November 2012 – Page 30 – InvestMacro Forex News

November 7, 2012

Market Review 7.11.12

The euro saw significant gains during overnight trading, as investors shifted their funds to riskier assets after it became clear the Barack Obama would be reelected as President of the United States.

Other higher yielding assets, including gold, saw gains as well. The precious metal advanced close to $17 an ounce during Asian trading, eventually reaching as high as $1726.62, before dropping back to its current level of $1722.70.

After falling more than 50 pips during overnight trading, the USD/JPY has since recouped most of its losses and is currently trading at 80.25.

Main News for Today

Greek Parliamentary Vote
• The Greek parliament is set to vote on a new package of austerity measures needed to unlock a new round of bailout funds
• The austerity measures are widely unpopular, and there is heavy pressure on elected officials to vote against them
• Should the austerity measure fail to be enacted, risk aversion could result in the euro taking heavy losses

Forget the US Election, This Stock Market Event is the One to Watch For

By MoneyMorning.com.au

The US elections have finally arrived.

I have no interest trying to add to the reams of commentary on the US election outcome. I think we all know that not much will change either way.

The American government (Republican or Democrat) will continue to spend more money than it can afford to and will pay for it with printed dollars. If any cans need kicking they will be booted by both parties until they can be kicked no more.

But what about the idea that the stock market does better depending on which party wins the White House? If you want to trade stocks on the back of the US election outcome then stop.

You should keep reading today’s Money Morning before you punt your retirement savings using that strategy…

The fact is there is no clear correlation between stock market returns and who is in the White House. You can see that in the chart below from Alliance Bernstein:

Do Stocks Care Who’s in the White House?

Click to enlarge

Source: Alliance Bernstein

But that’s not to say the US election won’t trigger a market reaction. It’s just that it won’t matter who wins.

I think the risk is to the downside after the US election, because the stock market has been pumped up by a string of better than expected data that I believe was massaged higher in order to help Obama’s prospects. That means we may see some mean reversion in the data over the next month or so.

So as far as I’m concerned the US election is a bit of a fizzer in relation to stock market direction. I’m glad it’s now almost out of the way so that we can focus on other things, such as the real canary in the coal mine — the euro.

The euro has turned back down over the past few days. The movements in the Euro are often a good proxy for the risk on/risk off trade. We have seen a strong rally in the Euro since mid-July from US$1.20 to nearly $1.32. The rally is starting to look a little tired now, having retested the downtrend from the last couple of years (see chart below).

EURUSD Daily Chart

Click to enlarge

Source: Slipstream Trader

The intermediate trend has also shifted to the downside in the last week, when the 10 day moving average closed below the 35 day moving average. There is now a fairly good chance we could see the euro trending back down towards the lows at US$1.20 over the next few months. If that occurs then we may also see equity markets coming under pressure.

The earnings season that we just witnessed in the States was certainly nothing to write home about. Many companies were massaging their future revenue projections down after seeing their top line growth fading or negative.

QE3 (money printing) has come and gone and it’s quite clear that equity markets are no longer screaming higher at the mention of money printing. The yields on stocks are now so low that you have to wonder just what value remains in buying the stock market at these levels.

There are plenty of analysts pointing at the low P/E (price to earnings) ratios of stocks currently, but the big question is whether the current projections for earnings are valid. With falling revenue projections as mentioned above I think earnings will be under pressure going forward.

The Gap Between Commodity Prices and the Aussie Dollar

On the local front, the Aussie dollar reacted positively to the lack of an interest rate cut yesterday. But as I mentioned last week there is a growing divergence between the Aussie dollar and the Continuous Commodity Index (CCI).

Commodity prices have fallen quite sharply lately but the AUDUSD is ignoring the price action. The high yields in Australia have certainly helped to prop up the Aussie dollar, but I think it’s only a matter of time until the weakness in commodities is reflected in our currency. My projections are that we will see the AUDUSD heading towards the mid-90′s over the next three to six months.

We have seen a big rally in stock markets world-wide since European Central Bank president Mario Draghi made his ‘whatever it takes’ comments about saving the euro. The usual cycle during the crisis has been for stock markets to rally on the back of hopes and promises and then slowly wake up to the reality that the promises made haven’t fixed a damn thing.

Then markets turn back down as reality dawns. When the sell-off becomes aggressive enough the central bankers and politicians are forced to wheel out another set of promises and bailouts. Then the stock markets turn back up in hope that this time it will be different.

My bet is that we’re getting fairly close to the inflection point where markets wake up to the fact that the crisis isn’t actually over. The buying pressure is still present at the moment, but the last few weeks’ price action has given a hint that the rally is getting long in the tooth.

So, what does this mean for stock traders?

Look out for a sharp sell-off in the S+P 500 once it snaps beneath the 1390-1400 area, which is currently providing strong support. It will only take one nasty night to break through and then we will see a distinct shift in momentum.

Murray Dawes
Slipstream Trader

From the Port Phillip Publishing Library

Special Report: After the Bust

Daily Reckoning:
Why Gold Hasn’t Risen

Money Morning:
A Non-Mainstream Guide to the US Presidential Election

Pursuit of Happiness:
Seven Questions to Answer Before You Retire

Forget the US Election, This Stock Market Event is the One to Watch For

November 7, 2012

Don’t Fear the Recent Gold Correction

By MoneyMorning.com.au

Over the past 28 trading days gold dropped more weight than a Jenny Craig model.

Sure, the shiny stuff can probably fit into a smaller pant size. But the bigger problem, when it comes to apparel, is the shiver this recent pullback has sent down the britches of gold bugs – indeed, gold’s US$100-move in a month is nothing to sniff at!

Today we’ll look at three possible explanations for this downward movement – and some added insight for gold’s next move…

There are plenty viable reasons why the gold price is pulling back, today we’ll cover the three most pressing…

Gold’s Technical Drop

Back on May 16th of this year the outlook for gold didn’t look good on a chart. After hitting an all-time high above $1,900 in August 2011, gold started on a descending journey – settling in May below $1,550.

From there, prices consolidated and traded in a tight window around $1,600. That’s when the recent rubber band “snapback” rally kicked in and propelled the metal towards $1,800 -hitting a high of US$1,791 just last month.

Gold prices have since pulled back.

To a chart-watcher this could signal trouble. Since hitting a high over $1,900 in 2011, gold has made three subsequent runs at the $1,800 mark. Each time failing to break above the psychological threshold (on a daily close basis).

If you look at the one-year gold chart you’d see this triple try. Each time the metal failed to break through the $1,800-mark it was punished with a subsequent $100 downturn.

Nov 2011: Rally to $1,795, subsequent drop to $1,598
Feb 2012: Rally to $1,781, drop to $1,540
Oct 2012: Rally to $1,791, drop to $1,690

Looking at the most recent downturn on a 30-day gold chart, there was a methodical stair-step lower.

With each passing day, traders discounted gold’s probability to head higher and thus, on a short-term basis, gold sold off. After all, traders want short-term profits and if it’s not likely that gold will bust above $1,800 and on to higher-highs…they head to greener pastures.

That’s where things stand today. So from a technical, chart-watching standpoint gold’s dip could be as simple as that. I can hear it now in the pit… ‘Three strikes and you’re out!’

Gold’s Election Bugaboo

Caveat: the next explanation for gold’s price drop is a stretch.

With that said, there could be some election implication built in to gold’s recent downturn.

Although your editor isn’t sold on the idea that either candidate will cut government spending, the gold market could be discounted on increased probability that Romney will win today’s election.

A few months ago, most polls showed president Obama with a solid margin over Romney. Today – especially in the past few weeks – that margin and the likeliness of an Obama runaway win has dropped.

Crunching the numbers on a potential Romney win, the number-crunchers could have shaved a few points off the price of gold.

The idea is that Romney’s administration would, in fact, steer the ship closer to fiscal sanity. Whether or not that would actually be the case isn’t the point. But if speculators think it could happen, the price of gold could be reflecting that probability.

There’s actually a pretty easy way to tell if we’re right on this one, too. If Obama remains in office, gold prices should rally.

Hey, your guess is as good as mine, but it would be interesting to see a big jump on an Obama win ($20, $30, $50?) At that point we’d know what the number-crunchers think of another four years of the same.

Gold’s Nasty Relationship With The U.S. Dollar…

The last explanation for gold’s recent downturn is your editor’s favorite.

In the past six months gold has been controlled by the movement of the US dollar.

See, like all other staple commodities, gold is bought and sold in US dollars, the world’s reserve currency. We’re not talking about manipulation here. Instead, it’s just the direct relationship that the dollar and gold share.

With trouble looming for the global economy and currency woes plaguing the Eurozone, there’s been a lot of support for the dollar. And if you didn’t notice lately (I can’t fault you) the dollar recently broke above its sideways trading pattern – which propped the dollar index back above 80. This is a significant move.

It’s not out of the question to see another short-term run for the dollar, either. Looking at the fundamentals, the Eurozone doesn’t seem to be fixing itself anytime soon. And to be sure, any weakness in the Euro makes for a stronger US dollar.

Add in the fact that the U.S. is having a little rebound in energy production and manufacturing (both positive for the dollar) and you’ll see that the short-term outlook for the dollar could be up – even in the face of some Bernanke push-button, money-printing economics!

Time will tell on this last point. But just remember that the US dollar is in control here. Whereas we’re used to a weak dollar and inflationary measures by the Federal Reserve, a short-term bounce could create more headwind for gold. It’s sad but true.

The Overall Gold Trend, Is Still Our Friend…

The US dollar helps explain gold’s short-term pullback, but it can also give us a good idea as to where the metal may be headed.

You see, regardless of Eurozone worries and a bump in U.S. manufacturing, the Federal Reserve has yet to show ANY ability to stop adding more dollars to its inventory. This is the same ‘dollar be damned’ trend that took gold prices from $300 to today’s price near $1,700.

Don’t fear a normal gold correction. All of the long-term fundamentals that lead us to buy gold – including the last point about the Fed – are still intact.

If you’re into gold for the short-term trading action, today’s market presents a tricky proposition. But if you’re in it for the long-haul, like me, the recent pullback is nothing more than market noise in gold’s eventual move higher. Stay tuned.

Matt Insley
Contributing Writer, Money Morning

Publisher’s Note: This article originally appeared in Daily Resource Hunter

From the Archives…

More Bad News for the Asian Century
2-11-2012 – Kris Sayce

Is the Asian Century Already Kaput?
1-11-2012 – Kris Sayce

Has the Australian Dollar’s Luck Just Run Out?
31-10-2012 – Murray Dawes

How the Aussie Dollar is Caught Up in Big Bankers’ Games
30-10-2012 – Callum Newman

Does Excessive Government Spending Make You the World’s Best Treasurer?
29-10-2012 – Kris Sayce

Don’t Fear the Recent Gold Correction

November 6, 2012

GBPUSD moves sideways between 1.5913 and 1.6178

GBPUSD moves sideways in a range between 1.5913 and 1.6178. Another fall to test 1.5913 support would likely be seen, a breakdown below this level will signal resumption of the downtrend from 1.6309, then deeper decline to 1.2800 area could be expected. However, as long as 1.5913 support holds, the fall from 1.6174 would possibly be correction of the uptrend from 1.5913, and another rise towards 1.6309 is still possible. Resistance is at 1.6050, a break above this level will suggest that a cycle bottom is being formed on 4-hour chart, then further rise to re-test 1.6178 resistance could be seen.

gbpusd

Forex Signals

November 6, 2012

Whiskey Stocks to Burn the Throat: Beam, Brown-Foreman and Diageo

By The Sizemore Letter

In the whiskey swilling days of my youth, I always preferred Jack Daniel’s Tennessee Whiskey to Jim Beam Kentucky Bourbon. I was far from a whiskey connoisseur, but it just seemed to go down smoother.

Regrettably, I’m not as young as I used to be and, to quote Hank Williams, Jr., “corn bread and iced tea have taken the place of pills and 90 proof.” All my rowdy friends have, alas, settled down.

Today, when I want a good North American whiskey I’m more likely to pour myself a Crown Royal or a Maker’s Mark on the rocks. My drinking habits have crawled out of the backwoods and gone bourgeoisie.

The market for North American whiskies (defined for the purposes of this article as Kentucky bourbon, Tennessee whiskey, Canadian whiskey and rye) has been transformed in recent decades. Following the general trend of other popular spirits, it’s gone upmarket and international. Most popular brands are owned by a handful of international spirits groups: Beam Inc (NYSE:$BEAM), Brown-Foreman Company (NYSE: $BF-B) and Diageo PLC (NYSE: $DEO).

We’ll start with Beam, which is the purest play on Bourbon. Beam is the owner of the mainstream Jim Beam brand, as well as the higher-end Maker’s Mark and Knob Creek and the lower-end Old Crow. But Beam’s offering are not limited to Bourbon; the company also markets Canadian Club Canadian whiskey, Teacher’s scotch whisky, Sauza tequila, and Courvoisier cognac, among other smaller brands. And perhaps denting the company’s macho image a little, it is also the owner of Skinnygirl.

Brown-Foreman is best known for one brand—Jack Daniels Tennessee Whiskey—though it too has a diverse lineup of names, including El Jimador tequila, Finlandia vodka and Southern Comfort, as well as several smaller brands.

Diageo is the largest of the three and the least dependent on North American whiskey. Diageo owns the Crown Royal Canadian whiskey and Seagrams American whiskey brands, though it is far more famous for its Johnny Walker scotch, Smirnoff, Ciroc and Ketel One vodkas, Captain Morgan rum and Jose Cuervo tequila among many, MANY other brands. Diageo is the largest and most diversified spirits group in the world.

Company	Ticker	Price/Earnings (Trailing)	Dividend Yield
Beam Inc	BEAM	26.8	1.4%
Brown-Foreman Co	BF-B	25.6	1.6%
Diageo PLC	DEO	23.3	2.3%

One thing you will quickly notice is that none of the whiskey distillers are cheap. All trade for well over 20 times trailing earnings, and only Diageo trades for less than 20 times expected earnings for next year. None are particularly high dividend yielders either, though Diageo can make the proud claim of being an International Dividend Achiever. (International Dividend Achievers much have at least five years of continuously rising dividends.)

While the high prices are something of a put-off, they are not entirely unjustified. The premium spirits business has been a rare source of growth in recent years, much of which has been generated by rising sales to emerging market consumers and particularly Chinese consumers. In fact, Diageo has been a core holding of the Sizemore Investment Letter for years for this very reason.

Beam also beat analyst estimates last week with a blow-out quarter. Beam has had a good run since its split from Fortune Brands last year, and I expect more good results to come.

Another reason for the lofty valuations is the consolidation that is still taking place in the industry. Beam and Brown-Foreman are in a sweet spot in that they are large enough to be taken seriously in a cutthroat market yet small enough to still be considered as possible acquisitions by a Diageo or Pernod Ricard. Beam and Brown-Foreman have market caps of $9 billion and $14 billion, respectively, whereas Diageo weighs in at $72 billion. Neither would be an easy acquisition for Diageo, but the belief that the company might be interested has been enough to maintain a premium price on the would-be acquisitions.

For investors, it comes down to a very simple question: what are you looking for in an investment?

In Diageo, you have a massive, internationally-diversified group that gets roughly 40% of its revenues from emerging markets. Though I might prefer to buy it at a slightly cheaper valuation than I see today, this is the kind of stock you can buy, tuck into a drawer, and forget about. It should be a solid dividend producer (and grower) for decades.

Your motivations for buying one of the other two would be quite different given their relative sizes. Of the two, I would go with Beam. In Beam, you have a company that was recently spun off from a larger conglomerate (Fortune Brands) that made no sense, and a management team that is eager to prove what an independent Beam can do. Hedge fund superstar Joel Greenblatt has written volumes on the virtues of investing in spinoffs, and I am inclined to agree with him.

This is not to say I am bearish on Brown-Foreman, but of the three whiskey distillers discussed in this article I find it to be the least compelling of the lot.

Disclosures: Sizemore Capital is long BEAM and DEO.

The post Whiskey Stocks to Burn the Throat: Beam, Brown-Foreman and Diageo appeared first on Sizemore Insights.

November 6, 2012

Is Pakistan’s Paranoia Pushing it Into a Nuclear War with India?

By OilPrice.com

The possibility of a nuclear war between Pakistan and India grows every day. If the Pakistanis do not bring under control the terrorist groups in the country and resolve the conflicts with India, it is not a matter of if it will happen, but when.

There have been few achievements to celebrate in the sixty-five year history of Pakistan and that has made the success of the nuclear program central to the national identity. This is especially true for the military that receives a quarter of the budget and is the only strong national institution.

Development of the weapons started in January of 1972 by Zulfiqar Ali Bhutto, when he was the Minister for Fuel, Power and Natural Resources. The decision to go nuclear came after a disastrous military defeat in 1971 by India. Bangladesh with Indian assistance separated from Pakistan.

Without its eastern territory, Pakistan was facing an enemy six times larger. The only way to deal with such a threat was to acquire an equalizer. Pakistani Prime Minister Muhammad Ali Bogra stated in 1954, “When there is more equality of military strength, then I am sure that there will be a greater chance of settlement.” His words expressed what is an ongoing national preoccupation with military parity with the far more powerful India.

India joined the nuclear club in 1974. Pakistan followed in 1998 and became the only Moslem nuclear power with what became known as the “Islamic Bomb;” and that made it a leader in the Islamic world community.

The Pakistan high command believed that the U.S. does not want a Moslem country to possess nuclear weapons and will at some time in the future attempt to seize or destroy its arsenal. Since September of 2001, much of the American military action has been directed towards Moslem states. As the sole nuclear Islamic country, that convinces the Pakistanis that they too will be targeted.

Washington worries that Pakistan with a number of terrorist organizations supported by the Inter-Service Intelligence is the one place where terrorists would be the most likely to acquire a nuclear weapon or nuclear materials. A high ranking official of the Inter Service Intelligence told the Atlantic for a December 2011 article on the Pakistani nuclear weapons program, “You must trust us that we have maximum and impenetrable security. No one with ill intent can get near our strategic assets.”

Since April 2012, The Strategic Plans Division that is charged with protecting the nuclear arsenal of an estimated ninety to one hundred and ten strategic warheads has been adding an additional eight thousand specially trained troops to protect the storage facilities from an American attempt to seize or destroy the nuclear weapons. A retired high level Pakistani officer confided that he and many of his colleagues believe that the U.S. will move against nuclear facilities shortly after the American combat role ends in Afghanistan. He and his colleagues expect the United States to abandon Pakistan as it did in 1989 when the Soviet Union was driven out of Afghanistan.

The raid by U.S. special operation forces into Abbottabad in May of 2011 to kill Osama Bin Laden has been taken as a warning signal by chief of army staff General Ashfaq Kayani what to expect. Senator John Kerry was sent to Pakistan shortly after the raid to explain the American position. He did not reduce the general’s anxieties when he declined to provide a written guarantee that the U.S. would not attack the Pakistani nuclear storage facilities.

The positioning in the region of units under the United States Joint Special Operations Command is a factor that is feeding the Pakistani paranoia. The task of JOSC is to keep out of the hands of terrorists nuclear materials that were abandoned when the Soviet Union left the Central Asian states. Included in what is seen as a high risk region is Pakistan that is on the list of failed or failing states.

Satellite photos and other sources estimate that there are fifteen locations where weapons or nuclear materials are likely to be kept. Six of these have been attacked by terrorists, although no weapons or materials have been taken.

The generals are probably telling the truth when they say that the weapons are safe in the military facilities. What they are not saying is that their effort to evade detection by the Americans has created other serious flaws in the security.

The assurance that the weapons are safe from attackers collapses once a warhead leave the guarded facilities. Weapons are being moved frequently in lightly defended ordinary vehicles along public highways to prevent Indian and American spy satellites or snooping drones from tracking the movements. There is little doubt that various extremist organizations have penetrated the military and are aware of the schedules and routes, but ISI acts as if it has enough control over the terrorists to prevent an ambush.

The larger strategic nuclear warheads are often transported disassembled. Recently, though, Pakistan has adopted tactical nuclear weapons with smaller warheads that are easier to moved assembled.

In April, ISI released photos of the Nasr, a new sixty kilometer range missile that appears to be capable of delivering a nuclear warhead. Because of the short range of the weapon, it will have to be positioned close to the frontier. That places the missile in a more vulnerable position for a terrorist group to seize while being transported along public highways or in isolated locations.

At the time that Pakistan acquired nuclear weapons, military strategists rejected tactical nuclear weapons because they would provoke the Indians to escalate to strategic weapons in response. That opinion has changed. The addition of a fourth nuclear reactor at Khushab that produces plutonium to be used in tactical weapons says that the inventory will be expanded.

Estimates of the amount of enriched uranium and plutonium in their inventory in 2011 places the potential number of weapons that can be produced at between 160 and 240.

They are developing as well two cruise missiles, two short range shoot and scoot type missiles and two ballistic missiles that will all require different types of warheads and different amounts of materials. They have the fourth largest and fastest growing inventory of warheads of the nine nuclear classified countries. What has never been made clear is when they will feel that they have enough warheads to give them a sense of security.

The military consumes so much of the national budget that the country has been forced to curtail other developments. No other source of revenue is available that will enable the Pakistanis to compete with the Indian military that has a budget three times greater than theirs and a growing diversified economy to support its expansion.

The high command has concluded that the only equalizer for the weaker of the competitors is the tactical nuclear weapon. What makes this a very high risk strategy is the Pakistani first-strike policy.

India nearly retaliated against Pakistan after the 2008 Mumbai attack. That was before Pakistan had begun deploying tactical nuclear weapons. India would have been able to use its superior forces to crush Pakistani defenses.

Should there be another deadly attack by a Pakistan based terrorist organization, especially if it involves a stolen nuclear warhead, the Indians will not hesitate to retaliate. This time, the Indian army will encounter nuclear weapons in the field. Then, Delhi that has no tactical nuclear weapons will have to decide if a strategic response is to be used. The survival of South Asia and far beyond will be depending on that decision.

Source: http://oilprice.com/Geopolitics/Asia/Is-Pakistans-Paranoia-Pushing-it-Into-a-Nuclear-War-with-India.html

By. Felix Imonti for Oilprice.com

November 6, 2012

Reasons that May Force Greece Out of Euro Area after the US Election

By TraderVox.com

Tradervox.com (Dublin) – This is a possibility that Greece will leave the euro after the US election. While this conclusion is not necessarily related to reports indicating that Europe want to help Obama win the election. There are reasons that would lead to Greece exit from the monetary union in the coming weeks. Some of these reasons are directly related to the election while others are just coincident.

First, there is a possibility of coordination between the EU and US in handling of the Greece affairs. The US has invested in Greece through the IMF and any move would affect the world’s largest economy. While the policy on Greece would not be different under either administration, the EU leaders would rather work with what they know.

Secondly, the numerous delays in dealing with the Greece problem may be deliberate. The eurogroup leaders meeting on Oct. 8 and the EU summit on October 18-19 and other meeting have failed to come up with a solution. There are also reports indicating that the Nov. 12 meeting will not give any solution. Further, Greek Prime Minister has indicated that the austerity measures to be discussed in parliament tomorrow are the last one he will accept. In addition, there is a high chance that the parliament will not pass it.

Thirdly, the end of autumn has come. Jean-Claude Junker, the head of eurogroup, had indicated in august that he sees Greece staying in the euro zone at least up to the end of autumn. While he went ahead to add “and after that too”, the statement will be put to test this month.

Fourthly, Greece is running out of money. There are speculations that Greece will run out of money by November 16, other reports are contrasting and indicating that it will be the end of November. Despite the deadline uncertainty, it is clear that Greece is running out of money. The troika has indicated that Greece has to pass the harsh labor reforms which are opposed by most in the country. The government is losing support and this complicates matters. In addition, a court in Greece said that the reforms may be unconstitutional. These hurdles may be hard for Greece to overcome.

Lastly, it is clear that Germany is reaching its limits.

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.

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November 6, 2012November 6, 2012

US Monetary Policy “Unlikely to Change” Whoever Wins Election, Fiscal Cliff “Could Propel Gold Higher”

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 6 November 2012, 07:00 EST

WHOLESALE MARKET gold prices extended their gains from a day earlier Tuesday, rising above $1690 an ounce in London this morning – 1% up on yesterday’s two-month low – while stocks and commodities also ticked higher and US Treasury bonds fell, as voters head to the polls for the US presidential election.

Silver prices climbed to $31.43 an ounce – 2.4% up yesterday’s low.

“A Romney victory in the presidential race could push interest rates up,” says a note from HSBC, “[while] an Obama re-election could lower them. Lower interest rates historically have helped gold prices and higher rates have been gold-negative.”

“Even if Romney wins,” adds a note from UBS, “monetary policy in the short-to-medium-term is unlikely to change…[quantitative easing] will remain in place at least for the next fourteen months should subdued growth expectations play out, and gold participants need to bear this in mind.”

“Immediately after the election,” says HSBC, “the lame-duck Congress and the president will face the question of what to do about the so-called fiscal cliff, the USD530bn in tax increases and USD160bn in spending cuts scheduled to take effect in January 2013…if this issue spills over into January [it] could have important ramifications for gold prices, as uncertainty could propel them higher.”

“America is facing an urgent crisis, barely discussed during the fall’s election campaign,” a group of asset managers and pension funds, led by BlackRock, that was placed in US newspaper advertising Monday.

“Every day we go without a resolution to the fiscal cliff will erode confidence,” said BlackRock chief executive Larry Fink.

Workers in Greece meantime have begun a 48 hour strike today, ahead of tomorrow evening’s vote on a fresh austerity package that prime minister Antonis Samaras has promised will be “the final one”.

Elsewhere in Europe, the services sector in Germany and France continued to contract last month, and at an accelerated rate, according to purchasing managers index data published this morning.

The same was true for the Eurozone as whole. Italy and Spain saw slight improvements in their services PMIs, although both remain below 50 thus indicating ongoing sector contraction.

German factory orders meantime fell by a seasonally adjusted 3.3% in September compared to a month earlier, the biggest month-on-month drop in a year, data published Tuesday by the Bundesbank show.

“Germany’s economy is performing better than most of the others in the Euro area, but it won’t generate strong growth in the current quarter,” says Nick Matthews, senior European economist at Nomura in London.

The volume of gold bullion imported by China from Hong Kong rose 30% in September compared to a month earlier, with gross gold imports hitting 69.71 tonnes, Hong Kong customs data published Monday show. Net imports rose by 54% month-on-month to 41.56 tonnes.

“August was a very weak month, however, which puts the latest increase somewhat into perspective,” says today’s commodities note from Commerzbank.

If China were to import similar quantities of gold from Hong Kong in the current quarter, this would doubtless lend support to the gold price.”

Here in the West, private individuals took advantage of the fall in gold prices to add to their positions during October, the latest Gold Investor Index data published today by online gold and silver exchange BullionVault show.

The Gold Investor Index, which tracks the number of net buyers and sellers of gold on BullionVault over the month, rose to 56.0 last month – up from 52.5 in September, and the highest reading since May. A reading above 50 indicates more net buyers than net sellers. The total amount of gold owned by BullionVault users passed one million ounces last month.

In the US meantime, the volume of gold held to back the world’s biggest gold ETF, SPDR Gold Shares (GLD), fell back Monday to 1332.4 tonnes, although it remains within 1% of the all-time high volume hit last month.

In South Africa, gold mining firm Gold Fields has announced the strike at its KDC East Mine has ended, after it reinstated most of the 8100 workers it dismissed last month as part of a deal with the National Union of Mineworkers.

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+

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.

November 6, 2012

Major Events That Will Affect the EUR/USD Pair Today

By TraderVox.com

Tradervox.com (Dublin) – With Greece and troika divided on the labor reforms and the fragile situation in Greece, there is little hope for a deal. The US Non-Farm Payrolls impressed last week, pushing the pair down considerably.

On Monday, the Spanish Unemployment Change report was released which failed to impress. The US ISM non-manufacturing fell to 54.2 in October from 55.1 registered in September, increasing the demand for safety ahead of the US election.

The market is volatile as we head to the US election. Reports suggesting that European Central Bank was lenient with Spanish banks in offering collateral rules have also weighed down on the market, pushing the euro down against the dollar.

The euro area sentix investor confidence report showed an improvement yesterday, reaching -18.8 in November from last month’s -22.2.

Investors will be focused on several reports and events today, the major one being the US election. The incumbent president, Barrack Obama is seeking a second term and is competing with Mitt Romney. The major issue is the fiscal cliff which, if not avoided, will bring automatic tax hikes and severe spending cuts starting in 2013.

In Europe, the market will be following Italy to get the reading from Services PMI report which will be released at 0845hrs. The sector improved in September reaching a reading of 44.5 from 44.0 the previous month. The market expects the sector to remain in contraction this time round, with no change expected on the figure.

Another report that will be in focus is the German Factory Orders report which will be released at 1100hrs GMT. The orders declined in August, falling by 1.3 percent after appreciating by 0.3 the previous month.

The market predicts a further 0.7 percent decline, signaling that Germany’s economy is starting to succumb to the effects of the debt crisis in the region.

The dollar is expected to appreciate today against the euro as safety demand continues to grip the market. The US dollar index rose yesterday to a two-month high as euro and yen weakened. The dollar appreciated against the euro to close the day at $1.2767.

November 6, 2012

Euro Drops against the Dollar on Greece Aid Fears

By TraderVox.com

Tradervox.com (Dublin) – The 17-nation currency dropped against the dollar to almost eight weeks low as concerns about the Greece securing a bailout package rose in the market. The currency dropped against most of the peers ahead of data that is expected to show the German economy is succumbing to the debt crisis in the region.

The Australian dollar was one of the gainers yesterday before the Reserve Bank of Australia makes its decision this week. The dollar index improved to its strongest in two-months as safety demand increased ahead of presidential election today.

Ken Takahashi, an assistant vice president at Sumitomo Mitsui Trust Bank Ltd in New York, noted that the euro is looking softer as the market immerses in risk aversion mood. He predicted that this might continue as Greek parliament votes on the austerity measures tomorrow. There is a possible Greek exit from the euroland if the measures are rejected.

Euro has declined against it counterparts as reports from Spain indicated that the country is working on austerity measures. The country is headed towards a deficit and is relying on 100billion euros aid to its banks. The country has been urged to seek bailout to avoid being degraded by and Credit Rating Company.

According to Klaus Regling, the managing director of the European Stability Mechanism, the euro-area needs more time to solve the Greece-triggered crisis as it is the worst to hit the region since 1930s. The market expects these comments to be supported by a Markit Economics report today. The report is projected to show the composite services and manufacturing index for the region remained unchanged at 45.8, the lowest in three years.

The 17-nation currency dropped by 0.1 percent against the dollar to trade at $1.2784 today in Tokyo. The currency had dropped earlier to its lowest since September 11 of $1.2767 yesterday. Against the yen, the shared currency lost 0.2 percent to exchange at 102.55. It had earlier fallen by 0.9 percent in the previous sessions.