Gold Hits 5-Week High as Euro, Commodities Rise
Reuters
Gold climbed to its highest in five weeks on Tuesday as German data boosted the euro after several sessions of losses, and as stocks and commodities were lifted by Chinese trade data, which was seen likely to prompt pro-growth measures by Beijing.
The precious metal later eased back below $1,660 an ounce as the euro came under pressure from news the European Commission will take legal steps against Hungary over laws governing its central bank and others, but remained firmly supported.
Spot gold was up 0.8 percent at $1,656.90 an ounce at 1451 GMT, having earlier peaked at $1,667.41, while U.S. gold futures were up $26.60 an ounce at $1,657.40. Prices are up 5.9 percent this year after falling 10 percent in December.
"The issues that have been supportive of gold -- the debt crisis, quantitative easing, lack of economic growth in Europe -- should all still be there," said Citigroup analyst David Wilson. "When we got down to $1,520, $1,530 (in December), you had to think, this is a good point to buy in."
"There are good reasons to see support for gold. There seems to be more confidence in gold at the moment," he added.
While gold's rise since the start of the year has occurred without the benefit of a weaker dollar, it extended gains on Tuesday as the euro rose versus the U.S. unit.
The euro hit the day's high versus the dollar after a strong reading of German business sentiment suggested the euro zone's largest economy was improving despite the bloc's debt crisis.
It is still down on the year, however, and the outlook for the single currency remained negative after Standard & Poor's downgraded the euro zone's EFSF bailout fund by one notch to AA+ following multiple euro zone downgrades on Friday.
Elsewhere, stocks and commodities rose after data showed China's economic growth in the latest quarter beat expectations but was still its weakest in 2-1/2 years, potentially heralding fresh pro-growth measures from the government.
"The property slowdown has gathered speed and property investment growth slowed sharply to only 12 percent year-on-year in December," said Societe Generale analyst Yao Wei.
"New property starts slowed all the way to only 0.9 percent year-on-year. It indicates that in Q1 2012 the numbers will be very unpleasant. Policy easing will continue."
GOLD SET TO PEAK
Gold may set a record high above $2,000 an ounce in late 2012 or early 2013, but the metal is nearing the end of a decade-long run that has lifted prices by more than 600 percent, metals consultancy GFMS said on Tuesday as it released a closely watched industry report.
"The report does acknowledge that the gold market is nearing the closing stages of its decade-long bull run and that, once the macroeconomic backdrop changes and investment in gold fades - probably some time next year - a secular retreat in the price will unfurl," GFMS said.
India, the world's biggest consumer of bullion, has changed the import duty on gold to two percent of value from the earlier flat 300 rupees per 10 grams and that of silver to six percent of value from 1,500 rupees per kilogram, the government said.
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Analysts Expect Gold to Hit Record High in 2012
CNBC MoneyControl
Precious metals analysts expect gold prices to rise for a 12th year in a row and to reach a record high in 2012, but are less optimistic for silver and platinum, according to a survey by the London Bullion Market Association.
The LBMA's survey of 26 contributors showed all but 3 participants expected gold to hit an all-time high in 2012, with a majority of 19 of them forecasting gold to reach a high above $2,000 an ounce.
They also forecast gold to average $1,766.00 an ounce this year, compared with an average of $1,572.00 in 2011, the survey showed.
The gold price rose to a record $1,920.30 an ounce in September and gained 10 percent in price in an 11th consecutive year of gains in 2011.
Ruth Crowell, LBMA commercial director, said in a note that participants expected prices for all four metals to pick up from their current levels.
"However, if we compare the average 2012 forecasts with actual average prices in 2011, we can see that analysts are less bullish about the prospects for precious metals during the next 12 months," she said.
"Whilst analysts predict a similar rise in the price of gold (12.3 percent) and for the price of palladium to remain broadly unchanged (up 0.3 percent), they are forecasting a fall in the price of both silver (-3.2 percent) and platinum (-5.6 percent)."
Fear among investors over the debasement of so-called fiat currencies such as the dollar, the euro or the Swiss franc, together with the euro zone debt crisis and the bullish impact of ongoing central bank buying were major drivers for gold.
Palladium is expected to gain modestly this year, forecast to average $735.52 an ounce in 2012, compared with an average price of $733.63.
The metal, mostly used in catalytic converters in gasoline-powered vehicles, is expected to see solid demand from emerging economy auto markets such as China, but risks disinvestment from exchange-traded funds backed by palladium and modest supply from Russian government surplus stockpiles, UK refiner Johnson Matthey said in November 2011.
Silver is expected to struggle this year, according to the survey. Participants told the LBMA they expected silver to average $33.98 an ounce in 2012, compared with an average price of $35.11 last year.
According to the LBMA's survey, platinum has the least optimistic outlook in terms of price, which is expected to average $1,624.00 an ounce in 2012, compared with $1,720.00 in 2011.
The LBMA said it would publish the full results of its survey and comments from participants on its website in mid-January.
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4 Reasons Gold Prices Will Rise Again
International Business Times
Gold prices, which lost 20 percent of their value since early this month, will rise for four reasons, say analysts.
1. Physical demand for gold has not been this strong since January. Edel Tully of UBS said in a note to clients that "India stepped up to the plate as gold priced in rupees dropped 4 percent. Volumes on Friday were well above average and the highest since late August.
"Chinese buying was strong throughout the day as well, adding up to amounts we haven't seen in a quite a few months," Tully said. "This is also reflected in physical turnover on the Shanghai Gold Exchange, which is the highest since January."
The analyst said there also has been strong physical demand from European retail buyers.
"And in a sign that fear levels are rising, the conversion of gold from metal accounts into physically allocated accounts was also evident, highlighting the underlying fear that will ultimately benefit gold once the air clears."
2. Friday's big price drop brought out strategic buyers. Tully also said that once gold fell below $1680 it brought out "smart real money-type buyers.
Clearly, directional accounts have an appetite to take advantage of more opportune gold prices that haven't been seen since July, she said.
"If these quality buyers multiply, we believe gold would have a base on which to consolidate, although this morning's actions suggests that is still some time away."
3. In the scheme of things, gold is holding up well, despite recent selloffs. Suki Cooper, analyst with Barclays Capital said gold has been able to minimize its declines even though it "had to tackle a stronger dollar against the euro, which has strengthened to levels last seen in January when gold prices lost their lustre amid better macro data."
In addition, the yellow metal had to absorb yet another margin hike from the CME Group on Friday, which buffeted the commodity in Asian trading on Monday.
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A Gold Bubble? Perhaps Not
Gold's rise, and recent fall, have been fast and furious, but Mark Hulbert thinks warnings of a gold bubble are premature. Plus, the so-called "Fed Model" is popular with Wall Street, and usually wrong.
Gold, Silver Futures Rise as Dollar’s Slump Boosts Demand for Commodities
Bloomberg
Gold futures rose to a three-week high and silver climbed as the dollar’s slump spurred demand for commodities.
The Thomson Reuters/Jefferies CRB Index of 19 raw materials headed for the third straight weekly gain as the dollar fell as much as 0.8 percent against a basket of six major currencies. Before today, gold gained 25 percent in the past year, reaching a record $1,577.40 an ounce on May 2.
“Risk assets are back in vogue, and the camp that buys commodities when the dollar is weak is jumping on that,” said Adam Klopfenstein, a senior strategist at Lind-Waldock, a broker in Chicago. “There’s still a place to own gold in a portfolio.”
Gold futures for August delivery rose $9.70, or 0.6 percent, to $1,533.50 at 10:41 a.m. on the Comex in New York. Earlier, the price reached $1,536.10, the highest for a most- active contract since May 4.
Gold priced in euros and British pounds climbed to records this week as European policy makers seek ways to restore investor confidence amid increasing concern that Greece won’t be able to repay its debts after last year’s 110 billion euro ($157 billion) bailout.
“With a lot of talk in Europe about Greece’s debt crisis, gold safe-haven buying should continue in the near term,” Mark Pervan, the head of commodity research at ANZ Banking Group Ltd., said in a report.
Silver futures for July delivery rose 56.5 cents, or 1.5 percent, to $37.895 an ounce. Before today, the metal dropped 25 percent from a 31-year high of $49.845 on April 25. The price doubled in the past 12 months.
“If you’re a trader looking for volatility, then you’re putting money in silver,” Klopfenstein of Lind-Waldock said. “Gold is considered a more stable asset.”
The U.S. Mint said yesterday that its San Francisco facility will start producing American Eagle silver coins to meet demand at “unprecedented high levels.” The plant can produce as many as several hundred thousand coins a week.
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Gold, Silver Prices Recover After Carnage
The Street
Gold and silver prices were recovering Monday after a painful selloff last week as bargain hunters stepped in.
Gold for June delivery was adding $11.80 to $1,503.40 at the Comex division of the New York Mercantile Exchange after falling 4.8% in a week. The gold price Monday has traded as high as $1,510.70 and as low as $1,489. The spot gold price was rising $8.70, according to Kitco's gold index.
Silver prices were adding $1.54 to $36.83 an ounce after plummeting 27% last week.
The consensus seems to be that silver has more downside now than gold. Barclays Capital thinks that silver will find support in the low $30s as "retail demand" takes the lead but that "longer-term investor interest in gold remains robust." Barclays cites Asian demand as a key factor for higher gold prices.
Goldman Sachs seems to be in agreement, issuing a 12-month silver price target of $28.20 with silver slipping as low as $24.70 in the next three months, while gold's one-year target is $1,690 an ounce after falling to a three-month low of $1,480.
"There is overhead resistance in silver," said David Morgan, founder of silver-Investor.com, "the ratio will favor gold" for a while. The ratio refers to how many ounces of silver it takes to buy an ounce of gold. The ratio fell to as low as 31, when silver hit a recent intraday high of $49.82, and has now risen to 40.
"We're seeing gold outperform silver on a ratio basis ... I'm not that eager to get back into the market," Morgan said.
Morgan thinks the ratio could move even higher, as much as 50:1, which implied more downside from the $36 level, but that long term he is sticking by his ratio of 16:1.
"The fundamental fact remains that you cannot print wealth and as long as Federal Reserve Chairman Ben Bernanke and other central bankers in the world try to print wealth you're going to have more and more upside for the metals," he said.
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Gold May Rise to $1,600 an Ounce This Year on Investor Demand, GFMS Says
Bloomberg
Gold will rise as much as 13 percent this year to a record $1,600 an ounce, extending a rally that began in 2001, as investors boost demand for the metal as an inflation hedge, said researcher GFMS Ltd.
Prices in New York touched an all-time high of $1,478 on April 11 amid speculation that governments will keep borrowing costs near record lows to revive economic growth, increasing the risk of accelerated costs for consumers. Total gold demand rose 0.4 percent to 4,334 metric tons in 2010, the third straight gain, according to an annual report from GFMS.
“The prospects for gold prices this year remain bright,” GFMS Executive Chairman Philip Klapwijk said in a statement. “Investors continue to be concerned about the outlook for inflation, with governments in general showing little appetite to tighten monetary policy significantly.”
Gold, the most-widely-traded precious metal, rallied 25 percent in the past year to $1,453.60 yesterday as the Federal Reserve kept the benchmark U.S. interest rate at zero to 0.25 percent since December 2008 in a bid to pull the economy out of recession. Last week, the European Central Bank raised the main borrowing cost 25 basis points to 1.25 percent.
Investment in exchange-traded funds backed by the metal rose 18 percent to 2,177 tons in 2010, and buyers increased purchases of gold bars, coins and jewelry, according to GFMS.
Demand for physical gold bars rose 66 percent last year to a record 880.5 tons, led by purchases from China. The country’s central bank has raised rates four times since early October to combat accelerating prices. China’s consumer-price inflation reached 4.9 percent in February, above the government’s target of 4 percent.
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Gold Advances as Allies Attack Libyan Targets, Boosting Demand for Haven
Bloomberg
Pham-Duy Nguyen
Gold climbed for a fourth straight session, touching the highest price in more than a week, after air strikes in Libya boosted investor demand for the precious metal as an investment haven.
Allied officials said two days of missile and aircraft strikes have effectively grounded Muammar Qaddafi’s air force. The Libyan leader denounced the coalition mounting the attacks, which includes the U.S., the U.K. and France, as “the party of Satan.” Yemen’s President Ali Abdullah Saleh fired his cabinet yesterday and faced a growing internal revolt.
“The gold market is reacting to the fact that Qaddafi hasn’t folded,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “He’s backed into a corner, and if he remains in power under a cease-fire, a significant amount of uncertainty will come out of that region.”
Gold futures for April delivery rose $10.30, or 0.7 percent, to settle at $1,426.40 an ounce at 1:47 p.m. on the Comex in New York. The price, which gained 1.7 percent in the previous three sessions, reached a record $1,445.70 on March 7.
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Obama Budget to Produce $9.5 Trillion Deficit: CBO
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CNBC
The estimate from the nonpartisan Congressional Budget Office says that if Obama's February budget submission is enacted into law it would produce deficits totaling $9.5 trillion over 10 years — an average of almost $1 trillion a year.
Obama's budget saw deficits totaling $7.2 trillion over the same period.
The difference is chiefly because CBO has a less optimistic estimate of how much the government will collect in tax revenues, partly because the administration has rosier economic projections.
But the agency also rejects the administration's claims of more than $300 billion of that savings — to pay for preventing a cut in Medicare payments to doctors — because it doesn't specifying where it would come from. Likewise, CBO fails to credit the White House with an additional $328 billion that would come from unspecified "bipartisan financing" to pay for transportation infrastructure projects such as high speed rail lines and road and bridge construction.
Friday's report actually predicts the deficit for the current budget year, which ends Sept. 30, won't be as bad as the $1.6 trillion predicted by the administration. But 10 years from now, CBO sees a $1.2 trillion deficit that's almost $400 billion above White House projections.
The White House's goal is to reach a point where the budget is balanced except for interest payments on the $14 trillion national debt. Such "primary balance" occurs when the deficit is about 3 percent of the size of the economy, and economists say deficits of that magnitude are generally sustainable.
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Gold Gains on Dollar Drop, Oil Rise, Geopolitics
Reuters
Frank Tang and Amanda Cooper
Gold rose for a fourth day on Monday, buoyed by a weaker dollar, rising oil prices and investor jitters surrounding air strikes by Western powers on Libya and Japan's struggle to avert nuclear disaster.
Gold trimmed initial gains, following oil, but the metal stayed within a whisker of its record $1,444.40 an ounce set on March 7. A 1 percent rise in oil prices was still enough to stoke inflation worries that helped keep gold aloft, analysts said.
Silver soared nearly 3 percent on strong industrial demand and near-term supply tightness, after the metal fell 2 percent last week.
"You can't deny the escalating Middle East problems and the oil price are all supportive factors, but I wonder whether the big jump (in the gold price) is more weaker dollar-related," said Credit Agricole analyst Robin Bhar.
"It's all contributing to the safe-haven bid, and this week is going to be important ... geopolitical risk factors are uppermost in people's minds," Bhar said.
Gold rose 0.6 percent to $1,427.74 an ounce by 12:57 p.m. EDT (1657 GMT), while most-active U.S. April futures gained 0.8 percent to $1,427.80.
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