First to give you some news which no doubt is old but something that is important to know. The President of America Mr. Obama has declared that companies in America will no longer enjoy tax benefits if they outsource their jobs to Bangalore. This is a big reason to worry which the call centre owners say that they are not worried, but why would the American companies outsource their jobs in India anymore if they do not receive any tax benefits for it. The call centre at a time was the biggest employer of the youth population in the country. They have no doubt revolutionalised the job market, and infact they have given the opportunity to even the people who even being so qualified did not have a hope of getting a decent job and supporting their families. But this announcement will definitely create some panic in the job markets as well.
Coming back to the commodity markets now let me start with this, a loser is someone who puts down his weapons in a fight, but a fighter is the one who is ready to attack when the right time is in and wins the battle. Something similar is happening in the markets now. The markets have become very volatile for the time being and I have been seeing people really getting shaky with their current positions. Even though they are on the right side of the market they have been taking big hits with their stop losses being hit first and then the targets coming in sight. But I would say, that do not even think of putting down your weapons for now as there is a major battle to be won. Such a person is called a strategist. This is the time to take some rest, sharpen your weapons and be ready to battle out in the market. The right thing to do now is hold still wait for the right opportunity and then make your move. Have you ever seen a lion catch its prey? It waits for hours together and keeps a constant eye on its prey and when the right time comes in it strikes and has its food. The commodity markets are in the same situation now.
Let’s look at few commodities and let’s analyze the situation of what fundamentals they have and what moves they have made. First, the sacred obsession of the Indians- GOLD.
There is a rumor going on that China has been buying gold to increase its reserves. There had been certain newspapers carrying the news that the gold reserves of China have reached to 1054 tons from 600 tons. Now for you to know China has not been importing any gold and whatever reserves that they have been building up is from their own production. Believe me China is in no position to afford gold at these prices and China’s economy is in trouble but it never shows that it really is. Going by plain logic any person with a simple knowledge of basic economics can say that a country which is so dependant on exports cannot progress with the same speed if it does not have demand for its goods. Had the economy been good in China, they would not have faced loss of employment at all. Even a country like India that is an agricultural economy has faced job losses and economic growth slowing down, and then China cannot be an exception. China has become a hot favorite of the bull players who really want to ramp up the prices and blame it all on China demand; let that be gold, silver, copper, zinc, nickel, soybeans or even corn. Look back in articles of last 5 years you will realize that whenever any major moves have come in the prices of any commodity, the first reason that you will have is “China is buying”. The actual reasons may come in later on after days, saying that this was the real reason why the prices of that commodity shot up. Question is has any of the analyst really given a concrete evidence of how the economics of China are moving? The answer is a big “NO”. China has been the most secretive country and it will not reveal that they have problems because if it does then the whole world will panic, because China today is at no.1 position as far as the BRIC (Brazil, Russia, India, and China) nations are concerned. No country will like to portray that they are weak. Take the example of North Korea, which is facing such of economic turmoil and their people suffering but yet they display their military might and say they are strong.
The next commodity to look at is cardamom. Has anyone realized why cardamom prices have shot up so quickly for no reason? There is a reason behind it and I guess very few people are aware of it. First thing India does export cardamom but that is to the extent of only 5%- 8%. The crop in India is not damaged at all, but does anyone really know that cardamom is a major crop of Guatemala which is situated in South America close to the border of Mexico. Guatemala accounts for 60%-80% of world cardamom exports. There had been a major earthquake last week with the intensity of 6.1 on the Richter scale, which is quite big but none of the Indian TV news cannels reported it, except for the international news channels. This had created a panic in the market that India will now receive export demand for cardamom. But the real reason was much before the earthquake. The crop in Guatemala is damaged badly not because of earthquake but due to the weather conditions out there. Now which reason will you stick to take a long position in the market, the earthquake or the real crop damage?? Information is the key to trade the commodity. If you have the right information and have made your confirmations then stick with that commodity and you will end up making money. Following a rumor will always make you end up with losses because you will know when the player will enter the market but you will never know when they will exit and you will never be informed when they do. Trading on panic is profitable for a very short span of time, and if you are lucky enough you will make some profits.
The rains will be the deciding factor now for the commodity prices to have a perfect trend now. The rains should be in by the end of may and that should decide what is going to be the status of the sowing. I would urge the investors that if you are looking at taking some major positions in the market then the right strategy will be to hold on to your weapons wait for the trends to set in take the right positions. I know I have been saying this a lot to hold on and then take a position, but I do not want you to loose money if there is no trend in the market. I believe that the market is very volatile now and trading now will be based on your strong luck and not on strong fundamentals.
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