government will be able to revisit some of the restrictions on gold imports. Since the current account deficit is expected to be below $45 billion, almost half of $88 billion recorded in 2012-13, this may help the Government to ease some of the curbs. Bullion and jewellery traders are also pressing for some relaxation as the restrictions, imposed since August last year, are also leading to a rise in smuggling. The budget could also see additional allocation for some social sector welfare programmes. This is possible as the Finance Minister is likely to report a fiscal deficit of anywhere between 4.6 and 4.7 per cent of GDP (Gross Domestic Product), lower than the budget estimate of 4.8 per cent. This reduction will provide some room for the Minister to increase the allocation.
Expenditure concerns
The interim budget is presented when Government of the day is unable to present an annual financial statement for the coming fiscal year (April 1-March 31) either due to General Election or some other compelling reasons. Usually, this is just a statement of the Government’s achievements, revised estimate for the current year and budget estimate for the next fiscal . The new Government can revise the next year estimate in the full budget. Technically speaking, the interim budget must be approved by Parliament, for expenditure after March 31, since the previous full budget has already provided for expenditure till March 31 and the full budget will be presented only after a new Government is formed.
That is why the interim budget is also called Vote-on-Account. The Parliamentary approval is for expenditure for the next four months. The last interim budget, presented in 2009 by then Finance Minister Pranab Mukherjee, did not see any new tax announcements.
However, the 2004 interim budgetby then Finance Minister Jaswant Singh did mention the Government’s commitment to extending fiscal benefits for many new schemes .