Base Metals surged

Base metals rose on Wednesday boosted by positive sentiments from the equity markets and falling inventories on the London Metal Exchange.

Prices were up locally on MCX though the gains were capped due to strengthening of rupee against the dollar. On Wednesday rupee appreciated by 44 paise against dollar to close at 50.8.

Outlook remains bullish but investors should enter at low levels for investment purpose.

On LME at 5.30 pm local time, copper was 3% up at $4,286 per tonne, aluminium was 1.3% up at $1,418 per tonne, lead was 1.9% up at $1,312 and zinc was almost 3% up at $1,380 per tonne. Locally on MCX at 5.40 pm, copper June was up by 2.5% at Rs 220 per kg, aluminium May contract was 0.7% up at Rs 72.15 per kg, Lead was 1.6% up at Rs 66.6 per kg, nickel was 2.1% up at Rs 561.7 per kg and zinc was up by 2.8% at Rs 69 per kg.

On LME, inventories have registered some fall with copper stocks fallen by 8,825 tonnes to a three-month low of 411,450 tonnes, adding to a fall of 5,000 tonnes on Tuesday. There had also been demand from China to profit from the widening price gap between the London and Shanghai markets.

Stocks markets across Asia gained on Wednesday on easing concerns about the Swine flu outbreak.

The consumer confidence for April was highest in more than three years and the decline in US house prices slowed in February. Metals were also supported by the weakness in dollar against the euro. Both the yen and dollar dropped for a second day against the euro after European economic confidence increased in April for the first time in 11 months.

China - Gold Holding

Chinese gold reserves are now stated as being some 33.89 million ounces - or just over 1,000 tonnes, making it the world's sixth largest holder of gold after the US, Germany, the IMF, France and Italy - excluding, though, the 1,100 tonnes held in the SPDR Gold Trust ETF.

Firstly, it is pointed out that the purchases over the past six years had been made by the Chinese State Administration of Foreign Exchange (SAFE) rather than by the Peoples Bank of China (PBOC), which is why the amount of gold had not appeared in China's official reserve figures. Now though, the holding has been transferred to the PBOC and hence the announcement. The gold has been added to the monetary reserves held by the Central Bank.

While this may not be the proverbial opening of the floodgates, it does suggest that the PBOC, and other Central Banks may become net purchasers of gold in the years ahead, rather than net sellers as has been the case of late.

Jewellery exports

India's export of gems and jewellery will regain the shine within next 6 months.

Mehul Choksi, managing director of Gitanjali Gems, is of the opinion that earlier there was huge inventory and it is over now and the situation is improving.

Due to order cancellation and late payment from markets, the sector witnessed a decline of 18.8% in exports in second half of previous fiscal. The exports declined 30-35% during Feb-Mar 2009 compared to same period of previous year. The decline was 50% during Dec, 2008 - Jan 2009 compared to same period last year.

The export market comprises of cut and polished diamonds and coloured gems.

Silver: demand and supply

The historic price ratio of silver to gold shows that about 10 ounces of silver would buy one ounce of gold. Recently, the ratio is about a 70:1 ratio (with silver at $13/oz., and gold at $1000/oz.) As the silver to gold ratio returns to historic values, from 70:1 to 10:1, you may make over 7 times more money investing in silver, than gold!

Silver prices may rise to exceed the 10:1 ratio, for the following reasons:

More than all of the silver produced by the mines each year is consumed by industry, which leaves little to no room for substantial investment demand. Investment demand for silver is a tiny $1 billion per year. A small increase in investment demand will drive prices sky high.

Most silver is produced as a by-product of mining gold, copper, zinc, or lead. Higher silver prices might not substantially increase the amount of silver mined each year. Consider, in 1980, when silver prices went up to $50/oz., less silver was mined than in 1979!

Higher silver prices may not cause much reduced demand. Why? Because most silver consumed by industry is used in tiny quantities in each application, such as in film or electrical contacts, therefore, rising silver prices will not easily slow down growing industrial demand.

Zambia discovered more copper

Zambia, already Africa's top copper producer, has found more deposits in its north and will invite foreign companies to conduct further feasibility studies prior to mining, a minister said on Wednesday.

More copper and manganese had been discovered in Luapula province, which borders the Democratic Republic of Congo (DRC), and the government had already issued some licenses for the mining of manganese.

The Japanese International Corporation Agency (Jica) had financed geological mapping of areas with copper and the process had been extended to the nearby Northern Province. The government is trying to impress as many mining companies (as possible) to invest in Luapula province. We have huge resources and the prospects of mining are very bright.

Zambia planned to geologically map 45% of the country where there was mineral wealth in order to invite more investors into mining. The potential (for more discoveries) of minerals is very high.

Copper mining is the economic lifeblood of this southern African country of 12 million people, where authorities say copper production will rise to more than 600,000t this year from 569,887t in 2008

Gold marching towards 13000

Gold is moving slowly to the point from where it had picked up and made life time high.

The reasons were global stock markets were passing thro' worst period and investors started investing in gold, which is a safe investment right since ancient times. From around 45 INR per dollar went to 51 INR per dollar. Investors preferred gold for investment and thus buying interest was increased and the supply remained the same. Price shoot up.

But now, stock markets have shown some improvement and sentiment is very strong now. Rupee is again trading at 49 - 50 per dollar. And the G-20 countries have decided to allow IFM (International Monetory Fund) to sell 403 tonnes of gold reserves in the open market to raise funds for its global projects.

At higher prices, individuals started selling their ornaments in anticipation that prices will go down and at that time they can replace the same quantity in less amount. In Feb 2009 and Mar 2009, there was no imports of gold to India.

All these indicate that gold will go down to Rs. 13000 per 10 gms.

Gold

Gold is one of the chemical elements. Gold's chemical symbol is Au and its atomic number is 79. Gold does not interact with other chemicals or compounds. Gold doesn't tarnish and even the strongest acids have no effect. Thus, gold lasts forever - and stays shiny the whole time!

Gold has many industrial uses, but its main historical uses have been for jewelery and money - both are a store of value. Gold has been used as a store of value for at least 5000 years. Gold is measured and prices are quoted in Troy Ounces and Grams. As an example of gold's ability to store value, 2000 years ago one ounce of gold would buy a fine man's outfit. Today one ounce of gold will still buy a good quality man's wool suit with enough left over to buy a few shirts, a tie, some underwear, socks, a pair of shoes and a belt!

Gold has the remarkable ability to store value in both deflationary and inflationary times.Gold is a store of value virtually independent of economic conditions. Unlike shares of a company or government bonds - gold will always retain value. Gold's most important use is insurance against the paper currency of the country you live in. Almost every country has had at least one major "currency crisis" over the last one hundred years. Those that had some of their wealth in gold survived. Unfortunately many people saw their saving become worthless - sometimes in a matter of days.

It is better to buy gold in small amounts regularly, every month for example, over a period of time.The percentage of your total wealth devoted to gold is a personal decision and depends on your particular situation. A conservative goal would be ten percent. In times of uncertainty the percentage should be much higher. Gold is recognized and valued everywhere in the world. It is easier to sell gold than to buy gold! Of course gold can be used in barter or trade as it has for thousands of years.