Gold “Breaking Away” from Slump in Stocks & Commodities, “Safe Haven Again” as Euro Hits 16-Month Low
GoldSeek
Prices to Buy Gold touched a 2-week high at $1625 per ounce in London's wholesale market early Thursday, before pulling back to $1609 as commodities and world stock markets fell, led by Eurozone banking shares.
The 17-nation Euro currency fell to $1.28, its lowest level in 16 months.
"[Wednesday] saw gold finally beginning to break away from trading in step with risk assets," said one London dealer this morning.
The correlation between Gold Prices and the VIX volatility index of daily movement in US equities – positive during most of 2011 – recently fell to its most negative reading in two years, notes Reuters Technical analyst Wang Tao.
"Gold appears at present to be living up more to its status as a safe haven again," says a note from Commerzbank, citing "geopolitical risks" in Western sanctions against Iran, plus the ongoing Eurozone debt crisis.
In Iraq today, at least 50 people were killed in a series of bomb attacks, extending the death-toll since US troops pulled out in mid-December, while protests over rising fuel prices in Nigeria, the world's 10th largest oil producer, were broken up by police.
Base metal and other commodity prices fell hard, but European crude oil contracts pushed higher to $113 per barrel despite the rising US Dollar.
Silver Prices fell back 3% from a 3-week high at $29.70 per ounce.
Prices to Buy Gold remained "well bid throughout" Asian trade on Thursday said a note from a Hong Kong dealer.
"Jewellers were restocking [and] demand was good in southern India, especially in Tamil Nadu, due to the Pongal festival," says bullion merchant Chanda Venkatesh of CapsGold in Hyderabad.
"Jewelry demand for gold is pretty good," agrees another dealer, but adds that the price for Gold Futures holders to 'exchange for physical' (EFPs) fell hard overnight, possibly ahead of bullion sales due to New Year rebalancing in the big commodity-tracking investment indices.
"We believe that Gold Prices will recover in 2012, and we maintain our bullish posture," says HSBC analyst James Steel, despite cutting his average forecast for this year from $2025 per ounce to $1850 this week.
Eurozone investors looking to Buy Gold today saw the price touch 3-week highs above €40,000 per kilo as the single currency slumped towards $1.28 on the forex market – its lowest level against the Dollar since Sept. 2010.
Priced in UK Sterling, gold briefly rose this morning above £1040 per ounce, a 2-week high first breached on the way up in August 2011.
"The UK is attractive to international investors because it is outside the Eurozone," reckons John Wraith at BofA Merrill Lynch, commenting on the strongest foreign-investment demand for UK government debt on record set in Oct. and Nov.
Continued demand has since driven 10-year gilt yields down to 120-year lows below 2.00%.
But "If [the UK's] economic conditions deteriorate further," says Wraith, "that could prompt a sell-off due to stubbornly high deficits."
After Wednesday's auction of €5 billion in new German Bunds drew demand of €5.3bn – only just improving on November's technically failed €6bn auction – a new sale of French government debt today met 1.6 times enough demand, sharply down from the 3.0 bid-to-cover made by investors last month.
Banking stocks dropped sharply across Europe, led by a 14% plunge in UniCredit as Italy's largest bank priced a €7.5 billion shares rights issue fully 43% belowWednesday night's close.
French bank Société Générale said today it is considering 1,580 jobs cuts at its investment banking division. In the same sector, Royal Bank of Scotland – now 83% owned by the British state – is weighing up to 10,000 job cuts, says the Financial Times, after being told by UK chancellor George Osborne to "scale back risky activities."
The Mediterranean region of Valencia in Spain has meantime delayed repaying a €123 million loan to Deutsche Bank by at least 1 week, says the Wall Street Journal, while the Hungarian Forint today sank to a fresh all-time low against the Euro after Budapest scaled back a planned 12-month debt auction by more than one-fifth in the face of weak demand.
“We are very near boiling point in Hungary," said SocGen analyst Benoit Anne in a note Wednesday, "with a crisis that may escalate into something much more serious than a simple macroeconomic crisis."
Hungary must refinance almost €5bn of foreign debt in 2012, and is due to start repaying a 2008 loan from the International Monetary Fund (IMF) in February.
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Gold at Best in 2 Weeks, Regains Safe-Haven Status
MarketWatch
Gold futures on Wednesday rose to their highest in two weeks, drawing strength from safe-haven buying as investors remained concerned about Iran and the euro zone.
Gold for February delivery rose $12.20, or 0.8%, to $1,612.70 an ounce on the Comex division of the New York Mercantile Exchange. That was gold’s highest settlement since Dec. 21.
The metal earlier veered between small gains and losses, but gathered steam as U.S. stocks started their trading day on the red.
That is an indication that gold vied to regain its status as a safe-haven investment, said Adam Klopfenstein, an analyst with Archer Financial in Chicago. After it settled above $1,600 the previous session, it gained momentum, he added.
There are plenty of reasons to remain concerned about the global economy, with the euro zone “at the whims of bond holders” and only a negative piece of data away from more problems, Klopfenstein said.
In addition, “Iran definitely adds a back trap ... it also provides a bullish scenario for gold,” he said.
Gold ended Tuesday 2.2% higher, at its best in more than a week at $1,600.50 an ounce as the dollar lost against major rivals, and oil and U.S. equities rallied.
In recent months, gold has broadly traded in tandem with other commodities and stocks, losing most of its allure as a safe haven.
It started to veer toward that path again on Tuesday, however, in part due to concerns about Iran’s threats to disrupt oil shipping lanes in the Strait of Hormuz as well as news Iran had successfully made and tested nuclear fuel rods as the country continues to defy Western powers in face of sanctions.
Gold prices are expected to trade in a tight band between $1,570 and $1,620 an ounce, analysts at India’s ICICI Bank said in a note to clients Wednesday. Klopfenstein said that the settlement again above $1,600 would put gold back on the sights of large funds and provide some traction for the metal in the short term.
Meanwhile, Indian gold imports last year fell short of market expectations, raising more than a few eyebrows as India is one of the world’s top consumers of gold.
Demand for gold in India “is likely to be relatively muted this year too, and should remain at roughly the 2011 level,” analysts at Commerzbank said in a note to clients.
Last year, however, central-bank purchases “more than made up” for the weak Indian demand, and central banks are expected to keep expanding gold reserves this year as well, keeping gold prices well supported, the analysts added.
Other metals futures traded lower, leaving behind the previous session’s steep gains, fueled in part by optimism surrounding U.S. manufacturing activity as Tuesday’s Institute for Supply Management index rose more than expected in December.
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Gold Still a Safe-Haven Investment
Gulf News
Amid the economic slowdown, a lack of trading in the stock market and property values eroding, gold remains a major investment option for investors, experts say.
A Dubai-based spot trader of gold and silver bullion, Gold Arab Emirate, said it has achieved over $500 million (Dh1.84 billion) in transactions in 2011, mainly from Dubai, Turkey, Kuwait and Switzerland branches.
Gold trade in the first half of 2011 reached 580 tonnes (average price $1,455), with exports down from 225 to 214 tonnes, reflecting greater local consumption, according to the Dubai Multi Commodities Centre (DMCC) Authority.
"Dubai, in particular, has generated substantial trade volume driven by the continuing surge in local demand, as local imports have reached up to three tonnes of gold each year, reaffirming the emirate's growing status as the ‘City of Gold'," the company said in a statement.
A Gold Arab Emirate spokesperson said he expects volumes to continue increasing as gold remains the best investment.
The UAE has traditionally been a major gold trading hub. A Ministry of Foreign Trade study shows the country to be among the world's top five gold traders from 2005 to 2009, ranking second globally in gold imports in 2009 alone with $14.5 billion worth of gold imported which is equivalent to 16.6 per cent of global imports. In the same period, the UAE ranked third globally in gold exports with a 10 per cent share of global exports worth $10.5 billion.
"Gold fell in light holiday trade on Tuesday as technical weakness, options-related selling and a lack of fresh economic news failed to stimulate buying interest in the final week of the year. Gold is on track for a 9 per cent fall for December," according to an American Petroleum Institute trading update on Tuesday.
Technical support
"Prices earlier in the month plunged below key technical support they had held for nearly three years, fuelling fears that bullion was close to ending a more than decade-long bull run. Spot gold fell to a one-week low of $1,588.89 earlier in the session. It was down 0.8 per cent at $1,592.80 an ounce. This year to date, gold is up 12 per cent, one of the few investment assets that posted sizable gains in a rather difficult 2011 largely plagued by US double-dip recession fears and Europe's debt crisis."
Mohammad Abu Al Haj, vice-chairman and CEO of Abu Al Haj Holding Limited and Chairman of Gold Arab Emirate, said: "Gold is the only safe-haven investment for 2012 and everyone should have at least 20 per cent of their portfolio in physical gold. In this regard, Gold Arab Emirate therefore serves as a gateway for investors by offering a wide range of alternative solutions for gold investments." Al Haj believes the price of gold will exceed $2,500 an ounce by the end of 2012.
"Nobody can deny that inflation and possibly hyper-inflation will take place in 2012, and the only thing that can protect an individual's net worth from such inflation is gold," he said.
Keeping value
"Money can be printed, gold cannot. For that reason gold always keeps its value. Moreover, I believe that Dubai will be the main gold hub in the world since it has the best logistics and investors' supply/demand satisfaction."
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China Should Buy More Gold – Central Bank
International Business Times
News of falling gold prices may bad news for most, but not for China.
Now is the most opportune time for China to buy more gold assets when prices of the yellow metal are dropping, to ensure the country maintains and protects a well-diversified foreign-exchange portfolio, Zhang Jianhua, research bureau director at the People's Bank of China, said in the Financial News, a newspaper published by the Chinese central bank.
"The Chinese government... needs to further optimise China's foreign exchange asset portfolio and seek relatively low entry points to buy gold assets," Mr Zhang wrote, noting government should remain cautious of possible inflationary pressures rising.
Other assets such as government bonds and property are slowly losing value. "Gold remains the only safe haven for risk-averse investors," he said.
China should increase its gold acquisition, more aggressively when prices drop, Mr Zhang said.
He did not, however, specify as to how much of the country's $3.2 trillion forex reserve should be allocated to gold investments.
Figures from China's central bank showed the world's second-largest economy currently holds 33.89 million ounces of gold in its reserves, unchanged since April 2009.
Gold purchases of central banks from China, Russia, Thailand and Mexico in the third quarter of 2011 showed a hike of more than six times to 148.4 tons compared to a year ago. Figures from the Gold Demand Trends report for Q3 2011 by the World Gold Council said central banks have been aggressively buying the yellow metal to increase their total reserve allocation, a move to diversify investments away from U.S. dollars.
Central bank purchases have more than doubled by 114 per cent over the previous quarter, in what could be the highest level of central bank buying since at least 1970.
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Gold Outlook 2012 – Positive Fundamentals Remain and Crucial Diversification
The Market Oracle
With just a few trading days left in 2011, we can take stock of gold’s performance vis-à-vis other assets.
Gold is 13.7% higher in USD, 12% higher in GBP and 14.4% higher in EUR. Gains were seen in all fiat currencies and even stronger performing fiat currencies such as the CNY (yuan) and JPY (+9% and +8.75% respectively).
G10 and Gold in USD in 2011 (YTD)
Stock markets globally had a torrid year with the S&P500 down 1.3%, the FTSE down 8% and the CAC and DAX down 19% and 15% respectively. Asian stock markets also fell with the Nikkei down 17%, the Hang Seng 20% and the Shanghai SE down 22%.
The MSCI World Index fell 9%.
Thus, gold again acted as a safe haven and protected and preserved wealth over the long term.
While gold reached record nominal highs at $1,915/oz in August, it is important to continually emphasize that gold remains well below the real high, adjusted for inflation, in 1980 of $2,500/oz.
Gold today at $1,625/oz is 18% below the record nominal high of $1915/oz in August 2011. More importantly, gold remains 46% below its real high of $2,500/oz.
Since 2003, we have said that gold would likely reach the real high from 1980 for a variety of important fundamental reasons – such as global debt levels, global demographics and geopolitical, macroeconomic, monetary and systemic risk.
Money Creating Central Banks May Push Gold to New Nominal Record in 2012
Money Creating (Electronic and Printing) Central Banks Push Gold to Nominal Records (2008-2011)
Global money supply continued to rise in 2011 and helped push gold prices to all-time highs on the fear of currency debasement. If accommodative monetary policies continue as the dominant tool for central banks, precious metals will almost certainly continue to benefit.
Were this trend to turn, responsible monetary policy actions could hinder returns. We see no prospect of this in the short term – and little prospect in the medium term.
Central Banks Will Continue To Be Net Buyers of Gold
Gold Diversifying Central Banks Should Support Demand
Central banks have bought about 30 million ounces of gold since March 2009, about 12% of global demand on trailing 10-quarter basis. As central banks focus on stimulating growth, negative real interest rates in developing nations should continue to push diversification of foreign exchange reserves, which may encourage bullion purchases.
Central bank gold reserves are likely to return to the levels seen in the 1970’s and 1980’s due to a significant reappraisal of monetary risk and a recognition of gold’s increasing importance as a monetary asset.
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Gold Moves Up as Traders Mull Safe-Haven Appeal
MarketWatch
Gold futures headed higher Tuesday, after spending the session wavering between gains and losses, as traders mulled the metal’s safe-haven appeal against a backdrop of pressure from a stronger U.S. dollar and upbeat economic data, and support from growing euro-zone concerns.
Gold for December delivery GC1Z -0.01% rose $2.80, or 0.2%, to $1,781.20 an ounce on the Comex division of the New York Mercantile Exchange. It touched a high of $1,787.80 and a low of $1,707.20 earlier.
U.S. economic data reported Tuesday came in generally better than expected, dulling investor interest in gold.
The Empire State manufacturing index moved into positive territory, albeit slightly, in November after five months in negative territory, the Federal Reserve Bank of New York said. Read about the Empire State regional factories gauge.
Retail sales rose sharply for the second straight month, according to the Commerce Department. Read about retail sales.
And producer prices for October dropped by the largest amount in 20 months on the heels of a big drop in gasoline and a decline in vehicle prices. Read about the PPI.
Silver for December delivery SI1Z +1.13% lately traded below the session’s high. It was up 45 cents, or 1.3%, to $34.47 an ounce after trading as high as $34.84.
Aside from the upbeat data, a stronger dollar helped cap gains in both gold and silver.
The dollar index DXY +0.47% , which tracks the U.S. unit against a basket of six major currencies, stood at 77.864, up from 77.532 late Monday. Strength in the dollar makes gold and other commodities more expensive for holders of other currencies.
Euro woes
Meanwhile, trouble in Europe is worsening with France and Spain in the headlines, said Chintan Karnani, chief analyst at Insignia Consultants in New Delhi, in emailed comments.
“This has rattled investors” and provided some support for gold and silver,” he said.
On a technical level, gold still needs to break past $1,806 and if it doesn’t, prices may fall to $1,747 or below, said Karnani.
In the euro zone, third-quarter gross domestic product across the region expanded by 0.2% compared with the second quarter and grew 1.4% versus the third quarter of 2010, the European Union’s statistics agency reported earlier Tuesday.
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Gold Over EUR 1,300 – On Way to ‘Infinity’ on Eurozone Contagion?
The Business Insider
Risk has returned with a vengeance as Italian debt markets have gone into meltdown leading to falls in European equity indices. Gold remains near a seven week high and has risen to above EUR 1,305/oz due to the deepening Eurozone crisis and contagion risk.
Deepening geopolitical tensions regarding Iran, Israel and the western world has led to oil rising for six days in a row now and this is also supporting gold. The International Atomic Energy Agency said Iran was developing nuclear-weapons capabilities that gave it "serious concern" about possible military aspects to Iran’s nuclear programme.
Italy’s bond markets are heading the way of Ireland, Greece and Portugal with their 10 year bond yield surging to over 7.45% and the yield curve inverting with the 2 year yield rising above the 10 year.
China's gold consumption continues to surprise even bullish analysts. China's gold consumption is expected to jump nearly 50% to reach 400 tonnes this year. Thus exceeding the country's forecast of more than 350 tonnes. 400 tonnes compares to just 270 tonnes in 2010 which was itself a record month.
Official Chinese annual consumer inflation numbers showed an easing to 5.5% from September's 6.1%. The savings rate (1 year) is at 3.5% meaning steep negative real interest rates continue in China which is bullish for continuing Chinese gold demand.
So far, gold has not managed to rise above the psychologically important $1,800 level. However, the real risk of contagion in the eurozone and the breakup of the European monetary union means that gold’s safe haven properties will be increasingly appreciated in the coming months.
While much of the media attention has been on the political ‘punch and judy’ show in Athens, Rome, and in the European Union there continues to be a failure to soberly analyse the ramifications of the crisis for consumers, investors and savers.
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Comex Gold Higher On Safe-Haven Demand As Italy Now In The EU Debt Crisis Spotlight
Forbes
Comex December gold futures are trading higher and have hit a fresh six-week high in early U.S. trading Monday. Fresh safe-haven demand is featured. It’s the same song, just a different verse regarding the ongoing European Union sovereign debt crisis. Instead of Greece being the debt-strapped and troubled EU nation in the spotlight, this week it’s Italy. December gold last traded up $23.00 at $1,779.00 an ounce. Spot gold last traded up $23.60 an ounce at $1,778.00. December Comex silver last traded up $0.531 at $34.615 an ounce.
Safe-haven investor demand is again featured to start the trading week amid weekend developments on the European Union financial and sovereign debt crisis front. Just as it appears Greece will comply with its EU debt plan constricts—after a weekend shuffle in its government—now Italy comes to the front burner as its bond yields are soaring Monday and rumors of a leadership change in that nation abound. Traders and investors worldwide are wondering what will be next, but most reckon whatever it is, it won’t be positive for the market place. This heightened uncertainty remains a bullish factor for the precious metals markets.
The U.S. dollar index is trading slightly higher Monday morning, also on safe-haven investment demand amid the EU debt crisis. The dollar index bulls have gained upside near-term technical momentum recently.
Crude oil prices are modestly higher Monday morning, and that’s also an underlying bullish “outside market” force for the precious metals. Crude oil prices remain in a near-term uptrend.
U.S. economic data due for release Monday is light and includes the employment trends index.
The London A.M. gold fixing was $1,764.00 versus the previous P.M. fixing of $1,749.00.
Technically, December gold bulls have the solid overall near-term technical advantage and have gained upside momentum recently. Prices are in a six-week-old uptrend on the daily bar chart and hit a fresh six-week high overnight. Bulls’ next upside technical objective is to produce a close above psychological resistance at $1,800.00. Bears’ next near-term downside price objective is closing prices below solid technical support at last week’s low of $1,681.20. First resistance is seen at the overnight high of $1,781.30 and then at $1,800.00. First support is seen at the overnight low of $1,754.00 and then at $1,740.00.
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Top Gold Forecasters See Rally Lasting Until March
Bloomberg
The most accurate forecasters say gold will rebound from its biggest monthly plunge since 2008 and reach a record by March because economic growth is stagnating and Europe’s debt crisis is unresolved.
Futures traded in New York may rise 13 percent to $1,950 an ounce by the end of the first quarter, according to the median of estimates compiled by Bloomberg. The predictions are from eight of the top 10 analysts tracked by Bloomberg over the past eight quarters. Two declined to give forecasts.
Holdings in exchange-traded products backed by bullion rose the most in three months in October, and the most-widely held option gives owners the right to buy gold at $2,000 by Nov. 22. Demand for the metal accelerated since May as slowing growth and mounting concern that European leaders will fail to contain the region’s debt crisis caused $7.5 trillion to be erased from the value of global equities.
“There is a loss of trust in the entire financial system and urgent need for safe-haven investment,” said Ronald Stoeferle at Erste Group Bank AG in Vienna, the second most- accurate forecaster in the past three months. “The environment for gold is just perfect.”
ETP holdings expanded 1 percent to 2,271.2 metric tons last month, a pile now valued at $126.6 billion and greater than the reserves of all but four central banks, data compiled by Bloomberg show. Bullion bought for investment accounted for 38 percent of total demand in 2010, compared with about 4 percent a decade earlier, the London-based World Gold Council estimates.
Paulson Buys Gold
Paulson & Co., founded by John Paulson, remains the largest shareholder in the SPDR Gold Trust, the biggest ETP backed by physical metal, according to an Aug. 15 filing with the U.S. Securities and Exchange Commission. Paulson, who made $15 billion betting against subprime mortgages, bought the 31.5 million shares in the first three months of 2009. Their value increased to $5.3 billion from $2.84 billion since then.
Gold has risen 22 percent this year, beating the 1.8 percent advance in the Standard & Poor’s GSCI gauge of 24 commodities, the 8.3 percent decline in the MSCI All-Country World Index of equities and the 8.8 percent return on Treasuries calculated by Bank of America Corp. indexes. The metal has appreciated more than sixfold in its 11-year run of annual gains.
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Comex Gold Ends Slightly Lower But Well Off Daily Low On Bargain Hunting
Forbes
Comex December gold futures ended the U.S. day session modestly lower but nearer the daily high as bargain hunters stepped in to buy the lower price levels seen earlier. Some fresh, bullish European Union news headlines at midday also lifted the precious metals markets and many other markets off their daily lows. December gold last traded down $4.40 at $1,720.80 an ounce. Spot gold last traded up $4.30 an ounce at $1,720.00. December Comex silver last traded down $0.959 at $33.38 an ounce.
News headlines surfaced near midday that efforts by Greece’s prime minister to hold a referendum on whether to implement last week’s EU bailout package for that beleaguered nation is now not likely to occur. Earlier in the day, news headlines saying the Greek referendum would happen roiled many markets, including the precious metals. The U.S. dollar index spiked again on those news headlines, but in afternoon trading had backed will off its daily highs. That also helped to support the bargain hunting buying interest in the precious metals.
Once again, the EU debt crisis is back on the front burner of the market place. The precious metals markets have recently chosen to follow most other commodity markets lower during the “risk off” trading days. Ironically, if the EU debt crisis once again escalates to the downside, I suspect gold prices would be supported on safe-haven investor demand. Such has been the fickle day-to-day trading nature of the gold market.
The U.S. dollar index is still benefiting from Monday’s Bank of Japan intervention in the currency markets to sell yen and buy U.S. dollars. The dollar index bulls have gained some fresh upside near-term technical momentum this week.
Meantime, crude oil prices were lower Tuesday, and that was also a bearish “outside market” force for the precious metals. However, crude oil prices remain in a near-term uptrend and are so far just seeing a corrective and profit-taking pullback early this week.
The London P.M. gold fixing was $1,699.00 versus the previous P.M. fixing of $1,722.00.
Technically, December gold futures prices closed nearer the session high Tuesday. Profit taking from recent gains was seen. No chart damage has occurred this week. Bulls still have the overall near-term technical advantage, but need to show some fresh power soon. A five-week-old uptrend is still in place on the daily bar chart. Bulls’ next upside technical objective is to produce a close above solid technical resistance at last week’s high of $1,754.00. Bears’ next near-term downside price objective is closing prices below solid technical support at last week’s low of $1,636.60. First resistance is seen at Tuesday’s high of $1,725.60 and then at this week’s high of $1,746.50. First support is seen at $1,700.00 and then at Tuesday’s low of $1,681.20. Wyckoff’s Market Rating: 6.0.
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