Thursday, September 29, 2011

Jump in Asia's Gold & Silver Demand Sparks

London Gold Market Report
from Adrian Ash
Thurs, 29 Sept 2011

Jump in Asia's Gold & Silver Demand Sparks "Logistical Blockage" as Berlin Approves Extra €88Bn in Euro Support

WHOLESALE PRICES for silver and gold gave back an early rally in London trade Thursday morning, trading at $1615 and $30.15 per ounce respectively as Eurozone stock markets rose after the German parliament approved extra financial support for weaker member states.

Both German and Greek government bond prices rose – as did the Euro – offering new buyers respective yields of 1.99% and 22.88% per year.

Commodity markets were mixed, as industrial metals slipped but Europe's benchmark Brent crude oil contract rose moe than 1% to $105 per barrel.

"The Double Top formation in gold remain our main technical focus," says the latest chart analysis from bullion-bank Scotia Mocatta.

"Only a close back above $1704 would remove the bearish outlook," it reckons, targeting a "measured move objective" off this summer's peaks above $1900 down at $1488 per ounce.

The last week's 8% and 17% drops in gold and silver prices continue to jar, however, with the surge in physical investment demand reported by retail bar-and-coin dealers in both Europe and North America, as well as with extended delivery times in London's wholesale bullion markets.

"The blockage is logistical," said a senior precious-metals trader in London to BullionVault this morning, pointing to strong shipping demand from Swiss refineries wanting 400-oz London gold bars to convert into kilo-bars for European and especially Asian buyers.

Advanced bookings for silver shipments to China ahead of the New Year are also rising, he said.

"Current [gold] buying momentum is much stronger than the respective comparable period in 2009 and 2010," agrees today's note from Standard Bank's commodities team, "matching levels last seen in August 2010 and February 2011."

This surge in demand "is broad-based throughout Asia," says Standard, and "particularly strong" from India – where next month's Diwali festival is traditionally associated with strong gold jewelry demand – while sales of gold scrap from existing owners "have been sporadic rather than consistent."

On the US gold futures market, in contrast – where derivative contracts are typically settled in cash rather than metal – "We expect [this week] will show another and sharper decline in net speculative [demand]," says the latest Precious Metals Weekly from London's VM Group for ABN Amro.

The falling silver price saw a 10% drop in speculators' "net long" position (of bullish minus bearish bets) even before last week's sell-off, according to VM's data, while as a proportion of all Comex gold futures contracts, the "net long" held by non-industry players fell from 40% at the start of August to barely 26% last week.

Yesterday saw the gross tonnage held to back shares in the SPDR Gold Trust – the world's largest gold ETF – end unchanged at 1242 tonnes, down 0.8% from a week ago and 6% below its peak of June 2010. By value, however, the SPDR Gold Trust's holdings have swelled by more than 22% since then to reach some $64.5 billion today.

"The German parliament is voting for too little, too late," said Fredrik Erixon of the European Centre for International Political Economy in Brussels today, as the vote in Berlin saw strong parliamentary approval for an extra €88 billion in German support – some $118bn – for the European Financial Stability Fund.

Germany will now guarantee up to €211bn ($287bn) in so-called "bail out" loans to weaker member states. Some 40% of respondents to Bloomberg News' latest quarterly survey see at least one member state quitting the 17-nation currency bloc in the next year, and more than 1-in-3 respondents foresee a global recession sparked by the Eurozone's debt crisis.

"You suddenly have a crisis of confidence and trust that's impacting markets and could hurt economies," says one respondent, chief investment officer at Halkin Investments in London, Jean-Yves Chereau.

"Politicians need to move ahead pretty quickly."

Lack of political leadership is a key factor driving gold investment, said HSBC precious metals analyst James Steel last week at the London Bullion Market Association's conference in Montreal.

Gold's 10-year rise to date "shows that the political and financial systems the world lives by aren't working," agreed another LBMA Conference speaker, John Fallon of Peer Capital Management.

Adrian Ash

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is head of research at BullionVault – winner of the Queen's Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2011

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

Tuesday, September 27, 2011

AUD/USD Bounce Extending - September 27, 2011

The exchange rate is oscillating within a narrow band with a bullish bias as it attmepts to break higher. At the range highs lies the R1 daily pivot at the lows is support and resistance at 0.9850. There is further resistance from the point and figure charts at 0.9850 and 0.9890. 

Meanwhile the daily charts are showing a possible falling 3-methods Japanese candlestick pattern, although it is not yet complete. The sideways consolidation currently unfolding today looks possibly like a continuation pattern rather than a reversal and it will probably break higher with a target at the 1.0000 level or the fibonacci 50% retracement level at 1.0010.

Analysis prepared by:

Joaquin Monfort
Forex4you analyst

EUR/USD Intraday Technical Level - September 27, 2011


Breakout BUY Level : 1.3562.
Strong Resistance : 1.3554.
Original Resistance : 1.3541.
Inner Sell Area : 1.3528.
Target Inner Area : 1.3496.
Inner Buy Area : 1.3464.
Original Support : 1.3451.
Strong Support : 1.3438.
Breakout SELL Level : 1.3430


Today EUR/USD has the support and resistance at 1.3451 and 1.3541 is accompanied by a strong support at 1.3438 and 1.3554 strong resistance; 

If today EUR/USD can break out and close below the 1.3430 level then this indicates considerableBearish  strength, while if the EUR/USD today can break out and close above the 1.3562 level then this indicates considerable Bullish strength . 

Alternatively you can trade in a way to open BUY position at the level of 1.3464 and 1.3528 for SELL position in which both  targets are at the 1.3496 level.

Performed by Arief Makmur, Analytical expert

InstaForex Companies Group © 2007-2011

Gold & Stocks Rally as "Hong Kong Housewives Queuing Up for Gold"

London Gold Market Report
from Ben Traynor
Tuesday 27 September, 08:30 EDT

Gold & Stocks Rally as "Hong Kong Housewives Queuing Up for Gold", New Eurozone Plan "Treats Symptoms, Not Causes"

U.S. DOLLAR prices to buy gold rose to $1676 an ounce Tuesday morning London time – a 9% gain on yesterday's spot market low – as stocks and commodities also rallied and government bonds fell as reports circulated that European officials were drawing up new plans to battle the ongoing debt crisis.

The price to buy gold has now recovered all of yesterday's losses.

"Housewives are queuing up outside jewelry shops to buy gold after the dip," says one gold bullion dealer in Hong Kong, citing local press reports.

"At the current level people are buying," confirms another Hong Kong dealer, Ronald Leung at Lee Cheong Gold Dealers.

"They believed what happened in the past few days was only a correction."

"We continue to believe that gold will push higher into 2012," says Walter de Wet, commodities strategist at Standard Bank.

"However, until short-term funding, especially in Europe has been resolved, we remain neutral on gold."

Silver prices climbed to $33.54 per ounce – 28.2% up on Monday's low.

Overnight deposits made by Eurozone banks with the European Central Bank – rather than with each other – rose to a two-week high of €165.12 billion yesterday, a 9.6% jump from Friday's figure. Overnight ECB deposits hit their 2011 peak on September 12 at €197.75 billion.

Eurozone policymakers are currently devising a plan aimed at providing assistance to distressed European banks, according to a report published by financial news outlet CNBC on Monday.

Stock markets surged Tuesday morning – with the FTSE up 3% and Germany's DAX up 4.4% by lunchtime – in what CNBC's Jim Cramer hailed the 'No More Lehmans' rally, in reference to the plan.

The plan reportedly involves the European Financial Stability Facility – the Eurozone's €440 billion ad hoc bailout mechanism set up last year – as well as the European Central Bank and the European Investment Bank, which is owned by the 27 member states of the European Union.

The AAA-rated EIB, according to its website, exists to make "long-term finance available for sound investment" – including microfinance and loans to small businesses.

Under the new plan, the AAA rated EIB would set up special purpose vehicle capitalized by funds from the EFSF. This SPV would then issue bonds to private investors, using the money received to buy troubled sovereign debt. The SPV's bonds could also be used by the institutions that hold them – such as banks – as collateral against loans from the ECB.

The EIB "is certainly not a bailout-institution for the Eurozone," adds Jim Reid, head of global fundamental credit strategy at Deutsche Bank.

"[We understand the] EIB's charter currently does not allow sovereign or bank bond buying...changes to the EU Treaty with regards to the EIB's mandate would require a lengthy political process...[which] may involve all 27 EU member states rather than just the single-currency ones."

"Buying bonds," adds Standard Bank analyst Steve Barrow, "or recapitalizing banks works on the symptoms of the problem, not the causes...Eurozone growth will stay weak, leaving periphery countries like Italy and Spain fighting an uphill battle whether the EFSF can buy large amounts of their bonds or not."

Senior members of Germany's Free Democratic Party, the junior partner in the coalition government, said on Monday they would not vote for any plan that involves leveraging the EFSF – a suggestion made earlier this month by US Treasury secretary Timothy Geithner.

Over in Greece parliament is due to vote Tuesday on a new property tax aimed at cutting the country's deficit – while tax collectors are set to join a 48 hour strike in protest at the tax and other austerity measures. Greece is still awaiting confirmation that it will receive the next installment of its bailout funding – without which the government expects to run out of money within weeks.

Second hand home sales in Beijing meantime have fallen 73% in the last year, according to Chinese media reports.

Also in Beijing, Chinese consumers were given the chance to buy gold from the country's first gold vending machine over the weekend – although the machine was soon switched off again as it was not producing receipts.

China has been the world's fastest-growing source of private gold demand in recent years, and is currently the world's second-largest market behind India, according to World Gold Council figures.

Ben Traynor

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.

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

GBP/USD Wave Analysis - September 27, 2011

In general as expected, during yesterday’s trading the GBP/USD currency pair continued to develop its upside correction. Thus we can suppose that the price is forming the inner wave structure of the 4th wave of the whole downside trend initiated August 19. 

At the same time, because of the extreme prolongation in the 3rd wave the future 5th will probably become shortened by trying to test the 53 figure level.

Performed by Alexander Dneprovskiy, Analytical expert
InstaForex Companies Group © 2007-2011

EUR/USD Point & Figure Signal - September 27, 2011

We have a new long-term target on the 50pip box-size point & figure chart for eurodollar. The double bottom break at 1.3450 has given an extremely bearish downside count of 1.1500. 

Yes - the figure is very low but this chart has given very reliable signals going back to the origin of the euro in 1999. 

The signals can be traded and have proven profitable when back-tested over 10-years: enter a short position at 1.3450 with a stop at the 1.4550 highs and a target at 1.1500.

Analysis prepared by:
Joaquin Monfort
Forex4you analyst

Friday, September 23, 2011

Why are the Markets So Hectic?

by Ben Traynor
Friday, 23 September 2011

Another horrible weak for investors right across the board. What's going on…?

WE HAVE SEEN another tumultuous week for global markets. Gold prices have been hit hard – with silver prices getting it even worse.

Stocks and commodities have also suffered – while US Treasury bonds have had to put up with Ben Bernanke 'Twisting' them.

The real story, however, is not about gold and silver...or stocks for that matter. The real story features two lead characters: debt and growth. The world economy has too much of the former, and not enough of the latter to pay it off with.

Four news stories – all of which appeared on Friday 23 September – provide a worrying snapshot of where we are in this crisis:

·         The Financial Times reports on UK 'mortgage prisoners' – homeowners unable to move because their houses are worth less than what they owe on them, and who are reliant on record low interest rates to make ends meet
·         US money market funds are dramatically cutting their exposure to the European banking sector
·         The European Union says it will speed up the recapitalization of troubled European banks
·         The central bank governors and finance ministers of G20 ministers issue a joint statement committing "to take all necessary actions to preserve the stability of banking systems and financial markets as required."

So far in this crisis, governments and central banks have managed to stave off a depression.

They've done so by undertaking extraordinary measures – record low interest rates, quantitative easing, buying up toxic assets, nationalizing banks, guaranteeing bank deposits etc. The aim was to ward off a debt-deflation spiral and a banking crisis. 

We had a recession, and some banks have failed, but the great systemic financial and economic crash has not materialized. Yet.

Policymakers avoided catastrophe in 2008 by transferring private sector debt to the public sector. Some of this was done directly – buying stakes in banks or relieving them of their toxic assets, for example. Other methods were (marginally) more subtle, such as stimulus programs aimed at stirring up some activity in the economic petri dish.

Of course, we all know the governments that undertook these policies didn't just have the money for them lying around. And with recession looming they were hardly likely to raise it from taxation. So, in time-honored fashion, they borrowed it – spending tomorrow's wealth today. In this way, the proceeds of future growth were appropriated for the needs of the present – while the liability for current debt was pushed into the future:

The solution policymakers came up with was to construct a two-way debt-wealth transfer mechanism. For this solution to work, it relies on their being enough future wealth against which to borrow. In other words, you need sustainable growth. It looks increasingly likely, however, that the world's major economies are heading for severe slowdown – with some heading back into recession.

Take China – a byword for miraculous rates of economic growth. Preliminary figures published by HSBC this week suggest China's manufacturing sector – its economic engine for three decades – contracted this month. Beijing-based economist Michael Pettis argues that China's economy will have to rebalance its economy away from government-directed investment and towards private consumption – a bumpy process that could see growth rates more than halve.

Fears are also mounting that China will have its own subprime crisis in housing, and that a bubble in local government debt is set to burst.

As for the west, the debt crisis in the Eurozone is being very well documented right now (see virtually any newspaper this week for further info, or read BullionVault's very own daily market reports).

Of deeper concern, though, is that the Eurozone – along with its economic powerhouse, Germany – also looks to be heading for recession. Preliminary data this week show both the service and manufacturing sectors are slowing in Germany – and contracting in the Eurozone as whole.

German GDP growth dropped to 2.7% year-on-year in the second quarter – a drop from 4.9% in Q1. 

Then we have the US, where GDP grew at an annual rate of 1.0% in the second quarter. One of America's great strengths, compared to Europe, may turn out to be its most dangerous flaw. European leaders have been criticized for their slow response to the crisis. The US, as a single nation, has shown itself able to act more decisively.

But swift, decisive action is only an advantage if you're doing the right thing. There's a growing sense that, actually, maybe the people in charge, well, aren't. They themselves don't seem to be sure.

The Bank of England's latest Quarterly Bulletin, which came out this week, contained a paper that looked at how effective quantitative easing has been in Britain. In amongst the various charts and tables are the following cautious paragraphs:

There is considerable uncertainty around the precise magnitude of the impact.

Translation: we don't know if it worked

It is difficult to measure directly the effects of monetary policy measures such as QE and so estimates of those effects are highly uncertain.

Translation: we can't know if it worked

The wider macroeconomic effects of QE are difficult to quantify.

Translation: we don't know what else it might have done

There's nothing inherently wrong with these statements – the Bank's economists are being honest. But these caveats illustrate a fundamental truth about the policy response to this crisis: no one really knows what its effects are.

This is something the Federal Reserve noted this week, when on Wednesday it announced its Operation Twist policy – and announcement that was followed by two days of market turmoil:

The maturity extension program will provide additional stimulus to support the economic recovery but the effect is difficult to estimate precisely.

It's difficult to predict because there's a very realistic chance it won't do anything at all for the economy. Growth could therefore stay mired at 'stall speed' – or even slip into reverse. 

Without growth, the debt-wealth transfer mechanism breaks down:

This, in fact, may be what we're seeing right now – and why the markets have had such a torrid time lately. We are watching a patched-together, hastily constructed machine fall apart in front of our eyes.

What will happen next? How will policymakers deal with debt if they can't rely on growth? And how might gold owners respond to all this turmoil? Find out more in Part Two next week...

Ben Traynor

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.

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