Gold Recovers from 4-1/2-Month Low as Euro Firms
Reuters
Gold recovered from its lowest since late December on Wednesday, edging back into positive territory as U.S. stocks opened higher and after speculation Germany and France will act to keep Greece in the euro zone lifted the euro into the black.
Spot gold was up 0.3 percent at $1,549.04 an ounce at 1403 GMT, off a low of $1,527.00. The metal was earlier sucked into a broad-based financial market sell-off on the back of alarm over political turmoil inGreece.
Despite its recovery, it remains vulnerable to a further drop after its longest stretch of losses in nearly five months.
Gold fell along with other more industrial commodities such as copper and crude oil, under pressure from an early rise of the dollar, which put silver on track for its longest stretch of consecutive daily losses in nearly four years.
Fears a Greek exit from the euro zone would worsen the European debt crisis gripped European markets on Wednesday, sending shares and other riskier assets lower as investors shifted funds into safe havens like the U.S. dollar.
"Negative market sentiment seems well entrenched and we may see further downside in the price," BNP Paribas analyst Anne-Laure Tremblay said. "In particular, we could see further cross-asset liquidation if the probability of a Greek default increases in the next weeks."
Gold tends to trade inversely to the dollar, so that strength in the U.S. unit encourages non-U.S. investors to sell gold in exchange for greater profits in their own currencies.
The euro recovered after touching four-month lows versus the dollar, while European equities struggled off their lowest level for the year. Gains were muted, however. <MKTS/GLOB>
"It's difficult to see a turnaround just yet. There will be one, but I don't think this is the time, just when we are in the eye of the storm," Societe Generale analyst Robin Bhar said.
"Clearly, with people staring into the abyss, it could (fall) $50 or even $100 lower as it washes out. That is the unpredictability of it all and as equities fall, as the Greeks take money out of the banks and the banking sector collapses, I suppose you'd have to be wary of further price falls just to cover for losses in other markets," he said.
U.S. gold futures for June delivery were down $8.40 an ounce at $1,548.70.
BIG BULLS HOLD
In a small positive for gold, billionaire fund manager John Paulson held on to his stake in the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, in the first quarter of 2012, a regulatory filing showed on Tuesday.
The prospect of improvement in physical demand for gold from the Indian jewelry sector took a knock on Wednesday with the drop in the rupee to a record low against the dollar, driven by the widespread risk aversion.
Buying in India, the world's largest bullion consumer, has emerged with the decline in the dollar-denominated gold price to 4-1/2 month lows this week, but local dealers have said the weakness in the rupee could curb this.
"Definitely physical buying has gone up, although demand is not overwhelming," said a dealer in Singapore.
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Gold Takes It On the Chin…What’s Next?
GoldSeek
There was a strong reaction on Tuesday to the elevated debt crisis in Europe, with commodities and equities being indiscriminately sold. Gold fell 3 percent this week, losing its safe haven status as the dollar grew stronger and the 10-year government note headed lower.
The markets generally overreact to negative news, however, investors should keep in mind gold’s normal monthly historical volatility. Throughout the past 20 years of monthly returns, the precious metal generally increased only 0.5 percent in May, and has historically declined in June and July.
Facts don’t thwart the short-term pain, yet as contrarian investor Baron Rothschild said, “the time to buy is when there’s blood in the streets.” Here are five reasons we believe today’s sell-off sets up a buying opportunity for gold:
1. It is precisely the debt strangling the eurozone which will drive gold demand over the longer term. The side effect to the abundance of printing by central banks in the U.S., Europe, Japan and England is bloated balance sheets amounting to nearly $8 trillion. This is double the amount that it was only three and a half years ago.
2. Several developed markets have negative real interest rates and these rates are anticipated to remain negative for years to come. Historically, when the inflationary rate is greater than the current short-term interest rate, gold prices rose.
3. Emerging market central banks continued their gold buying spree in March. UBS Investment Research says that Mexico bought 16.8 tons, Russia bought 15.6 tons and Turkey added 11.5 tons. Additional small purchases were made by Tajikistan, Kazakhstan and Belarus. We wrote a few months ago that central banks have begun accumulating gold reserves since the Federal Reserve cut interest rates in 2007, and HSBC Global Research expects this buying trend to continue for another five years.
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Spain Bank Problems Loom Over Markets
BBC
Spanish shares have fallen and the interest rate on the country's benchmark 10-year bond has risen amid fresh worries over the banking sector.
The Ibex market fell by 3% and bond yields rose above 6%, a level seen as unsustainable.
On Friday, Madrid will unveil a plan to clean up banks exposed to the property and construction sector crashes.
Much focus will be on Bankia, which holds 32bn euros in distressed property assets and whose boss has resigned.
Rodrigo Rato, who stepped down as Bankia's executive chairman on Monday, was a former head of the International Monetary Fund.
Last month, it was confirmed that the Spanish economy was in recession.
'Last resort'
Concern over the weakness of the economy and the deficit have driven up the cost of borrowing for Spain, raising fears it will need a bailout.
That worry has been heightened by the realisation that there is a multi-billion funding gap in the Spanish financial system linked to the 2008 property crash.
Lenders are trying to write down 54bn euros of losses on bad property investments and will struggle to find the extra funds without state assistance.
The current Spanish government, elected in December, has so far insisted that no public money would be used to rescue banks.
But Prime Minister Mariano Rajoy conceded on Monday that "if it were necessary to prompt lending", he would do so "as a last resort".
"The banking issue has been allowed to fester for three years. More public cash will raise funding costs for the government, but it's worth the risk," said Gilles Moec, an analyst at Deutsche Bank.
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France May be the Domino that Causes the Euro to Collapse
Money Morning
Commentators are wringing their hands again, worried the troubles in Spain could cause the whole euro project to collapse.
As a result, all eyes are now on Spanish 10-year debt yields, which went above 6% last week as the threat of euro-chaos returned.
But it's not Spain the markets should be worried about.
The reality is that Spain is not in too bad a shape and that a rescue would be affordable for the European Central Bank even if it was needed.
The real tottering European domino to worry about is France.
After all, it would be impossible for the remaining solvent members of the EU to bail out France if it began to fall.
The larger reality is that France's fiscal position is considerably worse than Spain's.
The country's debt-to-GDP ratio was 85% at the end of 2011, while Spain's was only 66%. What's more, France's public spending is 56% of GDP, according to the Heritage Foundation, compared to Spain's 45% of GDP.
Spain's current government has also instituted a stiff austerity program, mostly comprised of cuts in public spending, which will reduce its deficit below France's by 2013.
Meanwhile, France's austerity has so far consisted almost entirely of tax increases on the rich -not actual spending cuts.
Spending cuts, especially from governments which are overspending, may well stimulate GDP because they free resources for the more productive private sector, whereas tax increases generally worsen recession.
French Elections Hold the Key to the Euro
Whether or not France brings down the euro hinges on the outcome of its upcoming presidential election, set for two rounds April 22 and May 6.
France's current position is very confused, to say the least. No fewer than five candidates have a chance to make it into the two-candidate runoff.
The incumbent, Nicolas Sarkozy, is currently running slightly behind the mainstream socialist Francois Hollande, but three other candidates potentially could knock one or the other of the front-runners out of the second round.
They are Marine LePen, a nationalist; Francois Bayrou, a moderate; and Jean-Luc Melanchon, an extreme leftist.
Presumably if any of those three made it to the second round, they would be beaten by the remaining major party candidate, as was LePen's father by Jacques Chirac in 2002.
But it has to be said that electoral prognostication is exceptionally difficult.
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Gold at 2,000 Dollars by Year-End?
FX Street
Financial markets including commodities spent most of the week recovering from the surprise weakness witnessed in the recent US jobs report. US stocks dropped to a one-month low and in Europe the dramatic divergence between different countries continued. The divergence in the performance so far this year between the DAX index in Germany and the IBEX index in Spain is really stunning and currently stands at 27 percent. Spain especially is now the focus in the prolonged European debt crisis with the yield on its 10-year government bonds reaching 6 percent, more than four percentage points higher than its German equivalent.
Meanwhile, the dollar continues on its road to nowhere with the EURUSD, the world’s most traded currency pair, once again finding support ahead of the important 1.3000 support level. The euro buying – dollar selling that followed once the support level was confirmed generally helped commodities to recover some of their poise late in the week.
However, the near-term outlook for global growth, especially in China where Q1 growth eased to a three-year low, points towards some softness and could limit the upside potential for commodities during this quarter. The China news triggered some selling of industrial metals, especially copper which at one point came close to critical support levels before bouncing as the dollar weakened.
Gold did receive a boost after support held once again and from a forecast that 2,000 dollars could be seen before 2013 while oil prices spent most of the week testing the strength of support.
Gold looks towards the FED – again
Traders in the gold market have been wrong-footed on several occasions during the last couple of months as the main price mover has been the constant on/off talk about further US quantitative easing. The recent weakness in US job growth has once again turned the focus towards the potential for more liquidity being provided. Support was also provided by GFMS, one of the world’s leading consultancies in precious metals. In its Gold Survey 2012 it forecast that gold could move above $2,000 by year-end or early 2013 before peaking some time during 2013.
The reasons behind the continued rally are well known, such as: concerns over the Eurozone debt crisis, negative real yields and the prospect of more US monetary easing. The peak in 2013 and subsequent retracement will occur once the prospect for higher US rates becomes a reality. GFMS also interestingly sees supply from mining and scrap continuing to rise faster than demand for jewellery and other goods leaving the investment community in charge of driving demand forward. It sees a point in time where not enough investors will step up and that could signal the turn in the market. The near-term floor in the market is called at 1,530 but will only be met during a risk-off scenario where gold also could get dragged lower for a while.
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I’m Back Into Gold: Dennis Gartman
CNBC
Dennis Gartman got out of gold last week, but he's back thanks to an inadvertent push by Federal Reserve Chairman Ben Bernanke.
"I was wrong in standing aside," said the publisher of The Gartman Letter. "Fortunately I didn’t stand aside on much. I got scared. The pros get more frightened than amateurs in this business, and the first rule is to keep your powder dry."
Gartman is a little unusual in that he owns gold in yen rather than in dollars, and last week he "thought the yen was going to weaken dramatically," which helped push him out of gold.
Then Bernanke spoke to the National Association of Business Economics before the market opened Monday and said that with a continuing weak labor market, the Fed could do morequantitative easing if necessary.
"Sometimes you get lucky" and "Dr. Bernanke got me a little lucky this morning," said Gartman. He said he "got lucky" with Bernanke's easing comments, indicating possibly another round, which would be QE3, is back on the table.
"If you'd ask people last week you’d think QE3 was off the table and broken on the floor," Gartman said. The thought of QE3 helped send gold higher.
But even before Bernanke spoke Gartman said "it was apparent to me the trend was still up" for gold. But he's not setting any targets.
"I’m old enough in this business to understand that making targets usually makes you look rather foolish," he said.
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Daily Pfennig: An Insider Comes Clean…
Proactive Investors
In This Issue…
* Gold’s price drop, manipulated?
* Jumping on the GATA bandwagon…
* RBA leaves rates & easing bias unchanged
* Only yen ekes out a gain VS dollar!
And, Now, Today’s Pfennig For Your Thoughts!
An Insider Comes Clean…
Good day… And a Tom Terrific Tuesday… What a long day on the desk yesterday… Whew! I’m glad I got through that without leaving a mark! And I came back! I laugh, because in the early days of EverBank, what I now call a long day, would have been a short day! I remember buying breakfast sandwiches for the desk, lunch and then pizza for dinner, as we worked on building the foundation that’s now EverBank World Markets… It’s now a strong foundation…
Gold has a strong foundation too… and even after suffering through the shenanigans of last week, the shiny metal is off by 1.3% overnight, so the shenanigans haven’t stopped, and those of us that use pull-backs in the price of Gold as an opportunity to buy at cheaper prices, have to scratch our heads and wonder if the shenanigans are over or will there be more?
Long time readers know that I truly believe there are price manipulators in Gold & Silver… well, last week there was some interesting information being put out there for us to go through, regarding “an insider” that came clean and admitted what was going on… WOW! Of course, you can’t believe everything you read, right? Well, I believe that when the information is in a market letter, like Dennis Gartman’s, then you stop, and think that it’s must be true…
OK… first of all let me set this up for you… Dennis Gartman has long been a naysayer regarding the GATA people and people like me that say there is price manipulation going on in Gold. Well… my friends over at the 5-Minute Forecast, had this to say yesterday…
“This was no free market,” says a well-placed insider about why gold plummeted nearly $100 on Wednesday.
The insider is unknown to us, but our longtime friend Dennis Gartman calls him “a very long-standing friend and client” in his newsletter. The mysterious Mr. X is trusted enough that Gartman is re-examining his oft-stated vehement dismissal of the GATA positions that the metals markets are manipulated.
“As I have very intimate details of [Wednesday],” says this individual, “I think it was, indeed, official selling. At the London fixing, an order came in to sell 3 million ounces of gold and it was explicitly ordered to be done in just a few minutes. No investor or speculator would 1) handle it this way and 2) do it at the fixing only.”
“This [has] happened this way three times in the last year, [Wednesday] being the fourth time.”
Concludes Gartman: “The market’s plunge... may have been the result of a very real effort to ‘manipulate’ the market lower... perhaps on orders of a central bank hoping to break the market... to buy gold more cheaply after the surge of selling, or perhaps on the order of a government wishing to drive gold down for the ‘optics’ of weaker gold prices.”
Chuck again… Hmmm… so where’s the CFTC? Why aren’t they calling around trying to find the mysterious Mr. X, to talk to him? And the selling continues… I shake my head in disgust, utter disgust, folks… and you should too, for this smells like, walks like, talks like and quacks like someone didn’t like the fact that the dollar was getting hammered by Gold (& Silver), and they needed to do something about it!
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Gold Rallies on Dollar Slide, Downgrades
MarketWatch
Gold futures on Tuesday rallied to their best in more than a month, relying on a weakening U.S. dollar and lingering concern about Europe’s recent debt downgrades as well as rallies for oil futures and stocks.
Gold futures for February delivery rose $24.80, or 1.5%, to $1,655.60 an ounce on the Comex division of the New York Mercantile Exchange. That was gold’s highest settlement since Dec. 13.
The market reacted to an increase in risk tolerance, said Jim Steel, an analyst with HSBC in New York. Gold was also riding the coattails of sharp increases for U.S. stocks and oil, he added.
Moreover, gold buyers are concerned with currency devaluation and loss of purchase power, and they note “the downgrades of the euro-zone countries means fiscal stimulus is not far behind,” George Gero, a vice president with RBC Capital Markets, said in emailed comments.
U.S. markets were closed for a holiday on Monday, and most assets traded sharply higher in the first business day of the week.
Also helping moving markets was news that China’s output rose in the fourth quarter, with the news aiding industrial metals such as silver.
Data released earlier Tuesday showed that China’s fourth-quarter gross domestic product rose 8.9% from the year-ago period, topping estimates. Monthly data also showed better-than-expected retail sales and industrial production in December. Read full story on the economic data.
U.S. and European stocks rose on the Chinese data. Markets also were lifted by an upbeat economic-sentiment indicator out of Germany and a well-received Spanish debt auction. That followed a successful auction by France on Monday.
Asian markets also climbed Tuesday, staging a strong rebound after Monday’s decline and reflecting improved risk appetite.
The U.S. dollar index, which measures the greenback against a basket of six major global currencies, fell at 81.099 from 81.436 in Europe Monday.
That helped to lift several commodities that are priced in dollars, including gold and other precious metals.
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Ahead: Inflation and a Gold Rally
MSN Money
Though 2011 was a poor (if not horrible) year for most investors in most markets, 2012 started off fairly strong for European and U.S. stocks early in the week. (Europe's bond markets, though, were largely unchanged Monday and Tuesday, after a decent amount of motion to close out 2011; they weakened as the week wore on.)
Meanwhile, the faltering euro did not precipitate enormous weakness in other currencies, though there was a bit of that. (The logic was that if the euro is weak then the dollar is strong, in which case you're supposed to sell everything except dollars. At least that is the current conventional wisdom, even though it doesn't make much sense.)
Out with the old, up with the new
I'm sure precious-metals bulls were extraordinarily frustrated late in 2011, as gold and silver were sold regardless of the news. Certainly markets can be maddening as well as unprofitable at times, especially at the end of the year, when forced selling (or, in some years, herd-driven buying) causes the markets to ignore favorable news. Selling sometimes feeds on itself.
Of course, when a trend is as powerful as the recent decline in gold was, I'm sure there were computerized trading programs jumping on the bandwagon as well, and betting on lower prices by getting short.
In any event, as the year ended, the stage was set for a potent rally in the metals, and that was what I think we saw starting on Tuesday. The questions now are whether the last week of December was the low for this entire decline, and whether we get some sort of test of those prices (as well as what such a test might look like).
Since so many people trade gold on a technical basis, the determining factor for what the next pullback looks like may be dictated by whether it can get over its 200-day moving average, at around $1,625 per ounce. I don't have a strong opinion at this point -- it would be almost impossible to have one yet. But it is entirely conceivable, given the forced liquidation and computer activity, that the lows for this correction have been seen.
No home-field advantage
Turning to the world at large, while the market "wrote the news" in the last couple of weeks (and the last couple of months) of the year, and the Standard & Poor's 500 Index ($INX -0.21%)rallied, folks seemed to get quite giddy over the possibility of potential strength in the U.S. economy. I think those expectations are misplaced. I don't think our economy is all that strong. It may not be the disaster that Europe's is, but I expect those looking for economic strength here will be disappointed.
Be that as it may, the U.S. is not the major focus of the markets at the moment anyway. That honor goes to the continuing saga of Europe's financial situation. On that score, as folks have had time to think about what the European Central Bank is up to and to look at its balance sheet, it is clear that the ECB has embarked on a money-printing mission, even though it refuses to call its actions that. (Basically, "long-term refinancing operation" is European for "quantitative easing.")
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Gold Rises Over 2 Percent as Equities, Commodities Rally
Reuters
Gold rose 2.5 percent on Tuesday, on track for its largest one-day gain in about two months, as economic optimism sparked broad-based equities and commodities rallies as well as bullion buying after the metal's heavy losses last week.
Silver was up over 6 percent, set for its biggest one-day rally since May 2011.
Gold was moving in lockstep with the euro, after an encouraging U.S. manufacturing report and positive data from China and Germany suggested that global economic recovery was gaining steam.
A $4 rally in crude oil futures on rising tensions between Iran and the United States and surging grain prices also supported gold's gains. <O/R> <GRA/>
"With the sell-off that we had based on very low volume to end the year, the gold market snapped back and a significant amount of bargain hunting is coming in at those lower prices," David Meger, director of metals trading at futures brokerage Vision Financial Markets.
Spot gold was up 2.4 percent at $1,603.39 an ounce by 12:06 p.m. EST (1706 GMT), set for its largest one-day rise since November 7. Bullion was down 2.5 percent last week on a technical sell-off.
U.S. gold futures for February delivery were up $38 at $1,604.80 an ounce.
Silver rose 6.3 percent to $29.55 an ounce.
Gold followed the near 2 percent gain in the S&P 500 index after data showed the U.S. factory sector expanded at its fastest pace in six months in December. <ID: nL1E8C32IN>
Bullion posted a gain of 10 percent for 2011, its smallest annual rise in three years. It remains down 16 percent from a record $1,920.30 set in September, and finished the fourth quarter with its first quarterly loss in more than three years.
Simmering geopolitical tensions also boosted bullion investor sentiment.
Iran said it had successfully test-fired what it described as two long-range missiles, flexing its military muscle amid mounting Western pressure over its nuclear program. Tehran has also warned it could shut the Strait of Hormuz, through which 40 percent of world oil is shipped.
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