Browsing all articles tagged with Monetary
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
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
27

Gold down Still Posts Greatest Weekly Addition in 3 Months

Bullion knock down in choppy trade on Friday on as investors took profits, however the market still posted its greatest weekly gain in three months on strong physical demand following bullion hit a two year low previous week.

In untimely trade gold climbed more than 1 percent following the US Commerce Department reported that economic growth regained speed in the first quarter, however not as much as expected. Gold gave back those early additions and slipped into negative territory as options related selling kicked in, and losses in industrial commodities including copper and crude oil also weighed.

Gold has recovered more than half of the loss of $225 an ounce incurred among April 12 and 16.

Investors in exchange traded funds headed for the exits concerned regarding potential central bank sales of gold and uncertainty over the outlook for US monetary stimulus.

Erica Rannestad, precious metals analyst at the CPM Group said that there is still some long liquidation in the market, signifying that some investors are still repositioning themselves and that leaves the price susceptible to some sideways actions.

Spot gold was down 0.6 percent at $1,457.76 per ounce by 3:28 p.m. EDT (1928 GMT), off the session high of $1,484.80.

US gold futures for June delivery settled down $8.40 at $1,484.80 per ounce. Trading volume was almost 10 percent above its 30-day average.

Robin Bhar, Societe General Analyst said that GDP is encouraging for precious metal as the whole sell off in the yellow metal was linked to perceptions that the US economy was getting stronger and stronger.

US first quarter growth expanded at a 2.5 percent annual rate, less then economists expectations for 3 percent. In the meantime, a separate report on consumer sentiment demonstrates a drop from the previous month.

Silver also climbed early, striking a 10 day high of $24.82. Then it slipped down 1.7 percent in late trade to $23.91 per ounce.

Holdings of the biggest gold backed exchange traded fund, the SPDR Gold Trust dropped 0.25 percent to 1,090.27 tonnes on Thursday from 1,092.98 on Wednesday. Holdings are at their weakest level since September 2009.

Among platinum group metals, platinum added 0.4 percent to $1,472.49 per ounce, as palladium was down 0.4 percent at $677.25 per ounce.

Apr
25

Gold Rise to 1 Week High, Central Bank Purchases Hold up

Bullion climbed to its highest in more than a week on Thursday, enhanced by prospects of more central bank buying following a recent steep sell off in the gold, as a firmer euro also underpinned prices.

Turkey and Russia raised their gold reserves in March, the International Monetary Fund stated on Wednesday raising their holdings ahead of the spectacular plunge in prices this month that shocked ardent yellow metal investors and bulls.

Central bank purchases and surging physical demand helped precious metal bounce from a two year trough about $1,321 per ounce hit previous week. However daily outflows from exchange-traded funds, reflecting sagging investor confidence capped gains.

Gold reversed early losses and stood at $1,445.56 per ounce by 0621 GMT, climbed $14.76. It strike a high of $1,447.66 per ounce earlier in the session its loftiest since April 15 the day it posted its largest ever daily slump in dollar terms.

Bullion is torn between an increase in demand for jewellery and coins, and investors in ETFs cutting exposure because they became gradually more convinced the US Federal Reserve will look to end its bullion friendly bond buying programme by the end of 2013 or beginning of 2014.

Joyce Liu, an investment analyst at Phillip Futures in Singapore said if the price breaks above $1,447-$1,450 levels, there will be more upward momentum. If it does not we may see a further dip in precious metal prices.

Premiums for gold bars soared to multi year highs in Asia following a spate of physical buying ran down supplies, with dealers in top consumer India expecting a surge in imports this month.

Holdings of the greatest gold backed ETF, New York’s SPDR Gold Trust slump 0.38 percent on Wednesday from Tuesday, their lowest since late 2009.

Dealer in Singapore said strong physical buying in China is overflowing into Hong Kong. I heard if you have gold bars now people will buy them at $2.50 to $3.00 premiums.

US gold for June delivery climbed more than 1 percent to as high as $1,447.50, its largest since April 15, however some dealers cautioned the current rebound in cash and gold futures was far from sustainable.

Gold futures rise on Thursday in electronic trade, on track for a second consecutive proceed supported by strengthening physical demand for the gold and downbeat US economic figures.

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.

Apr
20

G20 Urges EU to Complete Banking Union Fast, Germany Digs in Heels

World financial leaders support the European Union on Friday to rapidly complete its banking union to help growth, however Germany stood firm that the next step toward such a union be through a risky and lengthy process a change of EU law.

The banking union is one of the key projects to improve the economy of the 17 countries sharing the euro, it would assist eliminate many of the problems that now hold back the flow of credit needed to finance a euro zone economic recovery.

Finance ministers and central bankers from the G20 leading economies said in a statement that the euro area the foundations of monetary and economic union should be enhanced, including through an urgent movement towards banking union.

The EU has previously made the first step it agreed that the European Central Bank would take over the administration of all banks in the euro zone from July 2014 in what is called the Single Supervisory Mechanism.

The next step is to agree how the euro zone will deal with closing down failed banks and how it will pay for that in the provisional period before enough fees from the financial industry accrue to cover the potential expense.

The idea is to use the euro zone bailout fund, the European constancy Mechanism to provide the necessary money for resolving failed banks in that era, however that means the use of euro zone taxpayers money.

The German government, which faces elections in September, consider that without a treaty change the potential use of German taxpayer money for winding down a bank in another euro zone state could give grounds to query it in the German constitutional court.

Wolfgang Schaeuble, German Finance Minister told reporters earlier on Friday that the German government is willing to change the treaties, the sooner, the better.

He said we should do what is necessary appropriately, one must have the strength to do so. The German government is strongly determined to go this way, there was a prospect the changes could be introduced through a simplified procedure to speed the process.

Apr
16

Gold miners face New Challenge in Sinking Gold Price

A steep slump in the price of precious metal will strike profits at mining companies that are already straining under increasing costs, and could prompt some miners to reorganize their capital spending.

Although lower prices are not possible to wipe out miners profits, they will squeeze cash flows because companies are still feeling the impact of pricey acquisitions made at the height of the commodity cycle.

Yellow metal companies big and small sold off on Monday and Tuesday as the outlook of central bank bullion sales and fears that the US might reduce monetary stimulus tipped spot gold prices off a ledge, to a more than two year low around $1,300 per ounce.

Canada’s Barrick Gold Corp, which was forced to suspend construction on the Chilean side of its massive Pascua Lama gold and silver mine previous week over environmental concerns, fall 10.4 percent to C$20.55 on the Toronto Stock Exchange.

Pawel Rajszel, Veritas Investment Research analyst, who is broadly negative on the sector said that everybody was take pleasure in the high tide, and now that the tide is coming down you are seeing who’s swimming naked and the thing is everybody’s swimming naked.

The largest declines hit small and intermediate companies, which usually have less flexibility to focus exclusively on high quality assets than major producers.

The S&P/TSX Global Gold index ended with decreasing 9.3 percent on Monday following touching its lowest point since late 2008.

However competitor Goldcorp Inc was down a comparatively modest 4.7 percent at C$28.66.

Evolution Mining, which owns five gold and silver mines in Australia, drop 17 percent on Tuesday on the Australian Securities Exchange, as Alacer Gold, with gold mines in Australia and Turkey slipped 10 percent.

But bullion prices appeared to be recovering a small piece of that rout on Tuesday with futures up $16.90, or 1.2%, to $1,377.50 per ounce.

Apr
13

Euro zone finance ministers Back 10 billion Euro Cyprus Bailout

Euro zone finance ministers backed a 10 billion euro bailout for Cyprus on Friday and the European Commission stated it would try to assist the island’s economy grow again with enhanced use of EU structural funds.

The ministerial support opens the way for numerous euro zone countries, including Finland and Germany to seek approval for the three year bailout in national parliaments, so that loan agreement with Nicosia can be signed by April 24.

The first tranche of the credit 9 billion of which will come from the euro zone and 1 billion from the International Monetary Fund will flow to Nicosia in mid-May.

The euro zone loans will have an average maturity of 15 years and highest maturity of 20 years.

The euro zone ministers said in a statement, The Euro group consider that the necessary elements are now in place to launch the relevant national procedures required for the formal support of the ESM financial assistance capability agreement for an amount of up to 10 billion euro’s, subject to IMF’s contribution.

To wrap its financing requirements over three years, Cyprus itself will have to come up with 13 billion euro’s of its own, with the mass of that sum coming from the closure of its Laiki bank and the reform of the Bank of Cyprus.

Olli Rehn told a news in conference that the amount that Cyprus would require to contribute on its own had been estimated a month ago at about 7 billion however the two sums were not directly alike, EU Economic and Monetary Affairs Commissioner.

If you seem at these two figures of 17 billion and the 23 billion for program financing, they are not strictly comparable as the construction of the first and second, or final package are different.