Gold vs Silver : Current prospects

They are various contexts for comparing gold with silver, I put it here pointwise-

1. People generally prefer silver because they say it has a greater multiplier than gold or a better investment potential. In general if it is considered that somewhat nearly silver has a multiplier of 11 to l, whereas gold will only multiply at a rate of 5 to 1, it means that using arbitrary numbers of RS50 per 10grams for silver and Rs.5000 per 10grams for gold, silver could reach Rs550 per 10grams (Rs50 per 10grams times 11 = Rs550) and in the same time gold could reach Rs25,000 (Rs5000 per ounce times 5 = Rs25,000). So thats how the multiplier gives in a fair advantage to silver. We may have a greater profit percentage with silver.

2. Also silver has much greater industrial demand than gold. Silver which is an industrial precious metal is used in cell phone cameras computers and most of the IT gadgets. Also due to price of gold being too high it is convenient for most of the industries to go with silver as a substitute.

3. Also silver tends to be consumed rather than accumulating as a store of wealth like gold. So there is much greater availability of gold to silver (above ground) at any given point – as much as 80 times more. Some market observers point to the smaller volume in silver investment compared with that of gold. So thats kind of a disadvantage with silver with respect to volume.

As per analysis the price of silver has increased by 30% as compared to that of 17% for gold since Feb’2010.

U may also try the following link for more information-
http://www.getmoneyrich.com/which-is-better-gold-or-silver-investment/

CPI, WPI and their comparison

CPI (Consumer Price Index)

CPI is a statistical measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is a price index that tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation. Under CPI, an index is scaled so that it is equal to 100 at a chosen point in time, so that all other values of the index are a percentage relative to this one. Most of the major economies like US, UK, Japan, France, Singapore, and China have selected CPI as its official barometer to weigh its inflation. There are 8 groups in which CPI is used. They are: education, apparel, foods and beverages, communication, transportation, recreation, housing, and medical care. Other services like school and government registration fees and electricity and water bills are sometimes counted as well.

WPI (Whole-sale Price Index)

In this method, a set of some commodities and their price changes are used for the calculation. WPI is calculated on a base year and WPI for the base year is assumed to be 100. The data of wholesale prices of all these commodities in the base year and the time for which WPI is to be calculated is gathered. Then the WPI of a certain commodity is calculated. The overall Wholesale Price Index is the weighted average of individual WPI figures. Commodities are given weight-age depending upon its influence in the economy. India is amongst the few countries of the world, which selected WPI as its official scale to measure the inflation in the economy. The WPI can be established using the status of the five groups in basic human commodity namely: manufacturing, agriculture, quarrying, mining, and in the export/import industry.

Now the comparison

WPI-
1. Measure of temporal price change of wholesale transactions of all commodities in the country.
2. The weights of items have been assigned in proportion to their share in total value of transaction (output) in the economy.
3. Measures Inflation at each stage of production.

CPI-
1. Measures the average price of consumer goods and services purchased by households.
2. Weights are assigned in proportion to their share in the consumption expenditure of family of industrial workers in the selected centers.
3. Measures Inflation only at the final stage of production.

To put it in a very simpler way in which the majority could understand, Wholesale Price Index is the middle point of all the prices that the merchants pay for certain goods or services from the manufacturers or traders. While the Consumer Price Index, on the other hand, is also the middle point of all the prices that the consumers, homeowners and private sectors have paid for particular products and services.

Markets today : 11.05.11

Indian markets ended rangebound session on a positive note as buying activity emerged across the board with realty, metals and auto in the lead. Capital goods space ended marginally in the red.

Bombay Stock Exchange's Sensex ended at 18584.96, up 72.19 points or 0.39 per cent. The 30-share index hit a high of 18622.44 and low of 18454.93 in trade today.

National Stock Exchange's Nifty closed at 5562, up 20.75 points or 0.37 per cent. The broader index touched a high of 5574.70 and low of 5525 intraday.

BSE Midcap Index was up 0.56 per cent and BSE Smallcap Index moved 0.73 per cent higher.

Amongst the sectoral indices, BSE Realty Index was up 1.40 per cent. BSE Metal Index moved 1.01 per cent higher and BSE Auto Index advanced 0.95 per cent. BSE Capital Goods Index was down 0.03 per cent.

Hero Honda (3.31%), DLF (2.46%), Tata Motors (1.85%) SBI (1.78%) and Reliance Infrastructure (1.48%) were the major Sensex gainers.

NTPC (-1.86%), Tata Power (-1.39%), ONGC (-1.30%), Maruti (-1.14%) and L&T (-0.98%) were the top losers.

Market breadth was positive on the BSE with 1612 gainers against 1192 losers.

Economy Hapless : RBI Helpless : Govt Complacent

What we have here is a short cover up of views and perceptions of an expert panel including Lord Meghnad Desai, Professor of Economics at the LSE, UK, TN Ninan, chairman of the Business Standard, well known economist Bibek Debroy and from R Seshasayee, executive vice chairman of Ashok Leyland.

As we know Recently the RBI increased the interest rates by 50 basis points which is double of what the market had anticipated. This action was gravely condemned by the panel and was considered excessive and uncalled for. According to Mr. Debroy it is not going to help because the kind of inflation we have has nothing to do with monetary policy instruments. There are other reasons for that. And it will only achieve nothing but a lower rate of growth. Overall it is considered to be a fundamental mistake.

Mr.Ninan ahd two points to make on this matter-
One, No one has focused attention on the fiscal deficit. You have had very low inflation up to 2006 and very moderate inflation up to 2008. You had high inflation over the last 3 years and those were the 3 years, in which fiscal deficit on average has been close to 6% of GDP. In the previous 3 years, the fiscal deficit was only 3.5%. So, you have upped the government’s deficit. You have pumped in more money into the system and you are expecting the RBI to control it. I think the problem lies with the government. Second, we have inflation coming from high global oil prices and high international commodity prices. Domestic commodity prices are no higher than international prices. So, there is nothing that monetary policy can do to correct this.

So, that means the government, rather than the RBI has failed to understand the real causes of inflation. It’s also come up with the wrong remedies for tackling it and if international food and oil prices stay high, the pressure on inflation will continue regardless of what the RBI has done.

According to Mr.Desai, what is important is that inflation is a government failure. It is a failure of supply side policies and it has been persistent for all the two years that UPA II has been in power. The budget completely failed to address a question of inflation. The deficit is very large and 36% of revenue is paid in interest on government debt. It's really a very serious problem and the complacency on part of the Ministry of Finance is shocking.

Oil Prices tend to revamp : US economy prospective

The crude is indicating a return to a lower level on cost basis. As speculated by many analysts, the oil price may further go down.

According to Jonathan Barratt, MD of Commodity Broking Services, it all started with some fundamental news and people questioning the resolve of the recovery that US has had. On Wall Street, the Dow and the S&P 500 fell about 1% as energy shares slumped with the price of oil. This seems to be a result of lowering of demand powered by worries about the job market ahead of Friday's key employment report. On the other hand, he pointed that if we get a resolution on Libya then all of sudden we are going to see 1.4 million barrels coming on to the market. When you look at that type of fundamental news, just on the horizon, you could probably suggest that crude could actually trade all the way down to USD 80 a barrel.

The decline of $9.44 per barrel, or 8.6 per cent, brings the week's loss for oil to $14.13, or 12.4 per cent. Other commodities like silver and cotton have plunged as well. Oil was continuously being considered to be at much a higher level than it should be. Oil rose 35 per cent from mid-February through the end of April. As it climbed above $100, economists warned that high fuel prices were taking a toll on the US economy. Gasoline demand starting falling in March as motorists paid more at the pump; that trend was reinforced by industry and government studies released this week. This led most of the oil investors to go for the exit leading to a drop in its stock value.

The bear prowls on : Update 05.05.11

The day added to the the continuous losing streak for a ninth straight session as concerns of high interest rate continue to put pressure on economic growth. Negative cues on the global front added to the woes.

Indices opened on a subdued note and remained rangebound for most part of the day. However, sharp selling activity emerged in the afternoon and took the indices below 200 DMA levels, which is a bearish sign.

** DMA[[Moving average data is used to create charts that show whether a stock's price is trending up or down. They can be used to track daily, weekly, or monthly patterns. Each new day's (or week's or month's) numbers are added to the average and the oldest numbers are dropped; thus, the average "moves" over time. In general, the shorter the time frame used, the more volatile the prices will appear, so, for example, 20 day moving average lines tend to move up and down more than 200 day moving average lines.]]

National Stock Exchange's Nifty ended at 5459.85, down 77.30 points or 1.40 per cent. The broader index touched a high of 5560.30 and low of 5443.65 in trade today.

Bombay Stock Exchange's Sensex was at 18210.58, down 258.78 points or 1.40 per cent. The 30-share index hit a high of 18569.21 and low of 18160.65 intraday.
BSE Midcap Index was down 0.95 per cent and BSE Smallcap Index moved 1.23 per cent lower.

Amongst the sectoral indices, BSE Realty Index was down 2.89 per cent, BSE Power Index declined 2.40 per cent and BSE FMCG Index slipped 1.82 per cent. BSE Oil&gas Index ended 0.01 per cent up.

Ranbaxy Laboratories (-6.33%), Reliance Communications (-5.67%), Punjab National Bank (-5.53%), Tata Power (-5.08%) and Reliance Power (-4.91%) were the top Nifty losers.

Ranbaxy Laboratories was witnessing selling pressure after reports that that the federal prosecutors in the U.S have been negotiating a criminal and civil settlement with Ranbaxy and this could lead to Ranbaxy having to pay the penalt of about $ 1 billion.

Hero Honda (5.96%), Kotak Bank (2.30%), Maruti (0.76%), GAIL (0.55%) and Reliance Industries (0.18%) were the only gainers.

Market breadth was negative on the BSE with 1861 losers against 901 gainers.

European markets were down on profit booking and the Wall Street is also likely to follow suit. At 5:10 pm IST; Dow Jones futures was down 0.35 per cent, S&P 500 declined 0.43 per cent and Nasdaq moved 0.39 per cent lower.

Fear the bear : Markets Injured

Here comes a lot of disappointment and stress amidst what seems to be a depressing phase for the Indian economy and its investors as a whole. All the sectors continue to be beaten down inevitably restricting growth prospects of the economy. What rides this fall-down is the clear adamant attitude exhibited by the policy makers who have decided to rein in prices, sacrificing economic growth.

As I quote - "There is a possibility of another 10% correction in the Indian market near-term, as the impact of the RBI's rate hike sets in," said Saurabh Mukherjea, Head of Equities, Ambit Capital.

India's Sensex is the worst performer in Asia this year with a 10% loss after returning 17% last year. Investors worry that steep valuations, possible slowdown of the economy, could squeeze corporate earnings . A 20% fall in key indices is broadly accepted as a bear market. The BSE's 30-share Sensex fell 65.33 or 0.35%, to 18469, extending losses for the eight straight day. The NSE's 50-share Nifty dropped 28.10 points or 0.50%, to 5537.15.

The RBI on Tuesday raised the rates for the ninth time in 13 months to fight inflation that is well above the comfort level. Governor Duvvuri Subbarao said, "Inflation is inimical to sustained growth as it harms investment by creating uncertainty. Bringing them down, therefore, even at the cost of some growth in the short-run, should take precedence."

Economic growth forecast for this year is at 8%, down from 8.6% last year. Foreign funds have pulled out close to 2,000 crore in the last few days, including Wednesday's provisional figures.

But, a sustained economic growth requires some tough measures to cool prices. An economic slowdown now is needed to control inflation and investors may need to brace for some pain in the short-term. Thank You!