Month: March 2012

In focus this week: playing spin-offs to beat the market, natural gas in Africa and in pick-up trucks, finding bargains on the stock market and the SITFA.

Spin-offs

A Barron’s article this past week reported there are decades of evidence that support the idea that buying companies that are spun off is a sure way to beat the market.

According to the article, stockholders in the parent company sell off the new stock because they never intended to own the spin-off, but rather the parent company.

Wall Street doesn’t immediately cover the new company, so it falls off the radar for a while, which weakens the stock even more.

Both of these influences have historically made spin-offs a great deal.

But, despite all the evidence, this isn’t an area of the market that’s overrun by buyers. It is, in fact, largely ignored by the crowds. That’s a good sign!

Recent spin-offs like Trip Advisor, up 25% through February, and Post Cereal, up 15% in just a few weeks, are prime examples of how well this approach works and has been working for years.

But, the numbers indicate the best return, or highest rate of return, is during the first few months while the street is playing catch-up on the coverage and the new owners are selling off their stock.

An ETF that plays this segment has had just ok results because, according the authors of the article in Barron’s, they wait six months after the spin-off before buying onto the play. The numbers indicate they miss a big part of the price move by doing so.

Spin-offs, keep an eye on them, and early, too!

Natural Gas in Africa and Pickups

The Journal reported this week that Exxon and Statoil announced a huge new natural gas find in Tanzania. It’s called the Zafarani. This find of 5 trillion cubic feet of gas and another recent find by Italy’s Eni and the U.S.’s Anadarko in Mozambique are cementing East Africa as a major source of gas for the LNG market in Asia.

Exxon also just announced another gas find of 1.5 to 3 trillion cubic feet offshore in Romania.

That’s a lot of gas! We’ll soon have so much natural gas we’ll be paid to use it.

Combine all the gas we have here at home with the new finds in Europe and Africa, and any thinking person would have to wonder why we’re running our cars and trucks on gasoline. Natural gas, according to estimates, could run our cars for the equivalent cost of $1.50 a gallon, and here at home alone we have at least a 100-year supply. And, that’s growing almost daily with every new find.

Well, finally, finally, Ford, Chrysler and GM are beginning to offer vehicles that run on compressed natural gas.

It seems Honda has had a CNG Civic since 1998, and Chrysler will offer a bi-fuel CNG Ram truck in June (bi-fuel means it can run on CNG and gasoline as a back-up), and GM is offering a bi-fuel model truck in the third quarter. Ford has been offering CNG conversion kits for their vehicles for some time.

The GM and Chrysler models will run primarily on CNG and shift to gasoline if necessary for ranges of up to 650 miles.

Most of these trucks will be part of fleet operations, but the number of natural gas refueling stations, which is the big limiting factor for CNG cars, is growing and this could be the shift we’ve been waiting for to increase natural gas use and drive up the price.

I admit this is an early indication, but using natural gas for our transportation needs seems too obvious not to take off. To convert a vehicle from gas to CNG isn’t a big deal and is cost effective right now.

This could be the beginning of the end of gasoline as the primary transportation fuel in the U.S., at least for trucks, and it may be the catalyst we have been waiting for to push natural gas to the fore front.

Watch for the number of CNG vehicles manufactured and an increase in the number of refueling spots as big green lights. It will happen first in trucking.

This is the first really big shift in favor of higher NG use and higher prices in the future.

Bargains in What Looks Like a Pricey Market

The rosy economic news of late, just in time for the election, has finally pushed some investors back into the market, but on arrival they’re finding prices just a little high.

Robert Shiller, the Yale University economist, said in an interview this past week that the S&P 500 is at 15.8 times earnings. The long-term average is about 15.5, so we’re fully priced, at least according to historical standards.

Howard Silverblatt, Senior Index Analyst at S&P, says these full valuations may not hold since earnings growth has dropped from 16% last year to about 6% this year, and 6% growth in earnings may not be able to support these fully valued stock prices.

But despite high prices, the Journal insists financials are still cheap with about a 15% discount to the broad market. The Journal also likes techs. They appear to be fully priced except that their earnings are expected to grow at 10% this year not the 6% estimate quoted earlier. That gives them room to run a bit further.

Mitch Rubins of River Park Advisors, who was quoted in the same Journal article, dislikes financials that make their money by lending money, in other words, banks. He prefers the Blackstone Group. He likes its international exposure, the fact that it isn’t dependent on loans to make money and its 5% yield.

In technology, he likes eBay and Google over traditional equipment manufacturers. He especially likes their double-digit profit growth, the fact that they have more cash than debt and they’re priced in line with the market.

The Journal article also mentioned several high-yield bond funds and ETFs as plays, but as you all know by now, I think you should stick with individual high-yield bonds and avoid bond funds right now.

Individual bonds give you control over the price, leverage, which you should not have any of, and the average maturity of your bond holdings. Both the leveraged and bond funds with long average maturities will give folks a lot of heart burn in the next few years as rates move up.

In fact, I expect the average guy to take another bath, even bigger than the collapse, in bond funds and bond ETFs when rates finally move up. Leverage and maturities are the key here.

The focus is on financials not dependent on loans, profit growth, non-traditional tech stocks, avoid leveraged bond ETFs, and funds and long average maturities.

Shop wisely and keep an eye on the valuations.

And finally the SITFA, but before we get to it…

Last week at the CCR conference in Naples, Florida, a member accused me of making up these stories for the SITFA. He thought they were too funny to be true. I swear this is all true. I don’t think I could dream up this stuff. Most of them actually come from the Journal and Barron’s.

So, here we go!

This week it goes to the states that haven’t legalized medical marijuana. It seems those states are putting their citizens at greater risk than the states that have legalized it.

This is kind of a follow up to the Canny Bus story from last year. The guy who was delivering medical marijuana free in a VW bus. It’s in the archives. It’s really funny.

Anyway…

It seems the 13 states that legalized medical marijuana have seen significant reductions in the number of traffic accidents both with and without alcohol being involved.

There has been an 8.7% reduction in the number of auto accidents and a 12% reduction in accidents involving alcohol where marijuana has been legalized for medical use. That’s a big drop!

According to the authors of the story, the effects of pot on driving are not as well established as the affects of alcohol.

The study was completed by three economists at the Universities of Oregon, Montana and Colorado. They concluded that people who are stoned drive slower and avoid risky maneuvers. The authors described them as very mellow drivers and it appears they’re safer.

One other conclusion of the study was that the users were too busy eating Doritos to drive, except very slowly to their neighborhood food store, so that could contribute to the drop in accidents, as well.

Article by Investment U

The State Bank of Vietnam (SBV) cut the refinancing rate 100 basis points to 14.00% from 15.00% previously; also cutting the inter-bank rate to 15.00% and discount rate to 12.00% by the same margin.  The SBV said: “In response to the guidelines of the Government… on key solutions to realize the socio-economic development plan and state budgeting for 2012; on the basis of the downward trend of inflation and the capital supply-demand of the market, the Governor of the State Bank of Vietnam has issued Decision… to reduce key interest rates and maximum VND deposit interest rates for entities and individuals at credit institutions and foreign bank branches”

Last year the State Bank of Vietnam implemented a number of measures to counter inflation including rate hikes, a cap on bank deposit rates, an increase to the required reserve ratios on foreign currency by 100 basis points in June last year and lifted dollar reserve ratios 100 basis points in August.  The bank also increased its reverse repurchase interest rate by 100 basis points to 15.00% in May last year, and subsequently reduced the OMO rate by 100 basis points to 14.00%.  

Vietnam reported annual inflation of 18.1% in December, 22.42% in September, 23.02% in August, 22.16% in July, 20.82% in June, 19.78% in May, and 17.51% in April last year, according to the General Statistics Office.  Vietnam’s annual GDP growth rate averaged about 6 percent through 2011. The Vietnamese Dong (VND) is currently trading around 20,823 against the US dollar.

Investors will be digesting news from Europe this week in the hopes that the bond swap deal negotiated last week calms global markets. Good morning, this is Kristin Bianco with the Week Ahead Market Report for March 12, 2012.

By TraderVox.com

Despite fears of global economic slowdown following a disappointing trade data report from China, the greenback and the yen registered strong showing in the Asian session. Chinese trade data reported that exports grew by 18.4 percent which is less than 31.1 percent increase expected by many economists.

Trade data from China is especially important in the global economy since China is the largest exporter in the world. Analysts are now warning that there might be global economic slowdown later in the year if this trend continues. However, there are some analysts who are reluctant to place any significant weight on the trade data from Asia saying that the year-on-year growth for exports has been on the low since May 2010.

The Chinese trade data might augur the looming Euro area recession which is expected later in the year. Analysts have already warned that the recession might bring global economic growth to a halt, which will be one of a kind since the great recession. However, with the Greek debt crisis fairly resolved and the positive US jobs data released on Friday, some analysts have refused to accept the negative reports as signs of global economic slowdown.

The euro had dipped to its lowest of $1.3079 which is the lowest it had been since February 16. This coincided with the solid support at 55 day moving average for the euro. But some traders were wary of a close below 1.3080 which would prompt some hedge funds to augment short euro positions. The euro closed the Asia session at $1.3114. The strong showing of the dollar is as a result of safe haven appetite in the market after lower-than-expected Chinese trade data.

The yen increased against the dollar to close at 82.12 yen after rising to eleven month high of 82.65 yen 0n Friday. The strong yen and US dollar currencies have been viewed as signs for an increase in safe haven demand in the market.

Article provided TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

By TraderVox.com

Euro recovered against the US dollar during the US session as it has come above and trading stteadily above 1.3100 levels. The pair is currently trading around 1.3130, up about 0.12% for the day. The high so far is 1.3134 formed during the late European session. The support may be seen at 1.3100 and below at 1.3080 levels. The resistance may be seen at 1.3160 and above 1.3220.

Article provided TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

Since 3D bioprinting creates a product similar to human tissue, it could help pharmaceutical companies spot drugs that would fail long before they reach clinical trials.

What you’re about to read could change the world of medicine as we know it.

The technology I’m talking about is three-dimensional cellular construction, better known as 3D bioprinting, and the company delivering this revolutionary technology is Organovo (OTC: ONVO.PK).

Based in San Diego and founded in 2007, Organovo is a startup that looks to take regenerative medicine to the next level with its bioprinting technology.

How It Works

Organovo has created the NovoGen MMX Bioprinter™, the only commercial bioprinter in the world proven to create tissue.

Using both a software and hardware platform, NovoGen can take primary or other human cells and form them into three-dimensional tissue.

You might have heard of companies who are already in the 3D printing industry like Stratasys (Nasdaq: SSYS) or 3D Systems (NYSE: DDD), which can scan and make objects out of various materials. But what separates Organovo printers from others is that their ink is human tissue.

Here’s the “CliffsNotes” version:

The process involves taking a person’s cells, for example, muscle cells, and growing those cells in a culture. Once enough cells are present, an enzyme is applied that releases them from the growing surface and they’re loaded into a pellet-like structure.

The next step is incubation; this is where the cells start to attach to one another. After incubation, cells are placed into a nutrient broth in a Petri dish, where they feed and continue to attach. This is the beginning stage of solid tissue formation.

Next the forming tissue is sucked into a glass tube that serves as an ink cartridge and is loaded into the printer. With a computer-programmed script, the printer deposits the tissue into the desired shape.

The NovoGen will deposit the tissue one line at a time on top of a layer of gel.

Over a few days, the cells will merge into a single piece of tissue. After the tissue growth is entirely complete, it’s virtually identical to something removed from a human.

To date, the company has created several tissue types including lung, cardiac muscle and blood vessels.

So where’s the money in this?

Printing for Pharmaceuticals

Drug and biotech companies for decades have seen promising drugs fail in clinical trails.

Companies would see drugs initially tested in cell cultures and animals pass with flying colors, only to have them fail in clinical trials, since animals and cultures are extremely different from human tissue.

With Organovo’s 3D printing system, it becomes a new story for saving time and cost.

Since the NovoGen printer creates a product so similar to human tissue, it could help drug researchers spot drugs that would fail long before they reach clinical trials.

And knowing that a potential drug wouldn’t make it past clinical trials could possibly save drug companies billions of dollars.

The company is actively experimenting to prove that its 3D bioprinting technology can help drug companies identify drug toxicity before other tests. Organovo has already started the groundwork to set up partnerships with major drug companies, and first on their list is the drug giant Pfizer.

But it isn’t just drug companies that the company is targeting; they have bigger ideas in motion.

Implications for the Future

According to Donate Life America, more than 100,000 people currently need life-saving organ transplants in the United States. And another name is added to the national organ transplant waiting list every 10 minutes.

On average, 18 people die everyday due to a lack of organ transplants available.

And while organ donors provide a selfless act, out current system of transplanting organs from one human to the next still holds high chances of rejection.

Transplant rejection happens when transplanted tissue is rejected by the human recipient’s immune system. While rejections can be decreased by immunosuppressant drugs and finding molecular similarity between recipients and donors, they still happen frequently.

This is where Organovo hopes to step in and change the transplant game for good.

To date the company has only made small pieces of tissue, but the final goal is to use 3D tissue creating technology to print complete organs for transplants.

Organs could be created using a patient’s own cell, providing a lesser danger of transplant rejection. Moving forward, the company plans to finance organ-printing research with revenue received from tissue printing for drug makers.

Literally printing and growing a heart for someone using their own cells is something normally seen in science fiction, but with 3D bioprinting it could become a reality in the near future.

It’s no surprise that Organovo recently landed itself on MIT’s Technology Review’s 2012 list of the world’s 50 most innovative technology companies.

Investors should keep an eye on the company if they become successful in bringing their technology to the medical market at a significant scale, but take extra caution here as Organovo is still in its public infancy and volume on this microcap is extremely low.

Good Investing,

Ryan Fitzwater

Article by Investment U

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators increased their overall US dollar long positions last week while Japanese yen positions fell sharply for a fifth consecutive week and declined to their lowest level since April 2011.

Non-commercial futures traders, usually hedge funds and large speculators, added to their short positions in the euro, British pound sterling, Japanese yen and the Swiss franc while also trimming their long positions in the Australian dollar and the New Zealand dollar. The Canadian dollar and the Mexican peso saw higher long positions directly against the US dollar with both currencies showing multiple weekly gains.

Individual Currencies:

EuroFX: Currency speculators increased their Euro short positions after sentiment for the euro currency had improved for two consecutive weeks. Euro net short positions rose to 116,473 contracts against the currency on March 6th from the previous week’s total of 109,674 net short contracts.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: British pound sterling positions fell back as short positions increased after two weeks of improvements and seeing their best position since September, according to the data as of March 6th. British pound positions saw a total of 37,099 net short positions on March 6th following a total of 23,235 net short positions registered on February 28th. British pound sterling positions were at their best level on February 28th since September 6th when positions equaled 13,220 short contracts.

JPY: The Japanese yen speculative contracts continued their downward trend last week to fall for a fifth consecutive week and declined to their lowest level since April 2011. Yen  positions dropped to a total of 19,358 net short contracts reported on March 6th following a total of 1,203 net short contracts on February 28th. Yen speculative positions, now in short territory for second straight week, are at their lowest level since April 26th when positions totaled 36,997 short contracts.

CHF: Swiss franc speculator positions were virtually unchanged for the third consecutive week last week. Speculator positions for the Swiss currency futures registered a total of 19,478 net short contracts on March 6th following a total of 19,391 net short contracts as of February 28th.

CAD: Canadian dollar positions rose higher for a fifth consecutive week and are at their highest level since August. Canadian dollar positions rose to a total of 26,032 net long contracts as of March 6th following a total of 22,480 long contracts that were reported for February 28th. CAD positions are now at their highest position since August 2nd 2011 when long contracts equaled 41,037.

AUD: The Australian dollar long positions declined following two consecutive weekly increases. Australian dollar positions fell to a total net amount of 61,720 long contracts on March 6th after totaling 78,201 net long contracts reported as of February 28th. The AUD speculative positions on February 28th were at their highest level since Australian dollar long positions totaled 81,438 on July 26th 2011.

NZD: New Zealand dollar futures speculator positions decreased for a second consecutive week after they had risen for nine straight weeks through February 21st. NZD contracts fell to a total of 16,788 net long contracts as of March 6th following a total of 22,114 net long contracts on February 28th. NZD contracts on February 21st had passed the previous 12-month high level recorded on August 2nd when net long contracts totaled 24,126.

MXN: Mexican peso speculative contracts improved for a ninth consecutive week and are at the best position since August 2nd. Peso long positions numbered a total of 66,347 net long speculative positions as of March 6th following a total of 60,750 long contracts that were reported for February 28th.

COT Currency Data Summary as of March 6, 2012
Large Speculators Net Positions vs. the US Dollar

EUR -116473
GBP -37099
JPY -19358
CHF -19478
CAD +26032
AUD +61720
NZD +16788
MXN +66347

Other COT Trading Resources:

Trading Forex Using the COT Report

Automakers are pouring money into natural gas vehicles to take advantage of low natural gas prices. But will it pay off?

It sounds counterintuitive…

But by this summer, drivers could spend more money filling up their Toyota Prius than their Ram 2500 Heavy Duty truck, Chevrolet Silverado, or GMC Sierra 2500 Heavy Duty pickup.

That’s right. In the newest version of the Ram 2500 HD – coming out this July – drivers could save as much as $15 every time they fill up their tank compared to the Prius.

And that’s not all… This $15 savings only accounts for gasoline prices as of today. By July, who knows how high the price of oil will be and what impact that will have at the pump.

No, manufacturers didn’t just invent a new way to get great gas mileage from these heavy-duty trucks. And the U.S. government doesn’t have a secret hatred for the Prius, either.

So, then how can three gas-guzzlers cost less to fill up than a compact, fuel-efficient car like the Prius?

It’s all because of two words: natural gas.

Looking to the Future

If you’re unfamiliar with the natural gas vehicle market in America, you should know, it’s not very big.

According to the Associated Press, less than 0.1% of vehicles in the United States run on natural gas. That’s certainly not going to change within the next year or two… or even three or four.

But natural gas just may become a real alternative for the transportation industry sooner than anyone realizes.

For starters, 75% of the oil we use in America today, or just about 16 million barrels per day (bpd), is imported.

That means, at current oil prices, the United States spends about $624 billion every year just buying more foreign oil.

And of the oil we use each day, 70% or 14.7 million bpd, is consumed by the transportation industry.

It’s not rocket science. There’s simply no way we can sustain this path for the long term. And that’s exactly why natural gas powered vehicles make so much sense…

Let’s Just Get Started

Right now, gasoline prices are averaging about $3.80 per gallon. Meanwhile natural gas prices are trading around their lowest level in a decade. At the pump, compressed natural gas is as low as $2.13 per gallon.

With natural gas prices this cheap, interests in natural gas vehicles have spiked. For example, in Obama’s 2013 budget proposal, he offered to replace the current $7,500 electric vehicle tax credit with an advanced technology credit of up to $10,000. This legislation would include natural gas-powered vehicles.

Still, I can think of three more good reasons natural gas vehicles should replace cars that run on gasoline only…

1. You don’t have to buy a new car to convert:Natural gas conversion kits don’t come cheap. You could expect to pay just about $10,000 to have it done at an auto shop.

   But don’t be surprised to see more incentives provided by the U.S. government for consumers to convert their vehicles over to natural gas.

2. You won’t need to lose your regular gas tank: Most people don’t realize it, but natural gas-powered vehicles don’t necessarily have to run entirely on natural gas.

   For instance, MotorTrend reports the Dodge Ram 2500 HD “has a range of 255 miles on compressed natural gas and an additional 122 miles thanks to eight gallon gas tank.”

3. The United States is already falling behind:Many countries around the world – Argentina, Brazil, Pakistan, New Zealand and others – already use more natural gas vehicles than the United States.

   But competition and the United States’ natural gas boom should be plenty of incentive to start manufacturing more cars that run on natural gas and build more fueling stations.

Of course, there are challenges.

The Risks are Worth It

The biggest one that’s keeping natural gas vehicles from breaking through to the mainstream is the fact that you just can’t go fill up your tank many places.

As the Associated Press reports, “There are around 1,000 natural gas fueling stations in the U.S., but only half of them are open to the public.”

In fact, the Ram 2500 HD, Chevy Silverado and GMC Sierra 2500 HD are all examples of vehicles that won’t be for sale to the general public.

Yet, just remember this: As long as regular gasoline prices continue surging, you’re going to start hearing a lot more about natural gas fueling stations and natural gas fueled cars.

And it could pay off in a huge way down the road for switched on investors…

Good Investing,

Mike Kapsch

Article by Investment U

Share buybacks increased by 46% in 2011. Has there ever been a more bullish indicator?

There are a number of signals that bode well for price appreciation with individual stocks: growing market share, rising sales, strong earnings growth and improving margins…

But you shouldn’t overlook another excellent indicator: share buybacks.

According to Standard & Poor’s, U.S. public companies spent at least $437 billion last year buying their own shares back. That was 46% more than in 2010.

Is this a good thing? Absolutely…

Regardless of whether you’re an individual or a corporation, sitting on cash isn’t terribly rewarding these days with the average money market fund paying five one-hundredths of 1%. And if the outlook is uncertain, a business owner doesn’t want to commit to building new facilities or taking on employees that aren’t needed. Nor is it necessarily in the best interest of shareholders to distribute this cash in the form of taxable dividends.

So buying back shares often makes good sense. Why? Because when you divide net income into a smaller number of shares outstanding, you get greater growth in earnings per share. And, ultimately, that’s what drives share prices higher.

Of course, stock buybacks boost earnings per share only if they’re larger than stock issuance. Historically, that hasn’t always been the case. (Much executive compensation today comes in the form of stock options that have a dilutive effect on existing shareholders.)

But in recent quarters, the supply of shares outstanding has been shrinking. And, according to analyst Howard Silverblatt at Standard & Poor’s, during the current earnings season, 97 of the S&P 500 enjoyed a boost to earnings per share of at least 4% from repurchases alone.

More Buybacks Ahead

Expect to see more of these buyback announcements in the weeks ahead. Why? Because U.S. corporations are sitting on more than $2 trillion in cash. That’s enough to buy all of ExxonMobil (NYSE: XOM), Microsoft (Nasdaq: MSFT) and IBM (NYSE: IBM).

There are some caveats, however. Some companies announce their intention to buy back shares and then don’t follow through. If business conditions change, interest rates rise, or cash flow decreases, a repurchase program may never get completed.

The other thing to watch is the exercise of stock options, as mentioned above. If a company is only buying back enough shares to offset the dilution that occurs when executives exercise stock options, you won’t see the buyback boost earnings per share.

But, generally speaking, share repurchase programs are a decided positive. And right now, with money cheap and corporate earnings strong, buybacks are occurring at record levels. Attractive companies in the midst of major share buybacks right now include L-3 Communications (NYSE: LLL) and ConocoPhillips (NYSE: COP).

Having Your Cake and Eating it, Too…

Of course, some analysts would rather see corporate executives buying shares with their own money rather than the company’s money. And I don’t disagree…

But sometimes you can have your cake and eat it too. In a recent study, stocks that were subject to repurchases but not insider buying beat other stocks by nearly nine percentage points over four years. But stocks that were the subject of both repurchases and insider buying beat others by a whopping 29 points over four years.

Which companies have enjoyed share buybacks and insider buying recently? Two of them are Boston Scientific (NYSE: BSX) and Bank of New York Mellon (NYSE: BK).

These are the kind of companies that should handily outperform the market in the months ahead.

Good Investing,

Alexander Green

Article by Investment U

London Gold Market Report
from Ben Traynor
BullionVault
Monday 12 March 2012, 09:00 EDT

THE DOLLAR gold price fell back through $1700 an ounce as US markets opened on Monday, continuing its slide begun when Asian markets opened several hours earlier.

The silver price dropped to $33.63 per ounce – a 2.0% fall on last week’s close – while stocks and commodities edged lower and US Treasury bond prices gained.

By Monday lunchtime in London, the gold price was 1.2% below where it closed on Friday.

“Gold’s latest behavior has been rather volatile over the past week,” says the latest commentary from Swiss precious metals refiner MKS, adding that gold last week was “battered by the economic news.”

The gold price “continues to look vulnerable on the charts,” MKS adds.

“Gold looks to have recovered from last week’s technical dip,” says a note out Monday from ANZ Ban, “but remains vulnerable to correction within a broadly positive longer term trend.”

On the gold futures and options market, the net long difference between bullish and bearish contracts held by so-called speculative gold traders dropped 22% in the week ended last Tuesday, the latest figures from the US Commodity Futures Trading Commission show.

“As expected, net speculative length was dealt a severe blow,” says Marc Ground, commodities strategist at Standard Bank.

“This was mostly the liquidation that occurred after market expectations of liquidity growth were undermined by Fed chairman Bernanke as he failed to mention further quantitative easing in his address to US lawmakers the previous week.”

The Federal Reserve Open Market Committee is due to announce its latest monetary policy decision tomorrow, with some in the market wondering whether there will be a third round of quantitative easing.

“If there’s no QE3, then there will be disappointed selling again,” reckons Ronald Leung, director of Hong Kong-based Lee Cheong Gold Dealers.

Over in China, the world’s second-biggest gold consumer in 2011, exports in February fell 23.6% from the previous month – while year-on-year growth slowed to 18.4% – according to figures published Saturday. The fall in exports contributed to a trade deficit of $31.5 billion, “the largest monthly deficit since at least 2000” according to the Wall Street Journal.

“It is still very much necessary that the policymakers in Beijing provide sufficient support for funding for investments in the coming period,” reckons BNP Paribas economist Ken Peng.

During the last three months, the People’s Bank of China has twice cut the reserve requirement ratio for banks, which dictates how much money they have to hold as reserves as a proportion of total assets.

“Theoretically speaking, there is much room for RRR cuts,” PBOC governor Zhou Xiaochuan said Monday.

“But there are restraints, and we are paying particular attention to the possible impact on capital flows, especially in a time of economic globalization.”

Zhou said last week that the Yuan should be allowed to fluctuate in a wider range against other currencies, a move seen by some analysts as a way of encouraging Chinese firms to get used to managing exchange rate risk.

After Saturday’s export data however, the PBOC set the Yuan’s midpoint against the Dollar 0.33% lower on Monday. The move represented the second-biggest one day fall for the Yuan since China set up its foreign exchange market in 1994, with the biggest being the Yuan’s 0.36% fall in August 2010, newswire Reuters reports.

US lawmakers last year proposed a bill that would see tariffs imposed on Chinese imports into the US if China continued what some US politicians have called exchange rate manipulation.

In Japan meantime prime minister Yoshihiko Noda said today that the Yen remains “somewhat overvalued” despite falling around 8% against the Dollar since the start of February.

Japanese authorities intervened in the currency markets several times last year in an attempt to halt the appreciation of the Yen.

Japan’s finance minister Jun Azumi today added that the authorities “will take firm action against excessive and speculative moves” by currency traders.

Here in Europe, the International Swaps and Derivatives Association confirmed Friday evening that the use of collective action clauses by the Greek government to force some investors to go along with a bond swap constitutes a credit event. An auction has been scheduled for March 19 to determine the recovery value of outstanding Greek debt, and thus determine how much credit default swaps should pay out.

Eurozone finance ministers meantime are due to sign off Greece’s €130 billion second bailout when they meet today, enabling Greece to meet maturing bond payments next week. Finance ministers are also expected to discuss Spain, which last week said it will ignore its European Union deficit target for 2012.

Over in the US, the national average price for a gallon of gasoline rose above $3.80 on Monday, up from $3.77 last week and $3.51 a month back, according to motoring organization AAA.

The Organization of the Petroleum Exporting Countries (OPEC) said Friday that it is still exceeding its production target despite a fall in production from sanctions-hit Iran.

The value of all commodity assets under management rebounded in January to $366.8 billion – equivalent to over 2% of US GDP – according to a report by French investment bank Societe Generale.

The report adds that “aggressive monetary policy” should benefit gold and silver prices, news agency Bloomberg reports.

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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