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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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Chinese & Indian Gold Demand Rising as Zero Rates “Distort” Investment Markets, “May Kill Credit”

February 2nd, 2012

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 2 Feb., 09:15 EST

The WHOLESALE-MARKET gold price slipped 0.5% from a new 8-week high in London Thursday morning, while global stock markets stalled after a 3-day rise and commodities also edged back.

The Euro fell from $1.32 on the forex market for the third time this week after chief finance minister Jean-Claude Juncker said new proposals for stemming the currency zone’s debt crisis – agreed at a summit on Monday – were “largely insufficient”.

The gold price in Euros touched €43,900 per kilo, a level breached only five times during the surge to all-time record highs of summer last year.

Beijing meantime said China’s full-year gold mining output in 2011 – all of which was bought domestically, since exports are banned – hit a record 361 tonnes, a rise of 5.9% on 2010.

China’s 2011 gold imports may have reached 490 tonnes, perhaps twice the 2010 level, according to Credit Suisse.

So far in 2012, imports of Gold Bullion to India – the world’s No.1 consumer – have been “significantly above average” reports UBS strategist Edel Tully, despite last month’s doubling of import duties.

The central bank of Vietnam said today it plans to “mobilize” private gold holdings via “credit institutions” which would effectively replace the private operations banned last year.

“For now, gold may well remain volatile,” says Dirk Wiedmann, head of investments at Rothschild Wealth Management, now running some €12 billion ($15.7bn) in client funds.

“[But] it is increasingly attractive as the only truly hard currency…[Our] large positions in gold seek to preserve and grow the real value of our clients’ wealth.”

“We can’t put $100 trillion of credit in a system-wide mattress,” says Bill Gross, founder and co-manager of the giant Pimco bond-funds group. “But [savers and creditors] can move in that direction by delevering and refusing to extend maturities and duration.”

Because interest rates cannot go down from zero, bond prices have little room to rise, says Gross, and so “Zero-bound money may kill as opposed to create credit.

“It may, as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper.”

January’s sharp rise in global stock markets, however, means that “Strategists at the biggest banks are capitulating on their bearish forecasts,” reports Bloomberg today, citing a sharp reversal in predictions and recommendations after last month’s 7% jump in emerging-economy equities.

“We have been increasing exposure to risk assets over the past six weeks,” says Andrew Cole, director of strategic policy for Baring Asset Management’s £9 billion multi-asset portfolios.

“We see a self-help cycle materialising” thanks to the European Central Bank’s long-term banking loans, Cole tells Investment Week after buying £350m in Italian government bonds.

“Italy is not going to go bust and this is our way of getting exposure to the improved liquidity.”

“We believe that the ‘risk off’ attitude of investors which took hold in the second-half of 2011 is largely over,” agrees Angelos Demaskos, chief investment officer of the £35.6 million Junior Gold Fund ($56m) at Sector Investment Managers in London to Proactive Investors earlier this week.

Anyone who “wanted to sell” junior gold mining stocks has already sold, Demaskos believes, “and there is a very strong possibility they will be re-rated to catch up with the underlying commodity.”

Over the last 12 months, Sector Investment’s Junior Gold Fund has lost 9.0% of its value, according to TrustNet.

The physical gold price has risen 29.7% in British Pound terms.

Silver bullion has risen 11.9% over the last year.

“It’s been a good month” for US silver coin demand, says Michael Kramer of authorized US Mint distributor Manfra, Tordella & Brookes, quoted by Kitco News and pointing to January as the second-strongest monthly sales of silver bullion Eagle coins on record.

Demand was “greatly” helped by the launch of new 2012 coins however, Kramer added., because “People always want the brand-new coins, so January sales are always pretty good.”

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, 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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Gold Set for Biggest Monthly Gain of C21st, But Ends January with “Lackluster” Physical Interest in Asia

January 31st, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 31 January 2012, 09:00 EST

U.S. DOLLAR gold bullion prices looked set to record their largest calendar month gain this century by Tuesday lunchtime in London.

Gold prices hit $1745 per ounce – just less than 14% up on the Dollar gold bullion price set at the last London Fix of 2011.

By this measure, January 2012 looked set to record the fourth-largest calendar month gain in the last three decades, and the biggest since September 1999, the month that saw the signing of the Central Bank Gold Agreement, which limited the sales of gold bullion by signatory central banks.

Stocks and commodities also gained Tuesday, while government bond prices dipped.

“In overnight trade in Asia, we continued to see lackluster physical interest,” says Marc Ground, commodities strategist at Standard Bank.

“[There was] even some scrap gold and silver coming to market from Japanese recyclers…nevertheless, prices held steady.”

Physical volumes on the Shanghai Gold Exchange Tuesday were down 28% on the previous day.
The first day’s trading after Lunar New Year saw “strong physical demand” on Monday, according to one gold bullion dealer in Hong Kong.

Silver bullion prices meantime hovered around $33.80 per ounce – 21.2% up on the start of January.

Industrial manufacturers meantime are set to use over 15,000 tonnes of silver in 2012 – 2.5% more than last year – according to estimates by Barclays Capital. Morgan Stanley meantime reckons investors may invest in 2000 tonnes of silver bullion via exchange traded vehicles – following net selling by such investors of 1300 tonnes last year.

“Silver got hammered [following last April's peak],” says Dan Smith, head of metals research at Standard Chartered.

“Now we’re into a phase where it will do quite well…Appeal comes from its widespread use in both industry and investment. I think it’s relatively cheap.”

“The short-term investment argument is not entirely convincing,” counters David Jollie, strategic analyst at Mitsui Precious Metals in London, citing “weak industrial demand” in places like China.

Chinese silver imports in December were 36% down on their average for the last two years, customs data cited by newswire Bloomberg show.

Here in the UK, seasonally adjusted M4, the broadest money supply measure, fell 1.4% in December – its largest one month drop since the Bank of England began recording the data in 1982. The year-on-year fall was 2.5%.

Net consumer credit in November meantime fell by £377 million – the first net drop since last January and the biggest monthly fall since the data series began in 1993.

“There is clearly a risk that credit constraints may hinder the reallocation of resources required to rebalance the economy,” Bank of England governor Mervyn King said in a speech last week, adding that “there is scope for interest rates to remain low, and, if necessary, for further asset purchases [to facilitate quantitative easing].”

Eurozone unemployment meantime hit a record high last month at 16.5 million people – with the unemployment rate at 10.4% – according to official figures published Tuesday by Eurostat.

“In many cases you find firms continuing to delay investment projects,” notes Citigroup economist Guillaume Menuet.

“For those that are still making profits, hiring is being frozen, and for those which are under pressure to hit results or losing money, job losses are becoming the only solution that they have.”

Elsewhere in Europe, banks are preparing to borrow at least €1 trillion when the European Central Bank holds its 3-Year longer term refinancing operation next month – more than twice the amount borrowed at December’s 3-Year LTRO.

Greece meantime is hoping to conclude a deal with its private sector creditors by the end of the week, Greek prime minister Lucas Papademos said Tuesday. There remained however no agreement among European leaders over what to do about the deterioration is Greece’s fiscal position.

“Greece’s debt sustainability is especially bad,” German chancellor Angela Merkel said Monday.

“You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”

At yesterday’s summit leaders agreed to accelerate the implementation of the €500 billion European Stability Mechanism, the Eurozone’s permanent bailout fund.

There was also endorsement of proposed new deficit rules – although a German suggestion that the EU appoint a budget commissioner to oversee Greece’s finance appears not to be receiving wider support.

“Surveillance of Greece’s progress is normal,” French president Nicolas Sarkozy said, “but there was never any question of putting Greece under guardianship.”

Over in the US, the Commodity Futures Trading Commission, which regulates gold futures and options trading on the New York Comex, has said it is considering new rules aimed at firms using automated and high-frequency trading systems as part of its efforts to implement the Dodd-Frank legislation on financial services.

Venezuela has completed the repatriation of 160 tonnes of gold bullion – around three quarters of its total reserves that were held in US, European and Canadian banks – newswire Dow Jones reports.

“Venezuela’s gold is now in the hands of Venezuelans, secured by Venezuelans and at the service of all Venezuelans,” said Venezuela’s central bank head Nelson Merentes.

Gold bullion makes up 71% of Venezuela’s total foreign reserves, according to figures from the World Gold Council.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

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Gold Up – Dollar Down – Japanese Intervention Talk

January 31st, 2012

Gold Up – Dollar Down – Japan Intervention Talk

Article from Forex FX 4X

Gold moved higher on Tuesday and bullion prices are set for a major monthly rise following from the the Federal Reserve pledge to maintain interest rates at close to zero levels until late 2014. This has likewise put downside pressure on the dollar as the loose monetary policy by the US Federal Reserve has market speculators positioning themselves accordingly.

The precious metal is heading towards a near 11 percent gain in January, this is the highest since a 12 percent gain in August 2011

The 61.8% Fib retrace of the previous major swing lower is situated just above the 1762 high from 2nd December and is an area of potential resistance on the move higher.

Further to this the 1800 area previously gave major resistance and a subsequent drop down to the 1530 level.

With regards to the USDX. There is a technical area of confluence between 78.20 – 78.30 which has 38.2 Fibonacci and 50% retrace levels of the respective swings highlighted below.

Price structure historical support levels are seen at 77.89 and 76.50 which could be hit should the current USDX down trend continue. Previous resistance is noted at 79.67 with the 80.00 psych level just above.

One topic that is one the mind of many traders right now is whether the japanese will intervene on the currency markets. The chart below shows how price is moving closer to the all time lows. Jun Azumi, the Finance Minister of Japan advised yesterday that they will adopt firm steps in opposition to excessive volatility. See the USDJPY chart below.

Any information or views found in this post are provided for educational reasons and do not in any way represent investment advice. The article author doesn’t guarantee the accuracy or completeness of this or any other information provided. Forex-FX-4X or the post authors will not accept liability for any losses arising directly, indirectly or because of reliance on any of the trading setups or associated analysis in any way.

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31-1-12 Forex CT Video News Update & Outlook

January 31st, 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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Beijing Shoppers “Snatching Up Gold”, Germany “Failing to Learn Lessons of History” with Greek Fiscal Plan

January 30th, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Monday 30 January 2012, 09:00 EST

THE SPOT MARKET price of buying gold climbed to $1728 an ounce Monday morning London time – a slight drop from last week’s close – while stock markets, commodities and the Euro all fell and government bond prices rose as European leaders met for their latest summit in Brussels.

The cost of buying silver fell to $33.08 at one point – a 2.6% drop from where it ended last week.

Gold fell as low as $1718 per ounce Monday morning, dropping steadily during Asian trading, though this represented a loss of only 1% on Friday’s closing price.

“Everybody seemed to be expecting profit taking out of Shanghai after the two Chinese bourses came back online,” said one Hong Kong dealer.

“As far as we can see, there wasn’t much of that.”

During last week’s Lunar New Year holiday, China saw a “gold rush”, with consumers spending more on buying gold than during the 2011 festival, according to a China Daily report.

“People seem crazy about gold, snatching it up more like a cheap cabbage than such a precious metal,” it quotes Beijing resident Miao Miao.

The value of sales at two of Beijing’s top gold retailers, Caibai and Guohua, reportedly hit 600 million Yuan ($95.28 million) – a 49.7% rise on last year’s sales. The gold price in Dollars meantime rose around 25% over the same period.

The Yuan also appreciated against the Dollar over that time, gaining around 3.6%, which implies a rise in Chinese domestic gold prices of around 20%.

Despite strike action in Belgium that has brought transport to a halt, European leaders met in Brussels on Monday, where the issues of budget discipline and the Greek debt crisis were expected to dominate discussions.

“Solidarity and reliability are really coming together in this context,” German finance minister Wolfgang Schaeuble said last week.

“We are credibly addressing the problems in the affected countries…and in the meantime we have to demonstrate solidarity.”

Britain however has already walked away from the new budget treaty currently being drafted.

“To write into law a Germanic view of how one should run an economy and that essentially makes Keynesianism illegal is not something we would do,” one British official told newswire Reuters.

Denmark, which does not use the Euro, has negotiated a concession that fines imposed on a country that breaches new deficit rules would only go into the Eurozone bailout fund if the fined country were a Eurozone member – otherwise they will go to the European Union’s general budget.

Greece meantime has rejected a German proposal that an EU budget commissioner should have power over Greek taxes and spending.

“I think it’s wrong that money from the EU’s structural development fund is being spent on bicycle stands,” German foreign minister Guido Westerwelle said on Friday, arguing that EU funds are being squandered.

The proposed budget commissioner would have the power to veto any decisions that were not consistent with targets set by Greece’s international creditors.

“I would rather resign as a minister than allow anybody to tell us the way we should be spending our money,” Greece’s culture minister Pavlos Yeroulanos told the BBC.

Greek finance minister Evangelos Venizelos said the proposal “ignores some key historical lessons”.
‘Nein! Nein! Nein!’ said the front page of Greek tabloid Ta Nea on Monday, which showed a picture of German chancellor Angela Merkel as a puppeteer, with the map of Greece depicted as a marionette.

Ahead of Monday’s EU summit, there was still no news of a voluntary agreement between the Greek government and private holders of its debt over how that debt should be restructured and how large should be the losses private sector bondholders take.

Greece needs to its second bailout, worth €130 billion, to be approved if it is to meet €14.5 billion of maturing bond payments on March 20.

Eurozone economic confidence meantime rose for the first time since March last year, according to the European Commission’s economic sentiment indicator.

“The outlook for economic growth in Europe in 2012 is not a healthy one,” warns Ian Scott, London-based chief global strategist at Nomura.

“Nevertheless, even a recession in the Euro area, and very slow growth elsewhere, is unlikely to be sufficient to undermine the market if governments and central banks are able to stabilize sovereign spreads and lessen the immediate tail risk of a messy sovereign default.”

Over in New York, the difference between bullish and bearish futures and options contracts held by Comex traders for selling and buying gold – the so-called speculative net long – rose for the third week in a row in the week ended last Tuesday, according to the latest data from the Commodity Futures Trading Commission.

“The change in the net position was largely the result of speculative longs being added,” notes Standard Bank commodities strategist Marc Ground.

“Net spec length is still far off Q3 2011 levels,” adds a note from precious metals consultancy VM Group.

“[This suggests] further moves higher are likely should sentiment remain bullish.”

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

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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

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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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“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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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

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Gold Ignores Indian Tax Hike, Rises “Because of China” as Stocks & Commodities Jump

January 17th, 2012

London Gold Market Report
from Adrian Ash
BullionVault
Tues 17 Jan., 08:45 EST

The WHOLESALE MARKET gold price reached new 5-week highs as Asian trade ended and London opened on Tuesday, while global stock markets and commodity prices also rose after stronger-than-expected growth data from China.

The world’s second-largest economy, China reported annual growth of 8.9% for the end of 2011 – the weakest level since mid-2009 but stronger than analysts forecast and almost 5 times the pace of US growth at last count.

The Shanghai Composite stock index jumped 4.2%. Copper led base metal prices by rising 2.6%.

Silver bullion re-touched last week’s 2-month high above $30.50 per ounce, despite news of a sharp hike in Indian import duty which also affects gold.

The gold price peaked on Tuesday mornng at $1667 per ounce, more than 9.4% above the 5-month low touched in late December.

US crude oil contracts jumped back to $100 per barrel after Saudi oil minister Ali al-Naimi said the Opec-cartel member is now targeting that level – “a new line in the sand” substantially above the previous “fair price” of $75 according to Standard Bank today.

“Gold price action is becoming increasingly indifferent to physical trade and far more susceptible to broader market headwinds,” says a note from Japanese conglomerate Mitsui’s London team today.

“Everything is rising because of China,” says one commodities analyst in Frankfurt to Bloomberg. “It’s general market sentiment.”

“Simply put,” reckons China economist Ting Lu at Bank of America/Merrill Lynch in Hong Kong, “Beijing will continue its policy easing which was started in mid-October, though we should not expect a big-bang stimulus.”

Beijing cut the required reserve ratio which banks must keep back from lending for the first time in three years last November, easing it back half-a-percentage point from a record 21.5%.

Analysts now expect a further two percentage-point cut in 2012, reports Reuters, “with many banking on one in the run-up to next week’s Lunar New Year holiday.”

“In terms of calendar year 2011, [gold demand from] India was ahead,” says Philip Newman, research director at Thomson Reuters GFMS, presenting the consultancy’s latest global data in London today but it does seem as though China, in terms of our data for the first half [of 2012], may just tip it.”

GFMS now forecasts a gold price peak of $2000 per ounce, sometime in 2012.

China’s domestic gold mining output – the world’s No.1, and currently subject to an export ban – rose sharply in December to end 2011 some 19% higher than 2010 at 731 tonnes, according to the National Bureau of Statistics today.

Across in India – the world’s hungriest gold consumer – the government today raised import duties on silver to 6% by value, and raised the duty on gold from 300 Rupees per 10 grams to a value tax of 2%.

That doubles the effective tax rate on gold, first deregulated as India moved away from a command economy in the early 1990s.

The gold price on the Multi Commodity Exchange (MCX) today rose almost 1% to INR27,760 per 10 grams, while shares in leading jewelry chains shed some 3%.

Over the last 12 months, the plunge in the Indian Rupee’s forex value has made the gold price rise over 10% higher than it otherwise would. Annual imports to India – which has no domestic gold mining output – declined by 9% from 2010′s record level, according to the Bombay Bullion Association.

Meantime in Europe on Tuesday, several governments including Greece and also the cross-border Stability Fund – downgraded from its “triple-A” credit rating on Monday by Standard & Poor’s – raised almost €11 billion in short-term bills, and at lower interest rates than last time of asking.

The Euro rallied 1.5¢ from last week’s 17-month low near $1.26.

The gold price rose faster, however, nudging cost of gold to Eurozone buyers above €1300 for only the second time since 8th December.

“Spot gold in Euros is about to touch the November peak at €1316.48 [per ounce],” reckons Axel Rudolph, technical analyst at Commerzbank.

“Should this level be surpassed a swift acceleration higher towards last year’s all-time high at €1359 should be seen.”

New data released Tuesday showed the pace of consumer-price inflation slowing last month across the European Union – the largest single export market for China.

Adrian Ash
BullionVault

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

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Gold Trend Forecast for 1st Quarter of 2012

January 16th, 2012

By Chris Vermeulen: www.TheGoldAndOilGuy.com

Over the past five months gold has fallen sharply and is no longer headline news which it once dominated back in 2011 when it was making new highs every day. The shiny metal has been under pressure because traders and investors started to pull some money off the table to lock in gains. Gold prices had surged so fast most advanced traders knew that final high volume surge was not sustainable. But the main reason gold topped out in my opinion was because the US Dollar index had put in a bottom and started to build a base. As we all know a rising dollar typically means lower stocks and commodity prices.

I have posted some charts below covering gold in detail using multiple time frames. The weekly which is long term, daily which is the intermediate trend and the 4 hour chart which shows gold momentum and intraday action. At the very bottom I talk about the US Dollar and what is happening with that.

Gold Weekly Long Term Trend Analysis

The weekly chart is not the most exciting time frame to follow as you will grow old watching it. That being said it is crucial for understanding the long term trend, price and volume analysis.

Below you can see that gold’s recent pullback has been a 3 wave correction, which is a normal pullback for any investment. But taking into account the rally from 2008 – 2011 I feel this pullback will have one more low put in before bottoming out. This would make for a 5 wave correction much like what happened in 2008.

Daily Chart of Gold Showing the Intermediate Trend

The daily chart allows us to see gold intra-week price action and use the 150 moving average which is my preferred daily moving average. As you can see we are getting a similar pullback as 2008 with gold now trading under the 150 MA.

I would like to see gold make another lower low in the next 2-3 months. If that happens I feel it complete the correction and trigger a strong multi month or multiyear rally in gold.

4 Hour Intraday Chart of Gold

The 4 hour chart of gold allows us to see all the intraday price action which would normally not be seen with a daily chart. It also gives us enough data to build our analysis upon.

My preferred setup for gold which I feel if happens will trigger major buying in the yellow metal. If/when we get a rally in gold would also likely mean some more economic uncertainty has entered the market either from within the USA, Europe or China…

Weekly Dollar Index Long Term Analysis

The dollar has the potential to rally to the 87 – 88 level before putting in a major top. For this to happen we will need to see the Euro crumble (both currency and countries divide) in my opinion.

If you look at the weekly chart of gold and this chart of the dollar index you will notice that gold topped when the dollar bottomed. Over the past couple year’s gold and the dollar have had an inverse relationship to each other.

With all kinds of crap about to hit the fan overseas I think it’s very possible gold will rally with the dollar. Reason being there is way more people overseas who want to unload their euro’s and with all the negative talk and doubt with the US Dollar individuals will naturally want to buy more gold.

Weekend Trend Trading Conclusion:

In short, I expect a bumpy ride for both stocks and commodities in the first quarter of 2012. With any luck gold will pull back into my price zone shaking the majority of short term traders out just before it bottoms. And we will be positioning ourselves for a strong rally buying into their panic selling.

To just touch base on the general stock market quickly. I have a very bearish outlook for stocks. If the dollar continues to rise it is very likely the stock market will fall into a bear market. So I am VERY cautious with stock at this time.

If you would like to receive my Weekly reports, updates and trading education videos each week join my free newsletter here:www.TheGoldAndOilGuy.com

Chris Vermeulen

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Gold Gains Alongside Dollar, “Clear Winner” from S&P Downgrades is Germany as “Only Bond Haven Left in Eurozone”

January 16th, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Monday 16 January 2012, 08:45 EST

U.S. DOLLAR spot gold prices climbed to hit$1647 an ounce Monday morning in London – 0.8% below last week’s high – while stock and commodity markets were broadly flat as markets absorbed Friday’s news of cuts to nine Eurozone sovereign credit ratings.

“Spot gold [however] is expected to fall to $1417 per ounce over the next three months,” warns Reuters technical analyst Wang Tao in the newswires Q1 2012 commodities outlook published Monday.

“[The] medium-term downtrend that started at the Sept. 6 high of $1,920.30 will continue.”
Spot silver rose to $30.10 per ounce – 0.9% up on Friday’s close.

The Euro meantime fell 1.8% in Monday’s Asian session – hitting its lowest level since September 2010 – before stabilizing as Europe opened. Conversely, the Dollar Index – which measures the US currency against six others – hit a 16-month high at 81.7.

Spot gold in Euros hit its highest level since December 8 at €41803 per kilo (€1300 per ounce) – 5.4% off September’s all-time high.

Ratings agency Standard & Poor’s has cut its credit ratings for nine Eurozone members, having placed fifteen members on CreditWatch negative at the start of December. S&P cited “insufficient” policy initiatives from Eurozone governments as the main driver for the decision, as well as its concern that fiscal austerity measures could prove “self-defeating”.

Those affected include France, which had its rating cut by one notch from AAA to AA+. Five others, including Germany, had their existing ratings affirmed. S&P’s move, which was announced after markets closed on Friday, leaves only three triple-A rated Eurozone members – Finland, the Netherlands and Germany. Of those, only Germany has a ‘stable’ outlook, with S&P’s outlook for the other two given as ‘negative’.

“S&P’s action has reinforced the market’s view that the only haven in the Euro region bond market is Germany,” says Peter Chartwell, fixed-income strategist at Credit Agricole in London.

“Germany comes out as a clear winner,” agrees Jacques Cailloux, chief European economist at Royal Bank of Scotland.

“The French downgrade will complicate future negotiations around fiscal integration and comes at a delicate time domestically…[Germany] will have its position at the negotiating table strengthened even further.”

“There are a lot of risks still ahead of us and we don’t think gold has priced in these risks,” reckons Societe Generale commodity strategist Jeremy Friesen, adding that S&P’s decision “is one of the incremental pushes for gold to appreciate.”

Representatives of Europe’s banks meantime are considering asking French president Nicolas Sarkozy and German chancellor Angela Merkel to try to break the deadlock in negotiations over the size of losses private sector Greek bondholders should take, after talks broke down on Friday, the Financial Times reports.

European leaders agreed last October that private sector involvement (PSI) should amount to losses of 50%. However, “some [Eurozone government] collaborators are not following that decision,” says Charles Dallara, managing director of the Institute of International Finance, which is negotiating with Greece on behalf of private sector bondholders.

Germany has long been a proponent of PSI as a key component of any Greek crisis solution. French banks meantime have the highest exposure to Greek sovereign debt of any major European banking sector, according to Reuters data.

In China meantime, protesting workers at the Sanyo electrical factory, have clashed with police in the southern city of Shenzhen, according to Chinese press reports. The protests over pay and job security are the latest to hit China’s manufacturing sector.

Last week, workers at Foxconn, which produces Microsoft’s Xbox, threatened to jump off the factory roof in a dispute over severance pay and job transfers, while production was halted at an LG Display factory last month after workers went on strike.

China’s Q4 2011 GDP figures are due to be released Tuesday, with many economists forecasting that growth will have dropped below 9% to its slowest pace since early 2009.

Here in London, representatives of the Hong Kong Monetary Authority met with UK Treasury officials today to discuss steps aimed at making London a major offshore center for Chinese currency dealing.

Demand for gold jewelry in India grew between 5% and 7% last year – and is set to grow by up to 15% in 2012 – according to Mehul Choksi, head of India’s largest jewelry retailer said Sunday.
However, dealers in India report that last week’s rise in spot gold prices has curbed demand at the start of the harvest season, which began yesterday.

The difference between bullish and bearish contracts held by noncommercial gold futures and options traders on New York’s Comex exchange – the so-called speculative net long – rose 2.7% over the week ended last Tuesday to the equivalent of 433.7 tonnes of gold bullion, ending four weeks of declines, according to the latest data from the Commodity Futures Trading Commission.

“The change in the net position was the result of speculative shorts being unwound,” says Standard Bank commodity strategist Walter de Wet.

“Although only a modest improvement this past week, the decline in short positions is encouraging. Perhaps the speculative market is becoming less apprehensive about gold’s prospects.”

Ben Traynor
BullionVault

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Gold Up On The Week – Dollar Gains From Flight To Liquidity As Fx Major Trend Continues

January 14th, 2012

Gold Strength Seen During The Week But Capped On Profit Taking

Click here for the full article: Gold strength On Flight To safety

Gold fell 1 percent during the final day of the week as the dollar gained across the board versus the other majors on a flight to liquidity. This came after the rumours regarding a potential credit downgrade associated with the euro-zone countries hit the markets. Standard & Poor’s subsequent rating downgrade of France, Austria and other nations was actually revealed as the financial markets were near to closing down for the week but even the earlier unconfirmed rumours motivated precious metal speculators to take early profits following this recent bullish upside movement for Gold. The early week price actionshould be interesting as the markets re-open on Monday as the real impact will be seen. This credit downgrade may already be priced in but the danger remains that a fresh wave of “risk off” markets could return.

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Markets “Comfortable Again with Gold”, Euro Falls After “Soft” Italian Debt Auction

January 13th, 2012

London Gold Market Report
from Ben Traynor
BullionVault
Friday 13 January 2012, 08:45 EST

SPOT MARKET Dollar gold prices dipped to $1637 an ounce Friday morning London time – a 1.4% fall from Thursday’s high – as the Euro fell against the Dollar following a successful-yet-disappointing Italian bond auction.

In contrast to Dollar gold prices, the gold price in Euros gained throughout Friday morning, hitting €41,326 per kilo (€1285 per ounce) around lunchtime.

Silver prices dipped to $29.69 – 3.3% below yesterday’s peak – while stocks and commodities were mostly flat and government bond prices gained.

“We feel the market is once again comfortable with gold,” says Scotia Mocatta’s latest technical analysis report, “but will liquidate on a break of $1605.”

Heading into the weekend, gold prices are up 1.5% in Dollar terms, while on a fortnightly basis gold is looking at a gain of 4.7%. Based on PM London Fix prices, this would be gold’s biggest two-week gain since the fortnight ended 4 November.

Italy successfully auctioned €4.75 billion of 3-Year government bonds this morning, paying an average yield of 4.83% – down from 5.62% paid at a similar auction two weeks ago.

“On the whole [however] the auction results are mixed to soft,” cautions Rabobank strategist Richard McGuire, adding they were “certainly far from the humdinger we saw in Spain yesterday.”

“It doesn’t defeat the notion that the [European Central Bank] extraordinary liquidity provisioning will support peripheral debt but it perhaps tempers expectations as to what degree these operations will support.”

ECB president Mario Draghi argued yesterday that last month’s 3-Year longer term refinancing operation – at which European banks borrowed close to €500 billion – had averted a potentially disastrous funding crisis.

“The ECB can be rightly justified in saying that the Armageddon we were facing toward the end of last year does seem to have been addressed,” reckons James Nixon, chief European economist at Societe Generale.

Speaking at a press conference following the announcement that the ECB would leave interest rates on hold, Draghi said that “the [ECB's] monetary stance is and will remain accommodative”.

“Further rate cuts,” says SocGen’s Nixon, “will only be forthcoming if, for example, we see signs of an outright credit crunch.”

The decline in the Euro in the second half of last appears to have boosted the Eurozone’s trade balance.

The 17-nation Eurozone saw its external trade surplus grow strongly in November – rising to €6.9 billion from €1.0 billion a month earlier – data published Friday by Eurostat show. However, the full 27-member European Union still ran an external trade deficit of €7.2 billion, though this was less than half that run in October.

The Euro ended December around 12% below its 2011 peak against the Dollar, and currently trades around $1.28.

“With a rate of $1.29 or $1.30 … [the Euro] is still too high,” said French president Nicolas Sarkozy back in January 2011.

Hungary – whose government debt is now rated as junk by all three major ratings agencies – must show “strong commitment” to economic reform before the International Monetary Fund will consider opening negotiations on a bailout, IMF managing director Christine Lagarde said Thursday, following a meeting with Hungarian officials.

“We fully understand and agree with the experts from the IMF,” said Tamas Fellegi, the Hungarian minister appointed to negotiate with the IMF.

Hungary’s prime minister Viktor Orban said this morning however that “there are areas where views differ significantly” between his government and the IMF.

China meantime saw its foreign exchange reserves fall to $3.18 trillion in the fourth quarter of last year, a period that included the first consecutive monthly fall (in December) since early 2009.

“The decline in foreign exchange reserves in Q4 is consistent with the sharp reversal in capital flows out of emerging markets in general and the region in particular,” reckons Andy Ji, economist at Commonwealth Bank of Australia.

The news “might also be contributing to gold’s downward movement,” reckons Standard Bank commodity strategist Marc Ground.

“This can be explained in terms of the negative effect that a slowing down in Chinese foreign-exchange reserve accumulation would have on global liquidity and the ability of governments, especially those of developed nations, to borrow.”

Copper and gold provide “the best value opportunities” for investment this year, according to a report published by Goldman Sachs on Friday.

The Goldman report also argues that there was a “wedge” between gold prices and real interest rates towards the end of last year. Short-term gold lease rates – the difference between the return on lending cash and the return on lending gold – were negative for much of 2011, falling towards the end of the year.

“Demand for US Dollars drove the gold lease rates to unprecedented negative levels as US Dollars became increasingly more valuable than gold,” the report says.

“This new demand for Dollars was mostly from European banks using the gold market to source US Dollar liquidity when their funding from the US money markets dried up, which created a significant amount of gold selling.”

Ben Traynor
BullionVault

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Gold’s Appeal “Undiminished” as China Blocks High-Yield Savings, Euro-Debt Auction Succeeds “Thanks Only” to ECB Money

January 12th, 2012

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 12 Jan., 08:55 EST

The PRICE of BOTH gold and silver hit a 1-month high in London on Thursday morning, gaining 0.9% and 2.1% respectively as world stock markets also rose, as did the single Euro currency and industrial commodities.

US, German and UK government bond prices all ticked lower, nudging yields higher, after Spain and Italy successfully auctioned €22 billion in new debt between them, and at much lower interest rates than investors demanded in December.

Dollar prices to buy gold touched $1658 per ounce. Silver extended its New Year gains to 10.0% at $30.70.

“Because gold is easy to sell, it has seen the same flight to cash that risk assets such as equities have suffered,” says Mark Dampier head of research at UK equity and fund brokerage Hargreaves Lansdown, writing in Money Marketing magazine.

However, “The attractions of gold remain undiminished…I believe the fall back in price could present a buying opportunity,” says Dampier, advising investors to consider “more risky and potentially more rewarding” exposure to gold through mining stocks.

“Clearly the uptrend [in gold] will prevail,” agrees UBS Wealth Management’s head of commodity research Dominic Schnider.

“[But] technically we are still in a consolidation period after the record high in September, and this phase will likely end in end-February or early March.”

Ending New York trade on Wednesday some 0.3% higher – and “finally closing back above its 200-day moving average at 1636″ – the rising price to buy gold means “We are more neutral now from our bearish outlook,” says Scotia Mocatta’s latest technical analysis.

Wholesale demand to buy gold in Hong Kong was “slow” overnight according to one local dealer.

“This is surprising,” says Thursday’s commodities note from Standard Bank, “given that we usually see a seasonal pick-up in physical gold demand from China ahead of the New Year celebrations” – falling earlier than usual in 2012 on January 23rd.

China meantime reported a drop in consumer-price inflation to 4.1% annually for December.

Currently offered just 3.5% annual interest on bank deposits, Chinese households were today deprived of yields of up to 9% offered by trust funds investing in short-term debt issued by banks and corporations known as commercial paper.

“We have received the phone call today, and the product has been banned,” Reuters quotes an un-named executive with a state-owned trust.

“If the notes aren’t sold to banks, it’s equivalent to moving a loan off banks’ balance sheets,” says She Minhua at Zhong De Securities.

One Chinese data provider says 17 such commercial-paper trusts were launched in 1 week in December. The China Banking Regulatory Commission reckons their total value is perhaps CNY300 billion ($48bn).

Beijing yesterday announced its 2012 targets for money-supply and bank lending growth, raising the permitted volume of new credit by 7% from 2011′s full-year total of CNY7.47 trillion ($1.18trn).

“Inflation is coming down, but there are still a lot of tailwinds and structural forces behind price rises,” says Kevin Lai at Daiwa Capital Markets in Hong Kong, speaking to Reuters and pointing to last year’s 22% rise in the China’s minimum wage.

But “China is more worried about an economic slowdown now and will continue the policy easing cycle,” says Nomura’s chief China economist Zhang Zhiwei.

Here in Europe on Thursday, both the UK and Eurozone central banks today voted to keep their interest rates on hold, and both also left their latest “extraordinary measures” on hold.

That enables the Bank of England to buy and hold a total of £275 billion ($420bn) in UK government bonds. The European Central Bank will next month repeat its unlimited offer of 3-year loans, of which commercial banks took €489 billion ($623bn) in December.

“The only reason [today's Italian and Spanish debt sale] has been taken so well is abundant ECB liquidity,” reckons strategist Michael Leister at DZ Bank in Frankfurt.

“The market seems very complacent.”

Eurozone governments “need to do their utmost” to correct fiscal deficits, said ECB president Mario Draghi at the monthly press conference following today’s interest-rate decision, adding that the 50% write-down of privately-held Greek government debt is “unique and exceptional”.

The Euro rose on Thursday, but the Pound fell to its lowest level against the Dollar since early October, helping the price to buy gold in Sterling rise to 1-month highs just shy of £1080 per ounce.

Adrian Ash
BullionVault

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