All the Gold, Glitters no more !!

There is an old Roman saying that Gold is tried by fire and Brave men by adversity. In the current scenario, it looks like the saying has to be twisted and retold as 'Brave men are tried by Gold'. Those brave men who showed courage in buying when the Yellow metal was at its peak in worth. And now its sliding and how. This graph is steeper than the falling career graph of Vinod Kambli.

Gold was sitting pretty at more than Rs. 31,000 per 10 gms some weeks ago and now its a big struggle to be at even Rs. 26,000. Not bigger than the one faced by the last shirt button of then Adnan Sami. The experts are predicting a free fall and the prices to go downhill from here as well. However there is some light at the end of the tunnel as there might be a support at 22,000. The keen technical analysts would know better. In simple words, Rs. 22,000 is where you would look to stop buying Gold and hope the cascading stops.

Main reason is that global inflation is falling which ends up  reducing the value of the yellow metal as a hedging mechanism against rising prices. The so called market pundits who were betting on the wave of inflation  hitting every shore of financial activity are scrambling to reverse their bets. Their haste for the exit on their gold positions is greater than the haste of those people for the exits of theaters playing RGV movie.

Another reason for gold losing its strength could be the rising dollar. The green buck has also moved up on the hopes that US economy is emerging from its crises. Similar to how the morale of Mallya goes up once Gayle starts hitting sixes. I hope Mr. Mallya atleast pays him, afterall he wins them half the matches.

Second big reason just might be the speculative selling by investors seeing that there is a trend of falling gold prices. Not just that, simply small pieces of news doing the rounds that Cyprus is planning to sell some of their gold holdings also triggered the speculative selling in anticipation. Somewhere the capseller has thrown his cap and now monkeys all around the world are throwing theirs. Fools all around, or are they ?

Over the years investors considered gold as a safe asset having stable value that is indifferent to inflation. People are known to stock gold even if they dont find any quick inflows which they could have easily got in fixed deposits or scrips. Its like using all your money and buying Glenn Maxwell and using him as a waterboy.

Basically there are two types of investors: One who buy gold for consumption purposes while others for investment purposes. The consumption kind are on seventh heaven and rushing to the nearest Kalyan Jewellers outlet with shopping bags in hand and sparkle in their eyes. No wonder India accounts for 31.5 percent of gold consumption and that too 77% of that in form of jewellery. Power to women !!

Other kind is the pro investment type. They want to extort big bucks from the market and Gold ETF is their weapon of choice. The one time poster boy of Mutual funds look to have lost its sheen with an increased redemption in the last fiscal. And if the pundits are to be believed, owing to falling prices of the yellow metal Gold ETFs would see a severe decline in terms of the popularity.

But even if the investors and the retailers turn their backs on this precious, all need not go berserk as there will be this demi-gold, I mean demi-god who will come to the rescue. Main hoon na !! Like a Boss !!

The Gold and the Loans !!

With the recent surge in the markets, we saw a big impetus in the books of Gold Loan Financing companies ... The big Ms - Mannapuram n Muthoot finance especially. Even the markets are going ga-ga over the performance. So what exactly is the business model of these Gold Loan financing companies ? 

Many of these companies have been quoting astronomical growth figures, supported by unrelenting demand from a public increasingly looking at gold more as an investment than as a piece of jewellery. Something which has proved to be a big deviation from the otherwise socially conservative Indian culture and the 'whole family jewels need to be safeguarded' issue. Its as strange as Nirupa Roy with extravagant makeup and short skirt partying in Hard Rock Cafe. 

So basically the model works in a very simple manner. Gold jewellery as well as gold in other forms is collected and taken to one of these Gold loan financing companies and kept as collateral for small term say 6 months to one year. In return loan amount upto as high as 10-15 lakhs is transacted to the investor and the gold is kept safe with the organization. The gold is returned once the payment is made. So yeah .. no rocket science.

One more fact to ponder is that what do these organizations do with the gold jewellery in the mean time? Well it just stays with them in the safe lockers and no, it is neither showcased on their public mannequin Bappi Lahiri's body nor invested further to cover the opportunity cost.

Conveniently speaking, these gold loan financing companies are working more on the lines of probability of default. With the yellow metal in sight, they will obviously look towards the investors to default so that the 'Precious' can be there's to keep. Thats why all the terms and conditions are super lucrative which make the risk averse of all drool away in greed. As opposed to 12-15% interest rate on personal loans, people are still opting for 20-24% gold loan rate as it is still better than 35 odd % offered by the unorganized moneylenders. Enough of the numbers coz numbers do not justify anything, ask poor Wasim Jaffer !! Bad Bad Srini uncle !!

Another thing which acts in the favour of these gold loans is that you get the loan with the minimum of fuss and that too in a jiffy. It is said that the loan amount is said to be transferred in just an hour. Some gold loan financing institutions guarantee transfer of money in 6 minutes flat. Thats a laymen equivalent of 6 cups of ready to eat noodles. Phenomenal !!

Secondly, minimal paperwork is what is asked for. Just a photo ID and one pan card copy here or passport copy there should do the trick. No credit history is asked. Infact there is a huge advantage if the investor defaults. It works well for those people to whom regulated banks and NBFC wont give loans. Again a win-win for the parties involved.

The next and one of the decisive fact about these Gold loan financing companies is the penetration of the same across India. Each nook and corner seems to be having an office of a gold loan company. There might not be a convenience store but gold loan finance we have !! No wonder the market share of the Big Ms has risen to almost 1/3rd of the organized market. Let the celebrations begin !!

Finally these companies are leaving no stone unturned. Roping in celebrities, regional or even the Tees Maar Khan of Bollywood for promotions is like the ultimate step. And yes, in this celebrity inspired innocent India its working. So we leave you with one glimpse of the brand ambassador of a gold loan company, telling you what to do to the worries once you are their member - A big Bye Bye !!

Financography .. when Finance meets Geography !!

As much as the topic sounds a bit weird but how riveting it would be to learn such a subject. Its often conveyed by the so called 'Gurus of Finance' that Finance is not a stand alone thing .. you have to align yourselves with all the avenues adjoining it. Its like Finance is no Chuck Norris, visualize it more like Justice League or the Avengers !! With this we take almost the literal meaning of avenue and the expansive geographies  that go with it. 

Take Fiscal cliff for example. The fiscal cliff is a newly coined term in USA referring to the effect of a number of laws which, if unchanged, could result in tax increases, spending cuts, and a corresponding reduction in the budget deficit beginning in 2013. And you thought it would be one of those specially named geographical appendage along the Grand Canyon. Headlines doing the rounds are 'Rivals dig in as Fiscal cliff deepens' making one think that this is surely a geographical marvel which is being dug upon under the orders of the people in charge. So the wealthy will be taxed more so as to bring parity and improve the economy of the nation. Now this even the Geographers would not mind, even Mr. Eratosthenes !! 

The world of Technical Analysis - A branch of checking stocks, sends the not so finance world in a tizzy. There are peaks and there are troughs which are actually the measures to see price levels and not the means for cartographers to draw maps on. However both have this common thread - pressure. While the geographic counterparts develop as a result of the air and ground pressure all along, their financial namesakes develop due to buying and selling pressure of the stocks and scrips.

Then there are wedges, not sand nor green, they are technical analysis patterns which forecast market trends. Again Geography waits behind in the queue like geeks after the cool guys devoid of existence.

Now for Time to bring some History to the mix. Bretton Woods is an epoch event not just for USA but for the World at large as it is here that the exchange rate system involving gold and US dollars came into existence. By mere one look at the word, it sounds more like the one next to Yellowstone Park where Yogi Bear & BooBoo would venture out in search for picnic baskets.

American, European & Bermuda options are all terms in the Derivatives segment. All are means of exercising the option on or before the expiry of the contract and not some continent oriented avenues for the people on a vacation. As for Bermuda, I would be immensely happy if people mistake it for the island of notoriety and not for a piece of clothing worn by the great Govinda !!

Basel Accords are not the pre decided tourist spots in a Yashraj movie, they are infact the principles adopted for banking regulations. So now you know one more thing apart from Roger Federer to come out of Switzerland and which is important. Ouch !!

Upstream is just the methodology of exploration in oil industry and not the way in which the fishes swim. For a minute even Moby Dick got excited. Sorry thats the only famous fish I know. Technically a mammal. Damn this is hard !!

Shogun and Tankan are not Japanese mountain peaks. They are merely public offerings and public information systems in the Land of the Rising Sun. But who would blame the land where a mere plumber teaches a kid martial arts and makes him win a big tournament involving big bullies. Ohh wait .. was it Chinese ?!?! Can the real Mr. Miyagi please stand up !!

There are many more instances where Finance weds Geography and a confused term is born as a result of this wedlock. Keep calm and let the term find its own existence in this finance crazy world.

Heard this fact very often that dont judge the book by its cover. Taking the proverb forward, I promise that I wont judge the financial term by its geographical relation. Is it too late to put this under my New Year resolution, coz this seems feasible.

The Golden Pompous

Ohh the title bears similarity with a Hollywood movie .. with the animals speaking the mood !! Well its almost the same, the Bulls n the Bears have spoken and yeah Gold is worth its wait .. oops I meant weight !!

Well the gold prices which scaled record highs in the month of August had investors going gaga in the US and Europe. Investors preferred the yellow metal over the fickle minded equity markets.

Priced at Rs. 27136 per 10 gms in January this year, Gold is now enjoying premium price of Rs. 31219 per 10 gms as of September.Now even that cloud is wondering why dint I wait for the golden lining. Although this demand somehow fizzed out in the latter first half of the year largely thanks to slowdown in India & China. It seems like there are no mahurats available for weddings in Kerala !!

Its quite a stat that India & China account for 45% of global demand. Why are Chinese investing so much in Gold rather go and invest in Jackie Chan or Jet Li movies. However investment demand for Gold in particular has fallen in the two Asian giants off late. Gold has acted like that faithful Ramukaka or Deendayal giving steady returns in India over the years. While sensex moved like Abhishek Bachchan's career graph, Gold was the Rahul Dravid of all commodities.

Since Gold prices are denominated in terms of Dollars the equation becomes as clear as an Akshay Kumar movie. The more you see him the less you see other characters in action. Likewise the increase in the price of Gold means a big jolt for Dollar among other currencies.

Under these circumstances come a new wave in the market, the Gold ETFs. This product helps the gold crazy nation to accumulate gold one step at a time with minimum risk of theft or cheating. Transparency being a USP, Gold ETFs have no tax hassles and can become an Indian's best friend if welcomed with open arms.

But no matter what the price is Indians will not end their fascination for the precious metal. Indians are crazy about owning gold. No wonder, that the physical gold held by households in India is more than 15,000 tons, which is the largest in the world. The daughters will continue to get married laden with gold. The middle aged dad will always invest in Gold as a long term investment inspite of better investment options. And yes the festivals, our rich heritage will force even the sane of all to get lured away by the yellow metal. If this madness is not enough, the devotees move up one step ahead and actually are giving gold to Gods.