Month: October 2012

By TraderVox.com

Tradervox.com (Dublin) – The sterling pound advanced against the 17-nation currency after a report from UK showed that retail sales in the country climbed more than the market was expecting. The report has been construed as a sign that the UK economy is improving. The sterling pound strengthened against the US dollar as positive retail sales report followed another report released yesterday showing that unemployment claims in the country fell in September as the payrolls improved.

Simon Smith, the Chief Economist at in London at FXPro Group Ltd, said that the data from UK indicates that there is momentum behind the economy as the market searches for evidence that the UK is recovering from recession. Smith also noted that the labor-market data released yesterday was taken as positive for the pound hence its advance against the euro and the dollar. According to the Office for National Statistics, total retail sales improved by 0.6 percent in September as compared to the 0.4 percent gain expected by economists. The gain came after falling by 0.1 percent in August. The Office for National Statistics released a report yesterday showing that jobless claims dropped by 4000 to 1.57 million, last month.

In a note to clients, Elsa Lignos, a senior currency strategist in London at Royal Bank of Canada indicated that the pound has gained marginally due to the strong retail sales adding that these are volatile data. Robert Savage, the chief strategist at FX Concepts LLC in New York, predicted that the UK currency will weaken against the US dollar as a result of structural weaknesses in the UK economy. The sterling pound advanced by 0.6 percent against the euro to trade at 81.18 pence per euro at the close of trading yesterday in London. The pound had weakened by as much as 0.8 percent against the 17-nation currency over the last couple of days.  The pound was little changed against the dollar, trading at $1.6135 after it fell yesterday by about 0.2 percent.

Disclaimer
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London Gold Market Report
from Ben Traynor
BullionVault
Friday 19 October 2012, 08:00 EDT

THE SPOT gold price traded lower to $1732 an ounce Friday morning in London, near one-month lows, while stock markets and the Euro also fell as a two-day European summit came to a close with several issues unresolved.

The gold price in Euros meantime sank to its lowest level since the end of August at €42,647 per kilo (€1326 per ounce).

Heading into the weekend, the Dollar gold price looks set for its second successive weekly fall, the first time this has happened since May.

“We hold selling by speculative financial investors responsible for the price slide,” says today’s Commodities Daily note from Commerzbank.

“In recent weeks they had strongly built up their positions and may now be seeing themselves forced to take profits given the faltering upswing.”

The silver price also fell this morning, hitting a six-week low at $32.26 per ounce. Most other commodities saw gains, with the exception of copper which sold off, while US, UK and German government bonds all rallied.

Leaders meeting at the two-day European Union summit in Brussels, which concludes today, took a step towards the creation of a single Eurozone banking supervisor Thursday.

An agreement was reached that will give the European Central Bank supervisory powers over the approximately 6,000 financial institutions in the single currency area.

Germany has previously argued that only the largest institutions should come under ECB supervision. Under the agreement, day-to-day oversight for smaller institutions will remain in the hands of national bodies, although the ECB will have powers to intervene in any bank.

There is no agreement however on the direct recapitalization of banks by the European Stability Mechanism. Leaders agreed in principle to the idea of using bailout funds to recapitalize banks in July 2011, although the creation of a single banking supervisor has since become a prerequisite for that.

Thursday’s agreement “papers over significant differences over the direct recap” one unnamed EU official told the Financial Times.

“The direct recap is going to be much more difficult.”

A French source briefed Reuters to say they expect direct recapitalization could be as early as the first quarter of next year, although a German government source told the same newswire it is “very unlikely” to happen soon.

The summit’s conclusions published Friday contained no mention of Spain or Greece.

“Here’s an idea that almost certainly wasn’t discussed at Thursday night’s European summit,” adds a story in Friday’s Wall Street Journal.

“Using countries’ gold reserves to lower the borrowing costs of Eurozone governments.”

The WSJ report refers to a proposal by the World Gold Council that some Eurozone nations could reduce bond yields if they pledged gold as collateral.

“As a real asset, the use of gold as collateral is not inflationary,” says economist Andrew Lilico in a paper by consultancy Europe Economics commissioned by the World Gold Council, “any more than would be the use of historic buildings or military equipment or islands or any other of the forms of collateral that have been proposed for distressed sovereigns.”

Although it appears the proposal was not discussed at this week’s EU summit, a draft paper on the subject has been published on the European Parliament website.

Over in India meantime, traditionally the world’s biggest source of gold demand, gold bullion imports in the final three months of the year are set to rise for the first time in six quarters following recent gains for the Rupee, Bloomberg reports.

“The appreciation in the Rupee has caused the gold price to correct from the record levels and this correction is seen as an opportunity by many to get into gold,” says fund manager Chirag Mehta at Quantum Asset Management.

“With the festival season and marriage season starting now, demand will gain further momentum.”
Gold imports could rise as high as 200 tonnes this quarter, according to All India Gems & Jewellery chairman Bachhraj Bamalwa, up from an estimated 157 tonnes in Q4 2011.

In South Africa, Gold Fields has said all but 1500 of the 15000 gold mining workers threatened with dismissal have returned to work. Those who have not have been fired.

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.

Article by AlgosysFx Forex Trading Solutions

Risk-on trades are once again presumed to debilitate the US dollar today as European leaders struck a deal toward establishing a single banking supervisor for the Euro region in the ongoing summit in Brussels. Meanwhile, economic figures in the US continue to surprise as a gauge of manufacturing inclined larger-than-expected.

Earlier today, European leaders concurred to have a new supervisor for the Euro region’s banks operational next year, a step widely seen to pave the way for the bloc’s bailout fund to inject capital directly into struggling banks. The officials stated that the legislation to create the supervisor, which will be placed under the authority of the European Central Bank, should be completed by the end of the year. Direct recapitalization of banks by the ESM is widely seen as a crucial step in resolving the crisis as it will likely ease the burden of governments with weak public finances such as Spain being unable to support their banking systems. Hailing the development, French President Francois Hollande said that the worst is over, likely seeking to reassure investors that Europe is keeping up momentum to emerge from its financial crisis.

Over to the US, factory activity in the mid-Atlantic region expanded in October, snapping five months of contraction. The Philadelphia Federal Reserve Bank reported that its business activity index inclined from -1.9 points to 5.7 points this month, exceeding forecasts of a modest rise to 1.3 points. Although both new orders and employment still contracted, the report suggests the resilience of the factory sector, which became the cornerstone of the US economic recovery. Likewise, a separate gauge of US economic activity designed to provide signals over future conditions posted a solid gain in September, recovering after a decline in August. The Conference Board reported that its index of leading indicators expanded by 0.6 percent last month after falling 0.4 percent in August. The strength stemmed from a considerable increase in building permits which climbed to a four-year high during the month.

Today, the National Association of Realtors is awaited to report that Existing Home Sales edged lower in September after reaching a two-year high in August. The annualized number of residential buildings that were sold last month is believed to have come in at 4.73 Million last month from 4.82 Million in August. Nonetheless, the report is unlikely to cast any doubt on views that the housing market has turned the corner, with low mortgage rates spurring buyers to enter the market. Likewise, builder confidence in turn has improved while home prices have elevated. Considering these developments ameliorating confidence, a long position favoring the Aussie is advised today.

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

Source: ForexYard

Yesterday, U.S. Jobless claims affected all major currencies and pairs when the Unemployment Claims came in higher than expected. Today, traders should look to continue following reports out of the EU Economic Summit as it goes into its second day. U.S. Existing Home Sales will also be released at 14:00 GMT, which will be a good indicator for trading in many currencies and commodities.

Economic News

USD – U.S. Jobless Claims Erase Greenback Gains

On Thursday, the EUR/USD held steady around 1.3100 in the afternoon trading session after data showed applications for U.S. unemployment benefits jumped to 388K in the week ending Oct. 13th, erasing gains in the greenback from the prior week, and the GBP/USD fully retraced its rally on better than expected UK Retail Sales during the London session with a beginning low of 1.6115 to reach a high of 1.6170 before declining to a low of 1.6120.

Today, look to the U.S. Existing Home Sales to be released at 14:00 GMT as a leading indicator of economic health. A better than expected result today may signal positive changes in the U.S. economy and could help the dollar in afternoon trading.

EUR – 2nd Day of EU Economic Summit

Yesterday was the first day of the EU Economic Summit. The euro hit a five-month high against the yen, 104.13, during Thursday afternoon trading, buoyed by solid demand at a Spanish bond sale and greater optimism on the global economy. Yesterday, the Swiss Franc continued its declining trend against the euro that it started about a month ago.

Today, euro traders will want to pay attention to the euro-zone German PPI and Current Account data, scheduled to be released at 6:00 GMT and 8:00 GMT, respectively. The EU Economic Summit meets all day today, for the second day, to discuss Spain, Greece, banking union, and plans for monetary and economic integration. If the EU Economic Summit suddenly voices a pessimistic note with regards to the euro-zone economic recovery, the common-currency could turn bearish during mid-day trading.

CAD – Canadian Core PPI and PPI On Tap

Canadian Whole Sales numbers were released better than expected yesterday at 0.5%. After bottoming out in the 0.9763 region Thursday morning (session low), the USD/CAD has pared its losses on the heels of economic data in both the United States and Canada, whereby regaining over 35 pips to test the 0.9800 range again during the waning stages of European trading Thursday. The EUR/CAD rose throughout Thursday trading and seeing about a 20 pip jump upward at 14:30 GMT.

Today, there are two major Canadian news releases Canadian investors should note, Canadian Core CPI and Canadian CPI, to be released at 12:30 GMT. Any better than expected Canadian data could result in the CAD recouping some of yesterday’s losses against the euro.

Crude Oil – Crude Oil Falls to $90.65

Crude Oil dropped to $90.65 a barrel in early Thursday afternoon trading, pressured by signs of a healthier supply outlook and a rise in U.S. jobless claims, offsetting Chinese data signaling stabilization in the economy of the world’s second-largest oil consumer. Then after a few hours of trading, crude oil had recouped its losses.
As for today, traders are advised to watch carefully after the leading stock markets and the major economic indicators which will be published from the U.S. and Euro-Zone, such as U.S. Existing Home Sales and EU Current Account data, in order to predict next movements in oil prices.

Technical News

EUR/USD

The EUR/USD cross has experienced a bullish trend for the past week. However, it seems that this trend may be coming to an end. For example, the weekly chart’s Stochastic Slow signals that a bearish reversal is imminent. A downward trend today is also supported by Williams Percent Range. Going short with tight stops may turn out to pay off today.

GBP/USD

The cross has experienced much bullishness in the last 2 days, and currently stands at the 1.6125 level. There is much evidence in the chart’s oscillators that supports a possible bearish correction today. This is supported by weekly chart’s Slow Stochastic. Going short with tight stops may turn out to bring big profits today.

USD/CHF

The USD/CHF cross has experienced a bearish trend for the past 2 weeks. However, it seems that this trend may be coming to an end. The Williams Percent Range of the Weekly chart shows the pair floating in the over-sold territory, indicating that an upward correction will happen anytime soon. Going long with tight stops might be a wise choice.

USD/JPY

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.

The Wild Card

DAX 30

DAX prices rose significantly in the last week and peaked at 7440.75. However, the daily charts’ RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage

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

Mark today on your calendar because it could be the most important day of the year.

This week the S&P/ASX 200 hit the highest mark since mid-2011.

And since the stock market hit the low for the year in June, stocks have rallied 14.4%. And according to the major housing indices, house prices have flattened and started to rise.

The reaction has been predictable…and yet surprising.

The usual stock market bulls have called the start of a new bull run — that’s predictable. But what has surprised us (although it shouldn’t) is the speed with which supposed contrarian commentators have flipped sides.

We guess it’s the herd mentality. When it comes down to it, most people are just too dog-scared to stand out from the crowd. They want to fit in.

You’ve probably figured out by now that we’re never in a rush to fit in anywhere. Besides, while the mainstream gets excited about China GDP, US employment numbers, and the latest Eurozone bailout, we’ll stick with the one market barometer that hasn’t failed us yet.

We’ll explain more below…

Renowned investor John Templeton is famous for buying 100 shares of 104 companies in 1939 that were trading for $1 or less. As the story goes, 34 of those companies were in bankruptcy.

Why would Templeton make those trades?

He had a simple view on buying stocks. When the stock market reaches the ‘point of maximum pessimism’, that told him it was the time to buy.

We take the same view with one of the most accurate stock market indicators we’ve seen in nearly 20 years. Only we’re not looking at market pessimism. And we’re not even looking at a group of investors.

We’re looking at the pessimism of one man…who happens to sit a few metres from us staring at a bank of trading screens.

We’re talking about our in-house trading guru, Murray Dawes.

If you’ve seen Murray’s work you’ll know he’s a naturally bearish trader. That doesn’t mean he only short sells, because he doesn’t. He buys stocks too.

But he’s really in his element when he spots a false break-out at the top of a distribution…sorry, we’ll skip the jargon. In short, when he sees the charts setting up for a short-selling opportunity, it’s like a light switches on inside his head. He shifts from a point of maximum pessimism to whirlwind of clicking and typing as he rushes to get the trades out.

Farewell to the Fair-Weather Bears

You see, for John Templeton he saw the point of maximum pessimism when the stock market had crashed and when the world was on the verge of war. At that point, few people could have imagined that stock prices would ever go up again.

But for Murray, as a short-seller, the point of maximum pessimism happens at a different point in the stock market cycle. It’s when the stock market has hit a new high point. It’s when the perma-bulls say stocks are going to the moon, and it’s when the fair-weather bears switch sides, fearing they’ve missed out and not wanting to miss out on more gains.

That’s the herd mentality we mentioned earlier.

But as we say, we don’t care much for joining herds. Not when our stock barometer yesterday reached his ‘point of maximum pessimism’…

The last time I saw Murray this pessimistic about the stock market (that is, the stock market had hit a high point) was on the 25^th of April, 2012.

At that point the stock market had gained nearly 10% in seven weeks. And once again the bulls were chattering, and again the part-time bears had switched sides.

We were this close to putting our arm around the big fella and telling him to keep his chin up.

The next day, the barometer had changed and we didn’t need to worry about consoling him. By the end of the day he had sent out five short trades and while the stock market had turned from sunshine to gloom, Murray had gone the opposite way.

Four weeks later, the stock market had fallen 10.3%.

We saw the same attitude from Murray yesterday before we left the office. It seemed like he didn’t know where the next trade was coming from. Yet as we write this note, we see the same feverish activity that we saw six months ago.

There’s only one way to sum him up; he’s like some sort of brooding genius.

Stock investors have gotten cocky. The stock market has rallied strong and investors believe this run will continue. Maybe it will, but based on what we can see, it’s nothing more than a false dawn.

Good Luck

You see the same behaviour from the housing bulls. House prices have fallen, and now that they’ve plateaued for a couple of months, the bulls have gotten cocky, and the supposed bears think this is the end of the housing crash.

Are they kidding? The housing crash isn’t even half over.

But it’s at this time when you discover the true contrarian investors. Over the past four years, there have been a whole bunch of people who didn’t see the crisis coming and yet jumped on board after the fact, claiming they predicted it all.

And now, having failed to predict the crash, they think they can predict the next rally. Good luck. It just goes to show they’ve got no idea about how markets and economies work.

We’ve got one thing to say about those people — they’re fools. For them it’s more important to be a respectable commentator and get on the TV and in the big papers, than it is to offer genuine analysis and advice (analysis the mainstream won’t screen or print).

They’re the types who believe the front page of today’s Australian Financial Review makes sense:

‘The federal Treasury is relying on a jump in the construction of houses, apartments and office buildings to keep the economy ticking over as iron ore, coal and other commodity export prices fall more sharply than it expected and investments in resource projects peak earlier than forecast.’

To call that ‘clown analysis’ is generous.

But it gives you a clue about the kind of economic nonsense and false hope that’s keeping the market going. Only after the exposure of these ridiculous fallacies will the markets truly reflect the Aussie economy.

To sum up, go ahead and buy a portfolio-full of shares if you want to…follow the herd. But we’ll stick with our stock market barometer, who has a canny knack for picking these stock market tops.

Cheers,
Kris

PS. Murray has just sent out a couple of trades and we expect him to send out a swag more in the next few days. You can take a test-drive of Murray’s service here…

From the Port Phillip Publishing Library

Special Report:
How to Make Money from the End of the Mining Boom

Daily Reckoning:
An Australian Property Boom and Bust all at Once

Money Morning:
A Back-Door Way to Invest in the Electric Car Industry

Pursuit of Happiness: Why it’s OK to Smoke, Drink and Play Frisbee

Why this Could be the Most Important Day of the Year for the Stock Market

By MoneyMorning.com.au

China’s slowdown has arrived.

The Chinese economy grew by 7.4% in the third-quarter of 2012, compared to the same time last year.

That’s the seventh quarter in a row that the pace of growth has slowed. And it’s the slowest growth seen since the first quarter of 2009 (back when the global financial system was imploding).

Yet China’s leaders don’t seem to be panicking. There’s a very good reason for that.

And as I’ll explain in a moment, this lack of panic could be very bad news for anyone betting on a huge commodities rebound…

China’s ‘unthinkable’ Economic Slowdown is Here

Once, the idea that China’s growth would slow to a mere 7.4% was unthinkable. Anything below 8% was seen as mass revolution territory.

That wasn’t just some figure plucked from thin air by bullish China analysts either. In 2010, notes Bloomberg, Premier Wen Jiabao said that the country needed 8% growth to ensure ‘basic stability of employment’. Anything lower would create ‘problems’.

It seems that’s no longer the case. There was a very interesting story on Bloomberg this week about the recruitment problems Chinese employers are having. It seems that despite the economic slowdown, staff are still hard to come by, and wages are still rising.

According to Louis Kuijs of Royal Bank of Scotland, it’s all down to the one-child policy and its impact on population growth. There simply aren’t as many new workers joining the workforce. So the slowing Chinese economy is being offset by a falling supply of workers.

Notes Bloomberg: ‘The working-age population is growing at 0.5% a year now, one-third the pace of ten years ago, Kuijs estimates. That means the benchmark [GDP] growth rate may be 7%, he said.’

However, while that might be good news for China (at least until the demographic picture deteriorates even further), it’s not such good news for anyone betting on a rampant Chinese “stimulus” package.

The Chinese Communist Party Wants a Quiet Life

Why not? Experienced China hand Jonathan Fenby thinks both the bulls and bears are wrong on China.

Jonathan points out that the most important aspect of understanding China is to understand the aims of the people who run it – the Chinese Communist Party. And their primary aim is to keep the population happy with the status quo.

That makes sense to me. The people who run China are like the rest of us – they like a quiet life. In China’s case, a quiet life involves being able to sit at the top of the civil service and cream off a lot of the money that flows through the system.

In return, you make sure anyone who wants a job can get one, and that people’s standard of living broadly keeps going up.

On the one hand, an economic stimulus package is quite useful for creating new jobs and preventing global trade from utterly collapsing. That’s what China achieved with the big stimulus in 2008/09.

Trouble is, “stimulus” is also very good at creating social inequality and inflation. It boosts asset prices, and in China, the price of property in particular. Few things irritate an up and coming younger generation more than being unable to “get on the housing ladder”.

So as far as the Chinese leadership is concerned, stimulus is a double-edged sword. If they can maintain employment rates without having to run the Chinese economy any faster, and risk boosting inflation or inequality by reflating the property bubble, they’ll be content to do that.

Also, if they can avoid splurging yet more money on shoddy infrastructure, in favour of pushing the whole “Chinese consumer” story harder, they’ll do that too.

In turn, that means that anyone betting on a big infrastructure spending push by the country to boost their own prospects – such as producers of industrial metals, or machinery providers, for example – are barking up the wrong tree.

In short, as I’ve noted before, the price of many raw materials could have a lot further to fall, almost regardless of the nature of China’s landing. And that could take a further toll on the mining sector.

However, there is one group of miners I think could actually do well from China’s slowdown: gold miners. One big problem for gold miners in recent years has been soaring costs. But if there is less demand for labour and machinery, then some of that cost pressure should ease. That would be great for profits, particularly if the price of gold also continues to rise.

John Stepek
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek

From the Archives…

The Biggest Graphite Find in Decades Comes With a Catch
12-10-2012 – Dr. Alex Cowie

Don’t be Fooled by Banker’s Remorse
11-10-2012 – Kris Sayce

Why the Australian Stock Market Could Fall 400 Points in ‘Weeks’
10-10-2012 – Murray Dawes

Why the Hunt for Strategic Minerals took me to Holden in Port Melbourne
09-10-2012 – Dr. Alex Cowie

What’s so Important about Gold?
08-10-2012 – John Stepek

The Chinese Economy’s Big-Spending Days Are Over

By Chris Vermeulen, TheGoldAndOilGuy.com

8-minute video by EWI’s Currency Specialty Service editor shows you how the Elliott wave concept of “waves within waves” allows you to find both the short- AND long-term trends.

By Elliott Wave International

In mid-July, AUD/USD, the exchange rate between the U.S. and Australian dollar (and a popular forex pair) was trading near 1.0100.

But Elliott wave analysis told EWI’s Currency Specialty Service editor, Jim Martens, to expect a big rally: all the way to 1.05, at least.

Three weeks later, AUD/USD indeed rose to that target — and then some. On August 7, AUD/USD hit a high of 1.0600 — a 400-pip rally.

There is a lot more to this story.

Watch the entire 8-minute video Jim Martens recorded for his subscribers on July 13. It’s a great lesson in using Elliott to find multiple trading opportunities at various degrees of trend.

The video also gives you a taste of the kind of analysis you get 100% free for 7 days, starting on October 17, during our special event for currency traders: Forex FreeWeek.

 

Join EWI’s Forex FreeWeek now >>

 

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By Central Bank News
    The Central Bank of Egypt kept its benchmark overnight deposit rate unchanged at 9.25 percent, saying there are still downside risks to the country’s economy and cautioned that higher food prices could threaten the outlook for inflation.
    Egypt’s inflation rate eased to 6.2 percent in September from 6.47 percent in August, mainly due to favorable base effects. The core inflation rate fell to an annual rate of 3.8 percent from 5.3 percent – the lowest level since May 2006 – but the bank was still concerned over higher global food prices.
    “It is important to underscore that if the latest pick up in international food prices proves to be persistent this would pose and upside risk to the inflation outlook along with the re-emergence of local supply bottlenecks and distortions in the distribution channels,” the bank said in a statement after a meeting of its Monetary Policy Committee.
    The central bank has kept its overnight deposit rate unchanged since November last year, when it was raised by 100 basis points.
    Egypt’s Gross Domestic Product expanded by an annual 3.3 percent in the second quarter, down from 5.2 percent in the first quarter, and the central bank said there was continued weakness in the manufacturing and tourism sectors, which suppressed signs of recovery in the construction sector.
    “Looking ahead, the current political transformation may continue to have ramifications on both consumption as well as investment decisions, adversely weighing on key sectors within the economy,” the central bank said, adding:
    “Moreover, downside risks continue to surround the global recovery on the back of challenges facing the euro area. These factors, combined, pose downside risks to domestic GDP going forward.”
     Last year Egypt’s economy expanded by only 1.8 percent as political turmoil hit tourism earnings and manufacturing. Later this month a delegation from the International Monetary Fund will be visiting Egypt to discuss a $4.8 billion loan.
    www.CentralBankNews.info