Rupee will top out in next 2-3 months around 60-62 level.
Gold and Silver are very near to targets of $1100 and $18.
Deflation is knocking door!!
Refer below 3 previous articles to better understand trail article:-
Sometimes though you predict trends right, but you don’t feel good about it. In my last article on 27th May, 2013, I expressed my expectation that Rupee may hit 59-60 in coming months but frankly I was not feeling good about it. And that was one of the reason, though I expected Rupee to hit 62, I said 60 only. Because, Rupee above 60 is as big crisis as the recent Kedarnath flood and clout burst is. Rupee above 60 will devastate economy, will derail all reform measures Govt has taken post Sep, 2012. It will also increase chances of derating. Companies of all sort will come under tremendous pressure.
Your currency paints complete picture about nation and its economy. It exhibits strength and weakness. It is a barometer to measure Nation’s well being.
Rupee if remains above 60 for sustained period, it will bring tsunami effects on economy.
I expect, this is last leg of Rupee’s depreciation. Rupee may stay in broad and volatile range of 58-62. Yes, it is too big to call a range but volatility will not abate in time to come. For next 2-3 months, Rupee may stay in the said range and most probably will form top in this range. From there on, Rupee will start to appreciate. Some very aggressive, decisive and directed prompt reforms can save rupee in immediate time.
Why I expect Rupee to appreciate in time to come?
I have been expecting a bigger correction in Gold, Oil, Metals and Commodities, later on participated by equity markets, too.
As you see, correction in each of this asset class is in action. Gold is trading at $1230(as I pen this article) from high of $1920. Gold washed out gains of $700 ( 37 % )from the high. Silver has corrected badly following big brother. In India, for sure Rupee has saved Gold traders and Investors otherwise we should have been trading it at around Rs. 20,000.
Oil has resisted downfall. It dropped to $ 86 from high of $97 in April. But, it has recovered since then and is now trading around $ 94. I strongly expect Crude Oil to slide further, to test $84-86 once again and later on falling to $76 and $ 69.
Copper has corrected 33% from high of $ 4.48 to $ 3 in last 1.5 years and still continue to correct.
Aluminium has declined 36 % from mid of 2011 and still continuing slide.
Nickel has declined 53 % and continue to decline.
Sugar is down more than 50 % since mid of 2011.
Corn is down 28 % in last 1-1.5 years.
Wheat is down 30 %.
More or less story is similar across the asset classes. And, I expect further declines in all these asset classes.
In fact, in short, We are in deflationary cycle. Wherein prices of tangible assets (metals, commodities, bullions etc…) correct and currency appreciate. In India, that phase will begin in next few months.
As these asset prices correct, India’s Current Account Deficit will shrink. Meanwhile, Rupee depreciation will help to boost exports and collectively these activities will cause Rupee to appreciate.
Hence, if you were short on Rupee, now you should be neutral or should have minimum positions left for the target of 62.
I will update in detail on this topic next week.
Gold & Silver
Gold and Silver are very near to their respective targets, I have been expecting for last 1-1.5 years. Very soon, Gold should hit $1100 and Silver $18. To know, reasons of Gold’s massive decline, pl visit my previous articles on blog.
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