Vote for your future…vote for safe trading …vote for profitable trading…
Voting is taking place all over the country now, and I have voted for the right party that I think will make my future secure in this country and even my hard earned money. So I wish that even you make a wise decision and vote for the right party and make your future secure and even the future of your dear family. Here we have the elections running in our country and the cricket IPL going on in South Africa. What is interesting to know that we Indians out here are watching the IPL on the TV and the NRI’s out there are watching the elections updates on their TV? So even the Indians sitting out of our country are concerned of which government is going to come into power, because even they are worried of how their hard earned money is treated in India.
That no doubt is a cause of concern, but what is new concern now is “SWINE FLU”. This year the first swine flu outbreak was reported in Mexico with 159 already confirmed dead. And it is being spreading very rapidly. This is actually the 4th outbreak of swine flu in the world. The first outbreak was in 1918-19 which affected 1/3 rd of the world population which was around 500 million people and caused around 50 million deaths. The second outbreak was in 1976 in America which was controlled not immediately but with a delay of 9 months by vaccination where almost 40 million Americans or 24% of the population was vaccinated. The third outbreak was in 1988 again in America but that was not a major outbreak as such. And now in 2009 we again have this coming in and it starts from Mexico and the earliest known case was of a 5 year old child.
This pandemic has created a sort of panic in the world markets. As soon as the news hit the TV screens the commodities were the first to react. Soybeans on CBOT collapsed during the electronic trading session collapsed from the high of 1057.50 to the low of 975.25 within 3 days. CBOT corn collapsed from the high of 395 to make a low of 375 in 2 days itself. CBOT Wheat in 1 day itself made a high of 550.4 and a low of 519.4. Because all these commodities some or the other way are connected to the pig farming industry. But what about crude? Let me mention that too it came down from the high of $51.75 to a low of $48. Now why would crude react in such a manner is a good question. Crude oil is indeed connected to all this panic. When a major pandemic breaks in any part of the world there is always a general fear among travelers to go to any part of any country. When such a thing happens the first industry to be affected is the airline industry which is a major consumer of crude oil. At these times all the commodities get a bit wild and become a bit directionless. The tops and bottoms that are formed are completely illusionary and there is a high possibility that you may be tempted to trade these moves but let me tell you they are actually traps which may cause you major losses with your stop losses being hit bad. That’s why I will advise you to stay away from the market for sometime and wait for a week’s time for the swine flu paranoid to end and then start trading.
This week it would be a bit difficult to give any levels for trading any commodities. What ever levels I give the stop losses levels will be very high and the risk involved would also be big. If you have the patience of holding on for sometime and wait for clear trends to come in it will make you comfortable, as you will not loose money by not trading.
Showing posts with label commodity trading. Show all posts
Showing posts with label commodity trading. Show all posts
Friday, May 1, 2009
GOLD
A lot is being said about gold this month. If you pick up any newspaper for last one week you will see all of them saying the same thing in a different manner on different day. Let’s run through the headlines.
“Gold prices rise as India starts importing gold again”
“Gold prices shoot up Rs. 400 because of buyer’s interest coming in again”
“Gold prices rise because of demand of festive season of Akshay Trithiya”
“Gold rallies for another day again”
With so many headlines making news everyday, I could not come up with a decent headline, so I said to myself why not allow my readers decide what headline to have for gold? I am pretty sure that when you read those articles there would not be any difference in the matter of the article. It would be like some daily update saying that the prices of gold have shot up but no one to give a decent reason why?
For last two months India did not import any gold as there was no demand for it. Well I would say that India did not import any gold because India being the largest importer of gold was actually selling scrap gold in the market. By scrap gold I mean the gold that is fabricated into jewellery. Indian’s were simply not comfortable with the prices and they are of the belief that gold prices are too expensive to be bought at these prices. I would like to ask you this question, are you ready to buy gold at these prices? I guess most of the answers will be a big “NO” except if you have some marriage in your family you will be forced to buy it. Even if you think of buying gold on the day of Akshay Trithiya, how much will you buy at these prices? I bet if you would be going out to jewellery store and pick up gold it won’t be more then 10 grams. Believe it or not we Indians are the biggest bargainer in the world. I know that is an exaggeration but even if it is, isn’t it true. Wouldn’t you like to buy anything at a discount? Don’t we go to any store and start bargaining to even save a rupee and squeeze the maximum for the hard earned money that we make? And why not if we make the money with so much of efforts then why not bargain? Go to any store that has discount more than 50% and it will be the most crowded place, because it is always the mentality of the buyer that he is always paying a higher price for whatever he is buying.
Coming back to gold now, there has been lot of confusion in the markets right now of where are the prices heading. How much ever anyone tries, you cannot catch the prices of gold at its rock bottom or sell it at the peak. For last two weeks gold has been in the range of $865- $905. As I had mentioned in my previous article of gold that the level of $885 is a very crucial level for gold prices and this was broken on 6th April to make a low of $865. Now if we go with the physcology of the market once a major support is broken in the market the market gets a bit panicky and the market looks to settle down with the shock of it. Once the bulls and the bears of the market settle down then the prices start a new move which give the market a new environment to decide the prices. Right now the prices are within a range of $905 - $865 and it will take time for it to give a break out. I guess a little patience at this point of time will be highly profitable.
Right now a lot is being speculated that India, China and Russia are planning to increase their gold reserves. But that is not something that can be believed. With the current economic situation it is not possible for any of this country to buy gold. It is basically a panic that is being tried to be created in the market to support the prices of gold as there is no other reason that can now get the prices of gold shooting up, except if any war breaks out in any part of the world. There are people who compare the crude oil and gold ratio to make their analysis. But tell me something would anyone really trade both crude and gold based on the ratio. Crude itself is still struggling to find a bottom so where would you get a ratio out of it. Russia financially is not in the position to buy gold as they are already facing it difficult to run their economy with crude prices at such low levels. Crude oil and natural gas is the major foreign exchange earner for Russia. Do you think china is in such a position that its economy is not affected by any of this economic turmoil? Of course it is. China is dependant on the US economy to run its economy how much ever they deny this fact. If that was not the case then china would not have faced any economic trouble at all. But India is unique in itself. India is still an agricultural economy. So it should not be affected by the economic crises that badly the was china or Russia was. It was only the panic that had made the stock markets in India to crash and not the fundamentals. This was the same statement that was made my Mr. Anand Mahindra in a TV interview about the Indian economic situation. India’s economy is very much dependant on monsoon, and believe it or not even the international markets follow Indian markets based on the monsoon situation in our country. India does not need to increase its gold reserves because if you look at the cash reserves of the RBI you will be completely surprised.
The gold prices are going to take time to find a proper trend as of now. I would say it is still not the right time to buy gold, as it has to find a proper bottom to settle down. Hold on to your money for now and wait for it to give a sure signal. Till the time the chart does not show a decent reversal pattern it is better to stay away from buying gold. Once the pattern is confirmed then even if you buy gold at a bit of higher prices you will be rest assured that they will be stable and rise further. During depression gold is the last commodity to fall and that is what is happening. It will take time to stabilize but it will for sure.
“Gold prices rise as India starts importing gold again”
“Gold prices shoot up Rs. 400 because of buyer’s interest coming in again”
“Gold prices rise because of demand of festive season of Akshay Trithiya”
“Gold rallies for another day again”
With so many headlines making news everyday, I could not come up with a decent headline, so I said to myself why not allow my readers decide what headline to have for gold? I am pretty sure that when you read those articles there would not be any difference in the matter of the article. It would be like some daily update saying that the prices of gold have shot up but no one to give a decent reason why?
For last two months India did not import any gold as there was no demand for it. Well I would say that India did not import any gold because India being the largest importer of gold was actually selling scrap gold in the market. By scrap gold I mean the gold that is fabricated into jewellery. Indian’s were simply not comfortable with the prices and they are of the belief that gold prices are too expensive to be bought at these prices. I would like to ask you this question, are you ready to buy gold at these prices? I guess most of the answers will be a big “NO” except if you have some marriage in your family you will be forced to buy it. Even if you think of buying gold on the day of Akshay Trithiya, how much will you buy at these prices? I bet if you would be going out to jewellery store and pick up gold it won’t be more then 10 grams. Believe it or not we Indians are the biggest bargainer in the world. I know that is an exaggeration but even if it is, isn’t it true. Wouldn’t you like to buy anything at a discount? Don’t we go to any store and start bargaining to even save a rupee and squeeze the maximum for the hard earned money that we make? And why not if we make the money with so much of efforts then why not bargain? Go to any store that has discount more than 50% and it will be the most crowded place, because it is always the mentality of the buyer that he is always paying a higher price for whatever he is buying.
Coming back to gold now, there has been lot of confusion in the markets right now of where are the prices heading. How much ever anyone tries, you cannot catch the prices of gold at its rock bottom or sell it at the peak. For last two weeks gold has been in the range of $865- $905. As I had mentioned in my previous article of gold that the level of $885 is a very crucial level for gold prices and this was broken on 6th April to make a low of $865. Now if we go with the physcology of the market once a major support is broken in the market the market gets a bit panicky and the market looks to settle down with the shock of it. Once the bulls and the bears of the market settle down then the prices start a new move which give the market a new environment to decide the prices. Right now the prices are within a range of $905 - $865 and it will take time for it to give a break out. I guess a little patience at this point of time will be highly profitable.
Right now a lot is being speculated that India, China and Russia are planning to increase their gold reserves. But that is not something that can be believed. With the current economic situation it is not possible for any of this country to buy gold. It is basically a panic that is being tried to be created in the market to support the prices of gold as there is no other reason that can now get the prices of gold shooting up, except if any war breaks out in any part of the world. There are people who compare the crude oil and gold ratio to make their analysis. But tell me something would anyone really trade both crude and gold based on the ratio. Crude itself is still struggling to find a bottom so where would you get a ratio out of it. Russia financially is not in the position to buy gold as they are already facing it difficult to run their economy with crude prices at such low levels. Crude oil and natural gas is the major foreign exchange earner for Russia. Do you think china is in such a position that its economy is not affected by any of this economic turmoil? Of course it is. China is dependant on the US economy to run its economy how much ever they deny this fact. If that was not the case then china would not have faced any economic trouble at all. But India is unique in itself. India is still an agricultural economy. So it should not be affected by the economic crises that badly the was china or Russia was. It was only the panic that had made the stock markets in India to crash and not the fundamentals. This was the same statement that was made my Mr. Anand Mahindra in a TV interview about the Indian economic situation. India’s economy is very much dependant on monsoon, and believe it or not even the international markets follow Indian markets based on the monsoon situation in our country. India does not need to increase its gold reserves because if you look at the cash reserves of the RBI you will be completely surprised.
The gold prices are going to take time to find a proper trend as of now. I would say it is still not the right time to buy gold, as it has to find a proper bottom to settle down. Hold on to your money for now and wait for it to give a sure signal. Till the time the chart does not show a decent reversal pattern it is better to stay away from buying gold. Once the pattern is confirmed then even if you buy gold at a bit of higher prices you will be rest assured that they will be stable and rise further. During depression gold is the last commodity to fall and that is what is happening. It will take time to stabilize but it will for sure.
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