Month: September 2012

London Gold Market Report
from Ben Traynor
BullionVault
Monday 17 September 2012, 07:30 EDT

THE WHOLESALE cost of buying gold dipped below $1770 an ounce during Monday morning trading in London, but remained less than ten Dollars below their six-month high hit last Friday, the day after the US Federal Reserve announced a third round of quantitative easing.

Prices for buying silver fell to around $34.50 an ounce this morning – 1.3% off Friday’s high – as stocks and industrial commodities also edged lower and major government bond prices rose.

“Precious metals are for the most part defending the gains they have made in recent days,” says Commerzbank in its morning commodities note.

“Gold is still pretty bullish this week,” agrees Phillip Futures analyst Lynette Tan in Singapore.

“I think gold prices will remain firm and probably test the [$1790] high set in February…buyers are still buying gold, but it seems that profit taking may occur later.”

On New York’s Comex, the so-called speculative net long position across all gold futures and options traders – based on the difference between bullish and bearish contracts – rose to its highest level since February last Tuesday, according to weekly data published each Friday by the Commodity Futures Trading Commission.

The world’s largest gold ETF SPDR Gold Shares (GLD) meantime saw its bullion holdings climb above 1300 tonnes Friday for the first time since August last year.

“We believe the macroeconomic environment for gold is turning more constructive,” says a report from Deutsche Bank.

“We expect that the growth in supply of fiat currencies is an important driver, the low interest rate environment is likely to continue to enhance gold’s attractiveness given the negligible opportunity cost.”

Since the start of the month, both the European Central Bank and the Federal Reserve have announced open-ended stimulus measures.

The ECB said it will buy sovereign bonds on the open market “with no ex ante quantitative limits”, while the Fed said it will buy $40 billion of mortgage-backed securities each month until it sees “substantial” improvement in the US labor market, a move generally being recognized as a third round of quantitative easing (QE3).

“People will see commodities as something they want to hold, because they see these moves as inflationary,” says John Stephenson, portfolio manager at First Asset Investment Management in Toronto.

“It’s hugely bullish in the short run, now that all of the central banks seem to be singing from the same hymnal.”

“The precious [metals] complex looks rather good medium to long term,” adds a note from Swiss refiner MKS.

“But after a month and a half rise without any correction, a violent crash for both gold and silver could happen.”

Since the ECB announced its plan on September 6, the Euro has gained around 4% against the Dollar, breaching $1.30 last week for the first time since May following the Fed QE3 announcement.

“While we can easily see the Euro rising further in the next few weeks, to $1.35 or so, we still hold to a $1.15 target over the next 6-12 months,” says this morning’s note from Steve Barrow, head of G10 research at Standard Bank.

Despite recent Euro strength however, the cost of buying gold in Euros remained within 2% of its spot market all-time high during Monday morning’s trading.

European finance ministers meeting in Cyprus over the weekend agreed to postpone a decision on whether to grant Greece more time to meet its austerity commitments until late next month.

Decisions on the creation of a single European banking supervisor were also deferred.

France’s finance minister meantime has defended plans for a 75% tax rate for those who earn more than €1 million a year.

“It’s a strong, patriotic measure,” Pierre Moscovici told RTL radio.

“Those that got very rich over the past period can help in a patriotic way to turn around the country… Lowering the [national] debt is a necessary battle to have our sovereignty from the markets. I don’t want France to be a prisoner of its debt.”

French economic growth is expected to remain “considerably below 1%” next year, Bank of France governor Christian Noyer says in an interview published in Les Echos Monday.

The United States meantime is to complain to the World Trade Organization about China subsidizing car and car part manufacturing, the Financial Times reports.

“The key principle at stake is that China must play by the rules of the global trading system,” a White House spokesman said.

“When it does not, the Obama administration will take action to ensure that American businesses and workers are competing on a level playing field.”

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. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

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.

By TraderVox.com

Tradervox.com (Dublin) – Federal Reserve Chairman Ben Bernanke announced his plan to add more money in the economy to boost economic growth yesterday, pushing the dollar down to almost four-month low against the euro. As expected, the move generated concerns that the greenback will weaken. The euro looks set for another weekly gain against the greenback and the yen as risk appetite diminished the demand for safe haven currencies. The euro will make a fifth weekly gain against the yen, making this the longest stretch in over three years. The move added to the demand for Asian stocks, which advanced to the highest level since May.

Andrew Salter, a Sydney-based Strategist at Australia & New Zealand Banking Group Ltd, observed that the strong move by the Fed Chairman will make shock-waves for a considerable period of time. In a statement to the Press, the Federal Reserve Chairman Ben S. Bernanke, said that he will engage in an open-ended purchases program to expand the Central Bank’s holdings for long-term security. The third round of quantitative easing will involve mortgage debt purchases worth $40billion a month. The central bank will employ this program in combination with other policy tools to boost the labor market.

The Fed also extended its forecast for the interest rates, saying it might hold them at near zero rates through to mid-2015. This is an extension from its previous forecast of holding the low interest rate through to late 2014. Dollar’s declines against the yen were limited after Takehiko Nakao, Japan Vice Finance Minister, indicated that he Briefed the Finance Minister on the forex situation, and the Bank of Japan is preparing to sell yen on October 31, after the yen surged to post-war record of 75.35 per dollar.

The greenback is set for a 1.4 percent weekly drop against the euro as it traded at $1.2995 per euro at the start of trading in Tokyo today; it had closed the day yesterday at $1.2991, when it touched its weakest level since May 9 of $1.3002. The dollar has lost 0.9 percent against the yen this week and is trading at 77.57 yen per dollar after it dropped to 77.13, the weakest since Feb 9.

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
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Article by AlgosysFx Forex Trading Solutions

The US dollar is foreseen to halt its declines and begin the week bullishly alongside the Australian dollar today as a lone economic report from the US is deemed to disclose that factory conditions remain bleak. Likewise, demonstrations around the world linked to territorial and political issues around the globe have managed to dampen investor moods.

Today, the Federal Reserve Bank of New York is awaited to report that its Empire State Manufacturing Index remained in the negative this month. The September index gauging manufacturing conditions in the New York area is estimated to come in at -1.9 points from -5.9 points in August. Although this represents an improvement, a negative reading still suggests that factory activity failed to rebound as falling new orders, production levels and employment all take their toll on the sector. Weak consumer spending at home, steady declines in business orders for large machinery and softening demand abroad have all combined to slow factory output. Last month, the Institute for Supply Management reported that factory activity shrank for a third straight month, and today’s report suggests that September is likewise unlikely to provide a boost to economic growth. Amid another sign of the tepid US economic recovery, safe haven trades are deemed to boost the US dollar.

In political news, the Obama administration is believed to announce today that it will file trade complaints to the World Trade Organization over government subsidies for its automobile industry. One of the administration’s complaints accuses China of putting US manufacturers at a disadvantage by illegally subsidizing exports of autos and auto parts. Another complaint revolves around China supposedly imposing unfair duties on around $3 Billion in US auto exports. The complaints are seen to escalate an intensifying trade standoff between Beijing and Washington DC. Meanwhile, still in China, demonstrators protested in a dozen cities, calling for Chinese sovereignty over islands that are also being claimed by Japan. Tensions rose after Japan announced that it would purchase the islands, known as Senkaku in Japanese and Diaoyu in Chinese. This prompted the Chinese government to dispatch government vessels near the islands. With these tensions deemed to harm global trade and economy, risk-off moods are presumed to increase. Hence, a short position is advised for the AUD/USD today.

For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx

By The Sizemore Letter

Listen to Charles Sizemore discuss the Fed’s QE3 announcement on Mike Robertson’s Straight Talk About Money.

If you cannot see the embedded audio player, the track can be found here.

Related posts:

• Charles Sizemore on Straight Talk Radio
• Charles Sizemore on Straight Talk Radio
• Charles Sizemore Discusses the Crisis on Straight Talk Radio

By The Sizemore Letter

Last week, I recommended that investors embrace risk (see “Reaching for Risk? Try Emerging Markets ETF”).

European Central Bank president Mario Draghi had just pulled out all the stops, announcing that he would engage in as many “outright monetary transactions” as it took to force the yields of periphery debt to sustainable levels. Equity markets around the world rallied hard, with riskier, high-beta sectors benefitting the most.

MONETARY ARMS RACE
This week, the market-moving news came from this side of the Pond. In what you might call a monetary arms race, Fed Chairman Ben Bernanke fired a bazooka even biggest than that of Mario Draghi. Bernanke announced the Fed would be pumping $40 billion of liquidity per month into the financial system for as long as it takes until he saw an improvement in the economy.

NO BLUFFING
To use a poker analogy, the two most powerful central bankers in the world have officially gone “all in,” and they are most certainly not bluffing.

EVERYTHING RALLIES
Whether their moves make much of a difference in the real economy remains to be seen. But for investors, the new round of easing means one thing: a rally in virtually everything.
For the remainder of 2012, I believe an investor could throw a dart at the Money and Investing section of the Wall Street Journal, buy whatever security the stock landed on, and still earn a decent profit.

The last two quarters have favored staid, conservative dividend-paying stocks. While I still believe that these are the best choice for a core, long-term portfolio, I expect these to lag their junkier and higher-beta peers.

JOIN THE RISK TRADE
My recommendation? Risk it up with shares of the ProShares Ultra QQQ ETF ($QLD).
QLD is a leveraged version of the popular PowerShares $QQQ, which tracks the Nasdaq 100 index. If the QE3 rally continues to build steam, investors could see a quick 20-40% gain in this ETF.

USE YOUR STOP
Investors should be careful here. QLD is volatile, and standard risk control rules should apply. I recommend a 20-percent trailing stop.

This article first appeared on TraderPlanet.

Related posts:

• Reactions to Bernanke’s QE3

By MoneyMorning.com.au

Some pretty big names in the financial prognostication business are recommending that investors start buying [US] houses. Jim Grant has devoted lots of space in Grant’s Interest Rate Observer to the idea. Marc Faber, Donald Trump, Warren Buffett and Chris Mayer all like sticks and bricks.

Five years ago, the unthinkable began to happen. It got worse and worse. By the end, housing prices nationwide were down 35%. In some markets like Las Vegas, where I spent time as a banker, the shellacking has been much worse. The bulls figure now’s the time to buy. You know, buy low and sell high.

In a piece for The Daily Reckoning, Mr. Mayer talks about how affordable housing is in the U.S. He points to the ratio of median home price to median income. The lower the ratio, the more affordable the market.

Hong Kong is an unaffordable 12.6, while a number of U.S. cities come in at less than 2, especially in economically ravaged Michigan (maybe because these cities are bankrupt and municipal services are sketchy). But U.S. bargain hunters must steer clear of expensive Honolulu and Boulder.

“I turned bullish on U.S. housing in January 2011,” writes Mayer. “I did this after being a housing bear for about a decade. But the housing bubble that I feared has long since popped. Good bargains abound.”

Value or Value Trap?

Is housing the low-hanging fruit that Mayer and others think it is? Housing prices bounced in the first six months of this year, bolstering their case. But housing is anything but on fire. Prices are rising because resale inventory is at eight-year lows and new home inventories haven’t been this low since the Census Bureau started tracking that data, in 1963.

There are always people looking for houses, because life circumstances change. However, the only reason this tepid demand is moving the price needle at all is the lack of supply. As Nick Timiraos writes in The Wall Street Journal:

Low inventory isn’t necessarily a sign of strength. One problem is that many sellers can’t or won’t become buyers. Millions still owe more than their homes are worth, and even more — about 45% of all homeowners with a mortgage, according to data firm CoreLogic Inc. — have less than 20% in equity.

In some cases, the amount is hundreds of thousands of dollars. These folks are imprisoned by their debt. They have been told all their lives they must honor their debts no matter the cost.

They desperately keep paying to protect their precious credit rating, handing their savings and their futures over to wards of the state Fannie Mae and Freddie Mac or too-big-to-fail zombies like Wells Fargo and Bank of America.

Many homeowners naively go to their banks and try to negotiate a modification of their loan. They are stunned when the lender either ignores them or refuses to consider a rewrite if the loan is current. Eventually, many give up. But they don’t go anywhere. They just stop paying.

Bank servicers are overwhelmed and don’t file defaults for months, sometimes years. In Las Vegas alone, there are hundreds of thousands of borrowers who haven’t made a mortgage payment in years. Timiraos writes that it’s ironic that “prices are rising fastest in markets that have the most underwater borrowers because so few homes are for sale.”

The latest numbers in Las Vegas reflect an inventory that has dwindled to 3,981 units, compared with more than 11,000 a year ago. Last month, 44% of all sales were short sales. And currently, “About 85% of homes under contract are short sales waiting for lender approval,” reports Hubble Smith for the Las Vegas Review-Journal.

“We’re really struggling with inventory,” Robyn Yates of Windermere Prestige Properties in Henderson told the Review-Journal. “That’s the challenge. Even though it’s great that prices are going up, it’s not great from the perspective of real estate firms and buyers. It’s very frustrating.”

The Legal Tangle Boosting Prices

Many states have passed laws requiring that lenders provide proof they have standing to foreclose. Many can’t provide it. During the boom, most mortgages were assigned electronically through MERS (Mortgage Electronic Registration Systems). Judges like to see actual paper-and-ink assignments.

This legal tangle is keeping the market from clearing. Literally millions of homes are just waiting to be sold, foreclosed upon, or liquidated. This is not the sign of a recovering market. Instead, the clogged foreclosure pipeline artificially elevates prices.

Timiraos makes the point that mortgage rates are at historic lows. If you can qualify for the money, that is. Qualified buyers are few and far between, post crisis.

However, for those that do qualify, “Mortgage rates allow borrowers to take out about 12% more in debt without increasing their monthly payment,” writes Timiraos. This boost in sales and prices will not last once rates go back up.

And to top all of this off, wages and employment are just not growing enough to spark a rally in home prices. The only thing bringing down the unemployment percentage is people giving up on finding work. This would have been fine back in the NINJA (no income, no job, no assets) loan days. Bankers are again tightfisted.

There could come to be a time when houses are a good investment, but that day has not arrived.

Douglas French
Contributing Editor, Money Morning

Publisher’s Note: This is an edited version of an article that first appeared in Laissez-Faire Today

From the Archives…

Outright Money Transactions – Why ‘Free’ Money Costs You More
07-09-2012 – Kris Sayce

Spanish Banks are in BIG Trouble
06-09-2012 – Bengt Saelensminde

With Iron Ore Prices Falling Will Fortescue ‘Break the Buck’?
05-09-2012 – Kris Sayce

Brace Your Portfolio for a Hard Landing in China
04-09-2012 – John Stepek

Australian Resources Boom Curse…or Industrial Renaissance?
03-09-2012 – Nick Hubble

Is the US Housing Bust Over?

Source: ForexYard

The euro briefly extended its upward trend against the US dollar when markets opened last night, as risk taking continued to dominate market sentiment following last week’s announcement from the Fed of a new round of quantitative easing. The EUR/USD was able to reach as high as 1.3139 during the Asian session, before dropping back to its current level of 1.3120. Both the price of crude oil and gold were largely steady for most of the night, and currently remain near their multi-month highs.

Main News for Today

With no major news events scheduled for today, traders will want to watch out for any erratic movements among the main currency pairs and commodities, which can sometimes come as a result of low liquidity in the marketplace.

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

After the RIP-ROARING SUCCESS of the Federal Reserve’s last two efforts to kick start the US economy — by simply reinflating asset bubbles to get people spending — the wise and bearded one has gone all-in with his third round of QE (quantitative easing). In plain English it means money printing.

Or as I call it, ‘Questionable Easing‘.

The markets have been crying for it all year, and ‘QE3′ is now here.

The most important aspect of it is that it is open ended. The Fed will keep buying US$40 billion of bonds each month —until the unemployment rate falls to some unspecified level.

This makes it a very different beast to QE and QE2. And importantly, how long will it last?

What the Questionable Easing Means for the USA

I’d assume that it lasts for at least 12 months, based on previous form. But the fact is no-one knows. And what is the Fed’s unemployment target anyway? Seeing as Questionable Easing hasn’t worked so far, we could see QE3 continue in vain for years.

Why has the Fed opted for such open-ended policy? They would probably say that it gets over one issue of the past 2 rounds of QE, which was a sudden vacuum of uncertainty at the end of it. This is too volatile a business environment for anyone to make long-term decisions in.

The board members deny their plan is politically motivated, but…when was the last time hundreds of billions of dollars were spent without politics being involved?

The elections are looming, and Mitt Romney could lead the Republicans to victory. And they want Bernanke out of a job. So it looks a lot like Bernanke is putting his legacy in place: the printing presses will keep spitting out dollar bills regardless of whether he’s still Chairman, or writing his memoirs. We’ve got a suggestion for a title: How to Fix America Using Counterfeit Money.

With this nudge from the Fed (QE3), the global economy is drunkenly stumbling into a dangerous and complex future. An endless stream of cheap money coming into the market is one hell of an experiment, and will cause unforseen results.

But the effect won’t be limited to the US. It will cause monetary mayhem in other nations. During QE2, Brazil rightly accused the US of ‘Casino Capitalism’.

And as with all casinos, the key is to drive punters back into this ‘casino’, to get them giddy on the spinning dollar signs, so they start spending at the shops again. It’s all part of the Fed’s money printing policy. Last week, Bernanke said as much:

‘There are a number of different channels…for example, the prices of homes. To the extent that home prices begin to rise, consumers will feel wealthier, they’ll feel more — more disposed to spend. If house prices are rising, people may be more willing to buy homes because they think that they’ll, you know, make a better return on that purchase. So house prices is one vehicle.

‘Stock prices — many people own stocks directly or indirectly…And if people feel that their financial situation is better because their 401(k) looks better or for whatever reason — their house is worth more — they’re more willing to go out and spend, and that’s going to provide the demand that firms need in order to be willing to hire and to invest.’

I could complain at length about the criminality of this, but … you don’t want to get me started. Besides, as editor of Diggers and Drillers, my job is to think about how this affects financial markets in general and mining stocks specifically.

Commodities Rally, Some to Surge

Anyone invested in the market already will be rightly excited by the prospect of a Fed-driven rally. The old saying: ‘Don’t fight The Fed’ holds true, because the Fed’s actions are squarely aimed at forcing investors back into the market if they want yield.

In fact equities are already rallying, with some of the biggest gains coming in smaller stocks, and commodities are surging. The London Metals Exchange index was up 4.3% on Friday night alone, and is now up 13.8% in a month. Gold is up nearly 10% in a month, and silver tops the charts with a 23.4% gain in the same time.

Even iron ore is lifting its head after a recent beating, probably on the prospect of massive Chinese infrastructure spending when the government changes guard soon. As regular as a Swiss cuckoo clock, this has been the pattern in the past.

Copper has held its ground well over the last 12 months, and is looking explosive now. In fact, US Commodity Futures Trading Commission data show that copper traders’ holdings surged 25-fold — the biggest ever gain.

And after 18 months of sinking markets, small-cap indices are at bargain levels, like the Small Ords (XSO) and Emerging companies (XEC). Coupled with rising prices in shares and commodities, this is an explosive mixture for small-cap mining stocks.

So I’d be lying if I said I wasn’t very excited at the prospect of Diggers and Drillers readers doing very well in the next 12 months…despite the craziness of the Fed’s actions.

Watch Precious Metals

Gold stocks have gained more in the last week, with the Market Vectors Gold miners index (GDX) up 28% since the start of August. The gold chart is looking more bullish by the week, but is looking incredibly bullish now.

Gold’s golden cross — to herald the next 3 year long, 100% rally?

Click to enlarge

One important point in this chart is that the gold 50-day moving average (blue line) is about to cross the 200-day moving average (red line). This is the ‘golden cross’ — and is a powerful confirmation of a change of trend. We last saw this at the start of 2009 and it led to a three-year rally that saw the gold price DOUBLE.

As for silver, it has been outperforming gold two-to-one on the latest move, and I’d expect this to continue. Silver comprises a far smaller market, so is more sensitive to the kind of liquidity we are seeing now from the Fed. And don’t forget that the European Central Bank (ECB) is talking about unlimited bond purchases, which will increase the liquidity much further.

The gold to silver ratio shows how many ounces of silver it costs to buy one ounce of gold. Silver has risen so much faster than gold that this ratio has dropped from 60 to 50 already. During QE2, the ratio fell from 70 to 30, so we could have much further to go just yet. This makes this a very exciting time for silver investors.

The key is going to be how to position your trading for the coming rally. I’ve been busy all year with Diggers and Drillers tips focusing on gold, silver, oil, and strategic minerals. These should all do well, but as ever…there are always other hidden opportunities that I’ll keep looking out for.

Dr. Alex Cowie
Editor, Diggers and Drillers

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Questionable Easing 3

By Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

By Central Bank News
    The Reserve Bank of India (RBI) held its benchmark repurchase rate unchanged at 8.00 percent, as largely expected, but trimmed its Cash Reserve Ratio (CRR) by 25 basis points to 4.50 percent to help growth revive yet still maintain pressure on inflation.
     The cut in CRR will inject some 170 billion rupees into the banking system, the RBI said in its mid-quarter policy review.
    The RBI’s move comes on the heels of a flurry of reforms by the Indian government, which the central bank said had started to reverse negative sentiment. It added that steps to increase foreign direct investment should help capital inflows and productivity in the food supply chain.
    “Importantly, however, for the moment, inflationary pressures, both at wholesale and retail levels, are still strong,” the RBI said, adding: “As inflationary tendencies have persisted, the primary focus of monetary policy remains the containment of inflation and anchoring of inflation expectations.”
    In August India’s annual inflation rate rose to 7.5 percent, up from July’s 6.9 percent. The bank has said that it is comfortable with inflation of 5 percent.

    The RBI cut its repo rate by 50 basis points in April, a move it described as front-loading on expectations for fiscal policy support and supply-side initiatives. However, these expectations did not materialize and inflation did not fall significantly.
    India’s economic growth has been slowing the last two  years, and in the second quarter the economy  expanded 0.8 percent from the first quarter, for a 5.5 percent annual growth rate, only slightly improved from the first quarter’s record low of 5.3 percent.
    But the RBI said the government’s policy actions should stimulate growth and monetary policy would reinforce the positive impact of these actions while maintaining the focus on inflation.
    The RBI said global growth was weakening in the third quarter of 2012 and Europe’s weak economy poses significant downside risks to the global economy. The European Central Bank and the U.S. Federal Reserve have responded with liquidity measures.
    “While these measures have certainly mitigated short-term growth and financial risks, they will also exert pressure on global asset prices, and particularly, commodity prices,” the RBI said.
    www.CentraBankNews.info