Friday, August 31, 2012

Gold rises after Bernanke promises action


The price of gold and other precious metals jumped Friday, after Federal Reserve Chairman Ben Bernanke made clear that he expects to take further action to try to boost the economy.

The Fed can try to prop up the economy by buying government bonds, lowering interest rates and other measures. Those moves can lead to inflation. And when investors believe inflation is coming, they often buy gold and other precious metals because they believe they are protections against inflation.

In a speech at the Fed's annual retreat in Jackson Hole, Wyo., Bernanke stopped short of committing the Fed to any specific move. But he said that the central bank will do more, because unemployment is so high and the economic recovery "far from satisfactory."

Gold, palladium and platinum all jumped about 2 percent. Silver jumped more than 3 percent.

All can be traded as precious metals, though silver, palladium and platinum can trade as industrial metals as well since they are used in manufacturing certain products.

Copper, an industrial metal, rose only slightly.

http://www.huffingtonpost.com/huff-wires/20120831/us-commodities-review/


Thursday, August 30, 2012

At Long Last, Gold Miners' Turn to Shine

Gold gets all the attention, but gold-mining stocks finally are getting some action.

Anticipation that central banks led by the Federal Reserve and the European Central Bank will inject more liquidity into the financial system has helped spur a rally in gold-mining stocks. The Market Vectors Gold Miners exchange-traded fund (GDX) is up about 9% in the past month, compared to a 2.8% gain for the SPDR Gold Trust (GLD), which tracks the metal.

Investors can harness the momentum with a call-options strategy that would prove profitable if the Gold Miners ETF continues its advance through year's end.

Read more: Gold Miners' Turn to Shine

Tuesday, August 28, 2012

Gold Set for Best Year Since 2010 as Stimulus Bets Increase


Gold is poised to climb the most in two years as prospects for additional economic stimulus by governments from the U.S. to China stoke demand for the precious metal as a bet against inflation, a survey showed.

Bullion for immediate delivery may reach $1,800 an ounce by the year-end, extending gains this year to 15 percent, according to the median forecast in the Bloomberg survey of 15 traders and analysts at a conference in Hyderabad in South India on Aug. 25. That would be the most since a 30 percent surge in 2010, data compiled by Bloomberg show.
Enlarge image Gold Set for Best Year Since 2010 as Stimulus Bets Stoke Demand

Gold is set for a 12th year of gains as the European sovereign-debt crisis boosts haven demand amid speculation of further policy easing by central banks, including the U.S. Federal Reserve, which may be considering a third round of so-called quantitative easing, or QE3.

Gold is set for a 12th year of gains as the European sovereign-debt crisis boosts haven demand amid speculation of further policy easing by central banks, including the U.S. Federal Reserve, which may be considering a third round of so- called quantitative easing, or QE3. Investment holdings have expanded to a record on demand for a hedge against inflation.

“The euro zone has been quiet of late, but that doesn’t mean the problems have disappeared,” said Jeffrey Rhodes, global head of precious metals at INTL FCStone Inc. (INTL), who expects gold to rally to $1,975 by year-end. “The U.S. economy has been sluggish and there is a growing belief that there is going to be QE3 soon. This anticipation is driving the market.”

Fed Chairman Ben S. Bernanke said last week there’s “scope for further action” from the U.S. central bank. He is scheduled to speak later this week at the Fed’s annual symposium in Jackson Hole, Wyoming. China’s Premier Wen Jiabao has urged additional steps to support exports and help meet economic targets as evidence mounts the slowdown is deepening.
Europe Strains

Gold for immediate delivery rose as much as 0.4 percent to $1,676.90 an ounce today, the highest since April 13, and was little changed at $1,670.60 an ounce at 4:42 p.m. in Mumbai. Prices gained 3.4 percent last week, the most since the week ended Jan. 27. Spot gold reached a record $1,921.15 on Sept. 6.

“Europe’s financial situation is straining at the seams and with no fix forthcoming, demand for safe havens is likely to remain strong,” said Bimal Das, director at ScotiaMocatta, the metals trading unit of Bank of Nova Scotia.

The European leaders are preparing for a critical month in the three-year-old crisis that will involve the formulation of a European Central Bank bond-buying plan, a progress report by Greece’s international creditors and a looming German court decision on bailout funding on Sept. 12.

“More cash is coming into the market from investors,” said Philip Klapwijk, the global head of metals analytics at Thomson Reuters GFMS Ltd. “We expect there to be QE3 by September and gold will move substantially higher. The ETF demand has picked up and will continue to grow as prices rise.”
Soros, Paulson

Holdings in gold-backed exchange-traded products, or ETPs, rose 0.1 percent to 2,448.64 metric tons on Aug. 24, data tracked by Bloomberg show. Billionaire investors George Soros and John Paulson increased their stakes in the SPDR Gold Trust (GLD), the biggest gold-backed ETP, in the second quarter, U.S. Securities and Exchange Commission filings showed Aug. 14.

Central banks will purchase close to 500 tons this year after becoming net buyers in 2009, according to the producer- funded World Gold Council. Central banks added 254.2 tons to their holdings in the first half, according to the council, as countries from Russia to South Korea added to reserves.

“There is official interest in gold and central banks are buying, from Russia to Korea,” said Jeremy East, global head of metals trading at Standard Chartered Plc. “Central bank purchases are not driven by price but by asset allocation.”
Losing Steam

Gold may “lose steam quickly” if the market is disappointed by a lack of action to stimulate economies, Barclays Plc said in an e-mailed report today. “For gold to extend its gains, it needs to continue to draw wider investor support in light of the fragile physical market,” analysts including Suki Cooper said in the report.

Gold imports by India, the biggest buyer, may decline by 250 tons to 350 tons this year as record prices in rupees cut into demand, East said. Consumption rose to a record 963.1 tons last year, driving bullion imports to the highest ever at 958 tons, according to the gold council.

“The Indian currency has weakened and could weaken further, so demand may not come in,” East said. The Indian rupee declined to a record of 57.3275 per dollar on June 22, making imports costlier.

Bullion for October delivery gained as much as 0.5 percent to an all-time high of 31,091 rupees ($559) per 10 grams on the Multi Commodity Exchange of India Ltd. today. Prices have climbed 13 percent this year.

Original article can be found here

Sunday, August 26, 2012

Buy (Gold) Low And Sell (Stocks) High

For the past few months, the markets have risen back to highs made earlier this year as traders attempt to front run potential EU and Fed intervention. Federal Reserve Chairman Ben Bernanke and his counterpart ECB Chairman Mario Draghi have used almost every arrow in their quiver in an attempt to juice the markets higher over the summer.

We have been told that the Federal Reserve stands ready to act, the ECB would do whatever it takes, and that the ECB stands ready to enact a policy of unlimited bond purchases and/or sovereign debt yield targeting in an effort to prop up the markets.

The problem with promises of intervention is that once the markets have front run the targeted asset classes there is little left for investors. For example, the S&P 500 (SPY) now trades for 16 times earnings, an expensive multiple when one considers that earnings growth in the second quarter stumbled into the single digits and the third quarter little or no growth is expected. At the beginning of the year, earnings growth was expected to be in the low teens indicating that the global economy is slowing more than anyone expected.

The question now becomes what happens if the Central Banks do or do not deliver on their promises?

The ECB has already poured cold water on the idea of granting the ESM a banking license making the idea of targeting sovereign bond yields impossible at best unless they want to become the only buyer in town. This solution would create more risk and open the door to moral hazard as the affected governments would have no incentive to fix their structural problems.

The idea that targeting sovereign bond yields can stem the crisis in the European bond market harkens back to the LTRO which was effective until it ran out of funds. The LTRO helped plug holes in Spanish banks during bank runs earlier this year, but in terms of bringing an end to the European crisis, it has been a failure.

Initially, yields fell but then rose once the money ran dry. A similar situation may be occurring now as European leaders put the finishing touches on a new bond purchase program. Traders are front-running the program, buying up as much sovereign debt as possible in the hopes that they can flip the bonds to the ECB. If the program does not appear, look for a swift selloff as the trade quickly reverses itself. If the program does appear, look for yields to fall initially as traders stuff the ECB full of debt they purchased earlier only to disappear once the program is full sending rates higher. One huge risk of targeting sovereign bond yields is monetizing all debt from Spain and Italy as the markets will test the cap repeatedly until the limit is found.

In this environment, investors should be taking steps to protect their portfolios against the coming selloff. Stocks like Coca-Cola (KO) are extremely overvalued in this market climate, trading for 20 times earnings while giving investors 4% growth through the first six months of this year. No one denies that they are a one of a handful of global brands whose logo is recognized anywhere in the world, but there is the question of how much premium that brand commands in this economic environment.

The old Wall Street adage of buy low and sell high applies here. Stocks are overvalued and trading near yearly highs, while Gold (GLD) and Silver (SLV) have spent the better part of the summer tracing out bottom formations, setting the stage for the next move higher.

In either case, intervention or no intervention, gold and silver will move higher after a short pullback. Intervention means that gold and silver once again will take on their roles of safe havens in an uncertain environment. If there is no intervention, that means the inevitable has been delayed, giving investors the opportunity to buy in before the storm hit.

Originally published here:

http://seekingalpha.com/article/828651-buy-gold-low-and-sell-stocks-high


Saturday, August 18, 2012

Slim Majority See Higher Prices For Gold Next Week


A slim majority of participants in the Kitco News Gold Survey are expecting higher prices next week, but a good number of respondents said there is no reason for the market to push out of its current trading range.

In the Kitco News Gold Survey, out of 33 participants, 28 responded this week. Of those 28 participants, 16 see prices up, while three see prices down, and nine are neutral or see prices moving sideways. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

Sources who see higher gold prices next week said they expect gold to start to get ready to break out of its August doldrums and try to retest the upper end of resistance at $1,626-30. Darin Newsom, Telvent DTN senior analyst, said looking at Comex gold futures, the most-active December contract “is nearing a breakout of its four-week high of $1,633.30. Also, the U.S. dollar index is in position to turn lower again.”

Those who see prices holding in a range said given the time frame, there’s little reason for gold to break out of its trading range and is likely content to hold in this current path. Frank Lesh, futures broker at FuturePath Trading, said while the pattern of a succession of higher lows since May suggests a move into the $1,700s eventually, “it won’t happen without corresponding moves in the currencies. Next week looks like more of the same, so I expect price to continue sideways and be unchanged.”

Participants who see weaker prices said the low volume, low open interest in the futures market, along with no change in the trading pattern doesn’t bode well for the market. If the minutes from the Federal Open Market Committee come out next week without a hint of more stimulus, that may encourage some selling.

Original appeared at: http://www.kitco.com/kgs/goldsurvey_august17.2012.html

Thursday, August 16, 2012

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