Month: October 2012

By MoneyMorning.com.au

In 1966 England won the football (soccer) World Cup.

It was the first, and so far, only time that the birthplace of association football has won a major soccer tournament (England’s 54 British Home Championships don’t count as a major tournament).

But aside from the excitement of the win, a hat-trick from forward Geoff Hurst and a disputed line-ball goal, one of the most memorable moments is the commentary from the BBC’s Kenneth Wolstenholme.

With England leading three goals to two and only seconds left in the match, Wolstenholme said the immortal words:

‘And here comes Hurst, he’s got…some people are on the pitch, they think it’s all over [Hurst scores]. It is now.’

The argument over whether the Aussie resources boom is over has been going on since the world economy almost collapsed in 2008. Since then you’ve seen analysts, economists and commentators running on to the pitch…thinking the boom was over.

Fortunately for the Aussie economy, the resources boom wasn’t over. But, now in October 2012, if our old pal Dan Denning is right, it is now…

As Dan told your editor this morning over a coffee and a slice of carrot cake:

‘After going through a 20-year economic boom without a recession, Australia doesn’t have much to show for it. Federal government debt of $250 billion. A federal budget deficit of nearly $40 billion. And every month this year the Aussie trade deficit has been in the red. And yet the Aussie stock market is at a one-year high. Aussie investors should be worried.’

In short, Dan says the Aussie resources boom is over. The time when you could buy any old two-bit mining stock and see the price climb three-, four-, or five-fold is over.

Of course, we’re not saying you can’t make any money from the stock market. What we’re saying is that you’ll have to be far more selective of the stocks you back and the stocks you avoid.

Dan calls it a ‘new normal’ for the Aussie economy and Aussie investors.

Dan makes a fair point. For the last goodness-knows-how-many years we’ve heard how great Aussie policymakers are. The ‘great’ Peter Costello. The ‘great’ Wayne Swan. The ‘great’ Reserve Bank of Australia governors Ian Macfarlane and Glenn Stevens.

Turns out they aren’t that great after all.

The Pub With No Beer

It turns out they were like the barman giving away drinks for free and getting praise for always having a full pub. ‘What a great businessman. He sure knows how to look after his customers.’

Only now all the beer has gone, and now everyone’s wondering why the customers aren’t turning up anymore…‘We thought he was a genius.’

The ‘great’ governors and treasurers were nothing more than barmen giving away free beer while the times were good. As the old saying goes, in a rising market everyone looks like a genius.

Of course, the real sign of a genius is how you manage your finances when everything isn’t rising.

So how do these ‘great’ leaders look now? Not so good.

Because the worst thing is – to use the pub analogy again – not only were they giving away free beer during the boom, but the free beer wasn’t even theirs. They were siphoning it off from the pub next door…otherwise known as The Taxpayer Arms.

And now the taxpayer is dry. But if the stories from overseas are anything to go by, that’s not likely to stop the politicians from squeezing every last drop from the dehydrated taxpayer.

Take these news stories from the Financial Times:

‘France’s socialist government has delivered on its pledge to make big companies and the wealthy bear the brunt of an unprecedented budget crackdown in 2013, including a 75 per cent tax band.’

And this from the same newspaper:

‘Portugal announced sweeping new tax increases in an effort to keep the country’s faltering bailout programme on track amid a powerful public backlash against increased belt-tightening.

‘The new round of what the government described as “enormous” tax rises came as Lisbon revealed it would miss this year’s recently relaxed budget deficit target by the equivalent of 1.1 percentage points if it failed to take exceptional measures.’

But Australia is different…although not so much.

European-Style Tax Rises for Australia

The Aussie government has already started raising income taxes for middle and higher earners.

The government raised the Medicare Levy Surcharge, and it brought in a Flood Levy and a Carbon Tax. Then there’s the National Disability Insurance Scheme that taxpayers will have to pay for.

And of course there’s talk the government will raise taxes on super contributions (more on this in Money Weekend on Saturday).

But all governments tax and spend. In 2001 the federal government spent $156.8 billion. In 2008 the government spent $280.1 billion. And in 2011 it spent $356.1 billion.

The economy boomed. The government took more taxes. They spent it. And what does Australia have to show for it?

The socialists and social engineers will tell you we have lots of lovely infrastructure…new hospitals…new school buildings and new roads.

But what we also have is a retiring population that’s in so much debt they need to cash in their retirement savings in order to pay it off (again, more on this in Money Weekend). That leaves them to live off the poverty-line pension.

As the Age reported yesterday:

‘Baby boomers are taking on growing debts as they approach retirement, in a trend that threatens to undermine their future savings and leave taxpayers with a hefty bill.’

While the government, bureaucrats and lobbyists got rich as the resources boom increased government coffers, those nearing retirement went further into debt. Why? Because they fell for the spin about the never-ending resources boom.

And because the governments (both Liberal and Labor) continued to tax and spend, individuals couldn’t fully fund their own retirement.

But now the boom is over. Retirees thought it might be, but they kept hearing about the 50-year resources boom. So they thought it would all be fine…and they borrowed and spent.

Now it’s coming back to bite them, and it’s about to bite the Aussie government too. If the experience of foreign governments is anything to go by, what bites the government eventually bites the taxpayer.

For Aussie investors it means getting ready for French and Portuguese style tax rises in the years to come.

Cheers.
Kris.

Related Articles

How to Make Money from the End of the Mining Boom

The Grave Mistake of Telling the Truth

The Only Winner in the Currency Wars

The Resources Boom: They Think it’s All Over…

By MoneyMorning.com.au

Do you have a mortgage? There is a 1 in 10 chance you have been tricked. We’re not sure if we can use the word ‘defrauded’ instead of ‘tricked’, although that was our first thought. The trick is the very same one played on borrowers in the US, Spain, and Greece.

And that turned out to be devastating, not only for the borrowers, but for the entire world economy.

There is something you can do right now to find out if you have fallen victim. It’s probably better to know now than learn the hard way later.

But first, credit where it’s due. Your editor didn’t uncover this disgusting development. Although we can claim to have suspected something of the sort. Instead, it is Denise Brailey of the Banking and Finance Consumer Support Association who has uncovered the dirty secret of the Australian lending industry.

For those of you who think you are informed about this, think again. Denise has discovered that the rot extends to the full-doc loan market, not just the no-doc loan market we wrote about previously.

For those who don’t know the story so far, we better start at the beginning. The climax of the tale, by the way, takes place when you finish this article and ring your bank three times.

Hopefully that hasn’t put you off reading the explanation of why you need to do so.

The No-Doc Loan Scandal

We wrote about it a few weeks ago. The story goes that bankers and mortgage brokers abused the lax lending standards that came with no-doc loans.

These were supposed to be for people who didn’t have the typical documentation you need to apply for a loan. Business owners, for example, don’t get a regular paycheque.

But anyone who couldn’t get a loan because their documentation showed they couldn’t afford it simply applied via the no-doc loan route instead. The banks provided an ABN to make it look like the applicant owned a business.

On top of that, they threw in imaginary income and assets and, as simple as that, the loan was approved.

What’s crucial to understand here is that this happened without the borrower knowing. They just knew they were getting the cash. And the lender knew they were getting the commission or bonus for doing so many deals.

The key to the mystery is the Loan Application Form (LAF). On it, a bank will include your financial information, and the loan is approved based on what’s on that form.

If bankers and mortgage brokers add on a couple of assets after you leave their office, nobody will be the wiser. But the banker will be the richer after he gets his commission.

To be clear, the borrower is the victim here. You might feel like borrowers are getting what’s coming because they borrowed too much. That’s partially true. But you might want to make the three phone calls we suggest below before you feel self-righteous about this one.

You might not be the banks’ stereotypical victim (a 98 year old lady was given a 30 year mortgage). But you may yet find yourself caught up in the mess anyway.

Apart from that, for bankers to lend to people who can’t afford it, they had to get around their own lending standards. To do that, they fiddled with the Loan Application Forms. And that, as far as we’re concerned, is document fraud.

Legally it might not be, because the LAF is an internal document. We don’t know the legal situation.

Here’s the real question: If bankers were willing to invent income, assets and dodgy documentation for no-doc loans, were they willing to do it for full-doc loans?

The Rot Runs Deep

Denise Brailey decided to find out. By her count, 10% of Australian full-doc loans are also infected with a dodgy Loan Application Form. That means you can probably count you, your family or your friends among the victims.

First things first, here is the warning Denise Brailey’s consumer association has put out:

Consumer Warning!

DO NOT BORROW: Daily revelations show that borrowing for a mortgage in particular, is extremely hazardous to your financial well-being and you risk losing everything! Until the Australian Government initiates a ROYAL COMMISSION into the banking sector, any loan you take out with any of the 36 major banks or lenders, is most likely to be fraudulent. Loan Application Forms and Service Calculator Forms (to calculate affordability) are being doctored and changed without your consent or knowledge.

Learn How To Protect Yourself Here

Source: Banking and Finance Consumer Support Association

If you want to find out whether you’ve already fallen victim to the banks tactics, here’s Denise’s hard learned advice. We wanted to reveal it to subscribers of our soon-to-be launched financial newsletter, but the faster this gets out there the better.

We asked her how to get access to a Loan Application Form and here is what she wrote back, with some edits for readability:

‘Ah yes, the key question. I recommend they do not write to the bank as it gets nowhere.

‘The trick is to phone the bank customer relations service and ask for their 11 page document known as LOAN APPLICATION FORM. (Most people only signed 3 pages when they applied!)

If there is an excuse given, for example, ‘it’s an internal document’, hang up and dial again. You might have to do this three times. Eventually, one will say yes and send it.

‘We think this is due to confusion in the bank and not set instructions with staff. Collections departments are told to say NO you cannot obtain this.’

If you’re sceptical whether this works, check out the email we received from one subscriber below. Once (or if) you do get your LAF, check the income and assets it claims you have.

The bankers most commonly artificially increase your income. They’re quite shameless about it, because they figure nobody will ever check the LAF.

There is a vast amount more to this story than we can cover. For example, Denise pointed out to the Senators on the Economic References Committee that the government is currently profiting from this behaviour, as it owns a huge amount of the dodgy mortgages.

It’s also extraordinary to hear about some of the individual victims of the practice, many of them the perfect targets for predatory lending.

In America, former investment bank Bear Stearns had some internal emails released in which it called its mortgage based investment products things that would put the Bulldogs rugby league team to shame.

Using banking terminology, it’s safe to say that Australian mortgages aren’t the only ‘sack of sh*t’ in the banking industry.

You can find out more about Denise Brailey and the Banking and Financial Services Consumer Support Association here.

Let her and Money Morning ([email protected]) know about your experiences making those phone calls.

Note that this article first ran in The Daily Reckoning. Here is some feedback we have received since:

‘Ha! My phone call with bank played out as predicted!
‘…a real reluctance! finally got it after speaking to the supervisor’s
supervisor…
‘P.T.’

‘Hi Nick,

‘I am an avid fan of your emails, but felt I should send a letter regarding the ‘three phone calls ‘ article. You can see from my email address I work for one of those 36 banks.

‘I did Home Lending for a number of years, and can say that the statements made by Denise Brailey simply don’t happen. They are the exception rather than the rule.

‘I can honestly say that throughout my years I never used any of the methods suggested by Ms Brailey. In fact there were mechanisms in place to ensure the data was accurate. If it wasn’t then it was pretty much it would cost my job if it happened a couple of times.

‘What advocacy groups like Ms Brailey’s should concentrate on doing is educate people about entering into loan contracts. I can count on one hand how many people took the time to read the contract and terms of a loan offer. I found it amazing that people would commit to huge loans without hesitation.

‘Anyway, keep up the good work. I thoroughly enjoy reading your emails.

‘Kind regards,

‘R.’

Hi,

Thank you for helping to expose the ‘low-no doc loan’ scandal in Australia. We were 64 and 75 year old pensioners when the CBA gave us a 30 year $520,000 loan. We requested a re-finance of $360,000 but they pursued us relentlessly to take on the extra figure. Our loan application form is full of errors entered by bank staff without our knowledge or consent. My husband and I are listed as stock brokers on the form (which we’re not) and I am listed as a solicitor which I’m not, the list goes on and on.

We are now unable to keep up the payments as our savings are completely depleted through mortgage repayments.

Thanks and please more exposure.

‘R. J.’

Nick Hubble
Contributing Editor, Money Morning

From the Archives…

Why This Crisis Still Has a Long Way to Run
28-09-2012 – Kris Sayce

We Said This Four Years Ago, But Nobody Would Listen
27-09-2012 – Kris Sayce

The Grave Mistake of Telling the Truth
26-09-2012 – Murray Dawes

The Mission Creep Destroying Wealth Around the World
25-09-2012 – Tim Price

He Wobbles, He Flails, He Prints
24-09-2012 – Nick Hubble

Possibly the Most Important Thing You Will Ever Read in Money Morning

By MoneyMorning.com.au

Forget the US election. The contest that you should really be paying attention to takes place this Sunday – in Venezuela.

It might not seem that important. But in fact, the outcome of this election won’t just affect the lives of people in this Latin American country.

The result could impact on the entire global economy – via the oil price.

Why Hugo Chavez Could be on the Way Out

So who are the candidates in the Venezuelan election?

In one corner, you have the current incumbent, ‘Caudillo’ Hugo Chavez. Facing him, and breathing down his neck in the polls, is Henrique Capriles, who is backed by over 30 opposition parties.

They have radically different visions of how the country should be run. Chavez wants to continue the move towards a command economy, while Capriles wants to institute market-based reforms.

Most of Latin America has spent the last two decades opening up to trade and loosening barriers to the private sector. However, under Chavez, Venezuela has gone in the opposite direction.

After taking power in 1999, Chavez started to move private firms into state control. He also went on a spending spree that was designed to shore up his political standing.

To fund this, he used the national oil company as a piggy bank, putting up taxes on the oil sector. This has been a disaster.

Starved of investment, production has fallen greatly, even against a backdrop of higher crude prices. That has helped to keep the global oil price high – Venezuela is a key oil-producing nation.

Chavez’s role in keeping the price of oil higher than it probably should be extends to the international stage.

At the moment Opec – the oil producers’ cartel – is divided into two groups.

One group thinks the priority should be to moderate prices. This isn’t because they are charitably-minded – it’s because they worry that other energy sources will take over if crude gets too dear. It’s a calculated view taken in the interests of long-term self-preservation.

But Chavez needs money now. He is firmly in the camp, alongside Iran, that reckons oil output should be cut in order to raise prices – and revenues – as quickly as possible.

However, the election, which takes place in less than a week, might change all of this.

While the campaign started with Chavez in front, Capriles has been gaining momentum. Most analysts now agree that the contest is very close.

Indeed, one survey of public opinion shows that the gap between the two is as small as 2%. And Capriles’ rallies have been drawing more crowds than those of Chavez, despite government-led disruption.

Of course, Chavez could try to rig the election anyway. There are long-standing concerns that the electoral roll, which has shot up in recent years, contains a large number of dead people, for example. The president has also put his supporters on the council in charge of counting the votes. There are even fears that he may use armed gangs to suppress any protests.

However, Capriles is an experienced politician, who has faced similar pressures when he successfully ran for positions in local and regional government. He has assembled a huge army of volunteers to monitor polling stations. While this will not cut out fraud entirely, it should make it much harder for the government to rig the vote.

So, What Happens if Chavez Loses?

Capriles has kept his cards close to his chest about his policies. However, he has made two major promises regarding the oil industry.

Firstly, he has emphasised that he will encourage foreign companies to invest in oil exploration and development. While he will not move the state oil company into the private sector immediately, he will reform it so that it is run along business lines.

In the medium term, these policies should boost output, and increase the amount of oil on the world market. More market-friendly policies would help Venezuela to exploit its oil reserves more effectively. Given that these are the second-largest in the world, behind Saudi Arabia, that could have a huge impact.

Of course, while markets are forward-looking, these reforms will still take time to affect global supply. However, Capriles’ stance on foreign policy may have more of an impact in the short-term.

He has pledged to phase out barter deals with countries such as Cuba.

This will increase the amount of oil that goes directly onto world markets. And if he drops Venezuela’s support for Iran, this will reduce support on Opec for oil production cuts, paving the way for higher production – and therefore lower prices.

In short, a Chavez victory would have little impact on the oil price – it’s expected after all. But a Capriles victory could put a dent in a market that is already jittery about slowing economic growth, and being propped up largely by fears over Iran’s nuclear ambitions.

Matthew Partridge
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek

From the Archives…

Why This Crisis Still Has a Long Way to Run
28-09-2012 – Kris Sayce

We Said This Four Years Ago, But Nobody Would Listen
27-09-2012 – Kris Sayce

The Grave Mistake of Telling the Truth
26-09-2012 – Murray Dawes

The Mission Creep Destroying Wealth Around the World
25-09-2012 – Tim Price

He Wobbles, He Flails, He Prints
24-09-2012 – Nick Hubble

How the Venezuelan Elections Could Hit the Oil Price

USDCAD’s upward movement from 0.9632 extends to as high as 0.9884. Support is now located at the lower line of the price channel on 4-hour chart, as long as the channel support holds, the uptrend could be expected to continue, and next target would be at the upper line of the channel. On the downside, a clear break below the channel support will suggest that the upward movement has completed, then further decline towards 0.9632 previous low could be seen.

Daily Forex forecast

By Central Bank News
    Iceland’s central bank held interest rates unchanged on lower-than-expected inflation in August and a slow recovery of domestic demand, but added that is is likely to raise rates in the near future.
    The Central Bank of Iceland said earlier interest rate increases in May and June, together with lower inflation, had withdrawn some of the accommodative monetary policy, which has helped support the economic recovery.
    But as this spare capacity gradually disappears, the monetary policy slack should also disappear, but the degree of future rate rises would depend on how inflation evolves, the bank said.
    “But in the absence of changes in the outlook for inflation and the economic recovery, it is likely that further interest rate increases will be needed in the near future,” the central bank said.
    Last month the International Monetary Fund (IMF) called for tighter monetary policy in Iceland to tackle inflation. Iceland’s central bank targets annual inflation of 2.5 percent.
    The bank’s benchmark seven-day collateralised lending rate was held at 5.75 percent.

    The annual inflation rate rose to 4.3 percent in September from 4.1 percent in August while the economy contracted by 6.5 percent in the second quarter from the first quarter for an annual growth rate of  0.5 percent. 
    “Recent economic indicators suggest a slower recovery of domestic demand than was forecast in August. On the other hand, risks stemming from the financial crisis in Europe have abated,” the bank said.
    Iceland was hit hard by the global financial crises, with its economy shrinking by more than 10 percent in 2009 and 2010. But in 2011 it expanded by 2.6 percent due to strong exports.
    The central bank has already raised rates three times this year, for a total increase of 100 basis points.
    At their previous meeting in August, the central bank board discussed a 25 basis points increase.
    www.CentralBankNews.info

By Central Bank News
    The central bank of Poland held its interest rate unchanged, against the expectations of financial markets, but said it would cut rates if the economy continues to contract and inflation remains low.
    The National Bank of Poland (NBP) said it held its reference rate unchanged at 4.75 percent as inflation was expected to remain above the bank’s 2.5 percent target until the end of the year even if it was expected to ease in coming months due to waning base effects and slowing demand.
    However, if fresh information, including the bank’s projection for November inflation, confirm that the economic slowdown is protracted “while the risk of an increase in inflationary pressures are limited, the Council will ease monetary policy,” the central bank said in a statement following a meeting of its Monetary Policy Council.
    Poland’s inflation rate eased in August to 3.8 percent from July’s 4.0 percent with a slight drop in inflationary expectations by both households and businesses.

    Economic growth has been slowing this year due to the impact of the euro area’s debt crises, with Gross Domestic Product expanding by an annual 2.5 percent in the second quarter, down from 3.5 percent in the first quarter and 4.2 percent in the fourth quarter.
    “In the medium term, the slowdown in economic growth will contribute to inflation returning to the target while high commodity prices in the global markets remain an upward risk to inflation decline,” the NBP said.
    The bank said data for July and August “point to a continued slowdown in economic conditions in 2012 Q3,” and data for the labour market signal a possible slowdown in the private sector.
    Economists had expected the NBP to cut rates today, reversing May’s 25 basis point increase. In February the bank cut rates by 25 basis points, with rates now at the same level as the start of 2012.
    www.CentralBankNews.info

    

By OilPrice.com

U.S. Rep. John Boehner, speaker of the House of Representatives, received nearly twice as much financial support from donors tied to the energy sector than did the next-closest recipient, a report from the National Wildlife Federation finds. The 20-page report highlights the role it says oil companies play in U.S. politics, stating energy companies are working behind the scenes on Capitol Hill to influence legislation in favour of oil, natural gas and coal policies. The NWF report finds that the current 112th U.S. Congress has voted one out of every five times against legislation drafted in favour of environmental issues.

Boehner, R-Ohio, in a press conference this week, spoke out against a stagnant unemployment climate in the United States. The U.S. Labour Department, in an early September report, showed the unemployment rate dropped slightly in August to 8.1 percent, down 0.2 percent from its July level. That’s the 43rd consecutive month, however, that the unemployment rate was above 8 percent, the longest period since World War II. The House speaker said this was a sign of President Barack Obama’s failure to lead.

On Friday, Boehner led the House of Representatives in passing the so-called Stop the War on Coal Act, a measure that would block the Environmental Protection Agency from regulating greenhouse gases. It’s unlikely to pass through the Senate.

“We’re the Saudi Arabia of coal and the president wants to shut down coal production and the use of coal in the United States so that we can export it to our economic competitors around the world,” said Boehner in a statement. It’s a jobs issue, he said.

The report from the NWF, released on the eve of the House vote, finds that Oxbow Corp., a private company focused on mining and marketing of coal, natural gas and petroleum, donated more than $80,000 to Boehner’s campaign since 2010. The NWF explains that Oxbow was founded by William Koch, whose twin billionaire brothers are among the largest corporate financiers of the U.S. Congress. According to information NWF gathered from The Center for Responsive Politics, energy companies like Oxbow gave more than $814,000 to Boehner’s campaign during the current Congress.

The NWF’s report, however, is non-partisan in its effort to showcase the energy sector’s monetary influence over U.S. politics. Sen. Joe Manchin, D-W.Va., who serves on the Senate Energy and Natural Resources Committee, ranked No. 2 on the NWF’s list. Manchin, ahead of Friday’s vote in the House, said it was clear that “the EPA has overstepped its bounds” in terms of action that could target the coal industry. Of the top 10 lawmakers listed in the NWF report, however, Manchin is the only Democrat and received $480,050 compared to Boehner’s $814,060.

The NWF states that the House of Representatives, led by Boenher and his fellow Republicans, voted 109 times since the start of 2011 to weaken environmental laws or some of the safety regulations in the oil industry.

Larry Schweiger, president and CEO of the NWF, said the report provides a “behind the curtains” look into U.S. politics.

“America has been losing ground in the climate fight, and much of this is due to gridlock within our political system,” he writes. “The resulting inertia is sustained by oil, gas, and coal companies that have spent more than a billion dollars on campaign contributions, public advertising, and lobbying in the past two years alone.”

Source: http://oilprice.com/Energy/Crude-Oil/Big-Oil-Funding-U.S.-Politics.html

By. Daniel J. Graeber of Oilprice.com

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 3 October 2012, 08:45 EDT

SPOT MARKET gold prices rallied to $1781 per ounce ahead of Wednesday’s US session, recovering from slight losses earlier in the day to stay in line with recent trading, while stock markets were broadly flat and the Euro reversed earlier gains, as analysts speculated on when and whether Spain will request a bailout.

Silver prices rose briefly above $34.90 an ounce before easing back, while other commodity prices fell and UK and German bonds gained.

“We do not, at this stage, believe that another significant up move [for gold], that is to say to the $1900 level, will be seen before further consolidation has occurred,” says Axel Rudolph, senior technical analyst at Commerzbank.

“The $1815 area may be reached, though.”

Western households grew more bullish towards gold last month, according to Gold Investor Index data published by online gold and silver exchange BullionVault Wednesday.

The Gold Investor Index, which tracks the balance between gold buyers and sellers on BullionVault’s exchange, rose to 52.5 last month, up from 52.1 in August. A figure above 50 indicates more individual buyers than sellers during the month.

September saw the European Central Bank unveil its unlimited sovereign bond buying program, Outright Monetary Transactions, while the US Federal Reserve announced an open-ended third round of quantitative easing. The Eurozone crisis also returned to the headlines.

“Private households are continuing to join the bull market,” says BullionVault head of research Adrian Ash.

“But the response by retail investors to both QE3 and the latest phase of the Eurozone crisis is more measured…than the recent price action alone might suggest.”

Gold prices are up nearly $100 an ounce since the start of September, while the US Dollar Index, which measures the Dollar’s strength against a basket of other currencies, has fallen more than 2% since August 31, the day Fed chairman Ben Bernanke hinted at QE3 during a speech at the annual Jackson Hole conference.

“Gold is just another currency,” well-known investor and newsletter publisher Dennis Gartman told CNBC Tuesday.

“It is doing well in other currency terms…I am not a gold bug. I don’t think the world is coming to an end, but I think everyone needs to own some gold.”

Dollar gold prices hit new 2012 spot market high earlier this week, touching $1791 per ounce, but have been trading in a much narrower range over the last fortnight than they were over the four previous weeks.

“We are going through a bit of a consolidation period,” says Jeremy Friesen, commodity strategist at Societe Generale.

“My suspicion is that we’ll get more monetary policy responses from other central banks as the Fed program kicks off and the ECB program starts, probably by the end of this month. That’s bullish for commodities like gold.”

“There has been no further leg up in financial markets [this week],” adds a note from Barclays.

“[This] reflects ongoing uncertainty about the timing of Spain’s formal request for an official [bailout] program and concerns about global growth.”

News agency Reuters reported yesterday that Spain could be ready to request a bailout, which would pave the way for the European Bank to buy its bonds, as early as the weekend, but this was later denied by Spanish prime minister Mariano Rajoy.

“If a news agency reports that we’ll ask for aid this weekend, there can only be two explanations,” Rajoy told reporters Tuesday.

“That the agency is right, and knows more than I do, which is possible, or that they are not right…but, if it helps, and you accept that what I say is more important than this leak, I say no [we won’t ask for a bailout this weekend].”

“The Spanish government seems to want to have its cake and eat it,” says Standard Bank analyst Steve Barrow, noting that Spain would like the ECB to buy its bonds on the open market, helping to reduce borrowing costs, but does not want to accept the strict conditionality that could come with a rescue package.

Barrow adds that Spain may actually be able to reap the benefits of a bailout while avoiding some of the drawbacks.

“Spain can opt for what we’d call bailout-lite,” he says, referring to a scenario whereby Spain enters into a more precautionary arrangement with lower conditionality but which would still be sufficient for the ECB to activate its Outright Monetary Transactions program.

“[However] the country’s poor economic and budgetary situation suggests to us that it will, indeed, be sucked towards a full bailout in the future.”

Elsewhere in Europe, Germany’s services sector fell into contraction last month, September PMI data show, while the sector for Eurozone as whole continued to contract. Britain’s services sector continued to expand, according to PMI data, but at a slower rate, with the PMI dropping from 53.7 in August to 52.2.

“Rather than clearing, the cloud of uncertainty hanging over business investment and spending got notably darker in September,” says Chris Williamson, chief economist at Markit, which produces the PMIs.

Retail sales in the Eurozone meantime rose slightly in August, data released this morning show, rising 0.1%.

China, the world’s second-biggest gold buying nation last year, saw slowing activity in its services sectors during August, according to purchasing managers index data published Wednesday. China’s non-manufacturing PMI, published by China Federation of Logistics and Purchasing, fell to 53.7, down from 56.3 in July. A figure above 50 indicates sector expansion.

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) – There are several reports to be released today, that will affect the market. The highlights of these reports are the US ADP Non-Farm Employment Change, Australian trade balance and the UK Services Purchasing Managers’ Index.

In the US, the first report will be the ADP Non Farm Employment Change. The market is expecting a reduction in the number of Americans employed in the private sector, excluding the farming industry, to reduce to 146,000 from the previous months reading of 201,000. The other report which will be released later in the US is the Institute of Supply Management Non-Manufacturing Purchasing Managers’ Index. ISM makes a monthly survey on the level of business conditions in the US, including the new orders, employment, inventories and supplier deliveries. This is an important report, and a reading below fifty indicates contraction. The market is expecting a drop from the 53.7 registered in September to, 53.4. The final major report today from US will be the Crude Oil Inventories report. This is a weekly indicator estimating the number of barrels held in inventory in the US. The market expects no change on this report.

The Euro Zone has two major reports today –the Retail sales and he Final Services PMI. Retail sales in Europe are expected to rise by 0.2 percent from the September level. The Final Purchasing Managers’ Index which rate the business conditions that include the prices, production, inventories and supplier deliveries, is expected to remain unchanged at 46 points. This is indicative of a contraction in the retail sector. A reading above fifty shows expansion.

Still in Europe, the UK will have three major reports to keep an eye on. The Services PMI, which is expected to drop to 53.1 from 53.7 the previous month. The Halifax House Price Index report, which will record an increase of 0.2 percent according to the market, and finally the Housing Equity Withdrawal report, which shows the number of home loans that are not used for buying homes or home improvements. The report is expected to show a rise to 0.2B.

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Article by AlgosysFx Forex Trading Solutions

In the previous European trading session, the Euro gained versus the US dollar on news that Spain is already getting ready to ask for financial assistance from the Euro Zone’s bailout fund. In today’s European trading exchanges, the shared currency is projected to further drop versus the Dollar as Spanish Prime Minister Mariano Rajoy denied emerging reports that Madrid is getting ready for a bailout request.

Yesterday, Rajoy said that a bailout request is not imminent, and that the central government has agreed with the regional leaders over fiscal consolidation. Uncertainties over the timing of the request are becoming the markets’ primary concern. A request for bailout is seen as positive for Spain and the Euro Zone as it would activate the new bond-buying program of the European Central Bank to lower borrowing costs. Today’s release of the Retail Sales data is likely to weigh on the shared currency as August’s print is expected to decline by 0.1 percent, from the previous month’s reading of 0.2 percent. The ECB officials are set to meet tomorrow, and are expected to keep interest rates at 0.75 percent.

Until Spain requests for financial aid, the Buck is seen to strengthen versus the shared currency as demand for safer assets is likely to increase. Thus, a short position for the Euro-Dollar pair is recommended in today’s trading exchanges.

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