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"Gold No Slam-Dunk Sell in China as Aunties Buy Bullion"

"Gold No Slam-Dunk Sell in China as Aunties Buy Bullion" - Here is the opening from this informative article from Bloomberg:

Yang Cuiyan, a 41-year-old housekeeper from Anhui province, is one reason China is poised to topple India as the world's top consumer of gold even as investors desert the metal.

"I don't know anything about the stock market and I don't have enough money to buy property, so I figured gold is the safest choice," she said. "I can put it on when I go back home to show everyone that I'm doing well."

Yang, who made the 650-mile (1,000-kilometer) journey to the capital from her rural home to visit relatives and shop, is one of the legions of middle-aged Chinese women, respectfully referred to as aunties, who bought coins and jewelry this year, bringing support to a market shunned by many professional investors who began doubting the metal as a store of value.

Bullion consumption in the world's second-largest economy will surge 29 percent to a record 1,000 metric tons in 2013, according to the median of 13 estimates from analysts, traders and gold producers in China surveyed by Bloomberg News. Demand that may ease 2.4 percent in 2014 from this peak still points to purchases greater than any other nation and more than the U.S., Europe and the Middle East combined.

China's demand for jewelry, bars and coins rose 30 percent to 996.3 tons in the 12 months to September, while usage in India gained 24 percent to 977.6 tons, according to the London-based World Gold Council. India was No. 1 for calendar 2012.

My view - Gold remains in an overall downward trend; Goldman Sachs it talking it lower and western investors and traders are still drifting away from the Total Known ETF Holdings of Gold. However, it is also oversold in the short term and near prior support from the late June low.

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Deepak Lalwani's India Report -
My thanks to the author for his informative report published by LALCAP. It is posted in the Subscriber's Area but here is a brief sample:

The Indian economy grew at 5%, a decade low, for the fiscal year to 31 March 2013. Growth slowed even further to 4.4% in Q1 (April-June 2013) of the current fiscal year to 31 March 2014. The Q2 (July-September) GDP figure is expected on 29 November, and fears remain that growth back to 5% looks optimistic. Investors are increasingly concerned that India is stuck in a stagflation (stagnant growth + high inflation) environment. The wholesale price index (WPI) rose to an eight-month high of 7% year-on-year, driven by more expensive energy and manufactured goods. At the heart of India's inflationary pressure is a sharp rise in food prices which are threatening re-election prospects for the ruling coalition Government, led by the Congress party. Food inflation in October rose 18.2%. In the last 60 months food inflation has averaged over 12% per month. Onion prices have risen from Rs 20 per kilo last December to Rs 100 per kilo last month in Delhi and Bombay. The price of salt has rocketed in East India from about Rs 18 per kilo to well over Rs 100 per kilo. With five state elections in progress, the humble onion's power in toppling past Governments is focussing minds.

My view - To state the obvious, governance has never been easy in India's, large and ethnically diverse country. Its coalition governments have been weak and consequently beholden to minority factions. Nevertheless, the Congress Party appointed an impressive Reserve Bank of India Governor, Raghuram Rajan, in September.

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Tim Price: Madness, and sanity -
My thanks to the author for his ever-interesting letter, published by PFP Wealth Management. It is posted in the Subscriber's Area but here is a brief sample:

Probably the biggest of those fish is that giant part of the world economy known as Asia. The chart below shows the anticipated growth in numbers of the middle class throughout the world over the next two decades. The solid green circle is the current middle class population (or as at 2009 to be precise); the wider blue-fringed circle represents the forecast size of this population in 20 years' time. The OECD definition of middle class is those households with daily per capita expenditures of between $10 and $100 in purchasing power parity terms.

Note that in the US and Europe, the size of the middle class is barely expected to change over the next two decades. Central and South America, and the Middle East and North Africa, are forecast to grow a little. But one area stands out: the emerging middle class in Asia is forecast to explode, from roughly 500 million to some 3 billion people.

In equity investing, the combination of a compelling secular growth story and compellingly attractive valuations is a very rare thing, the sort of investment opportunity that one might only see once or twice in a generation, if that. But it exists, here in Asia, today. Once again, however, we have to abandon conventional financial thinking in order to exploit it.

My view - This is a very good issue of Tim Prices' letter and I commend it to you.

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Additional commentary by Eoin Treacy

The Iran Peace Deal Thanks to Emad Mostaque at Noah Capital Markets for this critique of the deal announced over the weekend. The report is posted in the Subscriber's Area but here is a section;

The key outcome of the deal agreed by Zarifand Kerry over the weekend on Iran's nuclear program is to show that the P5+1 has approximately zero interest in military conflict in Iran and the US has realised that sanctions won't really get anywhere in this issue. This syncs with our prediction 2 months ago in"Middle East Geopolitical Risk Waning, 22nd September", when we put forward that a dramatic shift on Iran was a lot closer than many expected, with our expectation being that an initial agreement and roadmap could be concluded around now.

We had previously seen that the probability of a strike on Iran, which had heightened in the wake of the Arab Spring as regional powers felt unsteady, peaked at the first quarter of last year and has been minimal since. Now it is almost zero as despite much public bellicosity from Netanyahu, who apparently scuppered a deal a few weeks ago by threatening via the French that he would attack Iran, it is unlikely Israel will do so when Iran's nuclear facilities have even more IAEA inspectors wandering around and Israel's own positioning politically has taken several body blows due to regional shifts. Others who have urged strikes behind the scenes have also been put on the back foot due to events in Syria and elsewhere, as their ties with the P5+1 nations have started to fray as interests have become misaligned.

My view In a region as culturally, ethnically and religiously diverse as the Middle East, the implications of this deal will be parsed over for some time. However, from a markets perspective, we can conclude that the risk premium attached to Israel, in particular, has decreased since the possibility of an outright conflagration between the two countries has been removed, at least for the moment,

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Email of the day
on commodity tracking ETFs:

Just flicking through the charts this weekend and noticed the Leveraged Nickel ETF versus standard Nickel ETF - I think it would be interesting for you to explain why standard Nickel halved in value from a 2011 peak and how leveraged Nickel has fallen from 16 to almost 2 - It would also be interesting to me if you were to explore this one - If standard Nickel was to rise from current levels, say 15000 back to 30000, would leveraged Nickel rise from 2 to 16.

I am asking this question mainly because I think it is a subject not covered anywhere else on the internet and also that I suppose the answer will prevent those looking at leveraged ETF's will avoid them. I got burnt once in the early days with a small holding and that's why I now avoid them but curiosity only means I do observe them from time to time.

Thanks in advance.

My comment Thank you for this question which comes up from time, with relation to ETFs attempting to track the performance of futures markets. Most people tend to think of ETFs as relatively passive baskets that simply mirror a well-defined Index such as the S&P 500. However, when this methodology is applied to instruments such as futures a number of additional considerations and costs have to be taken into account.

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Email of the day on an up-to-date list of Autonomies:

I wonder if there is a more up to date list of Autonomies that the ones on the forum.


My comment Thank you for this question which may also be of interest to other subscribers. FT Money's Autonomies is a constantly evolving list as we become aware of additional companies that meet our criteria of global leadership In their respective sector, brand recognition, breadth and often strong records of dividend increases.This section continues in the Subscriber's Area. 

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