Month: September 2011

Two reports this morning surprised investors with seemingly out of place optimism in the private expenditures sector of the Australian economy. At 2:30 GMT the Australian Bureau of Statistics issued two indicators that demonstrated a solid uptick in retail sales and private capital expenditures.

The retail sales report was anticipated to see sluggish growth near 0.3%, but surprised traders with a relatively stronger 0.5% reading. Private capital expenditures, which report the quarterly change in new capital investment by private firms, revealed a healthy 4.9% growth in the second quarter. The figure was down from the first quarter’s reading of 7.7%, but well above the forecast 4.1%, making it bullish yet ominous.

Read more forex trading news on our forex blog.

London Gold Market Report
from Ben Traynor
BullionVault
Thursday 1 September, 08:00 EDT

U.S. DOLLAR gold bullion prices edged down to $1820 an ounce by Thursday lunchtime in London – 1.1% off the high for this week so far – while stocks and commodities dropped and government bonds gained following publication of weak European manufacturing data.

“The [gold] market is dead in this time zone,” said a Hong Kong gold bullion dealer this morning.

Silver bullion prices were also steady, holding around $41.60 – 0.5% above where they started the week.

“The power of the drop from $50 [earlier in the year] still overhangs silver so we would not be surprised at another sideways month in price action,” say technical analysts at bullion bank Scotia Mocatta.

Euro gold bullion prices meantime edged up to €1278 per ounce Thursday morning – a high for the week so far.

Eurozone manufacturing activity declined in August, according to the purchasing managers index for the 17 nation single currency area. The Eurozone PMI fell to 49.0 – down from 50.4 in July (a figure below 50 indicates contraction).

China’s PMI recovered slightly to 50.9 – up from 50.7 in July – while the UK’s manufacturing sector continued to contract, its PMI falling from 49.4 in July to 49.0. Similar manufacturing data for the US are due out later today.

German manufacturing PMI fell from 52 in July to 50.9 last month – its lowest level for two years. German economic growth meantime slowed to 2.7% year-on-year in the second quarter – down from 4.9% in Q1 – according to official data published Thursday.

“The recovery should continue, albeit at a slower pace,” reckons Carsten Brzeski, senior economist at ING in Brussels.

“Nevertheless, the next stage of the Eurozone debt crisis will put…the German economy to the test.” Elsewhere in Europe, FT Alphaville reports on French banks’ relatively high dependence on wholesale funding – with deposits making up 31% of total assets, compared to 36% for banks in Europe as a whole – which, the report says, could leave them vulnerable to a shift away from Europe by money market funds.

UBS has reportedly cut its 2012-13 forecast for French banks’ earnings as a result.

“It is not a sustainable sign of faith in the region that some of the largest banks in the Eurozone, with generally sound asset quality and business models, struggle to fund themselves in public markets,” says Omar Fall, equity analyst at UBS in London.

“The crisis is not over,” Juergen Stark, European Central Bank executive board member, told an economic forum in Austria on Thursday morning.

“Not just in Europe is it not over, it is also not over in other regions of the world,” Stark added, citing the “enormous” debt problem in the United States.

“Given the weak [US] data we’ve seen recently,” Federal Reserve Bank of Atlanta president Dennis Lockhart said in a speech on Wednesday, “and considering the rising concern about chronic slow growth or worse, I don’t think any policy option can be ruled out at the moment.”

Lockhart added, however, that he is “acutely aware that pushing beyond what monetary policy can plausibly deliver runs the risk of creating new distortions and imbalances.”

“The uncertainty clouding the macro outlook has lifted gold prices,” says a research note from Barclays Capital on Thursday.

“As long as it persists and investors remain responsive to gold, barring short term corrections, prices are set to venture further into uncharted territory.”

Gold prices rose over 11% in US Dollar terms last month – despite Congress reaching an agreement on the debt ceiling at the start of August – with many gold buyers choosing physical gold bullion.

“Looking at the physical market, last month’s sales of gold and silver coins by the US Mint were strong,” notes one gold bullion dealer here in London.

“Its year-to-date gold sales [though] are lower than last year, perhaps indicating a reduced degree of fear amongst buyers this year.”

UBS, however, last month noted a “growing preference towards allocated gold” – gold held securely in a professional vault on behalf of its owner, rather than stored in its owner’s residence or safe deposit box.

Allocated gold providers BullionVault saw the volume of gold owned by its users grow 6.7% in August, hitting a new record of 24.3 tonnes.

By value, client-gold holdings at BullionVault rose by 20% in August to stand above $1.42 billion at today’s AM gold fix.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor
with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Aug. 31 (Bloomberg) — George Zachary, general partner at Charles River Ventures Inc., talks about venture capital investment strategies in the technology industry, Groupon Inc.’s initial public offering outlook and Twitter Inc.’s latest round of venture funding. Zachary speaks with Emily Chang on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

By Justice Litle, Editor, taipanpublishinggroup.com

The U.S. Dollar Index hasn’t been updated in years, and other vehicles give a broader perspective of how the greenback is doing.

When we talk about the dollar, we talk about the U.S. Dollar Index.

There’s almost no escaping it. The U.S. Dollar Index is the standard measure for the greenback, much as the Dow or the S&P is the standard measure for the stock market.

But what happens when an index gets outdated?

As The Wall Street Journal points out, the U.S. Dollar Index “hasn’t been adjusted in 12 years.” And the weightings in the index are strange. The numbers may fluctuate a little, but the following breakdown is roughly on point:

• Euro 58.6%
• Japanese yen 12.6%
• Pound sterling 11.9%
• Canadian dollar 9.1%
• Swedish krona 4.2%
• Swiss franc 3.6%

Immediate questions spring to mind with that mix. Where is the Australian dollar? Or the Chinese yuan? And the Swedish krona still has a stronger weighting than the Swiss franc? Really?

The biggest concern of all is that the U.S. Dollar Index has become a giant inverse-euro bet.

With such an overwhelming weighting towards euros (nearly 59%), the fortunes of Europe have a hugely outsized impact on the dollar. What’s more, if you chose to lump in the British pound and Swedish krona, nearly 75% of the index could be considered Europe-based.

“The U.S. Dollar Index was created by the Federal Reserve in 1973,” the WSJ reports, “and was meant to be a trade-weighted average of the dollar’s value as it freely floated against other currencies.”

While the index originally had a basket of 10 currencies, that number was dropped down to six with the introduction of the euro — and hasn’t changed since.

The U.S. Dollar Index is certainly still tradable. It’s the underlying basis for dollar-index futures, and thus also for the PowerShares dollar bullish and bearish ETFs (UUP:NYSE and UDN:NYSE respectively).

But it’s helpful to remember that, in terms of the question “What’s happening to the dollar?” the index does not necessarily give a full or accurate picture.

Sort of like the Dow Jones Industrial Average without Apple (AAPL:NASDAQ) or Google (GOOG:NASDAQ). Can we really say that such a limited slice represents the true market?

Also like the Dow and S&P, the U.S. Dollar Index is liquid, popular and deeply entrenched in terms of various trading vehicles tied to it. There is a “network effect” at work — the more traders and investors who pay attention to the index and use it as a proxy, the stronger its influence becomes.

The real acid test of the U.S. Dollar Index may come alongside seismic currency shifts in Asia. If the Japanese yen succumbs to debt crisis, for example, or the Chinese yuan moves to a new level of convertibility, the outdated composition of the index may have to be addressed.

In the meantime, it’s easy enough to get a rundown of “what’s happening with the dollar” through a handful of readily available instruments.

Here is a quick reference list:

• euro currency (FXE:NYSE)
• Japanese yen (FXY:NYSE)
• Canadian dollar (FXC:NYSE)
• Australian dollar (FXA:NYSE)
• British pound (FXB:NYSE)
• Swiss franc (FXF:NYSE)
• Mexican peso (FXM:NYSE)
• Swedish krona (FXS:NYSE)
• Chinese yuan (CYB:NYSE)
• Gold (GLD:NYSE)

All of the above are exchange-traded funds, or ETFs — some of them much more liquid than others. Each provides a snapshot of a single currency as traded against the dollar.

When one wants to “see how the dollar is doing,” it may make sense to quickly scroll through long-term charts of the above — if not the currency futures or spot forex pairs — as opposed to quickly glancing at the U.S. Dollar Index. If the euro and $USD are in gridlock but other important movements are afoot — like major moves in the franc, yen or Aussie dollar, for example — a scan of individual forex pairs will show it.

You may notice that the final entry, GLD, does not fit in with all the rest. Adding gold is somewhat tongue in cheek, but also a fair addition to the list, given the yellow metal’s longstanding role as a “neutral currency.”

So we’ll keep following the U.S. Dollar Index and considering the merits of the attached trading vehicles… but with recognition that it’s a bigger and more diverse world now.

Publisher’s Note: I want to give you a special bonus… a free trade. We met Brett Dolfman earlier this month after Jared Levy, the editor of our Option Strategies Weekly, introduced us. As a former floor trader and all-around options expert, Brett has a background almost identical to Jared’s.

If Jared has made subscribers strong, reliable gains… we figure Brett can too. Here’s what he recommends:

Even though Bernanke didn’t announce QE3 last Friday in Jackson Hole, WY, he did give some foreshadowing to the September Fed meeting. My sense is that a big announcement will come during that meeting and more easing will begin.

If it happens, a company like Cummins Inc. (CMI:NYSE) will benefit. Cummins exports a large portion of its products overseas, and a weaker dollar will be a plus for its sales.

CMI has taken a hit just like other equities during this “semi-meltdown.” I feel comfortable that CMI could get itself back to the $115-$120 level by October expiration. The bad news that has been coming throughout the economies of the world might actually be good news for CMI, since that will give the Fed Chairman more reason to act with his magic printing press.

My option choice is the CMI October 95 Calls @ $4.70 or better. If the move happens by October expiration, we could be selling these at $20-$25! October gives us enough time to let the scenario above take place. This is a trade that can get us on the right track for success!

Action to take: Buy the Cummins CMI OCT 95 Calls CMI111022C00095000 @ $4.70 or better.

I will keep a close eye on this trade and everything that could push momentum one way or another. Stay tuned for further updates.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed.

By Justice Litle, Editor, taipanpublishinggroup.com

Sept. 1 (Bloomberg) — Brian Jackson, a strategist with Royal Bank of Canada in Hong Kong, talks about the growth outlook for the global economy and emerging markets. Jackson speaks with John Dawson on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

By Aaron Tyrrel

Investing in copper stocks was a no-brainer back in 2009.

If you bought them then – and cashed in on the back of the 230 per cent rise in the spot price – well done!

But forget trying for easy money in copper stocks now…

Yes, demand is still strong. And supply is dwindling.

And the copper price probably won’t fall any time soon.

(In fact, it could still crack $10,000… even $11,000… a tonne. And even if copper fell to $6,000 a tonne, copper producers would still turn a tidy profit. That’s how good their margins are…)

But here’s what it boils down to…

Copper has had a great run.

• The spot price has more than tripled since January 2009…
• Supply is too low…
• Not enough new mines are coming online to meet demand…

Demand is huge.

The commodity data out of China shows demand is growing. Imports jumped 9.5% to a six-month high in July 2011. China’s imports of ‘copper scrap’… Which is just reclaimed copper from buildings and so on… Jumped to 306,626 tonnes at the same time.

And stockpiles are dwindling.

• Glencore reports copper stockpiles in bonded warehouses fell 50% in 2011, after they peaked in February.
• The Metals Economics Group says major copper discoveries have fallen ‘well short of what is needed to replace the copper produced’.
• And Morningstar predicts ’60% of today’s open-pit mines will deplete or go underground (at a higher-cost) by 2021′.

Copper is now only 12.5% from its two-year high. And in the highest price range it’s been in since 1998.

And that’s the problem… There’s ZERO upside.

When the copper price is rising, it’s like a floating tide that lifts copper stocks with it.
Demand is relatively strong. And risks to supply are rising. And because of that, prices are likely to be well supported going forward.

But you won’t make any easy money on the back of copper price rises.

Though if you’re prepared to do a bit of legwork, you can still make good gains.

Like if you find a stock about to get a takeover bid, you could see a healthy rise. (Like the $7.3 billion cash bid Barrick Gold offered to Equinox Minerals back in April.)

And then there are the explorers. They come out of nowhere, poke a few holes in the ground and if they hit something, their price could go anywhere.

Just take a look at what’s happened for Ventnor Resources.

Or what happened for Horseshoe Metals back in January.

So while the easy money has dried up for now, there are still profits to be made. And while copper stocks are probably no longer a ‘no-brainer’, with a little bit of thought, they still present good opportunities.

Aaron Tyrrell
Editor, Money Morning

Are Copper Stocks Still a ‘No-Brainer’?

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

By ForexYard

Economic news this week has pushed traders into a position of market pessimism. Little news has emerged which put a dent in the amount of pessimism surrounding the forex market, traders are now eyeing Friday’s NFP report before jumping into more significant investments.

Economic News

USD – USD Sideways as Sentiment Bearish Across the Board

The US dollar (USD) was seen trading sideways at yesterday’s close after a day of mixed news from the global economy. Mixed sentient towards risk this week was muddled even further as employment data in the United States disappointed traders with oddly bearish results.

Economic news this week has pushed traders into a position of market pessimism; though trading early in the week was acting as though no safe-haven could be found. Little news has emerged which put a dent in the amount of pessimism surrounding the forex market, traders are now eyeing Friday’s NFP report before jumping into more significant investments.

With a heavy news day expected from almost every major economy, traders will be witnessing abnormal volatility combined with reluctance among investors prior to Friday’s ever-important NFP publication. Following yesterday’s pessimistic data from ADP’s Non-Farm Employment Change report on the private sector, today’s unemployment claims will offer another piece of info regarding the employment sector of the US economy. Should it also support pessimism, traders may return mildly to safer assets and away from the USD until more light can be shed.

EUR – EUR Mixed as Bearish Sentiment Increases

The euro (EUR) was seen trading with largely mixed results yesterday as traders moved into and away from riskier assets across the region. Against the US dollar (USD) the euro was seen trading sideways in late trading as shifts away from the greenback, due to uncertainty about the US employment sector, caused several market participants to opt for other stores of value.

The mixed reports out of Europe yesterday have appeared to confound traders who were anticipating a string of bearish results. Though debt concerns still loom in the region, optimistic data has had the impact of muting the EUR’s losses against its primary basket of currencies. With a heavy news day expected today, traders should see some added volatility in today’s EUR market.

On tap today, traders will witness the release of a highly significant report from Switzerland and Great Britain, as well as several minor figures from the euro zone. Should the data come in bearish, we could see heftier shifts to safer assets in the days and weeks ahead. This would likely push the value of the EUR lower over the long-haul as traders flee risk.

AUD – Australian Data Expected to be Bearish

The Australian dollar (AUD) was weighed down yesterday, as market reports showed contraction across the boards. Piling atop recent reports on Australia’s shrinking housing sector, today’s publication of Australian retail sales show a broadening contraction striking several sectors of Australia’s economy.

Expectations for the retail sales report was for a modest growth of 0.3% from last month’s contraction of 0.1%. The actual report has led many investors to pull away from the Australian dollar (AUD) in recent trading. National data on housing and employment has also driven many investors away from the once-burgeoning AUD. This data, combined with dismal HPI and building approvals reports, has so far dragged the Aussie lower and looks to continue doing so this week.

Crude Oil – Crude Prices Holding Steady in Mid-$80s

Crude Oil prices held steady Wednesday as sentiment appeared to favor a downturn in global stocks ahead of a speculated double-dip recession. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and manufacturing demand.

An expected jump in dollar values due to this week’s risk averse environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains not materializing, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by the week’s end.

Technical News

EUR/USD

Last Friday’s candlestick posted an outside day up. The EUR/USD has followed up this price action by breaking out above the falling resistance line off of the May high and triggering stops that were lurking above the 1.4520 area. Initial resistance for the pair comes in at 1.4540. A close above 1.4700 would open the door to the May high of 1.4940. To the downside the euro may find willing buyers at 1.4325 where the 20-day moving average is located. Further support is found at 1.4260 off of the rising support line from the July low as well as the long term trend line at 1.3940.

GBP/USD

After failing to make a close above the 1.6550 resistance level sterling was sold only to find support at its 55-day moving average near 1.6210. Rising daily stochastics hint at an additional test of the range between 1.6550 and 1.6615. A break here may have scope to the April high of 1.6745. Should the 55-day average fail to contain the pair support is found at 1.6110 where the 200-day moving average is floating. 1.6000 may also prove to be supportive.

USD/JPY

The doji candlestick reversal has bought the yen some temporary respite from the selling pressure at the 76 yen level as the pair failed to test the all-time low last week. However, falling stochastics appear on both the weekly and monthly charts and hint at additional declines in the USD/JPY. A lack of support on the charts makes it difficult to find a target to the downside. A move higher could see resistance at last week’s high of 77.70 followed by 78.50 and the post intervention high of 80.20.

USD/CHF

The reversal of the USD/CHF continues and the pair is beginning to show additional bullish signs. Traders should eye the close of the monthly candlestick. As it stands now the candle is set to close on hammer pattern, a potential reversal pattern that hints at additional gains. The pair is testing the falling trend line from the February high at 0.8090 and if broken could turn into support as often occurs with previously broken trend lines. Additional resistance is found at 0.8270 followed by the 100-day moving average at 0.8340.

The Wild Card

Silver

Similar to gold silver prices have bounced from their lows near $38.70 after falling from a high of $44.20. However, unlike gold, spot silver prices failed to break below its rising trend line from July 1st which shows that the current uptrend remains intact. Forex traders should note that initial resistance is found at $44.20, followed by the high near $50. To the downside support comes in at the trend line near $39.00 and the August low of $37.

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.

The Banco Central Do Brasil dropped the Selic interest rate by 50 basis points to 12.00% from 12.50% previously.  In its statement, Brazil’s Central Bank Monetary Policy Committee (Copom) said: “Reevaluating the international scenario, the committee considers that there has been substantial deterioration, shown by, for example, generalized and large reductions in growth projections for the principal economic blocks.  The committee understands that this increases the chances that restrictions that are today seen in various mature economies will prolong themselves for a longer period than expected.” …”Therefore, the committee understands that the international scenario shows a bias toward disinflation on the relevant horizon.”