Gold, the safe haven of people, is experiencing a bang fall spoiling the dreams of many investors as however the condition is, people are always fond of taking long positions for the gold. A very optimistic approach to say because they expect Gold is one such commodity which will definitely rise and give them the desired profit, but like the greatest source of energy to earth, sun, also has to set to welcome the night, safe haven also has to go through dark phases taking many risky investors to the same darkness. In recent days, gold is really giving a hard time to the investors- it is falling and falling with a bang! It has been falling for long and it seems as if the patience of the investors has been at the uppermost limit of the test standard.

Digging into the reasons why this happened, one of the most important and eligible reason is the rising dollar which is on the way to break its history of last 34 years. And what else, the most influencive economy upto now, United States of America, declaring that the monetary stimulus it has been providing may get reduced within few months.  Fed came up with a strategy that the central bank may soon implement policy to reduce the bond purchases, just a step to reduce the liquidity expansion it was providing to the market. Since the declaration, the Standard & Poor’s 500 Index has been continuously going up whereas the holding of gold-backed exchange-traded products has been sinking at a high speed.

Institutional investors have not been showing much interest on the gold investment in the scenario when the central bank in the USA has been lifting the stimulus from the economy. Experts believe that gold is going to have a hard time in the present firm-dollar environment. Gold futures for the June delivery has gone down by 1.6 percent as the gild is facing this slump as the highest since it had faced in March, 2009. Gold has toppled around 19 percent in this year due to which few of the investors have lost the faith on gold and started backing the stock market instruments. Fed has begun its asset purchases which has shown very positive impact on the overall labor market situation, therefore when the central bank will think about halting the current monetary measures, least hope of gold recovery can be expected. Besides that, the news of central banks in Greece, Cyprus, etc. trying to sell a part of their gold reserves is also accelerating the price fall.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.

Lentil is a viable agricultural product that can be traded in the Nepalese commodity market. Almost all the districts in the country are capable enough to produce Lentils except Manang and Mustang. Those two districts are trans-Himalayan districts with the most tedious topography in the country. Though most parts of Nepal can produce lentils, Terai region is dominant with the production and more than 90 % of the lentil is grown from this region because of the most favorable climatic and soil conditions. Dang, Rautahat, Bara, Sarlahi, Bardia and Kailali are the major districts producing lentil. The largest exporter of the lentil in the world is Canada; meanwhile one of the major producers of the commodity is India. United States of America (USA) and Turkey are few other nations producing lentils significantly.

Naturally also, Lentil is very tolerant and adaptive plant. Only if it can be provided with good internal drainage, it can adapt in all types of soil- may it be sandy, clayey, loamy, etc. The major obstacle with lentil production can be- the flooded or water-logged soils, lentil cannot absolutely tolerate high amount of water for itself. The best soil, however can be the sandy loam soils which is rich with phosphorous and potassium. Good drainage system is mandatory because even a short span of exposure to high amount of water can kill it. For lentil production, the best soil could be considered as the one with pH close to 7.0. Talking about the usage of lentil in the day-to-day lives of the people, they are very good for our heart and function as the major neutralizer to the muscle acids in our body. They are high in proteins enough to help rebuild our destroyed tissues in glands and blood and their mixed items with fruits and vegetables add up ingredient value of the food.

Nepal Agricultural Research Center (NARC) has been providing the improved variety of seed to the locals at different places with an objective to enhance the lentil production in the country. But the country is lacking in that place where the country, as an entity, cannot do anything, a market place. The country’s role always is to facilitate the market and then enhance the requirements for the effective and efficient market but the country or the government itself cannot work to start a market place. Rather, the government has to take steps to introduce a trade facilitation policy which can assist to seize at least some part of the international market. In the last 10 years, the lentil production has increased by 6.8 % in terms of value and 6.2 % in terms of volume. The percentage increment could be escalated by catalyzing it through the favorable policies.

There are few more products viable but here we discussed only one of them. In short, what we need to understand is that the production is good, the prices are high but farmers do not earn, who earns? The middlemen, there are various levels of middlemen in the market who share the part of farmer’s earning. Commodity exchanges can definitely replace them, but for that Nepali policy should intervene the Agro-insurance sector first. Once the produces in the field are insured, the confidence of farmers increases. Both public and private entities should be encouraged to establish standardized warehouses and the government should be keen enough to promote recognized accreditation agencies. And all of these should be addressed by the full-fledged lawful measures. Once, these pre-requisites are specified, the net public welfare would definitely increase and we could reach close to efficient market- both with pricing and trade.

While heads were turned towards the US for indications of an improving economy in the past week, the other side of the Atlantic furnished news of a cut in the interest rates which quickly moved up the charts as a major market mover.  The European Central Bank (ECB) has cut the interest rates by quarter points to 0.5% as a result of the extended slump that enveloped the European shores. The ECB has signaled it was prepared to go even further, if the condition in the Euro zone failed to turn for the better. In hindsight, the ECB has now finally aligned with other economies at arriving at ultra-low base rates. In the aftermath of the sub-prime crisis, the US had slashed the interest rates all the way down to 0-0.25% at the end of 2008, following which the Bank of England had cut the same to 0.5% in March 2009.

In mid-2009, the Euro zone rates were reduced to 1%, although the largest economy in the bloc, Germany, resisted the decisions following the rate-slashing actions of other leading central banks around the globe. The ECB had actually raised the rates a couple of times in 2011 under pressure from Germany. But as the European economy resumed its slide, the rates have been steadily cut since.

The real driver for the cuts is attributed towards unemployment figures from the region. In March, the region registered an unemployment total of almost 20 million, a record 12.1% of the working age population. However, this figure hides contradictory figures from the nations under the bloc. While Germany has unemployment figures of only 5.1%, Portugal has a 17.5% figure of the labor force not working. In other debt-ridden nations including Spain and Greece, the figures stand at a mindboggling rate of 26.7% and 29.1% respectively.

While the global financial markets have pointed inadvertently to a recovery, with investment bank economists’ repeatedly issuing forecasts of a convincing growth, such confidence is yet to extend to business leaders beyond the financial sector- which includes a vast majority in the region. Since early 2011, the Euro zone industrial production has declined rapidly while rising elsewhere, including the Western countries. In the preceding two months, the manufacturing PMI survey moved southwards, as did the EU’s Economic Sentiment Indicator, which covered not only manufacturing, but also retail trade, construction and other services. For all the hype surrounding the rate cut, the Euro zone-with this new easing- has moved a step closer to sovereign defaults once again. 

The current Chinese economic stance suggests that the resurgent liquidity isn’t filtering through to the economy given the lack of demand for loans. The status is somewhat contradictory to the observed pick-up in the credit growth where the numbers are heading north since mid-2012. The hidden explanation for the increased money supply not reaching the real economy in China is that there is normally a six month lag effect in place. For instance, the first quarter of 2009 stimulus didn’t result in a rebound in economic activity until the third quarter of that year. Given much of the recent stimulus came late last year, we can probably expect a rebound in economic growth from mid-2013 or few month beyond. The other reasons suggesting that a mild recovery might be on the cards is the uptick in the exports to the developed markets, including the US and Euro zone; the strengthening import data, the enhancement of the retail sales in March after disappointing figures in the first two months of 2013; and the subdued inflation prevailing on the shores of the nation in spite of worrying rumors doing the rounds.

On the contrary, the long-term outlook of the nation, taking into account few coming years from now, still exhibits a bleak picture. The reason is that the economy has become ever more dependent on debt-financed investment for its growth- an instrument not popular to drive the economy out of its rubbles.

However, with due respect to the grim side of the coin, considering the expectations for the rebound in the Chinese economy, there will be significant improvements in the investment side in the ensuing days. Amidst forecasted optimistic market outlook, the Chinese stock markets could rise from the current depressed levels. The beaten-down sectors, including the manufacturing industries, could be expected to take the lead on this. More significantly, we could see a renewed hope of a global economic recovery, with China leading the way. But in the long-term, the outlook paints a sorry state-of-affairs for the investor participating in the Chinese-led rebound of enormous proportions. Under such circumstances the magnitude of the Chinese economy could only be interpreted or rigidly forecasted taking into account the weight of market perceptions and sentiments.  

Last time we discussed on how the gradual process of agriculture commercialization can be initiated. Along with the strategy of farm-area, we also looked into the Agricultural Information System (AIS) that can be established and the usage of which can help us know, in general, about the total production and consumption status; besides that also about what are the challenges being faced at the grass-root level and what could be possible issues that need to be taken care of while designing the policy for escalating the commercial trade of few viable agricultural commodities through the commodity exchanges contributing significantly to the market price and overall economy.