Silver Review

Silver also fell yesterday along with gold. The immediate delivery future at the COMEX settled 1.67% below prior closing

 The dollar index slid 0.09% despite a better jobless claims data. A rebounded equity market might have made people to shift some money from the refuge to riskier stocks

The US and European equities made a comeback yesterday while Asian equities closed in red

The I-share silver holdings slid a bit to 9890.74 tons from 10010.45 as on 9th Aug

OUTLOOK:

Silver at the Globex platform is quoting up by $0.176 at $38.84. As discussed in Gold’s outlook. Concern over the Euro area’s debt is keeping the Euro under stress. Dilemma to ban short selling while implementing measures to reduce the nation’s budget deficit may make the Euro little volatile for the day. The dollar index is at a stronger note after the equities rebound and lesser jobless data yesterday. It is gaining on anticipation of reports may show a rise in advance retail sales with business inventories to grow a slower pace. However the Euro zone’s industrial production may stall which might impact upon the metal adversely. But support from the global equities again may push the metal up. Overall, silver’s volatility is likely to make the metal swing between gains and losses.

 

GOLD MARKET

Gold futures fell for the first time of the week paring the best weekly advance as higher margins on future contracts encouraged sales after the metal rose to cross the $1800 milestone. The immediate delivery future at the COMEX settled 1.84% lower than the prior

 The dollar index slid 0.09% despite a better jobless claims data. A rebounded equity market might have made people to shift some money from the refuge to riskier stocks

 The US and European equities made a comeback yesterday while Asian equities closed in red

 Holdings in the SPDR Gold Trust, the world's largest gold backed exchange-traded  fund slid a bit to 1272.89 tons from 1296.51 tons as on 11th Aug after some sell offs have been seen as an effect of raising margin in futures

 The gold-silver ratio slid a bit to 45.25 from 45.33

OUTLOOK

After a brief correction in effect of raising initial and maintenance margin by the CME, gold at the Globex platform is seen to rebound and is quoting up by $10.70, at $1760.50. France, Spain, Italy and Belgium will be banning short selling from today to stabilize the market, that is, they are to protect bets on price falls. Equities rebounded nicely as an unexpected drop in the US jobless claims might have boosted confidence and the dollar is therefore showing the strength against the majors. Asian equities are taking cues there on as reports suggest that things are not as dire as market has feared. Italy seeks to ease labor market laws, sell local services and possibly raise the capital gains tax to eliminate the budget deficit and secure ECB’s support for its bonds after Italian borrowing costs reached the Euro area’s high last week. This might have kept the Euro under pressure along with anticipation on likely report for a stalling expansion in industrial production. From the economic data front, Michigan confidence is still expected to be weaker while an expected upswing in retail sales during summer months could point to a soft patch as consumers are still willing to spend and hence business inventories are also likely to increase at a slower pace. The above analysis shows that there is a blend of impact from the Europe. One side it is Euro nations to protect price fall while Italy’s strive to reduce budget deficit may make the Euro pretty volatile. US releases being expected to be positive, it is therefore likely that gold will remain strong in the Asian hours while it may take little correction in the evening. So, it is recommended to remain short at higher prices for the metal.

Silver slashed heavily by 3.80% at the COMEX yesterday on the brink of Federal Reserve’s meeting which kept the interest rate unchanged to bolster the economy. The global industrial usage might have hampered which led the metal to retreat amid global uncertainties for a slowing economy.

 The dollar index settled 1.17% lower from the prior closing as the Fed maintained the lower interest rate for an extended period

The Before the Fed meeting started, Asian equities slumped heavily. US and European stocks followed the same at early trades but recovered nicely after the policy statement came, raising the hope for another round of monetary easing

The I-share silver holdings  remained unchanged at10010.45 tons from 9858.92 tons as on 5th Aug

OUTLOOK:

Silver at the Globex platform is quoting up by $0.467 at $38.35. As discussed in Gold’s outlook, the Asian equities are reviving nicely after the Fed  painted a much gloomier picture of the economy and indicated it would keep cash cheap and easy for at least two more years. The dollar index rebound but is not likely to maintain the initial gain as the US monthly budget in the evening is expected to widen the deficits due to lower tax income from the lowering personal income. The bounce back of equities will be supporting silver to trade high while the rupee appreciation might limit the upside. Also, keeping the rate unchanged by the Fed is basically to bolster the economy and therefore manufacturing, industrial companies might raise the productivity slowly, thereby will be supportive for the metal. On an intraday basis, a likely weak dollar index in the evening, US budget deficit and anticipation of a fore coming monetary easing might lead people to take positions early at this present low prices. Hence silver might remain strong for the day.

Gold futures advanced for a third straight day after Federal Reserve seeks to bolster the economy by keeping the interest rate unchanged. Amid global equities slump and concern for a slowing economy, gold ticked new high of $1780.90. At the COMEX the immediate delivery future settled 1.74% higher than the prior

 The dollar index  settled  1.17% lower from the prior closing as the Fed maintained the lower interest rate for an extended period

 Before the Fed meeting started, Asian equities slumped heavily. US and European stocks followed the same at early trades but recovered nicely after the policy statement came, raising the hope for another round of monetary easing

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded  fund remained unchanged at  1309.92 tons as on 8th Aug

 The gold-silver  ratio improved to 45.96 from 43.46 till yesterday as gold surpassed silver’s performance

OUTLOOK

At the Globex platform gold is seen quoting up by $14.70, at $1756.10. The US and European stocks rallied the most in recent past,  reviving from the hefty slump after the Federal Reserve vowed to keep the interest rate near zero. The Fed also discussed a range of policy tools to bolster the economy and raised speculation of a third round quantitative easing through bond purchases. The dollar index rose as a pledge by the Fed to keep the key rate at a record low till 2013 failed to calm concern that the global growth is slowing. The Asian equities also rebounded taking the cues from US and Europe and are trading at a green at present. From the economic data front, the US monthly budget will be announced which is expected to widen its deficit as the government would not have able to raise the tax income to that extent due to a fall in personal income. This might make the dollar weak. So, cheaper money is likely to bid the metal higher for the day. The rupee depreciation by half a percent yesterday prompted Indian gold to settle at a premium to the parity price, which is likely to appreciate today. So, the metal’s upside would be limited although a gap up opening is expected. In the early Asian hours gold is therefore likely to remain stable while in the evening, anticipation of an increasing US deficit budget might lift the metal at a faster pace.

Silver with tandem to Gold soared but is struggling to break the life high as the metal is related to equities and a global slump is retraining the metal to have a fierce upside. The immediate delivery future at the COMEX closed by gaining 3.06%

 The dollar index  settled 0.37% higher from the prior closing

The global equities plunged heavily with DJIA, FTSE all were settled by losing five to seven percent

The I-share silver holdings  remained unchanged at10010.45 tons from 9858.92 tons as on 5th Aug

OUTLOOK:

Silver at the Globex platform is quoting little down by $0.175. As discussed in Gold’s outlook, silver’s volatility is increasing due to the global cues from shattering equities and financial turmoil. This added with slumping global manufacturing and industrial productions are making the metal swing between gains and losses. At present the Asian equities are at a hefty amount of loss with the dollar index at a weaker note. The Fed will be holding a meeting today as the unprecedented down grade for the US top credit rating fueled speculation that USA is heading for another economic slowdown. The Indian rupee at present is depreciated by 40 paisa which will be having immense support for the metal to grow. From the economic data front, US nonfarm productivity might be reduced while the UK manufacturing and industrial production may also stall. This may however put a little downside pressure on the metal. So, silver is expected to have a wide range bound movement with bias towards an upside.

Gold extended its rally to a record second day as the global slump in equities and crude oil deepened concern on economic slowdown which worsen further after S&P downgraded the US credit rating. The immediate delivery future was settled by gaining 3.72% at $1711.60

 The dollar index  settled  0.37% higher from the prior closing

 World equities plunged heavily with DJIA, FTSE all were settled by losing five to seven percent

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded  fund increased to 1309.92 tons from 1286.29 tons as on 8th Aug

 The gold-silver  ratio improved to 43.46 from 43.18 till yesterday

OUTLOOK

The yellow metal is on a winning spree amid global anxieties as the equities and crude oil continued to face the mayhem. At present, at the Globex platform Gold is ticking another new high of $1750, $38.40 up from the prior level. The weak dollar index (-0.22%) is supporting the metal to soar along with worries about global financial turmoil, which might have kept investors to stick in to the refuge. The Asian stocks fell for the sixth straight day on worsening global outlook and after data showed Chinese inflation accelerated restraining the government from easing monetary policy. Kospi Index, NIKKEI, Hangseng all are bleeding at present with a loss to anywhere between five to eight percent. The Fed will be holding a meeting today as the unprecedented down grade for the US top credit rating fueled speculation that USA is heading for another economic slowdown. The Indian rupee at present is depreciated by 40 paisa which will be having immense support for the metal to grow. From the economic data front, US nonfarm productivity might be reduced while the UK manufacturing and industrial production may also stall. So, an expected slowing global economy will be keep pushing the metal to an upside. Hence it is recommended to be long for the metal

 

SILVER MARKET

Silver futures shaken yesterday by 5.57% after the global equities extended their losses by a hefty margin. A buoyed stock market plunged heavily on absence of any sign to a further monetary easing. A strong dollar index also quickens the fall.

 The dollar index  gained more than one and a half percent after Japan sold its currency and the Euro sank as the ECB provided cash to the banks amid debt concern

The global equities extended a hefty slump driving the S&P 500 index to the biggest decline since February 2009, while Europe also plunged by more than 3%

The I-share silver holdings remained unchanged at 9824.93 tons as on 2nd Aug

OUTLOOK:

At the Globex platform silver is seen quoting down by $0.086, at $39.345. As discussed in Gold’s outlook, Asian equities plunged heavily taking cues from the US and European equities as fears about the economic growth raised ahead of key jobs data in US. The dollar index after gaining more than 1.5% yesterday, is paring the gain at present due to the same concern. However, payrolls may add more jobs after the unemployment rose to 9.2%, which might provide the dollar some support to revive in the evening. So, there is a possibility that silver may take another correction with due consideration to the payroll data and reviving dollar index. Hence a range bound move in silver can be expected.

Gold Market

Gold futures took correction from a new all time high of $1683.50 to settle at 1657.50, 0.44% down from the prior. After the debt ceiling was raised, it was the QE2 which has buoyed the stock market till date, after which the thrust came in absence of any sign for a further round of monetary easing.

 The dollar index gained more than one and a half percent after Japan sold its currency and the Euro sank as the ECB provided cash to the banks amid debt concern

 The global equities extended a hefty slump driving the S&P 500 index to the biggest decline since February 2009, while Europe also plunged by more than 3%

 The ECB yesterday failed to halt a rout in Italy and Spain might have led the Euro to retreat heavily against the dollar

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded  fund remained unchanged at 1286.29 tons

 The gold-silver ratio dropped to 42.03 from 39.87 after silver fell by 5.57%

OUTLOOK:

At the Globex platform gold is seen quoting down by $6.80, at $1652.20. Asian stocks nosedived taking cues from the global tumult as fears about economic growth concern raised ahead of key economic report on US jobs. This also has kept the dollar index under stress which is at present is down by 0.246%. There is speculation that the CME could raise the margin requirements on a 100 ounce contract like it did with silver after the metal skyrocketed. This means the traders need to put up more money to buy a gold future contract so the result is that a lot of investors are forced to sell, which decreases volatility in the long run. Over the short term, however, it can get ugly as traders exit their positions. From the economic data front, it is the US payrolls data which are due to release in the evening, are expected to add private jobs after the unemployment rose to 9.2%. Investors might have booked the profit to cover losses elsewhere in equities along with the expected jobs data could have prompted the price correction. But, looking at the economic conditions, bullishness still holds good. Overall, gold may remain strong for the day although possibility of a further correction ahead of the crucial data can’t be neglected.

Gold Review

Gold futures  dropped yesterday from record on optimism that the US congress will pass a compromise bill to raise the US debt limit to stave off the default. Gold future for October delivery made a low of $1608.10 although it revived nicely to settle 0.58% below prior closing at $1620.40.

 The dollar index gained over half a percent at settlement as the US clinched the debt deal at the very last moment, just one day prior to the deadline of Aug.2

 The Asian equities closed at a positive note on confidence that the US regulators will take definite step to tame the default. US and Europe stocks however pared the initial gains after reports showed slump in manufacturing indexes

 Manufacturing indexes from the US to Europe and China declined in July raising the concern that the global recovery is losing momentum

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded fund  remained unchanged at 1263.57 tons as on 1st Aug

 The gold-silver ratio improved to 41.22 from 40.63

OUTLOOK:

At the Globex platform gold is seen quoting up by $1.30 at $1621.70. The House of Representatives approved legislation to raise the US debt limit by at least $2.1 trillion and cut federal spending by $2.4 trillion or more, just one day before the deadline. The plan goes to the Senate for a final vote today. The

US deal offered  breather but downgrade looms as the rating agencies threatened and anticipating so, the dollar index is showing weakness. The Asian equities are trading at a downside on slowing manufacturing growth aver the globe. Coming to the economic data front, the US personal income might see a reduction while UK PMI construction may also slid a bit. Dollar therefore might see some pressure in the evening. Since the ceiling has been raised and US for a shorter while is out of danger, precious metals are likely to feel the heat and is expected to retreat a bit. Although the rupee depreciation might push the metal to grow at the Indian context, a slide can’t be over looked.

SILVER REVIEW

Silver got a hit yesterday on optimism of the US debt talks. The immediate delivery future retreated by 1.91% at the COMEX

 The dollar index settled with marginal gain before a planned briefing by Obama administration officials on the stalemate in raising the US debt limit that is needed to avert a default

The global equities remained submissive yesterday and settled all most all at a negative side. The ambiguity over the US debt ceiling might led the investors to remain calm for investing in riskier assets, except FTSE all other renowned exchanges fell

The I-share silver holdings remained unchanged at 9915.86 tons as on 27th July

OUTLOOK:

At the Globex platform silver is seen quoting up by $0.006, at $39.80. As discussed in Gold’s outlook, the Asian equities are mostly trading at a downside as the US debt ceiling talks stalled yesterday and were being postponed for today. The vote is likely to take place at 6 pm Washington time. The dollar index at present is at a stronger note on optimism for the US lawmakers to find at least a provisional solution for the debt ceiling. However, the US releases are not likely to support the dollar today as reports might come up with a lower GDP and reduced consumption. Overall, silver also is likely to have a range bound movement today, tending towards downside. It is the debt limit talks which are creating the market jittery. So, silver is likely to have a range bound move for the day

Gold Market

Gold future took a little correction yesterday on optimism of debt talk till $1602.80 after which it again revived to settle at $1613.40 as the debt talk stalled and vote for the plan postponed.

 The dollar index settled with marginal gain before a planned briefing by Obama administration officials on the stalemate in raising the US debt limit that is needed to avert a default

 Unemployment benefit claims fell in the US by more than expected signaling a fading labor market weakness might have supported the dollar to gain

 The global equities remained submissive yesterday and settled all most all at a negative side. The ambiguity over the US debt ceiling might led the investors to remain calm for investing in riskier assets, except FTSE all other renowned exchanges fell

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded fund increased to 1262.97 tons from 1244.79 tons as on 28th July

 The gold-silver ratio improved to 40.54 from 39.81

OUTLOOK:

At the Globex platform gold is seen quoting up by $4.70, at $1618.10 after the US House postponed a vote on speaker John Boehner’s debt limit plan which will be taking place today evening at 6 pm Washington time. Asian stocks, taking cues from the US equities are trading mostly at a downside as the US debt talk stalled yesterday. The dollar index is gaining at present on optimism of the US lawmakers; finding of a temporary solution to the debt limit. In  the early morning Japan industrial production on a monthly basis rose but lesser than expected which might have appreciated the Yen. The dollar index is however likely to pare the initial gains as reports in the evening might show a contraction in GDP along with a reduced personal consumption. Overall the bullion sector looks dicey. On one hand it is the debt limit talks, if works out positively, gold will be set to poise. On the other hand, if the opposite happens along with a faltering GDP, gold might be  demanded as haven. Under such circumstances it is therefore likely to remain at an elevated level before voting starts. So, it is recommended to be long for a shorter target for the metal.

Commodity money

Commodity money

Many items have been used as commodity money such as naturally scarce precious metals, conch shells, barley, beads etc., as well as many other things that are thought of as having value. Commodity money value comes from the commodity out of which it is made. The commodity itself constitutes the money, and the money is the commodity. Examples of commodities that have been used as mediums of exchange include gold, silver, copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, etc. These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or Price System economies. Use of commodity money is similar to barter, but commodity money provides a simple and automatic unit of account for the commodity which is being used as money. Although some gold coins such as the Krugerrand are considered legal tender, there is no record of their face value on either side of the coin. The rationale for this is that emphasis is laid on their direct link to the prevailing value of their fine gold content. American Eagles are imprinted with their gold content and legal tender face value.

SILVER MARKET

Silver plunged yesterday on the same optimism that the EU leaders would have moved closer to resolve the region’s debt crisis. The immediate delivery future at the COMEX fell 1.65%

 The dollar index  settled near half a percent below prior closing as the debt ceiling decision remained indecisive 

Global equities closed mixed. While Europe and some Asian regional stocks gained, the US stocks fell after the existing home sales fell unexpectedly

The I-share silver holdings increased to 9864.33 tons from 9673.36 tons as on 19th  July

OUTLOOK:

At the Globex platform silver is seen quoting up by $0.537, at $40.095. As discussed in Gold’s outlook, the Asian equities are trading at a downside  as a deal to prevent the US debt default remained obscure. The dollar index is therefore sliding against the majors. The Euro  area chiefs are having the second summit today in Brussels to solve the second bailout of the Greek default where the German chancellor and the French president are likely to announce a joint position over the same issue. Hence the euro is gaining against the dollar.Coming to the economic data front, the PMI numbers from the Euro zone and German are likely to fall short from the prior level which may impact upon the Euro adversely although the EU chiefs meeting at Brussels today may keep the currency strong on an anticipation of resolving second bailout of Greece. The US releases are also expected to have a mix kind of impact. Hence silver may remain volatile today with bias towards upside. Hence it is recommended to be long for the metal.

GOLD

Gold fell for the second straight day on optimism that the EU policy makers are moving closer in resolving the region’s debt woes, cutting demand for the metal as haven. The immediate delivery future at the COMEX lost 0.26%.

 The dollar index  settled near half a percent below prior closing as the debt ceiling decision remained indecisive

 Global  equities  closed mixed. While Europe and some Asian regional stocks gained, the US stocks fell after the existing home sales fell unexpectedly

 Gold losses remained limited on concern that the Obama administration and congressional leaders won’t reach an accord on increasing the nation’s debt ceiling

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded fund slid to 1246.01 tons from 1249.34 tons as on 20th July

 The gold-silver ratio increased to 40.36 from 39.80

OUTLOOK:

At the Globex platform gold is seen quoting up by $5.20, at $1602.10. Most of the Asian stocks declined as a deal to prevent US debt default remained elusive. Dollar index is therefore also sliding while the Euro is gaining strength against the dollar after the German chancellor and French President reached a joint position on Greece’s debt crisis. The Euro area chiefs are having a summit today with an aim to stem the contagion on expectation of which the Euro is expected to remain strong for the day. On the other hand, US president Obama’s administration has signaled that it may accept a short term increase in the US debt limit if lawmakers need a few days to finish the work on a broader agreement to cut the deficit. Coming to the economic data front, the PMI numbers from the Euro zone and German are likely to fall short from the prior level which may impact upon the Euro adversely although the EU chiefs meeting at Brussels today may keep the currency strong on an anticipation of resolving second bailout of Greece. The US releases are also expected to have a mix kind of impact. Hence gold may remain volatile today with bias towards upside. Hence it is recommended to be long for the metal.

 

SILVER REVIEW

Silver climbed to a nine week high after S&P joined Moody’s credit rating to undermine US credit rating. Futures at the COMEX gained 1.42% .

 The dollar index settled 0.01% higher than the prior amid missed talks regarding monetary easing and a better than estimated jobless claims data

  Global  equities fell on concern of a failure of right decision by the US president Obama and Congressional leaders to tackle the debt

New applications for unemployment benefits fell last week to the lowest level in recent times, suggesting fewer layoffs in early July than usual

The I-share silver holdings increased to 9633.55 tons from 9500.57 tons as on 13th July

OUTLOOK:

At the Globex platform silver is seen quoting down by $0.469 at $38.225. As discussed in Gold’s outlook, duality in Fed’s remarks for monetary easing within two consecutive days, made investors skeptic about the economy’s outlook. Beside’s a failure to reach any deal on debt ceiling by the Obama administration is also creating ambiguity to contain the debt limit. Data yet to release from the US in the form of manufacturing and industrial production is likely to increase which might provide a boost to the dollar and thereby silver might remain under pressure. The Asian equities are trading at a mix tending towards down side may also trigger silver to retreat. Overall, silver is likely to remain weak for the day and hence is recommended to remain short for the metal.

GOLD REVIEW

Gold future rallied to a record high of $1594.90 to settle at 0.24% higher from the prior at $1589.30 on speculation that debt woes in the US and Europe will escalate, boosting the appeal of the precious metal.

 The dollar index settled 0.01% higher than the prior amid missed talks regarding monetary easing and a better than estimated jobless claims data

 Global equities fell on concern of a failure of right decision by the US president Obama and Congressional leaders to tackle the debt

 New applications for unemployment benefits fell last week to the lowest level in recent times, suggesting fewer layoffs in early July than usual

 Holdings in the SPDR Gold Trust, the world's largest gold backed exchange-traded fund remained unchanged at 1225.40 tons from 1205.41 tons as on 14thJuly

 The gold-silver ratio slid to 41.07 from 41.55

OUTLOOK:

At the Globex platform gold is seen quoting down by $5.60, at $1583.70. The Fed is prepared to take additional action if the economy appears to be in danger of stalling, Bernanke said recently but opposed the same yesterday while president Obama and congressional; leaders have as yet failed to reach a compromise on reducing deficits and raising the debt ceiling. The dollar index is therefore weakening after S&P joined Moody’s and came out with a likely US credit rating cut. The Asian equities are trading at a mix, tending mostly towards downside amid uncertainties of US economic conditions whether to provide stimulus or not. Coming to the economic data front, the US consumer price index is likely to ease while the manufacturing and industrial productions are likely to improve. These may provide a boost to the dollar in the evening.  In Europe, results of stress tests on 91 banks as part of an effort to reassure investors the region’s lenders have enough capital will be released by the European Banking Authority today. Overall, gold seems to be little weak today and hence is recommended to remain short for the metal.

GOLD REVIEW

Gold future rallied to a record high of $1588.90 to settle at $1585.50 amid concern of Moody’s warning to the US about the probability of losing its “Aaa” debt rating. US debt ceiling talks stumbled and Europe’s sovereign crisis persisted, boosting demand for the haven.

 The dollar index  plunged more  than a percent yesterday after Moody’s put US under review for a credit rating downgrade, damping demand for the nation’s currency

 Global equities remained firm. Despite the dollar retreated, Bernanke’s probable arrangement for more stimulus package kept  the investors confident to contain the risk

 US president Barack Obama and Congressional leaders have as yet failed to reach a compromise on reducing deficits and raising the $14.3 trillion federal debt ceiling before the government exceeds its borrowing  authority on Aug.2

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded fund increased to 1225.40 tons from  1205.41 tons as on 13th July, indicating growing investment demand

 The gold-silver ratio slid to 41.55 from 43.84

OUTLOOK:

At the Globex platform gold is seen quoting up by $0.90, at $1586.40. The dollar index is at a weaker note on Moody’s warning. The Asian equities are trading mix amid uncertainty of the US economy’s fate. Fed chairman Bernanke will testify the debt limit for a second day before lawmakers amid data that is likely to show retail sales slid in June. If the data come soft, it would give the market more of an excuse to anticipate more quantitative easing. He also said that he is prepared to provide more stimuli if needed after the dollar sank 1.4% against the Euro within a single day and warned a failure by congress to raise the debt limit would send shock waves through the financial system which is an enough reason for the metal to take an up ride. Italy is due to sell government debt today amid concern that the crisis may be spreading to that nation. Besides, Fitch has cut Greece’s credit grades to its lowest for any country in the world. The move from “B+” to “CCC” reflects the absence of a new fully funded and credible program by the IMF and the EU which intensified a real possibility of default. Overall, gold is likely to remain strong for the day and hence is recommended to be long for the metal.

 

SILVER REVIEW

Silver remained pretty volatile yesterday however revived towards end after the EU finance ministers failed to defuse the region’s financial woes. Futures at the COMEX fell slightly .

 The dollar index  settled 0.24% lower than the prior after The Fed report said policymakers continued to debate whether additional stimulus will be needed if the outlook for economic growth remains weak

  Global  equities  shattered yesterday after Ireland’s downgrade to junk status added concern on Europe is losing control of the credit crisis

Ireland joined Portugal and Greece as the third Euro are nation to have its credit rating to below investment grade as European finance ministers struggle to contain debt

The I-share silver holdings  remained unchanged at 9532.4 tons

OUTLOOK:

At the Globex platform silver is seen quoting up by $0.556, at $36.19. As discussed in Gold’s outlook, the Asian equities gathered momentum after Chinese GDP  rose better than expected with acceleration in industrial production. The dollar index is at a lower side as the Fed minutes of the meeting showed no confirm solution about the monetary easing in near term. Ireland entered as the third Euro nation of getting the junk rating and the debt contagion is likely to spread to Italy. Economic release from the US scheduled today in form of monthly budget, is likely to widen the deficit which will be supporting the metal’s price. Hence it is recommended to be long for the metal.

GOLD MARKET

Gold futures rose to a record settlement as Europe’s debt crisis boosted demand for the metal as a haven. The Euro fell against the dollar after a meeting of EU finance ministers failed to defuse the region’s fiscal woes. COMEX future immediate delivery advanced 0.85%.

 The dollar index settled 0.24% lower than the prior after The Fed report said policymakers continued to debate whether additional stimulus will be needed if the outlook for economic growth remains weak

 Global equities shattered yesterday after Ireland’s downgrade to junk status added concern on Europe is losing control of the credit crisis

 Ireland joined Portugal and Greece as the third Euro are nation to have its credit rating to below investment grade as European finance ministers struggle to contain debt

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded fund increased to 1225.40 tons from  1205.41 tons as on 12thJuly, indicating growing investment demand

 The gold-silver ratio improved to 43.84 from 43.39

OUTLOOK:

At the Globex platform gold is seen quoting up by $3.40, at $1565.80. Asian stocks halted a two day slump after China in the early morning reported a stronger than forecasted economic growth. Chinese GDP rose to 9.5% YOY basis while industrial production also accelerated, indicating the economy is still maintaining momentum even after hike in interest rate to cool inflation. The dollar index at present is weakening against the Euro and with this currency volatility and the debt contagion risk in Greece which is likely to spread in Italy, investors are therefore likely to gravitate towards something tangible like gold. Besides, the Fed policy makers disagreed on whether additional monetary stimulus will be needed, even if the outlook for economic growth remain weak, minutes of their meeting last month showed. Some members noted that the committee might need to consider further stimulus, while others voiced concern about an increased inflation risk that might warrant tighter monetary policy.  This is further propelling dollar to fall against the majors. The data yet to release from the US in form of monthly budget is further expected to widen the deficit which might be another triggering factor for gold. Overall, gold seems to remain strong for the day and hence is recommended to be long for the metal.

SILVER OUTLOOK

Silver plunged by more than 2 percent at the COMEX before any result declared from the meeting held by the US president Obama.

 The dollar index settled by gaining near a percent on anticipation of some result to come out from the meeting between Obama and the Republicans

 Global  equities  shattered yesterday as investors got worried after the European debt crisis was anticipated to be spilled over to Italy and Spain

The I-share silver holdings remained unchanged at 9532.4 tons

OUTLOOK:

At the Globex platform silver is seen quoting up by $0.121, at $35.810. As discussed in Gold’s outlook, the Asian stocks are trading at a downside amid concern of a probable worsening situation of European debt crisis. The Euro at present is weakening against the dollar before Italy to start selling one year bond today. The US treasuries yield fell as the government is going to sell $66 billion of notes and bonds this week, starting with a $32 billion of three year auction today. Coming to the economic data front, the US trade deficit is likely to worsen while Fed is yet to release the FOMC minutes of the meeting held on June 21-22. Overall, it is therefore likely that gold will beremaining strong for the day and hence is recommended to be long for the metal.Overall silver is likely to have a range bound movement for the day inclining to the upside.

GOLD REVIEW

U.S. gold prices extended their gains to five straight sessions on Monday, supported by safe-haven worries that European nation debt issues could widen to other countries. August gold prices gained 0.49% to close at $1549.20 in the COMEX.

 The dollar index  settled by gaining near a percent on anticipation of some result to come out from the meeting between Obama and the Republicans

 Global equities shattered yesterday as investors got worried after the European debt crisis was anticipated to be spilled over to Italy and Spain

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded fund remained unchanged at 1205.41 tons

 The gold-silver stood at 43.32, slid slightly from 43.39

OUTLOOK:

At the Globex platform gold is seen quoting up by $3.40, at $1552.70. Asian stocks dropped amid concern of Europe’s debt crisis will worsen. European finance ministers revived the prospect of bond buybacks to ease Greece’s plight and declined to rule out a temporary default as they struggled to contain the debt crisis that has now spread to Italy who will sell one year bills today and as much as 5billion Euros of bonds on 14th July. So, the Euro is depreciating against the dollar.The US 10 year treasuries yield snapped gains as the US is also prepared to sell $66 billion of notes and bonds this week, starting with a $32 billion of three year auction today. The government also intends to offer $21 billion 10 year debt tomorrow. This may be another triggering factor for the metal to move up. US president has urged Republican leaders to compromise on their opposition to tax increase and achieve the largest possible deal to cut the Federal budget deficit. Coming to the economic data front, the US trade deficit is likely to worsen while Fed is yet to release the FOMC minutes of the meeting held on June 21-22. Overall, it is therefore likely that gold will be remaining strong for the day and hence is recommended to be long for the metal.

SILVER MARKET

Silver also moved up yesterday on anticipation of ECB’s rate hike. Also the better than expected UK manufacturing data prompt the metal to grow.

 The dollar index settled 0.28% below prior closing despite better jobless claims data but because of ECB’s rate hike which made the Euro stronger

  The US  and European equities closed by gaining modestly along with the Asian stocks assuming a better payrolls data to be released after ADP employers added more jobs than expected

 ECB has raised its benchmark rate yesterday to the highest in more than two years to curb inflation

The I-share silver holdings remained unchanged at 9532.4 tons as on 6th July

OUTLOOK:

At the Globex platform silver is seen quoting down by $0.106, at $36.43. As discussed in  Gold’s outlook, Asian stocks have advanced on anticipation of better payroll data after the ADP services showed a better than expected numbers. The dollar is also gaining on the back of same expectation. ECB  announced that the governing council decided to  suspend the minimum required collateral rules for Portuguese government debt in the refinancing operations which came in light of Tuesday’s step from Moody’s to cut the credit rating status to junk. Coming to the economic data front, the US employers are likely to add almost twice as many jobs in June compared with May after a better than expected figures cam e from ADP employers services yesterday. This may provide support to the dollar. US wholesale inventories may also fall. Overall, European debt woes may keep the metal strong for the day although the US release towards evening may put pressure. Hence, it is recommended to be long for the metal for a shorter target with due consideration to the US payrolls data

GOLD MARKET

Portugal’s credit rating to below investment grade, making it the second euro area nation after Greece to be downgraded to so called junk status. On speculation of Europe’s sovereign crisis will spread, appeal for the precious metals boosted.

 The dollar index settled  0.28% below prior closing despite better jobless claims data but because of ECB’s rate hike which made the Euro stronger

 The ECB has raised its benchmark rate yesterday to the highest in more than two years to curb inflation

 US and European equities closed by gaining modestly along with the Asian stocks assuming a better payrolls data to be released after ADP employers added more jobs than expected

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded fund  remained unchanged at  1205.80 tons,  increasing concern about the investment demand as on 7thJuly

 The gold-silver stood at 42.57, slid slightly from 42.71

OUTLOOK:

At the Globex platform gold is seen quoting up by $0.90, at $1531.50. Asian stocks mounted before reports may show US payrolls increased. The dollar index is at a stronger side anticipating a better payroll data. Greece’s jobless rate is on the record, is raising the political cost of budget cuts providing fodder for anti government protest, which might have weakened the euro.  Trichet said that the ECB monetary stance remains accommodative and refrained from signaling a new rate hike for next month, especially after he said that recent data suggested growth is decelerating. The positive news and the end of all speculation was when Trichet announced that the governing council decided to suspend the minimum required collateral rules for Portuguese government debt in the refinancing operations which came in light of Tuesday’s step from Moody’s to cut the credit rating status to junk.Coming to the economic data front, the US employers are likely to add almost twice as many jobs in June compared with May after a better than expected figures came from ADP employers services yesterday. This may provide support to the dollar. US wholesale inventories may also fall. Overall, European debt woes may keep the metal strong for the day although the US release towards evening may put pressure. Hence, a range bound movement is expected.

Silver Market

Spot silver also gained by 0.82% yesterday. A sluggish kind of movement has been observed due to the US holiday.

 The  dollar index  settled 0.12% lower from the prior on anticipation of ECB’s rate hike this week made the Euro strong against the dollar

  The Asian equities closed at a positive note while FTSE also advanced near about half a percent. US markets were closed yesterday due to the Independence Day holiday

The I-share silver holdings remained unchanged at 9536.65 tons as on 1st July

OUTLOOK:

At the Globex platform silver is seen quoting up by $0.526, at $34.220. As discussed in Gold’s outlook, the Asian stocks are trading at a downside after Moody’s services threaten the Chinese banks credit outlook at a negative side. Also, on anticipation of raising interest rate at this weekend, dollar rallied

against the Euro as a refuge. Coming to the economic data front, the German and Euro zone PMI releases although are expected to remain at the prior level, the Euro zone retail sales are likely to

slow down a bit. Data belongs to the US in the form of factory orders however may raise which may provide support to the dollar. The same kind of explanation holds in silver also regarding the

opening price in Indian platform. At present, rupee is depreciating against the dollar and hence a gap up opening to that extent only is expected. However, relating to the economic releases, silver seem to be weak for the day. Hence, it is recommended to be short on the metal at higher prices.

GOLD MARKET

Spot Gold gained for the first time in three days as the weaker dollar spurred demand for an alternative asset and benefitted from the stronger Euro on speculation that the ECB will raise interest rate this week.

 The  dollar index  settled 0.12% lower from the prior on anticipation of ECB’s rate hike this week made the Euro strong against the dollar

 The Asian equities closed at a positive note while FTSE also advanced near about half a percent. US markets were closed yesterday due to the independence day holiday

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded fund  remained unchanged at  1205.80 tons,  increasing concern about the investment demand

 The gold-silver stood at 43.78, slid slightly from 43.98

OUTLOOK:

At the Globex platform gold is seen quoting up by $14.70, at $1497.30. The Asian equities are trading at a mix with Chinese stocks paring gains after Moody’s services said that China banks’ credit outlook is potentially negative. Also, speculation mounted that China may raise interest rate as early as this weekend; offsetting optimism that Greece will avoid default, on the back of which the dollar rallied against the Euro. Coming to the economic data front, the German and Euro zone PMI releases although are expected to remain at the prior level, the Euro zone retail sales are likely to slow down a bit. Data belongs to the US in the form of factory orders however may raise which may provide support to the dollar. Due to US holiday yesterday a choppy kind of trading was seen at the electronic platform. At the Indian platform, the US spot prices might have factored in and the rupee appreciation put a lid on gold prices to move higher at a greater extend. Today, immediate delivery future although is showing 0.98% up, it might not open that much high as it would have been following the parity price in India. Hence, the rupee movement will be a crucial factor to decide the opening bell of Indian gold. Overall, gold is likely to remain weak for the day after a probable gap up opening (as rupee is likely to depreciate) and hence is expected to have a range bound movement for the day gold prices to move higher at a greater extend. Today, immediate delivery future although is showing 0.98% up, it might not open that much high as it would have been following the parity price in India. Hence, the rupee movement will be a crucial factor to decide the opening bell of Indian gold. Overall, gold is likely to remain weak for the day after a probable gap up opening (as rupee is likely to depreciate) and hence is expected to have a range bound movement for the day

Silver Market

The week gone by silver also tumbled more than the gold as investors’ optimism rose after the Greece got the aid from the European Union.

 The dollar index headed for a more than one and a half percent fall after a third straight weekly gain against the Euro, as the Greek probability of default subsided

  Global equities measured by the MSCI all country world indexes, posted gain of 5.36% while the Asian benchmark index climbed, driving the region’s key benchmark index up for a second straight week by 2.49% after Greece was able to put a halt to the worst case scenario. On the other hand, the CRB Index, a bellwether for commodities, also advanced by 2.07% despite precious metals got a hit. US stocks climbed, pulling the DJIA to gain by more than five percent

The I-share silver holdings slashed to 9536.65 tons from 9588.19 since last week

OUTLOOK:

At the electronic platform silver is seen quoting up by $0.30 at $34.01. As discussed in Gold’s outlook, the Asian equities are trading firm after the European officials approved an aid payment to Greece to stave off the default The Euro is also gaining strength against the dollar on the back of this news. The European Union has approved its share of 12 billion Euro aid to Greece however, IMF is still yet to provide the rest. From the economic data front, the Euro zone PPI is likely to come down which will be another factor for the Euro to make it strong against the majors. However, due to the US Independence Day holiday, a sluggish kind of trade can be expected. Overall, silver is expected to remain high although sustainability remains under concern. Hence it is recommended to be short for the metal at higher prices.

Gold Market

The week gone by gold tumbled to eleven weeks low as Greece progressed in staving off a default and the US ends QE2, soften commodities prices. Futures at the COMEX settled down by 095%

 The  dollar index headed for a more than one and a half percent fall after a third straight weekly gain against the Euro, as the Greek probability of default subsided

 Global equities measured by the MSCI all country world indexes, posted gain of 5.36% while the Asian benchmark index climbed, driving the region’s key benchmark index up for a second straight week by 2.49% after Greece was able to put a halt to the worst case scenario. On the other hand, the CRB Index, a bellwether for commodities, also advanced by 2.07% despite precious metals got a hit. US stocks climbed, pulling the DJIA to gain by more than five percent

 Holdings in the SPDR Gold Trust, the world's largest gold backed exchange-traded fund  slashed to 1205.80 tons from 1209.14 tons since last week, increasing concern about the investment demand

 The gold-silver ratio slid to 43.14 from 43.46 till yesterday.

OUTLOOK:

The US market is closed today due to the Independence Day and hence a subdued market move can be expected. At the electronic platform gold is seen quoting $1493.60, up by $11. The Asian stocks rose after the European officials approved an aid payment to Greece to stave off the default The Euro is also gaining strength against the dollar on the back of this news. The Euro area approved its share of a 12 billion Euro aid payment for Greece and the finance minister agreed to disburse 8.7 billion Euros of loans under last year’s 110 billion Euros bailout by July 15. However, the IMF is due to provide the rest. The Euro is expected to remain strong therefore on speculation that that the ECB will increase interest rate this week after Greek was being pulled back from the brink of default. Coming to the economic data front, Euro zone PPI is likely to ease which will be helping the Euro to be strong. Overall, gold is therefore seemed to be traded high although sustainability of trading high is under concern due to reduced investment demand. Hence it is recommended to be short for the metal at higher prices.

SILVER REVIEW

Silver also shattered along with gold as investment demand stalled and a rising hope for Greece to protect the nation’s default might have led investors to take some risk in equities. The immediate delivery futures have also seen the same.

 The dollar index settled 0.38% below prior closing after the Greek prime minister won the second ballot and led the Euro to appreciate

  Global equities remained strong as confidence among investors might have boosted to take riskier bet after Greece able to stave off the worst case scenario

The I-share silver holdings   slid to  9580.61 tons from 9600.32 as on 29thJune

OUTLOOK:

At the Globex platform silver is seen quoting down by $0.267 at $34.565. As discussed in Gold’s outlook, Asian stocks advanced after Greece was able to stave off the worst case scenario on the back of which investors might have taken greater risk to flee from the commodities.The dollar index is gaining against the majors before report may show that the US consumer confidence rose than the prior. From the economic data front, the US vehicle sales are likely to increase along with construction spending while German and Euro zone PMI manufacturing numbers may remain unchanged.After the end of QE2 yesterday it is still under doubt whether this easing was able to take US from the lower growth. Results may be seen some days later. However, for an intraday basis, it is the economic releases which seem to be fair for the economy which may boost the dollar. Hence silver is set to poise for another day and therefore it is recommended to be short on the metal.

GOLD REVIEW

Gold fell yesterday on anticipation of Greece’s second round of vote amid national protest. The immediate delivery future in the COMEX has retreated by 0.50%.

 The dollar index settled 0.38% below prior closing after the Greek prime minister won the second ballot and led the Euro to appreciate

 Global equities remained strong as confidence among investors might have boosted to take riskier bet after Greece able to stave off the worst case scenario

 The US jobless claims applications have increased indicating gloominess over the labor market led the dollar to shatter

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded fund slid a bit to 1208.23 tons from 1209.14 tons as on 30thJune

 The gold-silver ratio slid to 43.14 from 43.46 till yesterday

OUTLOOK:

At the Globex platform gold is seen trading at $1500.70, down by $2.10. Greek prime minister won the second ballot to stave off the euro area’s first sovereign default as the lawmakers backed bill to authorize an austerity plan required to keep aid following. Asian equities are taking the cues from the Europe and US equities on confidence that Greece is at least now able to stop the worst case scenario. The dollar index is gaining against the majors before report may show that the US consumer confidence rose than the prior. From the economic data front, the US vehicle sales are likely to increase along with construction spending while German and Euro zone PMI manufacturing numbers may remain unchanged.Yesterday QE2 has ended but results of that easing is yet to come. Any news on infusing liquidity may lift the gold up. However, for an intraday basis, today’s economic releases seem to be eco friendly due to which gold may remain under pressure. Hence, it is recommended to be short on the metal.

 

GOLD MARKET

Gold futures for August delivery fell $32.90 or 2.1% to $1520.50 in the Comex, the biggest drop in a single day in last six weeks after the Fed said US economy is recovering at moderate pace though somewhat more slowly than expected.

 The dollar index gained more than half a percent as Bernanke emphasized the low rate to continue for at least two or three central bank policy meeting

 The US jobless claims rose more than forecast, signaling a fragile US economy

 Global equities fell after Bernanke inferred a slower than expected recovery for the US

 Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund remained unchanged at 1209.14 tons as on 23rdJune

 The gold-silver ratio improved to 43.44 from 42.28 as on 23rdJune

OUTLOOK:

At the Globex platform gold is seen trading at $1522.80, up by $2.30.  Asian stocks are quoting in green after oil prices tumbled yesterday and thereby raising the hopes of economic growth. Greece is facing the next hurdle to implement the 78 billion Euros budget cut after EU leaders pledged to stabilize the economy which will be backed by IMF also. Euro on the back of which made a bounce back after it plummeted yesterday. Gold is therefore likely to recover the losses it made yesterday. However, data due release from the US is quite handy for the economy. The annualized QOQ GDP is likely to improve slightly with personal consumption remaining at the prior level, seems to be supportive for the dollar. German business climate is also likely to be gloomy. So, Euro may fill the pressure. Overall it is likely that gold may revive a bit from yesterday’s heavy fall although is prone to turn down in the US session with due respect to the US data release. Hence, it is recommended to be short at higher prices for the metal.

SILVER

Silver remained pretty volatile yesterday ahead of the Fed policy meeting. Starting with a lower side it came back nicely and settled almost a percent up at the COMEX while

 The dollar index gained more than half a percent as Bernanke emphasized the low rate to continue for at least two or three central bank policy meeting

Global equities stalled after the growth outlook of the US was cut down by the Fed

The I-share silver holdings slashed to 9535.12 tons from 9626.1 tons as on 21st June raising the concern about investment demand for the metal

OUTLOOK:

At the Globex platform silver is seen quoting down by $0.53 at $36.20. As discussed in Gold’s outlook, the Asian equities slammed after the US growth outlook has been reduced by the Fed. The Euro is weakening before the EU meeting took place today for discussing Greece’s financing needs. The low rate will be extended but this extended period has been emphasized as two or three policy meeting by Bernanke. Hence on anticipation of that dollar may remain at a stronger side for the day. The data yet to release from the Euro zone and German in the form of PMI numbers are expected to fall short from the prior while the US data may have a mix kind of impact which may prompt Euro to fall further. However, the lowering investment demand is the main concern. Overall we expect silver to remain at a downside and hence are recommended to be short. We expect silver to have a gap up opening by Rs.700 at a lower side.

Copper futures have been trading non-directionally for the past month, as many traders try to make sense of current economic data and formulate projections of what the future may bring. Fundamentally, it seems as though the market is well supplied, largely due to previous stockpiling in China. This brings about questions regarding when China will restock and to what degree. Some traders have discounted anemic US and European growth, making Chinese data even more important. Technically, the picture remains just as murky as the fundamental outlook. The tightening of the chart hints at an imminent breakout, but the direction of the breakout is what is eluding traders. Some traders may wish to consider sitting back in the wings to wait for a direction to go long or short the market. The chart can be used for guidance to set objective and stop levels once a breakout occurs. Traders not wishing to trade Copper itself may also look for the breakout to help formulate opinions in other markets, as the price of the metal can oftentimes be seen as a better leading indicator of economic growth than government reports.

Fundamentals

COPPER Market

Copper futures have been trading just north of the $4 level for roughly a month, lacking a consensus among traders as to where the global economy is heading. It seems as though traders have found a “fair price” for the time being, given the lack of clarity over the state of European and US debt and questions about China’s Copper market. Chinese imports in May were down 47% over the same period a year ago. This indicates that the large stockpiles that the industrial giant has built up are being destocked in order to provide cheaper metal to local users and making it non-cost effective to buy the red metal overseas. China will eventually have to restock these inventories, but questions remain as to the size of domestic stocks, since they are not reported with the same level of transparency as LME inventories. China posted a stellar economic quarter, with metrics being better than expected virtually across the board. However, the cloud of inevitable interest rate action by the People’s Bank of China [[PBoC]] has many traders concerned that eventually the central bank will act too harshly and hamper growth. The interest rate hikes already undertaken and the increase in bank capital requirements have done little to slow Chinese commodity demand, much to the government’s displeasure. In the West, the European debt crisis, most notably in Greece, threatens to bring EU growth to a grinding halt. In the worst case scenario, we can see contagion of Greece’s problems to other member states, which would drive borrowing costs upward. The US housing market, which is the next most important Copper market mover behind China, may be on the brink of a double-dip, which could result in further weakness in US Copper demand. The mix of data and opinions has resulted in choppy, sideways trading in Copper. Historically, Copper has been one of the most volatile commodities, and the recent lack of direction could be the calm before the storm.

Technical Notes

Turing to the chart, we see the September Copper contract trading in a relatively tight range north of 4.00. The range has been tightening, resulting in what appears to be a wedge formation on the daily chart. The market is entering the narrow end of the wedge, indicating that a breakout to either direction may be on the horizon. Prices are well south of the 100-day moving average, but are trading near the 20 and 50-day averages. Momentum, RSI and the stochastics are all giving neutral readings, offering no hint to future market direction.

Oil Market

Those traders who are still bullish on Crude Oil may wish to use the current weakness in prices as an opportunity to explore selling out-of-the-money puts in Crude Oil futures options. For example, with August Crude Oil trading at 92.85 as of this writing, the August Crude 76 puts could be sold for about 0.25, or $250 per option, not including commissions. The premium received would be the maximum potential gain on the trade and would be realized at option expiration in mid-July should the August futures be trading above 76.00. Given the risks involved in selling naked options, traders may wish to close out their trades prior to expiration should the option premium trade at three times the amount received for originally selling the option.

Fundamentals

Oil futures have not been above the “risk-off” trade mentality seen recently, as traders concerns over the European debt crisis as well as signs of an economic slowdown in the US sparked long liquidation selling in WTI Oil futures this past week. Front month July Crude Oil broke through technical support at 95.00 per barrel, triggering sell stops below this key price point. The short-term outlook appears to be favoring the bears, as US Oil demand remains lackluster. Concerns that China plans to raise interest rates once again could slow Oil demand from the world’s most populous nation. However, in the long run, Oil prices may still have room to move higher. The International Energy Agency warned that the additional Oil output from Saudi Arabia of 1 million barrels per day would not make up for the loss of Libyan Oil, which is higher quality and in demand by European refiners. The agency also expects Oil prices will continue to rise in the next 5-years, with continued increasing long-term demand from both China and India outpacing production and causing average Oil prices to rise by nearly $20 per barrel in the coming years. The IEA also warns of increasingly tight supplies of “lighter and sweeter” grades of Crude Oil in the coming months, mainly tied to the Libyan shutdown, but also due to lower production out of the North Sea and potential disruptions out of Nigeria, where political rebels have caused damage to the Oil infrastructure which has lowered the output if its highly prized “Bonny Light” Crude. A current tight supply of high grade Oil is a major reason why the “Brent” contract has traded at a huge premium to the US “benchmark” WTI contract along with the continued glut of Oil in the NYMEX delivery point in Cushing, Oklahoma. However, even in Cushing, we have started to see supplies being drawn down a bit, as the recent shutdown of the Keystone Pipeline from Canada had refineries with access to Oil from Cushing begin to drawdown inventories. So unless we see the global economy move back into a recessionary phase where global Oil demand decreased sharply, any major declines in Oil prices may turn out to be short-lived.

Technical Notes

Looking at the daily chart for August Crude Oil, we notice prices moving well below the 200-day moving average for the first time this year. The 14-day RSI is approaching oversold levels with a current reading of 33.94, as long liquidation selling due to fears of an economic slowdown keep pressure on prices. 90.00 is now seen as the next support level for August Crude, with resistance found at the 20-day moving average currently near the 99.50 area.

 

 CRUDE REVIEW:

Oil prices traded lower during Asia and early Europe session however, in the U.S session oil prices recovered and ended on a positive note. The August contract NYMEX ended at $93.63 levels. The market recovered as the U.S equities ended on a positive note along with US dollar index ended lower.

OUTLOOK:

Currently at 9:10 AM IST crude oil futures at Globex platform is seen trading up by 0.43% and now trading around $94.00 levels. This has been a mere recovery from the previous rise. Perhaps the gains are supported by higher equity markets across Asia. In fact the dollar index is currently trading down though in a steady mode. We believe the scenario might change during the day as economic data expected from Germany and U.S are likely to have strongly negative impact on these respective countries and thereby may cause oil to lessen its demand. The Zew survey (current situation, economic sentiment) from GE is expected to be much negative from the prior figures. Emphatically this should be expected as the ongoing crisis in Greek; Euro-zone is prompting a negative sentiment in the market.   The DOE data are expected tomorrow where in there is a marginal decline in crude oil inventory but products inventories are piling up suggesting lack luster short term demand for the products. However, the actual data should be the driving factor. We could also expect a volatile trade during the day as July futures of WTI crude oil at NYMEX is expiring. Hence, rolling over and squaring off of positions may be seen. Overall, we may expect a sideways trend for the day

Silver Review

Silver revived superbly in the evening session yesterday after the Greece finance leader assured to find out solution for the region’s crisis. After a sluggish morning session the faltering dollar helped the metal to revive and futures in Comex settled at a positive tune.

 The dollar index settled at the prior closing level, eroding the initial gain as assurance came from the Greek finance minister about a solution to the crisis, led the Euro strong

After the Asian equities closed almost all at a downside, the US stocks rallied, snapping the treasuries gain although Europe remained at a bit downside concerning over the assurance to work out

The I-share silver holdings slashed to 9626.1 tons from 9639.74 tons from as on 17th June raising the concern about investment demand for the metal

OUTLOOK:

At the Globex platform silver is seen quoting down by $0.226 at 35.845, but is expected to revive. As discussed in Gold’s outlook, the Euro is appreciating on assurance of Greek finance minister’s quote to find out a solution over the crisis. The US treasuries also lowered on concern of Greece that they may be able to tackle the debt. Asian equities are tracking the cues from the US and are trading at a positive note which may also support the metal.Economic releases in the evening may show a fall in existing home sales in May, on anticipation of which dollar may remain under pressure for the day. Also, before the Fed announces its stance over the monetary policies in a two day meeting starting tomorrow, anticipation of keeping the interest rate at the prior level, dollar may lose its value on the back of which silver may shine.However, volatility can not be ruled out in silver as the faltering investment demand for the metal is a matter of concern due to the descending global industrial activities. Hence, silver is likely to remain at a range bound tending towards an upside for the day.

GOLD REVIEW

Gold rose for the fifth straight sessions as negotiations for a Greek bailout stalled, boosting the appeal of the precious metal as a safe haven. Futures in Comex have gained modestly.

 The dollar index released the initial gain to remain unchanged at prior closing helped the precious metals to revive

 Global equities performed at a blend. While the Asian stocks fell on anticipation of a Greek default, US stocks rallied after Euro area finance minister assured to find a solution for the crisis

 Holdings in the SPDR Gold Trust, the world's largest gold-backed  exchange-traded fund remained unchanged at 1209.14 tons as on 20thJune

 The gold-silver ratio fell to 42.74 from 43.05 as on 20thJune

OUTLOOK:

At the Globex platform gold is seen trading at $1541.70, down by $0.300. Asian equities rallied after concern eased a bit that Greece will default on its debt after Euro area finance leader assured investors a solution will be found to the crisis. The Euro therefore is appreciating against the dollar, pushing the benchmark index at a lower side. The US treasuries also failed to revive as optimism that Greece will be able to tackle its debt drove the stocks higher in the US and Asia, on the back of which gold may gain strength. Greek prime minister faces a confidence vote today that may determine whether Greece becomes the first Euro area country to default. Austerity measures have been insisted by the EU leaders as a condition of the aid needed to avoid default in the next month. The dollar weakened before Fed policy makers begin a two day meeting amid signs that the world’s largest economy is losing momentum. Also, it is getting weaker before report may show a drop in home sales in May. However, German and Euro zone economic sentiments may be hurt after the prolong peripheral crisis which may hinge upon the Euro’s gain. Overall, we expect gold to remain strong today on weaker data expectation from the US and a probable solution from the EU leaders to recoup Greece from the crisis. Hence, it is recommended to be long for the metal.

 

 

Energy and Natural Resources Market Cheat Sheet (June 13, 2011)

 

Strengths

·         BP published its June 2011 Statistical Review of World Energy this week, which recorded a 5.6 percent increase in global primary energy consumption, the largest since 1973. China’s energy consumption grew by 11.2 percent to make up 20.3 percent of the world total, eclipsing the U.S. for the first time.

·         Mexican mining production rose 15 percent year-over-year in April and 66 percent month-over-month to 31,893 tonnes and reportedly includes full production at the Buenavista del Cobre mine.

·         The latest European stockholder steel shipment data highlights the positive demand conditions for the regional steel sector in late first quarter. Flat product steel sales were up more than 10 percent year-over-year, exceeding the 2007 record annual average for the first time since the global financial crisis.

·         Ukraine’s coal production rose 9.9 percent to 33.9 million tonnes in the first five months of the year from a year earlier, reported the Energy and Coal Industry Ministry.

·         The latest data marks total U.S. oil demand at a strong 19.13 million barrels per day, up 0.22 million barrels per day week-over-week, continuing with an upward trend of the weekly reading which began the month of May at 18.16 million barrels per day. The data shows that the weakness earlier in the month pertained primarily to refinery and petrochemical plant outages rather than the falling away of underlying demand in the U.S.

 

Weaknesses

·         According to the China Iron and Steel Association, daily output of crude steel in China during the last week of May fell 3.46 percent week-over-week reaching 1.915 million tonnes.

·         The China Association of Automobile Manufactures reported that vehicles sales in China shed 13.95 percent month-over-month to 1.19 million in May 2011. China’s automobile sales dropped for the second month in a row pointing to slowing demand after Beijing stopped offering incentives and introducing new limits on car purchases earlier this year.

·         Preliminary data suggest that total oil products demand in April in the three largest European markets (France, Germany and Italy) fell by 3 percent year-over-year, similar to the decline seen in March, with most of the decrease due to very low sales of heating oil (down 29 percent year-over-year) resulting from very warm weather.

 

Opportunities

·         The president of Baosteel’s stainless steel unit reported this week that he expects stainless steel consumption in China to grow 5 to 7 percent annually over the next five to ten years.

·         Global natural gas use may rise more than 50 percent by 2035 from 2010 levels and meet more than a quarter of global energy demand, according to the International Energy Agency.

·         The U.S. Department of Agriculture estimated corn plantings at 94 percent complete, below the five-year average pace of 98 percent, leaving about 5.5 million acres (2.2 million hectares) of the projected 92.2 million yet to be seeded.

 

Threats

·         China’s National Development and Reform Commission (NDRC) warned thermal coal producers against price increases, and indicated fines of up to five times the revenue generated. The NDRC has been trying to stabilize the coal market but rising international prices is leading to discontent among miners, according to Bloomberg News.

·         Allegations of serious malpractice from a short selling specialist sent shares in Sino-Forest plunging by two-thirds, despite strong denials of the claims by the Toronto-listed timber group. The shares shed 70 percent in two sessions after the allegations, wiping about $3 billion off the company’s stock market value.

Gold Market Cheat Sheet (June 13, 2011)

On Friday, spot gold closed at $1,531.35, down $10.60 per ounce, or 0.69 percent for the week. Gold equities, as measured by the Philadelphia Gold & Silver Index, fell 4.69 percent. The U.S. Trade-Weighted Dollar Index moved up 1.46 percent for the week.

 

Strengths

·         The top forty global mining companies are poised to break through the $1 trillion asset mark this year, due to record levels of cash, property and equipment on balance sheets, says a new PricewaterhouseCoopers report. According to the company’s report, Mine 2011: The game has changed, total revenues for the top forty mining companies increased 32 percent to $435 billion, breaking the $400 billion mark for the first time. Net profit rose 156 percent to $110 billion and net debt was reduced to $46 billion.

·         South Africa’s gold output rose 1.5 percent in volume terms in April while total mineral production rose 12.4 percent compared with the same month a year earlier.

·         Scotia Mocatta, a global leader in precious and base metals trading, noted that “one thing is for sure, even if gold gets caught up in commodity / equity sell offs, dips are there to be bought as gold is increasingly recognized as a currency in its own right!”

 

Weaknesses

·         Nevada’s Governor Brian Sandoval signed Senate Bill 86, which repeals a state law that allowed the mining industry to use the power of eminent domain to take private homes and ranches for mining, smelting and related activities.

·         Many are urging the Obama administration to extend for 20 years a mining ban on one million acres around the Grand Canyon National Park. In 2009, U.S. Secretary of the Interior Ken Salazar issued a federal order calling for a two-year "time-out" from all new mining claims in the Arizona Strip near the Grand Canyon. The lands were blocked from new exploration and mining activity. Supporters of the ban cite the extreme environmental effects of mining.

·         State-owned mining company African Exploration Mining and Finance Corporation would “never” be bailed out at taxpayers’ expense should it fall on difficult times, according to Mines Minister Susan Shabangu. “Bailouts from the state would never be an option,” Shabangu noted.

 

Opportunities

·         Ethiopia is set to hit its target of more than doubling mining exports to an annual $1 billion ahead of schedule, the country's mining minister told Reuters. Ethiopia is expected to earn around $500 million from mining exports in the financial year to next July, the mining minister said.

·         Chile and China signed agreements to increase cooperation in mining during a visit by China's Vice President Xi Jinping. The governments also confirmed financial cooperation and development funding accords between Chile's Banco Estado and China Development Bank, both state-owned. China, a top importer of commodities, is by far the biggest buyer of copper from Chile, the world's top producer of the metal.

·         Sprott Asset Management chief investment strategist John Embry believes this summer will be bullish for the price of gold. "I don't like putting numbers and dates in the same sentence because you always make yourself look bad - but I would be very surprised if it doesn't take out $1,650 this summer and maybe headed towards $1,800 over the next three months," he said. To back up the statements, Embry points to a number of macroeconomic factors that are likely to have a bearing on gold prices over the next few months.

 

Threats

·         Peru’s newly elected president Ollanta Humala has raised concern for Peru’s mining industry. President Humala has suggested Peru could impose a windfall tax of up to 40 percent on mining companies and raise the corporate tax rate from 30 percent. Royalties could be raised to 5 percent from 3 percent.

·         Tanzania, one of Africa's top gold producers, is considering a "super profit" tax on earnings from minerals as one of the ways to fund its five-year development plan. "Revenue from the mineral resources will be one of the important sources of financing the medium-term plan. Considering the increasing trend in mineral prices, it is optimal to introduce a super profit tax on the windfall earnings from the mineral sector," said President Jakaya Kikwete.

·         A report indicated that the majority of gold mines in South Africa will shut down within a decade. Despite the gold bull market of recent years, with the price of gold rising sharply, South Africa’s gold reserves are becoming depleted at a rate that, within 12 to 14 years would mean the end of the industry for the country.

Gold Review

Gold futures traded flat in electronic trading on Tuesday, retracing gains after Federal Reserve Chairman Ben Bernanke gave no indication that the central bank is about to raise interest rates, keeping the opportunity cost for owning gold low. Futures in the Comex and Mcx division have also seen a little downside at closing.

 The dollar index settled more than half a percent below while US treasuries prices moved higher after the Fed chairman acknowledged somewhat slower than expected growth of the US economy

 US equities pared gains in afternoon trading  following Bernanke’s speech. However rest of the world closed by gaining modestly

 Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded  remained unchanged at  1212.86 tons as on 7thJune

 The gold-silver ratio slid a bit to 41.67 from 42.06

 

OUTLOOK:

At the Globex platform gold is seen trading at $1540.20, down by $3.90. Asian stocks fell leading the Asian benchmark index to slide by 0.5% at present and the yen climbed against the dollar after the US Fed officials fueled concerns about whether the global recovery will be sustained and as China purchases of Japan’s long term debt reached a record, making the currency to appreciate. Fed chairman urged for another record monetary stimulus to be needed to boost the slow recovery and  also reiterated that the increasing inflation is transitory. This is however will be supporting gold prices to recover in the US session. Japan’s current account surplus plunged 69.5% and also logged a trade deficit of 417.5 billion in April as imports grew against a fall in imports due mainly to the impact of the earthquake is leading a fall in stocks at present. Coming to the economic data front, the German trade and current account balance is likely to shed while industrial production also may ease. Hence Euro may depreciate to make the metal little weak.

Gold Review

Gold rose to a month high on speculation that US will be limping to fasten its recovery, eroded the demand for the value of dollar and boosted the appeal for the precious metal.

 The dollar index  settled 0.28% higher from the prior closing yesterday on absence of any economic releases from the US

 Global equities closed all most all at a downside on weaker economic releases from the US

 Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded  remained unchanged at  1212.86 tons as on 6thJune

 The gold-silver ratio slid a bit to 42.06 from 42.61

Outlook

At the Globex platform gold is seen trading at $1541.30, down by $2.80. Asian stocks fell for the third consecutive day leading the Asian benchmark index to drop by 0.3%. The Yen appreciated against the dollar, hurting the export earnings and before reports today and tomorrow that may show a US index of optimism fell in June and German exports declined in April. The Euro is gaining against the dollar after the ECB president indicated his willingness to sanction bond rollovers in Greece. Fed chairman Ben Bernanke is scheduled to deliver a speech in the afternoon today about “The US economic outlook” and the proximity of his remarks to the upcoming FOMC meeting on June 21 are likely to make it an opportune to set the market expectation. Coming to the economic data front, the Euro zone retail sales and German factory orders may improve which might impact positively upon the Euro. However, any indication towards settling down the debt ceiling and any decisive cue to bring back the economy into growth path may boost the dollar. Overall, we expect gold will be under stress for the day on anticipation of the US economic outlook. However depreciation in rupee might limit the downside. Hence, it is recommended to be short for the metal.

Silver View: Is bearish is complete

Today’s Idea

Given the wild price swings we have seen in the Silver market lately, it may be difficult for many traders to hold an outright position in Silver, as the potential risk may be greater than most traders can stomach. One option for those who choose to take a position could be to investigate the purchase of debit spreads using options on Silver futures. For those with a bullish slant, exploring the purchase of a bull call spread might be interesting. For example, with September Silver trading at 37.190 as of this writing, the September Silver 43.000 calls could be bought and the September Silver 48.000 calls sold for about 0.720, or $3,600 per spread, not including commissions. The premium paid would be the maximum potential loss on the trade, which has a potential profit of $25,000 minus the premium paid which would be realized at option expiration in late August should the September Silver futures be trading above 48.000.

Fundamentals

After a nearly $18.00 plunge in just over a week’s time, Silver futures appear to have found some firm footing near the $32 per ounce level, which has sparked some renewed buying in this precious/industrial metal. The entire metals complex got a boost from a Goldman Sachs analyst who once again recommended long positions in commodities. In addition, the continued strength in the price of Gold may be pulling Silver prices along for the ride, especially as the Gold/Silver ratio has returned to a more “reasonable” 40 to 1. The recent strength in the precious metals sector comes despite a rising U.S. Dollar, which has been viewed of late as “bearish ” towards commodities in general. One gets the sense that the demand for “safe haven” investments has returned; especially as it seems that the European debt crisis is expanding. It appears that the sharp sell-off combined with much higher exchange margins has taken many speculators out of the Silver market. This has caused open interest to drop sharply and seems to have restored some health to the overall bull market. Although it appears that prices may have formed a near-term bottom, we may not see a huge move of speculators back into the market until we see daily price trading ranges shrink, as well as margin requirements lowered by the exchanges.

Technical Notes

Looking at the daily chart for July Silver, we notice what appears to be a “V-shaped” bottom formation. Prices are now testing the 20-day moving average, and a close above this widely watched indicator could spur some buying by short-term momentum traders. Even the steep sell-off in Silver prices we saw a few weeks ago failed to negate the longer-term bullish trend, as prices failed to come close to testing the 200-day moving average. The 14-day RSI has moved back to neutral territory, with a current reading of 48.39. Support for July Silver is seen at the May 12th low of 32.300, with resistance found at the May 11th high of 39.470.

Gold Bullion Demand Trends - Bullish! The World Gold Council has just published the latest issue of “Gold Demand Trends” (Q1 2011). This is a rather bullish report, concluding: “The outlook for global gold demand remains robust throughout 2011against a background of another strong quarter, the geographic and sectoral diversity of demand and strong fundamentals.” The report summarized the demand trends as follows: Global gold demand in the first quarter of 2011 totalled 981.3 tonnes, up 11% year-on-year from 881.0 tonnes in the first quarter of 2010. In value terms, this translated to US$43.7bn, compared with US$31.4bn in the first quarter of 2010, an increase of almost 40%. This was largely attributable to a widespread rise in demand for bars and coins, supported by an improvement in jewellery demand in key markets. The quarterly average gold price hit a new record of US$1,386.27/oz (London PM Fix), its eighth consecutive year-on-year increase. Despite a period of price consolidation in the early part of the quarter, it climbed to record highs throughout March and has continued to achieve new highs in April and May. During the first quarter of the year, investment demand grew by 26% to 310.5 tonnes from 245.6 tonnes in the first quarter of 2010. In value terms, investment demand was US$13.8bn. The main growth came from bar and coin demand which increased by 52% year-on-year, to 366.4 tonnes. In value terms, this represented a near-doubling of demand to US$16.3bn from US$8.6bn in Q1 2010. ETFs and similar products witnessed net outflows of 56 tonnes ($2.5bn). Redemptions were concentrated in January. Despite the outflows, the collective volume of gold held by global ETFs by the end of the quarter was in excess of 2,100 tonnes equating to more than $95bn. Jewellery demand in the first quarter of 2011 registered a gain of 7% from year earlier levels of 521.3 tonnes to reach 556.9 tonnes. This equated to a record quarterly value of US$24.8bn. India and China, the two largest markets for gold jewellery, together accounted for 349.1 tonnes or 63% of the total, a value of US$16bn. China’s jewellery demand reached a new quarterly record of 142.9 tonnes ($6.4bn) up 21% from 118.2 tonnes in the first quarter of 2010. Technology demand remained steady in the first quarter at 113.8 tonnes ($5.1bn). A revision to the fourth quarter figures now means that 2010 was the highest year on record for gold demand in electronics at 326.8 tonnes or $12.9bn. In Q1 2011, gold supply declined by 4% year-on-year to 872.2 tonnes from 912.1 tonnes in the first quarter of 2010. This decline was due to a sharp increase in net purchasing by the official sector and a fall in the supply of recycled gold, which was down 6% on year-earlier levels to 347.5 tonnes from 369.3 tonnes in the first quarter of 2010. Mine production increased by 44 tonnes year-on-year, a growth rate of 7% from year earlier levels, with negligible net producer de-hedging. Central bank purchases jumped to 129 tonnes in the quarter, exceeding the combined total of net purchases during the first three quarters of 2010. The World Gold Council expects gold to be driven by the following factors during the rest of 2011. Prevailing global socio-economic conditions will continue to drive investment demand for gold. These include: continued uncertainty over the US economy and the dollar, ongoing European sovereign debt concerns, global inflationary pressures and continued tensions in the Middle East and North Africa. Sustained momentum in Chinese and Indian jewellery demand will underpin growth in the jewellery sector throughout 2011. Strong demand in India during the recent Akshaya Tritiya festival and the beginning of the wedding season, alongside extensive purchasing on dips in the gold price, underlines the strength of the Indian market. Net purchasing by the official sector is expected to continue in 2011 as central banks turn to gold as a means of diversifying their reserves into an asset with no credit or counter party risk.

GOLD REVIEW

Spot gold revived strongly yesterday to settle 0.70% higher than the prior on anticipation of Fed’s meeting minutes to indicate about long term spending cut to raise the debt circuit  limit. The same has been observed in the futures in Comex.

 The dollar index settled down by 0.03% at 75.37, revived a bit after the ECB officials rejected Greek bail out

 Global equities closed all most all in positive except Indian Sensex

 The rate hike wasn't warranted by the ECB due to a lack of evidence that higher inflation expectations were becoming ingrained in wage and price decisions and skepticism over the underlying strength of the economy. Also, the central bank means to up the size of its assetpurchase, or quantitative-easing program by 50 billion pounds from 200 billion pound

 Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded further fell to 1191.34 tons from 1192.25 tons as on 18th May after the sell off came in

 The gold-silver ratio plunged to 42.61 from  44.19

OUTLOOK:

At the Globex platform Gold is seen trading $1498.00 up by $2.10 from the previous closing. The Asian equities are showing some confidence and the dollar index at present is weakening against the majors. The Euro is appreciating against the dollar, on the back of which gold is gaining strength. The bank of Japan is starting a two day policy meeting today may face increased pressure to add stimulus after the country’s GDP contracted to 3.7%, due to which the Yen is appreciating against the dollar. FOMC minutes showed no firm decisions rather told to need more discussions was needed to normalize policy; however, the committee’s asset purchase program and the federal fund target rate were warranted. It showed the current inflation is transitory and to unwind when commodity prices increase abated. Based on this concern, the metal may gain on anticipation of an unlikely rate hike by the Fed in near term to bolster the economic growth.  Coming to the economic data front, the US jobless claims are likely to reduce while the leading indicator may show an ease of economic activities which may down grade the growth prospect.

Overall, it is likely to have a good day ahead for the metal on the back of dollar’s weakness and hence is recommended to be long for the metal.

Jim Rogers on Why He Stays in Gold

Jim Rogers, veteran investor, talks to FT’s head of Lex, John Authers, about the value of gold and silver, the strength of commodities, Federal Reserve chairman Ben Bernanke and Treasury yields plus the housing bubble in China. He was interviewed at the CFA Institute Annual Conference in Edinburgh.

Dr. Prieur du Plessis is an investment professional with 26 years' experience in investment research and portfolio management. More than 1,200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns, including his blog, Investment Postcards from Cape Town. He has also published a book, Financial Basics: Investment. Prieur is Chairman and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and a number of foreign countries. He also serves as Honorary Consul of Slovenia for South Africa, actively developing economic, cultural and scientific relations between Slovenia and South Africa. Prieur is 54 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His leisure activities include long-distance running, traveling, reading, motor-cycling and scrappily

© MIS

CRUDE REVIEW

Oil futures prices traded on a bearish trend on yesterday. Global equity market closed on lower note, whereas dollar index 75.36 levels by losing more than 0.15 percent.  US economic releases in the form of Housing data, industrial production and capacity utilization have declined than prior period and lower than expectation. So, lower economic growth created a concern for crude oil demand and oil prices fell accordingly.

OUTLOOK:

 Currently, WTI Light sweet crude oil futures are trading above $98.50/ bbl by gaining near one percent in international market. Most of the Asian equities indices are trading on higher side whereas dollar index is trading at 75.14 levels, down by 0.30 percent. So, higher equities market and lower dollar index might have supported oil prices to pull back from the last three days fall. On the other side, crude oil inventory have declined along with Gasoline and Distillates stock piles as per API. Thus falling inventory level might be supporting oil prices to trade on higher side. In the evening, DOE inventory data releases are expected to be slightly negative for oil prices. However, actual inventory data must eye tonight. On economic front, Bank of England and FOMC meet is there which may change the market movement. Overall, we may expect crude oil futures prices to trade on higher side through out the day, where DOE inventory data will decide the movement tonight.

© MIS

GOLD REVIEW

Spot gold retreated yesterday on the back of an ambiguous Greek debt restructuring and the swinging dollar index propels the metal to loose value. The same has been observed in the futures in Comex.
 The dollar index settled down by 0.13% at 75.36 after it had an oscillation on anticipation of EU leaders’ decision
 Global equities plunged amid uncertainties of European debt crisis and lower than expected US housing data led DJIA, FTSE to retreat
 European finance minister endorsed a bailout for Portugal, and, reprofiling of the Greek bond maturities which may be a part of a package including sales of state assets and deeper spending cut may take place as last year’s 110 billion Euro rescue failed to restore Greece to financial health
 Gold shattered after the hedge fund titan George Soros exit from the gold market by shedding five million shares held in the SPDR trust
 Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded further fell to 1192.25 tons from 1205.38 tons as on 16th May after the sell off came in
 The gold-silver ratio improved slightly to 44.19 from 43.67

OUTLOOK:
At the Globex platform Gold is seen trading $1490.90 up by $10.90 from the previous closing. The Asian equities are showing some confidence and the dollar index at present is weakening against the majors.The Euro is appreciating against the dollar, on the back of which gold is reviving, after the talk of Greek debt restructuring weighed on risk sentiment and put a floor on the metal’s price. The minutes of the Bank of England and FOMC meeting will be keenly watched today which might direct the dollar’s move. Gold may gain strength as signs of financial turmoil in Europe will be bolstering demand for the precious metal as a store of value as because Ireland may be facing a second bailout as the nation remains locked out of credit markets spooked by concerns that they are unable to pay their debts. Overall gold is likely to trade at a higher side with due considerations to the minutes of BOE and FOMC meetings. Hence it is recommended to be long for the metal.

How to Make Money in Microseconds

Human beings can, and still do, send orders from their computers to the matching engines, but this accounts for less than half of all US share trading. The remainder is algorithmic: it results from share-trading computer programs. Some of these programs are used by big institutions such as mutual funds, pension funds and insurance companies, or by brokers acting on their behalf. The drawback of being big is that when you try to buy or sell a large block of shares, the order typically can’t be executed straightaway (if it’s a large order to buy, for example, it will usually exceed the number of sell orders in the matching engine that are close to the current market price), and if traders spot a large order that has been only partly executed they will change their own orders and their price quotes in order to exploit the knowledge. The result is what market participants call ‘slippage’: prices rise as you try to buy, and fall as you try to sell.

In an attempt to get around this problem, big institutions often use ‘execution algorithms’, which take large orders, break them up into smaller slices, and choose the size of those slices and the times at which they send them to the market in such a way as to minimise slippage. For example, ‘volume participation’ algorithms calculate the number of a company’s shares bought and sold in a given period – the previous minute, say – and then send in a slice of the institution’s overall order whose size is proportional to that number, the rationale being that there will be less slippage when markets are busy than when they are quiet. The most common execution algorithm, known as a volume-weighted average price or VWAP algorithm (it’s pronounced ‘veewap’), does its slicing in a slightly different way, using statistical data on the volumes of shares that have traded in the equivalent time periods on previous days. The clock-time periodicities found by Hasbrouck and Saar almost certainly result from the way VWAPs and other execution algorithms chop up time into intervals of fixed length.

The goal of execution algorithms is to avoid losing money while trading. The other major classes of algorithm are designed to make money by trading, and it is their operation that gives rise to the spasms found by Hasbrouck and Saar. ‘Electronic market-making’ algorithms replicate what human market makers have always tried to do – continuously post a price at which they will sell a corporation’s shares and a lower price at which they will buy them, in the hope of earning the ‘spread’ between the two prices – but they revise prices as market conditions change far faster than any human being can. Their doing so is almost certainly the main component of the flood of orders and cancellations that follows even minor changes in supply and demand.

‘Statistical arbitrage’ algorithms search for transient disturbances in price patterns from which to profit. For example, the price of a corporation’s shares often seems to fluctuate around a relatively slow-moving average. A big order to buy will cause a short-term increase in price, and a sell order will lead to a temporary fall. Some statistical arbitrage algorithms simply calculate a moving average price; they buy if prices are more than a certain amount below it and sell if they are above it, thus betting on prices reverting to the average. More complicated algorithms search for disturbances in price patterns involving more than one company’s shares. One example of such a pattern, explained to me by a former statistical arbitrageur, involved the shares of Southwest Airlines, Delta and ExxonMobil. A rise in the price of oil would benefit Exxon’s shares and hurt Delta’s, while having little effect on Southwest’s (because market participants knew that, unlike Delta, Southwest entered into hedging trades to offset its exposure to changes in the price of oil). In consequence, there was normally what was in effect a rough equation among relative changes in the three corporations’ stock prices: Delta + ExxonMobil = Southwest Airlines. If that equation temporarily broke down, statistical arbitrageurs would dive in and bet (usually successfully) on its reasserting itself.

No one in the markets contests the legitimacy of electronic market making or statistical arbitrage. Far more controversial are algorithms that effectively prey on other algorithms. Some algorithms, for example, can detect the electronic signature of a big VWAP, a process called ‘algo-sniffing’. This can earn its owner substantial sums: if the VWAP is programmed to buy a particular corporation’s shares, the algo-sniffing program will buy those shares faster than the VWAP, then sell them to it at a profit. Algo-sniffing often makes users of VWAPs and other execution algorithms furious: they condemn it as unfair, and there is a growing business in adding ‘anti-gaming’ features to execution algorithms to make it harder to detect and exploit them. However, a New York broker I spoke to last October defended algo-sniffing:

I don’t look at it as in any way evil … I don’t think the guy who’s trying to hide the supply-demand imbalance [by using an execution algorithm] is any better a human being than the person trying to discover the true supply-demand. I don’t know why … someone who runs an algo-sniffing strategy is bad … he’s trying to discover the guy who has a million shares [to sell] and the price then should readjust to the fact that there’s a million shares to buy.

© MIS

REVIEW

Crude oil prices recovered from the highest weekly falls in last two and half year time. However, fall in oil prices was witnessed in between in the last week, though prices closed on a positive note. Similarly, June contract closed at $99.65 / bbl, by gaining more than 2.5 percent in NYMEX platform.

OUTLOOK: Currently, WTI Light sweet crude oil futures are trading above $98.50/ bbl with fall of near 1.3 percent. Most of the Asian equities indices are trading on lower side whereas Dollar index is up by 0.18 at 75.84 levels. So, lower equity market and higher dollar index might be pressurizing oil prices. Euro-zone trade balance is likely to increase which may have some positive impact on oil prices during European session. However, empire manufacturing of US is expected to decline in the month of May. So, we may expect oil futures to trade on lower side initially; thereafter it may take some positive cues. However, technically we have given a buying call.

© MIS

GOLD Review

The week gone by, gold has an erratic movement impelled by an oscillating dollar index. Over the past week futures has gained  0.13% and 0.17% respectively in  the Comex.

 The dollar index strengthened as much as 1.16% to dilute the metal’s demand towards week end

 Global equities had a mixed last session where most of the Asian equities closed in green while the DJIA and FTSE lost a bit

 Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded further fell to 1192.25 tons from 1205.38 tons after the sell off came in. Billionaire investor Paul Touradji sold all of its shares (173000) in the SPDR gold trust, valued at $24 million as per the filing to the US Securities and Exchange Commission

 The gold-silver ratio slid slight to 42.65 from 43.30

 

OUTLOOK:

At the Globex platform Gold is seen trading $1490.90 down by $2.70 from the previous closing. The Asian equities fell and the dollar index at present is in commanding mode. The Euro at present is getting weakened on concern that the  European Finance minister may fail to quell speculation about  Greece’s debt restructuring. Greece today will plead for a boost in  its 110 billion Euro financial  salvation from European government and the IMF.  Besides, Fed president Obama’s concern on a failure to raise the US debt ceiling by early August might disrupt the global financial system and may plunge the nation in to another recession, which might boost the metal’s havens demand. Coming to the economic data front, the Euro zone CPI is likely to ease while the trade balance is expected to improve which may provide support to the metal’s price. However, the US releases are likely to have a mix kind of impact where the net long term TIC flows are likely to increase. Today’s meeting of the EU ministers will be keenly watched and concern about Greece’s restructuring may continue to give selling pressure on the Euro. However, gold may revive on the back of Euro zone’s favorable economic releases but will remain under pressure on the ambiguity of Euro’s fate.Overall gold is likely to trade at a upside with due consideration to the Euro’s probable weakness against the dollar. Hence it is recommended to be long for the metal with a limited upside.

© MIS

Energy and Natural Resources Market Cheat Sheet (May 16, 2011)

Strengths

• Coal prices at Richards Bay Coal Terminal rose to the highest level in almost a month, gaining 0.3 percent to $123.93 a ton last week. The price climbed 45 percent in April from a year earlier and 1.6 percent from March.
• China released its oil trade data this week that implied total oil demand growth for the month of April was up a robust 12 percent year-over-year. China’s crude oil imports increased 1.8 percent year-over-year to 5.26 million barrels per day.
• In Indonesia, tin surveyed for export prior to shipment increased by 23 percent year-over-year to 9,708 tons in April, the highest monthly total recorded in the last two years. It’s the highest figure for April since the export licensing system was first introduced in 2007.
• China Iron and Steel Association said this week that China’s daily crude steel output reached 1.93 million tons in April, up 1 percent month-over-month.

Weaknesses

• Coal sales at South Gobi are being threatened by supply side disruptions as the Russian suppliers, from whom Gobi had been buying its diesel needs, are facing shortages.
• Even after constant tightening efforts by the Chinese government, the statistics bureau reported China’s consumer prices rising 5.3 percent on a year-over-year basis in April. This would exceed the government’s full-year target of 4 percent. The gain was more than consensus estimate of 5.2 percent and producer prices increased 6.8 percent.
• Turkey’s chrome ore exports fell by 13 percent month-over-month and 53 percent year-over-year in April 2011. The main driver was lower shipments to China, which saw a 37 percent decrease from April 2010.
• Imports of unwrought copper and products fell by 14 percent on a month-over-month basis and 40 percent year-over-year basis to 263 kilotons, according to Chinese import data reported this week. The General Administration of Customs reported inbound movements of copper and products down to 262,676 metric tons from 304,299 metric tons in March.
• The U.S. gasoline demand for May was extremely weak, running lower year-over-year by 391 thousand barrels per day. Total U.S. oil demand was lower on a year-over-year basis by a massive 663,000 barrels per day.

Opportunities

• According to the Ministry of Industry and Information Technology, China plans to cut 291,000 metric tons of so-called outdated capacity for copper, close 600,000 tons of outdated aluminium capacity, 585,000 tons of lead-making capacity, and 337,000 tons of zinc production capacity this year.
• The Japanese government reported a likely dip in Japan’s crude steel output in April through June despite the impact of the March earthquake, as higher demand for construction steel will be partially offset by a plunge in demand from the auto sector.
• At least 11 Chinese provinces are now facing varying degrees of power shortages. This year, power tightness has come well ahead of the usual summer months in July and August.
• German Chancellor Angela Merkel recently said that Germany will end its reliance on nuclear energy. She said the only question was how long an overlap will be needed before other power sources can fill the gap. Over 22 percent of Germany’s electricity needs are supplied by nuclear energy, 42 percent by coal, 13.6 percent by natural gas and 16.5 percent by renewables.
• Brazil may become a net importer of aluminum in 2012 as supply lags behind demand fueled by the hosting of the World Cup and the Olympic Games. The country will most likely import 50,000 metric tons of aluminum next year in net terms. Based on that estimate, shipments will rise to 350,000 tons in 2015.

Threats

• Standard and Poor’s warned this week that “Indonesia’s mining industry is undergoing a regulatory overhaul that is likely to weaken the operating and financial performance of domestic mining companies.” S&P highlighted that existing producers are “grandfathered” but the agency remains concerned that new supplies will be impacted.
• The Chinese economic data for April showed signs of slowing momentum, with industrial production at 13.4 percent year-over-year from 14.8 percent year-over-year in March. New loan growth was down 5 percent year-over-year to RMB 740 billion. Power generation was weaker, slowing to 10.5 percent year-over-year, largely due to a sharp year-over-year slowdown in hydro generation, which was up only 1.2 percent.
• Executives from five of the largest oil companies faced questions about tax deductions in U.S. Senate hearings this week.
• © MIS

Gold Market Cheat Sheet (May 16, 2011)

On Friday, spot gold closed at $1,493.22, up $2.38 per ounce, or 0.16 percent for the week. Gold equities, as measured by the Philadelphia Gold & Silver Index, fell 3.43 percent. The U.S. Trade-Weighted Dollar Index strengthened 1.27 percent for the week.

 

Strengths

• CPM Group noted China’s importance not only as the world’s third largest silver miner but also as a major global silver consumer. While Chinese silver mine supply accounted for roughly 16 percent of global silver mine production last year, CPM Group indicated the country was also a major manufacturer of many silver containing products. And CPM found domestic demand for silver has outpaced supply growth. “China was a net exporter of silver until 2006, but became a net importer since 2007.”
• A new PricewaterhouseCoopers (PwC) report, “Seize the Day-The Mining Industry in British Columbia (BC) 2010”, found BC mining companies turned in near-record results for revenues, net income and cash flows last year. “The 2010 financial performance of the BC mining sector was outstanding, driven by strong coal and metals prices and a lot of hard-working people in the industry,” said Michael Cinnamond, leader of PwC's BC mining practice. The PwC report shows that just about every aspect of the BC mining sector has done better than expected and many of the positive trends we saw last year have continued into the first quarter of 2011.
• The slump in silver prices has raised demand for silver in India, where companies are handing out silver coins as part of employee bonus packages and jewelry stores promote silver as an affordable alternative to gold.

 

Weaknesses

• With gold prices up significantly, gold majors are looking for acquisitions to significantly boost their ounces of reserves but are finding the affordable pickings slim and competition fierce. Soaring gold prices have put company valuations at record levels, making deals, especially those in the multimillion-ounce club, very costly endeavors.
• Dundee Securities mining analyst Paul Burchell said: “It’s getting more and more difficult for these larger companies to add new projects that are significant. It doesn't mean that there aren’t valid projects out there. It’s just that there’s a lot of competition for the few of them that are there.” Also Morningstar analyst Ming Tang Varner noted “I think companies are very cautious when they are looking at properties because it’s a very delicate dance that these gold companies are doing.”
• In hindsight, overzealous acquisitions have been a tremendous challenge for management to retain a high level of credibility with investors.

 

Opportunities

• The Canadian province of Quebec plans to develop its huge frozen northern reaches into a powerhouse of mining and renewable energy, targeting $83 billion of private and public investment. Quebec's 25-year “Plan Nord,” launched on Monday, envisages funding for infrastructure, mines and the development of renewable energy, taking advantage of an improving investment climate as the Earth warms and polar ice melts. Plan Nord covers an area roughly the size of South Africa.
• The sparsely populated region of Quebec has 11 mining projects in development now and over $8 billion (in Canadian dollars) in mining investment. The province, which topped a Fraser Institute survey of best mining districts from 2007 to 2009, slipped to third after it raised mining taxes unexpectedly last spring. It is now in fourth place on uncertainty over mining legislation.
• UBS restated their outlook on gold by saying, “Our average gold price for the course of this year is $1,500, so it is just a tiny bit below where gold is trading right now, so I think a gold price above $1,600 this year is very, very possible.” Edel Tully, UBS precious metals analyst, said one of the main reasons for this is the slate of continued macroeconomic concerns facing countries around the globe. Inflation concerns in China, which Tully acknowledges is a very important market for gold, have further boosted demand for the metal. “Whenever I go to China, the actual view on inflation appears to be much higher on the ground than what the official statistics would reveal. So, I think the Chinese population will remain friendly toward gold so long, really, as inflation is a problem.”

 

Threats

• The South African mining industry is facing “a very serious” threat from silicosis claims that could result in implied damages of $100 billion, says RBC Capital Markets equity research unit. The potential silicosis claim is 100 times larger than the claims in an asbestos-related case in 2003 which saw British company Cape paying $5 million to 7,500 workers. Former South African mining company Gencor is establishing a $37.5 million trust fund for its former workers. “The risk of this becoming something very serious should not be ignored,” the analysts said. They added that the risk applies mainly to South Africa’s hard-rock gold and platinum mines.
• China, the world’s largest user of natural resources, is pulling back from commodities and energy acquisitions as the rest of the world pursues deals at the fastest pace since the start of the financial crisis. China’s companies have spent $14.2 billion on acquisitions this year, down 30 percent from the same period last year, according to data compiled by Bloomberg. Globally, the value of takeovers in the industry is $176 billion, the fastest pace since 2007.
• “Indonesia’s mining industry is undergoing a regulatory overhaul that is likely to weaken the operating and financial performance of domestic mining companies,” Standard & Poor's warned this week. “For example, the provision on domestic market obligations for coal could increase the price of coal and pressure the financial performance of coal-based electricity generators across Asia,” the analysts suggested. “Likewise a ban of metal and mineral ore exports could also affect the operations of foreign smelters that rely on ores from Indonesia.”
• © MIS

Copper Review

Base metal prices ended higher with gains of anywhere between half to one percent on the back of strong equity markets. Most of the Asian and European equity markets closed on a strong note. Trade surplus from China also came in better expected thereby providing further support to prices. Dollar index ended largely flat at 74.7. US equity markets ended higher by 0.60 percent thereby marking third consecutive day of gains. Asian equity markets are trading mixed currently with negative bias. Chinese CPI in the month of April came in at 5.3 percent. This though indicating slight moderation from previous reading of 5.4 percent is still above the comfort rate of 4 percent. Industrial production numbers also indicated moderation in growth. This is keeping the Chinese equity markets under pressure. In the morning session on LME, base metal prices are trading largely flat. On the fundamental front, preliminary data from China indicated that the nations copper imports amounted to 262,676 tonnes in April. This is lower by 40 percent (YoY) and down 14 percent from March. On the economic data front, trade deficit in US is expected to widen while the monthly budget balance might indicate improvement. Overall, base metal prices are expected to remain under pressure given the weak copper import numbers and higher than expected CPI.

© MIS

REVIEW: Oil prices continue the bullish trend for second day of the week on account of higher equity market and expected higher demand from China. Global equity market traded on positive trend on yesterday. US equity market closes with gain of more than one to two percent. Trade balance of China increased in the month of April to $11.42B, which includes higher import of crude oil indicating higher demand of crude oil. Import price index increased by 2.2 % whereas Wholesale inventories increased by 1.1%.

OUTLOOK: Currently, WTI Light sweet crude oil futures are trading above $103.75/ bbl with a marginal fall in Globex electronic platform. Most of the Asian equities are trading on higher side by tracking higher closing of Yesterday’s equity market, which may support oil prices. On the other side, Mississippi river flooding may continue further which is threatening refiners. Pipeline of Exxon mobile carries crude oil from St. James Louisiana delivery centre which may have to close down due to supply disruption threat. As per API, crude oil inventory have increased in Cushing and Oklahoma centre, whereas fall in gasoline stocks is seen. However, actual DOE inventory report must eye in the evening session. On economic front, increasing CPI and PPI of China have created the concern of inflation which may have some negative impact on crude oil price. US budget deficit is likely to decline which is positive for the economy, hence for oil prices. Trade deficit of US may widen further which may pressurize oil prices. So, we may expect oil prices to trade on positive side initially on account of higher equity market and under threat of flood. In the evening session, US crude oil inventory data and key data from US must eye which may change the price movement.

Trading Recommendation: Buy at 103.50 TP 104.80 SL 101.80

 

© MIS

GOld Review

Gold extended its advancement as the resurgence of Europe’s sovereign debt crisis drove up demand for precious metals as havens investment. Spot gold settled 0.17% up from the prior closing and the same has been observed in the futures in both Comex.

 The dollar index continued to descent to settle 0.24% down from the prior closing at 74.559 which led the metal to grow

 The US wholesale inventory piled up raising the concern about reduced demand and an increasing import price index is an indication to a sliding dollar index

 Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded further slid to1201.95 tons from 1205.38 tons from as on 10thMay, after sell offs have seen in the last week

 The gold-silver ratio again slid back to 39.41 from 40.50 after silver rebounded fast than gold

OUTLOOK:

At the Globex platform Gold is seen trading $1521.20, up by $4.30 from the previous closing. The Asian equities are trading flat, mostly at a positive note. Dollar index at present is slightly up by 0.06%. In the morning, China’s consumer prices rose 5.3% in April from a year earlier after which they have said to maintain a prudent monetary policy. This higher than expected inflation readings might result in some medium term support for precious metals. With the resurfacing of Euro zone sovereign debt concerns, we expect to see continued appetite for precious metals. However, the mostly waited US budget statement will be announced today which is expected to reduce its deficit amount than the prior, may give the dollar a boost. Also the Bank of England’s inflation report is yet to release and is likely to determine the Euro’s fate after the currency got weaker on Greece’s news. So, in the evening it is expected that the dollar index may get stronger and will put some pressure on the metal. Overall gold is likely to trade at a higher side in the early session but gradually may release some tint as and when dollar index revives to gain more strength.

© MIS

GOLD Review

Spot gold rebounded from the weekly slump and gained on
renewed demand for precious metals as alternative assets. Spot
gold settled 1.21% up from the prior at $1513.75. The same has
been observed in the futures in the Comex and Mcx division

 The dollar index settled yesterday by losing 0.21%
at 74.68, recovering a bit after the Euro fell on the
news of Greece’s credit rating cut by S&P

 German trade balance came far better than
expected as exports outpaced imports and hence
current account also made surplus more than
expected

 Holdings in the SPDR Gold Trust, the world's
largest gold-backed exchange-traded further slid
to1201.95 tons from 1205.38 tons from  as on 9th
May, after sell offs have seen in the last week

 The gold-silver ratio again slid back to 40.50 from 42.27 after silver rebounded fast than gold

OUTLOOK:
At the Globex platform Gold is seen trading $1510.20, up by $7
from the previous closing. The Asian equities are trading flat,
mostly at a positive note. Japan’s NIKKEI fell after a credit
rating down gradation on Greece which pushed the Yen higher
as confidence wanes about the strength of the recovery in the
global economy. Dollar index at present is slightly positive by 0.01%.
The Euro fell against after S&P cut Greece’s credit
rating from B to BB-, renewing concern that the region’s debt
crisis is escalating. Greece today is set to sell 1.25 billion Euros
in an auction of 182-day bills which might make the currency
further weaken against the dollar. A further credit rating down
gradation is likely to take place for Greece as the risk of default
rises, would make the country lowest rated country in Europe.
So, concern over a further rating cut may lead the dollar index
to a stronger note through out the day. From the economic data
front the US import price index is likely to slash a bit although
whole sale inventory may pile up. So, these may impact at a mix.
Overall gold is likely to trade at a higher side in the early
session but gradually may come down as and when dollar index
revives to gain more strength.

REVIEW: Crude oil futures prices plunged by 15% on last week, the highest fall since October 2008. However June contract have fallen near 15% on NYMEX platform, after making low of $95.18/bbl. On the other side, ICE Brent crude oil futures prices have fallen more than 13% and settled at $125.89 on weekly basis. OUTLOOK: Currently WTI Light sweet crude oil futures are trading above $98.80/ bbl by gaining more than 1.8 percent in Globex electronic platform. Oil prices have regained from the highest weekly fall since last one and half year of time. Most of the Asian equities indices are trading on higher side, which is also supporting oil prices. Dollar index is down near 0.50 percent at 74.54 levels. Thus, weaker dollar index is also supporting oil prices. German trade balance is expected to increase which is positive for the economy. So, we are expecting oil prices to trade on higher side supported by above factors. TRADING RECOMMENDATION: Buy at 98.30 TP 100.20 SL 97.30

Silver headed for the steepest weekly decline as an increase in margin requirements prompted investors to unwind their speculative positions. Silver futures collapsed brutally near about 28% last week  Prices of silver collapsed for the fourth consecutive day, falling a brutal 7.99% to $36.23.  Global equities also recovered a bit on the last session after the US has added more jobs than expected  The dollar index gained by 0.87% in the last session to settle the week at 74.84  The I-share silver holdings further slid to 10253.75 tons from 10387.26 tons as on 6th May after huge sell offs in the last week OUTLOOK: At the Globex platform Silver is seen trading up by $0.81 at $36.095 and the dollar index at present is showing some feebleness against the majors. The Asian equities are trading flat, almost at a positive note As discussed in gold’s outlook, the gain in euro on the prospect that the region’s debt won’t keep the ECB from raising interest rate, will be helping the dollar index to remain under stress. This on the other hand is a supportive factor for the metal. The economic releases from the German and Euro zone are also expected to be fair for the metal. Overall it is likely to be a good day ahead for the silver and hence is recommended to be long for the metal. TRADING RECOMMENDATION: Buy at 3550 TP 3720 SL 3480

Despite last week’s precipitous fall in commodities, last day of the week had seen some bounce back. Sentiments have certainly shifted but fundamentals behind the prices and prospects of precious metals have not changed yet. Spot gold recovered the last day to settle 1.44% higher than the prior to settle at $1495.60  The dollar index settled the week by gaining 0.87% last day as the Euro depreciated largely against the dollar  American employers added more jobs than forecast in April and payrolls also expanded  Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded further slid to1205.38 tons from 1208.41 tons from as on 6th May, after sell offs have seen in the last week  The gold-silver ratio improved to 42.27 after silver capped the biggest weekly loss of the year as compared to gold OUTLOOK: At the Globex platform Gold is seen trading $1498.40, up by $6.80 from the previous closing. The Asian equities are trading flat, mostly at a positive note. Dollar index at present is slightly down by 0.46% In Sirya and Yemen security forces beat back protests and fired on demonstrators which may again fuel the haven demand. Japan’s government has requested to shut down a nuclear reactor located close to an earth quake fault line which may hurt the economy. The Euro gained against the dollar after three days on prospects that the region’s debt crisis won’t keep the ECB from increasing interest rate further. The common currency gained as European officials may require Greece to provide collateral for aid. From the economic data front, German current account balance is likely to improve as imports are expected to come down at a larger extent than the exports. From the Euro zone, consumer confidence is also likely to improve which are beneficial for the metals to move Overall gold is likely to trade at a higher side for the day and hence is recommended to be on the long side for the metal. Trading recommendation: Buy at 1490 TP 1508 SL 1475

Gold Market Cheat Sheet (May 9, 2011) On Friday, spot gold closed at $1,495.15, down $68.55 per ounce, or 4.38 percent for the week. Gold equities, as measured by the Philadelphia Gold & Silver Index, fell 9.01 percent. The U.S. Trade-Weighted Dollar Index rallied 2.58 percent for the week. Strengths Mexico massively ramped up its gold reserves in the first quarter of this year, buying over $4 billion of bullion as emerging economies move away from the ailing U.S. dollar, which has dipped to a two and a half year low. This was the third biggest off-market purchase of gold by any country over the past decade, and Mexico’s reserves went from just 6.84 tons at the end of January to 100.15 tons, or 3.22 million ounces, by the end of March. The International Monetary Fund also reported that Russia and Thailand purchased 18.8 and 9.3 tons to bring their respective totals to 811.1 and 108.9. The gold purchases by Mexico, Russia, and Thailand are consistent with a change that occurred in 2010, in which central banks became net buyers of gold rather than net sellers for the first time in nearly two decades. This change in trend should be viewed as a positive sign for the gold price. Weaknesses Some prominent hedge funds have started selling their gold and silver positions in recent days “signaling the sector’s rally may be entering more dangerous territory.” One hedge fund manager thinks the chance of deflation has been reduced, lessening the need for large precious metals positions. The huge volume in silver ETFs may suggest that some investors are receiving margin calls. South Africa’s powerful National Union of Mineworkers (NUM) will hold a one-day protest over safety in the North-West province, which could affect some mining operations in the area. While some operations may be affected by the protest, the nationwide event might shut down the mines. Miners in Africa’s biggest economy have been hit in the past by a raft of strikes over wages, which dented output after unions demanded above-inflation increases, which employers said they could not afford. German politicians don’t want to give Portugal its bailout cash until it sells its own assets. Norbert Barthle, who is a member of Angela Merkel’s party and budget speaker, as well as his Social Democrat rival, Carsten Schneider, have called for Portugal to think about selling its gold. Frank Schäffler, a member of the FDP party in coalition government, is more adamant, saying that Portugal should have to “sell their silverware,” including gold, before they receive a bailout. Opportunities Ghana’s annual gold output in 2011 should be higher than last year’s run of about three million ounces, although rising electricity costs could crimp output in the future. The country has benefited from record gold prices, with output rising 1 percent in 2010 to 2.97 million ounces. Many predict China will introduce further monetary tightening pressures in an attempt to curb inflation. India’s central bank raised key interest rates this week, the ninth hike in just over a year. Europe dashed expectations that another interest rate hike was imminent. Globally this furthers gold’s appeal versus owning the debt of counties that can’t afford to pay interest on their borrowings. In the short-term, this could lend support to the dollar as debt markets reposition. Threats The CME Group raised the silver margin requirement four times in one week and this not only sent silver prices down by more than 20 percent this week but also spilled over to liquidations in other commodities. Not until Friday did the markets see a positive close in silver or gold. Peru’s next president, to be elected on June 5, will inherit hundreds of social conflicts that threaten to paralyze mining and energy investments in one of the world’s fastest-growing economies. Some $40 billion in mostly foreign investment has been lined up for Peruvian projects over the next decade, equal to about one third of Peru’s gross domestic product. But much of that could be rerouted if the government fails to defuse strident opposition in rural areas to the extractive projects that local residents say will cause pollution, use up scarce water supplies and fail to lift them from poverty. South Africa’s big three gold miners will report drops in production in the first three months of 2011 but earnings will be lifted for at least two of the companies because of other factors. Production will be down as seasonal factors such as higher power supply tariffs bite into output, though some analysts say things seem sluggish based on normal March-quarter standards.

Gold Market Cheat Sheet                                                                                                                                         (April 18, 2011)

For the week, spot gold closed at $1,486.70, up $11.77 per ounce, or 0.80 percent for the week. However, gold equities, as measured by the Philadelphia Gold & Silver Index, fell 4.47 percent. The U.S. Trade-Weighted Dollar Index declined by 0.29 percent for the week.

Strengths

Gold prices surged to new all-time highs, touching $1,486 per ounce. The gold price turned higher after news from China that its consumer prices surged 5.4 percent compare to the previous year. The hotter than expected inflation data, combined with the announcement that China’s foreign exchange reserves rose above $3 trillion, led investors to increase their exposure to gold.

Ian McAvity, author of Deliberations on World Markets, predicts that gold is likely to fall the least if the global economy slows down in the second half of the year which he sees as a very real possibility. Part of the reason behind gold's resilience in the face of a very high likelihood of further problems in the west is the monetary role that it has played and, is increasingly playing again.

The U.S. Mint said it will accept orders for its 2011 five-ounce silver bullion coin beginning April 25 with the coins honoring the Gettysburg National Military Park in Pennsylvania, as well as the Glacier National Park in Montana. Silver coin values have soared this year as silver prices have hit 30 year highs.

Weaknesses

Reports that Burkina Faso’s president may have fled the presidential palace following a revolt by the presidential guard sent several West African gold stocks lower as investors feared a unclear change in the power structure within the country.

South Africa, the top gold producer for more than a century until 2007, has now slipped to fifth position, according to data compiled by Gold Fields Mineral Services (GFMS). China was the number one gold producer in 2010, followed by Australia, the US and then Russia, which just edged past South Africa, the group said in its 'Gold Survey 2011' report.

Members of the Nevada Exploration Coalition and the Nevada Mineral Resources Alliance are still steaming over a Nevada Mining Association deal with legislators during a special legislative session last year, which raised the state's claims fee structure. The agreement raised $27.5 million in more revenue for the state, which the exploration companies feel placed them at a costs disadvantage relative to producing mines in the state.

Opportunities

Simon Hunt, founder of Simon Hunt Strategic Services, recently noted 2012 will be an important year for markets and the global economy. A new round of money printing by the Fed will unleash another bout of commodity buying after a pullback seen in the summer of 2011. Rises could be pretty parabolic with the U.S. dollar tumbling.

GFMS released their annual gold survey for 2011. They reiterated their positive outlook for gold and maintained their forecast that gold could trade above $1500 per ounce and reach $1600 ounce by the end of 2011. GFMS believes gold will rise because there is little chance of a radical departure from loose monetary policies in developed nations, sovereign debt troubles in Europe will continue, inflation concerns will grow, and physical demand , particularly in China and India, should support investment demand.

Standard & Poor's expects gold prices to remain high in the next year because of economic challenges in Europe, increasing global inflation and potential economic fallout from the Japanese earthquake. Also, Standard & Poor's forecast that most U.S. and Canadian metals and mining companies will improve their operating performance in the first half of this year, "reflecting a rise in average prices and strengthened end-market demand."

Threats

Bolivian President Evo Morales is considering issuing a decree that would rescind existing contracts between foreign mining companies and the state run mining agency, effectively expropriating the mining and exploration assets. The International Monetary Fund (IMF) warned the U.S. that it currently lacks a credible strategy to stabilize its debt. The IMF said the U.S. was the only advanced economy to be increasing its underlying budget deficit in 2011 at a time when the economy wasn’t growing fast enough to bring down borrowing. Inflation would be around 10 percent if the same measurement policies were used as during the 1970’s, and inflation today would be near the same levels as when Volcker was Fed chairman and hiked rates. If you used the reporting methodologies in place before 1980, inflation would hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter.

©Morningstar Investment

 

SILVER Spot is 40.31$ Trading Startegy : 1. Buy SILVER at 40.50$ Target 40.70$. 2. Sell SILVER at 40.08$ Target 39.88$ @MIS

SPDR Gold Trust holdings fall to 1,301.742 tonnes The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P) said its holdings fell to 1,301.742 tonnes by July 26 from 1,302.046 on July 22. The holdings hit a record at 1,320.436 tonnes on June 29. For details on the gold holdings of the ETF listed in New York and co-listed on other exchanges, Following are changes in SPDR holdings; Date: Total tonnes July 26 1,301.742 July 22 1,302.046 July 20 1,308.128 July 15 1,314.211 July 12 1,314.819 July 9 1,314.515 July 8 1,316.036 July 6 1,316.481 July 2 1,318.915 July 1 1,319.219 June 29 1,320.436 June 24 1,316,177 June 22 1,313,135 June 17 1,307.963 June 10 1,306.137 June 8 1,289.530 June 4 1,286.359 June 3 1,289.839 June 2 1,268.539 June 1 1,268.234 May 27 1,267.930 May 26 1,267.626 May 25 1,267.322 May 24 1,236.889 May 19 1,220.152 May 17 1,217.108 May 14 1,214.065 May 12 1,209.499 May 10 1,192.150 May 7 1,188.498 May 6 1,185.787 May 5 1,166.002

Banks, Officials Find Common Ground on Rules at Davos Meeting

Policy makers and bankers called a truce after a week of mutual recrimination at the World Economic Forum annual meeting, saying they agreed on the need for global financial regulations.

“On many aspects, we found common ground,” Deutsche Bank AG Chief Executive Officer Josef Ackermann said in an interview after a private session of bankers and regulators in Davos, Switzerland, yesterday. “There was better dialogue between business leaders, political and regulatory leaders than ever before.”

The meeting came after policy makers pushed back at bankers who had warned of excessive and uncoordinated attempts to toughen regulation following unprecedented government bailouts of the financial industry. Executives from Bank of America Corp., HSBC Holdings Plc, Standard Chartered Plc and JPMorgan Chase & Co. were among those in attendance.

“There are very important issues to which there needs to be input from the politicians, from the regulators, from the central bankers, from the private bankers and from the private sector,” Adair Turner, chairman of the U.K.’s Financial Services Authority, said after the meeting. “The purpose was to discuss the full range of issues.”

One of the topics was how to define whether an institution is “too big to fail,” meaning that its collapse would harm the entire financial system, according toJohn Sununu, a former U.S. senator who’s on the board of managers of Bank of New York Mellon Corp.’s ConvergEx Holdings LLC. He attended the meeting.

‘Systemic Problems’

“Some people think you need to try, and others think you need to understand that small institutions with certain interconnectedness can cause systemic problems just as much as large institutions,” Sununu said. “Larger institutions can sometimes use their size to effectively diversify their risk.”

“We had good discussions and agreement among all the participants,” saidBrian Moynihan, the CEO of Bank of America, the largest U.S. bank. “There has to be a lot of discussion to make sure that we do the things we need to do in terms of reform.”

HSBC Chairman Stephen Green, Standard Chartered CEO Peter Sands and JPMorgan’s international chairman, Jacob Frenkel, also were at the meeting, along with White House economic adviser Larry Summers, U.K. Chancellor of the Exchequer Alistair Darling and French Finance Minister Christine Lagarde.

Central bankers at the gathering included Zhu Min, the deputy governor of the People’s Bank of China, Italy’s Mario Draghi, France’s Christian Noyer, Mexico’s Agustin Carstens and Switzerland’s Philipp Hildebrand.

Leaving Behind Rhetoric

“It was the first time I’ve seen both sides go beyond the rhetoric,” Duncan Niederauer, CEO of New York Stock Exchange owner NYSE Euronext, said after the meeting. “There were practical suggestions being discussed. It’s now everyone’s responsibility to produce some tangible results.”

Terry Smith, CEO of London-based brokerage Tullett Prebon Plc, said one topic was contingent capital, or debt instruments that can convert into equity.

“I don’t know of any other opportunity that the high-level ministerial and regulatory officials there have to interact with such a broad group of participants from the private sector,” Sununu said. “There was a very direct, frank exchange because it is a private session.”

U.S. President Barack Obama’s plans to rein in banks and impose a levy on those with liabilities of more then $50 billion went beyond the blueprint laid out by the Group of 20 nations last year. To avoid a repeat of the worst financial crisis since the Great Depression, G-20 leaders said banks should tie bonuses to long-term performance and increase the quantity and quality of capital they hold.

Trading Restrictions

Financiers, surprised by Obama’s embrace of a plan to restrict proprietary trading and investing at banks, have argued in Davos that such efforts undermine global cooperation and could jeopardize economic recovery. Officials, including Darling and U.S. Representative Barney Frank, who chairs the House Financial Services Committee, countered that banks shouldn’t argue against reforms.

“The big banks, if they think they’re in a position to stop the regulation, they’re deluding themselves,” Frank said before the meeting. “They have no political support.”

Afterwards, Frank said banks “got the message” on the need for more regulation. He said there was “general agreement” on the need for global coordination.

“A large part of the discussion was with other regulators about how we can coordinate,” Frank said after the meeting.

After that, Frank left to meet with Turner from the U.K.’s Financial Services Authority.

 

How to effectively use stops to lock in profits

 

This little trading tip can and will make a difference in your trading results in 2010.

Stops are enormously important part of a traders arsenal of trading tools. Some traders confirm that stops are the most important part of their trading armour.

So here are three ways to use stops to protect your capital and lock in profits from a trade. These three money management techniques can be used in stock, futures and forex trading.

The important rule is that you do use a real stop in the marketplace. A friend of mine joked with me that that he had never seen a “mental stop” filled electronically or in the pits.

If the market is good your stop will not be hit. If the market is bad or changing direction then you’ll want to be out of it anyway. That is why stops are so crucial to trading success.

Here are the three most commonly used types of stops. Which one do you use?

(1) Dollar stop.
(2) Percentage stop.
(3) Chart stop.

If you chose (1) you’d be correct, but, you would also be correct if you had chosen 2 or 3. All three are money management stops and are used to either lock in profits or protect capital.

 

1) A dollar stop, is when you set a predetermined dollar amount to a trade. Let’s say you want to risk $500 on a grain trade or $750 on a stock trade. Once you get your fill back from your broker or electronically online you simply figure from your fill price where to put your stop.

Pros: Easy to implement and use.
Cons: Can place stops too close in a volatile market

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2) Percentage stop, is a very simple way for you to place a stop on a position. Here’s how it works. Let’s say your trading account is 100,000 dollars and let’s say you only want to risk 1% of your total portfolio on any one trade. You simply take a $1,000 risk which represents 1% of your over all portfolio. This can help enormously in avoiding taking BIG LOSSES. A 1% loss is easy to absorb. A 30% or 40% loss in a trade is an account killer, and should be avoided at all costs.

Pros: Easy to implement and use.
Cons: Can place stops too close.

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3) Chart stop, a chart stop is where you place a stop that is either above or below a crucial chart level. The good thing about a chart stop is that this level is often used by other traders. That can both be a good thing and a bad thing, here’s why. Using either one of our first two examples only you know where the stop is. With a chart stop, a great many traders/brokers know that is where the stops are. In an illiquid market this type of stop should not be used, as many times brokers gun for the stops. In a highly liquid and active market this is a good stop to use.

Pros: Very easy to implement and use.
Cons: Can’t be used in thinly traded markets.

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So there you have it. Now you have all three ways to manage your money and protect your profits in 2010.

Use stops…let them work for you.

 

Looking Ahead: January 18 through January 22, 2010

Central Bank activities
January 19	Canada	Bank of Canada Policy Announcement
January 20	UK	Bank of England MPC Minutes
January 21	Canada	Bank of Canada Monetary Policy Report
The following indicators will be released this week...
Europe
January 18	Italy	Merchandise Trade Balance (November)
January 19	Germany	ZEW Business Survey (January)
	UK	Consumer Price Index (December)
January 20	Germany	Producer Price Index (December)
	UK	Labour Market Statistics (December)
January 22	UK	Retail Sales (December)
Asia/Pacific
January 20	Japan	Tertiary Sector Activity Index (November)
Americas
January 20	Canada	Consumer Price Index (December)
		Manufacturing Sales (November)

Global Stock Market Recap

		2009	2010		% Change
	Index	Dec 31	Jan 8	Jan 15	Week	2010
Asia
Australia	All Ordinaries	4882.7	4942.2	4929.5	-0.3%	1.0%
Japan	Nikkei 225	10546.4	10798.3	10982.1	1.7%	4.1%
	Topix	907.6	941.3	966.4	2.7%	6.5%
Hong Kong	Hang Seng	21872.5	22296.8	21654.2	-2.9%	-1.0%
S. Korea	Kospi	1682.8	1695.3	1701.8	0.4%	1.1%
Singapore	STI	2897.6	2922.8	2908.4	-0.5%	0.4%
China	Shanghai Composite	3277.1	3196.0	3224.2	0.9%	-1.6%
India	Sensex 30	17464.8	17540.3	17554.3	0.1%	0.5%
Indonesia	Jakarta Composite	2534.4	2614.4	2647.1	1.3%	4.4%
Malaysia	KLCI	1272.8	1293.0	1298.6	0.4%	2.0%
Philippines	PSEi	3052.7	3077.2	3118.5	1.3%	2.2%
Taiwan	Taiex	8188.1	8280.9	8356.9	0.9%	2.1%
Thailand	SET	734.5	739.0	746.5	1.0%	1.6%
Europe
UK	FTSE 100	5412.9	5534.2	5455.4	-1.4%	0.8%
France	CAC	3936.3	4045.1	3954.4	-2.2%	0.5%
Germany	XETRA DAX	5957.4	6037.6	5876.0	-2.7%	-1.4%
North America
United States	Dow	10428.1	10618.2	10609.7	-0.1%	1.7%
	NASDAQ	2269.2	2317.2	2288.0	-1.3%	0.8%
	S&P 500	1115.1	1145.0	1136.0	-0.8%	1.9%
Canada	S&P/TSX Comp.	11746.1	11953.8	11685.4	-2.2%	-0.5%
Mexico	Bolsa	32120.5	32892.0	32262.3	-1.9%	0.4%

 

 

In Part 1, I replied to the issues raised by John Exter a generation ago:

1. The coming rush for liquidity
2. Gold as the most liquid asset
3. Currency and T-bills will do almost as well as gold
4. Gold as money, despite a commission
5. Asset prices influence consumer prices

 

In Part 2, I went on to deal with the myth of price deflation in Japan. First, there has been no monetary deflation. On the contrary, there has been mild monetary inflation (M2). Second, there has been price stability in Japan, despite massive declines in the real estate market and the stock market after 1989.

In response, I received a letter from Mike Rogers, a contributor to Lew Rockwell's site. He has lived in Japan for decades. He is the author of a book, Schizophrenic in Japan. Here is what he wrote.

I read your article. You are absolutely correct. There is no deflation in Japan. The average Joe-Blow on the street uses what we in Japan call the "Bento-index." Bento is those boxed lunches that Japanese people pack and eat. The price of a good cheap bento in 1996: about Y500–Y700 yen (maybe you can find a Y450 place – I knew of one. It was good too!) The price of a good cheap bento in 2010: about Y500–Y700 yen (may be you can find a Y450 place – I know of one. I ate there last Friday. It was good too!)

He added this piece of evidence that I have seen nowhere else. There has been a change of consumer buying habits in Japan. Japanese consumers have become price-sensitive.

This is a major change. For decades, the Japanese government restricted entry of American firms, such as Wal-Mart, which are highly price-competitive. Price competition was regarded as a threat to traditional Japanese business standards. This attitude made possible political and social controls favoring wage stability, promotion by seniority, and the practice of lifetime employment. In short, it made possible government laws that in turn made Japanese corporations more like government bureaucracies.

When price competition becomes prominent, consumer authority has more clout in the retail markets. This has forced changes in Japanese corporate policies. This pressure will continue to work its way up the corporate chain of command.

This brings me to Part 3: currency's role in the inflation vs. deflation debate.

CURRENCY'S ROLE

A piece of paper money that is not a legal warehouse receipt for a specific quantity and quality of gold or silver is fiat money. All paper money systems today are fiat money systems.

The question is: How is a paper dollar issued? It has these words on it: "Federal Reserve Note." This tells us where the money came from.

Paper dollars are printed by the Treasury Department's Bureau of Engraving and Printing. The Treasury runs the BEP. You can see this on the BEP's site.

What is not generally known is that the Treasury does not issue currency directly, on its own authority. It acts as an agent of the Federal Reserve System. We read in the Federal Reserve's FAQ list on currency:

This is crucially important information for understanding how currency affects the money supply.

There is relatively little paper money circulating inside the United States. It is well known that paper money is sent back home by immigrants. This money is withdrawn from circulation here. Estimates on the percentage of the total U.S. currency supply held outside the United States range from 50% to 70%. The Federal Reserve and the Treasury estimated that in 2005, this was about 60%. (http://GaryNorth.com/snip/895.htm)

With this in mind, consider the words of a booklet produced in the 1970s by the Federal Reserve Bank of Chicago, Modern Money Mechanics. It is no longer in print, but it is on the Web. The booklet begins its discussion of currency with a widely shared fallacy.

Yet relatively few transactions take place through the use of currency. That was true 30 years ago. It is far more true today, because of the use of credit cards. When the booklet was written, customers used checks.

The booklet then describes what happens to the total money supply when currency is withdrawn from a bank by a customer.

The national money supply does not change immediately. "The public now has the same volume of money as before, except that more is in the form of currency and less is in the form of transaction deposits." Things do not remain constant, however. The withdrawal reverses the fractional reserve process.

This means that the bank must call in loans. It has to get its new, lower reserves balanced by a reduction in its assets: loans on its books. Or maybe it refuses to make new loans as old loans are paid off. It may have to borrow money in the federal funds market until it can reduce its loans.

This means that the withdrawal of currency is deflationary. This usually does not matter, because the person with the currency spends it at a business establishment. The business then deposits the currency at the end of the day. As the booklet says, "When Currency Returns to Banks, Reserves Rise."

The money supply then increases: "Since only $10 must be held against the new $100 in deposits, $90 is excess reserves and can give rise to $900 of additional deposits" (p. 17).

So, if there were a run on the banks for currency, this would be deflationary. This was why the U.S. government created the Federal Deposit Insurance Corporation (FDIC) in 1934. It created a similar agency for savings & loan associations. Ever since 1934, there has been no threat to the total money supply from currency withdrawals. The Federal Reserve can use open market operations to offset any decline in the money supply. It can buy assets. As Modern Money Mechanics says,

To avoid multiple contraction or expansion of deposit money merely because the public wishes to change the composition of its money holdings, the effects of changes in the public's currency holdings on bank reserves normally are offset by System open market operations.

WHY ROBERT PRECHTER IS WRONG

Robert Prechter is the most widely known promoter of the Elliott Wave theory. He is a deflationist. He has been consistent, unlike most deflationists, who promote gold ownership. In 2004, he said that gold at $450 would be the top.

He also said this:

Why owning gold would be better than owning paper money, which the U.S. government has never outlawed, he did not say. Gold falls in price in price deflation. Paper currency appreciates, income tax-free: more real wealth, no taxes.

On December 18, 2009, he wrote the following article: "The Fed's Presumed Inflation Since 2008 Is Mostly a Mirage." In this article, he did not mention excess reserves deposited at the FED's regional banks by commercial banks. These reserves came close to offsetting the increase in the FED's holdings of assets in its monetary base, which was the result of the bailouts in the fall of 2008. Instead, he said that the FED has offset its own policy. He did not say how this was possible.

This is not true. The increase in its assets still is listed in its balance sheet.

Prechter continued:

This is also not true. The FED does not "retire money," as if money were some aging race horse put out to pasture. It sells assets, which destroys money in a fractional reserve banking system. It has not done this, as its balance sheet indicates.

Prechter then brings up the issue of currency.

This is irrelevant. The United States operates in terms of debt money created by its purchases of debt. Very little currency circulates inside the United States. When this increases, the money supply falls, due to the reversal of the fractional reserve process.

What does he mean, "swaps money"? The FED swapped assets at face value: liquid Treasury assets for illiquid toxic assets. That did not change the money supply because money was not involved. When the FED swaps money for a previously issued debt, it must create the money used to swap. It does not have "money" in reserve.

By the way, the phrase "net change in the amount of dollar-based 'purchasing power'" is meaningless. The issue is this: Does the monetary base increase when the FED "swaps money for previously existing debt"? The answer is yes. To deny this is to deny both money and banking practice and theory.

This is incoherent. This is why you cannot follow it. It is not your fault.

Investors are not money holders unless they hold currency or a liquid account in a bank. The total of these is M1. There was no increase in bank reserves held by the public. That is because of excess reserves. So, this leaves currency. There was not $1.3 trillion in currency to hand over to them. Currency is held by the public or in bank vaults as reserves. Conclusion: there was no offsetting swap by the FED of money for previously existing debt.

Prechter went on:

This is also incoherent. The FED cannot "retire debt" and thereby "create money." The only way that it can create money directly is to buy debt. Indirectly, it can create money by lowering the legal reserve requirement or by imposing a fee on excess reserves. So, the only two ways for the FED to offset its own actions in 2008 are these: (1) increase legal reserve requirements; (2) sell all of these assets. It has done neither.

The economic effect of the commercial banks' voluntary increase in excess reserves is the same as an increase in the legal reserves. But the banks determined this; the FED did not.

Prechter is clearly confused about how the FED works or what the FED has done. Yet he has been publishing ever since 1979.

He then compounds his error.

Monetarists and Austrians and all other schools of economic opinion say that banks can legally lend any reserves made available by central bank purchases of debt – new debt or previously existing debt. (The word "re-lend" has nothing to do with anything.)

The banks did receive the money spent by the FED when it purchased assets in 2008. Bankers have decided not to lend this money. This stopped the fractional reserve process, just as an increase in the reserve requirement would have stopped it.

The FED has no policy of banks' buying mortgages. It buys Fannie Mae and Freddie Mac bonds for its own account, but it has remained silent on who banks should or should not lend to. In any case, banks can legally lend to any borrower they choose. Raising the issue of mortgages merely confuses the issue. What issue? The issue of excess reserves: the bankers' fear of buying anything, including T-bills.

Got that? ". . . virtually the only thing banks can use it for is to fund mortgages!" This is not true. The exclamation point makes it even more untrue.

It is very important that people who talk about Federal Reserve policy understand how money and banking work, both in theory and practice. Prechter does not.

CONCLUSION

The forecasters who predict inevitable price deflation, yet do not predict inevitable monetary deflation, do not understand monetarism, or Austrian School economics, or supply-side economics. They are not economists. They are journalists.

There can be monetary deflation. That could result from deliberate FED policy: increased legal reserves or sales of assets. It could result from the collapse of banks, due to the unwillingness of the FED to intervene to provide Congress with the fiat money necessary to fund the FDIC. Neither policy is inevitable.

Copper: The New Precious Metal?

Copper soared this week in London and New York, striking a new 16-month high, and headed for the biggest annual gain (140%) in more than two decades, as traders fretted that possible strikes at Codelco’s giant Chuquicamata mine may disrupt supplies from key producer – Chile. (Fig. 1) 

Defying the Dollar

The dollar remained strong against the yen and other key rivals, but copper took its cue more from the looming strike as well as the better than expected Chicago PMI. As such, the rebound in dollar had little impact on copper (as well as other industrial metals) on confidence about the bull-run into 2010, thanks mostly to speculative buying.

So far, the red metal has more than doubled this year, leading gains in the CRB Index of 19 raw materials, and climbed almost fourfold in the decade as consumption rose in emerging economies including Chindia.

However, despite the improving global economic backdrop, there is far from a consensus on how copper will fare throughout the next 12 months.

2009 - Beyond Reality

Despite its red hot streak in 2009, copper's continuous rally in the face of swelling inventories, a sign of weak consumption, has perplexed many in the market. Stockpiles and production worldwide have steadily increased this year alongside copper prices. (Fig. 2)

The latest data showed London Metals Exchange (LME) stocks rose 6,375 tonnes to above 500,000 tonnes, their highest level since April. Furthermore, the almost 600,000 tonnes in LME and Shanghai exchange warehouses are enough to cover the lost output from strike at Chuquicamata for more than a year.

Copper A La Gold

China's unprecedented $585 billion infrastructure-focused stimulus package and strategic stockpiling efforts have had a major impact on copper prices this year. This is evidenced by the 165% year-over-year surge of China's imports of refined copper to 2.58 million tonnes in the first nine months of 2009.

On that note, the market has looked beyond warehouses. Some even say copper is behaving more like gold rather than strictly a base metal. (Fig. 3)

Of course, a number of other factors such as an anticipated global economic revival, new investment cash, index/fund buying, a weaker U.S. dollar, concern over labor disruptions, have also contributed to overshadow bearish indications of the copper inventory build-up.

Copper Currency Standard?

While India is trying to accumulate gold reserves, China is going one step forward by buying up industrial metals on a scale that appears beyond the usual commercial reasons. Some believe Beijing may have made a strategic decision to stockpile metal as an alternative to US Treasuries and dollar holdings as it safeguards China's industrial revolution, while the West may one day face a supply crisis.

Speculation of an ultimate “Copper Standard” also swirled when in March, 2009, Zhou Xiaochuan, the governor of People’s Bank of China, reportedly called for a world currency modelled on the "Bancor”. The Bancor was to be anchored on 30 commodities - a broader base than the Gold Standard.

Copper “The Red Gold”?

Meanwhile, India’s $1.2 trillion economy expanded 7.9% in the 3rd quarter of 2009, the quickest pace in six quarters. The growth lagged behind only China among the world’s major economies with equally strong demand from auto and power sectors. Copper demand in India is expected to soar by 6% next year, in line with the GDP growth forecast of 7%.

As China and India each is looking to compete and develop their economies together, India could step up their copper buying efforts as well. Then, currency standard or not, copper could become the ultimate red gold as a strategic asset as well as an inflation hedge.

Electric Avenue Will Take It Higher

China is expected to expand 8.5% this year, according to the median estimate of economists surveyed by Bloomberg. Urbanization plus the next industrial revolution led by hybrid cars need plenty of copper. China plans to boost its annual production of electric or hybrid cars to 500,000 in the next two years, up from 2,100 last year. Such a shift would require huge amounts of electrically conductive copper.

Technically Bullish

Copper prices are still off their all-time high of $8,940 on LME notched in July 2008, before the global economic downturn caused markets to tumble.

Most of the technical signals for copper (Fig. 1) are very bullish, albeit a bit over-bought on some indicators like RSI & Bollinger Bands. But since the market just put in a new high, it may continue to become more overbought before corrections may occur.

Right now, it looks like the $7,500 to $7,600 levels should be the next resistance with potential retracement towards $6,500 and $5,800 levels. But if Western recovery continues to disappoint, or remain mixed, as they currently are, then we could see prices revert back to between $5,000/t to $6,000/t in 2010.

Chinese Copper Control

China is the world's largest copper consumer with about 38% market share, and its record levels of copper imports this year has made up for some of the slack demand in the U.S. and Europe. Copper, the hottest among the base metals, is controlled mostly by China as the single largest buyer in the world.

Now, some market participants say imports of refined copper into China may not reflect demand for at least the next six months, or longer, as China digests stocks built this year as a result of record imports.

In addition, China Daily reported on Nov. 12, 2009 that copper stockpiles held in duty-free warehouses in China may be re-exported after surging to as much as 350,000 tonnes from almost none at the start of the year. The country's imports of refined copper may lower to 1.6 million tonnes in 2010. However, the 350,000 tonnes reportedly belong to mostly private speculators and account for a fraction of the total imports.

Clearly, there is some copper supply/demand imbalance in China as the country is not entirely immune to this synchronized global recession. However, with copper price doubling up in 2009 and as China generally prefers buying on the dip, this re-export could also be a strategic tactic of Beijing in an attempt to push down the prices of copper.

2010 – Reality Bites

The general “recovery trade”, predicated primarily on China and other emerging economies infrastructure and industrial growth, lifted copper to overshoot the underlying fundamentals and somewhat disconnected from reality in 2009.

The continued rising copper stocks suggest demand has yet to recover outside China. As we enter 2010 with China taking an expected copper break, the trend for copper prices will increasingly be determined by the shape of economic recovery in the OECD.

The U.S. is the dominant focus for signs of recovery. The EU 15, which accounts for about 20% of global copper consumption, is also important, but the lead will come from the US.

The past 12 months it's been a variety of reasons that lifted all commodities higher. Copper will unlikely have a repeat performance of 2009. The strength in copper may remain at least in the first quarter of 2010, but after that the market will face a lot of uncertainties regarding the Dollar, interest rate, monetary policy, China's copper imports/exports change, and the high inventories as well.

An Economic Precursor

Either as a currency or as a new precious metal, one thing for sure is that copper is a bellwether for the economy because it is mainly used in housing, power generation and other cyclical sectors; therefore, it tends to lead other commodities.

Copper price dynamics over the next year or two could serve as a precursor to see if Asia can shift its focus from an export-oriented model to one that’s more internal consumer-based, as well as a realistic gauge of the global economy.

Trading volumes and data were light this week as markets wound down ahead of the holidays. In the US, the November housing starts and building permits data bounced back from the softness seen in October. The FOMC kept interest rates on hold and slightly sweetened its economic outlook, although this positive note was somewhat offset by the second consecutive increase in weekly jobless claims. The dollar gained steadily for a second week against the euro and the yen as sovereign debt issues continued to roil the Euro Zone, while gold hit a one month low below $1,100 on Thursday. The Senate Banking Committee voted to move the nomination of Fed Chairman Bernanke to a full Senate vote, but not without another round of Bernanke bashing from the usual quarters (even after Time named Bernanke the Man of the Year). In the background, there were dark rumblings: PIMCO's Bill Gross raised his cash holdings to the highest level since the failure of Lehman in Sept 2008, while BoA/Merrill Lynch analysts discussed the possibility of a "Valentine's day massacre" market correction in Q1 that could stem from the end of the Treasury's MBS buying program or other factors, and Meredith Whitney took another swipe at banks, cutting her 2009-2011 EPS targets on JP Morgan, Goldman and Morgan Stanley. US equity markets closed the week out on high volume due to quadruple witching and the quarterly Q&P rebalancing. Equity indices ended mixed for the week, with the DJIA down 1.3%, the Nasdaq rising 1%, and the S&P 500 slipping 0.4%. - Little was expected from the FOMC this week, although ahead of the decision an FT article prompted speculation that, in a nod to the ECB, the Fed might choose to distinguish between liquidity and monetary policy, specifically by raising the discount rate from the existing 0.50% level and simultaneously keeping the Fed Funds target rate steady at 0-0.25%. The discount rate hike never came to fruition, but the FOMC did alter its policy statement to remind markets that most of its special liquidity facilities are scheduled to wind down in Q1 2010. As expected, the Fed funds rate was kept unchanged and the commitment to keeping rates on hold for an "extended period" was reaffirmed, with the economic outlook paragraph slightly more optimistic. - Citigroup has wasted no time in scaring up the capital it needs to pay back the US Treasury. The bank said on Monday that it would sell more than $20B in debt and equity to repay a portion of its TARP funds, and had priced a 5.4B share offering at $3.15/share by Thursday morning. Wells Fargo was right behind Citi, announcing later on Monday that it would repay its entire TARP stake. It priced an offering of 426M shares at $25/share. Note that a number of regional banks have not disclosed any plans for repaying TARP as of yet and have lost ground this week, including SunTrust and Fifth Third Bank. Meredith Whitney was out this week ripping the more solvent end of the industry, cutting her earnings estimates on Goldman Sachs, Morgan Stanley and JP Morgan well below the consensus. - Exxon made a big vote of confidence in the shale gas industry by announcing a $31B deal to acquire major player XTO Energy. The deal could begin a new rush to own North American natural gas assets by major integrated names and may set off significant consolidation in the energy industry. Exxon will buy the firm for $31B in Exxon common stock and also assume $10B in XTO debt. Other leading natural gas names such as Apache, Devon Energy, Anadarko, EOG, Chesapeake and Nabors gained steadily this week on news of the acquisition. The deal is not a sure thing, however. Congress will certainly hold hearings on the move, while scrutiny of the environmental impact of shale drilling technology has been growing. Note that Congress is mulling restrictions on some of these techniques. - Strong earnings from selected tech names helped the NASDAQ outperform the Dow and S&P500 this week. Adobe, Oracle and Research in Motion reported better than expected quarterly results and offered strong forward-looking guidance. Executives from Adobe said demand improved in the quarter, while over at Oracle management said they expect the EU to clear Oracle's acquisition of Sun. RIMM's shipment volume grew more than 20% sequentially and new subscribers were up by more than 12% q/q. Intel took a hit this week when the FTC sued the company for using its dominant market position for a decade to stifle competition and strengthen its monopoly. - Trading in US Treasuries revolved around the FOMC statement this week. The yield curve hit fresh steepening highs post FOMC, with 2 10-year spread getting as wide as 278bps. Yields have traded in a fairly wide range over the course of the week, the benchmark 10y Note ascended though 3.60% for the first time since late summer, only to retreat to more respectable levels holding near 3.5% as the week drew to a close. - The Greek fiscal tragedy took more twists and turns this week. The government announced a number of ambitious debt and deficit reduction targets early on while the finance minister embarked upon a confidence building tour of Europe's major financial centers. But in the absence of any specifics bond markets and rating agencies remain unconvinced. S&P joined Fitch in downgrading the Hellenic Republic to BBB+ on Wednesday. The downgrade leaves Moody's flying solo with an A1 rating two notches above its peers. Should Moody's choose to recalibrate its rating to be closer to the other agencies, Greek government bonds would be ineligible collateral for ECB liquidity operations (if and when it decides to return to pre crisis rules) which would likely set off a chain reaction of issues for Greek banks. With the ECB making tentative steps toward the exit earlier this month, the story is clearly not going away any time soon. Bunds have been the main beneficiary, with safe haven flows sending the yield to within one basis point of the 3.10% level last tested in April. Greece's 10-year is now a hefty 260bps wider , while 10y UK Gilt yields hit fresh 2009 highs above their German counterpart near +70bps as polls began to point to a hung parliament in next year's general elections. - In currencies, trading saw more turbulence in the Euro Zone thanks to Greece's second credit downgrade and a negative call out of Moody's on the Irish banking system. Safe-haven flows out of peripheral debt weighed on the euro throughout the week, while year-end repatriation flows further aided dollar sentiment. Stresses are starting to filter down to the European financial sector: a Fitch analyst said European banks could face rating actions over commercial property losses and the ECB revised its Euro Zone bank write-down forecast to €553B from €488B prior for the 2007-09 period. The greenback is at its best levels of the last three months against the Euro and Swiss Franc thanks to these stories as well as thinning year-end liquidity conditions. Interest rate differentials have also played a role in helping the dollar, as reflected in notably widening yield spreads between the US and both Europe and Japan. - The technical picture has been constructive for the dollar, with 200-day moving averages were back on the radar, particularly against the European pairs. The FOMC statement only sustained the dollar's momentum, with the Fed offering a slightly more optimistic economic outlook. An alleged 1.4500 option barrier was breeched mid-week electing some stop loss selling in EUR/USD and triggering a broad adjustment across the G10 currency regime. Dealers said there were decent option flows, with a European name buying two-month EUR/USD puts with strikes between 1.36-1.40 early in the week. EUR/USD tested the 1.4530 level after the German IFO barely registered a 50 reading, demonstrating the fragility of the economic recovery. EUR/USD tested just below 1.4300 on Friday, hovering near its 30-week moving avg. - Sterling benefited the most on the initial news regarding Dubai World debt restructuring as the week began. GBP/USD tested above 1.64 after UK jobless claims declined for the first time since Feb 2008, although GBP was weighed down following the weaker UK retail sales data. UK newspaper The Daily Mail noted that the world was losing faith in the UK's debt load and concerns about the vast quantity of gov't bonds that would have to be sold over the coming years. - Commentators discussed the Swiss National Bank's slow exit from expansionary policy this week, strengthening the Swiss Franc. Although the SNB's Roth confirmed that the bank would continue to work to avoid franc appreciation, the market had other ideas. The rush to safe havens weighed on EUR/CHF during the latter part of the week, sending the cross below the pivotal 1.5000 level. Recall that this was deemed the "line in the sand" during the initial Swiss currency intervention back in March on rumors of a coup in Pakistan. The cross was off its Asian lows of 1.4910 but has yet to regain a foothold above the 1.50 level. - Expectation for a fourth consecutive interest rate tightening by the Reserve Bank of Australia at its next meeting in February repeatedly came under pressure from disappointing economic data and dovish central bank rhetoric this week. Starting on Tuesday, the minutes from the last meeting revealed a closer than expected decision to raise rates. The Board saw policy at a "less accommodative setting" after the move, offering policymakers "greater flexibility" for adjustment going forward. Despite the recent upside surprise in November jobs growth, RBA was also more cautious in its employment outlook, noting that the jobless rate may not have reached its peak. Then on Wednesday, Australia's disappointing Q3 GDP further downgraded RBA prospects, pushing February tightening probability below 40%. The Q/Q 0.2% figure - below the 0.4% expected - marked the lowest rate of growth since Q4 of 2008, while also revealing a greater chunk of economic expansion coming from the stimulus-infused public sector. Following that GDP release, Treasurer Swan - an early opponent of RBA tightening - said the data demonstrates that growth momentum is not yet self-sustaining, suggesting that Q3 would have been a contraction without the stimulus. - A Bank of Japan interest rate decision on Friday saw monetary authorities yielding to cabinet pressure with a notable shift to a more dovish tone, helping spark the regional equity rebound going into the weekend. Keeping the economic assessment unchanged after consecutive upgrades, BOJ said it would keep monetary conditions "very easy" amid signs that the economic recovery would slow until mid FY10. On the inflation front, BOJ dropped its prior view that the decline in core consumer prices is likely to keep narrowing, vowing not to tolerate CPI at or below zero and targeting 1% for price stability. BOJ then expressed its deflation fighting resolve by pointing out it would "patiently support the economy" until it comes out of deflation. JGB yields fell across the board on the dovish BOJ comments, with the 5-yr note registering a 4-yr low below 0.45%. - The Asian Development Bank maintained China's growth forecast at 8.2% in 2009 and 8.9% in 2010, but raised India outlook for 2009 to 7% from 6%. ADB also raised the overall developing economies growth target in the region to 4.5% from 3.9% in 2009 and 6.6% from 6.4% in 2010. The upgrade follows an upward revision as recently as late September.

OPEC members have their wish, but it won't last for long It's that time of year again and members of the Organization of the Petroleum Exporting Countries might already be getting just what they want -- an ideal oil price for producers and consumers alike. That's a good place for the oil market to be in ahead of Tuesday's meeting of key oil producers in Luanda, Angola who will discuss OPEC's production policy -- but don't expect it to last long. Right now, OPEC members have a "reasonably good price" at around $70 per barrel, said Charles Perry, president of energy-consulting firm Perry Management. They can "still make a lot of money at this price and it is not having much direct effect on the economy." "It can't get much better than that," he said. Of course, many would disagree that prices of around $70 per barrel aren't perfect, but after all the wrangling over the past couple of years that lifted prices to a record high of nearly $150 in July of 2008, the shifts in production and supplies, changing news and high volatility, it would be fair to argue that oil is finally in a more stable state. "I do not think OPEC will want to do much at this meeting -- they will want to leave well enough alone," said Perry. Besides, Saudi Arabia's Oil Minister Ali al-Naimi said it himself earlier this month, telling the world that OPEC ministers saw no need for any change to the cartel's output targets during the Dec. 22 meeting. Al-Naimi was widely quoted as saying that the current oil price was stable and "perfect" for consumers and producers. "Instead of living through a prolonged price crash, OPEC has managed to keep oil prices in the $70 to $80 range during the worst Western [U.S., Europe, Japan] recession in 75 years," said Byron King, editor of Energy & Scarcity Investor, published by Agora Financial LLC. And at these prices, "the Saudis are bringing in enough oil revenue to fund their budget -- not too much, not too little," he said. In fact, prices have been trading between $80 and $70 for the past 7 weeks. That's probably about as stable as oil can get. "Economic data remains tepid, inventories are high, OPEC production compliance is still relatively solid, and large spare capacity is in place," said Jason Schenker, president of Prestige Economics LLC. "We seem to be close to a relative near-term equilibrium," he said. Rocking the boat On the other hand, when something's too good to be true, it usually is. It hasn't been an uneventful journey to get to this point and there are a lot of factors in the market that can still shake things up. "OPEC believes that the price level is justified by improving demand but in reality, the price is what it is because of the effects of economic stimulus and the weak dollar," said Phil Flynn, senior market analyst at PFGBest. Now, the "biggest challenge for OPEC is not to produce oil faster than the recovery warrants or they could add to ... a global oil glut," he said.

Oil is FED Up. Oil finally got up off the mat, ignored a soaring dollar and it got lifted in a bout of demand optimism off a better than expected industrial production number. Ok it helped that the market was oversold and the session was less than exciting, yet the rally still seems to suggest that the market may still have some life or maybe just some short covering ahead of the Fed. And why should it not? The price of oil is a Fed inspired creation with a recipe of zero interest rates and printed money and the type of demand growth that can only be inspired by cheap and easy money. Yesterday the market was worried by a larger jump in wholesale inflation when the PPI came out triple expectations, rising 1.8%. That led some in the oil patch to wonder whether the Fed is too complacent and this is the precipice of a major inflationary cycle. We saw note yield hit the highest level since August on those concerns and the Fed statement may be the most important single factor that drives oil prices around today. But more importantly it may perhaps give us a window into the next big move when it comes to energy prices. Once oil closed back below $75 a barrel I told you we would be in a trading range that eventually would bring us down to $65. The Fed may overshadow even today's inventory report that will be heavily influenced by the cold. The API reported a big drop in distillate fuels as supply fell 2.604 million barrels as those heaters are starting to go on. Crude stocks actually increased by 924, 00 barrels as the AOI reported a surprising drop in crude runs. Gasoline stocks increased by 2.074 million barrels. With without much overhead short-term resistance the market decided to take the mixed report as slightly bullish overnight or perhaps it is just ignoring it and moving higher technically. Now despite current strength oil will have a hard time rallying too hard as it is clear that we will see more oil production out of OPEC. As OPEC meets it will not matter whether or not they change their quota, with their compliance already slipping to a new yearly low, we would expect to see more OPEC oil come onto the market. Natural Gas Breakout! It looks like natural gas in January will target 590 to 600! Stay warm as you put up that tree and bake those cookies!

As Good As Gold As the price of gold has pulled back from its recent run up to $1,200, many investors are left to ponder what exactly drives the movement of such an important and financially sensitive commodity. Most people are aware that gold prices respond to inflation expectations and that central banks, as the largest holders of gold, are big players in the market. But there is a very murky understanding as to why and how these players affect prices, and what their ultimate goal may be. Although I profess no great insight into how central bankers from Bombay, Berlin and Beijing are looking to manage the global gold market, a better understanding of how our current system came to be provides some clue about gold's recent behavior. The First World War was not only catastrophic to an entire generation of Europeans, but it also left the international financial system in tatters. After the war, the great powers met in Rome to re-establish a workable international financial system. The British pound sterling, which had always been fully convertible into gold, was selected as the official 'reserve currency.' Then, during the Great Crash of the 1930's, the collapse of Austrian and German banks triggered a run on sterling for conversion into gold. Unable to withstand the assault, sterling was replaced as the reserve by the U.S. dollar. Although the dollar was also convertible into gold, the Roosevelt administration had limited the risk to the U.S. Treasury by restricting redemption to central banks. In 1944, the newly established International Monetary Fund (IMF) selected the U.S dollar as its 'international reserve asset', which enshrined a quasi-gold standard to undergird global financial transactions. However, the inflationary policies of most governments caused the market gold price to rise above the official price of $35 an ounce. In 1961, as the price of gold drifted higher relative to the dollar, the major central banks formed the London Gold Pool, a 'gentleman's club' to coordinate gold sales in order to stabilize gold prices. But by 1971, the dollar's devaluation had overwhelmed their coordinated interventions. Ultimately, President Nixon was compelled to break the dollar's last links to gold by closing the 'gold window' to other central banks. For the first time in human history, the world monetary system 'floated'. Since then, major central banks have continued to debase their currencies at pace with the U.S. dollar. In 1978, via the IMF, they moved to demonetize gold, which stood to expose the true inflation rate. This was first carried out by massive central bank sales of gold in exchange for Special Drawing Rights (SDRs) from the IMF. When this failed, the U.S. gained support, in 1999, for the Central Bank Gold Agreement (CBGA) to coordinate the release of central bank gold onto the market. Officially, at least, this was meant to prevent central banks from dumping gold. However, it is highly suspicious that these nominally independent central banks would take coordinated action to support the gold price. This is especially true given that they've spent the last forty years trying to do the opposite. In my opinion, it is much more likely that the CBGA was designed to covertly time purchases and sales to magnify gold's price volatility, in order to dissuade investors from holding it over the long term. I believe this intervention is the biggest factor currently distorting the gold market. But the precious metals investor should understand that central banks can only pressure the market, not dictate it. Gold will move up as the following dynamics unravel. First, the dollar has benefited from its reserve status, which creates demand for dollars to complete various transactions. However, the conditions that put the dollar on the world monetary throne have already changed, and it's just a matter of time before it is forced to abdicate. Just as French endured as the international diplomatic language long after France waned as a world power, so too is the dollar coasting upon its former glory. When the dollar loses its reserve status, demand for the greenback will evaporate. Second, many holders of surplus currency have diversified massively into the euro. But the euro is a tower built on unlevel ground. Already it is showing cracks as Greece, Ireland, Spain, and Portugal exhibit signs of economic failure. What's more, the EU is about to assume responsibility for basket-case Iceland. If the solvent states of the union succumb to pressure to bail out their weaker neighbors, the euro will lose all of its newfound credibility with investors. Third, the U.S government has been successful in distorting the official inflation figures downward, reducing evidence of current inflation. Fortunately for the feds, people tend to think in 'nominal' rather than 'real' value terms. For example, investors still feel good buying stocks and bonds of American companies in U.S. dollars. They don't realize that when measured in terms of gold, or real money, the S&P has lost some 20 percent over the past ten years. Over the same period, the U.S. dollar has lost over 280 percent! Fourth (and perhaps least understood), the massive inflation already created by the Fed remains hidden within the banking system. As long as banks are able to lend directly to the Fed and Treasury at no risk, they have no incentive to circulate their new dollars. Only when the banks leverage up and lend to industry, or are forced to do so, will the prices for consumer goods skyrocket. Finally, by changing accounting standards for the banks' toxic assets and making self-congratulatory pronouncements, the government has created the impression that crisis has been averted and faith restored in paper currencies. This feeling of relief is flawed fundamentally. It will not be long before investors are brought to the devastating realization that true recovery from a credit boom requires tightening and recession - that Washington did not avert catastrophe, but ensured it. As these dynamics unravel, the full consequences of U.S. profligacy will be felt around the world. The central bankers could sign any agreement they wish but it won't stem the meteoric rise of gold. By then, investors will understand that those left holding dollars will be left holding the bill.

Technical Analysis For Crude Oil; Retracement Levels for Crude oil For Month December: 23.6%:74.4114// 38.2%:75.6743// 50%:76.695// 61.8%:77.7157// 78.8%:79.1689// 138.2%:84.3243// 161.8%:86.3657// So Crude oil is Bullish for Month December. ©Morninstar Investment Services Pvt Ltd

Month-To-Date Review Of The Market: Remain On Guard

What a world and what a market.

Despite ongoing economic weakness and now a potential sovereign default (Dubai), the major market equity averages closed the week generally unchanged. The Treasury market benefited the most from the reality that risks remain abundant and, in a flight to safety, capital poured into this sector.  The dollar continued its descent into hell while supporting a large number of market segments, primarily commodities and especially gold.

Despite seeming investor indifference to major fundamental developments over the last six months, we disregard the situation in Dubai at our peril. Why? As Bloomberg writes, Dubai Crisis May End in ‘Major’ Default, BofA Says:

Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.

“One cannot rule out - as a tail risk - a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.

A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote.

Let’s address economic data released this week prior to reviewing the month to date market returns.

ECONOMIC DATA

1. Existing Home Sales: increased by 10.1%. The expectation of Uncle Sam’s tax credit for housing being discontinued has served to pull demand forward in this sector. I’ll believe that health is returning to housing when mortgage delinquencies, defaults, and foreclosures decline on a regular basis. We’re a long way from that happening.

2. GDP: revised lower to a 2.8% increase from last month’s initial reading of 3.5% increase. Things that make you go hmmmm!!

3. Consumer Confidence: registered a reading of 49.5, which does not compare favorably to an August reading of 54.5. Confidence is all about jobs and housing. Unless and until we see signs of real health return to those sectors, do not expect a robust rebound in consumer confidence.

4. Durable Goods: declined by .6% versus an expectation of a .5% increase. This negative reading is offset somewhat by October’s Durable Goods report being revised from a 1.0% increase to a 2.0% increase. Again, I do not expect to see consistent growth in these figures without real consistency in the housing and automotive sectors.  

Let’s move along to market performance. The figures I provide are the weekly close and the month-to-date returns on a percentage basis:

U.S. DOLLAR

$/Yen: 86.69 versus 89.99, -3.7%
Euro/Dollar: 1.4960 versus 1.4717, +1.7%
U.S. Dollar Index: 75.01 versus 76.39, -1.8%

Commentary: the overall U.S. Dollar Index once again turned tail and continued its descent versus most other major currencies. In the process, the weak dollar supported our markets despite mixed/poor economic reports and Dubai being on the precipice of default. The Japanese specifically are getting increasingly concerned about the negative impact on its exports from the strengthening yen. To wit, I continue to reiterate my comment from previous weeks: while I think Washington is not disappointed in a relatively weak dollar, although they should be (”Dollar Devaluation Is a Dangerous Game”), other countries are not overly keen about further dollar weakness. Why? A weak dollar puts those countries in a marginally less competitive position in international trade.

I also would like to reiterate that although Fed officials play up the lack of inflation as a positive and an overriding reason for its easy money policy, they provide little to no commentary on deflationary pressures at work in large segments of the economy. I firmly believe these deflationary pressures are the Fed’s gravest concerns and they hope the weak dollar creates hints of inflation to offset these deflationary pressures. Can rising asset valuations support underlying economic fundamentals which provide little to no pricing power for many companies?

COMMODITIES

Oil: $75.95/barrel versus $76.95, -1.3%
Gold: $1179.2/oz. versus $1045.7, +12.8% ….!!! ON FIRE !!!
DJ-UBS Commodity Index: 135.77 versus 131.862, +3.0%

Commentary: while oil slipped, there was a solid rebound in commodities in general. All eyes remain fixed on the red hot returns in gold. What is going on there? Concerns of a meltdown in sovereign currencies, primarily the greenback.

EQUITIES

DJIA: 10,309 versus 9712, +6.1%
Nasdaq: 2138 versus 2045, +4.5%
S&P 500: 1091 versus 1036, +5.3%
MSCI Emerging Mkt Index: 958 versus 921, +4.0%
DJ Global ex U.S.: 195.55 versus 192.02, +1.8%

Commentary: equity markets ended the week largely unchanged despite generally negative fundamental economic news, including reports of an incipient default by Dubai. Don’t fight the Fed. The fact is, the Fed is now acknowledging the increased potential that a bubble is being created. In fact, the Fed wants some ‘bubbling over’ in hopes that the ‘bubbly bubbliciousness’ supports consumer spending. And we are supposed to invest our good, hard earned money into a market such as that? Remain defensive and flexible while realizing that equities may very likely continue higher into year end.

I reiterate: You’ve ‘got to be in it to win it.’ While I could expound on fundamental issues, I may bore you in the process. This market has not been about fundamentals in a long time. I think we are beginning to enter into a blowoff phase in which investors who have missed the market move to get in while those who are outright short the market are forced to cover. I view the current price action more akin to gambling than anything else.

BONDS/INTEREST RATES

2yr Treasury: .69% versus .90%, -17 basis points or .17% (rates down, prices up)
10yr Treasury: 3.21% versus 3.40%, -3 basis points or .03% (rates down, prices down)

COY (High Yield ETF): 6.42 versus 6.20, +3.6%
FMY (Mortgage ETF): 17.67 versus 17.90, -1.3%
ITE (Government ETF): 58.53 versus 57.96, +1.0%
NXR (Municipal ETF): 14.81 versus 14.79, +.1%

Commentary: please review my post, “The Message of  the 2yr Treasury, Deflation, and Japan,” in which I highlighted how I believe deflationary pressures are growing in our economy.

The Treasury market remains the prime beneficiary of the global economic risks increasingly exposed.

Summary/Conclusion

We live in a very fragile world economically and politically. Our global economic risks remain deeply embedded in the debt burdens of nations, corporations, and consumers. These debts are disguised and covered by central bank liquidity. The water may appear fine, but it remains shark-filled. Remain on guard.

American anxiety and rage continue to boil. I can understand and appreciate the anger and the rage. That said, let’s not lose sight of the forest for the trees so that we can best position ourselves in the short run and over the long haul to benefit personally and professionally.

Dubai Debt Crisis - Is It An Isolated Problem?

The Dubai debt crisis is once again a reminder of fragility of the global credit market and also how what may seem like an isolated problem can have far reaching tenticles.

Dubai is part of the United Arab Emerate. The capital is Abu Dhabi. Although one would think it would garner its wealth from oil, its economy is driven by tourism, real estate and financial services.   According to Wikipedia the economies wealth from oil is only about 6%. Real Estate and construction contributed 22.6%. Abu Dhabi, the capital of the UAE does have large oil revenues however and it is them who Dubai is looking for for help.

Dubai World has been the center of the investment focus largely catering to the rich of the world.  The state owned entity has been responsible for the creation of the Burj al Arab hotel which is the sail shaped ediface that charges a cool $1,000 a night, an indoor ski resort, the tallest building in the world,  the world largest shopping mall and the man made palm shaped islands of largely private residences.  All of which have been created with excess in mind and the hopes of attracting tourists and the world’s elites to its adult Disney World.

The building boom led to prices rising sharply with inflation running well above 10% through the 2000s, and with it the price of real estate soared with the frenzy atmosphere of “nothing can go wrong here” emerged.  OF course there is no such thing as a sure thing with no “excepts”…. The “except” was a global meltdown that reversed the whole up, up and away juggernaut. The problem with real estate of such grand porportion is how do you stop a 160 story building construction before conclusion, or the creation of man made cities in the form of palm trees.  The answer is you can’t.

So who pays?  Of course, some might think that with the oil wealth in the region the bank account of the Emirates would be the funder of such projects but we live in a capitalistic global economy where even the most wealthy of nations use the global capital markets to finance projects.  Dubai World was the borrower. Global banks were the lenders.

This week the delay of a debt payment of 59 billion US rocked the financial markets and raised the prospects that other emerging nations would likewise suffer. Credit default insurance rose dramatically for countries like Bulgaria, Hungary, Brazil and Russia.  The Credit Default Swap market which some feel forced the likes of Lehman to go under and Merrill to merge with Bank of America could pressure other riskier debt entities.  All of which makes banks less willing to lend and with less lending, cash continues to be king. Debtors? Well they suffer and suffer and suffer.

What about China and the US?  In China, ambitious expansion plans are fine and well but they must be done prudently. They also need funding and that funding has to be supported by economic growth, tax revenues, some sort of income stream that offsets the cost.  In the US, a blank check only works to some extent.  Printing money has its limits. It has to paid back some way and I am not sure that lessen is being heard.

Debt upon debt is not the answer to all things whether they be economic infrastructure expansion or the likes of the debt expansion that is going on in the USA.

Abu Dhabi can come in and write a check that would satisfy the problem of its emirate member, but is it the answer to the problem?  Does the prospects of a 160 story building yet to be completed or countless other commercial and housing real estate developments make sense for the region in a world which is losing wealth, losing its Richie Rich swagger. Is there any upside or is it a write off?  That is the answer the world will be looking to hear.

I am not sure it will be a simple sweep it under the rug or ignore the pink elephant in the room issue.  As a result we could/should see some additional dollar buying as that seems to be the thing that gets done when things go bad.   For those who follow my analysis, you of course know by now that the technicals will tell the market sentiment and paint the fundamental story line.  So continue to follow your technical chart levels and make sure the bias from the clues the prices tell us, dictate your trading positions.

The global economic story continues with a new chapter being written all the time.

Market Week Wrap-up - In the first half of the week, risk appetite roared back ahead of the Thanksgiving holiday in the US, erasing last week's losses in the equity market. Good data, mildly positive FOMC minutes, strong corporate earnings and light volume kept investors from fretting over the reduction in the second Q3 US GDP reading (to +2.8% from +3.5). The FOMC minutes showed the Fed believes the continuing decline in the dollar is orderly and unemployment will remain elevated for an extended period of time; the Fed also hiked its US GDP growth forecasts slightly. Weekly initial claims dipped below 500K for the first time since January, putting the four-week moving average below 500K. With the sharpened appetite for risk, the dollar got close to 12-month lows against the euro and ten-month lows against the yen. Natural gas futures rose to their best level in three weeks on Wednesday, surging 8.3% in part due to lower than expected inventory data from the EIA. But the positive tone in the markets was sand blasted away by a storm blowing out of the Middle East. Dubai World's surprise restructuring announced on Wednesday shook global markets in the latter half of the week on fears of a new contagion spreading through the world financial system. The Dubai story was used as cover for punishing what was perceived by some as a growing recklessness in credit and asset markets: Equity markets fell an average of 3% worldwide, the dollar strengthened rapidly, and commodities tumbled. After approaching $1,200 early in the week gold fell back to as low as $1,140 on Friday, and crude hit its lowest mark in six weeks. For the week, the DJIA lost 0.1%, the Nasdaq fell 0.4%, and the S&P 500 ended flat. - Apart from Dubai, the other overall theme of the week was the start of the holiday shopping season. Early returns from Black Friday have been somewhat positive. With retailers going all out including some opening their doors on Thanksgiving day, anecdotal evidence appears to show foot traffic has improved over last year. On Friday, Wal-Mart management said that it was getting "positive feedback" from its stores nationwide, while BestBuy commented that Black Friday shoppers 'materially' outnumber those seen last year. Macy's and Toy's R Us also reported brisk foot traffic. - Another handful of retailers disclosed quarterly results, with many roundly beating estimates. Apparel names American Eagle, J. Crew and DSW all came in well ahead of the consensus. High-end retailer Tiffany beat expectations and even hiked its full year guidance. Note that the October personal spending numbers showed that unemployment has yet to entirely cripple the US consumer, which only bodes well for the retail sector. - In other equity news, John Deere blew out consensus estimates and guided higher for the year. Hewlett-Packard's results were firmly in line with expectations. M&A action was highlighted by some ongoing dramas. There was much talk this week that Hershey was putting together a $17B friendly bid for Cadbury, topping Kraft's $16.8B offer launched back in early September. The offer, which is not ready for prime time as of yet, would reportedly include $10B in cash. Cadbury is said to be much more agreeable to a Hershey offer. Meanwhile, reports now say that three different brewers are eying FEMSA's beer operations with an expectation that a deal can be reached by sometime in January. - Shares of the leading US banks have declined noticeably this week on a string of cautious commentary from various sources. S&P said it believes capital remains a negative to neutral factor for the majority of global banks. The FDIC published its Q3 troubled bank list, noting that 552 institutions are on the list, the highest amount since 1993. The FDIC said the balance in its deposit insurance fund turned negative for the first time since 1992. The FDIC's Bair said US bank earnings remain weak and warned that she expects charge offs to increase in Q4. Also note that there were reports out of Washington that House Democrats were drafting a bill to impose a 0.25% Tobin Tax on certain financial transactions. Standard & Poor's chimed in with a warning that nearly all of the world's big banks lack sufficient capital to cover trading and investment exposure, risking further downgrades over the next 18 months unless they move swiftly to beef up their defenses. - Key October housing data buoyed markets during the week, although as usual there was much discussion whether the numbers really indicate any stabilization in the sector. The S&P/Case-Shiller home price index was basically flat over August levels, and nine of the 20 cities surveyed showed price declines. Karl Case noted that the US still faces a large backlog of homes to work through. Existing Homes Sales data for October showed sales were up 10% from September levels, while the October New Homes Sales were up 6% on a sequential basis. Some observers repeated the often-heard refrain that the uptick in home sales reflects the expiration of the new home buyer tax credit and distressed home sales (prior to the recent extension of the program), rather than any fundamental improvement in the economy. Contrasting with the better data was a report from real estate industry analysts at First American Corelogic, who wrote that 23% of US homeowners have "underwater" mortgages, which bodes very poorly for home prices. A historical perspective enveloped the forex market this week as dealers pointed out that the EUR/USD had finished the last few weeks of the trading year on firmer territory in at least 7 of the last 9 year ends since 2000. The price action was subject to 'whippy' movements as traders noted that they could "just feel market liquidity getting thinner." Dollar sentiment was initially driven by dovish weekend Fed speak. Chicago Fed President Evans noted in a FT interview that prevailing policy settings would remain for some time yet, possibly into 2011. The Fed's Bullard commented that he supported asset buying beyond Q1 2010 period. The release of the FOMC minutes mid-week appeared to pave the way for additional dollar weakness. The minutes described the dollar's decline as "orderly," which dealers took as a hint for the trend to continue. The dollar was testing some key technical levels as thin holiday conditions set in. USD/CHF busted below the parity level for the first time since April 2008. USD/JPY moved below the 88 level, which was a long suggested 'intervention' zone via the Japanese post office. Complementing the tone was chatter that India's Central bank (RBI) was reportedly mulling could consider buying the remains 201.3 metric tons of gold from the IMF. Spot gold hit fresh-all-time highs just below $1,200/oz -The dollar continued to receive verbal support from various officials throughout the week. ECB Chief Trichet reiterated yet again that he "appreciates" US support for a strong dollar. Japanese Government and ministry officials took notice of the JPY's appreciation and its potential to harm the fragile Japanese economic recovery. Finance Minister Fujii commented that he was prepared to contact the U.S. and Europe officials to organize some sort of coordinated intervention after the pair hit fresh 14-year lows below 85.00. There was also chatter that the BOJ 'checked rates' on Friday (seen as a closer step to currency intervention). -But the risk aversion theme provided a life-line for the dollar as the Thanksgiving holiday descended upon the US. The dollar regained some composure aided by official rhetoric coupled with concerns about the fallout of the still uncertain Dubai World debt situation. Dubai was shaking confidence across the Persian Gulf after its proposal to delay $59B debt payments risked triggering the biggest sovereign default since Argentina in 2001. Middle Eastern names were noted as active sellers of European currencies. - Renewed dealer chatter that the SNB was 'seen' on the interbank dealing machines and bidding for dollars USDCHF pair sent the pair moving off the lows of 0.9920. As usual, the Swiss Central Bank (SNB) declined to comment on any intervention rumors, which is its standard policy. - In Asia, Vietnam grabbed some of the regional spotlight after its central Bank unexpectedly raised benchmark interest rates to 8% from 7% and narrowed the Dong trading band to 3% from 5%. More notably, the central bank governor called for exporters to sell their foreign currencies in a move to devalue the currency. Fitch was the first credit agency to chime in on the potentially destabilizing developments, welcoming the devaluation decision as a positive that would not have any immediate ratings implications. - Vietnam's move comes ahead of an Australian rate decision next week, when the RBA is expected to raise its rate another 25 basis points. Ahead of this decision, the RBA's Battellino commented this week that Asian economies are recovering quickly and that he expects a return to a relatively normal pace of growth with Asian trading partners in 2010.

Will Copper Continue To Shine In ‘09? Fundamentals Copper futures have been trading sideways for the past few sessions, after firmly establishing a base above the $3 level. The Copper market continues to rally, in spite of increasing inventory levels. LME stockpiles of the base metal have increased for three weeks. There has been much discussion regarding China’s future purchases. On one hand, Copper users in China have been aggressively stockpiling the metal over the past few months, leading to more than ample inventory levels, which could inhibit price growth. On the flip side, China’s insatiable appetite for commodities is expected to increase in 2010, as economic conditions continue to improve. At this point, it seems that forward-looking traders who are optimistic about China’s growth and Dollar bears are the driving force behind the current rally. Copper could find itself facing significant selling pressure if the Dollar is able to strengthen, which is not very likely at this point. There is a large amount of economic data being released today and tomorrow, which may cause an increase in volatility. Of particular importance for Copper traders will be the housing value index data today and new home sales tomorrow. As far as the economy as a whole, traders will be mindful of today’s GDP revision and consumer confidence number heading into Black Friday. Trading Ideas Copper fundamentals do seem to favor the bull camp, as traders have been extremely bullish on China and Copper has been an indirect way to benefit from growth in the Asian giant. Downside risks remain, however, as evidenced by the stockpiling by China, which could result in a slower rate of imports and downward pressure on prices in the near-term. Some traders may wish to wait and see how Copper behaves if and when prices pull back to the 3.05-3.06 level. If the market is able to hold support here, some traders may possibly wish to enter into a long futures position in the March contract, with an upside objective of 3.25 and a stop at 2.95. The trade risks roughly $2,500 for a potential profit of $5,000. Technicals The March Copper chart shows prices breaking out of a wedge formation on the daily chart. The measure of the wedge suggests prices may test the 3.25 level. The sideways trading over the past week following the breakout of the wedge pattern suggests that traders are taking a pause and taking some profits off the table. The stochastic indicators are getting a bit overbought at the moment, suggesting this consolidation may continue in the near-term.

When Do We Sell Gold? How long before we see sellers of gold? Yes, I know I must be mad to ask the question, but it’s a good time of year to take profits. This is a TA piece so I won’t enter into the debate about supply/ demand/ inflation or Indian weddings. All the headlines look to favour gold and, in fairness, there’s little technical analysis to base a short trade on yet. Yesterday’s potentially bearish shooting star candle has so far been over-ruled by another green candle today. The 21-day moving average is still on the rise, though due to meet up with the price again soon. The MACD is showing a bearish divergence, but there’s no sign of such a move on the hugely overbought RSI, and the Parabolic continues to nurse the price higher. At the time of writing, gold hasn’t matched yesterday’s high, but is looking at a higher close. I just wonder, with the market so overbought, how long before traders, and even investment funds, decide that they’re close enough to the magic $1200 to start taking some money off the table. Of course, if momentum continues to be driven by tales of central bank buying there’s no reason why the move should stop at $1200, but it’s now a good time of year to lock in profits ready to tackle the New Year with a clean slate. I’m sure the $1200 will magnetically draw the price higher, but somewhere between $1180-1190 the risk/reward must favour a short bet with a stop loss a few Dollars above $1200.

Crude Oil Rises as U.S. Fuel Inventories Are Forecast to Drop

 

Crude oil advanced a second day on forecasts that a government report will show U.S. fuel inventories declined last week. Supplies of distillate fuel, a category that includes heating oil and diesel, fell 850,000 barrels, according to a Bloomberg News survey. The Energy Department will release its weekly supply report tomorrow, and the industry-funded American Petroleum Institute published its data late Tuesday.

 

“Everyone is gearing up for the inventory reports, be it the DOEs Wednesday ” said Carl Larry, president of Oil Outlooks & Opinions LLC, a Houston-based energy adviser. “There are a lot of people looking for the reports to show something big.”

 

Crude oil for December delivery rose 24 cents, or 0.3 percent, to settle at $79.14 a barrel on the New York Mercantile Exchange. Prices are up 77 percent this year.

 

Prices were up from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles declined 4.37 million barrels to 333.1 million. December oil rose 51 cents, or 0.6 percent, to $79.41 a barrel in electronic trading.

 

Heating oil also rose after Goldman Sachs Group Inc. said in a report yesterday that U.S. diesel demand will rise by 11 million barrels when farmers return to harvest crops after the end of fall rains. The U.S. Climate Prediction Center forecast below-normal temperatures in the Northeast and Midwest between Nov. 25 and Dec. 1.

 

Supply Forecast: The Energy Department report will probably show that gasoline inventories fell 25,000 barrels in the week ended Nov. 13, according to the median of 18 analyst estimates.

 

Stockpiles of crude oil climbed 300,000 barrels, according to the 17 analysts who provided crude estimates. Ten respondents forecast a gain, and seven said there would be a decline. Those looking for an inventory drop focused on disruptions caused by Hurricane Ida.

 

Ida made landfall in Alabama as a tropical storm and weakened on Nov. 10. Energy producers in the U.S. idled about 43 percent of oil output in the Gulf of Mexico that day, according to the Interior Department’s Minerals Management Service.

 

“It’s hard to know what impact the storm in the Gulf will have on the upcoming reports,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Some traders are probably buying on speculation that we will get a surprise drop in stocks as a result of the storm.”

 

Terminal Closure:The Louisiana Offshore Oil Port, used by import tankers too large for U.S. harbors, was closed three and a half days because of rough seas and high winds, said Barb Hestermann, a spokeswoman for the oil terminal.

 

“The closure of the LOOP could make a big difference in the weekly crude numbers and even in the products,” Larry said.

 

The Energy Department is scheduled to release its report at 9:45pm Wednesday in Washington.

 

Oil slipped as much as 1 percent earlier today as the U.S. currency rose. The Dollar Index, which tracks the greenback against the U.S.’s biggest trading partners, increased 0.6 percent to 75.341. The gauge touched 74.679 yesterday, the lowest level since August 2008. The dollar strengthened 0.8 percent against the euro to $1.4854.

 

Brent crude oil for January settlement rose 20 cents, or 0.3 percent, to $78.96 a barrel on the London-based ICE Futures Europe exchange.

 

December Meeting: The Organization of Petroleum Exporting Countries will leave its crude oil production target “as is” at a December meeting and will ask members for better adherence to quotas, Kuwait’s oil minister said.

 

“We will ask for more compliance, that’s all,” Sheikh Ahmed al-Abdullah al-Sabah said in Kuwait City today. The group’s average compliance with its goal of cutting output should be more than 65 percent, he said.

 

OPEC will meet on Dec. 22 in Luanda, Angola, to discuss output targets, after agreeing to leave them unchanged at the past three meetings.

 

The 12-member group should continue to invest in oil production capacity even as demand drops so that it can “cash in” when a supply crunch arises, according to Paul Stevens, a senior research fellow in energy at London-based think tank, Chatham House.

 

Excess Capacity: “Every time companies like Saudi Aramco have to turn on their excess oil capacity, it is at a time of extremely high oil prices,” Stevens said today at a conference in Abu Dhabi. “It is much better to sell oil at $170 a barrel than at $70 a barrel, provided you are not concerned about the long-term impact of that.”

 

Oil volume in electronic trading on the Nymex was 458,649 contracts as of  in New York. Volume totaled 622,512 contracts Monday, 11 percent higher than the average over the past three months. Open interest was 1.24 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

© Morningstar Investment

IMF Sells Gold To Mauritius

Monday, the International Monetary Fund said it sold 2 metric tons of gold to the Bank of Mauritius. This follows the sale of 200 metric tons of gold for US$6.7 billion to the Reserve Bank of India on November 2.

The latest sale was conducted on the basis of market prices prevailing on November 11, with proceeds equivalent to US$71.7 million. The Washington-based lender said this transaction was part of the total sales of 403.3 metric tons approved by the Executive Board in September.

“The Fund is standing ready for an initial period to sell gold directly to central banks and other official holders that may be interested in such sales,” said IMF. Thereafter, on-market sales of any amounts remaining from the 403.3 tons would be conducted in a phased manner over time, following the approach adopted by central banks participating in the Central Bank Gold Agreement.

©Morningstar Investment Services

Market Week Wrap-up

- US indices hit fresh 13-month highs this week and the DJIA managed to close above 10,250 as risk appetite flared up worldwide. Equities, gold and oil rose in tandem through the first half of the week, with crude testing $80 and gold making all-time highs above $1,120. With little US economic data on tap, markets were propelled by strength from Asia and Europe, especially reports of improving GDP performance in both regions. In China, PBoC vice governor Ma reiterated that China would be able to achieve 8% GDP growth this year, while continental Europe's biggest economies officially emerged from recession. An unexpected build in US crude and gasoline inventories data on Thursday took the wind out of crude in the latter part of the week, helped along by some firming in the US dollar. Potentially troubling results from two high-profile US data reports weren't able to stop equities on Friday. The September US trade deficit grew 18% sequentially, for the fastest rise in the series since early 1999. Traders preferred to concentrate on imports, which surged at the quickest monthly rate in nearly 15 years, although Goldman Sachs warned the data suggests a likely downward revision to Q3 GDP. Meanwhile the preliminary University of Michigan consumer sentiment index for November came in at 66.0, down from 70.6 in October and below expectations. For the week, the DJIA gained 2.5%, the S&P 500 climbed 2.3%, and the Nasdaq rose 2.6%.

- European preliminary third quarter GDP readings this week indicated the continent is slowly moving out of recession, although commentary from many officials warned that any recovery will be subdued. On Friday, the ECB's Weber said Euro Zone growth would be more sluggish than before the crisis, and forecasted a "speed limit" of 1% or so on European growth. Germany is leading the way out of the crisis, with a second successive quarter of growth that was even stronger than in Q2. France also reported a second quarter of growth, but the somewhat disappointing +0.3% figure was in line with the prior quarter. Austria and the Netherlands both escaped recession with strong growth, while Spain and Greece remain mired in recession. Note that the advanced Euro Zone GDP reading was -4.1% y/y.

- Fed speakers weighed in on various high profile debates, although no major shifts in thinking on monetary policy could ultimately be drawn from the comments. Tarullo and Yellen (both voters) acknowledged that the Fed needs to pay more attention to asset price bubbles - a topic which Chairman Bernanke has famously shied away from in the past. Dallas Fed Governor Fisher (currently a non voter) admitted the Fed is watching the dollar carry trade for disorderly influences. Finally, noted hawk Plosser (also a non voter) commented that while he sees no short-term inflation threat, excess reserves could have an inflationary effect if they flow into the economy too quickly. On Thursday evening, the Fed confirmed that while its balance sheet shrank modestly last week, excess reserves reached a new all-time high of $1.1T.

- The ongoing reform of US financial regulations took another step forward as Senate Banking Committee Chairman Dodd outlined some of the moving parts of his financial regulatory reform bill. Dodd said the proposed consumer protection agency that would have the power to assess fees on banks with $10B or more in assets. The bill envisions limits on leverage and size of large financial firms and would give regulators the power to force firms to divest assets. There was a great deal of talk about a "Tobin Tax" on financial transactions during the G-20 and EuroFin conferences in Europe. IMF Chief Strauss-Kahn once again said proposed transaction taxes could be avoided and would only work if all nations instituted them at the same time (which is very far from likely). British PM Brown was said to be rallying support for a Tobin Tax in the UK.

- In earnings, Wal-Mart offered mixed Q3 results, beating analysts' bottom-line projections but missing revenue targets by a hair. Department store name Kohl's came in slightly ahead of estimates for its Q3, although its Q4 guidance fell short of expectations. Struggling retailer Abercrombie & Fitch exceeded beaten-down expectations, while Nordstrom and JC Penny offered in-line results. Homebuilders Beazer Homes and Toll Brothers outperformed their peers this week after reporting very strong fourth quarter results. The CEO of Toll Brothers said data suggests the market for new homes is improving, although demand has been volatile since Labor Day.

- In tech, Hewlett-Packard offered a preliminary view of its Q4 and announced it would acquire network hardware firm 3Com for $2.7B. Intel reached a deal to settle all outstanding antitrust and patent disputes with AMD, paying the latter $1.25B and entering a five-year cross license deal. Selected solar names have been strong this week on news out of Spain and solid earnings results from JA Solar and Yingli Green Energy. JA Solar crushed earnings and revenue estimates and called for robust results next quarter. Yingli Green Energy offered good quarterly results and moderately improved its 2009 shipments guidance. Spain approved new renewable energy goals for 2010-12, setting a goal of increasing the amount of power generated via wind, solar and geothermal by 37%.

- The US Treasury completed an onerous $81B in quarterly refunding this week, wherein strong three- and ten-year auctions were followed by the now customary weaker sale of 30-year bonds. On the whole, the results were a timely success ahead of President Obama's visit to the nation's two largest creditors (China and Japan) which began today. Yields are rangebound as the week draws to a close, despite the October Budget Statement, which was worse than market expectations, confirming the worst deficit streak in history (13 months).

- The greenback began the week on a soft note in the aftermath of Saturday's G20 conference, where attendees failed to express any concerns about dollar weakness. Perception that government officials have adopted a policy "benign neglect" toward the dollar aided global risk appetite, pushing spot gold out to fresh all-time highs above $1,115/oz. The IMF said pressure from carry trading had moved the dollar closer to "medium-run equilibrium," but added that the dollar was still on the strong side. Recent weeks have seen a consensus emerge that a sustainable global recovery would depend on rebalancing growth requiring that trade surplus nations need to focus on growth while trade deficit countries need to build savings. This talk has put consistent selling pressure on the dollar, based on speculation that any concerted effort to rebalance the global economy would "talk down" the greenback. Nevertheless, the dollar has consolidated its position throughout the week despite steady advances in gold and equities.

- One factor benefitting the dollar was plenty of verbal intervention during the Asia-Pacific Economic Cooperation (APEC) summit in Singapore. Treasury Secretary Geithner reiterated several times during the week that a strong dollar was "very important" for the US. Other APEC finance ministers seemed to agree with the US point of view. As noted above, Fed Governor Fisher is watching the emerging dollar carry trade for bad influences, although he conceded that the depreciation of the dollar has been "rather orderly" so far.

- The sovereign rating situation was also in headlines this week. Fitch commented that the UK was the advanced economy that is most at risk to lose its "AAA" sovereign status while Germany is the least likely to lose its "AAA" rating. For Japan, a material rise in JGB issuance above ¥44T would prompt review of its ratings. Fitch also warned that US ratings would be pressured if its fiscal position did not stabilize, but said that there were no near-term risks to US's sovereign rating at the moment.

- In specific price action, despite spot gold's continued run at fresh all-time highs, EUR/USD has yet to take out its highs of 1.5069 from back on Oct 23rd, although the pair tested the 1.50 handle all week. Moreover, euro strength has so far failed to dent German exports. Sterling was aided by chatter that Kraft would proceed with a hostile bid for Cadbury; GBP/USD tested above 1.68 during the early part of the week. Fitch's sovereign rating contributed to pound weakness.

- In Asia, President Obama's visit to the Far East prompted a slew of Chinese Yuan comments. The IMF said a revaluation of CNY should be not resisted, prompting persistent speculation that China could revalue its currency over the weekend. Earlier this month dealer desks saw good selling pressure in long-dated USD/CNY forwards ahead of President Obama's visit to China. There is speculation that these sorts of developments could prompt a weaker dollar again other Asian pairs in coming months. However, China's PBoC reportedly told APEC members at the recent summit that yuan flexibility would be very gradual.

- Chinese data continued to surprise to the upside. China's October industrial production grew 16.1% y/y, beating expectations by six-tenths of a percent, while the Trade Balance came in just shy of $24B, above the $19B estimate. Note though that the components of the trade data showed declining levels of metal imports. Meanwhile in South Korea, the central bank held rates at 2.00%, and maintained a dovish stance. The Bank of Korea stated that inflation is being contained by the stronger Korean Won.

©Morningstar Investment Services Pvt. Ltd.

EUR/USD - Bearish Correction Within Uptrend

Price action on EUR/USD, has corrected back down to an uptrend support line after falling short of re-testing the 14-month high just above 1.50. Until a significant downside breach of this support trendline occurs, this currency pair is still very much in uptrending mode.

The key upside level to watch is still in the region of the 1.5060 long-term high, as any significant breakout above this level would confirm a continuation of the uptrend that has been in place since March. In the event of that breakout, the 1.5300 price region remains as an important further resistance area to the upside, followed by the key bullish target of 1.60.

As mentioned, the noted uptrend support line extending from March is currently still holding. But in the event of any substantial breakdown next week, the prevailing uptrend would be seriously threatened and price could subsequently move down to target strong support in the 1.4450 support/resistance region.

©Morningstar Investment Services Pvt. Ltd.

We’re A Few Months Away From $100 Oil, Here Are Three Ways To Profit

It’s the oil industry’s version of War and Peace. I’ve spent this week poring over the 2009 volume of the International Energy Agency’s (IEA) World Energy Outlook. All 698 pages of it. And what I’ve read so far sends shivers down my spine. Let’s start with the good news…

Temporary Relief From Rising Oil Prices

According to this year’s report, the recession and financial crisis gives us temporary relief from the fossil fuel demand and rising oil prices. Indeed, 2009 will be the first year since 1981 that global energy use will actually fall. Unfortunately, that’s where the good news ends. From next year, fossil fuel use - and oil in particular - will ramp up again. Consumption is projected to grow by 1% per year through 2030. And you can blame it on skyrocketing demand from emerging market countries. And it’s this resumption of demand - coupled with a possible shortfall in exploration and production - that’s a recipe for disaster.

The Oil Industry & The Paradox of Oil Prices

From the IEA’s World Energy Outlook: “Any prolonged investment downturn [in oil exploration and production] threatens to constrain capacity growth, eventually risking a shortfall in supply. This could lead to a renewed surge in prices a few years down the line, when demand is likely to be recovering and become a constraint on global economic growth.”

This, dear reader, is the paradox of oil prices - and it’s playing out right in front of us right now.

• During “normal” economic times: rising demand leads to increased investment in exploration and production. The end result is that supplies eventually increase, and prices subsequently drop (or go up less rapidly).
• During recessionary periods (like today): unemployment rises. And the unfortunate people without jobs drive less and demand for oil consequently drops. This also causes a supply glut and a subsequent drop in oil prices.

In 2008, we saw a situation where oil prices fell all the way down to $35 before the OPEC cartel managed to cut supplies enough to cause prices to slowly rise. But the damage was already done.

Result: exploration came to a virtual standstill. Rigs were mothballed. Drill ships were anchored - not in thousands of feet of water, but floating idly in harbors across the world.

Today, we’ve got tight credit markets thrown into the mix. And even with demand returning, investment in new exploration and production will slow. In fact, that’s already happening. According to the IEA, 2009 will see a 19% cutback in oil and gas investment. That’s $90 billion that won’t be going into finding more oil and gas or bringing new finds into production.

My friend Rick Rule likes to put it this way: “The cure for high prices is high prices and the cure for low prices is low prices.”

Of course the effects of this phenomenon vary widely between companies and a large part of it depends on production costs. Let’s take a closer look at what makes up the cost of a barrel of oil.

The Oil Industry’s Three Components of Oil Extraction

Extracting oil out of the ground to the pump at your local gas station is essentially divided into three components by the oil industry:

• Finding costs: These are those costs associated with actually finding an oil deposit, determining its size (and thus its commercial viability) and developing the field. According to data from the Energy Information Administration (EIA) this component can vary widely - from $4.77 a barrel in the Middle East to $49.54 for the U.S. offshore.
• Lifting costs: These are costs associated with physically bringing the oil to the surface. The characteristics of the reservoir, its depth and the actual consistency of the oil are the main factors affecting the cost of producing the oil. According to the EIA, lifting costs can range anywhere from $3.87 a barrel in Central and South America to $10.00 a barrel in Canada (oil sands).
• Total upstream costs: This includes transporting the crude, refining it into finished products and transporting and distributing those to end use points.

Today, more oil is coming from deeper and deeper locations, which results in higher finding and lifting costs. You can see this trend in the graph from the EIA.

So what does this mean for investors?

Simply put, with oil prices currently hovering around $80 a barrel - and set to rise - oil companies are beginning to pump money back into finding more oil. That’s good news for the companies who drill for it.

Three Oil Companies That Stand to Benefit From Rising Oil Prices

Here are three companies within the oil industry that stand to benefit from rising oil prices…

• Atwood Oceanics, Inc. (ATW: 38.13 +0.32 +0.85%) is an international offshore driller. The fact that its shares have soared by 159% since the beginning of 2009 signals a return to exploration and production by the major oil companies. Still, with a P/E ratio just over 9, it offers investors a good opportunity to play the offshore drilling space.
• Superior Well Services, Inc. (SWSI: 12.50 +0.01 +0.08%) is engaged in technical pumping and surveying services. It operates from 36 centers across the United States and has a fleet of 1,628 vehicles. It also provides for, and disposes of, fluids used in hydro-fracking of oil and gas wells.
• Weatherford International Ltd. (WFT: 17.78 -0.12 -0.67%) is a larger and more diversified version of Superior. Operating in over 100 countries, Weatherford provides services and equipment used in the drilling, evaluation, completion and production of both oil and natural gas wells. Weatherford shares are up 72% this year.

In summary, with oil prices set to rise over $100 a barrel next year, drillers are benefiting from some of the major oil companies who are once again starting to crank up their exploration and production budgets.

©Morningstar Investment Pvt Ltd.

Fundamental Overview: Crude Oil

Crude oil is the world's most actively traded commodity, and the NYMEX Division light, sweet crude oil futures contract is the world's most liquid forum for crude oil trading, as well as the world's largest-volume futures contract trading on a physical commodity. Because of its excellent liquidity and price transparency, the contract is used as a principal international pricing benchmark. Additional risk management and trading opportunities are offered through options on the futures contract; calendar spread options; crack spread options on the pricing differential of heating oil futures and crude oil futures and gasoline futures and crude oil futures; and average price options.

The contract trades in units of 250 barrels, and cash delivery.

Light, sweet crudes are preferred by refiners because of their low sulfur content and relatively high yields of high-value products such as gasoline, diesel fuel, heating oil, and jet fuel.

The crude oil futures contract, designed for investment portfolios, is the equivalent of 250 barrels of crude, size of a standard futures contract. The contract is available for trading on the electronic trading platform and clears through the MEX Nepal

Key Trading Notes:

Reports - Watch the DOE Weekly Supply numbers.

OPEC still is able to move the market, however, not as radically as it once had. Venezuela tends to produce a little more than OPEC would like. Russia has a vast amount of oil in the ground and they are becoming a bigger and bigger player.

The Mideast always seems to account for a premium in the price of oil. It would be difficult to imagine stability in the area for a long time.

Demand for oil tends to be the highest in summer and winter. The summer is mainly affected by increased driving on vacations, etc. This is mainly in the form demand for gasoline, a by-product of crude. Also, the hotter the summer, the more demand there is on energy for air conditioning. Demand during the winter comes largely for heating oil. Normally, the colder the winter, the more demand for heating oil.

Source: Morningstar Investment Services  

 

 

US$: Outlook upto Today

Fundamental Outlook for US Dollar: Bullish

-   US Dollar rallies substantially on S&P 500 losses

-    Forex Options and Futures continue to call for US Dollar bottom

 -    US Dollar to remain volatile on Rate Decisions and NFP’s

The US Dollar finally showed signs of life through the past week of trading, setting a substantial low against the Euro and other key forex counterparts. An early-week tumble in the US S&P 500 and other financial risk sentiment barometers provided the spark for the dollar turnaround. Given extremely one-sided Dollar-bearish sentiment, it was little surprise to see the previously downtrodden currency continue mostly higher through Friday’s close. We have long argued that the Greenback was likely to establish a substantial low on overstretched market positioning. Of course, it is never profitable to be early on calls for major counter-trend moves. Yet the substantive week-long turnaround gives us reason to believe that the US Dollar has set a major low and will likely continue higher through end-of-year trading.

A substantial week of economic event risk promises no shortage of excitement in the days ahead. Forex options market volatility expectations are now at their highest since early July ahead of highly-anticipated central bank decisions and the infamous US Nonfarm Payrolls report. Recent US Third Quarter Gross Domestic Product figures suggest that the world’s largest economy is in much better shape than previously believed, and consensus forecasts are calling for relatively steady improvements across key economic indicators. Yet bullish expectations leave substantial room for disappointment, and the recent spike in the S&P 500 Volatility Index (VIX) suggests traders will dump risky assets at the first sign of trouble. 

Early-week ISM Manufacturing and Pending Home Sales could spark further volatility across key asset classes, but the true fireworks will likely wait until the mid-week’s ISM Non-Manufacturing and US Federal Open Market Committee Rate Decision results. Traders are likely to pay especially close attention to the ISM Non-Manufacturing Employment Index ahead of Friday’s Nonfarm Payrolls result. The sub-index has seen fairly steady improvements after setting record-lows through 2008, but the below-50 reading shows that employment will likely continue to contract through the near future. Surprises in either direction will likely set the tone for the afternoon’s FOMC decision, while Friday’s NFPs will wrap up the week of substantive economic event risk. 

Global financial markets are expecting big price moves in the week ahead, and traders should be careful of substantial day-to-day volatility across US Dollar pairs. We have made no secret of our calls for further US Dollar strength, but prices never move in a straight line. Suffice it to say, we expect our convictions will be put to the test in what promises to be an exciting week of forex market price action.

Source: Morningstar Investment Services.

 

 

 

Monday, the dollar showed mixed performance against its major counterparts as investors will be looking to a slew of economic indicators this week for further clues about the strength of the U.S. economic recovery. While the dollar recovered from a new multi-week low against the yen, it fell from a 4-day high against the euro and the franc. On the other hand, the dollar soared to a 4-day high against the pound. The U.S. economy has been kick-started into growth but investors still face an uncertain outlook as Wall Street gears up for comments from the Federal Reserve and a key report on employment this week. The Fed's policy statement could signal fewer liquidity measures for markets, while nonfarm payroll data and the Institute for Supply Management surveys on the manufacturing and service sectors will give early indications of how the economy is faring in the fourth quarter. Investors are nervous that monetary and fiscal stimulus measures may be ended too soon. The bankruptcy of CIT Group Inc (CIT.N) on Sunday will also feed pessimism about the economy this week. The century old commercial lender was brought down by the global credit crisis that left it unable to fund itself, while the recession left it with too many bad loans. The bankruptcy, one of the largest in U.S. corporate history, has been widely expected for months and is unlikely to provide a massive near-term shock to the financial system. But CIT's trouble could further weigh on the fragile U.S. economy. The bankruptcy is also a blow for the U.S. government, which invested $2.33 billion in CIT in December through the Troubled Asset Relief Program and will likely lose most of it. The dollar slipped after reaching a 4-day high of 1.4685 against the euro and 1.0281 against the franc at 6:40 pm ET Sunday. At present, the dollar is worth 1.4789 against the euro and 1.0212 against the franc, compared to Friday's close of 1.4710 and 1.0265, respectively. The near term support for the dollar is seen at 1.017 against the franc and 1.486 against the euro. The Swiss SVME purchasing managers' index or PMI dropped to 54 in October from 54.3 in September, a report from Credit Suisse showed today. Economists had expected an increase to 54.9. Meanwhile, a final report from Markit Economics said today that the Euro-zone manufacturing Purchasing Managers' Index or PMI climbed to 50.7 in October from 49.3 in September. The index was unchanged from the flash estimate. Against the currency of U.K., the dollar is currently trading at a 4-day high of 1.6349. If the dollar gains further, it may target the 1.625 level. At Friday's close, the pound-dollar pair was quoted at 1.6434. The average asking price of a home in the United Kingdom was up 0.2 percent to 156,400 pounds in October, according to property data manager Hometrack, climbing for the third consecutive month. Prices also had added 0.2 percent in September. On an annual basis, home prices were down 4.2 percent following the 5.6 percent contraction in the previous month. The dollar plummeted to a new multi-week low of 89.21 against the yen before bouncing back at 6:45 pm ET Sunday. As of now, the dollar-yen pair is trading at 90.30, up from last week's close of 90.10. The next target level for the U.S. currency is seen at 91.6. Traders are now likely to focus on the New York session, in which the results of the manufacturing survey of the Institute for Supply Management are due out at 10 am ET. Economists expect the index to show a reading of 53 for October.The Commerce Department's construction spending report to be released at 10 am ET is expected to show a 0.2% decline in spending for September.Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 am ET. The index is expected to edge down 0.1% in September.

विश्व बजार मा सुनको मुल्य डिसेम्बेर कन्ट्राक्ट को लागि १८ महिना को उचाहीमा पुग्यो। १०२३.९८ अमेरिकी डलर प्रती आउन्स लाई छोएर आएको सुनको मुल्यलाई अमेरिकी डलरको निराशजनक पर्दशनले बढ्न सहयोग गरिरहेको छ। यो समय मा सुनको मुल्यलाई आधारभुत कुरा हरुले भन्दा मनोवैगानिक असरले निर्देशित गरिरहेको छ।    17/09/09 MorningStar Investment Services

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विजय दशमीं तथा शुभ दीपावलीको पावन अवसरमा लगानीकर्ता, कर्मचारी र हाम्रो व्यापार सँग सम्बन्धित सम्पूर्ण मानुभावहरुलाई हार्दिक मंगलमय शुभ-कामना।  - Morningstar Investment Services 

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फेडरल रिजर्व ले गरेको सर्वेक्षण अनुसार अमेरिका मा  आर्थिक मन्दी को  करिव करीव समाप्त भयो।  बिभिन्न क्षेत्र हरुमा देखिएका आर्थिक कृयाकलाप र सुधारात्मक लक्षणहरुले यस्तो परीणाम देखायो।

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सुनको मुल्य ले अमेरिकी डलर को कमजोरी र मनोवैज्ञानीक असरले गर्दा १००० अमेरिकी डलर को सीमालाई नाघ्यो। १००८ अमेरिकी डलर को समीप पुगेको सुनको मुल्य लाई सेप्टेम्बर महिना भएकोले  फाईदा भइरहेको देखिन्छ किनभने यो महिना बहुमुल्य धातुहरुको लागि  शुभ मानिन्छ। 08/09/09  Morningstar Investment Services 5:14 pm Nepal Time

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गत हप्ता शुक्रबार र शनिबार बसेको जी- २० को मिटिङ मा विश्व अर्थतन्त्रलाई  राहत हुने खालका केही प्रमुख एजेन्डाहरुमा ध्यान राखियो। वित्तिय बजारको सुपरिभिजन र निती नियमहरुमा बिशेष ध्यान।

रोजगार क्षेत्रलाई विस्तार गर्दै अर्थतन्त्र मा सुधारको ब्रिधी। 
विश्व अर्थतन्त्रलाई जिवित गर्ने वितिय बजारलाई जोगाउन अन्तर राष्ट्रिय वित्तिय संस्थाहरु (अन्तर राष्ट्रिय मुद्रा कोष र विश्व बैंक)ले पुँजी को
सहयोग गर्ने।
विश्वलाई सम्पन्नशिलता तिर लैजान व्यापार तथा लगानीलाई प्रोत्साहन र रक्षात्मक सिद्दान्तलाई अस्विकार।
आर्थिक मन्दीले धनी र गरीब सबैलाई नै असर पारीरहेको छ त्यसैले बिशुद्द र टिकाउ सुधार गर्ने प्रतिबद्दता।  03/09/09 Morningstar Investment Services

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BP Plc, Europe’s second-largest oil company, reported a “giant” discovery at the Tiber Prospect in the U.S. Gulf of Mexico that may contain more than 3 billion barrels, after drilling the world’s deepest exploration well. The well is located about 250 miles (400 kilometers) southeast of Houston, the London-based company said today in a statement. It was drilled to approximately 35,055 feet (10,685 meters), greater than the height of Mount Everest.

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-Current Economic Indicators
August 31, 2009 (Close of Day)
Indicator	Value
Inflation %	-1.89
GDP Growth %	-1.02
Unemployment %	9.40
Gold $/oz	952.60
Oil $/bbl	69.96
Prime %	3.25

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Month	Date	Forecast Value	50% Correct +/-	80% Correct +/-
0	Jul 2009	64.1	0	0
1	Aug 2009	70	6	14
2	Sep 2009	74	8	18
3	Oct 2009	65	9	20
4	Nov 2009	60	10	22
5	Dec 2009	52	10	23
6	Jan 2010	43	11	25
7	Feb 2010	49	11	26
8	Mar 2010	61	12	27

 Crude Oil Price Forecast

West Texas Intermediate Spot Price. USD/bbl. Average of Month.

Updated Thursday, August 20, 2009

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Month	Date	Forecast Value	50% Correct +/-	80% Correct +/-
0	Jul 2009	934.2	0	0
1	Aug 2009	948	55	123
2	Sep 2009	946	68	152
3	Oct 2009	935	76	171
4	Nov 2009	925	83	187
5	Dec 2009	949	89	200
6	Jan 2010	969	94	211
7	Feb 2010	977	99	221
8	Mar 2010	987	103	230

 Gold Price Forecast

London Fix. US Dollars per troy ounce.

Updated Thursday, August 20, 2009

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एसियाको तेश्रो धनी राष्ट्र भारतमा आर्थिक मन्दीको असर कम भईरहेको संकेत मिलिरहेको छ। हिजो को समाचार अनुसार सन २००७ देखी यता भारत को कुल ग्राहस्थ उत्पादन पहीलो पटक ब्रिधी भएर ६।१ प्रतिशत पुग्यो।  31/08/09 Morningstar Investment Services 

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विश्वको दोश्रो धनी राष्ट्र जापान मा भएको चुनावको घोषणा मा डेमोक्रेटिक पार्टी अफ जापान ले विजय प्राप्त गर्‍यो। डेमोक्रेटिक पार्टी अफ जापान का ६२ बर्षीय नेता युकियो हातोयमा नयाँ प्रधानमन्त्री बने। हार सँगै भुतुपुर्व प्रधानमन्त्री तारो आसो आफ्नो पार्टी लिबेरल डेमोक्रेटिक पार्टी को मुख्य पद बाट हट्न चाहनु भएको छ।  31th August, 09 Morningstar Investemt  Servics 

       

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Eligible Pledges

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अमेरिकी डेमोक्रयाट पार्टी का महान नेता तथा अमेरिकी सिनेट का शक्तिशाली सिनेटर एड्वर्ड केनेडी को असमायिक मृत्‍यु भएको छ। अमेरिकी इतिहासमा सबै भन्दा लामो समय सम्म सेवा गरेका शक्तिशाली सिनेटर एड्वार्ड ७७ बर्ष का थिए। प्रख्यात राजनैतीक परिवार सग सम्बन्ध राख्ने एड्वार्ड का जेठा दुई दाजु हरुको हत्या भएको थियो।    -   26/08/09 Morningstar Investment Services

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विश्वस्तरिय कारोबारमा देखिएको ब्रिधीले गर्दा निर्यात को माग बढन गई जर्मनी  को कुल ग्राहस्थ उत्पादन दोश्रो त्राइमासिक परिणाममा  ०.३ प्रतिशतले विस्तारित भयो।  त्यसैगरी जर्मन ब्यापार आत्मविश्वास सुचकपनि ९५.५ पुग्यो जबकी जुलाई महिनामा ८७.४ थियो।   26/08/09

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