Reserve Bank of India Proposes Tougher Capital, Sale Rules for New Banks

India’s central bank recommended tougher capital rules for new lenders and mandatory share sales within two years as conditions for issuing new licenses for the first time in seven years.

New lenders will also have to open at least one in four branches in rural areas that have a population of no more than 9,999 people, the Reserve of India said in draft guidelines posted on its website yesterday. The banks may need to meet a minimum capital requirement of 5 billion rupees ($109 million), more than double the requirement for banks in 2004. Foreign shareholding may be capped at 49 percent for new lenders for five years, the central bank said.

Stringent rules may restrict the number of entrants, according to Viren H. Mehta, a director at Ernst & Young LLP. The license winners will also face competition from State Bank of India (SBIN), which accounts for almost a fourth of India’s loans, and ICICI Bank Ltd. (ICICIBC)Companies including Larsen & Toubro Ltd. (LT) and billionaire Anil Ambani’s Reliance ADA Group have expressed interest in operating in a market where credit is forecast to expand 18 percent in the year to March 31.

“If a business group wants to get into the banking business, they have to be serious players,” said Mumbai-based Mehta. “Serious enough to even change their group structures to become eligible for a license.” Religare Enterprises Ltd. (RELG), controlled by billionaire brothers Malvinder Mohan Singh and Shivinder Mohan, said their owners qualify to apply for the license under the draft guidelines. “We would align our proposed business model to align it to regulatory intent,” Religare said in a statement.

‘Impractical’ Guidelines

New banks will also need to maintain a 12 percent capital adequacy ratio, compared with the 10 percent mandated by the regulator when it set guidelines for new lenders in 2001.

The owners of the banks will have to reduce their stake to 40 percent within two years after they are given a license, according to the central bank. Governor Duvvuri Subbarao on Aug. 23 said public ownership of banks would inspire confidence in the financial system and mitigate issues of conflict of interest between shareholders and depositors in the banks.

“The guideline asking for a listing within two years appears to be a bit impractical,” said Hemant Kanoria, chairman and managing director at SREI Infrastructure Finance Ltd. (SREI) “It will be very difficult for branches in the rural areas to start generating profits in the first two years.”

SREI will wait for final guidelines before deciding on applying for a license, Kanoria said in a phone interview yesterday. The regulator has sought feedback by Oct. 31.

‘Private Pool’

SREI climbed as much as 12 percent after the guidelines were released while L&T Finance Holdings Ltd. rose 10.1 percent to 50.8 rupees at the 3:30 p.m. close in Mumbai. Reliance Capital Ltd. (RCAPT) gained 9.6 percent to 377.25 rupees. India’s Bankex index, which tracks 14 stocks including State Bank and ICICI, climbed 4.1 percent yesterday, trimming its loss this year to 20 percent.

The proposed rules will ensure companies don’t use their banks as a “private pool of readily available funds,” Subbarao said on Aug. 23. Business groups controlled by Indian residents with at least 10 years of experience may be eligible to set up banks, the central bank said yesterday. Companies that get 10 percent or more of their income or assets from real estate or broking in the last three years won’t be eligible for the licenses, according to the guidelines. “We want a banking license and the guidelines announced are positive for us,” R. Sridhar, managing director of Shriram Transport Finance Co. said in an interview yesterday. “We may need some time to meet some conditions.”

Bank Stocks may Take the Lead in Market Revival

Outlook for auto,financial & telecom looks positive,says ICICI Pru Lifes Reddy

ICICI Prudential Life Insurance,which manages equity assets worth.40,000 crore,has a positive outlook on auto,financial and telecom stocks while it is cautious on companies in construction and infrastructure space.Auto companies will continue to be driven by rising disposable income,particularly in rural areas,said Lakshmikanth Reddy,head of equities,ICICI Prudential Life Insurance.On financial sector stocks,he said,While we remain cautious,we continue to stay invested in some banking stocks. Bank stocks that have borne the brunt of a selloff could be among the first to revive once the economic cycle bottoms out,he added.He is positive on telecom shares and sees scope for increase in profitability for large players from their current level in two-three years.The Bombay Stock Exchanges Bankex has fallen 24% year-to-date compared with 23% fall in benchmark Sensex.The countrys largest lender State Bank of India has fallen 33% so far this calendar year.The BSE Auto index has declined 21% during the same period.Reddy is cautious on construction and infrastructure companies whose fortunes are dependent on long-gestation capital expenditure or project-related investment activity.These segments have seen a slowdown from last year long before inflation and interest became dominant concerns.They never really saw any meaningful revival from the previous downturn.The reasons include land issues,low business confidence and companies remaining conservative after the last shock,governance issues,among others, he said.As of July,ICICI Prudential has total assets of.67,000 crore,of which equity comprises 60% (.40,000 crore).On an aggregate level,it has about 21-22 % of the assets in financials space,around 15% in energy,7-8 % each in auto and consumer.Reddy sees a good investment opportunity in large-cap stocks that have fallen over 25% and which have compelling valuation and long-term prospect.Keeping in mind,opportunities presented by the market and our own views,we continue to invest selectively and gradually.Two things to note when investing in uncertain situations.One,risk-reward is not always the best when everything looks rosy,and two,one can diversify the timing risk to some extent by buying over a range rather than all at one level.

According to him,the market is unlikely to see any meaningful fall from here.A highly probable outcome would be market grinding 5-10 % of the current range till the consensus doesnt get a sense of depth and duration of slowdown. The Indian equity market is facing a domestic slowdown as well as external uncertainty.Even though the market rates are close to peaking out,policy rates may go up in the short-term,he said.He sees external uncertainty impacting fund flows in the short term and earnings of some companies in the medium term,but it will not impact all segments of the market equally.If,indeed,growth slows down sharply in the developed world as is being feared and,if commodity prices fall,it might help sectors catering to domestic demand as well as reset inflation expectations lower, he said.

Weekly Sector Outlook

Bank Stock Outlook

1. Bank shares are likely to ease further next week as concerns over global economic situation may continue to weigh on the broad market, especially the financial sector, analysts said.
2. Lack of clarity on whether the RBI will continue its monetary policy tightening cycle or take a pause will also cast a shadow over bank stocks.
3. “There is some hope that there could be a short-term recovery in the coming one to two weeks in some bank stocks. Fundamentally, strong stocks like Bank of Baroda & HDFC Bank seeing selling could indicate a near-term bottom in these stocks,” an analyst said.

Auto Stock Outlook

1. Bias for automobile stocks will remain negative next week as volatile domestic and global socio-economic factors are likely to weaken the broader market.
2. Another analyst, however, said the benchmark BSE Auto index is likely to continue outperforming the broader market on good monsoon rains.
3. Good rains help jack up rural incomes, which in turn boost sales of two-wheelers, tractors, utility vehicles and cars.

Pharma Stock Outlook

1. Pharmaceutical counters are seen following broad market sentiment next week, and will take cues from US Federal Reserve Chairman Ben Bernanke’s speech later today, an analyst said.
2. Shares of Dr Reddy’s Laboratories Ltd, Sun Pharmaceutical Industries Ltd & Lupin Ltd., which have considerable presence in the US, are also likely to be impacted as global markets continue to struggle.

Telecom Stock Outlook

1. Shares of telecom service providers are seen trading with a positive bias next week with the exception of Reliance Communications Ltd., dealers said.
2. Dealers, however, warn that if the broader market slides more-than-expected telecom stocks too will come under pressure.

Capital Good Stock Outlook

1. Shares of major capital goods companies are seen tracking the broad market next week on lack of sector-specific triggers, dealers and analysts said.
2. The slow down in the new order inflows is seen dragging sentiment for the capital goods sector, analysts said.

Cement Stock Outlook

1. Shares of major cement companies are likely to track the broad market in the first half of next week, and later take cues from the current month’s despatches data that will be detailed on Thursday, dealers and analysts said.
2. CRISIL Research expects the cement maker’s profitability to decline to the lowest level in the past 10 years during 2012-13 (Apr-Jun).

Steel Stock Outlook

1. The Shares of major steel manufacturers may extend fall next week on concerns that demand is unlikely to pick-up due to slower industrial activity locally and overseas, dealers and analysts said.
2. However, brokerage CLSA has a word of caution as corporate earnings may get downgraded further during the current financial year.

IT Stock Outlook

1. Shares of information technology companies may continue to lag next week due to fears of slowdown in the US economy, the biggest market for Indian software companies, dealers and analysts said.
2. Early this week, IT stocks had recovered somewhat but could not sustain gains as investors sold at every rise amid weak outlook for the sector.

Oil Stock Outlook

1. Shares of state-owned oil companies may come under pressure next week as crude oil prices have remained sticky at current levels and even regained some lost ground this week.
2. Although the crisis in Libya seems to be nearing an end, there is uncertainty over the supply of crude oil from that country.

FMCG Stock Outlook

1. Shares of major fast moving consumer goods companies are seen outperforming the broad market next week as investor confidence in the category continues in the face of a weakening broad market, analysts said.
2. Demand for fast moving consumer goods is expected to be steady across the country as rural and urban incomes rise and demand for products in categories like health and hygiene increases.

Swaps Below RBI Rate for First Time in 15 Months Signal Halt: India Credit

For the first time in 15 months, traders in the swap market are anticipating the Reserve Bank of India will stop raising interest rates and may start to ease policy in the next year as the economy slows.

The cost to lock in one-year borrowing costs dropped below the central bank’s 8 percent benchmark rate this month for the first time since May 2010 and was 7.73 percent today, according to data compiled by Bloomberg. The gap has narrowed 58 basis points in August, compared with 110 in Brazil and 37 in China.

India’s central bank has boosted borrowing costs 11 times since March 2010, the most of the biggest emerging nations known as the BRICs. The bid to contain inflation will probably cut economic growth, according to Morgan Stanley and Standard Chartered Plc, which have both reduced their forecasts for India this year. Gross domestic product rose 7.6 percent in the three months through June, the least since the fourth quarter of 2009, according to the median estimate of economists surveyed by Bloomberg ahead of data next week.

“Swaps are signifying that the market is expecting the end of the rate-hike cycle as growth slows,” Vivek Rajpal, a Mumbai based fixed-income strategist at Nomura Holdings Inc., said in an interview yesterday. “Easing at some point of time is possible, but it may be in the form of liquidity-easing measures, not necessarily a cut in interest rates.”

Swap Movements

India’s swap rates, which are pegged to the overnight money-market rate, climbed to a three-year high of 8.37 percent on July 27, a day after the Reserve Bank unexpectedly raised borrowing costs by 50 basis points, or 0.50 percentage point. The cost needed to receive floating payments for one year dropped the most this month since December 2008 after traders pared expectations for rate increases on signs the global economy is slowing.

The one-year swap rate in Brazil is at 11.5 percent, one percentage point below the nation’s benchmark rate. In China, the 3.80 percent swap rate compares with the one-year deposit rate of 3.50 percent. In Russia, which doesn’t target one policy rate, the gauge is 5.31 percent, 52 basis points above the three-month MosPrime interbank rate, data compiled by Bloomberg show. Traders use swaps to guard against fluctuations in borrowing costs.

India’s bonds have rallied amid evidence Asia’s third- biggest economy is slowing. Manufacturing grew in July at the slowest pace in 20 months, the Purchasing Managers’ Index compiled by HSBC Holdings Plc and Markit Economics showed this month. Car sales fell in July from a year earlier for the first time since January 2009, the Society of Indian Automobile Manufacturers said on Aug. 10.

Bond Returns

The yield on benchmark 7.8 percent rupee-denominated notes due in April 2021 has dropped 17 basis points this month to 8.28 percent, according to the central bank’s trading system. The yield rose three basis points today before a debt auction, where the central bank will sell 110 billion rupees ($2.4 billion) of securities due in 2018, 2021 and 2027, according to the government’s debt calendar.

India’s bonds due in 10 years yielded 600 basis points more than similar-maturity U.S. Treasuries yesterday, down from a record-high 621 basis points reached on Aug. 18. Sovereign rupee notes returned 1.7 percent this month, outperforming four of 10 Asian debt markets, according to indexes compiled by HSBC.

The central bank may signal it is equally concerned over slowing growth and inflation when it meets next on Sept. 16, according to Mumbai-based Religare Capital Markets.

Growth Outlook

India’s economy may expand 7.2 percent in the year through March, compared with an earlier prediction of 7.7 percent, Morgan Stanley said on Aug. 1. Standard Chartered cut its forecast on July 26 to 7.7 percent from 8.1 percent. Increases in wholesale prices, which have held above 9 percent for eight months, will retreat to 7 percent by March, the Reserve Bank said in a statement on July 26.

“The RBI’s predominant concern until now was inflation, but now growth is also suddenly coming on the radar,” Jay Shankar, a Mumbai-based chief economist at Religare Capital, said in an interview on Aug. 24. “I hope they won’t raise rates in September.”

Policy makers will need to raise borrowing costs aggressively to attract global investors, according to Mumbai- based IndusInd Bank Ltd. International funds’ holdings of rupee debt totaled $21.7 billion as of Aug. 24, according to the Securities & Exchange Board of India, below the $50 billion ceiling set by the government.

‘No Option’

“To attract global investors you need to keep inflation below the growth rate,” J. Moses Harding, a Mumbai-based executive vice president at IndusInd Bank, said in an interview on Aug. 24. “I think the RBI has no option but to deliver a half percentage point rate hike in September.”

Harding predicts that the 10-year bond yield will be about 8.15 percent by December.

The rupee has dropped 4 percent this month, headed for the biggest slide since May 2010, as exchange data show global funds reduced holdings of Indian stock by $2 billion. The currency was little changed at 46.0738 per dollar today, according to data compiled by Bloomberg.

The cost of insuring the debt of State Bank of India against default using five-year credit-default swaps has climbed this month. The contracts rose 81 basis points to 273, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets.

The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

The central bank will raise borrowing costs by 25 basis points in September before pausing for the rest of the year, Shubhada Rao, chief economist at Mumbai-based Yes Bank Ltd., said in an interview on Aug. 23.

“While we expect RBI to remain significantly hawkish in its tone, we believe that the interest-rate cycle is close to peaking,” Rao said.

Govt Plans Interest Subsidy for Small & Medium Sector

The small and medium industry could for the first time get credit at lower rates through an interest subvention scheme which the government is considering for the sector.Small and medium enterprises selling both in the domestic and foreign markets would be eligible for the subsidised loans, according to a commerce department proposal."The small and medium sector faces the toughest time in accessing credit and they get it at the highest rate. With rising interest rates, there is a need to help them out,"a commerce department official told ET.

The department is discussing the proposal with the finance ministry and hopes to get a favourable decision on the issue soon. Large exporters, however,will be kept out of the ambit of the scheme."Exports have been doing quite well. We do not have a case for extension of the scheme for exporters in general, “the official said. This is the first time that a pitch has been made for subvention for the entire SME sector. The subvention scheme for exporters that lapsed on March 31 covered only SME exporters in addition to export sectors such as carpets, handloom and handicraft. The scheme offered a 2% discount on the interest rate charged by banks. The subvention rate for SMEs could be higher."Banks give credit to SMEs at rates much higher than what is offered to large producers. We have not yet arrived at the subvention rate that would be offered to SMEs, but we are trying to get them a higher discount, “the official said. According to Anil Bhardwaj of the Federation of Indian Micro, Small and Medium Enterprises, interest rate charged by banks from the SME sector ranges between 13% and 15% while it is between 10% and 11.5% for the rest of the industry."We not only want subvention, but also access to finance, “he said.

Although the SME sector is included in the priority sector lending directive by RBI to banks,it is clubbed with other sectors such as housing that is more attractive for banks."There should be sublimit mark on priority sector lending to the SME sector clearly earmarking funds,"Bhardwaj said. Small exporters say the sop was long due."We have been saying for a long time that the sector needed special attention. It is good that the government is trying to do something for them, “said S P Agarwal of the Delhi Exporters Association, a forum of mostly small and medium exporters. Large exporters, however, feel that subvention should be offered to all exporters from labour-intensive sectors to help them fight competition from other countries, including China."In the last nine months, interest rates have gone up by 61%.If labour-intensive sectors like leather and textile are not given some support, it will be very difficult to fight competition,"Ramu Deora, president, FIEO, said.Under the subvention scheme, banks give credit to the identified sectors at lower interest rates (depending on the rate of subvention) which is later reimbursed by the government.

India's Cloud Market to reach $4.5 b by 2015

There is a high chance that companies that are not adopting IT today and don't have major investments in datacenters and server farms will directly move into the cloud model

The total cloud market in India, currently at $ 400 million will reach a market value of $ 4.5 billion by 2015;of which private cloud adoption will dominate and account for $ 3.5 billion in revenues, growing at over 60 percent, according to a study "Private Cloud Landscape in India”, released by EMC Corporation and Zinnov Management Consulting, a management consulting firm in July this year. According to the study based on a comprehensive survey of over 100 CIOs and IT decision makers in India across industry verticals there is an increased preference of cloud adoption over the next five years in India. The study estimates that private cloud deployments could result in potential savings of up to 50% on the IT investments on average, when compared with a legacy IT model, with cost optimization in areas such as telecom and networking, facilities and fabric, hardware, software, internal labour and external IT services. In cloud computing, a company can store applications and information in its data centers, rather than on the local servers.

The source of data called “cloud” remains outside a customer's internal network. The information is stored and processed on computers "in the clouds" or data centers, which can be tapped remotely through a personal computer, cellphone or other device. Cloud computing will reshape the Indian IT market by generating new opportunities for IT vendors and driving changes in traditional IT offerings. There is a high chance that companies that are not adopting IT today and don't have major investments in datacenters and server farms will directly move into the cloud model."There are ample opportunities in every industry. Be it retail, manufacturing, banking, education or government, “says Pari Natarajan,CEO,Zinnov Management Consulting. The total cloud spend as a percentage of the total IT spend as such is expected to rise from 1.4% in 2010 to 8.2% in 2015.It notes that IT/ITeS,Telecom,BFSI,Manufacturing and Government sectors will contribute largest to the cloud market in India, with nearly 78% of the total market. The study also brings to attention that while private cloud market will create 1 lakh jobs by 2015 from 10,000 today - an opportunity for students and the workforce - companies today are under skilled in addressing cloud computing implementations in India. It recommends companies to invest in competency building internally to take advantage of cloud computing technologies. The study estimates that the skilling and re-skilling market in India will grow fast as cloud computing becomes critical to IT strategies. Leading public and private educational institutions, along with IT enterprises are expected to play a key role in enhancing workforce skills to match the industry demand for cloud computing."In India - for cloud computing to deliver its promise, customers need human resources with cloud computing competencies, both as vendors or as internal resources, “says Manoj Chugh,President,EMC India & SAARC.

Rangarajan Wants Plan Panel to Shed Funds Allocation Role

Planning Commission should focus on long-term strategic policy, allocations should be left to finmin

The Planning Commission may lose its power to decide allocations to central ministries if the government accepts recommendations of a high-level expert panel. The panel has sought abolition of the present system of classifying government expenditure into Plan and non-Plan, saying allocations should be the primary domain of the finance ministry.

The panel, headed by C Rangarajan,chairman of the Economic Advisory Council to the Prime Minister, was set up by the Planning Commission last year to suggest measures for efficient management of public expenditure. On removal of Plan/non-Plan distinction in the Budget, there should be a fundamental shift in the approach of public expenditure management from a segmented view of Plan and non-Plan to a holistic view of expenditure, the panel said in its report submitted last week. If this distinction is done away with, the Planning Commission will virtually lose the strings to nearly a third of the purse from which it doles out funds to states and central ministries. The panel has said that in this case, the commission will have to re-orient itself and focus on long-term strategic policy making instead of entangling itself in the nitty gritty of expenditure.

This shift to holistic view of expenditure would require,interalia,changes in organizational structure, mandates and processes, the report added. In the envisaged system, the finance ministry will prepare the allocations for ministries with broad scheme wise funds and committed items, and send it to the Planning Commission for its feedback and scrutiny. The commissions mandate will be reduced to scrutinizing the allocations based on the overall development priorities, outcome targets and sectoral requirements after which the finance ministry will finalise the budget.Currently, the Planning Commission initiates the budget process and decides on the primary allocations, which then go to the finance ministry for clearance.

The commission in its eleventh Five-Year Plan (2007-12 ) document had itself suggested doing away with the illogical and dysfunctional distinction of Plan and non-Plan expenditure. Plan expenditure is spent on productive asset creation through central government-sponsored programmes and flagship schemes, while non-Plan refers to all other expenditures, such as those on defence,subsidies and interest payments, including expenditure on establishment and maintenance activities, such as salaries. Some in the commission say the Rangarajan panel recommendations are in the right direction and that the plan body acting as the governments think tank should primarily focus on growth prospects and broad economic and policy framework. The role of the Planning Commission is not very well defined, a commission official told ET.We should focus on the bigger picture,on growth and how to drive growth.

Others, however, say the committee, set up to suggest expenditure reforms, has exceeded its mandate by suggesting changes in the functions of various government bodies. There is a feeling that the committee has gone beyond its mandate. The commission (if the report is accepted) will continue to be a part of budget making, but the powers will definitely be diminished, said another Planning Commission official. The Parliamentary Standing Committee on Finance, chaired by former finance minister and Bharatiya Janata Party leader Yashwant Sinha, had also suggested restricting the commissions control over the funds. Planning in the country has failed to deliver the desired results owing to disjunction between planning and budgeting, lack of synchronisation between the plans/policies and implementation and monitoring, the Standing Committee had said.

Time Ripe for Higher Export of Rice,Wheat & Sugar: Secretaries Panel

India may allow export of wheat, non-basmati rice and sugar next week to take advantage of the rising trend in global prices.

The committee of secretaries on food, which met on Friday, has decided that there is scope for export of all these items, a government official said. The CoS will forward its recommendation to the empowered group of ministers, which is likely to meet next week. This is a good time to export as may prices rise further due to low global stocks, he told ET.

The food EGoM is an apex body of ministers headed by agriculture minister Sharad Pawar that decides on export and import. As per the World Bank Food Price Index, grain prices were on an average 33% higher in July compared to a year ago. Although global prices of wheat are still slightly lower than domestic wheat prices in India, it may be feasible to export from some parts of the country, the official said.

European wheat futures rose sharply this month because of concerns over crop damage in south-eastern Europe due to incessant rains. The International Grains Council has already reduced its forecast of world wheat production for 2010-11 to 651 million tonnes, which is below global consumption of 655 million tonnes, due to poor weather in many countries. If we want to offload a part of our overflowing stocks in the world market,this may not be a very bad time, the official said.

The government may also allow export of another 1 million tonnes of non-basmati. It had allowed export of a similar amount last month, but a high court had ordered the ministry to stop allocation of export quotas as some traders had raised objections. The commerce department has filed a special leave petition with the Supreme Court against the order, he said. The CoS, headed by commerce secretary Rahul Khullar, has recommended export of additional sugar, over and above the 1 million tonnes allowed so far.Wheat exports were banned four years ago to check spiralling domestic prices, but current wheat stocks have crossed 33.6 million tonnes, well beyond the prescribed minimum of 20 million tonnes. In fact, some wheat lying in the open has started rotting.

Inflation will Drive Global Stocks Higher, says Mobius

SYDNEY/HONG KONG: Global stock markets are "bouncing along the bottom" after tumbling 16% in the past four weeks, and will start to climb as inflation accelerates, said Templeton Asset Management's Mark Mobius.

The US Federal Reserve hasn't given up supporting the economy by printing money and buying more Treasuries, said Mobius, executive chairman of Templeton Asset's emerging markets group. The firm is buying commodity stocks, expecting raw material prices to rise, he said.

"At this point, I do think we're bouncing along the bottom," Mobius, who helps manage about $50 billion, said in a telephone interview with Bloomberg Television on Monday. "For us in equities, it's particularly good because people will eventually realise that to beat inflation that's coming as a result of this higher money supply, we're going to have to be into equities."

The MSCI World Index of stocks fell last week for a fourth straight week as investors took flight after a deadlock in the US congress brought the government to the brink of default, reports showed the world's biggest economy is slowing, and concern grew that Europe's sovereign-debt crisis will spread.

The losses triggered speculation US Fed chairman Ben S Bernanke will this weekend signal a third-round of asset purchases to help sustain a recovery.

Energy and material stocks have been among the three worst performers in the past months in the 10 industry groups tracked by the MSCI Asia-Pacific Index, as a measure of primary metals traded in London and New-York-traded oil futures slumped.

"It's been an opportunity," said Mobius. "With the amount of liquidity coming into the system, commodity prices have to be maintained at higher and higher levels. The trend is very, very clear, and that's up."

Gold Advances to Record, Platinum to 3-Year High, Silver to 3-Month Peak

Gold rallied for a sixth day to an all-time high as a global economic slowdown and the European debt crisis boosted demand for a haven. Platinum climbed to the highest level in more than three years.

Immediate-delivery bullion gained as much as 1.6 percent to $1,882.55 an ounce, and traded at $1,881.50 at 2:14 p.m. in Singapore. The metal is up 16 percent in August, heading for its best monthly performance since September 1999.

“Gold has support given the risks are still there, so I wouldn’t want to short gold in the current environment,” said Jeremy Friesen, commodity strategist at Societe Generale SA. So- called short sales refer to bets on declines in prices.

The Standard & Poor’s 500 Index capped its biggest four- week loss since 2009 last week on concern German Chancellor Angela Merkel’s resistance to common euro-area bonds will prolong the region’s debt crisis. Central bankers from around the world will meet in Jackson Hole, Wyoming this week amid speculation Federal Reserve ChairmanBen S. Bernanke may signal a third-round of asset purchases to boost the faltering recovery.

December-delivery gold rose as much as 1.8 percent to a record $1,885.90 an ounce. Bullion priced in sterling advanced to an all-time high, while June-delivery gold on the Tokyo Commodity Exchange and December-delivery metal on the Shanghai Futures Exchange climbed to their highest ever. Futures on the Multi Commodity Exchange of India Ltd. also reached a record.

Haven Assets

“You have a look at some of the other safe-haven assets that investors were looking at, the Swiss franc and Japanese yen,” David Lennox, a resource analyst at Fat Prophets, said from Sydney today. “Authorities there have taken steps to try and curb the rise in those particular currencies. That’s probably pushed more investors into gold.” The franc and the yen weakened today.

The metal’s so-called relative strength index has topped 70 since Aug. 5, a signal to some investors who study technical charts that the metal may be set to decline. Exchange-traded product holdings fell for the first time in five days on Aug. 19 to 2,211.095 metric tons after reaching a record on Aug. 8, Bloomberg data show. Hedge funds and other money managers cut their net-long gold positions 2 percent to 200,086 contracts in the week to Aug. 16, data from the U.S. Commodity Futures Trading Commission showed. Long positions are bets on gains.

“A sharp correction would be triggered by a quick resolution or a clear direction of policy on the fiscal side to help the market, which I don’t think would happen anytime soon,” Friesen said fromHong Kong. “Conditions still remain bullish.”

Silver Advances

Spot silver climbed to the highest in more than three months, gaining as much as 2.5 percent to $43.975 an ounce. December-delivery silver surged 3.6 percent to $44.01, also the highest since May 3. Holdings in exchange-traded products increased for a third day on Aug. 19 to 447.5 million ounces.

“Once the market becomes comfortable with where they see the gold price and the gold-price trend becoming a norm, then they start to look at silver,” said Lennox.

The ratio of gold to silver fell to a two-week low as investors sought to protect their wealth with the metal that may also benefit from economic growth. One ounce of gold bought as few as 42.5917 ounces of silver today.

Cash platinum advanced as much as 0.9 percent to $1,891.50 an ounce, the highest price since July 2008, and traded at $1,887.25. Palladium was down 0.2 percent to $750.25 an ounce.