Intelligence Bureau lacks intelligence about gold and silver

The January report of the Intelligence Bureau, available with Moneylife, attributes rising prices of gold and silver to higher demand, oblivious of the raging global speculation

If the Intelligence Bureau (IB) has to be really useful in the quality of information it sends to various top officials it will have to drastically improve its knowledge of financial markets. In the January report sent to the offices of the prime minister, the home minister, finance ministry, etc, the IB writes that "Gold as well as silver prices are likely to further appreciate this year on the account of an increase in demand, especially from India and China."

The fact is that gold has been more of a global speculative asset for the last several years. As ace speculator George Soros has said: "Gold is the ultimate asset bubble." According to the IB, however, "Gold prices have increased as a result of sustained global demand for gold investment, together with growth in jewellery and industrial demand. Increasing demand by the world's two largest markets, India and China, on account of rising income levels and strong economic growth continue to push up consumption. Other factors that are expected to keep gold prices bullish are concerns over fiscal imbalances; currency tensions; a weakening US dollar; associated fears of global inflation; and increasing availability and accessibility of gold investment products to retail investors." These are tired and catch-all explanations. Gold has been around for 4,000 years. There has never been a shortage of gold. Higher demand is a remote factor in the rise in gold prices. This is because gold is in continuous supply from hundreds of different sources. Being chemically inert, gold suffers no decomposition and so can be used and reused.

The IB's report on the reasons for the rise in silver prices is even more hackneyed. "Apart from its ornamental value, silver is also used for several industrial and commercial purposes such as batteries, mirrors, catalysts, solar energy, photography, x-rays and in many modern electronic items such as coating of DVDs, CDs, circuit boards and television. On account of these varied uses and the rising growth momentum, the demand for silver is rising." It's laughable if one focused on the demand side as the reason for the prices of this age-old metal having jumped by nearly 60% from August last year. Anybody with some idea of global markets knows why silver prices are shooting up. It's not demand from "industrial and commercial" uses. The reason is speculative and technical. The IB officials should start with some Google search.

As we had pointed out yesterday, the silver market is agog with rumours about the possibility that two large banks, JP Morgan and HSBC, are short in the silver market and they would need to cover up their short sales as the price rises. Comex, where silver futures are traded, increased the margin for long positions on Friday. Normally a rise in the margin leads to a decline in speculation and a fall in prices. However, silver actually shot up past its all-time high on Monday and Tuesday, despite the higher margin, leaving observers wondering whether the rising prices were caused by desperate short-sellers covering up and what is the reality of silver positions. The IB, of course is completely oblivious to all this and sending important-sounding analysis to the highest levels in the government.

Comments
anonimus
1 decade ago
Y cant y get a link to the intelligence bureau examination result site...
Noticer
1 decade ago
Remember reading a story 2-3 months back in Moneylife which questioned the leakage of IB report to the media.

This one seems to be only in possession of Moneylife as no other media has reported. Why doesnt Moneylife question the easy availability of IB report this time
Shadi Katyal
1 decade ago
One has to ask why we need IB at all.
We need people who can do some research and find out what is going on outside of our own pond we live in.
Gold and other precious metals rise of price doesn't depend on India only as we are not the biggest users except storage in ornaments but there are many thousand usage of gold in this technical world of ours . It also depends on Law of Demand and
supply. Does the IB has any figures of world production and demand.
Does IB even knws where new mines are coming or what country is trying to reopen old mines with advqance of technology and cost reduction.

Noticed the similar report on Food and and laughed about the report.
malQ
1 decade ago
The real metal commodity which is going to impact matters will be steel - already on a high, and with raw material sources drying up while real demand keeps going up, likely to shoot up a lot more. Will gold/silver fall, is this related, no idea - but steel is still what is going to be actualy needed and used.

At the same time, steel stocks are at an all time high, especially in China.

pgd
1 decade ago
What IB is saying is true. When printing press around the world are on full time where do people go?
If you want to know why silver is going high despite margin hike just go through the history & find why GOLD & SILVER were under performer from 1980 to 2000.
captainjohann
1 decade ago
The IB report is what we get from Indian Pink papers and most the reports are just that EVEN ABOUT OTHER SECURITY MATTERS.
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