InvestMacro Forex News

Source: ForexYard

The direction of both Gold and Silver continues to sway as the two metals go from gains to losses.
Wednesdays’ trading saw Gold show a moderate rise of 0.2% to $1,650, whilst silver showed a gain of 1.23% to $32.23.

Reports claim that Chinas’ Manufacturing is set to contract for the fifth consecutive month, according to the recent HSBC Manufacturing PMI, the index slipped to 48.1 which shows that the nations’ manufacturing is on the decline. This news will be among the major factors negatively affecting the price of the two metals throughout the day.

There are a number of important news events released today, as both ECB President Mario Draghi and the Federal Reserve Chairman Ben Bernanke will speak. U.S Jobless Claims update as well as Canada’s Retail Sales complete the reports for today.

Chinas’ manufacturing crisis is the leading indicator of Gold and silvers moderate decline. Chinas’ progress is the main event for the bullion market, as we could see the two metals trading in the red throughout the day.
The news out of Europe today could affect the Euro and the Greenback, and consequently affect the prices of Gold and Silver.

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 Japanese yen was up and down on Wednesday against the USD. The beginning of Wednesday saw the yen making gains against the greenback but as the day moved on the dollar eventually came out on top. Towards the end of the afternoon, the yen was trading at 83.83 against the dollar.

A combination of mixed news from the U.S. as well as continued uncertainty regarding where the yen will move is contributing to the back and forth behavior of the USD/JPY. The U.S. has recently released various reports indicating strength in the economic recovery underway but yesterday’s home sales figures were a disappointment to many. Meanwhile, the yen continues to trade well above the 80.00 mark as investors express their uncertainty as to which way the Japanese economy and, subsequently, the currency will move.

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.

By Central Bank News
Here's today's Central Bank News link list, click through if you missed the previous central bank news link list.  Remember, if you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

By MoneyMorning.com.au

Sometimes Ron Paul seems too good to be true. For decades he has championed the cause of liberty and sound monetary and geopolitical policy. He has done this in the very heart of the Leviathan state even as the [US] federal government has accelerated its expansion in the post-war years. Further Dr Paul has repeatedly presented his case in print in clear language. Liberty Defined is the latest timely addition to those efforts.

The format is one we’ve seen before in books like Libertarianism A to Z. In Liberty Defined, the introduction lays out the overarching principles of liberty and anti-authoritarianism. The book itself then devotes each chapter to an individual issue, starting with abortion, then moving through things like Austrian economics, capital punishment, evolution and creation, global warming, hate crimes, Keynesianism, taxes, unions and much more.

The chapters are fairly short at just a few pages each, written in clear language that seeks to discuss and educate. Each chapter is a delight to read, particularly for lovers of liberty, but even when you don’t fully agree with Dr. Paul, you’ll find his position compelling and his honesty and consistency incredibly refreshing.

“The phrase ‘Austrian School’ or ‘Austrian economics’,” Dr. Paul writes, “is not something I ever expected would enter into the vocabulary of politics or media in culture. But since 2008, it has. Reporters use it with some degree of understanding, and with an expectation that readers and viewers will understand it too. This just thrilling to me, for I am a long-time student of the Austrian tradition of thought.”

And no doubt many readers will share Dr. Paul’s joy. They will also note that it is Dr. Paul himself who has been tirelessly campaigning for the free market principles of the Austrian School for the past several years.

He tells about the founder of the Austrian School, Carl Menger (1840-1921) “who wrote that economic value extends from the human mind alone and is not something that exists as an inherent part of goods and services; valuation changes according to social needs and circumstances. We need markets to reveal to us the valuations of consumers and producers in the form of the price system that works within a market setting.”

Dr. Paul notes that Keynes’ “entire agenda presumes the existence of a wise activist state that is involved in every level of economic life. Liberty was not an issue that concerned him.”

The Austrian School, however, believes, “We are not cogs in a macroeconomic machine; people will always resist being treated as such.”

Liberty Defined is certain to make people on both sides of the left-right political debate uncomfortable. Dr. Paul decries the welfare state beloved by those on the left, but repeatedly shows that such a state is just the other side of the coin of the interventionist foreign policies of those on the right.

Dr. Paul himself is a man of religious and spiritual conviction, but he also doesn’t shy away from analysing how the neoconservatives of the modern right use adulterate religion and patriotism to garner support for their imperialist adventures.

“Instead of religious beliefs being the cause of war, it is more likely that those who want war co-opt religion and falsely claim the enemy is attacking their religious values. How many times have we heard neoconservatives repeat the mantra that religious fanatics attack us for our freedoms and prosperity? Neoconservatives use religion to stir up hatred toward the enemy.”

Dr. Paul also isn’t given to idealism. He admits, for example, that a truly libertarian position would have porous borders, but he points out that that just isn’t possible right now. He notes that even in a stateless society, all property would be privately owned and those property-owners at the borders would have the right to decide who cross their land.

Dr. Paul handles the issue deftly and his proposals of work permits and conditional green cards as opposed to deportation, among other things, struck even this anarcho-capitalist leaning reader as reasonable.

And Dr. Paul is certainly no anarchist, but he is close enough for government work. He is the kind of politician even an anarcho-capitalist could love. Dr. Paul is well versed in the dangers of governments and their tendencies to grow; yet he thinks there is room in the world for a minimal amount of government. It’s a delicate balance. He pulls it off with aplomb. In the chapter on prohibition he says:

“Government should not compel or prohibit any personal activity when that activity poses danger to that individual alone. Drinking and smoking marijuana is one thing, but driving recklessly under the influence is quite another. When an individual threatens the lives of others, there is a role for government to restrain that violence.

“The government today is involved in compulsion or prohibition of just about everything in our daily activities. Many times these efforts are well intentioned. Other times they result from a philosophic belief that average people need smart humanitarian politicians and bureaucrats to take care of them.

The people, they claim, are not smart enough to make their own decisions. And unfortunately, many citizens go along, believing the government will provide perfect safety for them in everything they do. Since governments can’t deliver, this assumption provides a grand moral hazard of complacency and will only be reversed with either a dictatorship or a national bankruptcy that awakens people and forces positive change.”

Liberty Defined is layered with a practical view of the political realities, but it never fails to stay true to its moral core. Dr. Paul repeatedly points out that many of his solutions – which ultimately come down to the federal government getting out of the way – simply won’t be applied because the federal government is just too intertwined with the problem.

But Dr. Paul never wavers. With the fearlessness for which he has become famous, Dr. Paul continues to assault all the bad central planning policies and popular misconceptions that allow them to continue even in the face of failure.

On Keynesianism:

“…Something did change with the publication of The General Theory. Keynes gave the governments of the world a seemingly scientific rationale for doing what governments wanted to do anyway.”

On unions and government labour laws:

“Union power, gained by legislation, even without physical violence, is still violence. The labourer gains legal force over the employer. Economically, in the long run, labour loses.

“…If only it were so easy to help the working class. Just dictate wages and everyone will be financially better off. Unfortunately, this leads to disastrous results, whether it’s the prolonging of the economic mess as it did in the 1930s or the tragic results in American industry that we’re witnessing today.

“What good is it to mandate a $75 per hour wage if there are no jobs available at that price? What good is a minimum wage of $7.50 if it significantly contributes to overall unemployment?

“The reaction to the economic argument explaining the shortcoming of labour unions and minimum wage laws is that it’s heartless and unfair not to force ‘fairness’ on the ruthless capitalists. But true compassion should be directed toward the defence of a free market that has provided the greatest abundance and the best distribution of wealth of any economic system known throughout history.”

The chapter on taxes, however, is probably the best (and certainly this reviewer’s favourite). It sums up so many of the important themes: private property, liberty versus coercion, public education, economic misallocation, and the voracious appetite of the state.

“‘Taxes are the price we pay for civilization,’ according to Oliver Wendell Holmes. This claim has cost us dearly…If we as a nation continue to believe that paying for civilization through taxation is a wise purchase and the only way to achieve civilization, we are doomed.”

I am tempted to quote the chapter in its entirety, but at this point I would simply urge you to buy the book so you can read it there, along with the rest of this wonderful work.

Gary Gibson
Contributing Writer, Money Weekend

Publisher’s Note: This article originally appeared in Whiskey & Gunpowder

From the Archives…

Small Caps – A Way to Bet on Developing Markets…Without Investing Overseas
2012-04-013 – Kris Sayce

All Transactions to be Conducted in the Presence of a Tax Collector
2012-04-12 – Simon Black

How You Can Use Government Intervention to Profit on the Stock Market
2012-04-11 – Kris Sayce

Australia – The Pacific Pawn in USA Versus China
2012-04-10 – Dr. Alex Cowie

If Ron Paul Were US President…
2012-04-09 – Mark Tier

Ron Paul’s Liberty Defined

By MoneyMorning.com.au

It’s a rough number, but it’s thought there’s about 1.3 trillion barrels of known oil reserves in the world.

It might sound large, but it’s not.

When you consider that worldwide oil consumption is about 88 million barrels a day, that ‘supply’ would only last another 42 years.

The BP Statistical Review of World Energy (June 2011), estimated the world uses oil for 33.6% of its energy needs.

So finding more oil is essential.

But, it’s getting harder to find. And so, exploration is taking place in spots no one would have ever considered before.

It means that as the oil price stays high – it’s just under USD$120 per barrel – oil fields that were uneconomical to drill have become, well… economical.

Brent Crude – Oil just below USD$120 per barrel

Click here to enlarge

It also means that hard to access terrain… and even politically unstable countries are looking less and less like trouble… and more like investment opportunities.

The great news is, you can cash-in on these opportunities. But only if you back the right type of company. You see, you won’t find the big, well-known companies risking their capital in unstable places.

Not to begin with. It’s the small companies that get in first… the ones looking to stake a claim on a potentially huge resource…

Small-cap listed stocks.

Unfortunately, many investors miss out. Because they invest in the “safe” big oil producers (Westside, BHP, Santos, etc.).

But the big companies only come along later. Once the resource is proven.

By then, most of the big gains have been made. So, if you’re after the big return, you need to get in early. When a stock is at its riskiest point…

Worthless Permits Lead to Significant Oil Discovery

Back in 2005 Tullow Oil Plc. [LON: TLW] was a little known oil exploration company. The stock traded for around 160.00p, and the company had a market cap of less than £600 million. While it’s not a tiny, small-cap company, the risk for this company was still high.

Why? They held what some might call ‘worthless’ exploration permits in East Africa.

For the better part of last decade, it was thought East Africa only had 6 billion barrels of oil. Given the unstable political nature of countries like, Somalia, Kenya, Mozambique and Ethiopia, no one bothered to search for more.

After all, why would you waste your time? West Africa had more than 60 billion barrels of recoverable oil. And the northern part of Africa is estimated to hold nearly double that.

But with belief that something was there, Tullow went ahead with a test well in the landlocked East African country of Uganda.

Drilling in 2006 in Uganda proved to be successful. And a couple of years later, the company confirmed a 2 billion barrel resource… scheduled to produce its first barrel by 2014.

How did this affect the share price? The stock jumped from 160.00p in 2005 to 656.00p in 2007… giving investors a nice 310% gain in that time.

Tullow Oil Plc. – Up 310% in two years

Click here to enlarge

However, the company’s new found confidence in the region, encouraged more exploration.

Persisting with the idea that East Africa might hold more oil than previously thought, Tullow Oil, kept drilling.

And last March the company announced a significant find. This time in Kenya! The company is still yet to determine the size of the oil reserve, but believe it’s promising.

Confident they’re on the right track, they’ve cast the exploration net wider.

Such as an exploration permit in the rift basin in Ethiopia. The rift basin is showing almost identical geological formation as the one in Kenya. Meaning, the company is confident it will find another sizeable oil deposit.

The thing is, Tullow Oil is looking for oil in places other companies weren’t willing to look.

You see, a billion dollar company may decide the cost of exploration is simply too great. Perhaps a country or region is just too risky for a large company. Maybe, they think the area is worthless… unlikely to produce anything of value.

Yet for small companies, exploring in untapped areas is worth the risk. Tullow persisted with their ‘worthless’ exploration permits.

And it paid off.

Today the stock trades for around 1,535.32p. Those ‘worthless’ permits have seen the share value rise 859% since 2005.And now Tullow Oil has a market capitalisation of £13 billion. A big increase from seven years ago.

However, this story isn’t unique. If you scour the ASX, you’ll find many tiny exploration companies with permits in regions large oil companies wouldn’t touch.

But don’t be fooled, not all of them will put in a Tullow Oil style performance. Only a few will get lucky and find what they’re looking for.

How do you know where to find them?

Kris Sayce says he has the answer. Check out his latest presentation. He shares his tips on what he looks for when searching for a small cap stock. And even lists his top five picks for 2012 – including energy companies that are looking for oil and gas in untapped locations.

Shae Smith
Editor, Money Weekend

The Most Important Story This Week…

It’s hard to believe that there was time in both the United States and Australia when income tax did not exist. Both countries in their early development had small, modest governments. But that was destined not to last. Growth of government is usually a one-way street. They get bigger… More controlling. And always more expensive. Taxes follow in the same upward direction. Always more. The thing to remember is that taxes are a violation of individual liberty. The government uses force to take private property.

But taxes also distort the economy. The government brings into existence and supports industries at the expense of others… Price signals are confused…The wrong types of investments are made. All this comes at great cost to taxpayers, as individuals have to work harder and longer because government consumes more of their income. But it goes further. Taxes also have a harmful effect on society as a whole. This will come as a surprise for some. We are often lectured on how “taxes are the price we pay for civilisation”. Yet as Kris Sayce explains, the opposite is true. You can read the full details in How Taxes Destroy Society, Rather Than Enhance It.

Other Recent Highlights…

Greg Canavan on Two Things You Need To Ride The Gold Bull Market: “With government bond yields rising again, bank balance sheets are even weaker than they were at the end of 2011. Once again, the clowns running the financial system have just made things worse. Whether this is the start of the big sell-off I’ve been predicting is impossible to tell at this stage. But it sure feels like it.”

Kris Sayce on Why Natural Gas Is Still My Favourite Resource Opportunity: “The old investment saying is, “buy low and sell high”. If you do that with every investment you make, you won’t go far wrong. But what if the investment you like, keeps getting cheaper? In fact, what if the price had nearly halved since the start of the year? We’d say that makes it even more of a buy.”

Jeffrey Tucker on Why Walmart is the Real Victim of the $24 Million Pay-off in Mexico: “The breathless and bloviating Times expose is written as if these intrepid reporters were exposing a violent mob engaging in killings to get its way. You never quite get that Wal-Mart would much rather have used the money to expand its business, hire more employees or beef up its inventory. Money used for bribes is a loss to any company, a terrible price of doing business under the state.”

Shae Smith on Westfield – The Aussie Retail Stock That Could Make You Money: “You see, while it seems like you’d have to be mad to invest in Aussie retailers right now, the retail sector is turning a corner. Not here. But overseas. And surprisingly, it’s a rebound in US retailing that could boost your portfolio.”

Dr. Kent Moors on The Israeli Natural Gas Connection: “Most attention in the Middle East is now transfixed on the ongoing crisis in Syria, the renewed uncertainty after the Egyptian elections, and the developing standoff between Iran and the West. However, something else is happening offshore that may be a positive game changer. Natural gas development, and apparently a lot of it. This interest converges in two unlikely places…”

How $120 Oil Can Boost Your Small-Cap Returns

By Central Bank News
The past week in monetary policy saw 9 central banks announce interest rate decisions.  The only bank to change rates was the National Bank of Georgia, cutting 25bps to 6.25%.  Those that held interest rates unchanged were: Israel 2.50%, Hungary 7.00%, Japan 0.10%, New Zealand 2.50%, US 0.25%, Hong Kong 0.50%, Zambia 9.00%, and Mexico 4.50%.  The Bank of Japan also announced it would add a further 5 trillion yen to its now 70 trillion yen asset purchase program (quantitative easing).

Looking at the central bank calendar, the week ahead sees the Reserve Bank of Australia announcing its monetary policy decision on the first of May; where expectations are for an interest rate cut. The ECB however will likely continue to stand pat later in the week despite calls for more easing and even further cuts to the interest rate. There’s also the Asian central banks; Thailand and Malaysia due to meet this week.

Source: www.CentralBankNews.info

Article by Investment U

Economist and best-selling author Mark Skousen doesn't think much of Keynes' economic views, but you can't dispute his track record as an investor.

“When the facts change, I change my mind. What do you do, sir?”

– John Maynard Keynes

As longtime subscribers and readers of my books know, I’m no fan of John Maynard Keynes as an academic economist. His legacy is the welfare state, trillion-dollar unfunded liabilities and uncontrolled deficit spending. (See chapter 13, The Keynes Mutiny: Capitalism Faces Its Greatest Challenge of my book The Making of Modern Economics.)

But when it comes to Keynes the investor, it’s a different story, and the man deserves credit for being an outstanding stock picker during a period of war, uncertainty and depression…

According to a study published last month by two U.K. economists, David Chambers and Elroy Dimson, Keynes was a “star investor” who managed to gain 8% annualized returns from 1924 until he died at the age of 63 in 1946. And this was at a time when there was very little inflation and, in fact, much deflation.

What can we learn from this Cambridge wizard of finance? Here are three key lessons:

The Bottom-Up Approach

First, he became a much better investor by switching from being a top-down strategic macro manager and a technical momentum player to being a bottom-up stock picker and fundamentally contrarian value investor.

In the Roaring Twenties, he boasted of his ability to predict the ups and downs of the credit cycle, and was a bullish advocate of a “new era” of permanent prosperity. He once famously told a Swiss banker, “There will be no more crashes in our lifetime!” Two years later, in October 1929, the stock market crashed and Keynes’s portfolio of stocks and commodities was “wiped out.” Keynes recognized that he had no ability to pick tops of markets. (See my chapter, Keynes as a Speculator in Dissent on Keynes.)

After being chastened, he wisely changed his investment philosophy to become a contrarian and fundamentalist. “My central principle of investment is to go contrary to general opinion,” and to buy stocks that are “cheap” relative to “intrinsic” value and to hold these investments through “thick and thin.” He aggressively bought bank, utility and gold mining stocks in the 1930s, using leverage when appropriate. He was better at buying value near the bottom of markets than selling out at the top. He was, in short, a one-armed contrarian.

Investing in High-Yields

Second, Keynes switched out of fixed-income bonds and into on high-dividend paying value stocks rather than growth stocks. He bought utilities, banks and gold mining stocks that paid on average 6.1% annualized yields. He figured dividend-paying shares offered a much better deal with more upside potential than fixed income bonds.

Keynes’ approach was revolutionary at a time when banks and universities invested 90% or more of their portfolios in property and government bonds. He did almost the reverse in the discretionary accounts he managed at King’s College and insurance companies.

Even though he was anti-gold standard, he had the sense to recognize a good deal when Roosevelt went off the gold standard and raised the price of gold to $35 an ounce. Starting in 1934, he bought heavily gold stocks and profited handsomely.

Stick With What You Know

Third, Keynes avoided extreme diversification, but carefully bought a handful of publicly traded companies that he knew well. He was what we call a fundamental analyst who invested in a few companies where he knew management and the true value of the firms. They were primarily small- and mid-cap stocks. Some say he had insider information, at a time when insider information was legal. (Insider trading was not outlawed in the United Kingdom until 1980.)

I recommend you do the same today. Buy a few well-managed companies that pay rising dividends and buy them cheaply. To find out two energy plays that I’ve been recommending lately, check out today’s edition of Investment U Plus.

Good Investing, AEIOU,

Mark Skousen

Special TV appearance TONIGHT: I’ll be appearing tonight (Friday, April 27), on the PBS’ Nightly Business Report, where I will be interviewed by host Tom Hudson about the market outlook and my favorite stocks.

My last three picks (made on November 4, 2011) are up an average 20%, including dividends. (The market average has been 12% during this time). I’ll have some new recommendations tonight.

Check local listings; the Nightly Business Report usually begins at 6:30 PM ET.

Steve Forbes did what in Las Vegas?!

Steve Forbes speaks at hundreds of conferences every year. His normal routine is to come in, give a speech, sign a few books and leave. But he makes one exception: FreedomFest in Las Vegas. There he attends all 3 days! So does John Mackey, CEO of Whole Foods Market: “I wouldn’t miss it for the world, especially the debates.” And Senator Rand Paul liked it so much last year that he is returning this year with his wife – and staying all 3 days.

Alexander Green says this: “Next to my wedding day and the birth of my children, FreedomFest was the highlight of my life!”

Why would speakers say such things? What’s it all about? Everything! For 3 glorious days, the “best and the brightest” get together to discuss and debate politics, philosophy, history, geo-politics, science and technology, art and literature, healthy living, music, dance, religion, you name it. The Washington Post calls it “the greatest libertarian show on earth.” It even includes a 3-day investment conference, co-sponsored by The Oxford Club, with your favorite experts – Alex Green, Keith Fitz-Gerald, Marc Lichtenfeld, Karim Rahemtulla, Steve McDonald, Peter Schiff and many others.

As one attendee told me: “You don’t know me but my name is Tony Tardino from Phoenix, Arizona. I just want you to know that FreedomFest in Vegas is by far THE best conference I’ve ever attended, and I’ve attended all of them.”

To learn more, go to http://freedomfest.com.

Article by Investment U

Article by Investment U

Planetary Resources, Inc. announced it has very real plans to begin scouring the cosmos for its first mineable asteroid in the next 18 to 24 months.

It was only a month ago Hollywood Director James Cameron emerged from the bottom of the Mariana’s Trench, setting a world-record for the deepest solo dive by any human in history.

Today, he’s already getting involved in another adventure… mining asteroids in outer space. I’m not even kidding.

And he’s not alone…

Along with Cameron, former Google (Nasdaq: GOOG) CEO Eric Schmidt and current CEO Larry Page, as well as Ross Perot Jr. and others, are backing a privately owned company called Planetary Resources, Inc.

And on Wednesday, the company announced it has very real plans to begin scouring the cosmos for its first mineable asteroid in the next 18 to 24 months.

“To Infinity… and Beyond!”

Some Investment U readers may be familiar with Planetary Resources Co-Founder Peter Diamandis. Chief Investment Strategist Alexander Green has mentioned and recommended Diamandis’ book Abundance a handful of times over the past few months.

You can see why in this presentation he made below at the TED 2012 Conference. Diamandis reiterates a message that Alex has conveyed many times over – that the mass media is in the business of scaring you. However, in all reality things are never as bad as they are made to seem:

But getting back to mining asteroids…

For Diamandis, Planetary Resources started off as a childhood dream.

At a news conference at The Museum of Flight in Seattle, he said, “Since my early teenage years, I’ve wanted to be an asteroid miner. I always viewed it as a glamorous vision of where we could go.”

I know a lot of us had some pretty outlandish dreams as kids. But I’d never even heard of an asteroid miner until Diamandis said it.

Perhaps the most incredible thing though, despite there not ever having been an asteroid miner since the beginning of time, Diamandis has never given up on this dream.

He attended the Massachusetts Institute of Technology (MIT) where he received his undergraduate degree in molecular genetics and his graduate degree in aerospace engineering.

From there he went on to serve as CEO of a number of space related start ups. He even co-founded Space Adventures in 2004, a leading space tourism company. I could go on and on, too, but I think you get the picture.

Today, Diamandis is teamed up with Eric Anderson – considered the first to successfully introduce the idea of space tourism.

And together, the two not only have the know-how to turn his dream into a reality, they’re already masters at raising and making money.

Planetary Resources’ Eight-Year Plan

According to Planetary Resources, there are over 1,500 asteroids that are as easy to get to as the surface of the moon.

And as James Cameron told Voice of America:

 “We’re going to be a resource-depleted planet that’s going to be voracious for metals and rare earth minerals and things like that… there’s logic to getting [resources] from asteroids because you don’t have to lift them out of a gravity well – like, mining on Mars doesn’t make sense, mining on the moon makes very little sense, because you have to lift everything out of a gravity well to get it to Earth.”

Looking ahead, by 2020, Planetary Resources expects to have the world’s first gas station fully operational in outer space. And you can bet they’ll want to start mining not too long after that.

We’ll see what happens.

Good Investing,

Mike Kapsch

Article by Investment U

London Gold Market Report
from Ben Traynor
BullionVault
Friday 27 April 2012, 08.00 EDT

SPOT MARKET prices to buy gold remained steady around $1650 an ounce during Friday morning’s London trading – well within their range from mid-March – as stock markets and commodity prices were also flat and US Treasury bonds gained following a credit ratings downgrade for Spain.

Heading into the weekend, gold looked set to record its seventh successive Friday PM gold fix between $1600 and $1700 an ounce.

Prices to buy silver meantime held above $31 an ounce this morning after rallying in Thursday’s US trading – though they remained 2% down on the week by Friday lunchtime in London.

“Our concern with silver,” says the latest precious metals note from investment bank Natixis, “as with gold, is that when global markets begin to return to a greater degree of normality, the outflow from investors may be substantially larger than the inflow from industrial or jewelry demand, which could lead to substantial weakness in silver and gold prices.”

Ratings agency Standard & Poor’s last night downgraded Spain two notches from A to BBB+, adding that the outlook for the sovereign is ‘negative’.

“The [Spanish] government has committed to a target of 5.3% of GDP in 2012 and 3.0% in 2013,” said an S&P statement.

“In our opinion, these targets are currently unlikely to be met given the economic and financial environment. We forecast a budget deficit of 6.2% of GDP in 2012 and 4.8% in 2013.”

Yields on 10-Year Spanish government bonds rose to touch 6% this morning, but by Friday lunchtime actually looked set to close slightly down on the week.

German 10-Year bund yields meantime fell as low as 1.65% Friday morning, close to record lows hit earlier in the week.

Despite the Spanish downgrade, European stock markets edged higher this morning, although the Euro Stoxx 50 index of the leading Eurozone blue-chip firms remains more-or-less where it was six months ago.

“We are probably going to see more downgrades from other rating agencies,” reckons Philippe Gijsels, Brussels-based head of research at BNP Paribas Fortis Global Markets.

“You will continue to see this consolidation phase [in stocks] for some more time as the newsflow is likely to be predominantly negative.”

“Europe is headed to a suicide,” said Nobel Prize-winning economist Joseph Stiglitz Thursday.

“There has never been any successful austerity program in any large country…the European approach definitely is the least promising.”

French Socialist Party leader Francois Hollande, who received the highest share of the vote in last Sunday’s French presidential election first round, called this week for European economic policies to prioritize growth rather than austerity, adding that he would hold a “firm, friendly discussion” with German chancellor Angela Merkel if elected.

“It’s not for Germany to decide for the rest of Europe,” Hollande told French television last night.
Earlier in the week, Hollande said the European Stability Mechanism, the permanent bailout fund due to come in in July, should be given “the necessary firepower” by the European Central Bank.

“I’ve always campaigned for the statute of the ECB to be revised,” Hollande said.

“I know Germany’s reticence, but it would be better for the ECB to be able to intervene as the first and last resort for states.”

“Herr Hollande has misunderstood the problems in his country and in other Euro area countries,” Michael Meister, a member of Merkel’s CDU party, told Bloomberg Friday.

“If one throws money into a country with structural problems that won’t solve those structural problems…the aim is to gain control over excessive debt, not increase it.”

“A growth pact has to be focused on structural reforms,” agreed Spain’s economy minister Luis de Guindos yesterday.

“I do not see that the growth pact should involve any sort of fiscal boost or stimulus.”

The Euro meantime rallied against the Dollar in Friday morning’s European trading, climbing back above $1.32.

“The Euro/Dollar has held above $1.30 for some time, in the $1.30-$1.32 range, which coincides with gold also being caught in a range,” says Robin Bhar, head of metals research at Societe Generale.

“If the Eurozone crisis deepens and we see the Euro/Dollar correct below $1.30, that could give a bit of a lift to gold.”

The Pound also rallied against the Dollar Friday, hitting breaking through $1.62 to hit its highest level since last September.

Prices to buy gold in Sterling fell to £1019 an ounce – 0.6% below yesterday’s high for the week.
Earlier on Friday, the Bank of Japan announced a further ¥5 trillion ($62 billion) in quantitative easing on Friday, while also leaving interest rates on hold at 0.1%.

Over in China, the Shanghai Futures Exchange said Friday it is cutting its commission on various gold futures contracts in an effort to support liquidity. Commissions on gold trading will fall from 30 Yuan per lot to 20 Yuan per lot.

Ben Traynor
BullionVault

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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.

(c) BullionVault 2011

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