Gold Gains in New York as Price Slump Prompts Purchases
Gold rose in New York on speculation investors will boost demand after the metal's drop to an almost two-week low. Silver gained for the first time this week, Bloomberg reported.
Prices fell to US$1,738.30 an ounce yesterday, the lowest price since Sept. 13, on signs Europe's economy is still worsening. The Shanghai Composite of shares rallied 2.6% on speculation China may take more steps to boost growth. Gold is heading for the best quarterly gain in two years as the U.S., Europe and Japan announced quantitative easing.
The futures for December delivery advanced 0.3% to $1,758.40 an ounce by 7.50 a.m. on the Comex in New York. Prices are up 9.6% this quarter, 4.2% this month and 12% this year.
Prices in New York on Sept. 21 climbed to a six-month high of $1,790 an ounce.
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Gold Rallies as Nervousness Takes Hold
MarketWatch
Gold futures ended higher Monday, catching some safe-haven flows after a soft U.S. jobs report Friday and as traders were nervous ahead of a busy week for corporate earnings.
Gold for June delivery rose $13.80, or 0.9%, to end at $1,643.90 per ounce on the Comex division of the New York Mercantile Exchange.
Some support for gold was coming from investors who may have judged recent losses “overdone,” said Stephen Platt, analyst with Archer Financial Services in Chicago.
Other metals futures were mixed, with some of those more oriented toward industrial production reeling in the wake of the disappointing jobs report.
Silver for May delivery retreated 21 cents, or 0.7%, to $31.52 an ounce, adding to losses as the session progressed.
May copper declined 8 cents, or 2%, to $3.72 a pound.
Earnings season has its unofficial kickoff with Alcoa Inc. reporting after the close on Tuesday. The week also brings earnings from heavyweights such as Google Inc. and J.P. Morgan Chase & Co.
The much-expected jobs report on Good Friday showed the U.S. economy created only 120,000 jobs in March, well below market expectations.
Hiring failed to top 200,000 for the first time since November. The unemployment rate fell to its lowest level since January 2009, but only because people dropped out of the labor force.
Overall, the current low interest-rate environment remains positive for gold, but “gold will need to find a firmer footing first,” analysts at Barclays Capital said in a note.
Two key factors to watch in the near term remain holdings in exchange-traded product holdings as well as consumption in India and China, they added.
As U.S. stocks and commodity markets closed in observance of Good Friday, Monday was the first opportunity for investors to react to the disappointing employment data. U.S stocks opened lower and oil traded lower.
Platinum and palladium diverged Monday, with July platinum tracking gold higher, advancing $10.60, or 0.7%, to $1,618.20 an ounce. Palladium for June declined $1, or 0.2%, to $643.80 an ounce.
Bernanke Bludgeons Bullion: Opinion
The Street
Gold and silver prices plummet because the U.S. economy is so healthy that the Federal Reserve won't have to print any more money, and so there won't be any more inflation. Laughter, please.
The U.S. economy is healthy? As I have pointed out on previous occasions, 0% interest rates are nothing less than an economic defibrillator -- a temporary desperation measure to attempt to breathe life into a dying economy. Permanent 0% interest rates simply mean that economy is already dead, as we have seen with Japan. All that remains to be done is to put these zombie economies out of their misery, through debt default followed by massive restructuring.
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| Federal Reserve Chairman Ben Bernanke |
As I have stressed in my recent commentaries, it is also beyond absurd for Bernanke to pretend that the Federal Reserve has ceased its money-printing. The gravity-defying U.S. Treasuries market provides conclusive, mathematical proof that such a claim is false.
Maximum bond prices at a time of maximum supply defy every economic principle in the books. Maximum bond prices at a time of maximum supply, when the largest buyer (China) has been selling Treasuries for more than a year, when the "economic surpluses" which financed Treasuries-buying have nearly vanished, when Treasuries auctions have been rigged so that no one knows who the buyers are, and at a time when the U.S. economy is obviously and hopelessly insolvent defies legality.
Someone, somehow is financing the totally opaque purchases of $trillions in U.S. Treasuries, and the list of suspects is rather short: the Federal Reserve. If the Fed is not financing those purchases with its officially/legitimately created funny money, then in must be doing so in some less than legitimate manner.
The only other mathematically possible scenario is debt default: bonds immediately going to zero (or close to it). Otherwise, exponential money-printing takes the underlying currencies to zero, also making the bonds worthless. Either way, we are 100% certain to get to the same result. Paying maximum prices for any of these paper time-bombs goes well past idiocy and all the way to deliberate economic suicide.
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Analysis: Can U.S. economy withstand gasoline Price Curse?
Yahoo News
Could history repeat itself? That is a question uppermost in the minds of many Americans as they warily watch gasoline prices at the pump rise week after week.
After all, a spike in gasoline prices early last year helped nearly knock the economy back into recession.
The answer, economists say, is that this time is different: the recovery is in far better shape to absorb the blow.
"This is the dark cloud in an otherwise brightening domestic economic picture. It's something we need to watch right now, but not panic about yet," said Jerry Webman, chief economist at OppenheimerFunds in New York.
U.S. gas prices have jumped 8.8 percent since the start of this year, according to the Energy Information Agency, topping an average of $3.65 a gallon in the week through Monday. This is a record for this time of the year when prices are usually on the low side because of slow seasonal demand.
Early last year, a combination of strong gasoline prices in the wake of the so-called Arab spring uprisings and disruptions to motor vehicle production after a devastating earthquake in Japan put the brakes on U.S. growth.
Although gasoline prices are 41 cents higher than they were at this time last year, there are no supply-chain problems disrupting factory production and winter this year has been unseasonably warm, giving the economy a mild stimulus.
"Fortunately the U.S. economy is on an upswing, not strong but on the way up. It's in a better shape to deal with the oil prices," said Sung Won Sohn, an economics professor at California State University Channel Island. "We don't have the Japanese tsunami to worry about, business and consumer confidence have improved, and the job market is growing nicely."
CRUDE PRICES NEAR 9-MONTH HIGHS
Recent data ranging from employment to manufacturing have been solid, leading economists to temper their expectations of a sharp slowdown in U.S. economic growth in the current quarter.
The brightening outlook has helped support oil prices, although the main driver appears to be fear that a confrontation between Western nations and Iran could end up disrupting oil supplies. U.S. crude prices hit a more than nine-month high at $106.72 a barrel during trading on Wednesday.
Iran, the world's fifth-largest oil exporter, has threatened to close the Strait of Hormuz, the main Gulf oil shipping lane, in response to sanctions aimed at getting Tehran to abandon its nuclear program. Western nations say the program is aimed at developing weapons; Tehran says it's peaceful.
Although U.S. gasoline prices have jumped, economists take comfort in the fact that the pace of the increase has not been as rapid as it was in 2011. Gasoline prices peaked at about $4.02 a gallon in May last year, not far from the all-time high of $4.16 a gallon reached in July 2008.
The rise in gasoline prices poses a threat to both inflation and growth. It acts as a tax on households, which are already strained by weak income growth, and will likely pull spending away from non-energy goods and services.
So far, the pinch has been tempered by falling prices for natural gas. Natural gas prices dropped 2.9 percent in January, their fourth straight monthly decline.
"Roughly one-third of the gasoline spike has been offset by lower natural gas prices," said Joseph LaVorgna, chief economist at Deutsche Bank in New York. Other economists say the impact could be even greater.
Still, a sustained increase could complicate the task of the Federal Reserve. Officials who may want to come to the economy's aid with more stimulus could think twice if there is upward inflation pressure.
"If we get caught in an environment of steadily rising gasoline prices, that will put them in a bind," said Anthony Karydakis, chief economist at Commerzbank in New York.
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Bank of England Pumps More Cash Into Economy to Support Recovery
Reuters
The Bank of England voted to inject more cash into the economy to shore up a fragile recovery and shield the country from fallout from the unresolved euro zone debt crisis.
The central bank said on Thursday it would buy another 50 billion pounds of assets - mostly government bonds - with freshly printed money, taking the total to 325 billion pounds, as economists had expected. The BoE also left its key interest rate at a record-low 0.5 percent.
The cash boost is welcome news for the government, which has come under pressure again to loosen its austerity drive after the economy shrank at the end of 2011 and unemployment hit its highest level in more than 17 years.
"Some recent business surveys have painted a more positive picture and asset prices have risen," Bank of England Governor Mervyn King said in a letter to finance minister George Osborne, explaining the decision.
"But the pace of expansion in the United Kingdom's main export markets has also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries," he added.
The central bank said inflation would have probably fallen below the target of 2 percent over the medium term without further easing, as a significant amount of unused capacity in the economy was bearing down on prices.
Some improvement in Britons' real incomes was set to support a gradual recovery this year, though the tight credit conditions and the government's austerity measures presented headwinds.
Osborne said the central bank's loose monetary policy continued to play a "critical" role in supporting the economy as he continued his austerity program, and remained the main tool to respond to changes in the outlook.
VOTE SPLIT?
Sterling rose to a session high against the U.S. dollar while gilts reversed gains on Thursday after the BoE decision.
The BoE surprised markets in October by deciding to restart its program of gilt purchases funded earlier than expected, going on to buy 75 billion pounds' worth of gilts over four months, largely to shield Britain from the euro zone crisis.
This time around, a majority of analysts polled by Reuters had penciled in a 50 billion pound injection over three months. But most were surprised by what the BoE described as an "operational" decision to focus its gilt purchases on slightly shorter maturities than before, to avoid market frictions.
Many economists expect further increases in quantitative easing in May, although they also noted that some policymakers may already have second thoughts about more easing.
"We still think that QE2 has much further to go," said Vicky Redwood from Capital Economics. "There is a chance that today's decision was not unanimous, with those members less convinced that inflation will fall sharply, for example Spencer Dale, perhaps voting to keep the asset purchase program at 275 billion pounds."
The minutes from the two-day Monetary Policy Committee meeting will be released in two weeks, but economists will get an earlier steer when BoE Governor Mervyn King presents fresh quarterly inflation forecasts next week.
Inflation fell from the three-year peak of 5.2 percent in September to 4.2 percent in December, and policymakers have voiced confidence that it will dip below the BoE's 2 percent target later this year, as predicted in November.
With the government's hands tied by its pledge to erase the country's huge budget deficit over the next five years, the onus to boost the faltering economy is firmly on the central bank, though doubts about the impact of its easing continue to linger.
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Gold Edges Higher as Euro Climbs After EU Treaty
Proactive Investors
Gold prices edged higher today as traders responded to the deal reached by 23 of 27 EU members at today’s summit in Brussels with cautious optimism. The euro was on the rise this afternoon, while the safe-haven US dollar fell, lifting demand for gold, which is seen as an alternative asset to the greenback.
The deal calls for sanctions against countries that fail to keep its budget deficit within three percent of their GDP, while capping the size of Europe’s bailout funds at €500 billion.
In addition, EU policymakers have agreed to bring the launch date of the new permanent bailout fund, the European Stability Mechanism, forward by one year to July 2012.
The four EU members that refused to join the new treaty included the UK. British Prime Minister David Cameron pulled out of negotiations and used his veto power to block the proposed changes to the EU treaty as the deal failed to protect British interests.
The US dollar received some support from today’s US consumer confidence data that was released later in the afternoon.
The University of Michigan said its consumer sentiment index surged from 64.1 in November to 67.7 this month, hitting six month highs. The data topped expectations as analysts polled by Bloomberg News projected an increase to 65.8.
Gold traded at US$1,709/oz, up US$4 from Thursday’s close. Other precious metals were headed in the same direction as silver rallied 21 cents to US$31.87 and platinum added US$7 to reach US$1,500/oz.
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Gold Settles Higher, Reclaim $1,800 Level
MarketWatch
Gold futures advanced 1.7% Tuesday, regaining the $1,800-an-ounce mark as bargain hunters returned to the metal, fears remained about Europe’s sovereign-debt crisis, and investors expected the U.S. Federal Reserve soon to announce steps to improve the economy.
Gold for December delivery GC1Z +1.54% rose $30.20, or 1.7%, to settle at $1,809.10 an ounce on the Comex division of the New York Mercantile Exchange.
“There’s some move to safety” as Europe’s sovereign-debt crisis continues, said Tom Pawlicki, analyst with MF Global in Chicago.
Investors were also factoring in some announcement of economic stimulus on Wednesday, when the Fed concludes its two-day policy meeting. The expectation of more stimulus touches on fears of fiscal profligacy, one of the pillars of gold investing.
The contract fell $35.80, or 2%, on Monday to finish at its lowest level in more than three weeks as a stronger U.S. dollar pressured commodity prices, and investors were also biting back into the market after the retreat.
Late Monday, Standard & Poor’s Ratings Services cut Italy’s long-term credit rating, to A from A-plus. It also cut its short-term rating to A-1 from A-1-plus, citing a weak economic outlook and prospects for ongoing political gridlock.Read more about S&P’s Italy rating cut.
The rating cut “doused cold water over Italy’s capacity to address their public finances,” analysts at GoldCore said in a note to clients Tuesday.
“As long as governments cower from their responsibilities to balance their budgets and continue to print money instead of paying their bills, gold will likely appreciate in paper money terms,” they said.
In the medium term, gold is likely on a down trend, partly because it has failed to take out highs reached in late August, Pawlicki said.
Large funds have also exited the trade, foreshadowing downward moves that could set gold back to lows around $1,700 an ounce, he added.
Other metals settled higher Tuesday, with copper the exception.
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Gold Rises Most in Four Weeks
Bloomberg
Gold jumped the most in almost four weeks after a report showed that U.S. employment unexpectedly stagnated in August, lifting demand for haven assets.
The unemployment rate remained at 9.1 percent and payrolls were unchanged, the weakest reading since September 2010, Labor Department data showed. Analysts expected a gain of 65,000. Gold has more than doubled since the end of 2008, touching a record $1,917.90 an ounce last month, as governments worldwide struggled with debt crises and as record-low U.S. borrowing costs boosted bullion’s appeal as an inflation hedge.
“Today is one of a series of data points that, when taken in aggregate, continue to show a weakening U.S. economy and a lack of confidence in our government’s ability to do something about it,” Steve Shafer, who helps manage $300 million as chief investment officer of Covenant Investors, said by telephone from Oklahoma City. “Combined with the problems out of Europe, there’s a depreciating confidence in fiat currencies. All of those funnel into a heightened demand for gold.”
Gold futures for December delivery gained $47.80, or 2.6 percent, to close at $1,876.90 at 2:31 p.m. on the Comex in New York, the biggest increase since Aug. 8.
The Federal Reserve has taken the unprecedented step of saying it will keep borrowing costs at almost zero percent at least through mid-2013 to support the economy. Switzerland unexpectedly cut interest rates yesterday. The Bank of England and the European Central Bankleft rates unchanged today.
‘Significantly Higher’
“We had an end to the last gold cycle by jacking up interest rates, and that’s clearly off the table for the next couple of years,” Rick de los Reyes, who manages $800 million at T. Rowe Price Group Inc.’s Global Metals and Mining Fund in Baltimore, said today in a telephone interview. “We are going to be in a negative real-interest-rate environment. The price can go significantly higher.”
Gold has jumped 32 percent this year, heading for an 11th straight annual gain. The MSCI World (MXWO) Index of equities has slid 8.4 percent in 2011, and Treasuries were up 5.4 percent as of yesterday, according to a Bank of America Merrill Lynch index.
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Gold Rises 2%, Back Above $1,800
The Globe and Mail
Gold rose 2 per cent Tuesday, boosted by weak U.S. consumer confidence data, euro zone debt fears and a call by the Chicago Federal Reserve’s president for further action to help the U.S. economy.
Gold accelerated gains early after Chicago Fed President Charles Evans told CNBC television he backs “some of the most aggressive policy actions” being considered by the Fed, adding the labor market looks to be in a recession.
Other perceived safe havens, such as Treasuries, also rose after data showed U.S. consumer confidence crumbled in August to its lowest in more than two years.
A weaker-than-expected report on euro zone economic sentiment and renewed debt fears on Greece and Europe also boosted bullion buying.
“The weak U.S. and European confidence data brought economic worries back to the forefront. There was strong European physical gold buying due to significant concerns about the growth prospect,” said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.
Bullion has gained as much as 8 per cent in the last three sessions, supported after Fed Chairman Ben Bernanke last Friday raised hopes for a new market stimulus program.
Spot gold was up 2.7 per cent at $1,835.19 an ounce by 2:38 p.m. (ET). Gold fell more than 1 per cent last week, when investors stripped more than $200 off the price after it hit a record $1,911.76 on Aug. 23.
U.S. gold futures for December delivery (GC-FT1,838.2046.602.60%) settled up $38.20 at $1,829.80 (U.S.) an ounce. Trading volume was modest but below the record levels logged last week.
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Gold Surges to Record on Haven Demand as Economy Falters, Equities Tumble
Bloomberg
Gold futures surged to a record $1,829.70 an ounce on demand for an investment haven as mounting concern that the global economy is faltering triggered a plunge in equities.
The Standard & Poor’s 500 Index tumbled as much as 5 percent after manufacturing in the Philadelphia region unexpectedly contracted in August by the most in two years as orders plunged and factories shed workers. Europe’s debt crisis may freeze interbank markets and cut off funding, said Lars Frisell, the chief economist at Sweden’s financial regulator.
“There is further decay in the European situation,” Sterling Smith, an analyst at Country Hedging Inc., said in a telephone interview from St. Paul, Minnesota. “The nervousness in the equity markets is pushing people toward gold.”
Gold futures for December delivery jumped $28.20, or 1.6 percent, to settle at $1,822 at 1:45 p.m., on the Comex in New York, closing at an all-time high for the third straight day. The price has advanced 28 percent in 2011, after posting gains in the previous 10 years.
“If gold continues to climb at this rate for the next few days, we may touch $2,000 by the end of this month,” Smith said.
At the end of July, gold settled at $1,631.20.
Morgan Stanley cut its forecast for global growth this year, citing an “insufficient” response to Europe’s debt crisis and the prospect of fiscal tightening.
Inflationary Pressures
“A developed world with slower growth, a large fiscal deficit and near zero rates over the next few years, inflationary pressures in emerging economies, and larger political and economic uncertainty bodes well” for gold, Roxana Mohammadian-Molina, an analyst in London at Barclays Capital, said in a report.
Holdings of the metal in exchange-traded products rose 10.8 tons yesterday, the most since Aug. 8, to 2,198.7 tons, data compiled by Bloomberg show. Assets reached a record 2,216.8 tons last week as Standard & Poor’s cut the credit rating of the U.S.
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