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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.


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.


Precious Gold Increased More Than 1 pct, Heads for Best Week in 1-1/2 years

Yellow metal was headed for its greatest weekly addition in one and a half years following increasing more than 1 percent on Friday as a mid-month plunge in prices prompt bargain hunting and a surge in physical buying across Asia.

Gold still attracted buying even though the price had bounce back more than $100 since declining to a two year trough of about $1,321 previous week, with dealers reporting a shortage in gold coins, bars, nuggets and other products.

Ronald Leung, chief dealer at Lee Cheong gold Dealers in Hong Kong said that there’s panic buying. Everybody is buying gold. It still has a chance to go up to $1,500 and maybe a bit more. $1,525 is then the big barrier.

It was floating to be up more than 5 percent for the week. Gold posted its biggest daily climb since June last year on Thursday, however was still down 12 percent this year.

Precious metal was up $7.30 per ounce at $1,474.29 by 0408 GMT, off an initial high of $1,484.81 its strongest since April 15.

It’s not simple to go back down to $1,400 as long as the physical market is still firmed. The thing is that there are no immediate stocks.

US gold futures for June delivery climbed as high as $1,484.80 per ounce.

International Monetary Fund said on Wednesday, bullion was also supported by prediction of more central bank buying following Russia and Turkey raised their gold reserves in March, increasing their holdings ahead of a spectacular plunge in prices this month.

Premiums in Singapore stayed at their highest since October 2008 at $3 per ounce to the spot London prices on demand from Indonesia, India and Thailand.

Premiums for gold bars in Hong Kong climbed to at their highest level since October 2011 this week, at rise to $3 an ounce to spot London prices, partly as of an increase in buying interest from China, the world’s second largest consumer following India.

The Indonesians have told me they should begin selling at above $1,450, however they are actually buying some this morning, while the amount is not great. Local demand in Thailand is still good, he also see a pickup in demand for silver.


Precious Metal Added Because Buyers Chase Gold

Gold shrugged off weakening US gold futures to jump as much as 1 percent on Wednesday as buyers snapped up precious metal, coins and nuggets following prices touched their lowest in more than two years the session before.

Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore said people are essentially buying everything, gold bars and gold coins. People are hurrying to get a hand on it, we have a problem meeting the demand as we are unable to get new supply.

Yellow metal strike a session high of $1,381.80 per ounce and was standing at $1,370.84 by 0611 GMT, up $3.05. Gold fall to $1,321.35 on Tuesday, has dropped almost 18 percent so far this year following an unbroken 12-year string of gains.

However gold is not out of the woods yet because investors continued to shift holdings from exchange traded funds, even as the growth in physical buying led to a shortage of precious metal in Hong Kong and Singapore.

There’s a vast backlog, it’s the same for silver. So far sentiment seems to be improving even the price has more or less stabilized.

PDR Gold Trust, the world’s biggest gold backed ETF stated its holdings knock down 0.73 percent to 1,145.92 tonnes on Tuesday from 1,154.34 tonnes on Monday. Holdings of global gold ETFs are currently at their weakest since late 2011.

The purchases pushed up premiums for precious metal in Singapore to their highest in 18 months at $1.70 per ounce to spot London prices, however demand from top consumer India was surprisingly low despite the wedding season.

Gold future for June delivery gave up $14.80 or 1%, to trade at $1,372 per ounce during Asian trading hours.

On Tuesday, gold climbed $26.30 or 1.9%, on the Comex division of the New York Mercantile Exchange. The advance followed two consecutive sessions of turn down which stripped prices of more than $200 per ounce.


Gold Heads for Third Weekly Fall, Firm Shares Reflect

Precious metal prices were stable on Friday however remained on track for their worst week since late February as strong equities lured investors seeking better returns, as outflows from exchange traded funds underlined the shaky attitude for gold.

CIMB regional economist Song Seng Wun said US equities have continued to defy gravity accumulation that the market had also shrugged off the threat of conflict with North Korea.

Usually, given growing tensions there will be flight to safety and bullion will benefit, however he suppose at this point, as they are mindful of the increased risk, nobody really think that the North Koreans will actually carry through on their threats.

Growing tensions on the Korean peninsula have done little to blend safe haven buying, while yellow metal could regain some of its luster if the newest US earnings season disappoints.

Yellow metal was stable at $1,560.84 per ounce by 0628 GMT, heading for a more than 1 percent turn down this week, its third such fall in a row.

Gold has fall about 7 percent so far this year, following increasing for the previous 12 years, lagging added of more than 11 percent in the S&P 500 index.

US government agency has stated North Korea has a nuclear weapon it can mount on a missile, accumulating an ominous dimension to threats of war by Pyongyang, however the assessment was quickly dismissed by several US officials and South Korea.

Dealer in Singapore, it’s a slim market and a two way business. Mean’s we are seeing both buying and selling today, buying is not extremely high from India. I would say there is not anything strange yet.

Gold future for June delivery fall almost $20 or 1.3%, to 3,561.50 per ounce, on track for a weekly drop of nearly 1%. US gold for June delivery was $1,560.90 per ounce, drop $4.00.


Bank of England And European Central Bank On Close calls of Easing

Mario Draghi used his frightening vocal involvement previous month to assist cut short an unwanted euro rally however the European Central Bank chief is suspect to announce any fresh method’s to deal with the euro zone’s modest economy on Thursday.

Frank Oland Hansen, senior economist at Danske Bank in Copenhagen said that they suppose the governing council to argue rate cuts, we think Mario Draghi is probable to open the door for a rate cut in the next few months.

But they expect that euro zone statistics will recover in the next months, in which case the ECB is doubtful to really deliver a rate cut.

Most economists suppose the ECB to leave rates on hold at its conference on Thursday, however pressure for additional easing is likely to mount in the wake of economic statistics that illustrates the region probable remains in recession in the current quarter.

Although many anticipate that the Bank of England to increased asset buys rapidly, following minutes of the February conference of its Monetary Policy Committee(MPC) , three of its nine members including Gov. Mervyn King had called for a 25 billion pound boost to £400 billion.

The BOE will announce the Monetary Policy Committee resolution’s at noon London time, or 7 a.m. The ECB’s policy statement will come at 7:45 a.m. Eastern, with Draghi’s monthly news meeting set to get under way at 8:30 a.m. Eastern.

The ECB has highlighted frequently that any country looking for aid via the OMT must abide by strict policy condition. With Italy’s disturbed politics it is not clear that whatever government ultimately appears would be capable or eager to abide by such strictures.

Richard Barwell, senior European economist at Royal Bank of Scotland said that they suppose Draghi to describe the particulars of life, it is not his liability to interfere in domestic politics, to dictate policy and smooth governments. However it is his responsibility to set down the conditions on which the ECB can offer support within its mandate and then stick to them.


Europe Steadies Following Italy clears Auction Assessment

Euro bond and shares prices stabled on Wednesday following solid demand at an auction of Italian government debt facilitate calm fears that political stalemate in Rome could reignite the bloc’s debt crisis.

Though paying more than half a point additional interest previous to the vote, Italy sold all 6.5 billion euros of the 5 and 10 year bonds it presented investors two days following an election presented no party a majority and rehabilitated worries over its finances, It could have chosen to sell less.

European stocks and Italian bonds briefly increased following the sale. Bonds of other euro zone countries suffering worries over their creditworthiness were also helped. Save haven German bonds chop down before recouping losses, as the euro dropped having just strike a session high of $1.3114.

Michael Leister, a senior bond strategist at Commerzbank in London said that a very strong auction on all accounts, mutually when we look at the pricing side and the demand side. The Tesoro packed the maximum amount, with 4 billion allocated in the new 10-year which is very strong.

Italian 10-year yields chop down 7 basis points to 4.83 percent in the secondary market, the Bund future was 18 basis points up on the day at 145.09 following the sale.

The reinforcement over Italy was somewhat offset by statistics from the European Central Bank which demonstrate bank lending to euro zone firms contracted for the ninth month in a row in January although its record low interest rates.


European Central Bank State Banks To Repay Less Than Forecast of Second Loan

ECB stated banks will pay back only half the quantity of emergency loans economists predicted, signifying financial institutions remains cautious of lending to each other.

Central bank stated in today’s statement that total 356 banks will return 61.1 billion euros which is equal to $80.5 billion of the ECB’s second three year loan on Feb. 27, the first chance for early refund.

Jan von Gerich, chief fixed income analyst at Nordea Bank AB in Helsinki said that expectations following the initial repayment of the first loan became inflated, the current number illustrates much improved how the banking sector is doing. They are seeing improvements however it is a slow procedure.

Ewald Nowotny, committee member told reporters in Riga that today ECB expected quite a substantial number, Executive Board member Benoit Coeure, remarks following the number was published.

The ECB stated nine banks will pay back a additional 1.7 billion euros from the first three year Longer Term Refinancing Operation subsequent week. That takes the total quantity of funds pay off early to 212.3 billion euros, or 21 percent of the generally amount lent. Banks can persist to repay the loans over next weeks.

Nick Matthews, senior economist at Nomura International Plc in London said that ECB will appropriate the repayment as long as banks make it for the right reasons. If banks are comfortable that they do not require the money anymore or can get funding in the market, it’s alright. The final thing you desire, while, is to observe banks rushing to repay only to get into trouble as they don’t have their funding in place.


German Bonds Climbed as Mario Draghi Stated ECB Can Remain Accomm

German government bonds climbed during this week, with 10-year yields tumbling the most this year following European Central Bank President Mario Draghi pointed that additional interest rate cuts remain a possibility.

The yield on Germany’s two year notes knock down the most in two months. Italian bonds turn down for a second week as former Premier Silvio Berlusconi, who resist the current government’s reforms, narrowed front runner Pier Luigi Bersani’s lead prior to this month’s elections. Spanish securities plunged for a fourth week as Prime Minister Mariano Rajoy faced calls to resign amid contested corruption claims.

Karsten Linowsky, a fixed income strategist at Credit Suisse Group AG in Zurich said that the Draghi made it clear that they are still accommodative. We still have some doubts regarding the events in Italy and also with what’s going on in Spain. When you have a bit additional uncertainty, you see spreads widen over the bunds benefit.

German 10-year yields knock down six basis points or 0.06 percentage point, to 1.61 percent at 5 p.m. London time on Friday, the greatest turn down since the period ended Dec. 28. The rate fall to 1.58 percent, the slightest since Jan. 25. The 1.5 percent security due in February 2023 added 0.575 or 5.75 euros per 1,000-euro which is equal to $1,337 face amount to 98.995.

Draghi further said in Frankfurt on Feb. 7 that the inflation risks in the euro region are contained and the risk to economic growth in the 17-nation bloc remains to the negative aspect. He was speaking following ECB policy makers kept the central bank’s main refinancing rate at a record low 0.75 percent.

Italian 10-year yields rose 22 basis points to 4.55 percent during this week, as the rate on alike maturity Spanish bonds augmented 16 basis points to 5.36 percent.


European Central Bank Says Banks to Repay More Than Predicted of 3-Year Loan

ECB said that during the coming week banks will pay back more of its emergency three year loans than economists predict in another sign the euro region’s debt crisis is reduction.

The Frankfurt based ECB stated in a declaration today, about 278 financial institutions will pay back 137.2 billion euros which is equal to 184.4 billion dollars on Jan. 30, the first prospect for early repayment of the early three year loan. That compares with the center prediction of 84 billion euros. The ECB’s first loan totaled 489 billion euros and banks can persist to make early repayments during the coming weeks.

Christian Schulz, senior economist at Berenberg Bank in London said that the ECB is taking back some of the extra liquidity it added into the banking system previous year. This is a stark difference to other central banks such as the US Federal Reserve, the Bank of Japan and the Bank of England, who are still blowing up their balance sheets, no doubt that the euro exchange rate is going up.

The ECB swamped financial markets with two tranches of so called Longer Term Refinancing Operations accumulating more than 1 trillion euros a year ago following banks stopped lending to each other because of Europe’s debt crisis. Banks have the opportunity of repaying the loans, which were offered at the average of the ECB’s standard rate over their extent after a year.

Nicholas Spiro, managing director of Spiro Sovereign Strategy Ltd. in London said that the more than anticipated loan refund number is a additional confirmation of the sea change in response toward the euro zone over the previous several months. Yet this is a double edged sword if it’s the start of a major extraction of liquidity at a time when the euro zone economy is in recession.