U.S. Stocks Decline Amid Economic Reports
Bloomberg
U.S. stocks fell, a day after the Standard & Poor’s 500 Index failed to hold at an almost four- year high, as sales of previously owned houses missed estimates and data from Europe and China spurred economic concern.
Stocks pared losses after Greece’s finance minister said yesterday’s approval of a bailout means the nation is tied to the euro area. Toll Brothers Inc. (TOL) and KB Home dropped more than 2.7 percent to pace a slump in homebuilders. Dell Inc. (DELL) sank 6.1 percent as its sales forecast missed estimates. Financial shares had the biggest decline in the S&P 500 among 10 groups, falling 1.1 percent. Gannett Co. (GCI), the owner of 82 newspapers including USA Today, surged 4.4 percent as it will boost its dividend.
The S&P 500 retreated 0.1 percent to 1,360.89 at 2:19 p.m. New Yorktime, paring an earlier loss of as much as 0.5 percent. The Dow Jones Industrial Average declined 1.25 points, or less than 0.1 percent, to 12,964.44 after the 30-stock gauge rose above 13,000 (INDU)yesterday for the first time since 2008.
“You can ride this, but you’ve got to be very careful and sit near the exit,” David Darst, the New York-based chief investment strategist at Morgan Stanley Smith Barney, said in a telephone interview. His firm has $1.6 trillion in client assets. “Most of the economies are slowing. Earnings will be slowing. The market is overbought on a short-term basis.”
Stocks fell as purchases of previously owned homes climbed to a 4.57 million annual rate, less than forecast, data from National Association of Realtors showed. European services and manufacturing output unexpectedly shrank in February. China’s manufacturing may shrink for a fourth month, according to data from HSBC Holdings Plc and Markit. Fitch Ratings lowered Greece’s credit rating and said a default is highly likely.
Trimming Losses
Equities pared losses as Greek Finance Minister Evangelos Venizelos said yesterday’s decision by euro area finance ministers to approve a second rescue package for the country bound Greece to the euro and the euro area. Greece sealed a 130 billion-euro ($170 billion) bailout package by agreeing yesterday to austerity measures while reducing its bond principal by 53.5 percent as investors swap into new securities with longer maturities and lower coupons.
The S&P 500 yesterday failed to hold above its April 2011 peak of 1,363.61 (SPX), which was the highest level since June 2008. The index has rallied 3.6 percent in February and is poised for a third straight month of gains, the longest streak in a year. The monthly gain has extended this year’s advance to 8.2 percent amid higher-than-estimated U.S. economic data and profits and expectations Europe will tame its crisis.
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The Enduring Popularity of Gold
GoldSeek
The World Gold Council (WGC) reaffirmed the power of the Love Trade in its 2011 Gold Demand Trends report released this week. Gold demand grew 0.4 percent in 2011 despite a 28 percent year-over-year increase in bullion’s average price.
After flirting with the top spot for some time, China emerged as the world’s largest gold market for jewelry and investment during the fourth quarter of 2011 as demand in India weakened. This is the first time China’s demand outpaced India’s in 11 quarters. However, India did retain the gold demand crown for the entire year, purchasing 933 tons compared to China’s demand of 770 tons.
I always say the trend is your friend, and I believe China’s increasing demand for gold is one trend that is just getting started. Although gold imports from Hong Kong were cut in half in December, HSBC Global Research reports that overall gold imports from Hong Kong were 10 times the historical average from January through November 2011. HSBC expects a continued rise in Chinese incomes will keep demand at a robust pace. The WGC sees domestic demand for gold jewelry and investment driving 20 percent growth in Chinese gold demand during 2012.
China should consider its leadership as the No. 1 gold market a short-term position, though. While China’s presence in the bullion market is strong and growing for jewelry and investment, India’s ancient relationship with the yellow metal is such that “domestic drivers of demand are largely independent of outside forces,” says the WGC. The WGC does not see India’s role in the gold market diminishing over the long term.
Ajay Mitra, the WGC’s managing director for the Middle East and India, recently expressed India’s strong ties with gold in a 60 Minutes feature. Gold has always been a part of India’s history, culture and tradition. I have witnessed firsthand the strength of this bond many times over the years. As the famous saying goes, “no gold, no wedding.”
Don’t Forget About the Fear Trade
The Fear Trade was also recently reaffirmed by the Federal Reserve when it publicly stated its intention to keep inflation at “exceptionally low levels” through 2014. Inflation is the kryptonite to the Fed’s monetary efforts and it’s likely the Fed will take any measures necessary to prevent inflation spikes.
The Fed has targeted a 2 percent inflation rate, which means the U.S. dollar will lose 33 percent of its value over the next 20 years, says The Daily Reckoning’s Charles Kadlec. In the next four years alone, nearly 10 percent of the “value of Americans’ hard earned savings” will be destroyed, says Charles. Put another way, Charles estimates that it will take $150 in the year 2032 to purchase the same amount of goods you could get for $100 in 2012.
For four decades following the end of the gold standard, the purchasing power of the dollar has been plunging: A dollar worth 100 cents in 1970 is now valued at a measly 18 cents.
Charles isn’t the only one opposed to the Fed’s “monetary manipulation.” In his latest letter to shareholders, Warren Buffett faults the government and its “systemic forces” for destroying the purchasing power of investors. He argues stock investments offer the best long-term investment opportunity because interest rate levels don’t offset the loss of purchasing power due to inflation.
However, there is one group that benefits from the low interest rate environment—borrowers. This means the largest borrowers in the world, developed world governments, will be able to service their enormous amounts of debt more easily. This year alone, the U.S., Japan and Europe will roll over $8 trillion in federal debt.
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Gold Ends at Highest Level in More than Two Weeks
MarketWatch
Gold futures rallied Tuesday, ending at their highest point in more than two weeks as traders cheered the approval of a second bailout for Greece.
Gold for April delivery advanced $32.60, or 1.9%, to end at $1,758.50 an ounce on the Comex division of the New York Mercantile Exchange. It had traded as high as $1,752.50 an ounce.
The settlement was gold’s highest since Feb. 2.
“Gold right now is behaving like a risk asset more than anything else,” tracking gains for U.S. equities and other commodities, said Frank Lesh, a broker and futures analyst with FuturePath Trading in Chicago.
U.S. markets were closed Monday for the Presidents Day holiday.
After a marathon meeting into the early hours of Tuesday, European finance ministers sealed a deal to give Greece up to 130 billion euros ($171.9 billion) of financial aid.
Other metals tracked gold higher, with copper and silver rallying. Copper for March delivery advanced 13 cents, or 3.5%, to settle at $3.84 a pound.
Metals also benefitted from news that China cut reserve requirements for lenders in an effort to spur lending and increase liquidity in its financial system. China is a top consumer of gold, copper and other commodities.
That was “good news for gold in the long run as bullion remains an attractive alternative to major currencies. Real interest rates are negative in major developed nations while developing nations are also playing their part in currency wars, fearing rapid appreciation of their domestic currencies against weak benchmarks,” analysts at VTB Capital in London wrote in a note to clients.
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Gold Prices Climb With Euro on Hopes for Greek Deal
Economic Times
Gold prices rose more than half a percent on Monday as growing optimism that European leaders will sign off on a rescue deal for Greece lifted the euro, and after China's central bank further loosened monetary policy.
Spot gold was up 0.6 percent at $1,734.19 an ounce at 1210 GMT, while U.S. gold futures for February delivery were up $10.10 an ounce at $1,736.00.
Gold prices are up nearly 11 percent this year, benefiting from a rebound in the euro and expectations that U.S. monetary policy will remain loose, cutting the opportunity cost of holding non-yielding bullion. But analysts say the appeal of other investments could keep gold prices rangebound this year.
"The risks (in Europe) could dissipate modestly in the near term. Certainly, in China, there is a growing acceptance that the government will step in to support growth, and things look like they're stronger than expected in the United States," said Deutsche Bank analyst Daniel Brebner
"Globally, it looks like risk assets are being accumulated by investors, and in that kind of environment, gold should perform reasonably well," he added. "But I would argue it could underperform some of the other metals, the base metals and the white precious metals."
The euro rose 0.5 percent on Monday after China eased monetary policy to stimulate growth and expectations mounted that euro zone policymakers were set to approve Greece's long-awaited second bailout, averting a messy default.
Euro zone finance ministers are expected to approve a second deal for Greece when they meet at 1600 GMT, a move they hope will draw a line under months of turmoil that has shaken the currency bloc.
"The market's attention is to remain fixated on developments in the euro zone as finance ministers gather in Brussels to finalise the details of the second bailout for Greece," said VTB Capital in a note. "We see subdued action today as a positive decision on Greece is pretty much priced in."
Other assets seen as higher risk rallied along with the euro, with European equities reaching their highest in nearly seven months and oil prices up more than $1 a barrel. Safe-haven German government bonds slipped.
MONEY MANAGERS CUT GOLD LENGTH
Money managers in gold futures and options reduced their net long position by about 6 percent in the week of Feb. 14, their first decline in weeks, latest data from the U.S. Commodity Futures Trading Commission showed on Friday.
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China to Surpass India as Top Gold Buyer: Industry
Yahoo
China is set to overtake India as the world's largest gold buyer this year as demand for the metal for jewelry and as a safe-haven investment surges, the World Gold Council said Thursday.
Global demand hit 4,067.1 tonnes in 2011 -- edging up 0.4 percent year-on-year -- worth an estimated $205.5 billion, the first time demand has surpassed $200 billion, the WGC said in its latest annual report.
Gold prices rose to a record over $1,920 an ounce in September on frenzied buying by individuals, investment funds and central banks in the aftermath of a US credit rating downgrade and plunging global equity markets.
Prices have slipped since but still hover around $1,700 per ounce.
India, the largest gold consumer and importer, saw a 7.0-percent decline in demand year-on-year to 933.4 tonnes last year, while demand from China jumped 20.0 percent to 769.8 tonnes in the same period.
"There was a major boost to the overall demand from China, a trend we see continuing in the new year," said Marcus Grubb, WGC's investment managing director.
"It is likely that China will emerge as the largest gold market in the world for the first time in 2012."
India and China, which have been battled high inflation, combined account for more than half of the world's gold demand.
India, where gold is widely purchased for religious and ceremonial occasions, consumed less of the yellow metal in 2011 largely because of a weak rupee, which made imports of gold -- priced in dollars -- more expensive.
"The domestic currency fell precipitously in the second half of 2011, on foreign capital outflows. The rapid rise and fall in the rupee and resulting local gold price swings impacted gold buying," the report said.
India's gold demand was down 27.0 percent year-on-year in the second half of 2011.
The WGC said it expects global demand for gold to remain strong in 2012.
Despite the recent softening in demand, India is likely to record steady demand for gold this year, in-line with 2011 trends, analysts and the WGC said.
"The sentiment is likely to remain upbeat this year as inflation is moderating and various tax incentives are likely to support purchases," WGC's Middle East and India managing director Ajay Mitra told reporters.
Analyst Hareesh V. of research firm Geojit Comtrade expects India's gold demand to rise marginally by 2-3 percent this year.
"India could consume close to 965 tonnes in 2012, with the rupee rising against the dollar and inflationary pressures easing, which would boost the import of gold," Hareesh said.
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Middle-East Situation May Push Gold Prices: World Gold Council
Economic Times
Gold prices may go up in the near future because of uncertainty in the Middle-East, but this may not dampen the buying spirits among the Indians, the World Gold Council (WGC) said on Thursday.
"India's gold demand is likely to be positive this year in value terms. In volume, it may be same as last year or slightly higher," WGC Managing Director, Middle East and India, Ajay Mitra said here, after releasing the latest report on the precious metal.
"Prices in the short term may go up due to the uncertainty in the Middle East," he said. Tensions between Israel and Iran would lead to investors seeking refuge in gold, considered as a safe haven. Gold rates are ruling firm at Rs 28,340 per ten gram in Delhi today on seasonal demand and strong global cues.
Asked about the trends in the gold Electronically Traded Funds (ETFs), Mitra said, the option will retain investors' interest, including from the corporates.
"At present, about 50 per cent of investment in gold ETFs is from the corporates, who park their spare funds for better returns. This is very unique to India and due to this we see a similar investment demand trend in 2012 as well," he added.
Since the last two years, he said, WGC has also witnessed flow of funds from High Networth Individuals in the ETFs. He said demand for coins will continue to be stronger than bars. There is also a declining trend in recycled jewellery in the market mainly due to the rise in gold finance options.
When asked about jewellery demand for 2012, Mitra said, the current retail trend is positive. "The trend in the first half will give us a feel for the rest of the year in terms of jewellery demand ...", he said. In India, people normally buy gold during festivals as gifts and investments and for marriages.
Last year, 1,037 tonnes of gold was available in the domestic market, of which 969 tonnes was imported and the rest was from other sources, according to the 'Gold Demand Trends 2011' report.
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Gold Adds More Than $10 to End Losing Streak
MarketWatch
Gold futures log their first gain in four sessions Wednesday, as rising tensions between Iran and Israel as well as ongoing uncertainty over Greece’s debt problems buoyed the metal’s safe-haven appeal.
“The time is limited to avoid spreading the euro-zone debt crisis from Greece to countries with a larger economic impact, such as Portugal, Spain and Italy, [and] most of the efforts have been to contain the crisis,” said Jeff Wright, a precious-metals analyst with Global Hunter Securities.
Gold for April delivery rose $10.40, or 0.6%, to settle at $1,728.10 an ounce on the Comex division of the New York Mercantile Exchange. Prices had tallied a three-session decline of more than $23 an ounce.
European Union officials may delay parts or all of the second bailout program for Greece until after expected April elections in that country, according to a Reuters report.
“The situation in Europe is causing huge global uncertainties,” said David Beahm, vice president at precious-metals retailer Blanchard & Co.
“Even if Greece’s problems are solved, there are three or four more countries that are on the verge of needing the same type of help,” he added. “The problem is no one has the money to help, therefore the [European Central Bank] is going to have to print billions of euros to fight the debt problems Europe is facing.”
At the same time, “the geopolitical issues in the Middle East, specifically between Iran and Israel, are supporting the price of gold as well,” Beahm elaborated. “Gold is acting as a safe haven for what could be a situation that gets way out of control.”
China factor
Gold’s gains Wednesday came as Asian and European markets got a lift after Gov. Zhou Xiaochuan of the People’s Bank of China voiced optimism that Europe can overcome its sovereign-debt crisis and said that China will expand investments in the euro zone.
“If events spiral out of control, even with [People’s] Bank of China intervention, I can see how the euro currency dissolves or the more stable Northern European countries allow for a controlled default by Greece, Portugal and Spain,” said Global Hunter Securities’ Wright.
“While these events would strengthen the U.S. dollar and negatively impact gold in the short run, gold will continue to appreciate over the long term,” he added.
Gold also found support in advance of U.S. inflationary data due out Thursday and Friday, according to Wright.
He expects a continuation of the trend, seen in December at the producer level, showing signs of initial inflationary pressure. The “real impact will come when inflation hits CPI; gold will turn sharply higher on signs of price inflation.”
Silver gains
Silver futures also advanced in Wednesday’s Comex trading, finding support from upbeat U.S. manufacturing data. March silver SI2H +0.16% tacked on 6 cents, or 0.2%, to close at $33.41 an ounce.
The Empire State manufacturing index rose to a reading of 19.5 in February, its highest since June 2010, according to the Federal Reserve Bank of New York. The size of the February gain surprised analysts.
Separately, the Federal Reserve reported that U.S. manufacturers boosted output in January, though industrial production as a whole was unchanged.
“Silver is both a precious and industrial metal, with over 60% of demand for industrial applications, [meaning] positive signals for economic growth provide a leg up for silver,” said Wright. “Also, silver has not seen the same level of attention which gold has in the past couple quarters and should not be ignored.”
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Gold Higher on Greek Deal, Central-Bank Easing
MarketWatch
Gold futures ended higher Thursday after an agreement by Greece leaders on an austerity deal buoyed the euro against the dollar, and as European central banks decided to continue on a loose monetary-policy path.
Gold for April delivery rose $9.90, or 0.6%, to settle at $1,741.20 an ounce on the Comex division of New York Mercantile Exchange.
Gold traded as high as $1,755.50 an ounce, but lost steam in the last hour of trading.
The metal slid 1% on Wednesday.
Thursday’s trading was “all about the dollar, and the Greek deal is supporting the euro, weakening the greenback,” said Darin Newsom, a senior analyst at Telvent DTN.
The dollar index, which compares the U.S. unit to a basket of six currencies, recently traded at 78.561, down from 78.589 in late North American trading Wednesday, as the euro gained ground against the U.S. currency.
Gold is “trading opposite the U.S. dollar index again,” said Newsom. “Fundamentals have been tossed out the window for now with the main driver being the direction of the dollar. Gold, crude oil, and most other commodities are rallying.”
Traders also focused on “continuing ultraloose monetary policies by the Bank of England and the European Central Bank,” said Mark O’Byrne, an executive director at Goldcore.
There is also concern that any resolution in Greece will be fleeting, he added, while the risk of contagion to the rest of the euro zone remains.
Earlier Thursday, in an expected move, the Bank of England’s policy committee boosted the size of the bank’s asset-purchase program by 50 billion pounds to a total of 325 billion pounds and voted to leave the central bank’s key lending rate unchanged at a record low 0.5%.
The ECB said on Thursday it has eased collateral rules for credit operations.
Greece’s main political parties reached agreement Thursday on new austerity measures seen as necessary for the nation to secure a second bailout and avoid a debt default.
Against that backdrop, most metals futures were mixed, with platinum and palladium ending modestly lower.
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Gold Rises to Two-Month High, Eyes U.S. Payrolls
Reuters
Gold rose on Thursday for a third consecutive day on a larger-than-expected fall in new U.S. claims for unemployment benefits, but analysts said bullion could pull back due to an upcoming U.S. jobs report.
Bullion hit a two-month high, reversing initial losses after encouraging jobless claims data pointed to a recovery jobs market, ahead of the closely watched January U.S. nonfarm payrolls report on Friday.
The precious metal has risen nearly 12 percent this year, as gains accelerated after the U.S. Federal Reserve said last week it would hold interest rates near zero until at least late 2014.
"If you get a disappointing nonfarms tomorrow, you may see a flight into short-term market U.S. dollar securities. That tends to create a corrective action in stocks and in precious metals," said Richard Hastings, macro strategist at investment bank Global Hunter Securities.
Spot gold was up 0.8 percent at $1,757.70 an ounce by 11:59 a.m. (1659 GMT), having earlier peaked at $1,760.70, its loftiest since December 2.
U.S. gold futures for April delivery rose $11.50 an ounce to $1,761.
Silver was up 1.2 percent at $34.10 an ounce.
U.S. employment growth probably slowed in January as temporary workers hired during the holiday shopping season were laid off, but the improving labor market trend should remain intact. A Reuters survey shows nonfarm payrolls to rise 150,000 in January after increasing 200,000 in December.
"We expect gold to reach new highs in 2012, although episodes of extreme risk aversion may trigger corrections along the way," said Anne-Laure Tremblay, an analyst at BNP Paribas.
Tremblay said the recent rebound in risk appetite has encouraged gold buying, and anecdotal evidence suggests that bar and coin demand remains high in the U.S. and Europe.
Worries over the euro zone debt crisis had driven gold sharply higher for much of last year even as they weighed on the euro. Towards the end of the year, however, the metal behaved more like a commodity, following equities lower as risk appetite retreated.
The market largely ignored official data showing gold output in China, the biggest global producer of bullion, rose to a record 360.95 tonnes last year. Its domestic demand for gold far outstripped that figure, however.
Gold Edges Higher as Dollar Slips
MarketWatch
Gold clawed back a bit of lost ground early Tuesday as the U.S. dollar eased and profit-taking subsided.
Midday Tuesday in East Asia, gold for April delivery was trading up 0.2%, or $4, at $1,738.40 an ounce, rising from its Monday settlement of $1,734.40 an ounce on the Comex division of the New York Mercantile Exchange.
Monday had seen the benchmark Comex gold contract slip by $1 on the back of a strengthening dollar.
But the dollar lost ground during Asian morning trade, with the ICE dollar index slipping to 78.878 from its 79.142 level late Monday in North America.
Commodity researchers at Commerzbank pegged Monday’s losses to investors locking in recent gains following gold’s seven-week high at the end of last week.
They added that there was still “a risk of more profit-taking from ... if market sentiment deteriorates,” with risks including weak demand from major gold importer India.
Among other precious-metals futures, Comex March silver contracts followed gold higher, rising 9 cents, or 0.3%, to $33.62 an ounce.
April platinum rose 0.5% to $1,624.90 an ounce, while March palladium added 0.4% to $691.00 an ounce.
March copper was little changed, however, holding at the $3.83-per-pound level from its New York settlement after falling 1.6%, or 6 cents, on Monday.
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