Updates on Gold,, Oil, Interest Rates and China

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Dear Investor

I wrote you last on November 11, 2010 giving updates on asset classes on my list of recommendation since long.

Indeed, a big gap there after.

But, largely these asset classes have been moving in narrow range with upside bias since then. Hence, nothing has been missed in between.

Now onwards, I will write 2 posts in a week to update you on my recommended asset class.

Let us go straight to market.

I recommend to go through my last article before moving ahead.
Link: https://investmentacademy.wordpress.com/2010/11/11/quick-update-gold-at-1400-oil-at-88-and-china-up-20/

I know the obvious questions hitting your mind.

How high market will go from here? or will it correct significantly in 2011?

Broadly, world markets were into consolidation from mid of April till end of Nov, and recently only broke out and went up higher.
Hence, I expect world markets to remain higher in short term. Upside of 5-10% looks quite possible from current levels.

Indian market witnessed 20% upside after long consolidation between Oct 09 and Aug 2010. I do not rule out 5-10% upside from here.

But, be cautious once budget starts impacting market. I have no big hopes from 2011 budget. I believe, our Finance Minister has no option but to tighten the belt. If he does not do so, as a nation we will be heading towards hyper inflationary 2011, higher interest rates and 2011 will prove to be 2007 of USA. A year in which, USA Govt did not do anything to stem the demand and later higher oil prices, higher commodity prices and higher interest rates forced home owners to default on their mortgages. That led it to the biggest crisis.

Gold
Gold has remained largely muted in terms of price action since last 1 month after making $1432.5 high. If Gold takes out its recent high, has momentum to scale upto $1500 and than $1545. And If trades below $1360, then has chance to correct upto $1250.

I recommend to hold Gold investments if Gold corrects now.

Oil
As per my expectation, Oil has continued to gain strength and now trades around $92 pb. Oil broke out after 14 months long consolidation between Oct 09 and Dec 10. Hence, I believe this upside should continue for a while. Oil may hit $97-99 in short term and then trade in range between $86 to $95 for some period.

Interest Rate
I was first to highlight about higher interest rates in first quarter of this year and then wrote in details in subsequent months.
I foresee at least 11% deposit rate in second half of 2011. For details, read my article on Interest Rate
https://investmentacademy.wordpress.com/2010/05/17/india-interest-rate-scenario-part-i-3/

China
China has remained in consolidation with downward bias. Nevertheless, Investments in China Funds has retained steady gain of 18%.
I would use every correction as an opportunity to accumulate china shares from the perspective of next 2-3 years.

Undeniably, China remains world’s most solid economy with lots of opportunity to develop domestic market in years to come.
And, Chinese govt is decided to use full potential of domestic consumption to maintain 9-10% economic growth. China declared its Five year plan recently and Objective of plan is very clear to increase domestic consumption and
focus shift from the export-led sectors to increasing domestic consumer demand by raising Chinese labors’ incomes
I have no doubt that China will benefit greatly from domestic consumption growth in years to come.

Stay tuned to my posts.

Regards,
Dhaval
Investment Academy | Baroda | 098255 28815
Blog: Http://investmentacademy.wordpress.com

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