By all accounts, the price of gold should have gone up by now. All governments around the world have pumped in trillions of dollars to stabilise their economies which everybody suspects would lead to inflation and higher prices for gold. Besides, geopolitical factors are not all that favourable around the world from Iran to Pakistan to North Korea.
But, contrary to an expected sharp rally in gold prices, the yellow metal has actually dropped 2% since February 2009 and is currently trading around $940. Everybody is hoping that it would touch $1,000. But will gold go down before that fooling everybody? If it breaks $900, gold can go all the way down to $800 in the short term. Gold has a history of being extremely volatile.
Why is gold not going up, despite and array of top investors forecasting that it would? This is simply because gold is seen as a hedge against inflation but there is no sign of inflation anywhere. The world’s largest economies are in a deflationary environment. Consumer price index (CPI) has dropped 1.3% in the last year through May – the largest fall in the past 59 years. Therefore, the $1,000 mark will remain insurmountable for a while.
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Urea plants had been given the first priority in sale of natural gas from Reliance Industries' D6 but the Bombay High Court had upheld the Ambani family, giving 70% of the initial volumes from the fields to Anil Ambani Group's RNRL. "The gas in question has been allocated (to fertilizer, power and other sectors) based on the Government's authority and rights under the Production Sharing Contract (for D6) aimed at regulating gas marketing and allowing their orderly growth," Fertilizer Secretary Atul Chaturvedi wrote to his counterpart in the Petroleum Ministry, RS Pandey, on 24th June.
"Our understanding is that any family settlement would not over-ride the sovereign right of Government to formulate policies aimed at larger public interest," he wrote.
When contacted, Pandey acknowledged receipt of the letter and said "they have raised an issue which will need to be examined".
"In this context, implications of the judgement will have to be legally examined," he said.
Twelve urea manufacturing companies were allocated 14.97 million cubic meters per day (mmcmd) when the government prioritised sale of the initial 40 mmcmd from D6 primarily between fertilizer and power companies based on national priority of food security and meeting energy deficit.
But the Bombay High Court on 15th June ruled that RIL should honour its commitment in the family split agreement and supply 28 mmcmd gas to RNRL. "If such a private arrangement has implications on already signed Gas Sales and Purchase Agreements for the allocated gas and if the existing rights of fertilizer companies are altered to their disadvantage, I am afraid they may also seek available legal remedies independently," Chaturvedi wrote.
He sought a re-confirmation from the Petroleum Ministry that "existing gas allocation, its price and GSPAs would remain intact."
The fertilizer industry, he said, had sought a re-confirmation to the effect that the recent Bombay High Court judgement would have no implications on the supply of gas from KG basin.
"The clarification/re-confirmation in this regard will remove the uncertainty in supply of feedstock to the fertilizer industry.
"This would also have implications on the fuel oil and naphtha based urea units, which are making large investments to switch feedstock to natural gas as per the declared policy of the government," he wrote.
Chaturvedi said the fertilizer industry was allocated about 15 mmcmd of gas from D6 as first priority under the Gas Priority Utilisation Policy of the Government.