The biggest trades are now, Short Gold in INR and Long the Rupee in the currency market. In the stock market good shorting opportunities are not available with most jewellers not being available in the F&O segment.
Gitanjali's books seem to be the most suspect and the stock can see severe erosion if it enters the F&O segment.
Jewellers will be unable to match FY13 numbers for the next two years due to 1) gold price depreciation related inventory losses and 2) Falling prices leading to declining demand for Gold.
Over the 10 years from 2002 to 2012, net gold imports in India rose from 367 tons to 829 tons backed by rising prices. In USD terms Gold imports rose from USD 3bn in 2002 to 44bn in 2012, more than a 14x jump. Clearly a large part of this was investment demand.
Gold prices are directly correlated to economic cycles in emerging markets especially India and China as per GMO's research. This supports the short trade, especially as shorting gold in INR is actually an arbitrage position vis a vis its dollar price and a good way to play an anticipated rebound in the rupee.
To initiate the trade only variable to watch is crude price. A USD 2 decline in crude from current price can trigger the aforementioned price movements in INR as well as Gold
Signing off
Sundeep Patel
Gitanjali's books seem to be the most suspect and the stock can see severe erosion if it enters the F&O segment.
Jewellers will be unable to match FY13 numbers for the next two years due to 1) gold price depreciation related inventory losses and 2) Falling prices leading to declining demand for Gold.
Over the 10 years from 2002 to 2012, net gold imports in India rose from 367 tons to 829 tons backed by rising prices. In USD terms Gold imports rose from USD 3bn in 2002 to 44bn in 2012, more than a 14x jump. Clearly a large part of this was investment demand.
Gold prices are directly correlated to economic cycles in emerging markets especially India and China as per GMO's research. This supports the short trade, especially as shorting gold in INR is actually an arbitrage position vis a vis its dollar price and a good way to play an anticipated rebound in the rupee.
To initiate the trade only variable to watch is crude price. A USD 2 decline in crude from current price can trigger the aforementioned price movements in INR as well as Gold
Signing off
Sundeep Patel
Interesting that these turned out to be largely true as early as today after the post yesterday. Good Stuff however would appreciate if you were a little more detailed in your rationale analysis.
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