Gold Rallies to Highest Close in a Month
MarketWatch
Gold futures climbed Wednesday to mark their highest close in a month, buoyed by news of a drop in first-quarter U.S. productivity and a weaker dollar, amid optimism over the euro zone’s willingness to do more to stem the region’s crisis.
Gold futures for delivery in August climbed $17.30, or 1.1%, to settle at $1,634.20 an ounce on the Comex division of the New York Mercantile Exchange.
Prices, which gained $3, or 0.2%, in the previous session, logged their highest settlement for a most-active contract since May 7, according to data from FactSet Research.
”The big question in our mind is if gold’s recent strength is merely a relief rally, or is gold readying for the next leg up and about to challenge all time highs,” said Vedant Mimani, lead portfolio manager of the Atyant Capital Global Opportunities Fund, a precious metals-focused fund based in Miami.
Silver led the percentage gains among the precious metals, with July silver futures up $1.08, or 3.8%, to end at $29.49 an ounce, extending their Tuesday climb of 1.4%.
While the European Central Bank left its key lending rate unchanged, “further easing can be accomplished by creative means at the ECB to bring liquidity into their market,” said Jeff Wright, managing director at Global Hunter Securities.
“Future easing measures by the ECB will have a similar effect on gold as the U.S. Federal Reserve’s QE2 and “twist” did in 2011; due to prospect of future inflation beyond expectations,” he said.
In his monthly news conference, ECB President Mario Draghi said the central bank’s decision to leave its key lending rate at 1% earlier in the day was made by “very broad consensus,” indicating the decision wasn’t unanimous.
“The market seems to believe ... Draghi’s comments that the ECB has been urged to cut rates to ease pressure on European banks and governments,” said Mimani.
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Gold Settles a Tad Higher as European Worries Ease
MarketWatch
Gold futures edged higher Thursday, with some support from a round of U.S. economic data, a reprieve in concerns over Europe’s banking, and a weaker dollar, but with lack of investor interest keeping gains subdued.
Gold for June delivery advanced $1.30, or 0.1%, to end at $1,595.50 an ounce on the Comex division of the New York Mercantile Exchange.
“Gold is really lacking a theme in the marketplace,” said Adam Klopfenstein, an analyst with Archer Financial in Chicago. It does not move higher with equities, and it has been unable to catch flight-to-safety bids, which are going to the U.S. dollar and U.S. bonds, he said.
“Gold is really stuck,” and things are unlikely to change in the short term unless a steep, sustained fall for equity markets, he added.
Earlier Thursday, traders keyed off U.S. government data that showed initial jobless claims stayed relatively flat last week as import prices dipped in April and the U.S. trade deficit surged in March.
The dollar slipped Thursday, helping gold to stabilize after closing below $1,600 an ounce for the first time this year in the previous session.
Dollar-denominated commodities — particularly gold, which is seen as an alternate to paper currencies — often take a knock as the dollar rises.
On Thursday, European stocks and the euro rose after Spain moved to nationalize struggling real-estate lender Bankia and European leaders agreed to grant the next aid payment to Greece.
U.S. stocks traded modestly higher as well, with oil futures holding on to tenuous gains.
Despite its recent downturn, gold is not losing its luster “as the currency of last resort,” analysts at Goldman Sachs said in a report released Thursday.
“Improved confidence” in the dollar in recent months has made the U.S. currency the flight-to-safety asset at the moment, they said.
“However, we believe it is too early for the U.S. dollar to reclaim this status, as the original U.S. dollar concerns have not disappeared,” the analysts added. They left their 6-month forecast for gold prices unchanged at $1,840 an ounce.
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Bernanke Says ‘Prepared to Do More’ After Policy Unchanged
Bloomberg
Federal Reserve Chairman Ben S. Bernanke said the central bank stands ready to add to its stimulus if necessary even after leaving its policy unchanged today and upgrading its view of the economy.
“We remain prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target,” he said at a press conference today following a meeting of theFederal Open Market Committee in Washington. Additional bond-buying is still “very much on the table.”
Treasuries pared losses after Bernanke kept speculation alive that the Fed might embark on a third round of monetary easing after expanding its balance sheet to a record of almost $3 trillion. Central bankers today raised their forecasts for growth and the labor market this year while repeating that borrowing costs are likely to remain “exceptionally low” at least through late 2014.
The FOMC “expects economic growth to remain moderate over coming quarters and then to pick up gradually,” it said in a statement after a two-day meeting. The statement pointed to “some signs of improvement” in housing while saying the industry at the heart of the financial crisis “remains depressed.”
Policy makers are holding off on additional steps to boost the economy amid signs the more than two-year expansion is gaining strength. Still, the jobless rate isn’t declining fast enough to satisfy central bankers, who are also concerned about potential shocks from the European debt crisis.
Global Strains
“Strains in global financial markets continue to pose significant downside risks to the economic outlook,” according to today’s statement. The Fed has cited the risk in its previous five meetings. In March it said those strains had “eased.”
The yield on the benchmark 10-year note was little changed at 1.99 percent at 4:15 p.m. in New York, according to Bloomberg Bond Trader prices, after rising as high as 2.04 percent.
Stocks rose for a second day after Bernanke’s comments and as earnings beat estimates at companies from Apple Inc. to Boeing Co. The Standard & Poor’s 500 Index climbed 1.4 percent to 1,390.7.
Bernanke said that fiscal tightening may weigh on growth as lawmakers seek an agreement to narrow the budget deficit by year-end, before a deficit-reduction law requiring cutbacks takes effect.
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Gold May Advance as Euro-Area’s Debt Crisis Spurs Demand
Bloomberg
Gold futures advanced from a one- week low as the dollar declined, increasing demand for the metal as an alternative investment.
The greenback fell for the second straight day against a basket of currencies as European debt concerns eased and the International Monetary Fund increased its forecasts for economic growth. The Standard & Poor’s GSCI Spot Index of 24 commodities rose as much as 0.9 percent.
“The dollar’s weakness is supporting all commodities, including gold,” Sterling Smith, a market analyst at Country Hedging inSt. Paul, Minnesota, said in a telephone interview.
Gold futures for June delivery rose 0.1 percent to settle at $1,651.10 an ounce at 2:11 p.m. on the Comex in New York. Earlier, the price dropped to $1,635.20, the lowest since April 10. The precious metal has advanced 5.4 percent this year.
Silver futures for May delivery jumped 1 percent to $31.674 an ounce on the Comex. Prices have climbed 13 percent this year.
On the New York Mercantile Exchange, platinum futures for July delivery climbed 0.6 percent to $1,584.70 an ounce. Palladium futures for June delivery increased 1.7 percent to $661.95 an ounce.
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Gold Ends 1% Higher on Safe-Haven Flows
MarketWatch
Gold futures ended a see-sawing Tuesday, turning positive in the last hour of trading and rallying 1% as it joined the dollar and bonds as safe-haven instruments amid deepening weakness in U.S. equities.
Gold for June delivery added $16.80 to end at $1,660.70 an ounce on the Comex division of the New York Mercantile Exchange. The yellow metal has settled higher for the past three sessions.
It had traded as low $1,632.50 earlier, according to FactSet Research.
“You are starting to see safe-haven buying for gold,” as prices bounced off the day’s lows and the asset gathered more interest from risk-averse investors, according to Charles Nedoss, a senior market strategist with Olympus Futures in Chicago.
A close above $1,650 would herald another leg up for gold, with $1,680 to $1,685 as the next level of technical resistance, he said.
Gold rose 0.9% the previous day after investors reacted to disappointing U.S. jobs data and remained cautious ahead of key corporate earnings.
Analysts at London-based Sharps Pixley spoke of a “rebirth of uncertainty” following the lackluster U.S. payrolls report for March reported late last week, as well as simmering concerns about peripheral euro-zone countries and a higher-than-expected March reading on consumer prices in China.
U.S. stocks added to losses and crude futures pulled back toward $101 a barrel.
U.S. equities opened mixed, but recently all three major indexes were posting heavy losses, following a pullback Monday in which Wall Street dropped the most in a month on he weak jobs report.
The dollar and bonds had acted as safe-have conduits earlier, with gold joining in as the day progressed. Treasury prices rose on Tuesday, pushing yields down for a fifth session.
Most metals futures settled lower, with silver bucking the trend and tracking gold higher.
Silver for May delivery gained 15 cents, or 0.5%, to end at $31.68 an ounce.
May copper retreated 7 cents, or 1.9%, to $3.65 a pound.
July platinum declined $24.50, or 1.5%, to $1,593.70 an ounce, while palladium for June delivery declined $6.95, or 1.1%, to $636.85 an ounce.
Bullish pricing action forecast
Anne-Laure Tremblay, precious-metals strategist at BNP Paribas, forecast silver, platinum and palladium will trade higher in line with gold through 2012 and 2013.
“Silver is in large supply surplus, but should follow gold higher, given its strong positive correlation with the metal, although the downside risks here are particularly pronounced,” Tremblay wrote in a research report.
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Stocks Drop as Gold Rises After Disappointing Jobs Report
Bloomberg
U.S. stocks fell, extending losses from the Standard & Poor’s 500 Index’s worst week of 2012, while yields on 10-year Treasuries slipped and gold rose as job creation in the world’s biggest economy trailed estimates.
The S&P 500 lost 1.1 percent to 1,382.20 at 4 p.m. New York time. Treasury 10-year yields slipped as much as four basis points to a one-month low of 2.02 percent. Gold futures added 0.8 percent to $1,643.90 an ounce. The euro reversed losses, climbing 0.1 percent to $1.3113. Copper futures slumped to the lowest level since Feb. 17.
U.S. employers added 85,000 fewer jobs in March than economists projected, the biggest shortfall since the report released on July 8, according to data compiled by Bloomberg. The Labor Department’s April 6 statement spurred concern about the pace of American growth after improving economic data helped fuel a 12 percent first-quarter rally in the S&P 500 (SPX), the best annual start since 1998. The index lost 0.7 percent last week.
“The economy does continue to grow, but slowly,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “That’s been the source of frustration for a lot of investors, that we haven’t had the big forward movement in the economy like we have in the past.”
All western European stock markets were shut for holidays, along with Australia, New Zealand, Hong Kong, Thailand andSouth Africa. U.S. markets were closed on April 6, when the monthly report from the Labor Department was released. TheMSCI Asia Pacific Index (MXAP) of shares in the region fell 0.6 percent today.
Overcoming Jobs
The U.S. jobs report presents a challenge that stocks have overcome nine times during the bull market that drove the S&P 500 up more than 100 percent in three years. While the S&P 500 averaged losses of 0.8 percent in the day after the data missed projections by at least 85,000 since March 2009, the benchmark gauge cut its decline in half a week later and was up 0.9 percent after two weeks, the data show.
Alcoa Inc. (AA) slipped 0.3 percent. The aluminum producer is scheduled to disclose first-quarter results tomorrow, the first Dow Jones Industrial Average company to report. AOL Inc. (AOL) surged 43 percent, the most since it was spun off from Time Warner Inc. in 2009, after agreeing to sell and license patents to Microsoft Corp. in a deal valued at $1.06 billion.
The Shanghai Composite Index (SHCOMP) slid 0.9 percent. China’s consumer prices rose 3.6 percent in March from a year earlier, the government said. That compared with the 3.4 percent median estimate in a Bloomberg survey of economists and a 3.2 percent gain the previous month. The one-year swap rate rose five basis points to 3.195 percent.
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Gold Bugs Think Q2 will Bring New Rebound
MarketWatch
March was very cruel to gold bugs. But they think the metal will now rebound.
Gold measured by the CME active contract floor-close was down 6.5% or $116.20, measured from Feb. 28. The NYSE Arca Gold Bugs Index was down 13.8%. (Measuring from Feb. 28 represents March better. Leap Year Day, Feb. 29, saw a brutal sell off, smashing a promising rally and establishing the new month’s character.)
The last month of a quarter seems to be a dangerous time to own gold instruments. Last December was gruesome too, giving gold bugs a notably unmerry Christmas.
But in January, gold rebounded. Could another new-quarter reversal be possible?
The latest of gold’s two decent attempts to rally in March peaked last Monday. Although gold then fell back, over the whole week gold gained 0.6%, and further comfort to the bulls was offered by gold’s starting to rise mid-morning in New York on Thursday and adding $17 on Friday — when the HUI closed up 1.09%.
And there’s possibly bullish news out of India, by far the largest importer of gold. (China is a rival to India in consumption, but it mines the bulk of the gold it needs: India mines almost none).
The Indian government doubled import duties on the yellow metal on March 17. The huge Indian gold fabricating and retailing trade responded by going on strike! Reports from bullion dealers confirm that Indian imports subsequently have been very light, despite the low gold price.
But on Friday evening, HSBC gold analyst James Steel came up with something of a scoop: He reported that the strike is over. Subsequent newswire stories appear to confirm this.
There are differing opinions as to how much the increase in the gold duty — to just over 4% — will impact longer-term Indian demand. But in the short run, a substantial increase in imports after the drought of the last two weeks seems likely.
Gold bugs see reason for optimism from another angle too. CME gold open interest (the number of gold contracts outstanding, reflecting total public participation) plunged far more than gold in this period — down 15.2% to Thursday’s close (Friday’s will not be published until Monday morning).
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Gold Gains 6.7% on Quarter
MarketWatch
Gold futures rallied Friday, ending the quarter up 6.7% and breaking a three-day losing streak as euro-zone finance ministers boosted the region’s firewall against the spread of the sovereign-debt crisis.
Gold futures for June delivery rose $17, or 1%, to end the day at $1,671.90 an ounce on the Comex division of the New York Mercantile Exchange.
That brought quarterly gains to 6.7%, which follows a 3.4% decline in the fourth quarter of 2011 and yearly gains of 10%.
Some book-squaring ahead of the end of the quarter and end of the month boosted gold, said Darin Newsom, a senior analyst with Telvent in Omaha.
Support was also coming from a lower dollar and as buyers came back to the gold market after the recent selloff, he added.
“The economic news remain mixed,” Newsom said. Investors don’t want to end the quarter without some gold in their portfolios, which could also provide some additional boost next week, he said.
Traders will be waiting for manufacturing data from several countries, starting with China on Sunday, to have “a better indication of where the private industry is heading,” analysts at Sharps Pixley said in a note clients.
The ICE dollar index, which compares the U.S. unit to a basket of six currencies, traded at 78.983 from 79.176 in late North American trading on Thursday.
A weaker dollar tends to boost dollar-denominated commodities as it makes them cheaper for holders of other currencies.
The euro rose versus the dollar after euro-zone finance ministers on Friday agreed to temporarily raise the lending capacity of the region’s rescue funds to 700 billion euros ($934 billion) from €500 billion.
Meanwhile, the Commerce Department said Friday U.S. personal spending rose 0.8% in February, with U.S. consumers spending money at the fastest clip in seven months. Much of the spending went to pay for higher energy costs, with incomes rising at a slower pace.
With U.S. equities rising, some metals more closely related to industrial activities outpaced gold on the day.
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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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