Pithaly

I think we have missed out on some of the uses of precious metals which seem to be making a resurgence after thousands of years.

It is well known to the moderately intelligent Indian who has not fully migrated to McDonalds and Bling, that water kept silver vessels will kill bacteria. A recent application of silver has been in Air handling units where it is used to neutralise bacteria in the air stream.

It's the same case for gold. Early uses apart from the use of jewelery (which btw, was not merely for decorative purposes, but the heavy gold jewelery adorning the bare chests of men ensured absorption of gold molecules which serve a healthy purpose), also included the use of gold for false teeth on account of it's malleability, ductility and it's inertness.

Gold is now used in the manufacture of integrated circuits on account of it's ductility, non-corrosiveness and high conductivity.

Recent research has been going on in the use of gold in the manufacture of DNA sensors which would be used to detect diseases.

I dare say that the future will see more and more applications of this beautiful metal.

Excerpts from recent research:

ScienceDaily (Aug. 23, 1997) — Evanston, Ill. --- Researchers at Northwestern University have combined gold and DNA in an innovative way that should lead to new techniques for detecting many types of diseases. Screening for genetic and pathogenic diseases -- that is, those transmitted through heredity and those transmitted by microorganisms -- may be done using the new material, according to one of its inventors, Chad A. Mirkin, professor of chemistry at Northwestern.

Functionalized nanoparticles are covalently bound to internal, chemically modified bases on double-stranded DNA without the presence of destabilizing "nicks" along the DNA backbone. In addition, we report an approach for thiolating one end of the DNA/nanoparticle product and attaching it to a gold surface. The ability to attach one or both ends of the DNA/gold complex, after generation of the desired pattern, to fixed contacts or electrodes is necessary for nanodevices fabrication.

Abstract. This report presents the use of disulfide-modified single-stranded DNA (ssDNA) to form DNA self-assembled monolayers (SAMs) and mixed DNA-carbon nanotube (CNT) hybrids SAMs on gold substrates. Mixed DNA-CNT SAMs are composed of DNA,
mercaptohexanol (MCH) and DNA-CNT aggregates. Both, DNA-CNT and DNA areas of the mixed SAMs were analyzed and compared to traditional DNA SAMs. The results suggest the formation of a more compact and densely packed monolayer of DNA-CNT in comparison with DNA. The use of DNA-CNT hybrids to form SAMs on gold substrates might represent a new approach to improve the immobilization of DNA strands on gold, and might therefore help with the development of enhanced DNA sensors. Read more on this article...

Update: Consensus on growth of the Sensex basket of stocks is still 20%, whereas the growth in the 1st quarter is 5%. And this is the best quarter of the year!

Expect 10,500 as a minimum with an over shoot down to 9,000 in the next 6 to 12 months.

A PE ratio of the sensex o t 15 plus is still very expensive. Remember, the PE ratio was around 8 in March 2003, so one could expect at best a bottoming of the market at a sensex PE of say, 10 plus.

That's a long way down from here.

Indians sold out for paper:

Indians who sold their gold in 2007 to buy stocks are now paying out the wazoo for their gross misjudgment. In January of 2008, the Bombay Stock Exchange fell by more than 4,000 points. It is now a full 8,000 points short of its January 8th peak, while gold is $70 higher than it was then.

Ironically, on January 17th, the article Indians Sell Gold – and their Future was published. The following day, the Bombay Stock Exchange (BSE) lived up to its name and bombed from 21,000 all the way down to 17,000.

The BSE has never recovered.

It most recently has desperately tried to cling to the 14,000-level in hopes of avoiding further drops down to 9,000 and below – and failed, only to slip down to 13,000. That's the same level where it was in November of 2006, twenty months ago. At that time, gold stood at around $470. Now, gold costs nearly twice as much.

Most of the gains the Indian stockists enjoyed since then are now little more than vapors in their memory. All of the gains of gold since then are still there. Maybe diversifying into some stocks in addition to gold would have made better sense – but selling gold for regular stocks?
Ouch!

They should have known better.

What's the lesson? It pays big bucks to ignore the siren song of the paper-pushers: "Come, my poor peasant friend. Sell your clumsy gold and open a brand-new bank account with us. Then, you can buy and sell Indian stocks through our in-house brokerage service and support your country's powerful economy."

Now, the gold is gone, and so is much of the money they sunk into their paper stocks. What will Indians do? Will they return to gold?

In June, Indian gold buying dropped to a third of what Indians bought during June a year ago. They are still waiting for lower prices. Doesn't seem to be happening. Lower than now, maybe – but lower than the $650/oz. in June of 2007? Forget it!

The BSE's blue 50-day moving average has fallen way below the red 200-day MA, and its descent is accelerating. Gold, on the other hand, has never touched its own 200-DMA, and its 50-DMA rests securely above its longer term colleague and has recently turned north again.
However expensive Indians may perceive gold to be right now, it would be wise for them to put whatever disposable income, cash (and stock) assets they have back into gold. The rupee's fall makes holding cash unattractive. Equities are falling and so are Indian treasuries due to high inflation expectations.

Gold and silver will be some of the few things worth sinking money into - regardless of price - because the price of leaving their money in falling assets is obviously even higher. It only gets more and more expensive as time moves on.

Gold is rising even without India's traditional buying levels of approximately three times what they are now. The Indian gold train is moving and pulling out of the station. The more speed it gathers, the harder it will be to jump back on.

Hesitating any longer will be more expensive than gold could ever hope to be. In fact, logic would dictate that the more expensive gold gets, the more it will cost those who decide to wait before they buy it - in terms of lost profits. The same thing goes for all investors, of course, not only Indians.

Vietnamese have been the largest gold importers in Q1 of this year – and that's in absolute terms, not per capita!
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Guess why infrastructure stocks zoomed today:

Merrill Lynch & Co. Inc. ( MER ) has raised its annual infrastructure-spending estimate for emerging markets by 80%, as developing countries try to keep pace with fast-growing economies and large cash reserves, BusinessWeek reported.

Investment in infrastructure, which the firm sees as the long-term solution to inflation, will rise from $1.25 trillion to $2.25 trillion annually over the next three years. And China, the Middle East, and Russia will account for 70% of infrastructure spending.

---

Ridham Desai, MD and Co-Head Equity, Morgan Stanley, said the markets have made lower tops and bottoms, which confirms that we are definitely in a bear market. "Price damage is the first indicator. Fundamentals have also given way. The bottom may lie around 10,500. So, the markets are likely to se more downside for the next six months."

---

Who a few years ago would have thought Fannie May and Freddie Mac would lose 70+% and 80+% of their market value?

---

Sometimes your worst fears come back to bite you in the rear. Case in point: In the New York Times, on October 14, 2001 the managing director of an oil consulting firm warned: "If Ben Leden takes over and becomes king of Saudi Arabia, he'd turn off the tap ... he wants oil to be $144 a barrel."

At the time, oil traded at $23, and $144 a barrel seemed downright impossible. Well, terror mastermind Osma Ben Leden, safe in his undisclosed rat hole, must be grinning like a Cheshire cat, because last week oil soared past $144 a barrel.

--- Read more on this article...

by Eric Roseman, 4th July 2008

It seems Vietnam just borrowed a page from the U.S. financial-history books - by suspending all gold imports in June.

This marks the first time a Southeast Asian country has ever barred gold imports during skyrocketing inflation, soaring interest rates and an overvalued currency - the Vietnamese dong.

Seventy-five years ago, Franklin Delano Roosevelt [FDR] issued Executive Order number 6102 and confiscated all gold privately held in the United States on April 5, 1933. But unlike FDR's edict, the Vietnamese can still hold or own physical gold. They just can't import any more.

This shocking development was just revealed to me by my good friend in Zurich - Swiss Asset Manager, Robert Vrijhof of WHVP. It illustrates a new trend popping up in emerging market economies to stop gold hoarding.

By restricting gold purchases, the Vietnamese Communist Authorities are trying to hold down the local skyrocketing inflation. But inflation is already heading for Weimar Germany-style double-digit or possibly, triple-digit consumer prices.
Gold's Success is Fiat Money's Failure

It comes as no surprise to me that another dollar-linked or semi-pegged currency has collapsed vis-à-vis gold. Gold prices have been rising against all currencies since 2005, including the euro.

Spot gold prices have averaged US$910 an ounce in 2008 compared to US$659 just 12 months ago. From an average price of US$295 an ounce in 1998, gold prices have gained a cumulative 214%. But compared to its peak in January 1980 at US$850 an ounce, spot prices are up just 8.8%.

Asian inflation just hit a 9 ½ year high and averaged 7.5% in April. So it's no wonder dollar-pegged currencies are coming undone. Other peripheral currencies in the region that follow the Federal Reserve's monetary policy are also sinking under the pressure of inflation. This phenomenon is also happening throughout the Gulf region where dollar-pegged units are unraveling amid rising inflation.
Vietnam's Biggest Challenge: Wrestling 25% Inflation

Introduced in 1978, the Vietnamese dong is another example of fiat money gone wrong.

Inflation is now clearly out of control. Inflation soared 27% over the last 12 months through June. And inflation is still climbing as crude oil and other commodities prices continue to hit new highs.

The dong is down just 3.7% this year versus the dollar, but it still remains severely overvalued. Also, recently the dong breached its government-imposed trading band.

I visited the Vietnamese economy in early 2007. So I saw firsthand how Vietnam is overheating. It's a natural consequence of this country's strong economic growth is inflation and high interest rates.

High rates and inflation always threaten financial assets like stocks. The VIN Index, the country's largest stock exchange in Ho Chi Minh City has collapsed more than 60% since hitting an all-time high last year. Also, real estate prices are now in a downtrend following a big boom since 2005.

The Vietnamese economic miracle averaged a stunning 7.3% GDP (gross domestic product) growth rate this decade. And now Vietnam risks coming undone if the State Bank of Vietnam can't stop surging consumer prices.
The World's #1 Gold Importer

The Vietnamese government's decision to ban gold imports follows an unprecedented surge in gold ownership. The locals have lunged for gold bullion lately. In fact, they even surpassed India and China as the world's largest source of demand.

Gold production is already approaching net supply deficit. The largest gold exporters, South Africa and Australia continue to struggle to bring new supply to the market this decade.

Demand destruction is the code-word for declining consumption when commodity prices rise exponentially. So far, this has NOT happened in Vietnam. Fabrication demand has fallen sharply in India as gold prices raced through US$750 an ounce last fall. But despite a surging price since last August, the Vietnamese continue to absorb imports at a record clip - until now.

According to the World Gold Council, Vietnam's first quarter gold imports were 36.8 tons. That's up an astounding 71% from the first quarter in 2007. And gold-hungry consumers purchased 31.5 tons of that total supply or 86% as investments. In other words, they're buying gold to protect their wealth against rising inflation and a weak currency. Sound familiar?
No One in Vietnam Can Afford Gold Anymore

Since June, the Vietnamese can no longer buy gold. Officially, the government claims this new policy is to temper booming imports, which resulted in a record trade deficit for the first half of 2008. First-half imports surged 64% to US$45 billion while exports rose only 27% or US$28.6 billion.

Yet the value of gold imports prior to the June suspension was US$1.7 billion or 3.8% of total imports. That's hardly a dent compared to heavy industrial machinery and machine tool imports used for manufacturing. That suggests the government is targeting gold to stop demand.

Thus far, the Vietnamese Communist government has not confiscated gold. FDR made gold ownership illegal in the 1930s when the United States was suffering a devastating deflation. The U.S. also revalued gold to US$35 an ounce during this period.

If Vietnam continues to lose control of inflation, and possibly, the economy, gold confiscation becomes a real possibility in a country with a short history of fiat money.

All paper money, including the euro, the yen and even the resource currencies, continue to buy less gold compared to just three years ago.

I imagine gold prices will benefit enormously from the new global inflation spike the latter half of this decade. I see gold breaking through its inflation-adjusted high of US$2,200 an ounce set back in 1980 in the not-too-distant future.

http://seekingalpha.com/article/83772-vietnam-suspends-gold-imports-follows-fdr-s-great-depression-lead?source=wl_sidebar Read more on this article...

It's so easy to see gold support at $700-$725. (God help if that breaks!)

It's at $850 or so currently.

Seems that the downside target will reach End July- August which is India's lean period.

With gold ETFs available in India (demat gold), that's an easy ride on one commodity which is long term bullish.

Ride from $725 to $1,600. Not a bad 100% profit in say, two year's time.

http://futuresource.quote.com/charts/charts.jsp Read more on this article...

>XAU, weekly chart



>XAU, daily chart Read more on this article...

Gold for April delivery fell $59, or 5.9 percent, to $945.30 an ounce on the Comex division of the New York Mercantile Exchange. That's the biggest percentage drop for a most-active contract since June 2006. Gold reached a record $1,033.90 on March 17.

In 1980, the price tumbled $50 a day from Jan. 22 to Jan. 24. On Jan. 21 that year, the metal climbed to $873, a record that lasted for almost 28 years.

If you haven’t bought gold or silver already you are completely insane. Read more on this article...

(For other news from the Reuters Global Mining Summit, click on http://www.reuters.com/summit/GlobalMiningandSteel08?pid=500)

LONDON, March 11 (Reuters) - Soaring gold prices are likely to breach $1,500 an ounce in 2008, the chief executive of Canada's Yamana Gold Inc said on Tuesday.

"There is a good chance we will see it before the end of this year," Peter Marrone told the Reuters Global Mining Summit in London.

Gold was quoted at $977.50/978.40 at 1245 GMT.

It hit a record high of $991.90 on March 6, a rise of 19 percent since the end of 2007, driven by inflation fears, a weak dollar, record high oil, expectations of further rate cuts in the United States and tight supplies.

Marrone said the current environment formed "a perfect storm" for higher gold prices, which would need to rise to more than $2,000 in adjusted dollars to match the previous nominal peak of $850 set in 1980. (For summit blog: http://summitnotebook.reuters.com/) (For more on the Reuters Global Mining Summit see [ID:nN10455170] (Reporting by Ben Hirschler; editing by Rory Channing).

http://africa.reuters.com/metals/news/usnL11325529.html

^XAU


"When investors are focused on meeting a threshold like $1,000 an ounce for gold, a sell-off of
upto 15 percent is likely once the goal is achieved."

http://www.chicagotribune.com/business/yourmoney/chi-ym-marksjarvis-0309mar09,0,432614.column

(But with a 2 year target of $ 2,000 an ounce). Wave 1 likely to complete at around $ 1,400 to 1,500 an ounce).
Read more on this article...