GBPUSD is in uptrend from 1.4831 (Mar 12 low), the fall from 1.5605 is treated as consolidation of the uptrend. Initial support is at 1.5447, and the key support is located at the upward trend line from 1.4831 to 1.5034. As long as the trend line support holds, the uptrend could be expected to resume, and one more rise to 1.5800 is still possible after consolidation. Resistance is at 1.5605, a break above this level could signal resumption of the uptrend.
Over the past two weeks I’ve said that the Australian dollar was looking vulnerable to a near term sell-off. I pointed out that the last major line of support is around US$1.015.
After the interest rate cut on Tuesday we saw the Aussie sell-off sharply to, you guessed it, $US1.015.
Now things start to get interesting for the Aussie. In the last two and a half years every time this level has been broken the Australian dollar has sold off in a straight line to between US$0.94-$0.985.
I don’t think this time will be any different. The Aussie has been in a tight range between US$1.015 and US$1.06 for ten months now. The coke bottle has been shaking up for a long time in other words. Once the support level gives way you’ll see the Aussie hit parity in a matter of days…
The reason why I’ve spent so much time talking about the Australian dollar lately is because the short term charts are now lining up quite nicely with the very long term charts. There is a line of dominoes set up that if pushed could cascade into a steeper fall than anyone expects.
To show you what I mean, have a look at the monthly chart of the Aussie going back to 1991:
I use the 10-month/35 month moving averages to give an idea of the very long term trends. You can see that it has been amazingly accurate at sticking with multi-year trends.
We’ve only seen two instances in the last 20 years where the 10-month moving average has crossed under the 35 month moving average in the Aussie. The first one in mid-1997 was at the very beginning of a five-year bear market in the Australian dollar.
The second time was during the crash in the Aussie in 2008. It moved so fast and viciously at that time that the signal showed up fairly late.
We’re now on the edge of receiving the third very long term signal in over twenty years.
The other interesting technical development over the long term is the symmetrical triangle that has formed for the past couple of years (the dashed lines in the chart). A failure below the lows of that triangle around US$0.98 could spell trouble.
Yet another thing that I want to point out is the major high in 2008 of US$0.985 (The solid blue line). I think that level is a very large line in the sand for the Australian dollar.
It has held above that level for the majority of the time since late 2010. A lot of long positions have been placed above that level and I think we’ll see some serious liquidation if it starts trending below US$0.985 for any length of time.
On a monthly chart I would see a failure below the 2008 high as a ‘false break’ of the high, even though it has taken three years to play itself out. Or you could look at it as a double top formation.
Fundamentally we know that the Aussie should be trading a lot lower than here if it wasn’t for the influx of money from offshore hunting some yield and escaping their own devaluing currencies.
That theme is incredibly powerful and there is no indication that the major central banks around the world are about to stop printing. For that reason I would be surprised to see a sharp collapse in the Aussie like the one we saw in 2008.
But I really wouldn’t be surprised to see the Aussie heading towards the low US$0.90′s over the coming six to twelve months, especially if we see a continued deterioration in the economic data worldwide.
Source: ZeroHedge
As you can see from the chart above the US economic figures released over the past couple of months have been deteriorating sharply. Whether this is just a short term slowdown or something more sinister is still unknown.
On the same theme, it looks like George Soros has once again done his homework and started picking on the Aussie dollar at exactly the right time. The rumours of his entry into a short trade on the Australian dollar could be enough of a catalyst to get the ball rolling, and the interest rate cut has added fuel to the fire.
I think we will see the US$1.015 level give way within the next week or so, and then the dominoes could really start to fall.
It’s still an open question whether this development will be bullish or bearish for Australian stocks. There are sectors of the economy that have struggled under the weight of the strong Aussie dollar and we could see them breathe a sigh of relief if it stumbles.
The heavily beaten up resource stocks would be in that category as well as any companies in import competing businesses or with large revenues offshore.
But on the other side of the coin we may see some offshore money pulled out of Australian stocks if the currency starts to head south at a rate of knots.
As I’ve said many times in the past, there is a very high correlation between the Aussie/Yen and our stock market due to the influence of the carry trade and the high levels of Japanese cash now looking for a home outside of their own weakening currency.
If the Aussie/Yen plummets then it would be hard for Australian stocks to defy gravity.
Murray Dawes
Editor, Slipstream Trader
PS. Rumour has it that George Soros cleaned up by punting on the Aussie dollar this week. True or not, it should have you thinking about how to protect your investments if the Aussie dollar falls…especially if you own shares in companies that will suffer from a lower Aussie dollar. In today’s Money Morning Premium, Kris looks at a neat ASX-listed investment that could fit the bill. Click here to upgrade now.
From the Port Phillip Publishing Library
Special Report: TORRENT SIGNAL 3
Daily Reckoning: How the Dow is Just Wall Street’s Marketing Tool
Money Morning: Build Wealth Fast through the Resource Sector
Pursuit of Happiness: The Government’s Idea of Wealth Creation
Platinum has, like every metal, been in the wars.
But the travails of platinum mining companies have been even greater.
Rising costs; mines that have become cash-drains; lay-offs and labour disputes leading to violence; and, in one case, an ill-advised purchase of a copper company at the top of the market.
In short, they’re in a bad way.
But is this reflected in the price? Is it time to put on our contrarian’s hat and go looking to buy into the sector again?
Let’s have a look…
In the heady days of early 2008 the platinum price hit $2,286 an ounce, then collapsed to a low of $752 an ounce the same year. It then rebounded along with all commodities to flirt with $2,000 again by autumn 2011, but the test failed and the price fell.
Over the last 18 months or so, it has been stuck in a range between about $1,350 and $1,750. Just as gold capitulated last month, so did platinum, falling from $1,600 to $1,375 in just a few days.
The chart below shows the platinum price over the last ten years. I have identified the current support and resistance lines with a red band and blue line, respectively.
Platinum now sits at about $1,500 – considered just a little more valuable than gold, which is $50 or so cheaper per ounce.
This might seem odd. Platinum occupies a much more precious place than gold in the Western mind-set. A platinum credit card is superior to a gold card; platinum membership more desirable than gold; platinum record sales are better than gold – and so on.
But actually, the metals have frequently spent long periods trading on a ratio of just over 1:1, although that is the lower end of range, as the chart below from Nick Laird of www.sharelynx.com shows.
The blue line in the lower body of the chart represents the ratio of gold to platinum. In other words, it’s what you get if you divide the platinum price by the gold price. (For reference, the yellow line in the upper chart is the gold price, the black line platinum).
About 70% of the world’s platinum supply comes from South Africa, and most of that comes from the Bushveld region, just north of Johannesburg, near Rustenberg.
According to Johnson Matthey, about 5.8 million ounces of platinum were produced in 2012, a fall of about 10% on 2011. Almost 75% of that – 4.25 million ounces – was mined in South Africa.
Russia accounted for another 0.8 million ounces (mostly via Norilsk Nickel), Zimbabwe 0.36 million, and North America 0.34 million.
Total demand, however, has been pretty constant since around 2005, at eight million ounces. So demand is outstripping supply, with the shortfall being met by recycling. In 2011 there was a tiny surplus, but in 2012 this slipped into a deficit.
Not only has mining supply fallen, but so has recycling supply from vehicle catalysts (by 9%) and scrap jewellery by 19%.
And that deficit looks set to grow this year, because the South African mining industry is caught between a rock and a hard place.
On the one hand, falling metal prices have hit profits; on the other, the cost of equipment, energy (electricity in particular) and taxes is still rising, while unions have gone on strike demanding higher wages.
Just now, the eyes of the platinum world are on Anglo-American Platinum (Amplats). The company is in talks with the government and unions about restructuring plans, which may involve mothballing two mines and slashing as many as 14,000 jobs. The outcome is expected this week.
Rumours are that Amplats will scale down the cuts, but there are also rumours that the more militant of the unions – AMCU – will reject even a scaled-down version of Amplats’ plans.
Meanwhile, Impala, the world’s second-largest producer, may have to make its own cuts, as shafts have become uneconomic.
So without wishing to sound too grim, I have to say that I struggle to find one South African platinum company I’d want invest in. There are too many social, infrastructural, and political problems in South Africa for me to want to risk significant capital there, without the offset of a bubbling underlying metal price.
For a variety of reasons, Russian mining companies also sit in my file marked, ‘avoid’. And North America’s sole platinum producer, Stillwater, has its own problems, which include boardroom conflict, after it overpaid for Peregrine, a copper company in Argentina, at the top of the market in 2011. These are still not resolved to my satisfaction, despite a boardroom shuffle last week.
The lack of producers leaves explorers and developers, which are in a whole bear market of their own.
In short, if you’re interested in platinum – and in the longer run, I think you should be – the best bet is to buy the metal, not the miners. The metal is subject to the vagaries of the broader commodity markets, but there seems to be a floor under the price at about $1,350 an ounce.
And if platinum mining continues to be dogged with problems as it is now, and supply continues to be cut, the price will have to move higher, though it may take a while for it to do so.
Dominic Frisby
Contributing Editor, Money Morning
Publisher’s Note: This article originally appeared in MoneyWeek
From the Archives…
The Market Rebounds, but We’re Still Not Selling…
26-04-2013 – Kris Sayce
Is This the Last Hurrah for the Australian Dollar?
25-04-2013 – Murray Dawes
Here’s Proof the Silver Bullion Market is Alive and Well
24-04-2013 – Dr. Alex Cowie
Stand By for the Recession Rally in Resource Stocks: Take Two
23-04-2013 – Dr. Alex Cowie
A New Take on Hard Asset Investing
22-04-2013 – Kris Sayce
If Warren Buffett, Christopher Davis, Joel Greenblatt and Seth Klarman recommend a book, it might—just might—be worth reading. It certainly got my attention.
Warren Buffett calls Howard Marks’ The Most Important Thing “that rarity, a useful book.” And as a researcher with a library of a couple hundred books myself, I couldn’t agree more.
For those unfamiliar with Howard Marks, he is the Chairman and cofounder of Oaktree Capital Management, an investment firm with $77 billion under management. The Most Important Thing Illuminated, published in 2013, is an update to Marks’ original, published in 2011, though in Illuminated Marks has help. Greenblatt, managing partner of Gotham Capital and author of The Little Book That Beats the Market, offers his own commentary throughout the pages, as do Christopher Davis, portfolio manager of the Davis Large Cap Value fund, and Seth Klarman, president of The Baupost Group and a well-respected value investor. Marks keeps good company.
I had high expectations when I picked up The Most Important Thing Illuminated, and I wasn’t disappointed. This isn’t yet another “how to invest” book or a tired rehashing of received investment “wisdom” that looks more like something found in a fortune cookie and which rarely seems to hold up in practice.
Instead, Marks gives us the insightful thoughts of a man who struggles with his own investing decisions on a daily basis. There are no shortcuts, formulas, or easy tricks. But there is a wealth of experience and thoughtful contemplation from a real “in the trenches” investor who has been doing this a long time.
Marks starts the book with a chapter on “second-level thinking,” and I consider this one of the most valuable lessons in the entire book. Having a good understanding of this chapter alone will put you head and shoulders above most of your peers.
Mechanical trading rules work really well…right up until the point that they don’t. And why don’t they work consistently over time? As Marks explains,
The reasons are simple. No rule always works. The environment isn’t controllable, and circumstances rarely repeat exactly. Psychology plays a major role in markets, and because it’s highly variable, cause-and-effect relationships aren’t reliable. An investment approach may work for a while, but eventually the actions it calls for will change the environment, meaning a new approach is needed. And if others emulate an approach, that will blunt its effectiveness.
Investing, like economics, is more art than science. And that means it can get a little messy.
“Messy” is not a technical term, but it is accurate and descriptive hear. Markets are driven by people and by ever-changing real-world events. Trying to cram this into a mechanical trading model or a black box is a recipe for disaster. And frankly, it’s mentally lazy and reflects and unwillingness (or inability!) to grasp complexity.
This brings me to Marks’ points about second-level thinking. What exactly is “second-level thinking.” Perhaps it is best explained by example:
Call it contrarian thinking, applied game theory, or just being clever, but this is the mindset that is required to be a successful investor over time. It’s also a skill that few investors have or have the mental discipline to use.
It’s not easy going against the grain and taking views that are contrary to the consensus. But then, no one ever said that investing should be easy.
As a value investor, Marks is not a fan of technical analysis (i.e. charting) but he does stress the importance of understanding what he calls “market technicals,” or non-fundamental factors that affect the supply and demand for a security. Failing to understand these can lure an investor who looks at value alone.
What are some examples? Marks lists two specifically: the forced selling that takes place when a market crash trips margin calls, which forces leveraged investors to sell at any price, and the cash inflows that go to mutual funds that are usually invested irrespective of price. To these I would add short squeezes, secondary stock price offerings that dilute shareholders, and buyout offers.
These technical factors are often closely related to market psychology. And as Marks writes, “The discipline that is most important Is not accounting or economics, but psychology…
Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity. At that point, all favorable facts and opinions are already factored into its price, and no new buyers are left to emerge.
Need an example? Think of Apple’s performance over the past few years. Apple was the “must own” stock of the 2010s. Everyone owned it—individual investors, mutual fund managers, hedge fund managers…you name the investor, and chances are good that Apple made up a good-sized chunk of their portfolio.
There were cases of focused hedge funds having 20-30% of their portfolio in Apple. Even now, after Apple’s massive slide, the stock accounts for nearly 15% of the Technology Select SPDR (NYSE:$XLK), one of the most popular ETFs for investing in the tech sector. Apple’s position in the ETF is bigger than Google’s and IBM’s combined.
It’s not a figure of speech to say that there was no one left to buy Apple. No matter how great a company is, there is a limit to how high a percentage of investors’ portfolios it could comprise.
And we all know what followed. Apple’s share price fell by over 40%, and may or may not be finished falling.
A pure value investor wouldn’t have seen the risk in Apple. Based on popular metrics such as price/earnings or price/sales, Apple wasn’t particularly expensive. It actually looked pretty cheap compared to the broader market.
But if you had taken market technical and investor psychology into account, you would have known to be wary. You almost certainly wouldn’t have timed the top perfectly, but you would have known that caution was warranted.
Unfortunately, as Marks acknowledges, “psychology is elusive…and the psychological factors that weigh on other investors’ minds and influence their actions will weigh on yours as well.”
There are no shortcuts here. You have to remain as dispassionate as possible and, where possible, try to apply second-level thinking.
Risk is one of the most difficult concepts in investing because it is impossible to quantity. Yes, we have measures such as standard deviation, variance, or beta, but these measure volatility. Volatility and risk are not at all the same thing.
A better definition of risk is the possibility of loss. But even this is hard to define or quantify in any meaningful way. And at the time when a stock appears the most risky—such as after a recent volatile drop—it may actually be relatively less risky, as the selloff shook out the less committed investors. And on the flip side, it is when a stock looks least risky—think Apple this time last year—when it is in fact most at risk.
And it gets more complicated than that. You can’t gauge the riskiness—or the quality—of a trade based on what happened. You have to base it on what could have happened.
In other words, you can take a phenomenally bad gamble with negative expected returns and still come out ahead. But that doesn’t mean it was a good decision. Let me state it bluntly: A good outcome does not mean that the decision that led to it was a good one.
If you don’t understand what I’m talking about, you should probably stop reading. And you should definitely stop investing.
Winning the lottery is a fantastic outcome. But the expected value on any given lottery ticket is negative because the possibility of a payoff is infinitesimally small. Most people would agree that winning the lottery is good luck. But, being overconfident in their own abilities, they fail to see the role of luck in good investment returns based on bad trading.
Marks, in thinking very similar to that of Black Swan guru Nassim Taleb, does a good job of explaining this:
A few years ago, while considering the difficulty of measuring risk prospectively, I realized that because of its latent, nonquantitative and subjective nature, the risk of an investment—defined as the likelihood of loss—can’t be measured in retrospect any more than it can a priori.
Let’s say you make an investment that works out as expected. Does that mean it wasn’t risky?… Perhaps it exposed you to great potential uncertainties that didn’t materialize….
Need a model? Think of the weatherman. He says there is a 70 percent chance of rain tomorrow. It rains; was he right or wrong?
It’s easy to get overly academic here and veer off into directions that are not particularly practical. Perhaps it can be summed up with the old Wall Street adage to “Never confuse brains with a bull market.”
More broadly, we should always remember that risk is a complicated concept and that we can’t get complacent in our investment process. When you have capital at risk, you need to be vigilant.
Does this mean we should avoid risk? Not at all. As Marks puts it, “risk avoidance is likely to lead to return avoidance.” Assuming risk is part of the investment game. It is just a matter of keeping risk under control and making sure that the returns we realistically expect are worth the risk we are taking.
While Marks eschews charting and most forms of technical analysis, he does have respect for market cycles. In fact, he offers two rules for investing with a mind to cycles:
Marks’ interest in cycles ties back to his belief in the importance of market psychology:
Objective factors do play a large part in cycles, of course—factors such as quantitative relationships, world events, environmental changes, technological developments and corporate decisions. But it’s the application of psychology to such things that causes investors to overreact or underreact and thus determines the amplitude of the cyclical fluctuations…
Cycles are self-correcting, and their reversal is not necessarily dependent on exogenous events. They reverse (rather than going on forever) because trends create the reasons for their own reversal. Thus, I like to say success carries within itself the seeds of failure, and failure the seeds of success.
Well said. Marks’ views are consistent with those of Hyman Minsky, who believed that stability inevitably leads to instability (and vice versa) because stability encourages risky behavior and instability prompts more sober behavior.
Within the markets, a long period of stability and growth leads investors to assign higher and higher earnings multiples to stocks—think of the 1980s and 1990s. But during long periods of economic malaise and market turmoil, investors assign lower and lower earnings multiples. This cycle is probably the one permanent fixture throughout the history of the capital markets.
Marks offers so specific trading strategy to trade cycle fluctuations; his intent is simply to offer a word of advice to not ignore them.
In this book review, I have barely scratched the surface of The Most Important Thing. This book is chocked full of very accessible, very down-to-earth investment advice, and the praise heaped on it by Buffett, Klarman and the rest is well deserved. This is a book that I recommend you keep on your desk and thumb through on those days where the market isn’t making sense and you need a little grounding.
Compliments on a book well written.
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By www.CentralBankNews.info Global Monetary Policy Rates (GMPR) tumbled by 350 basis points in 24 hours as the central banks of Kenya, Australia, Belarus, Poland and Georgia cut key rates.
Following is the Global Interest Rate Monitor (GIRM) compiled by Central Bank News. The table shows the current average Global Monetary Policy Rate, total rate cuts year-to-date by the 90 central banks followed by Central Bank News plus total rate cuts for 2012 and 2011.
The table also shows each central bank’s current policy rate, the date and the size of the latest rate cut, the year-to-date rate cuts plus total rate cuts in 2012 and 2011.
The table is updated when rates change and can be accessed on our website.
Global Interest Rate Monitor (GIRM)
| COUNTRY | RATE | CHANGE | DATE | YTD | 2012 | 2011 |
| GLOBAL | 5.65% | -2151 | -6475 | 7517 | ||
| ALBANIA | 3.75% | -25 | 31-Jan | -25 | -75 | -25 |
| ANGOLA | 10.00% | -25 | 28-Jan | -25 | -25 | 0 |
| ARGENTINA | 9.00% | 0 | 0 | 0 | ||
| ARMENIA | 8.00% | 0 | 0 | 75 | ||
| AUSTRALIA | 2.75% | -25 | 7-May | -25 | -125 | -50 |
| AZERBAIJAN | 4.75% | -25 | 8-Feb | -25 | -25 | 225 |
| BAHAMAS | 4.50% | 0 | 0 | -75 | ||
| BAHRAIN | 0.50% | 0 | 0 | 0 | ||
| BANGLADESH | 7.75% | 0 | 0 | 50 | ||
| BARBADOS | 3.00% | 0 | 0 | 0 | ||
| BELARUS | 25.00% | -200 | 8-May | -500 | -1500 | 3450 |
| BOTSWANA | 9.00% | -50 | 30-Apr | -50 | 0 | 0 |
| BRAZIL | 7.50% | 25 | 17-Apr | 25 | -375 | 25 |
| BULGARIA | 0.02% | 1 | 30-Apr | -1 | -19 | 4 |
| CANADA | 1.00% | 0 | 0 | 0 | ||
| CAPE VERDE | 5.75% | 0 | -150 | 0 | ||
| CEN. AFRICAN STS. | – | 0 | – | – | ||
| CHILE | 5.00% | 0 | -25 | 200 | ||
| CHINA | 6.00% | 0 | -56 | 75 | ||
| COLOMBIA | 3.25% | -50 | 22-Mar | -100 | -50 | 175 |
| CONGO DEM. REP. | 4.00% | 0 | – | – | ||
| CROATIA | 6.25% | 0 | 0 | 0 | ||
| CZECH REPUBLIC | 0.05% | 0 | -70 | 0 | ||
| DENMARK | 0.20% | -10 | 2-May | 0 | -50 | -35 |
| DOMINICAN REPL. | 5.00% | 0 | -175 | 100 | ||
| EGYPT | 9.75% | 50 | 21-Mar | 50 | 0 | 100 |
| EURO AREA | 0.50% | -25 | 2-May | -25 | -25 | 0 |
| FIJI | 0.50% | 0 | 0 | -150 | ||
| GAMBIA | 12.00% | 0 | -200 | -100 | ||
| GEORGIA | 4.25% | -25 | 8-May | -100 | -150 | -50 |
| GHANA | 15.00% | 0 | 250 | -100 | ||
| HONG KONG | 0.50% | 0 | 0 | 0 | ||
| HUNGARY | 4.75% | -25 | 23-Apr | -100 | -125 | 125 |
| ICELAND | 6.00% | 0 | 125 | 25 | ||
| INDIA | 7.25% | -25 | 3-May | -75 | -50 | 225 |
| INDONESIA | 5.75% | 0 | -25 | -50 | ||
| ISRAEL | 1.75% | 0 | -100 | 75 | ||
| JAMAICA | 5.75% | -50 | 22-Feb | -50 | 0 | -50 |
| JAPAN | 0.00% | -0.1 | 4-Apr | 0 | 0 | 0 |
| JORDAN | 5.00% | 0 | 50 | 25 | ||
| KAZAKHSTAN | 5.50% | 0 | -200 | 50 | ||
| KENYA | 8.50% | -100 | 7-May | -250 | -700 | 1200 |
| KUWAIT | 2.00% | 0 | -50 | 0 | ||
| LATVIA | 2.50% | 0 | -100 | 0 | ||
| MACEDONIA | 3.50% | -25 | 9-Jan | -25 | 0 | -25 |
| MALAWI | 25.00% | 0 | 1200 | 0 | ||
| MALAYSIA | 3.00% | 0 | 0 | 25 | ||
| MAURITIUS | 4.90% | 0 | -50 | 65 | ||
| MEXICO | 4.00% | -50 | 8-Mar | -50 | 0 | 0 |
| MOLDOVA | 3.50% | -100 | 25-Apr | -100 | -400 | 0 |
| MONGOLIA | 11.50% | -100 | 8-Apr | -175 | -100 | 125 |
| MOROCCO | 3.00% | 0 | -25 | 0 | ||
| MOZAMBIQUE | 9.50% | 0 | -550 | -50 | ||
| NAMIBIA | 5.50% | 0 | -50 | 0 | ||
| NEW ZEALAND | 2.50% | 0 | 0 | -50 | ||
| NIGERIA | 12.00% | 0 | 0 | 550 | ||
| NORWAY | 1.50% | 0 | -25 | -25 | ||
| PAKISTAN | 9.50% | 0 | -250 | -200 | ||
| PERU | 4.25% | 0 | 0 | 125 | ||
| PHILIPPINES | 3.50% | 0 | -100 | 50 | ||
| POLAND | 3.00% | -25 | 8-May | -125 | -50 | 100 |
| QATAR | 4.50% | 0 | 0 | -105 | ||
| ROMANIA | 5.25% | 0 | -75 | -25 | ||
| RUSSIA | 8.25% | 0 | 25 | 25 | ||
| RWANDA | 7.50% | 0 | 50 | 100 | ||
| SAMOA | 5.00% | 0 | 0 | 0 | ||
| SAUDI ARABIA | 2.00% | 0 | 0 | 0 | ||
| SERBIA | 11.75% | -25 | 5-Feb | 50 | 150 | -175 |
| SIERRA LEONE | 17.00% | -300 | 15-Apr | -300 | 0 | -300 |
| SOUTH AFRICA | 5.00% | 0 | -50 | 0 | ||
| SOUTH KOREA | 2.75% | 0 | -50 | 75 | ||
| SRI LANKA | 7.50% | 0 | 50 | 0 | ||
| SWEDEN | 1.00% | 0 | -75 | 50 | ||
| SWITZERLAND | 0.25% | 0 | 0 | 0 | ||
| TAIWAN | 1.88% | 0 | 0 | 37.5 | ||
| TAJIKISTAN | 6.50% | 0 | -330 | 75 | ||
| THAILAND | 2.75% | 0 | -50 | 125 | ||
| TRINIDAD & TOBAGO | 2.75% | 0 | -25 | -50 | ||
| TUNISIA | 4.00% | 25 | 28-Mar | 25 | 25 | -100 |
| TURKEY | 5.00% | -50 | 16-Apr | -50 | -25 | -75 |
| UAE | 1.00% | 0 | 0 | 0 | ||
| UGANDA | 12.00% | 0 | -1100 | 1000 | ||
| UKRAINE | 7.50% | 0 | 0 | 0 | ||
| UNITED KINGDOM | 0.50% | 0 | 0 | 0 | ||
| URUGUAY | 9.25% | 0 | 50 | 225 | ||
| USA | 0.25% | 0 | 0 | 0 | ||
| UZBEKISTAN | 12.00% | 0 | 0 | -200 | ||
| VIETNAM | 8.00% | -100 | 25-Mar | -100 | -600 | 600 |
| W. AFRICAN STATES | 3.75% | -25 | 6-Mar | -25 | -25 | 0 |
| ZAMBIA | 9.25% | 0 | 25 | – |
By www.CentralBankNews.info Georgia’s central bank cut its refinancing rate by a further 25 basis points to 4.25 percent, its third rate cut this year, as its inflation forecasts for the next 18 months have been cut further and it now expects headline inflation to first approach it its target level by the end of 2014.
At its previous meeting in March, the National Bank of Georgia’s (NBG) policy committee said it expected inflation to approach its target in the second half of 2014.
The central bank, which started cutting rates in July 2011, said both headline and core inflation were low in April due to lower food prices, along with the base effect and lower regulated prices.
Georgia’s deflation continued in April, the sixth month in a row with falling prices, with prices down 1.7 percent.
The NBG said indicators showed that economic activity was weaker than expected in the first quarter of 2013 and this would also lead to inflation falling below expectations as overall demand fell along with a decrease in imports in the first quarter.
In the fourth quarter of 2012, Georgia’s Gross Domestic Product rose an annual 2.5 percent.
By www.CentralBankNews.info Malawi’s central bank held its benchmark bank rate steady at 25.0 percent, saying it would “be premature to loosen monetary policy at this early stage” despite signs of lower inflationary pressure and a stabilization of the kwacha currency.
The Reserve Bank of Malawi (RBM), which raised rates by 1200 basis points in 2012 to combat inflation, said “the deceleration in month-on-month inflation provides a clear sign that inflation is being brought under control and that the prospects for lower annual inflation rates have strengthened.”
Malawi’s headline inflation rate eased to 36.4 percent in March, down from 37.9 percent the prior month. But on a monthly basis, inflation only rose by 0.2 percent in March in contrast to the 6.6 percent monthly rise in February.
The RBM also said there were signs of a stabilization of the kwacha based on a rise against the U.S. dollar from curtailed demand for foreign exchange as a result of tight monetary conditions and proceeds from tobacco auction sales.
“The strengthening of the kwacha against the US dollar will serve to dampen inflationary pressures, including fuel prices, provided that the stability is sustained over the next few months,” the bank added.
Although liquidity conditions remain tight, the RBM said growth in bank credit remains strong, with lending to the private sector up by an annual 28 percent in March.
“This credit expansion needs to be contained in order to ensure that inflationary pressures are reined in,” the central bank warned.
But the central bank welcomed lower Treasury bill yields and said it looked forward to a further decline as the government continues to rein in domestic borrowing.
The Malawi government is projecting economic growth of 5.7 percent this year while the International Monetary Fund forecasts 5.5 percent.
By www.CentralBankNews.info Poland’s central bank cut its policy rate by 25 basis points to 3.0 percent, as expected by most economists, and will comment on the reason for its decision at a press conference later today.
Last month the National Bank of Poland (NBP) said its rate decisions would hinge on how far inflation fell below the central bank’s target and the state of the economy.
In March Poland’s inflation fell to 1.0 percent, the sixth month in a row of a disinflation, and below the central bank’s range of 1.5-3.5 percent, around a 2.5 percent midpoint.
Poland’s fourth quarter 2012 Gross Domestic Product rose by only 0.1 percent from the third quarter and growth in the full year of 2012 slowed to 1.9 percent from an upwardly revised 4.5 percent in 2011. The NBP has forecast growth slowing further to 1.3 percent this year.
Last November the Polish central bank started cutting rates – a move that was criticised as being too late to counter Europe’s recession – and then froze rates in April to evaluate the impact of the cuts that totaled 150 basis points.
The governor of the NBP, Marek Belka, has said he is counting on an economic rebound but other members of the central bank’s council have described this as wishful thinking.
In addition to the bank’s reference rate, the NBP’s Monetary Policy Council cut the Lombard rate by 25 basis points to 4.50 percent, the deposit rate to 1.5 percent and the rediscount rate to 3.25 percent.
www.CentralBankNews.info
By www.CentralBankNews.info Norway’s central bank held its policy rate steady at 1.5 percent and said it saw no reason to revise its view from March that the rate will remain around this level for the next year and then gradually rise toward a more normal level.
Norges Bank, which cut its rate by 25 basis points in 2012, said Norway’s economy had evolved largely in line with the central bank’s expectations and “global growth remains robust” while growth prospects for the euro area had weakened somewhat.
Deputy Governor, Jan Qvigstad, said in a statement that inflation had been slightly lower than expected and wages were expected to rise somewhat slower than forecast. On the other hand, the Norwegian krone had depreciated, unemployment was low and Norway’s economy was growing at a solid pace while household debt continued to rise from a high level.
“The key policy rate is low because inflation is low and because external interest rates are very low,” Qvigstad said, repeating the bank’s oft-used phrase.
In March Norway’s inflation rose to 1.4 percent from 1.0 percent in February, but still well below the central bank’s 2.5 percent target. The last time inflation was above the bank’s target was in December 2011 and since February 2012 it has been below 2.0 percent.
The Norwegian central bank first started easing its upward rate bias last October and finally at its previous meeting in March the central bank delayed any rate change until next year.
“In March, the key policy rate was projected to remain at around the current level for the next year before being raised gradually towards a more normal level. There is no basis for changing this assessment for now,” Qvigstad said.
Norway’s Gross Domestic Product expanded by 3.5 percent 2012, up from 2.5 percent in 2011, but the government this week cut its 2013 growth forecast to only 1.4 percent from a previous forecast of 2.5 percent.
London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 8 May 2013, 07:30 EDT
WHOLESALE market prices for buying gold climbed back above $1460 an ounce during Wednesday morning’s London trading, in line with its range over the last week, as stocks gained and longer-dated US Treasuries dipped ahead of an auction of 10-year bonds later today.
Silver climbed back above $23.90 an ounce, while copper also gained and oil prices fell.
A day earlier, gold dipped as low as $1440 an ounce in Tuesday’s US session before regaining some ground overnight.
“We believe there will be more sideways price action between $1441 and $1495 before the metal takes another run down to $1323,” says the latest technical analysis from Scotia Mocatta.
“Demand for gold as a safe haven is currently lower amid sharply rising equity markets,” adds today’s commodities note from Commerzbank.
US stock markets touched fresh nominal highs yesterday, with both the Dow Jones and the S&P 500 setting new records.
European stock markets also ticked higher this morning, with Germany’s Dax setting a new all-time high, following gains in Asia after China released figures showing its trade balance returned to surplus last month, with year-on-year export and import growth both stronger than expected at 14.7% and 16.8% respectively.
“I have no strong conviction whether the [Chinese trade] data reflects reality,” says Zhang Zhiwei, Hong Kong-based chief China economist at Nomura, noting that China’s State Administration of Foreign Exchange recently announced new rules aimed at preventing capital inflows being disguised as trade payments.
“China’s export growth is probably overstated by around seven percentage points,” adds the currency team at Standard Bank.
“[There are]anomalies caused by double-counting, capital inflows being disguised as trade receipts, some tax evasion and speculative currency positions, which are being done via Hong Kong…stripping out potential distortions, China’s exports increased by around 6.5% year-on-year in April, up from 2% in March.”
Elsewhere in China, the world’s second-biggest gold buying nation last year, “premiums on the Shanghai Gold Exchange remain elevated, although average daily volumes have eased by about 34% from the exceptional levels over the last couple weeks” says a note from UBS this morning.
“[Chinese] investment demand [for gold] should continue to stay strong through the rest of the year because of limited investment alternatives,” reckons Zhang Bingnan, secretary general of the China Gold Association.
“There’s still a shortage in the physical metal,” one Hong Kong dealer told newswire Reuters this morning.
“Premiums for gold bars are at $3.50 an ounce.
“Supply is indeed tight,” agrees one Singapore dealer, “[but] demand from Indonesia and Thailand has subsided, and in fact there’s some selling today from their side.”
Turning to world number one India, “our index of India physical flows continues to suggest demand that is well above average, but here too volumes have come off the peak of the previous two weeks,” says UBS, adding that next week’s Akshaya Tritiya festival, traditionally an auspicious gold buying occasion, means demand should “hold up reasonably well in anticipation”.
“However, it is less clear how resilient Indian demand will be afterwards. Last year appetite dried up shortly after the festival, which then fell on April 24, whereas back in 2011 offtake remained elevated for two weeks after Akshaya Tritiya, amid weaker gold prices.”
Proposals from India’s central bank to restrict imports of bullion by banks “will lead to a supply shortage in the market” according to Samir Sagar, director of Manubhai Jewellers in Mumbai, speaking to the Economic Times.
“Indian consumers will have to pay 3% to 4% more for jewelry during the lean season. This may go up to 7% to 8% during Diwali and wedding season.”
The Reserve Bank of India proposed last week to restrict banks’ import of bullion on a consignment basis – where the metal is shipped but remains the property of the supplier – to meet only demand from gold jewelry exporters. Gold and silver was India’s second biggest import item last year behind oil, and bullion imports are blamed for exacerbating India’s trade deficit.
“I don’t see much of an adverse impact of this measure,” Mehul Choksi, managing director at jewelers Gitanjali Group, said last week.
“There are other ways to import gold, like importing it by paying a fixed price or taking it on loan.”
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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 can be found on Google+
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