Gold Remains Above $1,300 Despite Pressure From US Data as Moody’s Downgrades Spain
Proactive Investors
Sergei Balashov
Gold remained strong despite a flurry of positive economic updates that were released today, triggering a rally in equity markets on both sides of the Atlantic.
US GDP growth estimate for the second quarter was revised upwards from 1.6% to 1.7%, while initial jobless claims fell 16,000 to 453,000.
An update on the Chicago PMI (purchasing managers index) also came in better than expected, showing an increase from 56.7 to 60.4, reflecting a higher manufacturing activity in the Midwest in September compared to August.
Gold is seen as the main safe haven asset and usually moves inversely to equities.
The upbeat US data more than offset the negative impact from another negative development in Europe’s fiscal situation.
Rating agency Moody’s today cut Spain’s sovereign rating from Aaa to Aa1, reviving fears over the debt situation in the euro zone, which have calmed over the past two months, easing pressure on the euro and European equity markets.
Spain’s downgrade provided enough support for gold to keep it above the US$1,300/oz level.
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Gold Hits Record High as Investors Eye U.S. policy
International Business Times
Gold rose to a record high in Europe on Thursday and was on track for an eighth consecutive quarterly gain as the dollar fell amid concerns over the prospect of further U.S. quantitative easing.
Strength in gold prices also helped lift silver to its highest level since 1980, palladium to a 2-1/2 year high and platinum to its strongest since May.
Spot gold reached $1,314.85 an ounce and was bid at $1,314.50 at 1018 GMT (6:18 a.m. EDT), against $1,308.80 late on Wednesday. U.S. gold futures for December delivery also hit a record $1,316.20 an ounce and were later up $5.50 to $1,315.80.
The precious metals are poised to build on their current rally ahead of further action from the U.S. authorities to bolster growth, analysts said.
"With quantitative easing, it is probably no longer a question of if, but when," said Daniel Briesemann, an analyst at Commerzbank.
"The other thing in the mind of investors is that there might be a war (of) currency devaluations in some of the main world currencies like the dollar, yen, and so on," he said. "That is supportive for gold as well."
The dollar fell to its lowest in five months against the euro and an eight-month trough versus a basket of six major currencies, weakened by concern that attempts by U.S. authorities to support growth could undermine the U.S. unit.
The dollar is on track for its biggest quarterly drop since the second quarter of 2002 against a basket of six other currencies, down 8.4 percent. The euro is up 11.3 percent, also its best performance since 2002.
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Gold Settles Near $1,309 as US Dollar Weakens
CNBC
Gold settled mostly flat Thursday, as the dollar weakened and the Federal Reserve stood ready to pump more cash into the U.S. economy to stave off double-dip recession.
Having hit its 11th record high in 13 trading sessions, gold was on course for a 5 percent gain for the month and the likelihood the Federal Reserve will pump more cash into the financial system to support the economy lifted silver as well.
Spot gold reached a record high of $1,315.80 an ounce and was last bid around $1,308, against $1,308.80 late on Wednesday.
U.S. gold futures for December delivery settled down $0.70 to end at $1,309.60.
Two measures of U.S. regional business activity beat expectations and a drop in weekly jobless claims supported the view that economic activity picked up in the third quarter, which boosted the dollar against a basket of major currencies and in turn weighed on gold.
However, this was unlikely to change the view that the world's largest economy is flagging, which bolstered gold's safe-haven status.
"In the United States, you've got a gradual grind on the economic side, so low GDP growth, the Fed likely to keep rolling over its balance sheet for a while and not increasing interest rates," said Bank of America-Merrill Lynch analyst Michael Widmer.
"In that environment, you have a lot of uncertainty and people are looking to increase their gold holdings."
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Dollar Set for Biggest Monthly Loss Since 2008 Versus Euro on U.S. Economy
Bloomberg
Yoshiaki Nohara and Ron Harui
The dollar headed for its biggest monthly loss since 2008 versus the euro as signs the U.S. economy is slowing damped demand for the nation’s assets.
The dollar was set for a quarterly drop versus all of its major counterparts before data forecast to show U.S. business activity and manufacturing slowed. Federal Reserve Chairman Ben S. Bernanke is scheduled to testify in Washington today amid speculation the central bank is preparing to buy more U.S. debt. The yen approached the strongest since the Bank of Japan intervened amid speculation exporters are bringing home overseas earnings before the end of the fiscal first half.
“America’s economic growth seems to be decelerating,” said Tsutomu Soma, a bond and currency dealer in Tokyo at Okasan Securities Co. “This is a negative factor for the dollar.”
The dollar was at $1.3602 per euro at 1:28 p.m. in Tokyo from $1.3627 in New York yesterday, when it touched $1.3647, the weakest level since April 15. The greenback has fallen 6.7 percent this month versus the euro, the most since December 2008.
The yen traded at 83.51 per dollar from 83.70, after reaching 83.49, the strongest since Sept. 15. Japan’s currency rose to 113.62 per euro from 114.06, after dropping to as low as 114.23, its weakest since July 29.
U.S. Data
The Institute for Supply Management-Chicago Inc. will say today its business barometer fell to 55.5 this month from 56.7 in August, according to the median estimate of economists in a Bloomberg News survey. Figures greater than 50 signal expansion. The ISM manufacturing gauge dropped to 54.5 this month from 56.3 in August, according to another survey before the data tomorrow.
The Fed announced following its Sept. 21 meeting that it’s prepared to do more to help the economy, spurring speculation policy makers will add securities to the central bank’s holdings under a policy known as quantitative easing.
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Gold Dips but Posts 8th Straight Quarter of Gains
Reuters
Frank Tang and Amanda Cooper
Gold dipped on profit-taking on Thursday after rallying to record highs, racking up its eighth consecutive quarterly gain as the Federal Reserve stood ready to pump more cash into the U.S. economy to stave off double-dip recession.
Having hit its 11th record high in 13 trading sessions, gold posted a 5 percent gain for the month and the likelihood of more U.S. monetary easing to support the economy lifted silver as well.
Two measures of U.S. regional business activity beat expectations and a drop in weekly jobless claims supported the view that economic activity picked up in the third quarter, which boosted the dollar against a basket of major currencies and in turn weighed on gold.
However, this was unlikely to change the view that the world's largest economy is flagging, which bolstered gold's safe-haven status.
"In the United States, you've got a gradual grind on the economic side, so low GDP growth, the Fed likely to keep rolling over its balance sheet for a while and not increasing interest rates," said Bank of America-Merrill Lynch analyst Michael Widmer.
"In that environment, you have a lot of uncertainty and people are looking to increase their gold holdings."
Spot gold scaled a record high of $1,315.80 an ounce and eased 0.1 percent at $1,307.85 at 1:28 p.m. EDT (1728 GMT). U.S. gold futures for December delivery fell $3.10 to
$1,307.20.
COMEX gold open interest eased but held near Tuesday's record at 619,408 lots, and the exchange estimated final gold volume at almost 150,000 lots, nearly 30 percent higher than its 30-day average, preliminary Reuters data showed.
Bullion investors took profits on the last trading day of the third quarter, as the dollar index turned higher after falling to an eight-month low.
There is market talk that the Fed, the Bank of England and the Bank of Japan would limit rises in interest rates, which would prove a positive for gold, which tends to benefit in an environment of loose monetary policy.
"With quantitative easing, it is probably no longer a question of if, but when," said Daniel Briesemann, an analyst at Commerzbank.
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Politics Versus Gold
By Thomas Sowell
One of the many slick tricks of the Obama administration was to insert a provision in the massive Obamacare legislation regulating people who sell gold. This had nothing to do with medical care but everything to do with sneaking in an extension of the government's power over gold, in a bill too big for most people to read.
Gold has long been a source of frustration for politicians who want to extend their power over the economy. First of all, the gold standard cramped their style because there is only so much money you can print when every dollar bill can be turned in to the government, to be exchanged for the equivalent amount of gold.
When the amount of money the government can print is limited by how much gold the government has, politicians cannot pay off a massive national debt by just printing more money and repaying the owners of government bonds with dollars that are cheaper than the dollars with which the bonds were bought. In other words, politicians cannot cheat people as easily.
That was just one of the ways that the gold standard cramped politicians' style-- and just one of the reasons they got rid of it. One of Franklin D. Roosevelt's first acts as president was to take the United States off the gold standard in 1933.
But, even with the gold standard gone, the ability of private individuals to buy gold reduces the ability of the government to steal the value of their money by printing more money.
Inflation is a quiet but effective way for the government to transfer resources from the people to itself, without raising taxes. A hundred dollar bill would buy less in 1998 than a $20 bill would buy in the 1960s. This means that anyone who kept his money in a safe over those years would have lost 80 percent of its value, because no safe can keep your money safe from politicians who control the printing presses.
That is why some people buy gold when they lose confidence in the government's managing of its money. Usually that is when inflation is either under way or looming on the horizon. When many people start transferring their wealth from dollars into gold, that restricts the ability of politicians to steal from them through inflation.
Even though there is currently very little inflation, purchases of gold have nevertheless skyrocketed. Ordinarily, most gold is bought for producing jewelry or for various industrial purposes, more so than as an investment. But, at times within the past two years, most gold has been bought by investors.
What that suggests is that increasing numbers of people don't trust this administration's economic policies, especially their huge and growing deficits, which add up to a record-breaking national debt.
When a national debt reaches an unsustainable amount, there is always a temptation to pay it off with inflated dollars. There is the same temptation when the Social Security system starts paying out more money to baby boom retirees than it is taking in from current workers.
Whether gold is a good investment for individuals, and whether the gold standard is the right system for a country, are much more complicated questions than can be answered here. But what is clear is that the Obama administration sees people's freedom to buy and sell gold as something that can limit what the government can do.
Indeed, freedom in general cramps the government's style. Those on the left may not be against freedom in general. But, at every turn, they find the freedoms granted by the Constitution of the United States hampering the left's agenda of imposing their superior wisdom and virtue on the rest of us.
The desire to restrain or control the buying and selling of gold is just one of the many signs of the inherent conflict between the freedom of the individual and the left's attempts to control our lives.
Sneaking a provision on gold purchases and sales into massive legislation that is supposedly about medical care is just one of the many cynical tricks used to circumvent the public's right to know how they are being governed. The Constitution begins, "We the people" but, to the left, both the people and the Constitution are just things to circumvent in order to carry out their agenda.
Copyright 2010, Creators Syndicate Inc.
this story originally published here
Dollar Tumbles, Gold Hits Record High
AFP
The dollar sank against the euro and hit a record low point against the Swiss franc on Wednesday while gold struck a new all-time peak, as traders mulled possible US moves to boost its ailing economy.
Meanwhile in Asia, China's central bank pledged to increase the flexibility of its exchange rate just as US lawmakers were to vote on legislation that could punish Beijing for alleged currency manipulation.
The People's Bank of China promised to continue to implement an "appropriately loose monetary policy" and "increase currency flexibility", according to a statement on its website.
It also said it would "gradually improve the exchange rate setting mechanism."
The central bank's wording was almost identical to that used in a similar pledge in June. Since then, the yuan has risen by less than two percent against the US dollar.
The US House of Representatives was to vote later on Wednesday on legislation to expand the powers of the US Commerce Department by allowing it to impose tariffs when another nation is found to be manipulating its currency's value.
The measure enjoyed strong support from President Barack Obama's Democratic allies and their labour union supporters, as well as his Republican foes, and was expected to win approval.
US lawmakers have redoubled their accusations that Beijing keeps the yuan -- and therefore Chinese exports -- artificially cheap, driving US manufacturers out of business and costing thousands of US jobs.
In London, commenting on the weakness of the dollar, Rajesh Patel, a trader at firm Spread Co in London, said: "The dollar bashing continues unabated today."
He said: "Quantitative easing seems to be well and truly at the forefront of traders' minds."
He also said: "Gold is being brought along for the ride, as cheaper dollars makes gold more attractive."
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NY Gold Sets Another Record As Dollar Dips
Wall Street Journal
Matt Whittaker
Gold futures settled at a new record above $1,300 for the second-consecutive session Wednesday as expectations of more U.S. stimulus money boosted the metal as a perceived dollar and inflation hedge.
The most-actively traded gold contract, for December delivery, rose $2, or 0.2%, to settle at $1,310.30 a troy ounce on the Comex division of the New York Mercantile Exchange, marking the metal's 10th record settlement in the last 12 sessions. The contract hit a record intraday high of $1,314.80 in electronic activity overnight.
"Investor demand has been great," said Stephen Platt, analyst with Archer Financial Services in Chicago. "People are still very nervous in relation to potential quantitative-easing actions leading to inflation."
Expectations have ratcheted up that the Federal Reserve will further ease monetary policy. This so-called quantitative easing is expected to include the purchase of Treasurys, which would pressure the dollar and boost gold as a hedge against the potential devaluation of the greenback.
Some believe such measures, and similar ones from other nations, will eventually lead to inflation, benefiting gold as a hedge against rising consumer prices down the road.
"With governments such as Japan, the U.S., Switzerland, the U.K., Brazil, [South] Korea, Taiwan, China and many others internationally devaluing their currencies, there is a growing risk of inflation and indeed stagflation," according to a note from Dublin-based bullion dealer GoldCore.
The weakening dollar has also been supporting the dollar-denominated metal by increasing demand from buyers using other currencies.
Ultra-low interest rates have been another leg of support for gold by reducing the opportunity costs of holding the metal, which pays no interest itself.
Meantime, fears about euro-zone sovereign-debt issues have also been boosting gold as a so-called safe-haven investment, as have wider worries about the slow pace of the U.S. and worldwide economic recovery.
Jitters came this week as Moody's Investors Service downgraded the debt of Anglo Irish Bank, and a weekly German newspaper reported European Commission officials were worried about the health of several regional banks there.
Gold is considered a safer bet than some other commodities and equities in times of financial uncertainty because the precious metal isn't as linked to industrial cycles as those other investments are.
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The U.S. Dollar Slide Must Continue
Seeking Alpha
Thomas Noon
The latest news is that the government is flooding the market with liquidity – quantitative easing – in order to fight another drop in GDP. The federal government funds their increases in money supply in two ways, a process known as "debt monetization".
Hundreds of years ago, one of the methods to issue more coinage was done by taking a bit of every dollar and using it to generate more dollars. Governments and kings thereby skimmed on the money supply, a process known as “coin clipping”. (In fact, the reason for those little knurls around the edges of coins is to avoid the coin being shaved around the edges of a tiny bit of gold, silver or nickel and then being passed off as the original coin.)
When the US national government does it, however, it is legal and, as far as we know, public and visible. The government "monetizes” its debt by borrowing from the Federal Reserve System, another part of the government. The government sells its bonds to the Federal Reserve; the Fed creates new bank deposits like the wave of Obi-Wan Kenobi’s hand and uses them to pay for the bonds. This process creates new money, thereby expanding the money supply; hence, it is called "monetizing" the government's debt.
Can more dollars be created without continuing to erode the value of those in circulation? Obviously not.
Another way to fund the debt is to borrow the money directly from the public or internationally by selling T-Bills. So far, this has been working since the crisis began in September, 2008 as people have been putting their money into low-interest T-Bills out of fear of economic uncertainty, sucking money out of bank deposits (thereby making commercial loans more difficult to find).
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Gold at Record High, Copper Crosses $8000
Commodity Online
Spot gold prices touched a new record high of $1313/oz today and were hovering around $1309/oz till 3.50 pm IST today. After breaching the psychological $1300/oz on Tuesday, the yellow metal prices continued their northwards journey today.
Economic data from the US yesterday indicated that consumer confidence index declined to 48.5 in September from the previous figure of 53.2 in August. This is reiterating that the US Federal Reserve would have to pump in more money into the system to support the faltering economy.
In its latest FOMC meeting this month, the Federal Reserve had indicated that it would provide further support through asset purchases and since then the US Dollar Index (DX) has been on a constant decline.
Copper prices breached $8000/tonne on the LME today and the red metal prices were trading at 8025/tonne till 4.30 pm IST.
Sharp decline in the DX continued to provide upside support to the red metal prices. Moreover, economic data from China today indicated that that manufacturing index increased to 52.9 in September from 51.9 in the previous month.
Increasing manufacturing activity from the world’s largest consumer raises hopes of demand for metals. Copper inventories continued to decline on the LME warehouse, providing further support to the prices.
Inventories of the red metal declined by 175 tonnes to reach 375,100 tonnes today.
Crude oil prices were trading in the green on the Nymex today, trailing around $76.41/bbl till 4.00 pm IST. Crude oil prices are awaiting the inventory data to be released by the US Energy department today.
On the MCX, crude oil prices declined marginally mainly because of the appreciation in the Indian Rupee. Spot Rupee gained more than 0.5% against the dollar today and this factor exerted pressure on oil prices on the Indian exchanges.
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