MC: Gold to be bearish in '09, sell it: Safetrade Advisors
N Prasad of Safetrade Advisors sees the near-term range for crude between USD 37-45 per barrel. He sees the near-term range for gold between Rs 12,500-13,200/10 gm. According to him, gold looks very bearish for 2009 because once oil comes down, the economies that are dependent on oil revenue and who have got surplus gold will sell and try to maintain their budgetary deficits. Gold should be a sell, he added.
Here is a verbatim transcript of the exclusive interview with N Prasad on CNBC-TV18. Also watch the accompanying video.
Q: Do you actually sense that the worst is behind us when it comes to commodities in terms of the slowdown or the data points, the USD GDP Data that came out etc, reiterates that we are in for much lower levels when it comes for base metals and crude?
A: When I see base metals and crude, I just see this as the beginning of the bear market. If Asian GDP is reversed to 7%, India’s GDP is coming to 7% and China is reducing their GDP, then it can have a major impact on the global oil scenario that the demand can be very destructive. There is a huge difference but if Asia goes down, we are only thinking of American demand going down to 2.5%. When Asian Markets, Emerging markets and the rest of the world comes down then it will be still disastrous and to put a point more here if the oil producing nations economy is spoilt trading below USD 50 and trading below the budgetary things are spoilt and then they do not meet the revenue for the expenditure then things can be worst.
Q: So are those scary levels of USD 25/bbl spoken about by some brokerage reports going to be a reality in 2009, what’s the range you looking at?
A: USD 33/bbl is a reality, we saw USD 33.5/bbl already and once we see that and we were having USD 10/bbl for the carry forward charges for the next settlement and it is getting settled and the target is getting corrected to that level. It’s not very surprising if it trades again at USD 32-33/bbl and there is no big difference in USD 33/bbl and USD 25/bbl when we see USD 150/bbl and USD 33/bbl.
Q: February going into contango doesn’t give you any hope?
A: There is no hope because until and unless the automobile industry with the bailout package has been given, it is an utter failure. They are saying we are giving you some loan for three months, if you don’t do well we call back. It is an uncertain era. The four major automakers are on the stage of failure. They are claiming for bankruptcy. We cannot expect a better market at this price. Even if crude bounces to USD 50 per barrel, it will be a technical pullback rally. Again those who have got stuck, people will sell. There are rumors that 25 super tankers are filled and there are no buyers.
Q: What is the call on copper now – sub USD 3,000 per tonne and what is the outlook on lead and tin that have played a catch-up role on the downside?
A: The total base metals, the demand as I said, last year it fell on fears of a recession being officially declared in the US. But the real recession that is starting in Asia, which is China and India, the demand will be very subdued, and the markets will be very subdued.
Only hope for them in Indian currencies, a weakening rupee can somewhat make the import prices at parity. Other than that, there is no hope on these commodities. A sell-on rallies is a good strategy.
Q: A quick word on gold with the dollar coming under a bit of pressure?
A: The dollar pressure is very temporary because it is Christmas Eve, there is a half day today and there are no big volumes, and currency markets are standstill. The US dollar is now appreciating and currency is the king now. Nobody would like to invest in anything, and liquidity is a question now.
Recently in Parliament our Ex-Finance Minister was saying that they have only adequate liquidity, not ample liquidity. In the whole of the five years the economy was run on ample liquidity. Now the scenario has changed. Gold looks very bearish for 2009 because once oil comes down, the economies that are dependent on oil revenue and who have got surplus gold will sell and try to maintain their budgetary deficits. Gold should be a sell.
