Month: June 2013

Is the Nikkei taking its cue from China markets?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Japan’s blue-chip stock index doesn’t usually take its cue from China’s stock market but that has changed this week as the Shanghai Composite slumped to its lowest level in more than four years.

While the sell-off in the Nikkei has not been as marked as the one in Shanghai this week, analysts say the drubbing in Chinese stocks has come at a bad time for Japanese shares which were showing signs of a rebound after falling sharply from a five-and-a-half-year high hit in May.

 “The China issue is another macro shock and all markets will respond to that,” said Ben Collett, the head of Asian equities at Sunrise Brokers in Hong Kong. “The Nikkei isn`t necessarily following the full scale of the sell-off in China, but there is a lack of clarity about China and that is having an impact.”

The Nikkei stock index is up roughly 4.8 percent from a two-month low hit earlier this month but has struggled to break above the key 13,000 level this week as the Shanghai Composite tumbled as much as 10 percent over the course of two days.

In fact, the typical pattern of trade for the Nikkei in the past two sessions has been to open higher only to be dragged lower in afternoon trade as China stocks headed south. Japan`s stock market rose almost 2 percent in early trade on Thursday.

“The Nikkei has been moving along with the Shanghai Composite. There was an expectation that the Shanghai Composite would go up [Wednesday] and Japanese futures rallied and then they fell with China,” Harry Ida, senior analyst at Thomson Reuters in Tokyo told CNBC Wednesday.

He added that the weakness in Chinese shares was also boosting the yen`s value against the US dollar, with yen strength further undermining Japanese stocks.

A credit squeeze in Chinese money markets this month has raised concerns about the outlook for the world`s second biggest economy, which is already showing signs of weakness . Recent data have proved to be on the weak side and a number of economists have slashed their 2013 forecasts for gross domestic product growth.

 “There are a lot of companies in Japan that would suffer a lot if growth in China weakens sharply. For instance, the construction and machinery sectors, automakers and shippers,” said Sunrise Brokers` Collett. “China is one of Japan`s biggest trading partners so what happens there is important.”

Gary Evans, the global head of equity strategy at HSBC, added: “We have cut our forecasts for China growth. With interest rates spiking up, people are taking that as a cue the government is being tough on reforms .”

“So, in the meantime you have to expect Chinese equities to be quite volatile and quite weak,” he told CNBC Asia`s “Squawk Box” on Thursday.

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Guess who was buying amid the June sell-off

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Fears arising from a tapering of stimulus in the US may have resulted in a sell-off in global equity and bond markets in June, but a recent survey shows institutional investors’ confidence was high that month with a healthy appetite for risk.

An index – developed by the investment research arm of Wall Street firm State Street Corporation – which measures risk appetite based on stock buying and selling patterns of institutional investors rose to 106.8 in June, up over 12 percent from May. A reading of 100 is considered neutral – where investors are neither increasing nor decreasing their long term allocations to risky assets.

According to Harvard University professor Kenneth Froot, who co-developed the State Street global Investor Confidence Index (ICI), the “robust” increase in the index number shows that institutional investors took somewhat contrarian positions in June.

“We witnessed selling of US equities, buying of European equities, and significant buying of emerging markets equities. These reallocations run counter to price movements over the period,” Froot said in a note on Tuesday.

“Overall, our data suggest that institutional investors are content to ‘take the other side’ of these price moves.”

Paul O’Connell of State Street Associates, who also developed the index, added: “While the prospect of an end to quantitative easing in the US has caused a spike in bond yields and a sell-off in equities, institutional investors have viewed this as an opportunity to add equity risk at the expense of bond holdings.”

US benchmark indexes – the SandP 500 and the Dow Jones Industrial Average – are both down more than 5 percent from yearly highs hit in May. They are down over 2 percent in June alone, while the MSCI Asia Pacific ex-Japan stock index has also fallen 11 percent over the past month.

The bond markets have seen a wide sell-off after Federal Reserve Chairman Ben Bernanke said that the central bank could reduce its monthly USD 85 billion bond buying program this year. The yield on the 10-year Treasury has risen to 2.61 percent from 1.6 percent in early May.

But despite fears of the Fed scaling back its stimulus, risk appetite in June was driven largely by North American institutional investors, according to the survey.

There was a more than 11 percent increase in risk appetite to 114 points among North American institutional investors in June from May, while confidence among European and Asian institutions increased 5 percent and over 3 percent, respectively.

O’Connell said the firm would be watching the data closely to see if the optimism “is a one-off opportunistic trade, or a more durable valuation-based strategic trade.”

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EU strikes deal on who will pay for bank bailouts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Finance ministers from the European Union reached a deal in the early hours of Thursday to set up rules about who would have to foot the bill for any future bank bailouts to avoid costs to tax payers.

According to the new rules, shareholders, bondholders and depositors with more than 100,000 euros (USD 132,000) should share the burden of saving a bank.

Analysts say the negotiations on how to deal with bank failures are crucial to restoring confidence in the euro zone, which has been hit hard by a debt crisis, and helps pave the way towards establishing a banking union in the single-currency bloc.

“If the banks get into trouble we will now, throughout Europe, have one set of rules on who pays the bill,” Dutch Finance Minister Jeroen Dijsselbloem told CNBC.

“So that’s a major shift from the public means, from the taxpayer if you will, back to the financial sector which will now become for a very, very large extent, responsible for dealing with its own problems,” Dijsselbloem added.

Europe’s tax payers have had to pay for a number of bank rescues since the global financial crisis, sparking outrage across a region that has been hit by recession and high unemployment.

The EU spent the equivalent of a third of its economic output on saving its banks between 2008 and 2011 using taxpayer cash, Reuters reported.

But the latest deal suggests the EU is stepping towards harsher measures that shift the onus of bank bailouts from the taxpayer to depositors. A sign of that was seen earlier this year when a bailout of Cyprus forced large losses on depositors.

“There is some room for flexibility. National funds can be used if they are available, but it’s only a limited amount of flexibility,” Dijsselbloem said. “For the rest of it, it’s going to be a bail-in mechanism which is the main instrument to save banks.”

One country that has insisted on more flexibility on possible bank bailouts is Sweden and it reached a separate deal to allow it to “bail-in” the first 20 percent of risk-weighted assets in return for setting aside more money for its national resolution and deposit guarantee funds.

“It’s a compromise, but given that we can apply 20 percent risk with assets, given that we’ll have a 3 percent pre-funded deposit insurance system, this is an acceptable compromise,” Anders Borg, Sweden’s Minister for Finance, told CNBC.

Putting Off Depositors?

Dijsselbloem said he did not think the new rules would discourage savers from parking their cash in certain banks.

“All deposits under 100,000 [euros] are completely exempt from this system, so they’re absolutely safe. And the other depositors are right at the end of the hierarchy,” he said.

According to Swedish finance minister Borg: “We should really try to safeguard the depositors, particularly the household deposits concerned. There are some risks and difficulties in these kinds of proposals and therefore we think there could be further progress and trial-outs.”

EU leaders pledged a year ago to set up a banking union that would give the supervision and rescue of banks to European institutions rather than leaving weak member states to deal with the problem alone.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Has gold entered a long term bear market?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Gold, which is trading at its lowest level in nearly 3 years, is in the midst of a long term bear market, and investors should look for an opportunity to exit positions in the precious metal, experts told CNBC.

“It`s a long term bear market. If you bought into it today, don`t expect it`s going to do much. And if you own some and get a rally, get rid of it,” said Dennis Gartman, editor of The Gartman Letter, a daily commentary on financial markets.

The precious metal plunged 4 percent late Wednesday, trading as low as USD 1,221.80 an ounce, as the rally in U.S. equities dampened demand for bullion as protection against economic uncertainty. Gold has fallen 23 percent in the second quarter and is currently on track for a record quarterly loss.

Yoni Jacobs, chief investment strategist at Chart Prophet Capital, an equity investment fund, says if the precious metal breaks through the USD 1,200 level, which is the next key support level and regarded as the production cost of gold, it could fall to USD 1,000.

“We`re either going to find support at USD 1,200 or  USD 1,000, at which point a lot of the bulls will be reinvigorated to buy gold. When that happens people will make a few bucks, but ultimately it will collapse,” said Jacobs, who is also the author of Gold Bubble: Profiting From Gold`s Impending Collapse.

“Gold is going to USD 700 in 3-5 years. The last gold bear market lasted 19 years. Such a thing is not out of the question,” he added, referring to the long-term downtrend in gold prices from 1980-1999.

The global inflationary environment will play a part in determining the length of the bear market, he said. The world`s two largest economies, the U.S. and China, are currently facing downward price pressures.

Jacobs noted that sentiment towards the yellow metal has taken a severe beating with what he deems as the bursting of the gold bubble.

“Seeing the panic and devastation in gold, some say gold will probably never be as popular as it was in last 2 years,” he said.

Reflecting this bearish sentiment, Societe Generale last week downgraded its fourth quarter forecast for gold prices this year to USD 1,200 an ounce from USD 1,375, citing a “paradigm shift” in investor attitude towards gold resulting from the recent dramatic sell-off in April and the prospect of the U.S. Federal Reserve tapering its bond buying program later this year.

Swiss investment bank UBS also slashed its 12-month gold forecast to USD 1,050 from USD 1,750, warning that gold`s appeal as an inflation hedge is at risk of becoming “obsolete” on Fed tapering plans.

Look at Gold`s History

In order to determine the floor for gold, historical charts could provide a good indication, said Jacobs of Chart Prophet Capital.

According to Jacobs, the current gold bubble that began to inflate in 1999 is actually part of a larger bubble that started in 1968. Prices rose from USD 250 in 1999 to over USD 1,900 an ounce in 2011 – a 600 percent gain.

He has identified USD 700 as target for gold based on long term historical average prices and previous support levels. USD 680 is the low hit in 2008 during the global financial crisis.

Jacobs said the production cost of gold is unlikely to provide major support over the longer term, because miners can adjust this cost.

“Two-three years ago the production cost of gold was cited at USD 600-700 an ounce. If no one wants gold, the cost of mining will be lower, because there will be less interest in the space, less competition,” he said.

What About Physical Buying?

Some strategists say physical buying out of the world`s two largest gold consumers India and China will not be enough to counter institutional selling.

India, has taken several steps in recent months to temper demand for the precious metal including raising an import duty to 8 percent from 6 percent earlier in June.

Gold imports into Asia`s third largest economy are forecast to fall by more than half in the July to September quarter from the April to June period, according to local media reports that cited the Bombay Bullion Association.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

The biggest risk for Asian markets (it’s not China)

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The biggest risk for beaten-down Asian markets is not China’s financial instability, say experts, it’s a further spike in US Treasury yields.

“If US [10-year] Treasury yields go up from here to 3 percent – that’s going to be a disaster for the asset markets in Asia,” Kelvin Tay, regional chief investment officer, southern Asia-Pacific, at UBS told CNBC.

“It’s going to shift a lot of capital away and it will basically hasten the liquidity movements out of this region,” he added.

The US 10-year Treasury yield has risen sharply since the beginning of May, from 1.6 percent to 2.61 percent currently, driven by expectations that the Federal Reserve will begin scaling back its bond buying program as early as September.

The narrowing spread between US and Asian government bond yields, has led investors to sell the latter in favor of safe-haven Treasurys, which in turn has had a negative impact on Asian currencies and equities.

Investors pulled USD 1.5 billion out from emerging market bond funds in the week ended June 5, according to fund tracker EPFR, while equity funds lost USD 5 billion – their biggest outflow in almost two years.

Meanwhile, Asian currencies have also seen a rout. The Malaysian ringgit, for example, has fallen 4.3 percent against the US dollar since the beginning of May, while the Thai baht has plunged 6.1 percent over the same time period.

The MSCI Asia Pacific ex-Japan stock index has also fallen 11 percent over the past month.

Timing Is Key

Dhiren Sarin, chief technical strategist for Asia-Pacific at Barclays, agrees that a move to 3 percent yield on the US 10-year government bond is a risk for the region’s markets, but how much impact it will have will depend on how swiftly this level is reached.

“If we get there in the next week or two, it will cause a lot of stress in emerging markets. The faster it goes the more scare it causes over the cost of funding and there would be a rapid escape from emerging markets,” Sarin said, noting that such a scenario would cause emerging market equities to fall to multi-year lows.

If it is a more gradual move higher, then asset managers will have time to reassess and reallocate their portfolio holdings, he added, which would be more “palatable for risk appetite.”

At this point, both Sarin and Tay say they don’t expect yields to rise at a rapid rate, but it remains a risk.

“I think the Federal Reserve is probably cognizant of the destabilization effects of that. If yields go up very sharply I’m pretty sure the Fed will come up with some form of rhetoric to talk the markets down,” said Tay.

Mark Matthews, head of research, Asia at Bank Julius Baer, agrees the central bank will likely be reactive to a drastic move in yields.

“This central bank is clearly reactive to financial markets If they wanted to they could reverse their policies. That would look pretty sloppy, but in a worst case scenario they could,” Matthews added.

-By CNBC’s Ansuya Harjani
Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

After Fed, China’s bears return with vengeance

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Less than a week after the US Federal Reserve rattled global markets with talk about possibly easing its monetary stimulus this year, growing worries about a credit crunch in China suggest the risk appetite that was so strong just two months ago could take some time to return.

In fact, fears that tight liquidity conditions could harm the world`s second largest economy kept stock markets firmly in negative territory on Tuesday.

The benchmark Shanghai Composite index led falls in Asian stocks with a decline of more than 5 percent to its lowest level in more than four years, putting the market in bear territory. The market, however, pared back its losses in late trade amid talk of a news conference later in the day involving the central bank to address the credit squeeze.

Japan`s blue-chip Nikkei closed down 0.7 percent, setting a negative tone for European and US markets.

“The volatility in global markets started with the [Fed chief] Ben Bernanke comments on tapering a month ago and now we are looking at this adjustment in liquidity in China,” said George Boubouras, chief investment officer at Equity Trustees in Sydney. “It`s not going to stop.”

In an effort to get local lenders to clamp down on credit growth, China`s central bank has shown a reluctance to step in aggressively and ease tight liquidity conditions. Analysts say that although that is good news for the economy long-term, the credit squeeze does suggests short-term pain for an economy that is already showing signs of weakness.

“The dragon economy now resembles a panda,” Evan Lucas, a market strategist at trading firm IG said in a note. “It has been over a decade since China has experienced a cash squeeze like this.”

China`s economy grew at its slowest pace for 13 years in 2012 and recent disappointing data prompted a number of growth downgrades by major banks. Goldman Sachs on Monday for instance lowered its 2013 gross domestic product forecast to 7.4 percent from 7.7 percent.

“The market has taken an extreme view of what`s happening in China but we are going to have to wait for the dust to settle down now,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney, told CNBC`s “Capital Connection.”

Bad Timing?

Still, the money-market squeeze is bad timing for financial markets already grappling with the prospect of an unwinding in the Fed`s massive stimulus program also known as quantitative easing.

Benchmark 10-year US Treasury yields have spiked to about 2.7 percent this week, their highest level in almost two years, while US stocks fell more than 1 percent overnight. Emerging markets, hit hard by the Fed jitters, have also been unnerved by worries about China.

The MSCI Emerging Market Index, which has fallen almost 15 percent in the past month, on Tuesday fell to its lowest level in just over a year.

“Look at global markets in general. Here we are in June and it`s like a mini-1994. We have risk-free bonds with a negative return and equity markets with a negative return,” said Equity Trustees` Boubouras, referring to the aggressive monetary tightening by the Fed back in 1994 that sparked a sharp jump in US bond yields.

“So you`ve got 1994, one year of pain, all in one month and the volatility doesn`t look like it will wane any time soon,” he said.

– By CNBC.Com`s Dhara Ranasinghe, Follow her on Twitter:@DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Gold now at levels worse than April’s big sell off

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The selloff in gold extended into the Asian session, with the precious metal falling to as low as USD 1,269 on Friday, following a 5.4 percent plunge in the US trading session overnight.

According to strategists, the pain is not over for the yellow metal that is trading at its lowest since September 2010, with some not ruling out a fall to $1000 an ounce, or a 20 percent decline from current levels.

“USD 1200 an ounce, or USD 1000: all very possible. We have to remember gold prices have risen for 12 years in a row and they were due for a correction. Sentiment plays a very large role in determining its pricing,” Gaurav Sodhi, resource analyst at Intelligent Investor told CNBC on Friday.

Gold, which has declined more than 30 percent since its peak of around USD 1900 in 2011, has fallen victim to a heavy bout of selling since April. The benign global inflationary environment has lessened the appeal of the metal as a hedge against rising prices. In addition, prospects for a scaling back of liquidity in the world`s largest economy, alongside a stronger US dollar, have also weighed on the precious metal.

Jim Iuorio, managing director at TJM Institutional Services, says he has seen a shift in sentiment among investors towards gold, which doesn’t bode well for prices.

“Something has changed materially in the sentiment in the gold market and that’s become evident to me. Even today, when the stocks were taking on the chin and people flocked to bonds, they didn’t touch gold,” said Iuorio.

With gold falling through a key support level of USD 1,320 late Thursday, Stan Shamu, market strategist at trading firm IG Markets, says that rallies in the precious metal would be an opportunity to sell.

“It’s looking very negative for gold from a fundamental and technical perspective. We have the Fed tapering threat underpinning the US dollar, which is negative for gold. Also, lower money supply is negative,” Shamu said.

“Demand-supply dynamics are starting to show signs of strain with China and India not being as big a net buyer of gold as before,” he added.

The world’s largest gold consumer, India, has taken several steps in recent months to temper demand for the precious metal including raising an import duty to 8 percent from 6 percent earlier in June.

No Clear Floor in Gold

According to Victor Thianpiriya, commodities analyst at ANZ, the production cost of gold, which is estimated to be around USD 1200-USD 1300 an ounce, may not be a good gauge for how low prices will fall.

“That cash cost of production is a moving target. If margins get squeezed, miners could start pulling back on exploration expenditure. To say there is a solid line in the sand that prices can’t fall below, is not the right way to look at it,” Thianpiriya said.

He expects gold to trade in a range of USD 1200-USD 1400 over the next six months, but is not ruling out moves below USD 1200, given violent moves in the precious metal recently.

“It’s certainly possible gold could fall below USD 1200 – we also need to see how far the US dollar rally can continue to go,” he said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

China cash crunch already being felt on the ground

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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There are already signs of distress among Chinese businesses stemming from tighter liquidity conditions in the world’s second largest economy, according to the China Beige Book’s survey for the second quarter.

“Firms are telling us that rates are going up, and have been for three quarters. And borrowing is going down,” Leland Miller, president of US-based China Beige Book (CBB) International told CNBC Asia’s ‘Squawk Box’ on Tuesday.

The CBB, which launched its first quarterly private sector survey in 2012, uses methodology adapted from the US Federal Reserve’s Beige Book. Its survey, which gathers anecdotal evidence on current economic conditions, is based on interviews with over 2,000 people from different sectors and regions of the country.

According to Miller, “credit isn’t getting to small and medium sized enterprises, it’s not getting to the economy.”

Despite data showing total social financing, the widest measure of credit, was up 52 percent year on year in the first five months of the year, Miller says it is not an accurate reflection of liquidity on the ground.

“Despite widespread reports that a massive growth in shadow banking has resulted in a tidal wave of total social finance liquidity, we see no growth in the frequency of non-bank lending,” Miller said.

According to Moody’s Asian Liquidity Stress Index published earlier this month, the China sub-index showed that about one third of below-investment grade Chinese companies had inadequate internal sources of cash to fund their debt over the next 12 months.

“Our data are clear that there has been no flood of credit; on the contrary, which helps explain the recent SHIBOR (Shanghai interbank offered rate) spikes,” he added.

While the 7-day repo rate – a measure of interbank funding availability – has eased from above 10 percent last week to 7.5 percent on Monday’s close – it remains far above the one-year average of 3 percent.

The People’s Bank of China has largely taken a back seat in its response to the cash crunch – which threatens growth in the mainland economy – saying on Monday that overall liquidity was at a ‘reasonable’ level and asking commercial banks to improve the ways they manage their liquidity and control lending.

This hands-off approach has unnerved investors, sending the benchmark Shanghai Composite to its lowest levels since 2009.

“The risk here is people don’t understand that the Chinese government seems to mean business, they want to tighten conditions,” he said, referring to China’s efforts to tame informal lending and slow credit growth.

“It’s up to the market to understand that this is what is happening right now,” Miller added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Five reasons why gold will plunge further

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Gold prices edged further lower on Tuesday after a brutal sell-off last week and HSBC gives five reasons why the yellow metal is likely to continue falling as major banks downgrade their price targets.

Gold which hit an almost three-year low at USD 1,268 per ounce on Thursday, is down more than 8 percent since the start of last week and both UBS and HSBC have slashed their price targets for the precious metal.

In its second downgrade since April, HSBC is now predicting that the average gold price will be USD 1,396 in 2013, down from USD 1,542. While UBS last week changed its 12-month forecast by more than 40 percent to USD 1,050.

The reasons for this downgrade are five-fold says HSBC. From the US Federal Reserve tapering its bond buying program leading to a stronger dollar to falling demand from India and China as growth slows in these emerging economies, all factors are going to take the precious metal lower in coming months.

“After an initially encouraging upwards price performance in the aftermath of the April sell-off, which lasted until early May, the bullion rally lost momentum and gold and silver prices resumed their slide, with losses accelerating notably in the aftermath of the June 18-19 FOMC [Federal Open Market Committee] meeting,” HSBC said in a note, referring to the Fed meeting when chief Ben Bernanke signaled that it could soon scale back its USD 85 billion a month bond buying program.

Gold prices have plunged over 20 percent since April to around USD 1,276 on Tuesday.

India and China Weigh

Besides the Fed factor, the growing pessimism over China`s growth prospects will also weigh on gold prices as the world`s second largest economy is also the second largest consumer of gold.

“Our economists cut 2013 China GDP [gross domestic product] forecast from 8.2 percent to 7.4 percent and 2014 GDP forecast from 8.4 percent to 7.4 percent,” HSBC said.

Plus India, the largest consumer of the precious metal has also taken steps to curb appetite for gold.

“Increased import duties and the Indian government`s efforts to reduce gold imports are curbing that nations` demand for bullion and crimp jewelry demand,” HSBC said.

On Monday, India`s largest jewelers` association – the All India Gems and Jewelry Trade Federation – that represents about 90 percent of jewelers asked members to stop selling gold bars and coins, adding to the government`s efforts to cut gold imports and stem a growing current account deficit, Reuters reported.

Besides lackluster demand for physical gold, HSBC says a stronger US dollar as the Fed withdraws liquidity will lead to more weakness in gold. The dollar index, which measures its value against a basket of foreign currencies, is up over 4 percent from a yearly low in February.

Finally, another support for gold – central bank buying is now either falling or not growing as quickly, HSBC said.

“These [gold] reserves are now either falling or not growing as quickly due to declines in current account balances in many emerging market nations as a consequence of the slowdown,” the bank wrote.

– By CNBC.com`s Rajeshni Naidu-Ghelani; Follow her on Twitter @RajeshniNaidu

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow