Browsing all articles tagged with inflation
Jun
1

Gold falls 1.6 Percent Notches Second Sharp Monthly Loss

Precious metal knock down almost 2 percent on Friday following US data showing low inflation and improving consumer confidence dampened investor interest, with gold notching sharp losses for a second consecutive month.

A combination of declining fund interest, option expiration and squaring of books following investors covered short positions also sent open interest in US gold futures to its lowest in approximately four years traders said.

Data showing a six-year high in consumer sentiment weighed on yellow metal a traditional safe haven.

Carlos Perez-Santalla at brokerage Marex Spectron said that the metals were previously under pressure going into the end of the month as many people have a lot of short positions outstanding and the consumer confidence statistics just added fuel to selling.

Spot gold knock down 1.6 percent to $1,390.80 per ounce by 3:17 p.m. EDT (1917 GMT), its largest one-day loss in two weeks.

US Comex gold futures for August delivery settled down $19 at $1,393 per ounce, with trading volume almost 30 percent below its 30-day average.

Yellow metal had gained more than 3 percent in the previous three sessions as discouraging US growth data and jobless claims figures boosted expectations for continued Federal Reserve stimulus.

However for the month of May, precious metal fall 5.8 percent following April’s decline of more than 7 percent. On Thursday, CME data showed Comex gold futures open interest inched up less than 1 percent to 385,901 contracts, hovering near its weakest level since September 2009. The market gauge was 13 percent lower versus 445,517 lots previous Thursday.

Economic optimism and increasing investor interest in better-performing assets such as equities explained decreasing interest in the safe-haven metal.

Holdings in the SPDR Gold Trust, the world’s biggest gold backed exchange traded fund, remained unchanged at 1,013.15 tonnes on Thursday, following increasing for the first time in three weeks on Wednesday. However these are still near four-year lows, having lost almost 337 tonnes in 2013 so far.

Jun
1

Record Unemployment Low Inflation Highlight Europe’s Pain

Unemployment has reached a new high in the euro zone and inflation remains well beneath the European Central Bank’s target, pacing pressure on EU leaders and the ECB for action to stimulate the bloc’s sickly economy.

Joblessness in the 17 nation currency area climbed to 12.2 percent in April, EU statistics office Eurostat stated on Friday spoting a new record since the data series began in 1995.

With the euro zone in its greatest recession since its creation in 1999, consumer price inflation was far lower the ECB’s target of just below 2 percent, coming in at 1.4 percent in May slightly higher then April’s 1.2 percent rate.

That augment may quieten concerns regarding deflation, however the deepening unemployment crisis is a threat to the social fabric of the euro zone. Almost two-thirds of young Greeks are not capable to find work exemplifying southern Europe’s lost generation.

Policymakers and economists including Germany’s finance minister Wolfgang Schaeuble have stated the greatest menace to the unity of the euro zone is now social collapse from the crisis, rather than market-driven factors.

In France, Europe’s second biggest economy, the number of jobless rose to a record in April while in Italy the unemployment rate hit its highest level in at least 36 years, with 40 percent of young people out of work.

Thousands of demonstrators from the anti-capitalist Blockupy movement cut off access to the ECB in Frankfurt on Friday to protest against policymakers handling of Europe’s debt crisis.

Some economists suppose the ECB, which meets on June 6 will have to go beyond an additional interest rate cut and consider a US style money printing program to breathe life into the economy.

Nick Matthews, a senior economist at Nomura International in London said we do not expect a strong recovery in the euro zone. It puts pressure on the ECB to deliver even more conventional and non conventional measures.

May
25

Gold Fall, however 2.15 percent Weekly Rise Biggest in a Month

Precious metal turned modestly lower on Friday as some players exited positions ahead of a long US weekend however registered its largest weekly percentage gain in a month, supported by a fall in stock markets and a softer US dollar.

Comments from a Federal Reserve official that dampened talk the US central bank is set to restrain monetary stimulus also underpinned yellow metal prices, which stuck to a fairly tight range.

Spot gold was down 0.23 percent at $1,387.51 per ounce by 2:37 EDT (1837 GMT), slightly lower than $1,390.40 late on Thursday. It remained up 2.15 percent on the week, its largest weekly rise since late April.

COMEX June gold futures closed at $1,386.6 per ounce, drop $5.2 or 0.37 percent and held about those levels in after-hours business.

Bullion got a boost this week from declining equity markets, which in Europe on Thursday posted their largest one day drop in nearly a year. On Friday, US stocks knock down for a third day, putting indexes on track for their first negative week since mid-April.

Robin Bhar, metals analyst at Societe Generale Group in London, a weaker greenback combined with continued QE, some physical buying at the lower levels out to China in particular all of those factors have helped precious metal in the last few days.

QE refers to quantitative easing, or the Federal Reserve’s program of buying almost $85 billion per month in debt to keep US interest rates low and stimulate the economy.

The US dollar extended its decline against the yen and was on track for its largest weekly loss in three years against the Japanese currency. The euro climbed 0.7 percent this week against the dollar its first weekly addition in three periods.

During the US session, precious metal ventured into negative regions with some players reluctant to hang onto a long gold position over the extended Memorial Day weekend in the US, given the newest uncertainty about Federal Reserve policy.

Speculation the Fed would scale back its monetary easing program evaluate on yellow metal this week after Fed Chairman Ben Bernanke stated the central bank could start scaling back its $85 billion in monthly bond purchases in the next few meetings.

But, St. Louis Fed President James Bullard stated on Friday that US inflation would have to pick up before he voted to scale back stimulus.

Bhar said there’s a lot of uncertainty, there’s still no better than 50/50 chance that the Fed will unwind its stimulus or that the economy performs as they expect it will.

May
25

German Economy to Pick up Although Fall Short of Traditional Pace

Germany’s economy will recuperate from a bout of winter weakness however fall well short of the dynamic growth rates of previous years as euro zone recession and global slowdown stunt investment and exports.

There are homegrown problems too. What hue of government will result from September elections is injecting doubts and foreign investors cite worries regarding over-regulation and Germany’s future energy mix after Chancellor Angela Merkel turned her back on nuclear power.

Europe’s paymaster was long flexible to the euro debt crisis but contracted at the end of previous year and only eked out meager growth in the first quarter.

The Bundesbank stated this week a solid second quarter recovery was in prospect. Construction is expected to bounce back following a harsh winter and private consumption will grow thanks to low unemployment inflation-busting wage boost and low interest rates.

Although even the government forecasts just 0.5 percent growth in 2013 and economists doubt German companies will start investing heavily in the short term.

Christoph Schmidt, head of the German Council of Economic Experts, nobody expects strong growth for this year now particularly as the first quarter was so sobering, advisors to the government known as the wise men.

The economy grew just 0.1 percent in the first quarter following shrinking 0.7 percent in the previous three months of 2012.

Schmidt said trade will not contribute much, it could even drag on growth so that leaves domestic demand, private consumption is comparatively stable however investments are restrained and the key question will be when and how much they pick up.

May
2

Precious Metal Holds Near 1 week Low, ETFs Outflows Persist

Precious metal held near its weakest level in practically a week on Thursday, following declines in holdings of exchange traded funds, equities and other commodities overshadowed the US Federal Reserve’s decision to uphold its loose monetary policy.

Prices fall $225 per ounce between April 12 and 16 on fears of a withdrawal of the Fed’s monetary stimulus and after the International Monetary Fund and the European Central Bank asked Cyprus to sell reserves as part of a bailout deal.

While the Fed’s money-printing to buy assets could stoke inflation, yellow metal has been overwhelmed by fears of sales by central banks and a fall in global bullion ETF holdings to their lowest since September 2009.

However this is unlikely to be sold on the open market. I consider another central bank will be buying it. China’s physical demand is still strong. This morning they are perhaps keeping a lookout to see where the market is going before purchasing.

Precious metal fell $3.05 per ounce to $1,453.69, having shed more than 1 percent in the previous session its largest daily drop since gold’s historic decline in mid-April. It smash a low of $1,439.74 on Wednesday, the weakest since April 25.

Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore said that people are more wary as yellow metal has been trading within the same trading band. Moreover, Europe has agreed on a loan deal for Cyprus, and one of the terms state that assets in bullion might be sold.

US gold for June delivery stood at $1,453.70 per ounce, climbed up $7.50.

In its statement subsequent a two-day meeting, the Fed reiterated it would carry on to buy $85 billion worth of bonds each month to support a moderately expanding economy that still has too high an unemployment rate.

Investors are now waiting for US non-farm payrolls report for April scheduled for release on Friday, which will signal the longer term predictions for the Fed’s monetary stimulus.

However instead of rallying on the news, yellow metal tracked other markets lower on renewed doubts over the Chinese and US economies following the latest economic data from both countries elevated doubts about the strength of the global economy.

The US economy is likely to have added 145,000 jobs.

March’s number chop down far short of expectations at 88,000, triggering a sell-off in riskier assets. Precious metal for June delivery added $9.70, or 0.7%, to $1,456 per ounce.

China’s factory sector growth eased in April as new export orders chop down for the first time this year, a private survey showed on Thursday, suggesting the euro zone slump and sluggish US demand may be risks to China’s economic recovery.

May
1

Yellow Metal Edges Down, Investors Cautious Ahead of Fed

Yellow metal ticked lower on Wednesday on a shortage of physical buying and as investors waited to see if the US Federal Reserve sticks to its stimulus programme to spur the economy, which may lift the metal’s appeal as a hedge against inflation.

Doubts that central banks money printing to buy assets will stoke inflation have been a key driver in boosting precious metal, which rallied to an 11-month high previous October following the Fed announced its third round of aggressive economic stimulus.

The Fed’s policy making committee ends its conference later in the day with a statement that could reflect recent weak economic statistics. Investors also await Friday’s non-farm payrolls data which will signal the longer term predictions for the Fed’s monetary stimulus.

Edward Meir, a metals analyst at futures brokerage INTL FCStone said that accommodative policies are generally seen as supportive for bullion, however as the events of the last few weeks have demonstrated, gold does not always move in lockstep with simple expansion in money supply.

In its place, it seems to pick up steam either as a result of disorder in the financial markets or on the back of higher inflation readings, neither of which seem to be dominant at this particular time.

Gold dropped $1.89 per ounce to $1,474.71 by 0602 GMT, with the market torn between expectations that the Fed will keep its current policy and daily outflows from exchange traded funds, as investors cut their exposure.

US gold futures for June delivery stood at $1,474.20 per ounce added $2.10.

SPDR Gold Trust, the world’s biggest gold backed exchange traded fund, said its holdings dropped 0.19 percent to 1078.54 tonnes on Tuesday, their lowest since September 2009.

However gold has recovered more than half of its $225 loss incurred among April 12 and 16, boosted by strong physical demand, especially in top gold consumers China and India.

The longer term trend has been broken to the downside. This fact is important as in a downtrend the default move of a price is lower in the absence of convincing fundamentals. With fundamentals only neutral, we think certain risk still persists.

Credit Suisse in a report said that with investment flows negative however monetary policy supportive, we consider a neutral fundamental rating is the most appropriate one. In contrast to neutral fundamentals, technical indicators are clearly negative.

Singapore and Hong Kong were closed for a holiday. A rush in buying of gold bars following the recent plunge in prices has led to tight physical supply in Asia.

In other markets, the US dollar eased on Wednesday as investors warily awaited the result of the US Federal Reserve’s policy meeting, although expectations the European Central Bank will cut interest rates on Thursday capped the euro.

Apr
30

Precious metal Down 1 percent; ETF holdings hit lowest Since Sept 2009

Precious metal fell 1 percent on Tuesday, falling into negative territory following some early bargain hunting, however daily outflows from exchange traded funds highlighted investor’s lack of confidence in the gold.

Tim Riddell, head of ANZ Global Markets Research, Asia said that from a technical point of view, while the rebound has been relatively solid it appears to be a more sustained correction of the drop that we saw from late March rather than a turn in trend.

Although yellow metal’s appeal as a hedge against inflation may be burnished by hopes the US Federal Reserve will continue its bond buying programme, flowing stock markets could tempt investors to ditch gold and shift to equities.

Actually what we need to see is a series of closes above $1,505 to take the pressure off, he added that a fall below $1,435 could trigger a favored technical pullback to $1,300 and potentially even as deep as $1,245.

US gold for June delivery gave up early increases and stood at $1,461.10, down $6.30.

US gold futures and Cash dropped to almost $1,321 on April 16, their lowest in more than two years, after a fall below $1,500 led to a sell-off which stunned investors, and encouraged them to slash holdings of exchange-traded funds.

Precious metal fell $14.18 per ounce to $1,461.61 by 0617 GMT.  It had increased slightly on Monday on expectations the Fed would keep the pace of its bond buying unchanged at $85 billion a month following less than expected US growth.

The SPDR Gold Trust, the world’s biggest gold backed exchange-traded fund, said its holdings dropped 0.22 percent to 1,080.64 tonnes on Monday from 1,083.05 tonnes on Friday to their lowest since September 2009.

A weak March employment report in the US and other softer signals from the economy seemed to kill off expectations the Fed could taper the pace of bond buying in next months.

Asian shares edged higher on Tuesday, a day after the S&P 500 index ended at an all-time high and as investor risk appetite was bolstered by expectations the European Central Bank and US Federal Reserve the will continue with growth supportive monetary stimulus measures.

The Fed is currently buying longer dated US Treasuries and mortgage backed bonds every month and is expected to vote to keep doing so at the conclusion of a two day policy setting meeting on Wednesday.

Fears that central banks money printing to buy assets will stoke inflation have been a key driver in enhancing gold, which rallied to an 11-month high in October last year subsequently the Fed announced its third round of aggressive economic stimulus.

Apr
29

Precious Gold Rises 1 percent, Holds near One Week High

Yellow metal rose more than 1 percent on Monday and held near its highest level in more than a week as a bounce back in prices from multi-year lows failed to control investor appetite for the gold’s, leading to a shortage in physical supply.

Current bleak US growth statistics that raised expectations the Federal Reserve will keep its current pace of bond buying at $85 billion a month also supported precious metal that is typically seen as a hedge against inflation.

However investors are still roiled by the very recent event of the tumble. The question is how supportable is this physical buying as at the same time, we are still seeing funds flowing out of yellow metal. Retail investors won’t be buying bullion in hundreds of millions of dollars like the funds.

Both cash gold and futures dropped to around $1,321 on April 16, their weakest in over two years, subsequently drop below $1,500 sparked a sell-off that encouraged investors to slash their holdings on exchange traded funds. They touched an 11 day high above $1,484 on Friday.

I don’t consider gold is out of the woods yet, however there’s room for upward correction. One of the reasons why precious metal has plunged so much was the strong signs of US economic recovery.

US gold futures which often give trading cues to cash metal, hit a high of $1,472.20 per ounce. By 0226 GMT, prices stood at $1,469.60 climbed $16.00. Spot gold gain $7.51 per ounce to $1,470.01.

Premiums for gold bars have jumped to multi-year highs in Asia as of strong demand from the physical market, which has led to a shortage in gold coins, bars, nuggets and other products.

In other markets, shares in Asia crept ahead on Monday however the US dollar lost ground to the yen as markets braced for a busy week for economic statistics and central bank policy meetings in the United States and euro zone.

Holdings on the biggest gold-backed exchange-traded-fund ETF, New York’s SPDR Gold Trust continue to drop, which was a sign investors have yet to reinstate their confidence in gold. The holdings are currently at their lowest since September 2009.

The current string of underwhelming statistics will strengthen the hand of the doves at the Fed and temper any talk of tapering back the bond buying programme. The policy setting Federal Open Market Committee will announce its decision at 1815 GMT on Wednesday.

Report by the Commodity Futures Trading Commission showed on Friday that yellow metal rallied to an 11-month high in October previous year after the Fed announced its third round of aggressive economic stimulus, raising fears the central bank’s money printing to buy assets would stoke inflation, money managers and Hedge funds trimmed their net longs in gold futures and options in the week to April 23 as investors reduced optimistic bets.

 

Apr
24

ECB poised to cut rates to help recession-hit euro zone

The European Central Bank is closer to inferior interest rates than at any time since it previous cut them in July 2012 and is likely to shave a quarter point off at its policy meeting coming week.

Senior sources involved in the negotiations say momentum is building for action to assist a euro zone economy which has fall back into recession, a move that some policymakers wanted to take earlier this year.

Inflation descending well below target gives the bank scope to act and a senior ECB official stated even Bundesbank chief Jens Weidmann, the most hawkish member of the 23 man Governing Council had an open mind.

Following the bank’s previous monetary policy meeting on April 4, ECB President Mario Draghi signaled that a cut could come soon when he stated that the bank stood ready to act to enhance the recession hit euro zone economy.

The ECB’s Governing Council meets in Bratislava coming Thursday one of two annual policy conferences outside Frankfurt. The 23 man body infrequently moves rates when it meets off base; however the bleak economic picture strengthens the case for action.

Any decision on whether to act in May will depend on the economic statistics. Benoit Coeure, a dovish member of the ECB’s core group of policymakers said on Monday the bank had not seen statistics pick up since its last rate decision.

The ECB expects a steady recovery in the euro zone in the second half of this year, subject to downside risks. Facts indicating the economy’s performance will be weaker than that scenario would strengthen the case for a rate cut.

Policymakers think a rate cut would have limited impact on the economy however would at slightest show they are supporting it. A decision to cut could well not be generally supported.

That marked the fourth time the German Composite PMI has dropped below 50, into contractionary territory since September 2008. On the preceding three occasions, an ECB rate cut has followed immediately following publication of the final data or the month after.

Apr
23

Euro zone Slump Moderates However German Uncertainties Appear

A sharp fall in German business activity overshadowed an easing slump in France in April, surveys showed on Tuesday, and lifting concerns over a further economic contraction in the euro zone.

Markit’s flash euro zone services PMI, an early gauge of business activity each month climbed to 46.6 in April from 46.4 in March, below the 50 line that divides growth from contraction however matching the predicted of economists.

Survey compiler Markit cautioned against taking the increased as a clear sign the region’s recession has bottomed out, pointing to a surprise turn down in German companies that form the backbone of the euro zone economy.

Chris Williamson, chief economist at Markit said that formerly we’ve seen Germany expand while other countries have contracted – notably Spain, France and Italy.

Currently it seems those contractions are being accompanied by a recession in the largest economy, Germany, and that will no uncertainty act as a drag on growth.

Williamson stated officials at the European Central Bank, which meets coming week to decide monetary policy, may be relieved to see the euro zone PMIs at least did not signal a promote deterioration this month.

The forward looking indicators suggest there are risks to the weakness for the contraction to gather pace. The euro zone economy contracted 0.6 percent quarter on quarter in the previous three months of 2012.

Comments by European Central Bank policymakers on Monday stressing declining inflation and poor growth prospects in the euro zone suggest the ECB may be leaning towards an additional cut in its main interest rate.

Confidence in services companies concerning the coming year slipped to the lowest level this year, with the business expectations index fall to 55.7 from 56.2 in March.

Consumer morale in the euro zone improved in April, the European Commission stated on Monday, however remained well below the currency area’s long-term average.