Analysis: GOLDBEES

Today’s pick is GOLDBEES. [stockquote]GOLDBEES[/stockquote]. The ETF has been in a constant uptrend since the start of this year. However, since touching the 52 weeks high around 3100 levels, the stock corrected to 2950 levels and saw a pullback from the pre-existing trend-line. The 52 week high is currently behaving as a resistance level. In the last three months, the ETF is down -0.5% against 11% rise of Nifty’s.


Oscillators RSI and CMO are at currently at 47 and -16 are closing in towards the over-sold territory.

MACD line has just cut signal line in a bearish manner, suggesting a near term bear run for the stock.

The long-term and short-term GMMA lines are running very close to each other not suggesting any particular direction for the ETF.

Short-term technical just saw a 9X4 bearish cross over for the ETF.  


GOLDBEES’s average correlation of -0.014 with the Nifty is negative. The ETF will not replicate the movements of Nifty. [stockquote]NIFTYBEES[/stockquote]


GOLDBEES has a historical volatility in the range of 0.6 to 1.2. The scrip’s volatility is currently in the middle of the range.

Looking at these technicals the ETF is short-term hold. A pennant seems to be forming that makes us nervous suggesting a long-term buy. However, it seems to have held its trend-line over the last few trading days. At the risk of sounding too nuanced, we suggest a medium-term buy. We’ll turn long term buyers of the yellow metal once we see a bullish breakout of the pennant. 

Enhanced by Zemanta

Gold trumps stocks for third Diwali in row

The yellow metal is on course to record sparkling returns for third year in row despite a strong year for equities.

While investors in gold have reaped over 15% returns since last Diwali, the returns from Sensex has been a fixed deposit-like gain of about 8.5 % for the same period.

While the precious metal has risen from Rs 26,700 levels last Diwali to Rs 30,700 currently, the BSE benchmark Sensex has risen from near-17,300 levels to 18,755 since last Diwali. Gold prices have also more than tripled from Rs 10,000 levels to Rs 31,000 in the last five years. India is the largest consumer of gold with an annual demand of about 700 tonnes.


The fact that gold jewelry and investment demand remains robust despite the rising prices is a reflection of the inherent desire among Indians to hold gold driven mainly by its alluring appeal as a jewelry and as a safe-haven against inflation that erodes both savings and income.

The impact of the European sovereign debt crisis, inflationary pressures and the still-shaky outlook for economic growth in developed countries is driving high levels of investment demand for the precious metal.


From gold coins, gold jewelry to MFs and ETFs, robust consumer appetite in gold’s cultural heartlands, India and China, has seen global prices rise from $270 an ounce in 2001to more than $1700 an ounce as on November this year. India, the world’s largest gold consumer and China account for over 55% of global gold jewelry demand and 52% gold investment demand.

Gold is being seen as a safest hedge against credit risk, currency risk and inflation that has besieged the financial world in the last decade. With the financial world navigating from one hurdle to another like the mortgage crisis to the banking crisis to the current sovereign debt crisis, investors have sought refuge under gold to protect their wealth.


Apart from sluggish growth in stock markets and high inflation rates, a spurt in central banks gold buying since 2009 after being net seller for over two decades has also contributed significantly to demand and thereby prices.

Off late, gold ETF investments are gaining ground at a rapid pace and are increasingly emerging as preferred route for long term investment in gold.

Technical Analysis

Despite the Finance Ministry’s measures to discourage investments in gold, assets under management of gold ETFs crossed the Rs 11,000 crore mark in September this year from Rs 10,701 crore in August and Rs 5,000 cr in May 2011, reflecting the robust appetite for the yellow metal.

Even as jewelry demand has been declining due to the volatile prices, a reflection of the price-sensitive nature of this segment, the rush for gold ETFs has meant that AUMs have soared from Rs 138 crore in April 2007 to Rs 11,198 crore in September, 2012 — over 80 times in 5 years.

With Diwali and Dhanteras round the corner, festive flavor is expected to add more color to the yellow metal and garner greater portfolio share of investors.

Enhanced by Zemanta


Gold glitters, gives India the jitters

Too much of anything is bad. India’s unending appetite for gold is also proving to be its nemesis.

clip_image001Trade deficit for 2011-12 (April-January) at $ 148.7 billion was 40.4 per cent higher than $ 105.9 billion in 2010-11 (April- January). While higher oil import bill is largely a known factor, the sharp increase in import of gold and silver has intensified pressure on trade deficit (exports minus imports).

From April to December during the current fiscal (2011-12), imports of gold and silver surged by 53.8% to $45.5 billion. Higher gold imports increases the country’s external financing needs as it would require more foreign exchange to foot the import bill. The share of gold and silver in import basket has risen from 9.3% in 2000-01 to 13.3% in the first half of 2011-12.


Despite record high prices, India was largest consumer of gold in 2011 with total demand of 933.4 tonnes, according to the World Gold Council, down only moderately from 1,000 tonnes in 2010. Apart from traditional factors, high inflation has prompted many investors to switch to gold from financial savings.

clip_image001[17]The fallout of this buying binge by bullion buffs has forced Finance minister Pranab Mukherjee to double the basic customs duty on gold bars to 4%, revising the cost upwards by up to Rs 1,040 per 10 grams. This is the second increase in the last two months to moderate demand. Blaming the sharp surge in imports of gold and other precious metals during the first three quarters of the year for driving the current account deficit (CAD), Mukherjee also intends to charge 2% on jewellery purchases of more than Rs 200,000 along with an excise of 1% on non-branded jewellery. CAD stood at 2.9 per cent in 2010-11 and is expected to be around 3.6 per cent this year.

Fearing more pressure in the country’s CAD, the Prime Minister’s Economic Advisory Council (PMEAC)’s economic report called for discouraging unproductive imports like gold by making other financial assets like mutual funds and insurance attractive.


But will Indians go beyond gold? In these times of downgrades, defaults and debt crisis, ‘yellow fever’ is only likely to spread further.