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Bernanke’s Comments “Lend Support” to Gold, But Precious Metals Dip Following Strong US Jobs News

February 3rd, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Friday 3 February 2012, 09:30 EST

SPOT MARKET gold prices slipped back below $1750 an ounce while stock markets rallied strongly following the release of better-than-expected US jobs figures on Friday.

The Bureau of Labor Statistics nonfarm payrolls report, published on Friday, shows that the US added a net 243,000 nonagricultural private sector jobs last month. In addition, both November and December’s nonfarm figures were revised upwards. The unemployment rate fell to 8.3%, down from 8.5% the previous month.

Silver prices also fell following the nonfarm announcement, while the US Dollar saw an immediate gain against major currencies such as the Pound, Euro and Yen.

Earlier on Friday Dollar gold prices hit their highest level in 11 weeks at $1762 per ounce, a level not seen since mid-November, following US Federal Reserve chairman Ben Bernanke’s appearance before Congress on Thursday.

“We are not seeking higher inflation,” Bernanke told the House Budget Committee, in response to comments from Republican representative Paul Ryan, who said he was “greatly concerned to hear the Fed recently announce that it would be willing to accept higher-than-desired inflation in order to focus on the [employment] side of its dual mandate.”

“We do not want higher inflation and we’re not tolerating higher inflation,” responded Bernanke, although elsewhere in his testimony he warned that “risks remain that developments in Europe or elsewhere may unfold unfavorably and could worsen economic prospects here at home.”

Fed policymakers revealed last week that a majority of them expects interest rates to remain near zero for at least the next three years. Bernanke added yesterday that the speed and aggressiveness of any future rate rises “may depend to some extent on the balance” between maintaining employment and pursuing price stability.

“These comments lent support to gold,” reckons James Steel, chief commodities analyst at HSBC in New York, noting that the Fed could opt for additional quantitative easing if progress towards full employment was inadequate.

US inflation as measured by the consumer prices index fell to 3.0% in December, down from 3.4% the previous month, but up from 1.1% 12 months earlier.

“As every day goes by, I see deflation in the things you own and inflation in the things you need,” said hedge-fund partner Kyle Bass at a meeting of the University of Texas’s $25.7 billion Investment Management Co. (Utimco) in Austin, Texas on Thursday.

“I’m against selling any of the gold,” Bass said, referring to the $1.2bn which Utimco now owns in physical gold bars after switching out of futures contracts then worth $992m in April 2011.

Over in Europe, Greece’s finance minister Evangelos Venizelos said Thursday that the European Central Bank would need to take losses on its Greek government debt holdings if Greece is to achieve the goal of reducing its debt-to-GDP ratio to 120% by 2020.

Greece is yet to agree a deal with its private creditors over the size of losses they will take. The lack of a deal throws into doubt Greece’s €130 billion second bailout, without which it will be unable to pay out on maturing bonds next month.

“Greece needs a new program, there’s no question about that, but Greece must create the conditions for it,” German finance minister Wolfgang Schaeuble said Thursday.

“We can’t pay into a bottomless pit.”

“Precious metals are enjoying some support from safe-haven demand as issues in the Eurozone once again weigh on investors’ minds,” says Marc Ground, commodities strategist at Standard Bank, who sees resistance for gold prices at $1768 per ounce.

Gold jewelers in India meantime the government to raise the duty drawback – the amount of duty exporters can claim back from the Department of Revenue – applicable to the gems and jewelry sector. The request from the Federation of Indian Exports Organisations follows the government’s decision last month to increase duty on gold bullion imports and switch to an ad valorem tax, which takes the form of a percentage of value rather than a discrete amount by weight.

Heading into the weekend, Dollar gold prices looked set to record their fifth straight weekly gain.
The gold price in Euros meantime was up 1.8% for the week by Friday lunchtime, and closing in on the four-month high touched earlier on Friday at €43,098 per kilo (€1340 an ounce).

Like those for gold, Dollar silver prices also hit their highest levels since November Friday morning, at $34.44 per ounce.

Based on London Fix prices, gold is up nearly 15% since the end of 2011, while silver is up by more than 19%. Despite silver’s rise, however, the world’s largest silver ETF, the iShares Silver Trust (ticker: SLV) has seen its holdings of bullion rise just 0.2% since the start of 2012.

By contrast, the amount of gold held to back shares in the SPDR Gold Trust (ticker: GLD), the world’s largest gold ETF has grown 1.8% over the same period, rising to its highest level since December 20 yesterday at 1277 tonnes.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

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US Non-Farm Payrolls Set to Generate Heavy Volatility

February 3rd, 2012

Source: ForexYard

Today’s US Non-Farm Payrolls figure, widely considered the most significant economic indicator on the forex calendar, is set to generate heavy trading today. At the moment, analysts are predicting that the US added somewhere around 150K jobs in January. Should the final result come in below expectations the USD may come under renewed pressure to close out the week.

Economic News

USD – Negative Euro-Zone News Gives USD Temporary Boost

Fresh concerns regarding Greece’s debt negotiations sent investors to safe-haven assets during the beginning of yesterday’s trading session. The news resulted in the US dollar recouping some of its recent losses against the euro. The EUR/USD dropped to the 1.3085 level before staging a correction during the evening session. The greenback was not as fortunate against other riskier currencies. The AUD/USD range traded for much of the day, maintaining its recent bullish trend around the 1.0725 level.

Turning to today, traders can expect significant volatility in the marketplace as the US Non-Farm Employment Change figure is set to be released. Wednesday’s ADP Non-Farm figure, which is widely considered an accurate predictor of today’s news, came in below expectations and resulted in some bearish movement for the US dollar.

At the moment, analysts are predicting that the US added 150K jobs in January. Should the final figure come in significantly below that number, the greenback may extend its losses. At the same time, traders will want to note that the employment statistic is notoriously difficult to predict. A better than expected figure is entirely possible, and could result in dollar gains ahead of markets closing for the weekend.

EUR – EUR Turns Bearish Following Greek Debt Uncertainties

The euro saw bearish movement during the European session yesterday, amid fresh worries that Greece’s negotiations with its creditors may prove to me more difficult than originally thought. Additionally, worries regarding Portugal’s sovereign debt added to investor pessimism regarding the euro-zone economic recovery. As a result, the EUR/USD dropped as low as 1.3085 before staging an upward correction toward the evening session. Similarly, the EUR/JPY tumbled almost 100 pips, reaching as low 99.59 before staging a reversal.

Turning to today, the US Non-Farm Payrolls Figure is likely to dictate the direction markets take and traders can expect extreme volatility when the indicator is released at 13:30 GMT. At the moment analysts are predicting that the US added around 150K jobs in January. A worse than predicted result is likely to weigh down on the dollar and could give the euro a significant boost to close out the week. At the same time, should the employment number come in above expectations, the common currency may extend its downward movement.

JPY – JPY Maintains Upward Trend against USD

The USD/JPY stayed largely bearish throughout yesterday’s trading session, as concerns continue to grow that the Bank of Japan (BOJ) may soon intervene to limit the yen’s strength. Japan’s export based economy is negatively impacted when the yen displays bullish strength. The USD/JPY was largely range trading yesterday between 76.03 and 76.20. Analysts are warning that should the pair drop to around the 75.50 level, the BOJ may make a move.

Whether or not the pair could drop that low today, will largely be dependent on the US Non-Farm Payrolls figure, set to be released at 13:30 GMT. Traders will want to note that should the figure come in below expectations, the yen is likely to extend its bullish trend on the dollar. Whether or not that will lead to the BOJ intervening in the market place is not yet known, but traders will want to pay careful attention to the news to find out.

Crude Oil – Crude Oil Tumbles amid Increase in Risk Aversion

Crude oil continued to fall throughout the day yesterday, as fresh euro-zone debt concerns drove investors away from riskier assets. The commodity fell as low as $96.24 a barrel during the European session before staging a slight upward correction. Fresh concerns regarding both Greek and Portuguese debt contributed to the bearish direction oil took. Crude often falls when there is a bearish outlook for riskier currencies, largely because the commodity becomes less attractive to international investors.

Whether or not crude will maintain this trend today will largely be dependent on the results of the US Non-Farm Payrolls figure, set to be released at 13:30 GMT. A worse than expected US jobs figure may weigh down on the dollar ahead of markets closing for the week. In such a case, the euro may see a boost which would likely result in a bullish reversal for oil.

Technical News

EUR/USD

After steadily increasing in recent days, technical indicators are now showing that this pair may see a downward correction in the near future. The daily chart’s Williams Percent Range is currently at the -10 level, while the Relative Strength Index has drifted above 70. Going short may be the preferred strategy today.

GBP/USD

Technical indicators are showing that this pair is in overbought territory and could see a bearish correction shortly. A bearish cross has formed on the daily chart’s Stochastic Slow, while the Relative Strength Index on the same chart is well into the overbought zone. Going short could prove to be the wise choice.

USD/JPY

While a bullish cross has formed on the daily chart’s Stochastic Slow, indicating impending upward movement, the Relative Strength Index on the same chart is in neutral territory. Traders may want to take a wait and see approach for this pair, as a clearer trend may present itself later on.

USD/CHF

Technical indicators on the daily chart show this pair trading in oversold territory, which is typically a sign of impending upward movement. The Williams Percent Range has drifted below the -90 level, while the Relative Strength Index is at 20. Opening long positions may be the wise choice.

The Wild Card

AUD/NZD

Most technical indicators show this pair trading in the oversold zone, typically a sign that upward movement could occur in the near future. A bullish cross has formed on the daily chart’s Stochastic Slow, while the Relative Strength Index on the same chart is hovering around the 30 level. forex Forex traders may want to go long in their positions today, ahead of a possible upward breach.

Forex Market Analysis provided by ForexYard.

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

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China to Play the Eurozone’s White Knight?

February 2nd, 2012

Since the early days of the Eurozone debt crisis, insiders have identified China and its $3.2 trillion in foreign reserves as a potential contributor to a Eurozone bailout fund. Today, Premier Wen Jiabao gave markets reason to believe this may yet be the case when Wen suggested that China is considering the options for how it may contribute to keeping the Eurozone together.

The original European Financial Stability Fund (EFSF) is scheduled to be superseded by the European Stability Mechanism (ESM) later this year. The ESM is expected to provide 500 billion euros ($656 billion) to the establishment of a bailout fund. Wen did not confirm whether China would contribute to the ESM directly, but this does seem to be the most logical way China could help support the region.

China Desires a Stable Euro and Eurozone

It is in China’s interest to help stabilize the Eurozone. It is estimated that up to one quarter – or roughly 620 billion euros – of China’s foreign exchange is held in euros. Shielding this investment from further decline is obviously of vital importance to China.

However, China also wants to see prosperity return to the region as quickly as possible to protect its export interests. The wider European Union is China’s largest export market with 282 billion euros worth of goods exported in 2010. Sales for 2011 continued to increase but at a slower pace and there is a growing worry that sales could soon start to decline.

German Chancellor Angela Merkel arrived in China today to kick off a three-day visit aimed largely at reassuring China that European leaders have a handle on the debt crisis.

Scott Boyd is a currency analyst and a regular contributor to the OANDA MarketPulse FX blog

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Eurozone Debt Crisis Infographic

February 1st, 2012

The recent downgrade to sovereign credit ratings for several of the Eurozone countries is just the latest challenge to befall the 17-member group of countries sharing the Euro. A total of nine countries were included in the downgrade and while none of the changes were overly surprising, the reclassification casts doubt on the likelihood that some of the weaker countries can remain viable.

With the reclassification, Germany, Finland, and the Netherlands are the only countries to retain triple-A rated status. When expanding to all of Europe, only two more countries – the UK and Switzerland – can claim top status, and the UK’s hold on triple-A is tenuous.

The following graphic compares the debt for most of the European economies together with their current credit rating. The 10-year bond yield is represented by the anchor dragging behind each economy – the bigger the anchor, the greater the drag on the economy.

At a Glance: European Debt and Credit Ratings

Created by OANDA

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Gold, Stocks and the Euro All Gain in “Risk Asset Recovery” as Positive Manufacturing Data “Confirms China’s Soft Landing”

February 1st, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 1 February 2012, 08:30 EST

THE U.S. DOLLAR cost of buying gold climbed to $1750 an ounce Wednesday morning London time – gold’s highest level since early December – while commodity prices also ticked higher and stock markets surged following the release of better-than-expected manufacturing data from several major economies.

Prices for buying silver rallied to $34.01 – though they remained below yesterday’s high.

US Treasury bond prices fell meantime, while the Euro rallied 1.3% against the Dollar.

“Buyers have returned to the Euro, which is helping the situation in gold,” says Ole Hansen, senior manager at Saxo Bank.

“[Gold] had a bit of lackluster profit-taking yesterday but didn’t break anything important on the downside, which helped confirm that being long is back in vogue.”

“I think that going forward, gold is still going to be looking at the US and the Euro zone for direction,” reckons Phillip Futures analyst Ong Yi Ling in Singapore.

The wholesale market price of buying gold in Euros meantime rose to its highest level since September – hitting €42,864 per kilo (€1333 per ounce) – before dropping ahead of US open.

Based on month-end PM London Fix prices, January saw gold’s biggest calendar month gain in Dollar terms since September 1999. The Dollars-per-ounce price of buying gold was fixed at $1744 yesterday – 13.9% up on the last PM Fix of 2011.

January also marked gold’s best start to a year since 1980, Amanda Cooper at Reuters reports.
Stock markets meantime recorded their best January since 1994, according to Bloomberg, which cites a 5.8% rise for the MSCI All-Country World Index if dividends are included.

“Three things have been behind the recovery in risk assets,” says Mike Ryan, chief investment strategist at UBS Wealth Management Americas in New York.

“Progress on a fiscal compact in Europe, better-than- expected economic data and more accommodative central-bank policies.”

Stock markets gained strongly Wednesday morning too – with the FTSE 100 in London up 1.4% and Germany’s DAX up 2.4% by lunchtime – following news of worldwide manufacturing growth.

China’s manufacturing sector grew in January, according to the official purchasing managers index release, which rose to 50.5 from 50.3 last month (a figure above 50 indicates expansion).

“Today’s data further confirmed a soft-landing story for China,” reckons Ken Peng, economist at BNP Paribas in Beijing.

“However, consumer demand may weaken after holiday effects disappear.”

“New export orders declined,” points out Wei Yao, China economist at Societe Generale.

“Together with a depressed level of backlog orders…the boost in total orders looks temporary, and suggests that manufacturers are not very optimistic about the near-term outlook. Given today’s report, we think year on year export and import growth will prove to be barely positive in January.”

China’s PMI figure “was expansionary, but no so expansionary that we anticipate [monetary] tightening,” says one gold dealer here in London.

“There will be a power transition in Beijing this year,” adds a dealer in Hong Kong.

“I expect maintaining stability at all cost is what this government is going to do.”

Britain’s manufacturing sector also expanded in January, with the PMI coming in at 52.1 – having been below 50 the previous month. Similarly, German manufacturing resumed growth last month, according to its January PMI, which was reported today as 51.0.

Eurozone manufacturing as a whole, however, continued to shrink, albeit at a slower rate, with the PMI rising from 46.9 in December to 48.8 last month.

Similar manufacturing data for the US are released later on Wednesday. The latest ADP Employment Report meantime shows the US added 170,000 private sector jobs in January – down from around 300,000 the previous month. The official nonfarm payrolls data are due to be released by the US Bureau of Labor Statistics on Friday.

Greece’s private sector creditors may be offered a ‘sweetener’ in the form of a bond whose coupon is tied to future economic growth, Bloomberg reports. Negotiations – which Greek finance minister Evangelos Venizelos said yesterday are “one step” from success – stalled last week after parties could not agree on the size of the coupon on new bonds for which existing ones would be swapped.

The government in India – the world’s largest source of demand for buying gold– announced Wednesday it is raising the base import price of gold by 5.7% to $556 per 10 grams. Silver’s base import price will rise 12% to $1067 per kilo. The base import price is the price used to calculate the import duty.

The move follows last month’s switch from discrete to ad valorem taxation, a move which also saw the effective duty on gold almost doubled.

The higher import duties have had a “definite impact” on demand for buying gold in India, according to Harshad Ajmera, proprietor of JJ Gold House in Kolkata.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

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Record Eurozone Unemployment Pits North Against South

January 31st, 2012

The December unemployment rate for the 17-member countries comprising the Eurozone rose to the highest level since the Euro was introduced in 1999. For the month of December, the rate for the entire region rose to 10.4 percent after the November result was similarly revised upwards one tenth of a percent from the originally-reported 10.3 percent.

A total of 16.5 million people across the Eurozone are now out of work. This is an increase of three quarters of a million in the past year alone. But the pain is not being felt equally amongst all Eurozone nations.

Greece and Spain recorded the greatest increase in unemployment over the past year. At 22.9 percent, Spain had the highest unemployment rate for the entire area with Greece not far behind at just over 19 percent. Portugal watched helplessly as its unemployment rate continued to climb reaching 13.6 in December.

Comparing the results of these southern countries with the northern jurisdictions reveals the gap between the north and the south. In Germany, for instance, December’s unemployment rate actually fell more than expected to 6.7 percent – the lowest since German was reunited. Meanwhile, Austria and the Netherlands continued to record the lowest Eurozone unemployment at just 4.1 and 4.9 percent respectively.

Unemployment to Increase in Some Eurozone Countries

Looking ahead to the coming year and beyond, there is every likelihood that the situation will actually worsen. As even the most casual observer knows, the Greek government is presently under intense pressure to implement the infamous “austerity” measures to address the country’s widening deficit.

The massive spending cuts targeted to meet the goal of ultimately eliminating the deficit will require Greek authorities to eradicate a significant number of government jobs. Other countries including Spain, Portugal, and even Italy will be forced – to some degree at least – to follow the same agenda in order to get a handle on overall spending.

Widespread job losses will not be restricted to just the government, however; the private sector too will be forced to reduce costs as companies struggle with falling sales. In the face of the continued uncertainty and growing fears of recession, companies will postpone or even cancel all but the most essential new projects, delaying new hiring accordingly.

Again, it will be the southern countries that will feel the effects of this most keenly.

Article by forexblog.oanda.com

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EUR/JPY Outlook- Jan 29, 2012

January 29th, 2012

EUR/USD broke the resistance mentioned last weekend and quoted above and then moved further up as we had mentioned towards 1.3230. The currency pair went as high as 1.3233 or a few pips below the Fibonacci 38.2% retracement of the downward move from October 27th to the recent bottom of January 15th.

The strong upward correction and the break above the upper edge of the daily Ichimoku cloud indicate that we can expect some more upward correction in the coming days. The development in Europe about the debt crisis do not really add any strong positive outlook for Euro in the mid-term.

eur usd daily chart

On the upside a break over the Fibonacci 38.2% retracement, as mentioned above, i.e. 1.3244 and then 1.3260 is important. A firm break above this zone should take EURUSD towards the resistance zone of 1.3430 to 1.3485 resistance zone. Please note that 1.3434 represents the Fibonacci 50% retracement of the above mentioned move. Not only this but the range of 1.3430 to 1.3550 had proved to be a very strong resistance zone during November 30th to December 9th, 2011. The psychological resistance of 1.3500 would also come into picture at those levels. However a break above this will bring up the possibilities of a test to 1.3620.

Please note that we are considering the recent move as only a correction/consolidation during the overall downtrend and overall we would expect a fall from one of these resistance levels. On the downside the important support levels would be 1.3040 and then 1.2960. A firm break of these support levels and then 1.2930 should take the euro-dollar pair to retest the recent 1.2626/1.2624 bottom. The support levels mentioned are based on 55-day and 22-day EMA as well as the supports of Tenkan and Kijun-Sen of the daily Ichimoku cloud.

You may also check daily technical eur/usd analysis and the weekend eurusd forecast at ForexAbode.com.

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Credit Crisis: Are We Set Up for The Perfect Storm?

January 27th, 2012

Robert Prechter discusses what’s backing your dollars

By Elliott Wave International

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Gold “Has Foundation to Build Next Move Higher” Following FOMC “Catalyst”, Slow Physical Demand “Explains Gold’s Resistance at $1730″

January 27th, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Friday 27 January 2012, 08:30 EST

WHOLESALE MARKET gold prices were headed for their biggest one-week rise since the start of December Friday lunchtime in London, climbing back through $1720 an ounce – a weekly gain of over 3%.

Silver prices meantime hovered around $33.60 per ounce – 4.2% up on last week’s close – while other stocks and commodities were broadly flat and US Treasury bond prices slipped.

A day earlier, gold prices hit a 7-week high at $1730 per ounce before easing in Friday’s Asian session.

“Lack of physical demand partly explains the inability of gold to make a sustained move beyond the $1730 level,” says Standard bank commodities strategist Marc Ground, citing this week’s Chinese Lunar New Year holiday as impacting demand from China, Singapore, Malaysia and Indonesia.

“[But] while slowing physical demand might provide some resistance during price rallies, we do not feel that it would be the cause of prices moving significantly lower.”

“The [physical] market has been like a yo-yo,” one Singapore dealer tells newswire Reuters.
“I think it’s a good time to buy gold…but clients are all cautious. They are doing enough to roll their money but keeping it all for the possibility of buying back.”

“Maybe it’s better to wait until Monday,” reckons another Singapore dealer.

“The Chinese market reopens and [we will] see whether they will buy some more gold or they will take profits.”

Based on PM London Fix prices, gold by Friday lunchtime looked set for its biggest weekly gain since the week ended December 2 last year.

That week saw gold’s biggest single-day Fix-to-Fix gain of recent months, when gold prices rose 2.5% on 30 November last year. Between that day’s AM and PM Fix, six of the world’s central banks announced a co-ordinated move lower the cost of Dollar funding for to the banking system.

This week meantime saw the Federal Reserve’s Federal Open Market Committee begin publishing members’ interest rate projections on Wednesday. The majority of FOMC members expect rates to remain at or below 1% until at least the end of 2014.

“The market attitude towards gold for most of January could be summed up in two words: cautious optimism,” says the latest precious metals note from UBS.

“Investors were reluctant to add to positions aggressively as memories of the disappointment in Q4 lingered…A fresh catalyst was needed and we think the FOMC outcome on Wednesday fit the bill.

More accommodative policy is a very good foundation for gold to build on the next move higher.”
Between Wednesday’s London PM Fix and Thursday’s AM Fix – during which time the Fed made its announcement – gold prices gained 3.8%. Notwithstanding the New Year break, this was the biggest Fix-to-Fix gain since September 27.

That rise in gold prices coincided with reports that European policymakers were preparing a move to recapitalize the continent’s banks – though the reported proposals were not adopted.

European leaders meantime are “just about to close a deal on private sector involvement between the Greek government and the private-sector community,” European commissioner for economic and monetary affairs Olli Rehn said Friday, speaking at the World Economic Forum in Davos, Switzerland.

A Greek deal would pave the way for Greece’s second bailout, agreed last October and worth €130 billion – without which Greece will not be able to repay €14.5 billion of maturing debt on March 20.

Iran – which was earlier this week hit by fresh sanctions on oil, diamond and gold dealing – has said that it may immediately halt its oil exports to Europe to pre-empt a European Union ban due to come into force July 1. Greece is thought to import around one third of its oil from Iran.

Two weeks after ratings agency Standard & Poor’s downgraded them to junk status, yields on 10-Yeat Portuguese government bonds hit their highest levels since the crisis began Friday morning when they traded at 15.4% – almost double the yield on equivalent Irish debt.

Portugal’s 5-Year bond yields breached 20%.

“It makes it impossible for Portugal to access debt markets in 2013,” says JPMorgan rate strategist Nikolaos Panigirtzoglou.

“It’s a country that still relies on the official sector in terms of financing its current account deficit and repayments and this makes it certain that we’re going to get a second bailout for Portugal later this year.”

“The market is asking whether Portugal is really just like Greece,” adds Richard Batty, strategy director at Standard Life Investments.

A survey published this morning by British free newspaper Metro finds that 68% of British people believe the Euro will collapse.

French bank Societe Generale’s latest Hedge Fund Watch also finds that hedge funds are shorting the single currency “like never before”, the Financial Times Alphaville blog reports.

The Euro however rallied against the Dollar Friday morning, breaking back through $1.31.

Euro gold prices were flat Friday morning, holding above €42150 per kilo (€1310 per ounce) – still a 1.7% gain for the week.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

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“Fed Euphoria” Sees Gold Touch 7-Week High as 0% Rates Promised ‘Til 2014

January 26th, 2012

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 26 Jan., 08:30 EST

INVESTMENT DEMAND to buy gold continued to push wholesale prices higher Thursday morning in London, after the US Federal Reserve vowed to keep Dollar interest rates at zero until at least 2014 – one year later than previously promised.

The global market’s AM Gold Fix here in London was set at $1713 per ounce, more than 3.8% higher from Wednesday afternoon and the highest level since Dec. 8th.

The most-active US gold futures contract yesterday saw its heaviest volume in six weeks according to Amanda Cooper at Reuters, while investors wanting to buy gold exposure added 9 tonnes to the holdings of the New York-listed SPDR Gold Trust, whose assets rose to $69.3 billion by value.

“People are still very under-invested in gold, and so there is a huge scope of that increasing,” reckons UniCredit analyst Jochen Hitzfeld in Munich, speaking to Bloomberg.

“The [Fed's] announcement prompted investors to buy gold as a hedge against inflation,” says the Associated Press, “which investors fear could be a result of the its extended low-interest rate policy.”

Five-year US Treasury yields touched a new record low of 0.75% last night. US consumer-price inflation was last pegged at 3.0% annually.

All other tradable assets also pushed higher Thursday morning, sending Japanese, German and UK government bond yields lower as crude oil added 1%, copper rose 1.8%, and the MSCI index of emerging economy stock markets gained 1.3%.

Silver bullion prices today rose 5.3% from Wednesday’s London Fix to trade at $33.35 per ounce, a better than 2-month high.

Hong Kong stocks added 1.6% on their first trading day after the Lunar New Year holidays.

“Because the low US interest rate will continue to 2014, I think it gives good support to stock and gold markets,” Reuters quotes Ronald Leung of Lee Cheong Gold Dealers.

“But Hong Kong is still in a holiday mood. I don’t expect too much activity on our side for the whole week.”

“We would expect prices to ease off as the euphoria subsides,” says Marc Ground at Standard Bank in London, reporting “some profit-taking already overnight in Asia, which kept precious metals from rallying further.”

Gold traded on the Hong Kong Gold Exchange rose 3.4% today, as did Tokyo gold futures, which jumped to their highest level against the Japanese Yen in 7 weeks.

Meantime in Europe on Thursday, the Greek press reported that private-sector investors were nearing a deal with Athens’ officials over the interest rate to be paid on new bonds, issued to compensate them for a 50% or greater write-down of their existing positions.

Various reports put the rate between 3.75% and 4.0% per year.

The Euro currency today touched its best level vs. the Dollar in 5 weeks at $1.3170, up by 4.3% from last week’s 16-month low.

Eurozone investors looking to buy gold, however, also saw it rise in price to break €42,000 per kilo – a level first breached in mid-August and barely 5% below Sept’s all-time high.

“Gold finally made the breakout,” says one London dealer in a note. Thanks to the Fed’s announcement, “The blue touch-paper was lit.”

Formally announcing a 2% annual target for US consumer-price inflation, Fed chairman Ben Bernanke said in his quarterly press conference on Wednesday that “[Our] framework makes very clear that we need to be thinking about ways to provide further stimulus if we don’t get improvement in the pace of recovery and a normalization of inflation.”

“It sounds like the finger is on the trigger [for more quantitative easing],” reckons one money-market economist quoted by Reuters.

“Financial repression,” says Bill Gross, founder and co-manager of the $1 trillion Pimco bonds fund-management group on Twitter, pointing to the loss of real value imposed on savers by sub-zero returns after inflation.

“QE 2.5 today, QE 3, 4, 5… lie ahead.”

“[The Fed's policy committee] have now locked themselves in to [zero rates until] at least late 2014,” says a note from RBC analysts. “This shows you the level of worry.”

“The median [inflation] expectation of the committee may be lower than we had expected,” says Goldman Sachs.

“Indeed, a significant proportion of the committee may project the first rate hike in 2015 or later.”

Adrian Ash
BullionVault

Gold price chart, no delay | Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

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Gold “Still Respecting” Post-Lehman Trend, Fed Policy “Set to Support Gold”, ECB “Should Participate in Greek Debt Efforts”

January 25th, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 25 January 2012, 08:30 EST

SPOT MARKET gold bullion prices dropped to $1653 an ounce Wednesday morning London time – down 1.7% from Monday’s high – while stock markets, commodities and the Euro all slid and US Treasuries gained after the head of the International Monetary Fund suggested the European Central Bank could take losses on its Greek bond holdings.

Silver bullion fell to $31.67 – down 1.8% for the week so far.

“On the weekly chart, gold is still respecting the uptrend off the October 2008 low, with key support at $1550,” says the latest report from technical analysts at gold bullion bank Scotia Mocatta.

“If the level of Greek debt held by the private sector is not sufficiently renegotiated,” IMF managing director Christine Lagarde said this morning,” then public sector holders of Greek debt should also participate in the efforts.”

The ECB – which started buying Greek bonds in May 2010 when the crisis first escalated – remains opposed to seeing its holdings of Greek debt restructured, according to newswire Bloomberg, which cited anonymous sources.

“Once again, policy makers leave the room and hope the ECB will fill in,” says Thomas Costerg, London-based European economist at Standard Chartered.

“The risk is that by putting the ECB on board, as the IMF asks, this could result in debt swap negotiations restarting from scratch, which could mean additional delay to an already over-stretched timetable.”

Debt restructuring formed part of an agreement reached last October to give Greece a second bailout worth €130 billion – without which it will be unable to pay maturing bonds worth €14.5 billion on March 20.

Over the course of Wednesday morning the Euro handed back all of this week’s gains against the Dollar.

In thin trade reflecting the absence of Far Eastern players during the Lunar New Year Week, Dollar gold bullion prices were down 0.8% for the week by Wednesday lunchtime.

“In the absence of sustained physical interest, gold is prone to a little more downside this week as bullion continues trading with global risk sentiment,” says VTB Capital analyst Andrey Kryuchenkov, adding that the US Federal Reserve looks “set to remain accommodative for now which is, as ever, gold-beneficial in the long run.”

“The Fed’s stance should continue to support gold,” agrees Marc Ground, commodities strategist at Standard Bank.

“Fundamentally, we believe that the long-term causal drivers of gold are global liquidity (defined as the Fed’s Balance Sheet plus FX reserve holdings) and real interest rates.”

The Fed will announce its latest interest rate decision later today, and is widely expected to leave its target federal funds rate within the range 0% to 0.25%. In addition, it will publish for the first time Federal Open Market Committee members’ projections for the appropriate target rate over the next few years.

“We expect the rate guidance in the policy statement to move the timetable for current accommodation well beyond mid-2013 and into 2014,” says a report from Citigroup fixed-income strategists Peter Goves and Nishay Patel.

US president Barack Obama yesterday outlined his “Buffett rule” for tax reform, which takes its name from the billionaire Berkshire Hathaway chief executive Warren Buffett.

“If you make more than $1 million a year,” Obama said, “you should not pay less than 30% in taxes.”

Obama’s address came days after Republican presidential candidate Mitt Romney disclosed that he paid 13.9% income taxes on $21.6 million of earnings in 2010. Romney disclosed his tax returns following criticism from his rival for the Republican nomination Newt Gingrich.

The UK economy meantime declined by 0.2% in the fourth quarter of 2011, official data published Wednesday show. Were the economy to shrink for a second consecutive quarter, Britain would be back in technical recession.

“[A negative growth rate]gives additional ammunition to those at the Bank of England who want to do more quantitative easing sooner rather than later,” reckons Peter Dixon, London-based global equities economist at Commerzbank, adding that the news “gives some more credence to the idea they will move in February.”

The Bank’s Monetary Policy Committee will make its next policy announcement on February 9.

“With inflation falling back and wage growth subdued, there is scope for interest rates to remain low, and, if necessary, for further asset purchases,” said Bank of England governor Mervyn King Tuesday, referring to the possibility of further quantitative easing.

The news that Britain’s economy had shrunk came a day after it was revealed that net public debt has breached £1 trillion for the first time in history.

The Bank of England’s latest survey of business conditions meantime shows spending, hiring, exports growth, borrowing and investment all weakening at the start of 2012.

Inflation in the cost of labor and raw materials eased slightly. But annual inflation in the price of imports “remained elevated” says the Bank’s summary for January.

While the Pound has stayed relatively steady against the Dollar and Euro over the last 12 months, the Sterling price of gold bullion is up more than 25% compared to this time last year.

Importers of gold bullion in India meantime are delaying buying gold following last week’s decision by the government to switch to a 2% ad valorem import tax – as opposed to the previous flat rate by weight – the Wall Street Journal reports.

Since the new tax is calculated by value, importers who delay will benefit if the price of gold subsequently falls.

High profile investor Dennis Gartman has said that while the gold bull market “is probably still extant”, he is now “neutral” on the prospects for gold bullion.

Ben Traynor
BullionVault

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Forex Interview: John Kicklighter of DailyFx shares his views on the Euro, USD, Yen and latest Currency Trends

January 25th, 2012

By Zac Storella, CountingPips.com

Today, I am pleased to share our latest forex interview on the latest major forex events and currency trends with John Kicklighter, Senior Currency Strategist at DailyFx.com. John specializes in fundamental analysis and overall market themes and has trading experience in spot currency, financial futures, commodities, stocks, and options. In his analysis for DailyFx, John’s regularly reports on G10 fundamental forecasts, global risk sentiment and carry trade analysis while his commentary has been featured in many publications including Bloomberg, Reuters, CNBC, AFP, and The Australian.

This week happens to be a relatively busy week of US economic data releases that includes the GDP report, an interest rate decision, home sales data and the durable goods report. What do you feel will be the one or two most important events and themes to pay attention to for the week and for the rest of January?

All of the economic data that is scheduled for release through the immediate future will play a role in shaping expectations for the relative health of the United States – an important consideration when there is a very real threat of recession for many of its most prominent counterparts. However, most individual indicators (like the housing data, durable goods orders and for that matter, probably even next week’s NFPs) will not significantly alter the larger consensus trend. The exception is the first reading of 4Q GDP. This figure can confirm or deny the market consensus, and catching market participants off guard on a big theme like this is a rare enough event that its impact is leveraged. Tapping the more elemental consideration of risk/reward, the FOMC decision could also be a market mover as it will offer a better framework for further stimulus and the eventual withdrawal of easy money. This particular meeting is a unique event as they will start producing interest rate forecasts along with their updates on growth and policy bearings. These are the known and definitive considerations. Real impact potential though comes from the unknown – speculation of QE3 and progress on the most recent ‘hope revival’ for the euro.

The EUR/USD has broken above the 1.30 level this week in trading. Do you feel the EUR/USD can sustain this momentum at these levels and perhaps ascend higher?

From a purely fundamental perspective, I think the euro has no business posting a meaningful advance. That said, this isn’t an academically-based fundamental world. Sentiment determines when a currency needs to be repriced. That being said, the market will itself to be caught up in the hope that additional stimulus is coming through for the Euro-area and that the Greek situation will be reconciled because the short-side is temporarily oversaturated. Though not a full representation of the spot market (due to difference in market depth and participation) the COT report of net speculative interest in Euro futures set a record level of shorts through the week ending Tuesday. Often, when we reach these extremes, it is a sign that one side of the market has been exhausted and a correction would be easier to facilitate. Given the depths the euro has plunged on an exchange rate and futures positioning basis, a bigger rebound wouldn’t be too hard to facilitate.

Seeing the CFTC futures speculators data showed that specs were still very euro-bearish last week, do you feel we could perhaps see a change in sentiment (a bottom reached and/or a short squeeze?)?

The CFTC’s Commitment of Traders report measures open positions to the Tuesday of that week. Therefore, the record net short exposure reading that we were given was not representative of the big Euro rally on Wednesday and Thursday. There is a good chance that exposure will see a correction with the next reading to account for the recent change in EURUSD’s bearing (even if it is temporary). That said, a quick reversal (in either price or extreme positioning) doesn’t necessarily guarantee a larger trend reversal. It’s important to remember in these times that there are corrections in larger trends.

What do feel is propelling the AUD/USD and the NZD/USD higher at this point? They are now respectively trading at their highest levels since October. Despite the AUD and NZD’s correlation to risk, these two pairs have largely avoided the euro’s slide of the last few months.

The euro itself is not a good representation of risk. We have seen the correlation between EURUSD and the S&P 500 (my favored gauge for risk appetite) deteriorate significantly over the past week. Anything can be a catalyst for broader risk aversion, but it doesn’t guarantee that everything and anything will do it. Through the euro’s recent slide, we have seen demand for equities slowly but steadily chop higher to five month highs. It is this acceptance of risk and appetite for higher yield that is encouraging capital to flow over to the higher yielding currencies.

The USD/JPY has been trading in a relatively tight range since the beginning of the new year roughly between 76.50 and 77.50. Do you see any catalyst upcoming that might be able to allow a breakout of this range? Likely more of the same sideways action?

The US dollar and Japanese yen are frustratingly, evenly matched as safe havens – that is in tolerable market conditions (should the very stability of the world’s financial markets come into question, capital will move over to the US dollar and its Treasuries, no questions asked). With volatility behind risk trends smoothing out, the need to favor a particular low-yield and deep-market currency diminishes significantly. Clearly, a crisis of global proportions could encourage a shift to the safety of the US market. In the absence of that overwhelming catalyst, we still have the possibility of BoJ intervention (though it seems they are looking at both EURJPY and USDJPY for inspiration).

As we have entered a new year, do you have any predictions for winners or losers over the first half of the year in terms of specific currencies and trends? Any other markets you feel may have a bearing on the major currencies?

Given the heights equities (and exposure to risk in general) have marched to, a bigger correction in long-risk exposure is highly probable. That means, high yield currencies, equities, speculative commodities, and high-yield paper are at risk of a deep correction. And, if all come under significant enough pressure at the same time, we could possibly see the funding markets freeze up; which is a crisis unto itself. In a regular risk aversion scenario, we can see the US dollar and Japanese yen advance for currencies while government paper and money markets for the US, UK, Germany and Japan swell. After such a down leg, we could see one of two scenarios. A short-term downdraft would see the Fed or some other equally dedicated policy authority step in with an artificial booster in the form of stimulus. Otherwise, a longer deleveraging would eventually flag and send too much capital to the sidelines – and the void would eventually need to be filled so market participants can make money and possibly take advantage of considerable discounts (after a meaningful reduction in cost).

Thank you John for taking the time to answer my questions in this week’s forex interview. To read John’s latest currency analysis and trading strategies you can visit DailyFx.com. Find more information to follow John below.

John Kicklighter
PHONE: (415) 343-4923
EMAIL: jkicklighter@fxcm.com
LOCATION: San Francisco
TWITTER: @JohnKicklighter

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“Absence of Far East Demand” sees Gold “Succumb to Profit Taking” as Markets “Fragile” on Greek Debt Uncertainty

January 24th, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 24 January 2012, 08:30 EST

WHOLESALE MARKET gold prices retreated to roughly where they started the week during Tuesday’s morning session in London, making a 1% drop from yesterday’s 6-week high to $1665 an ounce.

Silver prices slipped to $31.91 an ounce – a 1% drop on Friday’s close – as stocks and commodities also fell following news that Greek debt agreement remains elusive after yesterday’s Brussels finance ministers meeting.

“Key support [for gold prices] sits at the 200-day moving average, currently at $1643,” says the latest report from Scotia Mocatta technical analyst Russell Browne.

“Gold succumbed to profit-taking yesterday,” adds Marc Ground, commodities strategist at Standard Bank.

“The trend has continued into this morning, with the absence of Far East physical demand (due to Lunar New Year holidays) opening up the metal to further downside.”

European finance ministers have backed Greece in calling for private sector holders of Greek debt to take bigger losses.

Private sector Greek bondholders agreed last October to accept 50% losses as part of a bailout deal aimed at reducing Greece’s debt burden from 160% of annual gross domestic product to 120% by 2020. However, leaders now openly acknowledge that Greece’s efforts to reduce its deficit look destined to fail.

“It is obvious that the Greek program is off track,” said Jean-Claude Juncker, chairman of the Eurogroup of single currency finance ministers, following their meeting yesterday.

Greek finance minister Evangelos Venizelos has said he expects talks with private investors over Greek debt restructuring will be finished by February 1. His counterparts in other Eurozone governments meantime confirmed plans for a second Greek bailout of €130 billion should a deal be reached – without which Greece will be unable to repay €14.5 billion of bonds that mature on March 20.

“It seems as if we are far from an agreement,” reckons Yves Maillot, head of investments at French asset management firm Robeco Gestions , which oversees $6.8 billion.

“The problem of solvency of countries remains, along with the question of Greece. The market situation is fragile.”

Euro finance ministers also discussed stricter budget rules for European Union governments as well as the introduction of the European Stability mechanism – the permanent bailout fund now due to replace the temporary European Financial Stability Facility in July, a year earlier than originally scheduled.

Italy’s prime minister Mario Monti, along with International Monetary Fund chief Christine Lagarde, have called for the ESM to have an effective lending ceiling of €1 trillion. Germany, however, insisted it be capped at €500 billion – a proposal with which the Eurogroup agreed yesterday.

“I believe this is an important achievement,” German finance minister Wolfgang Schaeuble said of the meeting’s agreement.

“It demonstrates that the Euro group and the European Union as a whole is capable of taking the necessary steps.”

Germany’s manufacturing sector meantime has expanded this month for the first time since October, according to provisional purchasing managers index data released Tuesday.

Here in the UK, public sector net debt breached £1 trillion for the first time last month – equivalent to 64.2% of GDP – according to the Office for National Statistics.

The US on Monday imposed sanctions on Iran’s third-largest bank, Bank Tejarat. Any firm that deals with it will be locked out of the US financial system. Also on Monday, the European Union banned Iranian oil imports and joined the US in imposing sanctions on Iran’s central bank.

Monday’s actions “will deepen Iran’s financial isolation, make its access to hard currency even more tenuous, and further impair Iran’s ability to finance its illicit nuclear program,” said US Treasury Undersecretary David Cohen.

Earlier this month there were reports that sanctions imposed at the end of last year had led to Iranians buying gold as a currency hedge, and leading to concern among Iranian officials.

Japan meantime is expected to announce its first trade deficit since 1980 on Wednesday, the Wall Street Journal reports. The Yen has risen over 5% against the Dollar since the start of 2011 – and is up around 40% over the last decade.

Yen gold prices have risen by over 200% since January 2002 – compared to a rise in Dollar gold prices of over 450%.

“Gold is negatively correlated with the US Dollar,” says the gold investment statistics commentary from the World Gold Council.

“In periods in which the US Dollar depreciates, gold prices tend to rise.”

The report (which can be downloaded here (free registration required here)) notes however that the relationship is not symmetric, with the negative correlation often weakening when the Dollar is buoyant.

The report also comments that equity volatility rose faster than that of gold during periods of 2011 that saw extreme financial market stress.

Ben Traynor
BullionVault

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Forex CT 24-1-12 Video News Update & Outlook

January 24th, 2012

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

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Currency Futures: Forex Speculators bets for US Dollar edge higher. Euro, Pound Sterling dip

January 23rd, 2012

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators continued to increase their Euro and British pound sterling short bets for a fourth consecutive week while long US dollar bets overall edged higher.

Non-commercial futures traders, usually hedge funds and large speculators, added to their total US dollar long positions to $18.77 billion on January 17th from a total long position of $17.43 billion on January 10th, according to the CFTC COT data and calculations by Reuters which calculates the dollar positions against the euro, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc.

Individual Currencies:

EuroFX: Currency speculators continued to add to their Euro short positions as of January 17th and raised their short bets to a new record high. Euro short positions totaled 160,030 net short contracts from the previous week’s total of 155,195 net short contracts as speculator sentiment for the common European currency has declined for four consecutive weeks.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: Bearish bets of the British pound sterling rose for a fourth consecutive week as of January 17th and to the lowest level since December 6th. British pound positions saw a total of 41,634 short positions on January 17th following a total of 35,853 net short positions registered on January 10th. This is the lowest level since speculators were short by 43,560 contracts on December 6th.

JPY: The Japanese yen net long speculative contracts edged slightly lower but remained virtually unchanged from the previous week, according to the latest data on January 17th. Yen long positions dipped to a total of 58,862 net long contracts reported on January 17th following a total of 59,657 net long contracts that were reported on January 10th. Yen speculative positions on January 10th registered their highest level in over a year surpassing the August 2nd level when long positions leveled at 58,833 contracts.

CHF: Swiss franc speculators slightly increased their short bets against the Swiss currency as of January 17th although positions have barely changed in the past three weeks. Speculator positions for the Swiss currency futures numbered a total of 12,822 net short contracts on January 17th following a total of 12,097 net short contracts as of January 10th. Swiss contracts have now been on the short side by more than 10,000 contracts for four consecutive weeks.

CAD: Canadian dollar positions fell slightly for a third consecutive week to a total of 28,730 net short contracts as of January 17th following a total of 28,649 short contracts reported on January 10th. CAD positions are at their lowest level in at least a year.

AUD: The Australian dollar long positions advanced higher for a fourth consecutive week as of January 17th. Australian dollar positions increased to a total net amount of 54,306 long contracts on January 17th after totaling 53,526 net long contracts reported as of January 10th. The AUD speculative positions are at their highest level since August 2nd when Australian dollar long positions totaled 75,598.

NZD: New Zealand dollar futures speculator positions jumped higher and rose for a fourth consecutive week through January 17th. NZD contracts increased to a total of 9,455 net long contracts as of January 17th following a total of 5,029 net long contracts registered the previous week. NZD positions have increased for four straight weeks from the December 20th low standing (which was the lowest position since March 29th when positions equaled 239 long contracts) to the highest level since November 15th.

MXN: Mexican peso speculative contracts improved slightly against the US dollar for a second consecutive week. Peso short positions numbered a total of 17,328 net short speculative positions as of January 17th following a total of 22,332 short contracts that were reported on January 10th. Peso contracts are now after best level since November 15th when short contracts equaled 15,021.

COT Currency Data Summary as of January 17, 2012
Large Speculators Net Positions vs. the US Dollar

EUR -160030
GBP -41634
JPY +58862
CHF -12822
CAD -28730
AUD +54306
NZD +9455
MXN -17328

Other COT Trading Resources:

Trading Forex Using the COT Report

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Gold Touches Six-Week High as Technicals “Turning More Bullish”, Banking Sector Negotiators “Hopeful” for Agreement on Greek Debt

January 23rd, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Monday 23 January 2012, 08:30 EST

THE U.S. DOLLAR cost to buy gold hit a six-week high of $1677 an ounce Monday morning in London, as stock markets, commodities and the Euro all pushed higher and US Treasury bond prices dipped.

“Near term technical have turned more bullish [for gold],” says the latest technical analysis from Scotia Mocatta, though it sees “psychological resistance looming at $1700.”

The price of buying gold in Euros however fell to €41375 (€1287 per ounce) – down slightly on Friday’s close – as European finance ministers met to discuss Greek debt and a proposal to relax banking rules.

The difference between long contracts to buy gold and short contracts held by noncommercial gold futures and options traders on New York’s Comex exchange – the so-called speculative net long – rose for the second week running in the week ended last Tuesday, according to the latest data from the Commodity Futures Trading Commission.

There was no change last week however in the volume of gold held to back shares in the SPDR Gold Trust (ticker: GLD), the world’s largest gold ETF.

Silver meantime hit $32.82 per ounce Monday morning – 1.8% above Friday’s close.

“Growing investor confidence is evident in [silver] ETF positioning,” reports Standard Bank commodities strategist Marc Ground this morning, citing ETF purchases of 341.8 tonnes in the past week.

One London broker reported Friday that the Sprott Physical Silver Trust (ticker: PSLV) bought around 311 tonnes of silver last week.

Shares in New York-listed PSLV meantime gapped lower at the start of Wednesday morning’s trade, opening 9.4% down on the previous day’s close – a result of “the instantaneous premium evaporation in PSLV,” says Gene Arensberg of GotGoldReport, which had previously warned its readers that the shares’ premium to PSLV’s net asset value could disappear “at the drop of a hat.”

“Ouch for the faithful PSLV buyers,” says Arensberg, “and shame upon the managers of PSLV for allowing the premium to get so out of whack to the upside.”

Eurozone finance ministers meantime met in Brussels on Monday, where they were expected to discuss the terms of Greek debt restructuring, with negotiations in Athens over recent days having failed to produce a deal.

“I remain quite hopeful [of reaching agreement],” Charles Dallara, managing director of the Institute of International Finance – which is negotiating on behalf of banks that hold Greek debt – said Sunday.

The IIF made an offer on Friday to accept voluntary private sector involvement that would amount to losses on Greek bonds of around 65-70%, according to press reports. Dallara described it as “the maximum offer consistent with a voluntary PSI deal”.

A sticking point is the size of the coupon on new bonds that will be swapped for existing ones. Both sides were thought to be close to agreeing an annual rate of between 4% and 4.5%, newswire Bloomberg reported.

Germany and the International Monetary Fund, however, want to see this cut to 3%, according to the New York Times, citing officials involved in the talks.

“I believe that the private sector can accept a lower coupon than the 4% average, but the question then is: will the PSI still be on a voluntary basis?” one senior Greek banker told newswire Reuters.

Any deal that is not voluntary risks triggering payments on credit default swaps – which payout in the event of default. Failure to agree debt restructuring meanwhile also risks jeopardizing Greece’s second bailout – without which it will be unable to pay €14.5 billion of maturing bonds on March 20.

Also at today’s Brussels meeting, German finance minister Wolfgang Schaeuble, along with his French opposite number Francois Baroin, will call for relaxation of banking rules, according to the Financial Times.

The pair will ask for elements of Basel III – the regulations on how much capital banks must hold, due to come into force in 2015 – to be loosened for banks that own insurance companies, such as French banks Societe Generale and Credit Agricole. They also propose a three-year delay for the deadline on disclosing leverage ratios – in contrast to UK regulators, who have called for disclosure ahead of schedule.

Baroin meantime has confirmed that France’s proposed financial transaction tax – one of the issues that led to British prime minister David Cameron walking out of European Union talks in December – will not apply to government bonds.

The US Federal Reserve meantime could make the historic move of announcing a specific inflation target when it gives its interest rate decision on Wednesday, Reuters reports.

Also in the US, Newt Gingrich – who last week said the United States should consider returning to the gold standard – won South Carolina’s Republican presidential primary on Saturday. One of his opponents, Mitt Romney, has subsequently bowed to calls to release his tax returns.

China has seen a “New Year’s rush” to buy gold to mark the Year of the Dragon, which begins today, the FT reports.

“Some customers just walk in and buy a bunch of 100g gold bars all at once,” it quotes one manager at Chines bank ICBC.

“People like to give them away…companies come in too to buy gold bars for presents.”
ICBC – the world’s largest bank by stock market cap – announced last week that 2.33 million Chinese citizens use its gold accumulation program, which currently holds 22 tonnes of gold.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

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EUR/USD Outlook- Jan 22nd, 2012

January 23rd, 2012

Sunday, January 22nd, 2012: EUR/USDr had touched 1.2624 last to last week but found a strong support at 1.2626 last week and jumped up. It touched 1.2986 and found some resistance there.
The break of 1.2880 resistance makes the short-term outlook neutral, even though the overall outlook stays bearish for EURUSD.

eur-usd
On the upside, if a break takes over 1.2986 then we would expect EURUSD to have some more upward correction towards the resistance zone of 1.3030 to 1.3080. This resistance zone comes into picture as 1.3030 represents the 55-day EMA and since end of November, 2011, the currency pair has not been able to break above it. 1.3006 to 1.3045 level would also bring the resistance of lower edge of the daily Ichimoku cloud. Over these levels, 1.3070 to 1.3083 represents a strong resistance zone during December 25th to January 4th.

In case EURUSD breaks over 1.2986 and then the above mentioned resistance zone then we would expect some more upward correction towards 1.3230/1.3050. This zone would represent the resistance zone of Fibonacci 38.2% retracement of the downward move from October 27th to the recent bottom of January 15th.

As we have mentioned that overall we stay bearish and are taking the current move only as correction/consolidation, we expect a fall from either of the above mentioned resistance levels. On the downside, we would expect some minor support in the range of 1.2810 to 1.2840. This support is based on the 22-day EMA as well as daily Ichimoku cloud’s Tenkan and Kijun-Sen level supports. A firm break of this support zone should take the euro-dollar pair to retest the recent 1.2626/1.2624 bottom.
This is not for the next week but overall, any break below 1.2624/1.2620 should take the currency pair to 1.2520. As mentioned last weekend, please note that we expect a slower downward momentum as the currency pair nears 1.2500 and we do not expect a break below that very fast but overall a strong break below 1.2500 should bring supports near 1.2460 and then 1.2420 and then the next target should be 1.2355. The recent support over 1.2620 was such an example. The psychological effect of 1.2500 had already started working there.

You may also check daily technical analysis of eur/usd and the weekend eurusd forecast at ForexAbode.com.

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World Bank Downgrades Global Growth Outlook

January 18th, 2012

On Wednesday, the World Bank revised its global growth projections to reflect the deteriorating debt situation in Europe. Comprised of over 180 member countries, the World Bank predicted last June that global activity for 2012 would expand by 3.1 percent. The downgraded outlook now places global growth for 2012 at just 2.5 percent, with most of the growth slated for the emerging economies.

In fact, noted World Bank economist Justin Lin, Europe was likely already in recession and could trigger a return to the turmoil that led to the recession of 2009.

“The risk of a global freezing-up of the markets and as well as a global crisis similar to what happened in September 2008 are real,” Lin told reporters in Beijing.

The Bank of Canada agreed with the World Bank’s assessment of the situation in Europe saying on Wednesday that Europe will likely be in recession for most of 2012. The Bank also said it expected the impact will cost the Canadian economy about $10 billion due not only to lost export sales, but also a general decline in world-wide investor confidence and the impact this will have on global markets.

In November, the Federal Reserve likewise revised downwards its outlook for 2012. The Fed predicted that growth would expand by only 2.5 to 2.9 percent compared to its earlier view of between 3.3 and 3.7 percent. News of a more positive nature came in the form the Fed’s “Beige Book” which showed that for seven of the twelve regions surveyed, the last quarter of 2011 ended on a more upbeat note compared to the year before.

Despite the year-over-year gains, the recovery is still being held in check by two significant forces; a still-depressed housing market and stubbornly-elevated unemployment rate.

The longer-term view provides little optimism for a quick fix for either predicament. As a result, the Fed remains committed to its low-interest rate policy that will see the Federal Funds rate capped at 0.25 percent until mid-way through 2013.

Greece Close to Deal with Creditors

One hopeful sign from Europe is the latest news suggesting that Greece could be close to inking a deal with its major bond holders. Late last year, a committee made up of thirty-two of Greece’s private creditors was formed to lead the negotiations to set the guidelines for addressing about 200 billion euros ($254.6 billion) in debt due to mature in the first half of 2012.

An agreement reached Oct. 26^th of last year called for these soon-to-expire bonds to be swapped for new bonds with a significantly discounted face value expected to be about half of the original par value. Discussions are now said to be centered on the interest rate these new bonds will pay; insiders expect the annual interest rate will be between 4 and 5 percent with 20 to 30 year maturity dates.

Foreign currency markets reacted positively to the news of a potential agreement with the euro gaining half a percent on the dollar yesterday. The euro gained another 0.9 percent by early afternoon in New York rising to a 12-day high of $1.2853.

Scott Boyd is a currency analyst and a regular contributor to the OANDA MarketPulse FX blog

Categories Forex Market News & Analysis
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