Month: July 2013

By www.CentralBankNews.info

By The Sizemore Letter

It’s hard to take something called a “Magic Formula” seriously.  But you should.  It’s beaten the market by a wide margin over the past two decades and with less volatility.

The Magic Formula—a stock screener designed by hedge fund guru Joel Greenblatt –ranks stocks by two factors:

1. Profitability (based on Greenblatt’s chosen metric, Return on Capital)
2. Earnings yield (the inverse of the P/E ratio, defined here by Greenblatt as EBIT / Enterprise Value)

Buying good, profitable companies at cheap prices is not exactly a revolutionary idea; this is what Warren Buffett has successfully done for decades.   But Greenblatt has created a systematic way to do it, and most of the heavily lifting of number crunching is done by the screener.

By Greenblatt’s analysis, the Magic Formula generates annual returns in excess of 30% per year.  Independent back tests have generally come up with smaller returns, though the general consensus is that the Magic Formula does indeed beat the market, even after taxes and transactions costs are taken into effect.

For the casual investor, Greenblatt recommends buying a portfolio of 20-30 Magic Formula stocks, holding for one year, and then re-running the process annually.  That’s one way to do it.  But I prefer to use Greenblatt’s screener as a starting point for ideas.  I like to see which sectors are overweighted on the screen.  And while I am not a big fan of technical analysis and charting, I do take a quick look at a chart to see what the stock price is doing.  It’s usually a bad idea to try to catch the proverbial falling knife; all else equal, I like to see a stock in the early stages of a new uptrend.

So with all of this said, let’s take a peek at which stocks make the Magic Formula cut as of July.  I ran a screen of for the top 30 Magic Formula stocks with market caps over $1 billion, and here are the results:

A few names jump off the list, such as former market darling Apple (AAPL).  It’s a strange world  in which the second-largest company in the world by market cap appears in a value stock screen with a strong bias towards small caps.  But Apple is cheap enough—and profitable enough—to make the cut.

After spending most of the fourth quarter of last year in free fall, Apple has traded in a range of 400-450 for most of this year.  Could the stock have further to fall?  Absolutely. But it fits the Magic Formula criteria, and the price seems to have a fairly hard floor just below $400.

Apple’s old PC nemesis Microsoft (MSFT) also made the list, as did Cisco Systems (CSCO)—both of which I own in my dividend-focused portfolios.

Technology companies make up a full third of the screen.  In addition to the three I already noted, video game maker Activision Blizzard (ATVI), enterprise IT solutions companies CACI (CACI) and Unisys Corporation (UIS), semiconductor maker Cirrus Logic (CRUS), computer manufacturer  Dell (DELL), cyber security firm SAIC (SAI) and hard drive manufacturer Seagate Technologies (STX) made the screen.

Health and nutritionals company Abbott Labs (ABT)—a Sizemore Capital holding—also made the cut, as did Big Tobacco firm Lorillard (LO) and defense giant Northrop Grumman (NOC).

There are a couple points to note here.  First, cheap companies—even those with high returns on capital—can stay cheap for a long time.  Microsoft and Lorillard have both been regular fixtures on the Magic Formula screen for several years.  (Of course, both have also beaten the S&P by a healthy margin over the past five years, so duration of time on the list is not necesarily a bad thing.)

Second, some companies are not really investable at this point, or at least shouldn’t be.  I’ll use Dell as an example.  Given that Dell is currently in the midst of heated dispute over whether to take the company private, this is probably a company you should avoid.

I might also add that you don’t have to use my screen.  Greenblatt allows you to set a much lower market cap minimum (as low as $50 million), though you’ll want to be careful when trading in small, illiquid stocks.  And you can also expand the list from 30 to 50 stocks to give yourself a larger pool to research.

One final note: the math behind the Magic Formula is explained in Greenblatt’s book, The Little Book that Beats the Market. 

SUBSCRIBE to Sizemore Insights via e-mail today.

By www.CentralBankNews.info     Latvia’s central bank cut is refinancing rate by 50 basis points to 2.0 percent, narrowing the large gap to the European Central Bank’s (ECB) 0.50 percent refi rate, saying “inflation indicators are consistently low and the rate of economic growth poses no risks to price stability.”
    Latvia will become the 18th nation to adopt the single currency on January 1, 2014.
    The Bank of Latvia, which last cut its rate in September 2012, also said it was lowering its forecast for inflation this year to 0.7 percent, from a previous forecast of 1.0 percent, while it was raising its forecast for economic growth, with Gross Domestic Product forecast to rise to 4.1 percent from a previous forecast of 3.6 percent.
    Latvia’s GDP expanded by 1.4 percent in the first quarter from the fourth for annual growth of 3.6 percent, down from 5.1 percent in the fourth quarter.
    The inflation rate rose to 0.2 percent in June from deflation of 0.1 percent in May.
    In addition to cutting its refinancing rate, the Bank of Latvia also cut its marginal lending facility rates  with the size of the cut dependent on the length of time banks are using the facility.
    In its convergence report from June, the ECB said the high level of foreign deposits in Latvian banks posed “an important risk to financial stability.” Most of the foreign deposits are believed to be from Russia and amount to about one-third of Latvia’s GDP.

    www.CentralBankNews.info

By www.CentralBankNews.info     Serbia’s central bank left its key policy rate steady at 11.0 percent, saying inflation continues to decline due to lower demand and repeated that it should return to the central bank’s target range by October.
    The National Bank of Serbia (NBS), which embarked on a monetary tightening campaign last year to hold down inflation before cutting rates by a total of 75 basis points in May and June, said a good agricultural season and global market prices should lower domestic food prices and a deceleration in credit activity and lower growth in wages “confirm that low aggregate demand will continue to be the key disinflationary factor in the period ahead.”
    Serbia’s inflation rate eased to 9.9 percent in May from 11.4 percent the previous month, continuing the decline since hitting a recent high of 12.9 percent in October last year. The central bank targets inflation of 4.0 percent, plus/minus 1.5 percentage points.
    Like other emerging markets, Serbia’s markets have been hit by an outflow of funds from the Federal Reserve’s plan to taper quantitative easing later this year, and the central bank last month intervened in foreign exchange markets several times to slow the decline in the dinar.

    From the beginning of May through July 9, the dinar has depreciated just over 3 percent against the euro, quoted at 114 to the euro earlier today.
    “Unfavourable movements in international financial markets have led to higher investor risk aversion, which has sparked an increase in risk premia and depreciation pressures almost throughout the  region,” the central bank said.
    The central bank again appealed to the government to reduce its deficit further. Last month the government said it would cut spending to reduce this year’s deficit to 4.6 percent of Gross Domestic Product after the International Monetary Fund warned is could reach 8 percent.
    “The Executive Board holds that the effects of additional fiscal consolidation measures and the implementation of structural reforms will contribute to further subsiding of inflationary pressures and aggregate demand and will help increase investor interest in the Serbian economy.”

    www.CentralBankNews.info

By www.CentralBankNews.info     Malaysia’s central bank held its overnight policy rate (OPR) steady at 3.0 percent, as expected, but said the weak global economy may impact the country’s economic growth though domestic demand continues to support growth.
    The Central Bank of Malaysia, which has held rates steady since June 2011, said domestic demand in emerging economies remains a important source of growth for the global economy but the prolonged weakness in the “external environment has begun to affect domestic economic activity in these economies.”
    “For the Malaysian economy, domestic demand has continued to support growth amid the continued moderation in external demand. The sustained weakness in the external sector may, however, affect the overall growth momentum,” the central bank, known as Bank Negara Malaysia, cautioned.
    Malaysia’s Gross Domestic Product contracted by 4.9 percent in the first quarter from the previous quarter for annual growth of 4.1 percent, down from 6.5 percent. The bank has forecast growth of 5-6 percent this year compared with 5.6 percent in 2012.
    But the central bank said private consumption in Malaysia is still expected to remain steady, underpinned by higher incomes, while capital spending in domestic-oriented industries and infrastructure projects will support investment

    Malaysia’s inflation rate rose slightly to 1.8 percent in May from 1.7 percent but the central bank said it should rise in the second half of the year due to domestic supply and cost factors.
    “Pressures from global commodity prices are also likely to be contained given the moderate global growth prospects,” the central bank said.

    www.CentralBankNews.info
   

Source: Brian Sylvester of The Gold Report (7/10/13)

http://www.theaureport.com/pub/na/15431

These are scary times for precious metal investors. Resource equities are in the tank and, adding insult to injury, the gold price took a precipitous fall just days before summer, notoriously one of the slowest seasons for precious metals. Heiko Ihle, an analyst with Euro Pacific Capital in Connecticut, tells The Gold Report that something has to give. And soon. Ihle sets out a likely scenario and highlights some miners that are able to produce profitably at current metals prices.

The Gold Report: Heiko, in late June gold had its biggest weekly drop in two years. What’s your take on that?

Heiko Ihle: It was set off by far-reaching talk of a slowdown in quantitative easing. However, an awful lot of U.S. dollars are still floating around and the price of gold is pegged to the U.S. dollar. In the long run, companies can’t sell gold for less than it costs to take it out of the ground. At some point something has to give.

TGR: So, what’s going to give?

HI: Either the cost of mining or the price of gold. Quite frankly, the cost of mining has been reasonably sticky thus far.

TGR: Can miners profitably mine gold at $1,200/ounce ($1,200/oz) and silver sub-$20/oz?

HI: This is the first time in quite a while they’ve dipped this low, but there are miners that are able to produce profitably at these prices. One is Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE). The company’s mine-site cash costs were about $5/oz last year, and we forecast less than $6/oz this year. Even at $19/oz silver, Fortuna will be quite profitable.

TGR: Fortuna is planning in the third quarter to begin a 1,500 ton per day (1,500 tpd) mill expansion at its San Jose mine in Mexico.

HI: At current prices, Fortuna is more concerned about cutting costs than trying to increase production. That said, San Jose is a very profitable mine. It is a great location, fully permitted and operational. The site has a large amount of ore that can be mined over the next decade or two. I would continue to encourage the company to expand the mine.

TGR: What’s your price target on Fortuna?

HI: It’s $4. Given where the stock is trading, it’s actually pretty aggressive.

TGR: What are some of the companies under coverage doing to curb costs in this environment?

HI: There have been some cutbacks in every department. There have been layoffs. I’ve talked to a number of CEOs who are going to be doing more layoffs. Marketing budgets have been cut. A number of road shows have been flat-out canceled. There are cutbacks on exploration and general improvement budgets. Would Fortuna be expanding its mill if it started the whole process today? Probably not.

TGR: How does this trough compare to previous ones?

HI: There is general disinterest in nonproducing assets. Clients ask me almost every day: Why would I deal with a permitting process if I can get a producing asset for cheap? There’s also less interest in small-cap names because investors can buy Barrick Gold Corp. (ABX:TSX; ABX:NYSE) and Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) at a discount. Overall, it’s been quite hard to get investors excited about some of the names that we follow just because of a lack of interest in the space all together.

TGR: Many of the companies you cover have operations in Latin America, particularly Mexico. Mexico was the world’s largest silver producing country in 2012, with about 162 million ounces (162 Moz), up 6% from 2011. Silver production was up 4% globally in 2012 to 787 Moz versus 757 Moz in 2011. Tell us about your favorite precious metal stories.

HI: Endeavour Silver Corp. (EDR:TSX; EXK:NYSE; EJD:FSE), run by Brad Cooke, has a reasonably low cost of production of about $8/oz this year. We forecast about $7/oz next year as the El Cubo plant should be fully on-line.

Endeavour Silver has a great business model. It buys underappreciated mines, puts some money into renovations and puts them into production at much lower cash costs with more efficient operations. The company tends to get a lot closer to reserve grade than the prior owners.

Today, for the first time since I’ve been looking at this company, Endeavour traded under $3/share. It’s a very good value play.

TGR: El Cubo was purchased from AuRico Gold Inc. (AUQ:TSX; AUQ:NYSE) and turned around. Are there other underperforming assets that Endeavour could work its magic on?

HI: Certainly in this environment, where everybody wants to sell and nobody wants to buy. However, I don’t think Brad is going to make any acquisition that’s going to be transformational for the company, given the overall capital market conditions. These are scary times for all these guys. The cost structure that they operate under has changed substantially in those 34 months.

TGR: Endeavour’s Guanaceví mine in Mexico has cash costs around $16.70/oz silver. With silver currently trading at around $19/oz, does that put that mine at risk of a short-term shut down?

HI: Not yet. The overall headquarter costs remain intact. The company will likely start mining the high-grade veins and leave everything else behind. It lowers production, which leads to overall lower cash costs.

TGR: What about some other Latin American plays that you have under coverage?

HI: I like Rio Alto Mining Ltd. (RIO:TSX.V; RIO:BVL). The company has the La Arena project in Peru. It’s a great company with good management. CEO Alex Black is a great manager.

Rio Alto is producing about 200,000 oz gold at slightly more than $700/oz this year. It is expanding its sulfide operation. The grades are decent. The company has been lucky because it kept hitting higher grade zones than it anticipated, which helped it beat production figures every quarter last year. Those times have, unfortunately, ended. The stock has dropped substantially over the past two months. Its shares are currently below $2. There’s speculation in the marketplace that one of its largest holders is selling, which is creating an overhang on the name, but I think it’s a valuable asset. Rio Alto has proven that it can perform.

TGR: What is the next catalyst for Rio Alto?

HI: When the sulfide goes on line, but that’s not until around 2016.

TGR: One more precious metals story in Latin America?

HI: Fortuna Silver. CEO Jorge Ganoza is a third-generation miner. The family knows exactly what it is doing. Peru remains a politically safe environment. Labor costs are pretty decent. The company has a fairly low cash cost, in fact the lowest cash costs of companies I follow. That’s in part because of the decent gold byproducts, but it’s also because its San Jose mine in Mexico is a very efficient operation with fairly low tonnage costs. The mine site in Peru is fairly remote, however. I’ve been there. It’s an eight-hour drive from the beautiful little town of Arequipa. It’s high-altitude mining, but the grades are good.

TGR: Gold and silver prices are down about 3% today, but you still have a number of companies with buy recommendations. You still see upside. What are some turnaround stories?

HI: The whole market could be a turnaround story. In markets like this everybody remembers that gold is down $160/oz over the past 30 days. Well, guess what? Gold could be up $160/oz in the next 30 days. There is demand, but it is on the sidelines because everybody is scared. Ultimately, I genuinely believe that gold is money. I believe that companies need to be able to make a profit in addition to their cost of mining because otherwise the overall supply is going to dwindle down. I believe once that happens, either production costs will decrease or the gold price will increase. It will happen. Something has to give. We can’t have every single company in the space losing money for eternity.

There is another company that I like, but it’s not in production yet. Romarco Minerals Inc. (R:TSX) doesn’t have a full permit, but I feel strongly that it will be able to get permitted. The mine is going to have about 91 million tons of ore at 1.6 grams per ton for a total of 4.8 Moz gold. You are essentially buying this thing for $50/oz at the current trading price of $0.39/share. I believe Romarco will get up and running, because its management knows a lot of large institutional shareholders who would be willing and able to front them some more cash. I believe the Haile project in South Carolina will be a mine in a couple of years.

TGR: How does that $50/oz compare to its peers?

HI: They range from $40/oz to almost $120/oz. It is definitely in the lower range, and it should be because it doesn’t have a permit. It is not as derisked as a producing mine.

TGR: How likely are those permits to come within the next year?

HI: If you asked me that question a year ago, I would have said about 75%. Today, I am going to give you the same answer. There is a very decent chance that the permits are going to come reasonably soon. The permitting process, especially in South Carolina where there are no real mines, is not easy. The company has to have constant discussions with the U.S. Army Corps of Engineers. Romarco claims to be making progress. I am inclined to believe that, but these things always take a lot longer than you would like.

TGR: Meanwhile, Romarco has increased its resource and it has brought in more experienced personnel. What institutional support does it have?

HI: Van Eck Global, BlackRock, Baker Steel Capital Managers, Oppenheimer & Co., Tocqueville Asset Management and so on, the usual suspects. Seventy percent of shares are institutionally owned. Those firms haven’t owned this and watched the stock sink in order to throw in the towel when it actually comes time to build a mine.

TGR: Can this management team get the permitting done?

HI: Yes, it should be able to do it.

TGR: How much lower can gold go?

HI: That question is a trap! Long term, gold cannot sell below the cost of production. One of the two things has to give. Either the cost of production has to go down, which is doubtful, or the price of the gold has to go up, which is the camp that I fall into.

TGR: We are into the summer months, which are some of the quietest months for precious metals equities in general. How should investors approach the summer months?

HI: For one thing, don’t panic. Next, look at the companies you own or want to buy and see what they have done lately. Have they delivered on what they said they would? I am not talking about the price of gold. I am talking about production, grades, recovery and cash costs. If they have delivered, the overall thesis remains intact and hold on—as hard as that might be to do.

TGR: Thank you very much.

Heiko Ihle joined Euro Pacific Capital in November 2011 as a senior research analyst covering companies in the mining and engineering & construction (E&C) industries. Prior to joining Euro Pacific, Ihle spent over six years with Gabelli & Company, more than five of which as a research analyst. While at Gabelli, he was awarded second place in the 2010 Financial Times/StarMine Top Analyst Awards for the engineering & construction space. A native of Germany, Ihle received his bachelor’s degree in finance and management from the University of Illinois at Chicago in 2004 and his Master of Business Administration from the University of Miami in 2006. He has been a CFA Charterholder since 2010 and is currently a member of the CFA Institute and the Stamford CFA Society.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:

1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Gold Report: Fortuna Silver Mines Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Heiko Ihle: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Endeavour Silver Corp. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Euro Pacific Capital may sell to or buy from customers on a principal basis the named securities.

5) Euro Pacific Capital owns warrants in Endeavour Silver Corp.

6) Further disclosure information can be found on Euro Pacific Capital’s website at www.europac.net or by calling 1-800-727-7922.

7) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

8) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

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By CountingPips.com

An Added Advantage for Winning Traders

Trading in the forex market is inherently risky, the markets are often volatile and completely unpredictable. There are winners, there are losers. In the overall trading ecosystem, consistently profitable traders are in the minority. If a trader happens to be in this winning group, there has usually been a lot of time and effort invested into learning, developing, testing and honing their trading strategy and system. It has likely taken years of trial and error on demo trading accounts or small money accounts and long losing periods have likely been endured. Ultimately, traders have to overcome many obstacles through a lot of hard work, determination and intestinal fortitude to accumulate the experience and confidence to become a profitable trader.

The rewards for a consistently profitable trader can be the monetary benefits of winning trades, the satisfaction of a doing successful job and the stimulation of overcoming the great challenge of the markets. But winning traders now have an added advantage to further benefit from their trading skills –  by earning extra income in the form of selling their forex trading signals.

What are Trading Signals

Trading signals can be defined as the broadcasting, alerting or selling of a trader’s actual forex trades as they happen. These trade signals comprise the specific buy and sell price orders as well as the stop-loss and take-profit exit orders for each trade. When someone sells a forex signal, they are selling their future forex trades to be copied by others. The reason to buy or sell forex signals is easy; the buyer or subscriber of a trading signal looks to benefit from a successful trader’s performance while the signal provider usually sells or benefits in the sharing of their trades.

Due to the advancement of technology in the trading arena, it has become easier and easier to use forex signals either as a buyer or seller of signals through online tools, trading websites, social networks and even directly from trading platforms. When an online forex trader makes a trade, a record of that trade is then sent to a system or server that sends a message of that transaction electronically. Trading signals can be sent to the signal recipient by email, text message, twitter tweet or by many other similar posting systems.

In the past few years, trading signals have become more advanced and automated as trades can be executed directly in the signal buyer’s account in just about real-time. This automatic signal trading is also referred to as copy trading or mirror trading.

3 Benefits to Selling Signals

1. Earn Money Selling Forex Trades

The first advantage of selling signals is the direct monetary benefit the trader receives when subscribers purchase their forex signals. If a trader’s performance is consistent and profitable without being overly risky, they could very well find their signals in high demand. Buyers of signals are looking for consistent performance and will pay a reasonable amount of money for that skill if they think the payoff will exceed the cost.

The buyers of trading signals may be other traders or non-traders that are in the market to employ their extra risk capital in the forex markets. With trading signals, buyers can pick and choose signal providers and do it from their own trading accounts.

2. Don’t Give Up the Secret Sauce

Of course, winning traders have put a lot of time and effort into developing a winning trading strategies or systems. Understandably, a good number of successful traders do not want to give away their secrets. Purchasers of trading signals receive the orders from their signal providers and not the inner workings of their trading systems.

It does not matter if it’s a technical system, a fundamental strategy or if the signal provider uses pivot points, moving averages or the different phases of the moon. The buyers of the trading signal only need to be alerted with whether there is a buy or sell order as well as the stop-loss and take-profit exit orders. Signal sellers don’t need to fret that their system has to be outed or exposed.

3. Use Trading Success as a Steppingstone

Perhaps you have more ambition than being a solitary trader and would like to use your successful trading skills as a steppingstone to another venture. May be you have dreams of trading in a hedge fund, may be you would like to get a job at a top Forex brokerage or may be you would like to become more well known or write a book about trading. Maybe you even want to be a talking head on TV, whatever it is… All these endeavors could be helped by having a successful and provable track record to which you can point to.

People may listen to those who offer their opinions on trading but undoubtedly people are much more likely to listen if they know that person is a consistent winning performer. Right or wrong, proven winners are more likely to be respected, listened to or looked at as more authoritative.

An Easy Way for Traders to Sell Signals

One fast and easy way to start selling forex signals or testing out a forex signal system is to sign up for the MQL5 Community Social Trading Signals. All that is needed is a free MQL5 community account and a trading account (free demo account or real money account) on either of the MetaTrader 4 or the MetaTrader 5 platforms.

There are two reasons why the MQL5 Community can be a good choice:

1. Simplicity of getting started

If you want to sell signals and you use the Metatrader platform already, the process is rather easy and straightforward. Sign Up for a free MQL5 account, provide your personal details and documentation and then verify your information. After your account is approved, you can choose your specific Metatrader trading account to use for a trading signal and how much you want to charge to follow your signals.

If you do decide to be a signal seller and charge a monthly fee, there is an initial security screening system put in place that puts signal providers on a trial basis for a month that is designed to screen and filter out bad systems and individuals. Freely provided signals avoid the trial basis. Payment is received by the signal provider by Paypal (most countries) or Webmoney when they withdraw from their accounts.

See full description, directions and documentation here.

2. The huge inventory of traders on MetaTrader 4 and MetaTrader 5

The second reason the MQL5 community can be a good place to start is that there are literally thousands upon thousands of forex traders who use the MetaTrader 4 and the MetaTrader 5 platforms every day to conduct currency trades. If a trader is serious about earning some extra income from selling signals then having all of these traders as potential customers is a great way to start building a customer base.

Buyers of signals have the ability to enable trading signals right in their Metatrader platforms without any extra steps to be done. With such an easy way to subscribe to signals, it is almost guaranteed that there will be a good number of traders utilizing or browsing this market of signals.

In conclusion, selling Forex trading signals is another way for winning forex traders to benefit from their hard-earned trading skills. The benefits can even go beyond just the monetary rewards. If you are a profitable forex trader, you may want to think about whether selling your forex signals is right for you.

Article written by CountingPips.com

Risk Disclosure: Foreign Currency trading and trading on margin carries a high level of risk and can result in loss of part or all of your investment. Due to the level of risk and market volatility, Foreign Currency trading may not be suitable for all investors and you should not invest money you cannot afford to lose. Before deciding to invest in the foreign currency exchange market you should carefully consider your investment objectives, level of experience, and risk appetite. You should be aware of all the risks associated with foreign currency exchange trading, and seek advice from an independent financial advisor should you have any doubts. All information and opinions on this website are for general informational purposes only and do not constitute investment advice.

Blog Disclosure: CountingPips.com is an independent forex website and all opinions expressed on our blog postings are purely our opinions. This was a sponsored post and the company who sponsored it compensated via a cash payment, gift, or something else of value. We do accept forms of advertising, sponsorships and receive affiliate commission revenue. We do occasionally participate in paid reviews although our posts and opinions are not influenced by compensation and these posts are attributed as such. From time to time, we do recommend specific products or services for which we do receive compensation and in these cases, we do so on the belief that the product or service is worthy of an endorsement and will benefit our readers in their forex trading or in the furthering of their financial analysis. As always, we do our best to only recommend quality products and services but it is recommended to verify the accuracy of all products and services with their provider or manufacturer.

London Gold Market Report
from Adrian Ash
BullionVault
Thursday, 11 July 08:50 EST

WHOLESALE prices for gold retreated from an overnight surge to nearly $1300 per ounce in London trade Thursday morning, while world stock markets ticked higher with major government bonds and commodities.

Gold’s earlier 4.0% jump came after Federal Reserve chairman Ben Bernanke confirmed that the US central bank will maintain its “highly accommodative monetary policy for the foreseeable future [because it] is what’s needed.”

 Trading more than $100 above late June’s three-year low of $1181 per ounce Thursday morning, gold in large wholesale bullion bars recorded its best London Fix in two weeks.

 After falling sharply on previous talk of ending quantitative easing by mid-2014 and perhaps then raising rates from zero, “The strong reaction of the precious metal markets,” says Germany’s Commerzbank in a note today, “is [because] investors believe that the Fed’s actions and attitude do not differ significantly from those of the ECB or BoJ.”

 The European Central Bank last week suggested it may soon cut Eurozone interest rates from the current 0.5%.

 The Bank of Japan today kept its monetary policy unchanged, holding interest rates at 0.1% and continuing with more than $700 billion per year of new quantitative easing.

 “For the mid to longer term,” says David Govett at brokers Marex Spectron, “look to buy dips.

“Over the course of the next six months, gold will grind higher…On the whole, I favour the upside longer term.”

 Amidst gold bullion‘s record quarterly price drop this spring, “Recent recoveries consisted of upward moves of $150 and $80 respectively,” says another precious metals analyst, pointing to a top of $1320 for the current run “should it approximate what we saw in May.”

 “I suspect a test of $1300 will be on the cards,” says MKS Capital’s chief trader Alex Thorndike, because “order books are very light up to that point.

 “I have heard some chunky [mining] producer offers sit above this level, and there are good sell orders in the $1300-10 region.”

 UK investors wanting to buy gold bullion bars today saw the price reach a 3-week high above £857 per ounce.

 Silver prices meantime eased back 1.0% after hitting a 3-week high of $20.29 per ounce.

 The Euro currency also cut its earlier gains vs. the Dollar, as fresh political wrangling was blamed for a drop in Portuguese stock and bond prices.

 Meantime in India, the world’s No.1 gold consumer market, “We will not promote the sale of coins and gold bars till [the country’s current account deficit] issue is resolved,” the Times of India quotes Sanjeev Agarwal, CEO of major retail chain Gitanjali, today.

 Sixty-five per cent of India’s gold retailers have agreed to suspend sales of gold bars and coins for 6 months, the All India Gems & Jewellery Trade Federation said Wednesday, to help the government reduce imports and so cut India’s large gap between cash inflows and outgoings.

 Analysis by Barclays Capital says June saw the heaviest outflow on record of money from Indian bonds and equity holdings.

 Whilst India “remains vulnerable” to more outflows of foreign money, “For those concerned that the central bank will be forced to sell [some of its] gold,” says the Sober Look blog, “at this stage there are a number of other alternatives.”

 India grew its reserves of gold bullion bars by nearly 60% in 2009, buying 200 tonnes from the International Monetary Fund at a price of $1045 per ounce.

 “Given the nation’s cultural attitude toward gold,” says Sober Look, “[selling reserves is] politically just not an option.”

 For the retailers’ gold bullion suspension, “If we don’t follow through,” says Vikas Chudasama, director general of the All India Gems & Jewellery Trade Federation, “there may be a situation when jewelers don’t have any gold to sell.

 “The government and the Reserve Bank of India have already restricted gold imports.”

 The Times of India notes that over the last 10 years, gold jewelry demand has remained constant, but investment demand has risen 150% since 2009.

 The ban will run beyond India’s peak gold-buying festival season of Diwali and Dhanteras.

 But “retailers will not be hit [so badly],” says The Times, “due to the low profit margins” on coins and bars – some 1-2% versus 8-12% on jewelry.

Adrian Ash

BullionVault

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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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By www.CentralBankNews.info     Indonesia’s central bank raised its benchmark BI rate by a higher-than-expected 50 basis points to 6.5 percent and the deposit rate by 50 points to 4.75 percent to “ensure that inflation will return to its target path after the fuel price hike,” but also lowered its forecast for 2013 economic growth.
    Bank Indonesia already raised its rate by 25 basis points in June in a pre-emptive move to control inflation expectations, bringing this year’s total rate rise to 75 basis points. The lending facility rate was held steady at 6.75 percent.
    In addition to the rate hikes, BI said it would provide adequate liquidity in the foreign exchange market to maintain a stable exchange rate, introduce loan to value regulations for property and strengthen its policy coordination with the government to “minimize inflationary pressure and to maintain rupiah exchange rate stability as well as stability to the financial system so the economic growth momentum is sustained and moves toward a more sound economy.”
    Indonesia’s government cut fuel subsidies on June 22 to reduce budget deficits and the BI had forecast this would trigger higher inflation. In June consumer prices rose by 5.9 percent, up from 5.47 percent in May, but the central bank said it expects the impact of higher fuel prices to last for around three months, peaking in July, then easing in August and returning to normal in September.

    “Bank Indonesia will remain vigilant and respond with measured policy to mitigate second round effects of fuel price hikes to inflation, including strengthening policy coordination with the government,” the BI said.
    By 2014, the central bank expects inflation to ease to its target range of 4.5 percent, plus/minus one percentage point.
    The BI cut its forecast for economic growth this year to between 5.7 and 6.2 percent, down from its previous forecast of 6.2-6.6 percent due to lower exports from weaker-than-expected global economic growth.
    Economic growth in the second and third quarters is seen at 5.9 percent, but then growth should rebound in the fourth quarter and accelerate to a range of 6.4 to 6.8 percent in 2014.
   “Household consumption and investment are forecast to be slightly contained as a result of deteriorating purchasing power triggered by unfavorable exports and the impact of the fuel price hike,” the BI said.

    www.CentralBankNews.info

By www.CentralBankNews.info     The Bank of Japan (BOJ) maintained its target for the monetary base and asset purchases but said “Japan’s economy is starting to recover moderately”and “is expected to recover moderately on the back of the resilience in domestic demand and the pick-up in overseas economies.”
    “The year-on-year rate of change in the CPI is likely to turn positive,” the BOJ added, though it slightly revised downwards its latest forecasts for growth and inflation.
    The BOJ, which embarked on a new aggressive phase of monetary easing on April 4, has become increasingly confident about the economy and it was the first time in over two years that Japan’s central bank had used the word “recover” to describe the country’s economy.
     In June it had said that the economy was “picking up” and in May it said the economy had “started picking up.”
    However, the BOJ also admitted there was a high degree of uncertainty over the economy stemming from the prospects from Europe’s debt problem, developments in emerging and commodity-exporting economies and the pace of U.S. economic recovery.
    But exports from Japan have stopped decreasing as overseas economies are gradually heading toward a pick-up, the BOJ said, adding business fixed investment appears to have stopped weakening, public investment is rising and housing investment has generally improved.

    “Reflecting these developments in demand both at home and abroad, industrial production has stopped decreasing and signs of picking up have become increasingly evident,” the BOJ said, adding inflation remains negative through “some indicators suggest a rise in inflation expectations.”
    But the BOJ also said that it would continue with its easy policy stance to help the economy overcome nearly 15 years of deflation.
    “The Bank will continue with quantitative and qualitative monetary easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner,” the BOJ said, repeating its statement from recent months.
    The BOJ also confirmed its target for boosting the monetary base by an annual pace of 60-70 trillion yen.
    The BOJ will also purchase Japanese government bonds so their amount outstanding rises at an annual pace of about 50 trillion yen, buy exchange-traded funds and real estate investment trusts so the amounts outstanding rise by an annual pace of 1.0 trillion, and 30 billion yen, respectively, and continue to buy commercial paper and corporate bonds until the amounts outstanding reach 2.2 trillion and 3.2 trillion, respectively, by end-2013.
    In its latest forecast, a majority of BOJ policy board members see real Gross Domestic Product up by 2.8 percent in the current fiscal 2013 year, which began on May 1, slightly down from the April forecast of 2.9 percent. In fiscal 2014 growth is forecast at 1.3 percent, down from April’s 1.4 percent, and in 2015 growth is seen at 1.5 percent, down from 1.6 percent.
    In the first quarter of this year, Japan’s GDP rose by 1.0 percent from the fourth quarter for annual growth of 0.4 percent, steady from the fourth quarter growth rate.
    In May, Japan’s inflation rate remained negative at 0.3 percent but was up from April’s 0.7 percent drop and March’s 0.9 percent deflation rate.
   Consumer price inflation in the current fiscal year is forecast at 0.6 percent, slightly down from April’s forecast of 0.7 percent, while inflation is forecast to pick up to 1.3 percent in fiscal 2014 – excluding the effects of planned consumption tax hikes – down from April’s 1.4 percent. In fiscal 2015 inflation is seen hitting 1.9 percent, unchanged from April.

    www.CentralBankNews.info