Dollar Falls Against Euro After Fed Statement
The Associated Press
The dollar fell against the euro in volatile trading Wednesday after the Federal Reserve gave mixed messages about the state of the U.S. economy.
The Federal Reserve said in a statement that the economy is slowly improving, but Fed Chairman Ben Bernanke said in a press conference that he would still consider another round of bond-buying to help the economy.
"These conflicting comments triggered erratic moves in the U.S. dollar as investors tried to understand where the central bank stands on monetary policy," Kathy Lien, director of currency research for the currency trading company GFT, wrote in a note to clients.
The euro rose to $1.3230 in late trading Wednesday from $1.3189 late Tuesday.
The dollar rose against the dollar after the Federal Reserve released a statement after its two-day policy meeting without mentioning new steps to help the economy. But the dollar fell against the euro after Bernanke said more bond purchases remain "very much on the table." Bernanke made his comments during a press conference later Wednesday.
The Fed has launched two rounds of bond purchases, most recently in August 2010, to lower long-term interest rates and make stocks more attractive to investors.
Lower interest rates can weigh on a currency by reducing the returns investors get from holding it. With a third round of bond-buying still an option, traders sold dollars.
In other trading Wednesday, the British pound fell to $1.6182 from $1.6133. The dollar fell to 0.9081 Swiss franc from 0.9110 Swiss franc and to 98.29 Canadian cents from 98.87 Canadian cents.
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World Food Prices Rise Further, Raising Fears of Unrest
Yahoo News
Global food prices rose in March for a third straight month with more hikes to come, the UN's food agency said on Thursday, adding to fears of hunger and a new wave of social unrest in poor countries.
Record high prices for staple foods last year were one of the main factors that contributed to the Arab Spring uprisings in the Middle East and North Africa, as well as bread riots in other parts of the world.
The cost of food has risen again this year after coming down from a February 2011 record peak.
The FAO index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 215.9 points in March, up from a revised 215.4 points in February, the United Nations' Food and Agriculture Organisation (FAO) said.
Although below the February 2011 peak of 237.9, the index is still higher than during a food price crisis in 2007-08 that raised global alarm.
"The food crisis has not gone away since then," said Emilia Casella, spokeswoman for the U.N.'s World Food Programme. "Prices are a big concern and have remained a large reason why people are food insecure."
The FAO's senior economist and grain analyst Abdolreza Abbassian told Reuters there was scope for more price rises in the first half of this year, particularly for corn and soybeans, which could also drive up the price of wheat.
Higher food prices mean higher import bills for the poorest countries, which do not produce enough food domestically.
The net cereal import bill of the low-income food-deficit countries, known as LIFDCs, is expected to rise to a record $32.62 billion in 2011/12 from $32.28 billion in 2010/11 because of higher prices and lower domestic production, the FAO said in March. Poor countries face unrest if they cannot find the cash.
"Rising food prices are placing fresh pressure on policymakers globally at a time when many governments just have less money," said Larbi Sadiki, an expert in North African politics at Britain's Exeter University.
"In north Africa, food subsidies are a red line, especially in Tunisia and Egypt," he said. "Citizens can be expected to take to the streets to demand social justice."
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Will Gold be Part of the Emerging World’s Future Monetary System?
GoldSeek
In our last two articles we discussed just how the U.S. dollar came to be the central part of the world’s monetary system and held onto that position when its economy and balance of payments were structurally inadequate to do so. In the second article, we described how the U.S. was flexing its muscles in taking action to stop Iran from selling its oil and receiving payments for it.
The collateral damage from this exercise embraced China, India and other nation’s, who were the customers of Iran. It has become clear to these nation’s that the power in the hands of the U.S. in oil matters is far too great for their future, and that they should be making plans to remove the impact of that power from off them. If they are (China in particular) to be able to make their own decisions in the future –particularly on oil and currencies—then they must develop a monetary system that is independent of the U.S.
However, this will mean that the world must move from a world united under the USD to one where there is a fragmented monetary system with at least two parts to it. This break demand a period where uncertainty, fear confrontation, and conditions generally detrimental to financial harmony must be endured until a new order is established. The potential for damage to the current monetary system is huge as it will be the one in decline while the new system is on the rise.
New Emerging World Monetary System
The key participants in these new developments are the emerging world’s key players: Brazil, Russia, India, China and South Africa. Of these the main drivers in order of power are China, Russia, Brazil and then India. South Africa will remain the road into Africa’s commodity supplies. Of course they have a hard road to travel as they have to weather the storms that may attempt to derail their attempts. Because of this, the initial steps we are watching are cautious, steady and solidly made.
To date, we have seen the accumulation of $3.18 trillion in China’s reserves as well as much smaller amounts accruing to the other BRIC nations. This week saw these nations in discussions, in which the formation of the equivalent of the World Bank, for these nations was discussed.
According to the departing head of the World Bank, Mr. Robert Zoellick, the objective for China in the formation of this bank is to assist in the internationalization of their currency, the Yuan. India’s objective would be to facilitate the construction of its infrastructure. Russia’s objective was still to be decided. To us, it is a step forward in the building of a financial system to care for the BRICS nation’s needs outside the current World Bank and the I.M.F. and free from U.S. dominance.
The Consequences
How far will the development of this system go? As far as is necessary for financial independence to be achieved! The most dramatic consequence of these developments will be twofold:
1. The ability of these countries to access oil in their own currencies and not the dollar.
2. A large fall in the use of the dollar internationally, in line with the rise of the BRIC currencies, with the Yuan acting as the ‘hub’ of this new monetary world.
This will not mean that they will not use the dollar or any other of the developed world currencies in daily trades, but simply remove themselves from U.S. dollar dominance.
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Middle-East Situation May Push Gold Prices: World Gold Council
Economic Times
Gold prices may go up in the near future because of uncertainty in the Middle-East, but this may not dampen the buying spirits among the Indians, the World Gold Council (WGC) said on Thursday.
"India's gold demand is likely to be positive this year in value terms. In volume, it may be same as last year or slightly higher," WGC Managing Director, Middle East and India, Ajay Mitra said here, after releasing the latest report on the precious metal.
"Prices in the short term may go up due to the uncertainty in the Middle East," he said. Tensions between Israel and Iran would lead to investors seeking refuge in gold, considered as a safe haven. Gold rates are ruling firm at Rs 28,340 per ten gram in Delhi today on seasonal demand and strong global cues.
Asked about the trends in the gold Electronically Traded Funds (ETFs), Mitra said, the option will retain investors' interest, including from the corporates.
"At present, about 50 per cent of investment in gold ETFs is from the corporates, who park their spare funds for better returns. This is very unique to India and due to this we see a similar investment demand trend in 2012 as well," he added.
Since the last two years, he said, WGC has also witnessed flow of funds from High Networth Individuals in the ETFs. He said demand for coins will continue to be stronger than bars. There is also a declining trend in recycled jewellery in the market mainly due to the rise in gold finance options.
When asked about jewellery demand for 2012, Mitra said, the current retail trend is positive. "The trend in the first half will give us a feel for the rest of the year in terms of jewellery demand ...", he said. In India, people normally buy gold during festivals as gifts and investments and for marriages.
Last year, 1,037 tonnes of gold was available in the domestic market, of which 969 tonnes was imported and the rest was from other sources, according to the 'Gold Demand Trends 2011' report.
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Central Bank Buying to be Bulwark of Gold Rally
Commodity Online
Central-bank purchases to be a bulwark of the long-term Gold rally, said HSBC in a research note.
According to bank, a World Gold Council report estimating that central-bank gold purchases may have hit 450 metric tons in 2011. This means the official sector outstripped gold exchange-traded-fund demand of 155 tons last year by almost threefold.
“The outlook for central-bank gold purchases remains positive for this year, based on the likelihood that emerging-markets central banks will continue to diversify away from the USD,” HSBC said.
“If the U.S. continues to run substantial trade and current account deficits, then according to economic theory, the USD reserves of those countries that the U.S. runs a trade deficit with will rise. Since USD foreign-exchange holdings are already at record levels in many countries, we believe these nations will seek to increase Gold reserves, in a bid to diversify their USD-laden reserves,” HSBC concluded.
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Gold Prices Cap an 11th Straight Annual Advance
Bloomberg
Gold rose the most this month, capping an 11th straight annual advance, on speculation that demand will climb from jewelers and investors.
Gold fell 4.7 percent in the previous six sessions to the lowest since July 7 as the dollar gained against the euro, curbing demand for the metal as an alternative investment. That may boost seasonal purchases, said Marc Ground, a commodities strategist at Standard Bank Plc. In the first quarter of 2011, jewelry demand jumped 12 percent from a year earlier in India, the world’s biggest buyer, according to World Gold Council data.
“While we haven’t seen physical demand pick up yet, maybe people are anticipating it for next year,” Ground said in a telephone interview from Johannesburg. “January and February are usually good months in India, and a lower gold price might attract some buyers.”
Gold futures for February delivery climbed 1.7 percent to settle at $1,566.80 an ounce at 1:35 p.m. on the Comex in New York, ending a six-session slump that was the longest since March 2009.
While bullion gained 10 percent this year, prices have plunged as much as 21 percent since touching a record $1,923.70 on Sept. 6.
Dennis Gartman, the economist and editor of the Gartman Letter, said he is “about to become bullish” after being neutral since mid-November.
“We did not expect to see gold hold as well as it has or did in the past 24 hours,” Gartman wrote in his letter e-mailed today.
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Gold Inclusion as Tier 1 Asset Would be Huge: LBMA
MarketWatch
The London Bullion Market Association is supporting the gold sector's push to have bullion included by the Basel Committee on Banking Supervision in its recommendations of high quality liquid assets commercial banks should hold, which, if successful, will be one of the most significant events for the industry in recent years, the LBMA chairman said Monday.
"If the Basel III quest is successful, it could be one of the greatest changes in the modern day gold market," David Gornall, who is also global head of precious metals trading at Natixis, told delegates there.
The World Gold Council submitted evidence to the Basel Committee in December 2009 arguing gold should be included in banks' "Tier 1" assets, such as government bonds and currencies, by European banking regulators.
If this gets approved, it will spur a much wider use of gold by financial institutions, who can borrow gold from central banks at a relatively lower rate to conduct transactions or finance other projects, the WGC says.
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