Month: January 2013

By www.CentralBankNews.info     The Central Bank of Kenya (CBK) cut its Central Bank Rate by 150 basis points to 9.50 percent, slightly more than the 100 basis points expected by economists, with the bank saying this reduction should increase the uptake of credit by the private sector and help re-align commercial interest rates.
    The CBK said the economic outlook was positive with stable inflation and foreign exchange rates, and the main risk to macroeconomic stability was a full resolution of the euro zone’s problems along with its high current account deficit.
    Last month the central bank had said slow global growth, volatile oil prices and the high current account deficit were the main risks.
    Kenya’s economy is recovering from the CBK’s aggressive rate hike campaign to combat inflation from 2011 until mid-2012 when the bank reversed course and started cutting rates. Last year it cut by a total of 700 basis points but commercial lending rates still remain above 19 percent.
    In December, Kenya’s inflation rate eased for the 13th month in a row to 3.2 percent, down from 3.25 percent in November and a new low for the year.
    The bank said the drop reflected a continued fall in food prices and easing demand pressures with non-food and non-fuel inflation down to 4.81 percent from 4.83 percent so both inflation measures were now below the government’s 5 percent medium term target.

    “These developments, coupled with improved weather conditions and declining international oil prices continue to support a low and stable short-term outlook for inflation,” the CBK said in a statement following a meeting of its monetary policy committee.
    Kenya’s economy continued to strengthen in the third quarter and confidence remains high, the bank said, with Gross Domestic Product expanding by an annual rate of 4.7 percent, up from 3.3 percent in the second quarter.
    The bank’s survey in December showed that the private sector expects inflation and exchange rates to remain stable this year and “increased optimism for a strong recovery in growth in 2013.”
    The CBK’s monetary easing had improved liquidity and stability in the interbank market and the downward trend in private sector credit growth has reversed, the bank said, with growth up to 9.07 percent in November from 7.12 percent in October.
    It also said that commercial banks’ lending rates had come down slightly and the number of loan applications had risen by 32.5 percent in November from October.
   
     www.CentralBankNews.info  
   

By The Sizemore Letter

I originally penned this articled in December 2011.  Given Sears stock action in the year that has passed, it’s worth another read.

A well-respected value investor buys an old American company in decline, promising to restore its fortunes.  Alas, the recovery never comes.  The economics of the industry have changed, and the company cannot compete with younger, nimbler rivals.  The company ceases operations, but the value investor holds onto the shell to use as an investment vehicle.

Could this be the future of Sears Holdings (Nasdaq: $SHLD) under Eddie Lampert?  Maybe; maybe not.  But it was certainly the case for Warren Buffett’s Berkshire Hathaway (NYSE: $BRK-A).

Unless you’re a history buff or a dedicated Buffett disciple, you might not have known that Berkshire Hathaway was not always an insurance and investment conglomerate.  It was a textile mill, and not a particularly profitable one.  It was, however, a cash cow.  And after buying the company in 1964, Buffett used the cash that the declining textile business threw off to make many of the investments he is now famous for, starting with insurance company Geico.

So, when hedge fund superstar Eddie Lampert first brought Kmart out of bankruptcy in 2003, the parallels were obvious.  With its debts discharged, the retailer would throw off plenty of cash to fund Lampert’s future investments.  And even if the retail business continued to struggle, Lampert could—and did—sell off some of the company’s prime real estate to retailers in a better position to use it.  Lampert sold 18 stores to the Home Depot (NYSE: $HD) for a combined $271 million in the first year.

That Lampert would use Kmart’s pristine balance sheet to purchase Sears, Roebuck, & Co.—itself a struggling retailer—seemed somewhat odd, but his management decisions after the merger seemed to confirm that his strategy was cash cow milking.   Lampert continued to talk up the combined retailer’s prospects, of course.  But his emphasis was on relentless cost cutting, and he invested only the absolute bare minimum to keep the doors open.  Sears Holdings didn’t have to compete with the likes of Home Depot or Wal-Mart (NYSE: $WMT). It just had to stay in business long enough for Lampert to wring out every dollar he could before selling off the company’s assets.

The strategy might have played out just fine were it not for the bursting of the housing bubble—which killed demand for the company’s Kenmore appliances and Craftsman tools—and the onset of the worst recession in decades.  With retail sales in the toilet (and looking to stay there for a while), there was little demand among competing retailers for the company’s real estate assets.

It’s fair to blame Lampert for making what was, in effect, a major real estate investment near the peak of the biggest real estate bubble in American history.  But investors  frustrated by watching the share price fall by more than 80 percent from its 2007 highs have no one to blame but themselves.   Anyone who bought Sears when it traded for nearly $200 per share clearly didn’t do their homework.  They instead were hoping to ride Lampert’s coattails while somehow ignoring the value investor’s core principle of maintaining safety by not overpaying for assets.

Lampert is a great investor with a great long-term track record, and there is nothing wrong with paying a modest “Lampert premium” for shares of Sears Holdings.  If you like Lampert’s investment style but lack the means to invest in his hedge fund, Sears may be the closest you can get.  But at $200 per share—or even $100—the Lampert premium had been blown completely out of proportion.  The same is true of Buffett, of course, or of any great investor.  As the Sage of Omaha would no doubt agree, there is a price at which Berkshire Hathaway is no longer attractive either.

This brings us back to the title of this piece—is Sears the Next Berkshire Hathaway?

I would answer “yes,” but not necessarily for the reasons you think.

Everyone assumes that Buffett’s decision to buy Berkshire Hathaway was a typical Buffett stroke of genius.  Nothing could be further from the truth.  In fact, Buffett revealed in an interview last year that Berkshire Hathaway was the worst trade of his career.

If you cannot view the video above, please follow this link: “Buffett’s Worst Trade“ 

We like to think of Warren Buffett as the wise, elder statesman of the investment profession, but Buffett too was young once and prone to the rash behavior of youth.  He had been trading Berkshire Hathaway’s stock in his hedge fund; he noticed that when the company would sell off an underperforming mill, it would use the proceeds to buy back stock. Buffett intended to sell Berkshire Hathaway its own stock back for a small, tidy profit.

We’ve all been there, Warren.

But due to a tender offer that Buffett took as a personal insult, he essentially bought a controlling interest in the company so that he could have the pleasure of firing its CEO.  And though it might have given him satisfaction at the time, Buffett called the move a “200-billion-dollar mistake.”

Why?  Because Buffett wasted precious time and capital on a textile mill in terminal decline rather than allocate his funds in something more profitable—in his case, insurance.  Berkshire Hathaway will still go down in history as one of the greatest investment success stories in history.  But by Buffett’s own admission, he would have had far greater returns over his career had he never touched it.

So, in a word, “yes.”  Sears probably is the next Berkshire Hathaway.  And investors who buy Sears at a reasonable price will most likely enjoy enviable long-term returns as Lampert’s plans are eventually realized.   But Mr. Lampert himself will almost certainly come to regret buying the company—if he doesn’t already.

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The post Is Sears the Next Berkshire Hathaway? appeared first on Sizemore Insights.

Interview by James Stafford of Oilprice.com – the No.1 source for oil prices

Continued from Part 1…

In part 2 of our exclusive interview with Chris Martenson economist and editor of the popular financial website Peak Prosperity Chris talks about:

• How tight oil is being oversold
• An idea for solving the storage and Battery problem
• How price, not technology, has unlocked boom reserves
• Why it’s about conservation now, not new technology
• Why we should be concerned about another financial meltdown
• Future opportunities for investors
• Why exporting natural gas is a terrible idea

· Why Governments should help renewable Energy innovation

• Why net energy returns are the MOST important thing

In part 1 Chris spoke about: Why we shouldn’t be speaking about Energy Independence, why we could see $200 a barrel oil in the near future, why peak oil is not a defunct theory, what we aren’t being told about the shale boom, and much more… Click here to read part 1

James Stafford: With cheap oil looking like a thing of the past, what other energy sources should we be looking at developing? What are your thoughts on nuclear?

Chris Martenson: I believe nuclear can be done much more elegantly and safely than we’re currently doing it. And I am intrigued, also, by the possibility of thorium reactors. There are a variety of developments that we could look into. It will take quite a bit of investment, and there are a number of issues to be worked through, clearly. But nuclear does provide us with the possibility of having very low emission, very cheap electricity, which is important.

And if we’re going to talk about how we need to move towards electricity, which I believe we do, the thing we need to solve first is storage. We need to figure out how to store electricity.

The batteries that we can manufacture at scale have not advanced much since Volta first invented them in the 18th century. So we need batteries, we need storage, we need to start building zero-footprint buildings. All of these things can be done, but we really are not yet doing them on a serious basis.

Saving energy is something that really gets overlooked, but it’s where the biggest savings always happen to be. If I could wave a magic policy wand, I would take just one month from the Federal Reserve and I would dedicate it to a national prize to whoever can solve making batteries at scale from common materials and at a much higher energy density. The tasty prize would be $40,000,000,000, which may sound like a lot but is roughly two weeks of money printing by the Fed.

James Stafford: What role do you see renewable energy playing in the future? And do you think governments should help innovation in this area?

Chris Martenson: Governments right now are providing more than half a trillion dollars in subsidies for oil and gas, so they’re already in the business of shaping the alternative market, mainly by making their competitor’s products much cheaper. So is there a role for government to play in helping to boost alternatives at this point? The answer has to be yes, because there really isn’t a lot of time left on the clock. Left to its own devices, the market would deliver us an alternative energy future, but history suggests that energy transitions take a minimum of 40 years, sometimes 60 years, and we don’t have that kind of time.

When we’re truly threatened, such as when a nation has to go to war, we’d never think of leaving that up to the markets. When you’re in a predicament and coordination is necessary–to be effective requires a collective response, not 300,000,000 individual responses.

I see the challenges to us at this date, such as declining net energy and debt markets, tuned for an energy reality that does not currently exist, being so profound that we’re going to need a response along the lines of World War II times an Apollo project plus the Manhattan project. In other words, a response more complete, complex, and challenging than anything we’ve ever faced. So on that basis, absolutely I think we need a collective response because we are quite rapidly running out of time. In other words, a government response.

James Stafford: And what can cause this to happen? As you say, there’s no political will to make these changes at present.

Chris Martenson: We need a different narrative. Right now, the narrative we’re running is simply this: “We need our economy to grow.” That’s the first, second, third, and last piece of discussion that we ever seem to have.

It turns out we need another narrative in here which says, “Hold on. We can’t grow infinitely, we know this.” The question becomes, “When the remaining resources do run out, where would we like to be? What do we want the world, the landscape, and our energy infrastructure to look like?” And that’s the thing that’s completely missing. We’re just saying, ‘Our strategy is we’re just going to continue to grow.’ It’s not a strategy, it’s a tactic.

I am among many people who are working fervently if not feverishly to help change our narrative in time. Away from a story of growth for its own sake and towards a future shaped by design, not disaster, where we value prosperity first and growth second, if at all.

How do we do this? I really don’t know the answer to that because it has never been done before at this scale. But people and cultures do change, all the time in fact, and so this is not an impossible task, just a very tricky one, which makes it both challenging and fascinating.

James Stafford: You mentioned earlier that you thought the shale boom was being oversold. What are your thoughts on America’s oil and gas boom?

Chris Martenson: Well, this is really important. The current story is something along these lines: “Hey, look at how clever we’ve been. Because of the magic of technology, we have discovered how to unlock these incredible oil and gas resources that we just didn’t even know about before.”

When I talk to people who are in the oil business, they say, “Oh, no, no, we’ve known about those shale deposits, we’ve been drilling into and through them for decades. We’ve had horizontal drilling for decades; we’ve had fracking for decades. What we haven’t had is $80-a-barrel oil reliably enough to support us going into those with those technologies.”

So what really unlocked those reserves was price. Not technology, not cleverness, not ingenuity. Don’t get me wrong, there’s a lot of very clever, ingenious stuff going on in those drilling actions, but price was the primary driver here.

Here’s the thing, though: When more expensive energy comes out of the ground, it means that everything that you use to go get that energy, after a lag, becomes more expensive too. This is doubly compounded by this idea that there’s less net energy coming from these finds.

They use more energy to get that energy, but that more energy is more expensive. So that feedback loop is already in play here. It simply means that there’s less to be used as we like elsewhere in the economy.

When I look at America’s apparent energy abundance I’m a little worried that it’s been oversold. In particular, the dynamics of depletion that exist in both the tight shale oil and shale gas plays are very different from conventional reservoir depletion dynamics. I’m concerned that people are accustomed to the old and relatively slow reservoir depletion dynamics and are lulled by the sharp increases in output that these new reservoirs offer without really understanding just how rapidly they fall off as well.

Here’s an example, in the Barnett shale gas play, in one region where they drilled 9,000 wells, there was just this exponential increase in gas output. But then there was no more room for any more wells in that section, and within one single year the gas output from that region with all of those beautiful, technologically marvelous 9,000wells had fallen by 44%. One year!

So as long as America can continue to forever increase the number of wells that it’s completing and bringing online every year, it will be able to maintain rising production from the shale plays. Obviously that’s an impossibility. You run out of space eventually, you don’t have enough rigs or talent to drill incrementally more wells each year, or the capital just isn’t there for some reason. Sooner or later, there are only so many wells you can complete. At that point, we discover that the rapid increases in oil production almost immediately begin to drop. And this is a whole new dynamic. I think we need to build in a little caution for ourselves around this story that seems to be almost completely missing from most mainstream news reports.

So really, we’re on a very elaborate treadmill right now, where as long as we can continue to drill, drill, drill, drill, drill, drill, drill, then we’ll get an increasing output. I’m not convinced that that’s going to happen.

There are a number of factors that will cause that to slow. One is environmental concern. Another is, I don’t think they’re going to have the capital to do that forever. A third is that we’ve already drilled through all of the known sweet spots in these plays, and so we’re down to the more marginal portions of the main plays. The wells going into the less-than-sweet spots are going to require higher energy prices to break even than did the initial wells. And fundamentally, sooner or later, you just run out of places to put new wells.

The biggest problem I have with how the shale story is being sold is it is being used to justify a blind resumption of business-as-usual and I think we really need to be asking some deeper questions of ourselves because eventually even these plays will run out too. I say we should have a distinct and well thought out plan for how we want to use the potential work those resources represent to build ourselves the finest country energy can supply.

James Stafford: What is the most serious problem facing humanity? Resource depletion, population growth, climate change?

Chris Martenson: I’d rate these threats in the horizons. My most immediate concern, personally, is that our world financial system could crumble with the slightest provocation right now, with pretty disruptive effects. It’s not yet out of the woods by any stretch.

On a longer horizon, humans are living well beyond our ecological and energy budgets, and we’re eating into our principal on both accounts. Either we adjust on our own terms, or it will happen eventually on some other terms.

These are actually linked threats. At the root of it all we have a monetary system that enforces perpetual growth without which it wobbles and constantly threatens to utterly collapse. So even as our financial system is wobbling right now, sooner or later we have to come up with a system that can operate perfectly well within limits.

James Stafford: You talk about the world financial system crumbling. How would this look and how do you see this playing out?

Chris Martenson: So at heart what we have is a debt-based money system that requires exponential growth, just to not fall completely apart on a yearly basis. And that’s something that I can’t see working in a post-peak world.

We grow our use of mineral resources about 2% per year. Which means that every 30 years, roughly speaking, we’re going to be doubling the amount of those resources that we’re pulling out of the ground and putting into the world economy. Obviously you cannot constantly double your extraction of finite resources. This means we’re going to need a new money system at some point, and fortunately, they exist.

People really need to be concerned about this right now. And our current crop of leadership on both the monetary side and on the Fed and the fiscal side in Washington, D.C., have made it abundantly clear that they’re going to preserve the status quo as long as possible, and at any cost.

And so the risk contained in that observation is that we’re going to chug along until something forces us to change. And at this point I think that it will be a complete meltdown in the financial markets. And the possibility, then, of a dollar crisis that ends in either the complete destruction of the dollar as a useful form of money or something pretty close to that. I’m not saying that it will happen, but I am saying that the risks of that outcome are now increasing.

Fortunately, there are things that we can do to increase our personal and community resilience that are easy, fun, fulfilling, and great investments to boot. So, we still have a lot of control on this story.

James Stafford: The crash course paint’s a pretty bleak picture for our future. Are you optimistic about any technologies that can help us out of our various predicaments?

Chris Martenson: We don’t need any new technologies, we have everything we need right here on the shelf now to begin living a very different life. It begins with, I believe, the most fundamentally important thing we can do, conservation, at this stage.

If you look at a nighttime satellite photo, you can see that there are probably a few lights we could turn off and save a bit of electricity. There’s technology on the shelf right now enabling homes, either residential or commercial buildings, to be built that use a fraction of the energy they currently use, just by tilting them south and putting windows on the right side and ventilating them. Very simple things like that that can be done. All we have to do is decide that we’re going to use them, and that’s missing still.

So, yes, I am very optimistic about technologies and processes and understandings that already exist. The mystery to me is why they are not being deployed. They make complete sense from economic, political, national security, ecological and social justice standpoints yet we don’t use them at scale. That’s not a technology problem, that’s a narrative problem. Another way of saying that is I am very optimistic about technology but decidedly less optimistic that we will use it intelligently and rationally.

James Stafford: Should the US export natural gas?

Chris Martenson: Fossil fuels. They’re a one-time gift. You get to extract them and burn them exactly once. That is, whatever you choose to do with them is what gets done. They perform work for us. So we really should be focused on what sort of work we want those fossil fuels to do for us.

There are, right now, about a dozen proposals to liquefy and export US natural gas, and a study just came out this past week, commissioned by the EIA, saying that that’s a good idea. Wrong, it’s a terrible idea. Fully 25% or more of the energy contained within the natural gas is expended just in the process of liquefying it. That’s what you get to do with 25% of the units of work. You get to turn the gas into a liquid, and nothing else.

We should be using every possible unit of work that we extract from the ground contained within that natural gas to do something actually useful. If it were mine to say, we’d be using that energy to rebuild our nation’s crumbling infrastructure; we’d have a 30-year plan for exactly what we want our country to look like and how we were going to use our natural gas to get there. So when the natural gas runs out, and it will someday, we’ll at least have a resilient, well-built country that can run on alternative energy sources.

James Stafford: What are the big future opportunities for investors?

Chris Martenson: The big trends are very clear. Food, fuel, water, those are the big, obvious trends that a burgeoning population are going to place increasing demands on. But the things that excite me the most are those technologies, those things that we can do that are going to save us the most energy.

Anything that has a visible, obvious improvement in energy use, or new and improved ways of really growing food of higher quality with less embodied energy, those are the sorts of places where I think the most extraordinary opportunities exist.

And they’ll make economic sense right now, because they make energy sense right now, and in the future.

James Stafford: Chris – thank you for taking the time to speak with us.

Source: http://oilprice.com/Interviews/Conservation-Not-Technology-will-be-our-Saviour-Chris-Martenson-Part-2.html

Interview by. James Stafford of Oilprice.com – the No.1 source for oil prices

By www.CentralBankNews.info     Indonesia’s central bank held its benchmark reference rate steady at 5.75 percent, as expected, saying the country’s economy continues to be robust and should expand this year and next while inflation remains low and under control.
    Bank Indonesia (BI), which cut its key rate by 25 basis points in 2012, said sluggish global economic growth has kept inflationary pressures at bay, but “going forward, global economic growth is forecast to improve in 2013 and 2014 and some rebound is expected for global commodity prices as well.”
    In 2012 Indonesia’s economy expanded by 6.3 percent and is forecast to expand by 6.3-6.8 percent in 2013 and by 6.7-7.2 percent in 2014, with growth underpinned by “buoyant private consumption and strong investment, as well as some improvements in export performance,” the BI said.
    Last month the BI also said it expected stronger growth this year but it has now extended this forecast to 2014. In 2011 Indonesia’s economy expanded by 6.5 percent.
    Indonesia’s headline inflation rate was steady in December at 4.30 percent from November’s 4.32 percent, and the BI said core inflation was also steady, helped by the mix of macroprudential and monetary policy that is geared toward managing inflationary pressures from the demand side, imported inflation and inflation expectations.

    “Going forward, Bank Indonesia is confident that inflation will remain well under control in the target range of 4.5%+1% in 2013 and 2014,” the bank said in a statement.
     Last month the bank said core inflation could reach 4.7 percent this year, but remain below the 5.0 percent level that would raise alarm at the bank.
    The central bank also said its future policy would be directed toward managing domestic demand in line with efforts to maintain the external balance and this would be focused on a policy mix directed toward five pillars.
    Interest rate policy will be aimed at keeping inflation forecasts within the target range, exchange rate policy will be aimed at maintaining a stable rupiah, macroprudential policy will be aimed at financial stability along with internal and external balances, the communication’s strategy will be aimed at managing inflation expectations and lastly, policy coordination between the bank and the government will be strengthened to support macroeconomic management.

    www.CentralBankNews.info

By www.CentralBankNews.info     The European Central Bank (ECB) held its benchmark refinancing rate steady at 0.75 percent, as expected, and said the euro area’s economy is expected to remain weak but gradually recover later this year as improved financial market confidence supports domestic spending and stronger global demand helps boost exports.
    But ECB President Mario Draghi added that risks to the 17-nation euro area remain on the downside, mainly due to slow implementation of structural reforms, geopolitical issues and imbalances in major industrialised countries.
    “These factors have the potential to dampen sentiment for longer than currently assumed and delay further the recovery of private investment, employment and consumption,” Draghi told a news conference, adding:
    “In order to sustain confidence, it is essential for governments to reduce further both fiscal and structural imbalances and to proceed with financial sector restructuring.”
    The ECB’s forecast for gradual recovery later this year is unchanged from last month’s assessment.

    The euro area’s economy remains in recession and Draghi expects the weakness to continue this year reflecting weak consumer and investor sentiment along with subdued foreign demand.
    In the third quarter, the euro area’s Gross Domestic Product contracted by 0.1 percent from the second, following a 0.2 percent quarterly contraction in the second from the first. On an annual basis, the economy shrank by 0.6 percent in the third quarter, following a contraction of 0.5 percent in the second and a 0.1 percent contraction in the first quarter.
    The inflation rate was steady at 2.2 percent in December from November and Draghi said he expects inflation rates to decline further below 2.0 percent this year, based on futures prices for oil.
    “Over the policy-relevant horizon, in an environment of weak economic activity in the euro area and well-anchored long-term inflation expectations, underlying price pressures should remain contained,” he said.
    The ECB cut its refinancing rate by 25 basis points in 2012 and last month revised downwards its economic forecast. The ECB targets inflation of below but close to 2.0 percent.

By www.CentralBankNews.info     The Bank of England (BOE) held its benchmark bank rate steady at 0.5 percent and maintained its asset purchase program at 375 billion pounds, decisions that were widely expected.
    The BOE did not release any further details of its decision but said minutes of today’s meeting of the Monetary Policy Committee would be released on Jan. 23.
    The BOE has held its bank rate steady since March 2009 and also initiated its asset purchase program at that time. The last increase in the size of the program was in July 2012, when it was increased by 50 billion pounds. Purchases under the program were completed in November.
    Economists expect the BOE to keep its bank rate at close to zero for several years in light of the continued weak economy.
     To help stimulate activity, the BOE launched a Funding for Lending Scheme (FLS) together with the UK Treasury that offers commercial banks cheap funds provided they are used to make loans to businesses. A recent BOE survey of credit conditions showed that the supply of credit rose in the last quarter of 2012 and should continue to expand in the first quarter of 2013.

     The United Kingdom’s third quarter Gross Domestic Product rose a surprisingly strong 0.9 percent from the second quarter,  the first quarterly rise in four quarter. But compared with the same 2011 quarter, the UK economy stagnated after contracting by an annual 0.5 percent in the second quarter and 0.1 percent in the first quarter.
     The annual headline inflation rate was steady at 2.7 percent in November from October, above the bank’s target of 2.0 percent inflation.

    www.CentralBankNews.info

Source: ForexYard

Hey Everyone,

Below are some market trends for today.

Good luck!

-Dan

Gold- May see upward movement today
Support- 1640.98
Resistance- 1694.86

Silver- May see upward movement today
Support- 29.35
Resistance- 31.49

Crude Oil- May see upward movement today
Support- 92.18
Resistance-94.81

Dax 30- May see downward movement today
Support- 7616.82
Resistance- 7850.00

EUR/USD May see downward movement today
Support- 1.2894
Resistance- 1.3163

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The AUD/USD advanced more than 70 pips during overnight trading, following the release of a better than expected Chinese trade balance figure. China is Australia’s biggest trading partner, and positive news out of China typically benefits the aussie.

Expectations that the Bank of Japan will initiate additional monetary easing, possible as soon as next week, caused the USD/JPY to extend its bullish trend. The pair is currently trading at 88.15, slightly below a recent 2 ½ year high.

Crude oil prices gained more than $0.70 a barrel last night, as the positive Chinese news led to speculations that demand for oil in that country will go up in the near future. The commodity is currently trading at $93.69.

Main News for Today

EU Minimum Bid Rate/ECB Press Conference- 12:45/13:30 GMT
• If the European Central Bank decides to lower euro-zone interest rates today, the euro is likely to take heavy losses during mid-day trading
• Furthermore, if the ECB signals at today’s press conference that the euro-zone has fallen deeper into recession, risk aversion is likely to weigh down on the euro

US Unemployment Claims- 13:30 GMT
• The unemployment claims figure is forecasted to come in at 361K, slightly below last week’s 372K
• A lower than expected figure today may be taken as a sign of further improvements in the US labor sector, which could benefit the US dollar during afternoon trading

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 10 Jan, 07:30 EST

WHOLESALE London gold rose back to Wednesday’s 4-session high this morning, trading above $1664 per ounce.

Currencies were little moved, with “no change” decisions on interest rates expected in  both the UK and Eurozone.

World stock markets ticked higher – and commodities averaged a 1% gain – after strong new data from China.

Major-government bonds eased back meantime, and weaker Eurozone bond prices rose, after Spain successfully raised a fresh €5.8 billion ($7.6bn) of new debt at lower rates of interest than the last time of asking.

“Quantitative Easing is not the only bullish factor for gold,” says January’s Metal Matters Monthly from bullion-bank Scotia Mocatta.

“The financial system is drowning in debt and there seems no end in sight to ongoing massive budget deficits…Confidence in the financial system and in the fiat government paper that facilitates [it] will remain low.”

“The physical market has already responded positively to that price fall, with bargain hunting appearing in a number of regions,” says a note from another London market maker.

“Our view,” added Nic Brown of French bullion bank Natixis to Reuters on Wednesday, “is that gold prices are likely to trade lower as the year progresses, but there are some significant upside risks in the very near term.”

“If there was a reason for buying gold, you’ve got two good ones” in next month’s Chinese New Year and the ‘debt ceiling’ deadline in the US political system, now just 7 weeks away, he added.

“We’re surprised at how low gold prices are.”

Currently 0.8% lower from New Year’s Eve versus the US Dollar, the gold price is currently flat for the month-to-date against the Euro, and more than 0.8% higher against the Japanese Yen at ¥146,600 per ounce.

“Whereas gold is above its 1980 highs against both the USD and the [Swiss Franc],” says a technical note from London market-maker HSBC’s foreign exchange team today, “it has yet to surpass that barrier versus the [Japanese Yen].”

Rumors earlier this week claimed that the Bank of Japan is “mulling” a rise in its consumer-price inflation target from 1% to 2% – something which the Fitch Ratings agency said it would “watch closely” as Tokyo’s public debt continues to swell.

“It appears probable,” says HSBC, “that the 1980 high of ¥204,850 [per ounce] will be beaten before the gold bull market runs out of steam.”

On the data front Thursday, China reported a surge in December trade, with its total surplus rising to $31.6 billion as imports rose 6% but exports leapt 14% from the same month in 2011.

“The rise in exports was a result of a rebound in demand from the major market – the US,” says ANZ bank’s chief China economist, Liu Li-Gang.

“Overall, the data today have lifted hopes for the Chinese economy, and financial markets,” says Steve Barrow at Standard Bank, noting last month’s 43% jump in ‘total social financing’ – a new measure of private-sector credit growth which includes non-bank lending.

Warning that China’s economic growth could slip to 6% in 2013 however, such a Chinese “hard landing” would have serious implications for the gold price, says a report from Societe Generale.

The Bank of England meantime left its key interest rate at 0.5% for the 46th month running, and kept its money-creation “asset purchase” scheme at £375 billion ($600bn).

Speaking later on Thursday, the European Central Bank was also expected to leave its monetary policy unchanged, two days after the European Union warned of a worsening mismatch between skills and jobs, most “notably in Southern Europe”.

There “the risk of poverty or exclusion is [also] constantly growing,” said a separate EU report. Greek and Spanish unemployment now both stand above 26% according to Tuesday’s Eurostat release.

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

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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.

EWI Senior Analyst Jeffrey Kennedy shows you how to use momentum patterns to confirm your count

By Elliott Wave International

Are you looking for an easy way to improve your confidence as you analyze the charts you trade? Take a quick look at this chart (adapted from Jeffrey Kennedy’s December 26 Elliott Wave Junctures lesson) to see how divergence relationships help clarify your analysis.

According to Jeffrey, divergence relationships are easy to identify. Whenever prices make a new extreme, look for underlying indicators to move in the opposite direction. Specifically,

The momentum relationship most often seen in waves 3 and 5 is divergence. Bullish divergence forms when prices make a new low while an accompanying indicator does not. Conversely, bearish divergence occurs when prices register a new high while an accompanying indicator does not. Bullish and bearish divergences are common to waves A and C, just as they are waves 3 and 5.

Notice the bearish divergence between waves 3 and 5 in the daily price chart of Halliburton Company (HAL) — Prices reach a new high, yet the MACD indicator moves in the opposite direction:

Jeffrey notes that if you label an advance as a 5th wave move, and yet you do not see momentum divergence, that tends to argue for an extended 5th wave.

Next, at waves A and C, you can see an example of bullish divergence. Wave A bottomed at $32.90 in HAL and wave C ended much lower at $29.83. The histogram readings that correspond to waves A and C are -36.26 and -26.60, respectively.

Here’s another example of divergence between waves A and C in Akamai Technologies (AKAM).

Notice that wave C is lower in price than wave A. However, if you look at the MACD histogram, you’ll see that it registered a higher reading in wave C than it did in wave A, thus giving us a bullish divergence.

Understanding that Elliott waves demonstrate unique momentum relationships as well as price structure allows you to label waves more accurately and with greater confidence.

Learn to Use Technical Indicators to Improve Your Trading and Analysis This is merely one chart example of how you can use technical indicators to strengthen your analysis. You can also learn about Moving Averages, one of Jeffrey Kennedy’s favorite indicators, in a Free 10-page eBook from Elliott Wave International. Moving averages are one of the most widely-used methods of technical analysis because they are simple to use, and they work. Now you can learn how to apply them to your trading and investing in this free 10-page eBook. Learn step-by-step how moving averages can help you find high-confidence trading opportunities. Improve your trading and investing with Moving Averages! Download Your Free eBook Now >>