Month: June 2012

By TraderVox.com

Tradervox (Dublin) – The Australian dollar has strengthened against the US dollar after the Reserve Bank of Australian decided to lower interest rate. The advance was limited as the cut on overnight lending rate was lower than the market was expecting. The RBA decreased the interest rate by 0.25 to reach 3.5 percent, but the market was expecting a 0.5 percent decline.

The central bank had earlier made a 0.25 cut from 4.0 percent to 3.75. Analysts have said that the continued crisis in Europe might force the RBA to make further decisions on the interest rate. The New Zealand currency has held its yesterday’s gains as Asian stocks rose increasing the demand for riskier assets. According to a currency strategist, Roy Teo, of ABN Amro Private Bank in Singapore, the RBA did not meet the high expectation of the market in their rate decision but it has still caused so changes in the market and investors need to be positioned for short-covering.

The Australian dollar might bring some risk appetite in the market but only for a short time before the market start focusing on the Greece election to be held on June 17. The crisis in Italy and Spain is also expected to escalate but the market is waiting for the outcome at the G8 meeting. The Australian dollar has climbed by 0.6 percent against the greenback to exchange at 97.84 US cents. The Australian dollar had slid to eight-month low of 95.82 during trading last week.

The New Zealand dollar was high against the US dollar by 0.3 percent today to trade at 75.84 US cents. The kiwi increased as Asian stocks rose; the MSCI Asia Pacific Index of stock increased by 1.4 percent after it had declined for the last four trading days. Analysts are expecting this advance to be momentary and the Asia Pacific currencies might go back to their losing streak.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
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By TraderVox.com

Tradervox (Dublin) – There has been mixed signs in the US economic recovery and American companies are wary of this. However, hiring in the US may have increased in May after it gained the least in six months last month. According to economists keeping track of the US economy, this is a show of progress in the labor market which is good for the economy and the US dollar. A report to be released today is set to show that payrolls increased by 150,000 workers according to the market expectation after it gained by 115,000 in April.

However, analysts are claiming that there need to be a larger job and wage gain to spur a consumer spending and hiring that is needed to accelerate economic growth. But there is an impediment to this; the raging euro crisis and the slowing economic growth in emerging markets such as China and Brazil may lead American companies to limit the number of workers as they wait for evidence of growth in the US economy. Assurances from the government and the Federal Reserve may be needed to ensure that large American companies have confidence in the economy.

The Labor Department report is also expected to show that the private sector injected 164,000 jobs in the market in May after an increase of 130,000 was registered in April. If the report confirms these predictions, the total payrolls would bring a monthly average of 190,600 for the first five months of 2012 which is an increase from the 176,200 average monthly payrolls for the first five months of 2011. This might give American companies some confidence in the US economy.  The unemployment rate is expected to drop to 8.1 percent according to most analysts in the market. This is a new three-year low and will spur the dollar to finish the week and start a new month on a high against most major peers.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

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.

Source: ForexYard

The euro saw significant gains against the US dollar throughout yesterday’s trading session, as investors continue to digest last week’s disappointing Non-Farm Payrolls data. The EUR/USD moved up more than 100 pips over the course of the day, and was able to come within reach of the 1.2500 level. Turning to today, traders will want to pay attention to the US ISM Non-Manufacturing PMI. The PMI is considered an accurate gauge of economic health. Should the end result come in below expectations, it may lead to speculations that the Fed will soon initiate a new round of quantitative easing, which could weigh on the greenback.

Economic News

USD – Dollar Extends Bearish Movement

The US dollar extended its downward momentum throughout yesterday’s trading session, as weak unemployment data released last week has led to fears that the US economic recovery is losing momentum. Against the Japanese yen, the dollar briefly dropped below the psychologically significant 80.00 level during the morning session. The greenback was able to stage a slight upward correction later in the day and eventually stabilized around 78.20. The AUD/USD was up almost 100 pips during the European session yesterday, reaching as high as 0.9745, before moving downward and stabilizing around 0.9725.

Turning to today, traders will want to keep an eye on the US ISM Non-Manufacturing PMI, set to be released at 14:00 GMT. Analysts are predicting that the figure will come in around 53.6, which if true, would represent industry expansion and could help the dollar recover some of its recent losses. That being said, should the figure come in below expectations, it may cause investors to further doubt the USD’s status as a safe-haven currency and could result in additional downward movement for the greenback.

EUR – Euro Stages Upward Correction

The euro was able to move up vs. its main currency rivals throughout the day yesterday, but analysts were quick to warn that any gains may be short lived ahead of potentially significant euro-zone news set to be released later in the week. In addition to the more than 100 pip gain against the US dollar, the euro also advanced more than 50 pips against the GBP and 95 pips against the CAD. By the end of the European session, the EUR/GBP was trading around the 0.8115 level, while the EUR/CAD was at 1.2990.

Taking a look at the rest of the week, euro traders will want to pay close attention to the euro-zone Minimum Bid Rate on Wednesday followed by a Spanish bond auction on Thursday. Some analysts are predicting that the European Central Bank may cut interest rates when they meet on Wednesday. If true, it could cause the euro to come under renewed pressure. Furthermore, investors will be carefully monitoring the Spanish bond auction for clues as to the state of that country’s debt issues. Unless the auction goes smoothly, the euro could see downward movement towards the end of the week.

Gold – Gold Sees Gains amid Concerns Regarding Economic Recovery

Gold was able to largely hold onto its gains from last week during trading yesterday, as investors concerned with the pace of the global economic recovery continued to shift their funds to the precious metal. Investors are now treating gold as a safe-haven following disappointing employment data out of the US last week which resulted in the greenback tumbling. After reaching as high as $1628 an ounce yesterday morning, gold saw slight downward movement and spent most of the afternoon trading at the $1610 level.

Turning to today, traders will want to monitor what direction the USD takes. With investors concerned that the Fed is getting ready to initiate a new round of quantitative easing to stimulate growth in the US, any disappointing American news could lead to dollar losses, which could benefit gold’s status as a safe-haven and lead to additional gains for the precious metal.

Crude Oil – Crude Oil Sees Upward Movement

After weeks of steadily declines, the price of crude oil saw some upward movement during European trading yesterday. Analysts attributed the bullish movement to dollar weakness following last week’s worse than expected Non-Farm Payrolls figure. After dropping as low as $81.17 a barrel during early morning trading, the price of oil steadily increased, and eventually reached as high as $83.70.

Turning to today, oil traders will want to pay attention to the US ISM Non-Manufacturing PMI, set to be released at 14:00. Should the figure come in below expectations, the USD could come under renewed pressure which may result in oil extending its bullish movement. Typically, the price of oil increases when the dollar is weak, as the commodity becomes cheaper for international buyers.

Technical News

EUR/USD

The Williams Percent Range on the weekly chart is in the oversold zone, indicating that this pair could see upward movement in the coming days. This theory is supported by the Slow Stochastic on the same chart, which has formed a bullish cross. Going long may be the wise choice for this pair.

GBP/USD

In a sign that this pair could see an upward correction in the near future, the Relative Strength Index on the daily chart has dropped into oversold territory. Furthermore, the Williams Percent Range on the weekly chart is currently at the -90 level. Opening long positions may be a good idea for this pair.

USD/JPY

While the Williams Percent Range on the weekly chart is pointing to a possible upward correction in the coming days, most other long term technical indicators are in neutral territory. Traders may want to take a wait and see approach for this pair, as a clearer picture may present itself shortly.

USD/CHF

The Relative Strength Index on the weekly chart is approaching the overbought zone, indicating that this pair could see a downward correction in the near future. Additionally, the Slow Stochastic on the same chart appears to be forming a bearish cross. Traders will want to monitor these two indicators, as they may point to an impending downward correction.

The Wild Card

CHF/JPY

The daily chart’s Slow Stochastic has formed a bullish cross, indicating that upward movement could occur in the near future. Furthermore, the Relative Strength Index on the same chart has dropped into oversold territory. This may be an excellent time for forex traders to open long positions, as an upward correction could be forthcoming.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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.

By MoneyMorning.com.au

Kris is at home today. He claims to be taking care of a ‘sick nipper’, but we all know that he’s actually busy framing the front page of the weekend edition of the Financial Review. That’s because it features a chart of Australia’s falling house prices. Remember that such an event was once considered a ‘virtual impossibility’.

‘This transition involved lower interest rates, better-anchored inflation expectations, and increased availability of housing credit. Without some reversal of these structural changes – which is a virtual impossibility – we do not expect Australian housing prices to fall.’ – Paul Bloxham, chief economist, HSBC (formerly at the RBA)

Oops.

What’s surprising is that the housing spruikers were allowed to say things like that. Kris can’t tell his Australian Small-Cap Investigator subscribers that ‘it’s a virtual impossibility’ his beloved small-cap stocks will fall. The regulators would be up in arms. And yet the big banks came up with ridiculous ways to fool you into buying a house and paying them interest. Here’s ANZ’s chart of how house prices are meant to work:

How House Prices Are Supposed to Work

Notice how falling house prices show up nowhere in the chart? The Financial Review’s house price chart, which tracks actual prices, looks a little different. It shows falling house prices. Melbourne is down almost 9% in the past year! So will the banks be sued for misleading borrowers about the most important decision of their lives? Pah.

(Kris tells us he sent an email to the ANZ economics department last week asking if they could model a similar chart showing falling house prices. Unsurprisingly, they haven’t replied yet.)

The Downward Slope of Australian House Prices

Not that you should worry too much about all this. The Financial Review’s headline below the chart of falling house prices is optimistic. Don’t worry – the RBA’s rate cuts will save us all… Yeah right. What concerns you more? A 9% fall in your house price or a 25 basis point cut on your mortgage? And with the house price drop ‘accelerating, confounding Reserve Bank of Australia suggestions that they are stabilising,’ why wouldn’t you sell?

At least the editors of the Financial Review’s Life and Leisure magazine are on the ball. Their front page headline says ‘The Only Way is Down’. Whether they’re talking about house prices, the stock market or skiing in North America, they’re right. Given the background image of the magazine’s cover, it’s skiing that they’re referring to. But still, at least they can admit that what goes up must come down.

So what now? Is it time to buy? How will the Australian economy handle falling house prices? (Remember that America’s collapse began with falling house prices and Spain’s real estate bubble is the gorilla in the European room too.)

If you heeded Kris’ warnings about the housing bubble, congratulations. If you’re licking your lips at the thought of finally buying a house at far lower prices, there are some things you should know.

First of all, prices may have much further to go. On the downside of course. And they might not rediscover their uptrending ways for quite some time. That’s because assets that experience a bubble tend to find it very difficult to reinflate. It’s kind of like trying to blow up a balloon that popped. It just makes a rude noise.

Not that housing need be a bad buy forever. Remember though, that your time horizon for buying a house will need to be long. That’s because capital gains could be hard to come by. So, here’s our advice on the matter: the purchase of a house will have to be justified on other grounds. Don’t expect capital gains. Instead do the math on saving yourself the cost of renting, earning a good return on investment from the rental income, or the emotional pleasure of living in a house you own.

All of those are important factors you should be weighing up when buying a home, but that got lost amongst the capital gains frenzy of the past few years. We’re back to reality. Reality isn’t good or bad, it’s just real. Housing will become a place to live again, rather than something to speculate with.

Then again, we may be completely wrong about that. Maybe the new normal won’t be so normal. Maybe interest rates in Australia will be absurdly low, but people will be too scared to buy a house for fear of further price declines. That would make housing quite a profitable opportunity in terms of yield and price.

So for those of you looking for a place to live, patience is a virtue. For those of you looking for a bargain, patience is even more of a virtue.

Don’t Care About House Prices?

There’s also good news for those who aren’t interested in buying a house. That’s because Australian house prices are what explains the ridiculously high cost of living in Australia. So all sorts of costs might come down alongside house prices.

What kind of costs? Well, if shop rents fall, so will the price of their goods. If restaurant rents fall, so will the price of their beer. If office space becomes cheaper, financial newsletters will…

Ok, so you get the idea. The question is whether your wealth falls more or less than prices do. Actually, the question is how do you invest to make sure your wealth falls less than the cost of living does?

We summarised the investing strategies you should weigh up in the last weekend edition of The Daily Reckoning, the sister publication of Money Morning.

Nick Hubble
Editor, Money Morning

Related Articles

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The Slow Death of Australian House Prices

How Bad Monetary Policy Will End the Welfare State

With Falling Australian House Prices We Should Sue the Bankers

By MoneyMorning.com.au

If you followed the old stock market adage this year, and sold in May and went away, you probably feel rather relieved.

May was an awful month for stock markets, and most other ‘risk-on’ assets. Crude oil saw its worst monthly drop since 2008.

The main reason for the big drop this month is pretty clear – the eurozone crisis has managed to snowball yet again.

The bad news is that this time round, any sort of temporary eurozone resolution will be overshadowed by another looming nasty – China’s slowing economy…

Why China’s Economy Will Disappoint the Bulls

Growth in China’s manufacturing sector is slowing rapidly, according to official data. In May, the purchasing managers’ index hit a five-month low, worse than analysts had expected. A separate survey sponsored by HSBC – which pays more attention to smaller companies than the official measure – suggests it is already shrinking.

The response from the China bulls is that China will launch another stimulus of some sort to save the Chinese economy. The idea is that China’s leaders have so much power at their fingertips, that they can effectively make the Chinese economy do whatever they want it to.

Here’s a quote from Zhang Liqun, an economist with a Chinese government think tank. ‘Pre-emptive, targeted fine-tuning of macroeconomic policy has already started, especially with a series of measures to stabilise investment. As that impact is felt, the economy will stabilise,’ he tells the FT.

As we’ve noted before, this is just the same sort of reassuring waffle that we heard before the subprime crash. It’s not a million miles away from the sort of statements about Greece that we got used to seeing from eurozone officials in recent years either.

Why are intelligent investors willing to believe that China’s officials can succeed where others have failed?

Investment Stories Die Hard

As with most things, it’s all about the money. Fund managers have stories to sell. ‘You should buy stocks. You should buy my fund.’ It’s hard to make a pitch for stocks if there isn’t a cheerful story around to back up your bullish argument. So you’ve got to find one.

‘Yes, Europe is self-destructing. Yes, US growth is fragile, and stocks aren’t massively cheap. But don’t worry, because we’ve got China and Asia and all the other emerging markets. Their consumers will pick up the slack from the rest of the world. Western companies will have vast new markets to profit from. So all will be well.’

It’s a compelling story. But it’s just not that simple. As Matthew O’Brien points out in The Atlantic, government officials have admitted that banks might miss their lending target for 2012. How can this be? After all, ‘China still has a state capitalist model. The government sets targets for loans, and the banks have – until now – hit them.’

The Chinese Property Market

The problem is ‘a simple lack of demand.’ This in turn, is a side-effect of falling house prices. As O’Brien puts it, ‘popping a housing bubble – which is what China is trying to do – is usually an economic death sentence.’ The problem is that when prices fall, borrowers end up “underwater” (in other words, the collateral is no longer worth as much as the loan secured against it).

‘Underwater borrowers don’t want to borrow more until their balance sheets are right-side up, even at zero rates. That’s what happened to Japan in the 1990s. It’s what happened to [the US] in 2008.’

Some people argue that the property bubble will only affect wealthier Chinese people. Or that the Chinese don’t over-stretch themselves in the same way that Western homebuyers do.

Even if this were true – anecdotal evidence suggests that in fact Chinese people borrow plenty of money to buy property, just not through official channels – it misses the point.

Chinese Economic Growth

The key thing driving Chinese economic growth for years has been fixed asset investment – building stuff, in other words. As Patrick Chovanec points out on his blog, fixed asset investment accounts for over half of China’s GDP growth. And property investment accounts for a substantial chunk of this.

If property investment continues at the same pace as last year – in other words, if developers build as much property as they did in 2011 – ‘it could shave as much as 2.6 percentage points off real GDP growth.’

Of course, given that developers have already built too many properties, and demand is dropping off, chances are they’ll build less. And that could have a huge impact on Chinese growth. A drop of 10% in property investment ‘could bring GDP growth down to 5.3%.’

That kind of figure would really spook markets.

So What Should You Do Now?

The pattern in recent years has been that Europe has a crisis, it does something to temporarily relieve it, and markets bounce back.

The eurozone crisis is rapidly reaching another of those ‘something must be done’ points. European officials would clearly rather wait until after the Greek elections this month, crossing their fingers that a pro-austerity party will get in. But there’s no guarantee they won’t be forced to act before then.

Trouble is, any relief rally will rapidly collide with evidence that China’s economy is on the slide. So I’m not convinced that any ‘risk-on’ rally will have much staying power.

The only solution is to stay defensive for now.

John Stepek
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek (UK)

From the Archives…

How Bad Monetary Policy Will End the Welfare State
2012-06-01 – Dan Denning

The Setting Sun of the Japanese Economy
2012-05-31 – Greg Canavan

The US Dollar – The “Strongest of the Weak”
2012-05-30 – Kris Sayce

Europe’s Energy Resource Puzzle
2012-05-29 – Kris Sayce

The Market Has Crashed, But This Graphite Stock Has More Than Doubled
2012-05-28 – Dr. Alex Cowie

Why the Chinese Economy is On the Slide

By MoneyMorning.com.au

If you think that investing in times like these is difficult, you’re right. Recognising that these events happen regularly is a helpful step to sorting out your investment strategy. Do you simply wait for a lost decade to pass by before jumping into the stock market again? Is your money safe in a financial system with more than a quadrillion dollars’ worth of derivatives outstanding? Is your retirement dependent on government welfare in the midst of a sovereign debt crises?

You only have to ask yourself these kinds of questions occasionally. But when these times do come, if you have the discipline to carry out the right investment strategy you will be much better off.

But what sort of investment strategy do you use? What’s worked in the past?

Our regular haunt at the Daily Reckoning – gold – is top dog. But it’s also expensive these days. It would do well in a crisis, but it might not trend up like it has done over the last ten years. It’s still insurance against the fallibility of the political and financial system, but it doesn’t necessarily look like it has a good return baked in regardless.

So you should own some gold, but there may be better options when it comes to investing in the face of global instability.

Investment Strategy Number One

Australian Small-Cap Investigator (ASI) Kris Sayce likes to take big punts with small stakes. He reckons that certain stocks don’t really care about what the wider market or economy is doing. At least, that’s not what matters relative to the opportunity the stocks represent. Kris uncovers stories that could provide triple digit gains. Usually they involve some sort of creative destruction – where a new idea destroys an old industry or way of doing things and replaces it with something better.

The best thing about small cap speculation, apart from the returns, is that it’s a positive and hopeful experience. You don’t spend your time worrying about what the economy or ASX200 is doing. You spend your time anticipating and hoping for a whopping gain from a great business. That makes it fun.

It’s not a small-cap investor’s job to spend time lamenting the living standards of Europe. Because it doesn’t matter what Greece is doing when there are companies out there with disruptive technologies, resource opportunities and revolutionary business models – all of which add up to stock market gains.

This might be a pretty good strategy for part of your wealth in times like these. Even if you do care and worry about the big investment trends, why not try investing in assets that don’t rely on a growing economy?

Investment Strategy Number Two

Maybe you think you’ve got the world figured out. If you know exactly how the Eurozone mess will play out, how America will overcome its debt and how China will deal with its slowdown, you might want to invest in the assets that will benefit from your predictions. This is the world of macro investing. Exchange Traded Funds (ETFs) are a great weapon of choice for the macro investor. On the ASX you can find an agriculture ETF to profit from a global food shortage, currency ETFs to profit from currency wars, government bond ETFs to profit from falling interest rates, and emerging market ETFs to profit from the few booming economies left in the world.

It’s important to know the merits of ETF investing. There’s plenty of counterparty risk investing in this way. Can you be sure of what those ETFs are really up to?

Investment Strategy Number Three

If you’re sceptical about the world of finance and like things a little more clear cut, it might be a good idea to invest in the tangible things of the world – resources. Diggers and Drillers editor Dr. Alex Cowie uncovers the ASX’s best resource stocks. And many of them are aimed directly at defending against the economic trends of today – money printing and low interest rates. Recently, one of Alex’s tips was ‘the best performing stock on the market’ for the week. If you’re interested in tangible resource investments, Diggers and Drillers may be the place to start.

Remember, most companies sell an idea. A movie, fashionable clothes or financial services to make people richer… These ideas can disappear or change very quickly, along with the business selling them. But the likes of molybdenum and beryllium are very real. Not to mention copper, iron ore and so on. Investing in something tangible means stability in the face of instability. If the price of iron ore falls, is the iron ore changing or is the value of money changing? We’re not so sure about the answer, especially when central banks are willing to print money the way they do these days. But over the long term we’ll take the iron ore over paper money.

Investment Strategy Number Four

There’s one more strategy you should know about. Income investing is our favourite way of dealing with a dodgy economic environment and the poor capital gains that go with it. In the long run, it’s by far the most reliable and profitable investment strategy. But it’s got some major short term drawbacks. First of all, it’s not very sexy. The payoffs take a long time to appear.

But when they do, they are very sexy. At the After America conference we gave listeners a quick example of a way to generate 4000% dividends – turning a $10,000 investment into a $400,000 annual income stream after 15 years of patience. The example was based on a real stock and its real historical performance. But slightly more realistic assumptions for the same stock’s next 15 years came out at a 100% dividend, returning $10,000 each year to the patient buyer. Imagine raking in predictable triple digit returns every year, while your friends manage it only occasionally, when they’re lucky.

But which stocks could possibly hand out that kind of performance? We’re narrowing down our shortlist. We’ll keep you posted.

Nick Hubble
Contributing Editor, Money Morning

Publisher’s Note: This is an extract from an article that originally appeared in The Daily Reckoning Australia.

From the Archives…

How Bad Monetary Policy Will End the Welfare State
2012-06-01 – Dan Denning

The Setting Sun of the Japanese Economy
2012-05-31 – Greg Canavan

The US Dollar – The “Strongest of the Weak”
2012-05-30 – Kris Sayce

Europe’s Energy Resource Puzzle
2012-05-29 – Kris Sayce

The Market Has Crashed, But This Graphite Stock Has More Than Doubled
2012-05-28 – Dr. Alex Cowie

Best Investment Strategies For the Times Ahead

Source: ForexYard

The euro continued its upward movement in overnight trading, eventually reaching a one-week high against the US dollar. Today, traders will want to pay attention to the results of the G7 meetings, as they are expected to focus on the euro-zone debt crisis. Any positive developments could help the euro extend its recent bullish trend.

Main News for Today

US ISM Non-Manufacturing PMI-14:00
• Following last week’s disappointing Non-Farm Payrolls, investors will be watching this indicator closely
• Should it come in below expectations, it may lead to fears that the Fed will initiate a new round of quantitative easing, which could cause the dollar to extend its recent losses.

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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.

The refining director at BP caused a stir last week in Berlin when he was interpreted as saying the full version of the Nabucco natural gas pipeline was no longer an option for the consortium working in the Shah Deniz natural gas field in Azerbaijan. Wire services had reported that his statements meant Nabucco was effectively dead despite years of political maneuvering. Not so, said the European Commission, and several other players involved in the 2,149-mile project. It makes sexy headlines to sink a $10 billion ship, but there are plenty of reserves to keep Nabucco at least on standby.

By mid-May, proposals for Nabucco West, a smaller version of the original proposal, and the South East Europe Pipeline were sitting on the desk of BP’s offices in Azerbaijan. By next month, the BP-led consortium managing the second phase of the Shah Deniz natural gas field in the Caspian Sea is expected to pick one of them.

Last week, Iain Conn, chief executive officer for refining and marketing at BP, told an audience at an energy forum in Berlin that his company was examining several options to transport an estimated 10 billion cubic meters of natural gas per year to European markets. This would come from Shah Deniz 2 by 2017 to the tune of $40 billion. This natural gas designation means the so-called Southern Corridor, a network of natural gas transit projects, must be built to accommodate that volume. Any network within that corridor, he said, “must” be considered on its basis for future expansion.

The partners involved at Shah Deniz have already selected the Trans-Adriatic Pipeline for the southern route to Italy. This, he said, meant the planned Interconnector Turkey-Greece-Italy project was off the table and had “no possibility” to move forward. For markets in southeastern and central Europe, Conn said the group was examining SEEP and Nabucco West. Both had submitted their proposals to the BP-led consortium in Baku by mid-May and a decision is expected soon. SEEP, he said, was backed by Shah Deniz partners in coordination with the Bulgarian, Hungarian and Romanian governments. It meets the expansion requirement, he said, because it could be scaled up as more natural gas becomes available. Nabucco West, meanwhile, was submitted by the Nabucco international consortium based on work carried out for the original pipeline planned form the Georgia to European markets.

Does that mean Nabucco “Classic” is dead? According to some, it does. Most pipeline wonks already consider the greater Nabucco to be a thing of the past. In 2009, when Turkey, along with Romania, Bulgaria, Hungary and Austria, signed an intergovernmental agreement to build the entire pipeline, Ankara hailed it as a “historic moment.” But even then, most analysts were concerned about where the gas would come from for the pipeline. So far, Iraq, Azerbaijan and a variety of others are listed as possible suppliers for the full-scale project.

Alexandros Petersen, an adviser with the European Energy Security Initiative at the Woodrow Wilson International Center for Scholars, told me that whatever happens, it’s important to keep interest going for all of the projects involved in the Southern Corridor.

“It won’t be over once one pipeline is built,” he said.

Rumors of Nabucco’s demise are somewhat exaggerated. It’s not necessarily dead, just in hibernation.

Source: http://oilprice.com/Energy/Natural-Gas/Reports-of-Nabucco-Pipelines-Death-are-Exaggerated.html

By. Daniel Graeber of Oilprice.com

By MoneyMorning.com.au

Gold soared 4.1% on Friday – its biggest one-day jump in about 10 months.

This massive move in gold was on the back of a lousy US jobs report. I mean really lousy. Just four months ago, the US economy created 243,000 new jobs in a month. This has fallen steadily to the current pace of just 69,000.

In a country of 311 million people, 69,000 jobs don’t even touch the sides. So the unemployment rate actually climbed for the first time in a year, creeping back up to 8.2%.

Traders took one look at all this, and decided that the US Federal Reserve will have no choice but to print more money. Gold rose the last two times the US Federal Reserve did this (QE and QE2), so traders loaded up on gold in a big way to profit.

The trouble is, there’s a much bigger reason to own gold. And it could be the game-changer that sends the gold price soaring…

As you may know, I’ve been more bullish about gold than most in recent years, and I still like gold long-term.

But I think the markets are getting tunnel vision over the prospect of QE3, as if it was the only thing that mattered to the gold price.

Missing the Big Picture on the Gold Price

Gold did indeed soar 70% during the first dose of QE.

But like most drugs, its effect fades with repeat use.

The fact is that during the eight months of QE2, the gold price rose just 15%.

Seeing as the US gold price rose an average of 17% a year for the last ten years anyway, QE2 hardly even pushed gold above its yearly average.

So, should we get excited about what QE3 will do to the gold price?

Judging by the trend so far, maybe not.

But it depends on what the Fed has in store. Will they go guns blazing, and announce the mother of all printing programs? And how will they execute the program? The Fed meets on the 19-20 June, so we may not have a long wait to find out.

All year, we have seen gold rise and fall on the back of speculation about QE3. The gold price has twitched on every data release from the States. Every public word from the Fed’s Chairman, and his board members, has been analysed to speculate on what their real intentions have been.

There has been so much speculation about QE3, that the market has missed the bigger picture.

Even on last Friday’s massive jump, gold is still 4% beneath its 200-day moving average (the red line below). It’s barely back up to the 50-day moving average (blue line). The 50-day is well under the 200-day, which itself is rolling over. It’s not the rosiest gold chart I’ve ever seen.

The Gold Price – 6 Months and No Progress

More QE from the Fed could give gold a bit of zip, but it would really just be the icing on the cake.

What we really need is solid buying on the gold market.

The Hole Appearing in Gold Demand

But one of the engines of gold demand has recently started spluttering – India.

Last year India imported about 1,000 tonnes of gold – about 40% of global gold mine production. This year imports have fallen out of bed. The Bombay Bullion Association’s (BBA) own report says imports could halve this year, which would be around 500 tonnes.

I reckon they’re dreaming. Media reports suggest imports were just 15 tonnes in April. At that speed, India would import just 170 tonnes this year. That would leave 830 tonnes up for grabs. That’s a lot of gold. Any takers?

The general idea is that China will come to the rescue. We have seen some incredible jumps in Chinese imports. I feared it may slow down in April, but it soared to 67.4 tonnes.

Last year China imported 380 tonnes of gold. To mop up 500 tonnes of slack the BBA forecasts, keeping Chinese and Indian imports steady as a whole, China would have to import at least 880 tonnes this year. That’s an average of 73 tonnes a month.

That’s quite a pace, and Chinese imports between Jan and Feb were well below that.

It’s possible, and time will tell. For now, analysts interviewed by Reuters reckon China’s gold imports will be closer to 500 tonnes this year. Not that they can see into the future better than anyone else, but if they are right, there will be plenty of slack in the gold market. And that translates to more weak prices.

It’s not all bad news.

There is something on the horizon for gold potentially more important than any of this.

The Game-Changer for Gold

The Basel Committee of Bank supervision, who dream up the rules that govern banks, are looking at turning gold into a ‘Tier One’ asset.

This means the banks can carry gold as capital at 100% of its market value – instead of the current 50%.

This gives gold a huge increase in status, and effectively turns it back into money at the top level. It would also give the banks a strong reason to hold gold.

Consider that banks hold around $5 TRILLION in Tier One capital today.

Just 2.4% of this capital would absorb the ENTIRE annual output of annual gold mine production.

That’s a pretty incredible thought.

Gold turning into a Tier One asset would be a total game changer. If the bankers were incentivized to transfer even a fraction of the Tier One assets into gold, we wouldn’t need to pay much attention to Indian import levels!

A quick look through which countries are on the Basel Committee, and amongst it you will see many of the central banks from countries that are behind most of the recent buying; countries like Russia, Mexico, Turkey, and China. Note that China’s central bank buys plenty of gold – but they only report it every 5 years or so.

Other countries on the committee are those that already hold the world’s largest holdings like the US, Germany, and France.

To top it off, the Basel Committee is based in Switzerland, which has one of the largest gold bullion stashes of all countries!

You can see the committee countries all have good reason to improve the status for gold to a Tier One asset. And even more reason for the price to rise much, much higher once they are all set.

There hasn’t been much mainstream press about this – banking regulations hardly make the sexiest copy.

But if the Basel Committee gets this done, it will be the biggest reason to buy gold in years.

Dr. Alex Cowie
Editor, Diggers & Drillers

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