Tag Archives: Commodity Trading

History Shows Gold Could Fall Another $500/oz

16 Jul

A slowdown in growth in China, as evidenced in data released on Monday which showed that growth had slowed to 7.5 percent, was one potential indicator of lower gold demand.

gold updatesThe price of gold could fall below USD 800 an ounce over a long-term horizon, a drop of some USD 500 from its current level of USD 1,294 an ounce, Duke University’s Campbell Harvey told CNBC on Monday.

Harvey, who works at Duke University’s Fuqua School of Business, said that over 2,500 years of history, the real price of gold (the nominal price adjusted for inflation) had remained roughly the same.

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“Right now we’re way above the mean,” Harvey said, suggesting that the price of gold would correct over the long-term to approximately USD 800 an ounce.

“If you look historically, it doesn’t just go down to the average and stay there. It actually goes through and falls below, then comes back up,” he said.

The price of gold could therefore potentially go even lower than USD 800, he said. “It has been lower in recent history.”

“It might not be tomorrow,” Campbell added, but “the cycles go in 10-15 years, and we’re well into one of these cycles.”

He said investors mulling the price of gold should focus on demand rather than supply, which he said was “amazingly constant”.

A slowdown in growth in China, as evidenced in data released on Monday which showed that growth had slowed to 7.5 percent, was one potential indicator of lower gold demand.

“China is a demander of gold, lower growth there means lower demand,” Campbell said.

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India Coal regulator to bring relief to industries: India Ratings

10 Jul

Ind-Ra also expects it to establish yardsticks to determine quality or grades of coal supplies, ensure adherence to supply contracts, adjudicate on disputes between suppliers and consumers and oversee the progress of mining rights/licenses granted to private companies. Allocation of fresh coal mines will, however, continue to be the prerogative of the GoI.

MUMBAI : Government of India’s (GoI) recent decision to constitute an independent regulatory authority for the coal sector is a vital step for its much-needed overhaul. It can potentially bring considerable relief to industries which depend on coal as a critical input, most notably the beleaguered power sector, said India Ratings & Research (Ind-Ra) in its recent release.

Notwithstanding the reportedly large coal reserves in India, the sector is characterised by acute shortages, poor quality, inefficient mining practices and distorted pricing mechanisms.

These factors have had a crippling effect on power generation, a vital component of scaling up the country’s undernourished infrastructure sector. Many of these issues have been ascribed to the virtual monopoly enjoyed by the state-owned Coal India Limited.

It is yet unclear if price setting would also be included within the ambit of the proposed regulator. However, the proposed regulator is likely to determine the principles on the basis of which producers can price coal.

Ind-Ra also expects it to establish yardsticks to determine quality or grades of coal supplies, ensure adherence to supply contracts, adjudicate on disputes between suppliers and consumers and oversee the progress of mining rights/licenses granted to private companies. Allocation of fresh coal mines will, however, continue to be the prerogative of the GoI.

Although GoI’s recent announcement has brought in considerable optimism, Ind-Ra believes the mere constitution of a regulator in itself cannot act as a panacea for all the problems facing the sector.

The mandate given to the regulator and the resources provided to it for effective discharge of its duties in an independent and transparent manner, free from political interference, would be vital to realise GoI’s objectives.

Concurrently, other reform measures such as restructuring Coal India and significantly expanding private sector’s participation in coal mining would also need immediate attention.

The regulator is proposed to be set up through an executive fiat, demonstrating GoI’s urgency to address the problems plaguing the coal and power sectors.

This is another milestone in the GoI’s reforms agenda that it has been pursuing fairly systematically in the last 12 months or so to fix many of the ills plaguing the stressed infrastructure sector.

Parliament would need to pass a legislation constituting the authority and thereby ratifying the Government action – a bill to this effect is likely to be introduced in the ensuing session.

Earlier this year, a Group of Ministers had approved this proposal and recommended a revised draft bill for consideration of the Cabinet.

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