Dubai: Middle Eastern stock markets will "outperform" this year as the region's economies benefit from high oil prices and a recent correction has made stocks "reasonably attractive", UBS AG wrote in a note to clients.
Equities in the UAE, Egypt and other regional markets will "continue to offer one of the more attractive opportunities to foreign investors in 2008," helped by "attractive valuations," economic growth fuelled by high oil prices, and a "low" correlation with global markets, London-based strategist Oussama Himani wrote.
Members of Dubai's index trade at an average of 17 times estimated earnings, according to data compiled by Bloomberg. That compares with a multiple of 34.6 for China's CSI 300 Index and 21.4 for India's Sensitive Index.
Insulation
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UBS, Europe's largest bank by assets, expects Middle Eastern economies to be "largely insulated from slower growth in the US and Europe" with sustained economic expansion "not least because of high oil prices," Himani wrote.
Crude traded in New York averaged $72.36 per barrel in 2007, 20 per cent higher than the previous year, according to Bloom-berg data. The Gulf states, which together pump a fifth of the world's oil, are earning more than $1.3 billion a day with crude above $90 a barrel.
The Gulf Cooperation Council states of UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain will expand at a faster rate in 2008 than last year, EFG-Hermes Holding SAE wrote in a report on January 7.
The UAE's economy will grow 7.2 per cent, while the Saudi Arabian economy will expand 4.9 per cent in 2008, according to the median estimate of seven economists polled by Bloomberg in December. That compares with US economic growth of 1.9 per cent this year, according to a Bloomberg survey.
Markets in the UAE and Egypt are the most attractive, with opportunities especially in financial, insurance and materials companies, according to the note.
Monday, February 11, 2008
Venezuela threatens to stop US oil sales
Caracas: President Hugo Chavez on Sunday threatened to stop sending oil to the United States unless it halted an "economic war" that he said included an ExxonMobil lawsuit freezing $12 billion in Venezuelan assets.
The anti-American leader of a major crude exporter to the United States also warned that such US aggression could cause world oil prices to spike to $200 a barrel.
Oil prices rose last week in part because of the self-styled socialist revolutionary's dispute with the largest US company over compensation for Chavez's nationalisation last year of an ExxonMobil Corp project.
The administration of President George W. Bush has distanced itself from the Exxon legal offensive, in which the oil company won international court orders freezing assets of the state oil company PDVSA.
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"If you freeze us, if you really manage to freeze us, if you damage us, then we will hurt you. Do you know how? We are not going to send oil to the United States, Bush, Danger," Chavez said on his weekly TV show.
"Venezuela will join in your economic war and other countries will be with us in the economic war," added the ally of oil producers such as Iran and Ecuador.
Chavez has frequently issued conditional threats to stop shipments to its biggest oil customer, but has maintained supplies despite clashing with Washington over everything from crude prices to free trade to democracy.
"Never again will they rob us - the ExxonMobil bandits. They are imperial, American bandits, white-collared thieves. They turn governments corrupt, they oust governments. They supported the invasion of Iraq," he said.
Exxon retaliated for the seizure of a heavy crude upgrading project, winning the first big court battle over compensation in a wave of takeovers that Chavez says will help create a socialist state.
The court rulings in several countries mean the state oil company - Chavez's main income source - cannot sell certain assets or move some funds while the compensation case is reviewed.
Exxon's move is the boldest challenge yet by an oil major against any of the governments from Russia to Ecuador that have moved to increase their control over natural resources as energy and commodity prices have soared.
Industry analysts believe other companies could follow Exxon's lead if it prevails in a court battle that could take several years.
Chavez, who calls capitalism an evil, accuses big oil companies and large consumer nations of seeking to control the natural resources of major producers such as Venezuela.
His comments on Sunday followed days of a blitz on state television of programmes and advertisements denouncing Exxon as a predator company seeking to plunder Venezuela.
The court orders were a new blow to Chavez, who lost a referendum on expanding his powers and enshrining socialism as a state goal in December and has struggled for months to combat rampant inflation and chronic food shortages.
Never again will they rob us - the ExxonMobil bandits. They are imperial, American bandits, white-collared thieves. They turn governments corrupt, they oust governments."
Hugo Chavez
Venezuelan president
The anti-American leader of a major crude exporter to the United States also warned that such US aggression could cause world oil prices to spike to $200 a barrel.
Oil prices rose last week in part because of the self-styled socialist revolutionary's dispute with the largest US company over compensation for Chavez's nationalisation last year of an ExxonMobil Corp project.
The administration of President George W. Bush has distanced itself from the Exxon legal offensive, in which the oil company won international court orders freezing assets of the state oil company PDVSA.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
"If you freeze us, if you really manage to freeze us, if you damage us, then we will hurt you. Do you know how? We are not going to send oil to the United States, Bush, Danger," Chavez said on his weekly TV show.
"Venezuela will join in your economic war and other countries will be with us in the economic war," added the ally of oil producers such as Iran and Ecuador.
Chavez has frequently issued conditional threats to stop shipments to its biggest oil customer, but has maintained supplies despite clashing with Washington over everything from crude prices to free trade to democracy.
"Never again will they rob us - the ExxonMobil bandits. They are imperial, American bandits, white-collared thieves. They turn governments corrupt, they oust governments. They supported the invasion of Iraq," he said.
Exxon retaliated for the seizure of a heavy crude upgrading project, winning the first big court battle over compensation in a wave of takeovers that Chavez says will help create a socialist state.
The court rulings in several countries mean the state oil company - Chavez's main income source - cannot sell certain assets or move some funds while the compensation case is reviewed.
Exxon's move is the boldest challenge yet by an oil major against any of the governments from Russia to Ecuador that have moved to increase their control over natural resources as energy and commodity prices have soared.
Industry analysts believe other companies could follow Exxon's lead if it prevails in a court battle that could take several years.
Chavez, who calls capitalism an evil, accuses big oil companies and large consumer nations of seeking to control the natural resources of major producers such as Venezuela.
His comments on Sunday followed days of a blitz on state television of programmes and advertisements denouncing Exxon as a predator company seeking to plunder Venezuela.
The court orders were a new blow to Chavez, who lost a referendum on expanding his powers and enshrining socialism as a state goal in December and has struggled for months to combat rampant inflation and chronic food shortages.
Never again will they rob us - the ExxonMobil bandits. They are imperial, American bandits, white-collared thieves. They turn governments corrupt, they oust governments."
Hugo Chavez
Venezuelan president
Liquefied natural gas has got a logistic appeal as well
It is hard to look away from the fireworks surrounding Venezuela's firebrand president Hugo Chavez. He's now threatening to cut off oil supplies to the US, following Exxon's move to freeze $12 billion of Venezuela's state-owned oil company's assets after a decision to nationalise four heavy oil projects in the Orinoco Basin.
But there are only so many times I can write about a North American bully (Bush) facing off against a South American blowhard (Chavez). Besides, Opec is sticking to its "we aren't raising production" guns. So let the hot air blow back and forth in the Americas. In the meantime, I find myself being increasingly drawn towards liquefied natural gas.
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Although not all the news in LNG is good - there are still not enough regasification facilities in relation to the amount of LNG produced, for instance - 2008 is looking to be a brilliant year as many projects finally reach completion.
New production is set to come on line this year in Russia, Indonesia, Nigeria, Australia, Yemen and Qatar, where production is expected to eventually hit 39 million tonnes per year.
Regasification is finally starting to catch up as well, with more than 65 million tonnes per year of capacity set to open up in the United States, Mexico and Canada, bringing total capacity up to 90 million tonnes per year.
Europe should see roughly 26 million tonnes per year added to its capacity, and Asia will add about the same amount in Korea, China and India. And there is no ignoring that LNG demand is what pushed BG Group's fourth-quarter earnings up 36 per cent, beating analyst expectations.
Taking a quick stroll through the news stories recently, it is easy to pinpoint part of the appeal of LNG. Unlike unprocessed natural gas, which is transported through vulnerable pipelines that often cross international borders, LNG can be easily shipped on supertankers to any corner of the world.
European natural gas supplies, however, are constantly threatened by ongoing issues between Russia and Ukraine. The dispute, which centres around Ukrainian debt of about $1.5 billion in unpaid gas deliveries, has already cut gas supplies to Europe once. Considering that the European Union gets a quarter of its natural gas from Russia, through Ukraine, the situation is unstable at best. And while Russian First Deputy Prime Minister Sergei Ivanov said Europe will not feel the pinch again, Gazprom is still remaining on plans to halt the flow of gas on February 12.
Small wonder the EU is beefing up its LNG regasification capacity.
Meanwhile, those same natural gas pipelines remain entirely vulnerable to attack on both national and international levels. Just last Saturday, suspected militants blew up two gas pipelines in Pakistan. Everywhere from Turkey to Iraq to Georgia, natural gas pipelines have proved to be a tempting target for terrorists.
Then there are the political snarls that plague the transport of natural gas over international borders.
Iran and India have both decided to end negotiations to build an Iran-Pakistan-India gas pipeline, which were scheduled to get underway on Monday. Iran just backed out of the deal, and India pulled out slightly earlier, saying that it wouldn't come to the table until a new government was elected in Pakistan.
So keep watching the pro wrestling match that US-Venezuelan relations have become. But the real action is elsewhere as everything from LNG, gas-to-liquid (GTL) fuels and other energy sectors boom.
The writer is a freelance journalist based in Alaska, USA.
Unlike unprocessed natural gas, which is transported through vulnerable pipelines that often cross international borders, LNG can be easily shipped on supertankers to any corner of the world.
But there are only so many times I can write about a North American bully (Bush) facing off against a South American blowhard (Chavez). Besides, Opec is sticking to its "we aren't raising production" guns. So let the hot air blow back and forth in the Americas. In the meantime, I find myself being increasingly drawn towards liquefied natural gas.
--------------------------------------------------------------------------------
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Although not all the news in LNG is good - there are still not enough regasification facilities in relation to the amount of LNG produced, for instance - 2008 is looking to be a brilliant year as many projects finally reach completion.
New production is set to come on line this year in Russia, Indonesia, Nigeria, Australia, Yemen and Qatar, where production is expected to eventually hit 39 million tonnes per year.
Regasification is finally starting to catch up as well, with more than 65 million tonnes per year of capacity set to open up in the United States, Mexico and Canada, bringing total capacity up to 90 million tonnes per year.
Europe should see roughly 26 million tonnes per year added to its capacity, and Asia will add about the same amount in Korea, China and India. And there is no ignoring that LNG demand is what pushed BG Group's fourth-quarter earnings up 36 per cent, beating analyst expectations.
Taking a quick stroll through the news stories recently, it is easy to pinpoint part of the appeal of LNG. Unlike unprocessed natural gas, which is transported through vulnerable pipelines that often cross international borders, LNG can be easily shipped on supertankers to any corner of the world.
European natural gas supplies, however, are constantly threatened by ongoing issues between Russia and Ukraine. The dispute, which centres around Ukrainian debt of about $1.5 billion in unpaid gas deliveries, has already cut gas supplies to Europe once. Considering that the European Union gets a quarter of its natural gas from Russia, through Ukraine, the situation is unstable at best. And while Russian First Deputy Prime Minister Sergei Ivanov said Europe will not feel the pinch again, Gazprom is still remaining on plans to halt the flow of gas on February 12.
Small wonder the EU is beefing up its LNG regasification capacity.
Meanwhile, those same natural gas pipelines remain entirely vulnerable to attack on both national and international levels. Just last Saturday, suspected militants blew up two gas pipelines in Pakistan. Everywhere from Turkey to Iraq to Georgia, natural gas pipelines have proved to be a tempting target for terrorists.
Then there are the political snarls that plague the transport of natural gas over international borders.
Iran and India have both decided to end negotiations to build an Iran-Pakistan-India gas pipeline, which were scheduled to get underway on Monday. Iran just backed out of the deal, and India pulled out slightly earlier, saying that it wouldn't come to the table until a new government was elected in Pakistan.
So keep watching the pro wrestling match that US-Venezuelan relations have become. But the real action is elsewhere as everything from LNG, gas-to-liquid (GTL) fuels and other energy sectors boom.
The writer is a freelance journalist based in Alaska, USA.
Unlike unprocessed natural gas, which is transported through vulnerable pipelines that often cross international borders, LNG can be easily shipped on supertankers to any corner of the world.
Some Gulf banks could be hiding subprime losses
Dubai: The exposure of Gulf banks to the US subprime mortgage crisis is limited, however, it appears that some banks are hiding their losses, said Emmanuel Volland, director of financial services with Standard & Poor's.
"Transparency and quality of disclosures are still a big problem with some GCC banks and to that extent the information on the exact nature of exposure is limited. However, a few banks have recently acknowledged subprime related losses and there could be a few still hiding their exposure," said Volland.
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In August last year, S&P did a survey of banks it rates in the region and concluded that the losses could be less than one per cent of the total assets. However, a further deterioration in the values of subprime assets in the fourth quarter of last year has resulted in the valuations of investment portfolios of some of these banks dipping further.
Collateralised debt
Problems of most banks came from collateralised debt obligations (CDOs). These securities are created when pools of debt, some of them tied to subprime mortgages, are sliced into pieces carrying different levels of risk and return, and then sold to investors.
Although regional central banks have insisted in the past that Gulf banks are insulated from the subprime losses, the substantial decline in the US residential mortgage-backed securities (RMBS) and structured investment vehicles (SIVs) have put pressure on the bottomlines of a number of regional banks.
This month, Arab Banking Corporation and Abu Dhabi Commercial Bank reported declines in profits due to portfolio declines linked to US and western markets. ABC made Dh840 million worth of provisions and ADCB made a general provision of Dh560 million.
In December international rating agency Moody's warned of a few Gulf banks being affected by the US subprime related losses. In a rating revision Moody's changed the outlook on Gulf International Bank's (GIB) A2/Prime-1 deposit ratings and A3 subordinated debt ratings of GIB to negative from stable.
Loan portfolio
Apart from the portfolio losses, rating agencies are concerned about the bulging retail loan portfolios of Gulf banks. Retail loans have been growing rapidly in the region over the past three years.
According to UAE Central Bank statistics, retail loans in the UAE surged almost 40 per cent in 2007 while most Gulf countries reported retail lending growth in the range of 20 to 40 per cent.
"The retail loan growth has been supporting the financial performance of banks. However, these loans are untested by sharp economic downturn and could exacerbate asset quality problems under stress conditions," said Mohammad Damak, an analyst with S&P.
According to S&P, the asset quality of the rated banks continued to remain strong. In the first half of last year the overall non performing loans (NPLs) declined to two per cent compared with 2.3 per cent at the end of 2006. However, it warned that the NPLs could deteriorate should economic conditions decline.
"Transparency and quality of disclosures are still a big problem with some GCC banks and to that extent the information on the exact nature of exposure is limited. However, a few banks have recently acknowledged subprime related losses and there could be a few still hiding their exposure," said Volland.
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In August last year, S&P did a survey of banks it rates in the region and concluded that the losses could be less than one per cent of the total assets. However, a further deterioration in the values of subprime assets in the fourth quarter of last year has resulted in the valuations of investment portfolios of some of these banks dipping further.
Collateralised debt
Problems of most banks came from collateralised debt obligations (CDOs). These securities are created when pools of debt, some of them tied to subprime mortgages, are sliced into pieces carrying different levels of risk and return, and then sold to investors.
Although regional central banks have insisted in the past that Gulf banks are insulated from the subprime losses, the substantial decline in the US residential mortgage-backed securities (RMBS) and structured investment vehicles (SIVs) have put pressure on the bottomlines of a number of regional banks.
This month, Arab Banking Corporation and Abu Dhabi Commercial Bank reported declines in profits due to portfolio declines linked to US and western markets. ABC made Dh840 million worth of provisions and ADCB made a general provision of Dh560 million.
In December international rating agency Moody's warned of a few Gulf banks being affected by the US subprime related losses. In a rating revision Moody's changed the outlook on Gulf International Bank's (GIB) A2/Prime-1 deposit ratings and A3 subordinated debt ratings of GIB to negative from stable.
Loan portfolio
Apart from the portfolio losses, rating agencies are concerned about the bulging retail loan portfolios of Gulf banks. Retail loans have been growing rapidly in the region over the past three years.
According to UAE Central Bank statistics, retail loans in the UAE surged almost 40 per cent in 2007 while most Gulf countries reported retail lending growth in the range of 20 to 40 per cent.
"The retail loan growth has been supporting the financial performance of banks. However, these loans are untested by sharp economic downturn and could exacerbate asset quality problems under stress conditions," said Mohammad Damak, an analyst with S&P.
According to S&P, the asset quality of the rated banks continued to remain strong. In the first half of last year the overall non performing loans (NPLs) declined to two per cent compared with 2.3 per cent at the end of 2006. However, it warned that the NPLs could deteriorate should economic conditions decline.
Will the IMF Gold sale plan work?
St. LOUIS (ResourceInvestor.com) -- On Saturday, the Group of Seven (G-7) approved the sale of gold by the International Monetary Fund (IMF) from April as part of a broad reform of its budget. But this isn’t the first time gold sales have been approved and subsequently blocked, which raises the question of how this proposal would be any different.
With an annual deficit of about $400 million and a looming global economic slowdown, it stands to reason why the IMF wants to sell some of its gold. The fund is spending $1 billion a year but only bringing in $600 million, while holding 103.4 million ounces (3,217 metric tonnes) of gold worth about $92 billion at current prices - up from $23 billion just 5 years ago.
Italian Economy Minister Tommaso Padoa-Schioppa, also the head of the IMF’s steering committee, said at the meeting between Britain, China, France, Germany, Italy, Japan and the U.S. that “there was an acceptance among the G-7 that resources should be raised by selling gold ... the current gold price means a flow of income can be ensured.”
He said the agreement would be finalised in April and would complement spending cuts being drawn up by the IMF under new Managing Director Dominique Strauss-Kahn. But any sales of the IMF's gold must be approved by 85% of the organization's total voting power.
The United States, as the largest single member nation, and the largest single contributed of the IMF's gold, holds a crucial 17% of that 85% voting power and can effective veto the proposal. The U.S. previously blocked an attempt to sell IMF gold to the market formally in 1999 and informally 2005.
Matt Turner, metals analyst for VM Group, said the G7 meeting basically implies that the administrations of the countries involved are happy with the plan, but the “U.S. Congress is yet to give its authorisation.”
“So it's not clear whether it will pass Congress - for various reasons they might not agree,” he added.
In 1999, for instance, the U.S. Congress blocked on-the-market gold sales for debt relief citing concerns about the impact on the gold price as well as a broad belief that the gold belonged to the members and any surplus should be returned to them. Some were even against any IMF funding, preferring the Fund to be slimmed down or closed entirely, according to Turner.
As a result, in December 1999, the Executive Board authorized off-market transactions in gold of up to 14 million ounces to help finance IMF participation in the Heavily Indebted Poor Countries Initiative. Off-market transactions involving a total of 12.9 million ounces of gold were carried out between the IMF and two member nations, Brazil and Mexico.
This weekend’s announcement follows a recommendation in late January by an esteemed group of eminent persons, including former Fed Chairman Alan Greenspan and current President of the European Central Bank Claude Trichet, advocating on-the-market sales of up to 400 tonnes of gold by the IMF as means to finance ongoing costs.
In a report submitted to the IMF Executive Board today, the Committee, headed by Bank of International Settlement head Sir Andrew Crockett, concluded that the IMF's current income model, which relies heavily on the interest it earns from loans to member nations, is “no longer appropriate.”
At that time, the fund estimated gains about $6.6 billion in revenue with the sale of 400 tonnes (12.9 million ounces) at $500/oz. Investment of the proceeds would yield approximately $195 million per year, assuming a real rate of return of 3%, according to the committee. At $900/oz gold, revenue would increase to about $11.5 billion.
However, the Committee made clear that it wanted the gold sales to be limited to 400 tonnes sold in a way that didn't disrupt the market, much like gold sold consistent with the European Central Bank Gold Agreement (EGA), which limits sales to 500 tonnes per year.
“So the assumption was that they would have a bit of Germany's unused quota, or it might spill over into another EGA,” said Turner.
So far in the fourth agreement year of the EGA, European signatories have reported sales of about 118.6 tonnes, although some January sales have yet to be posted. Current estimates suggest gold sales through January total a little more than 131 tonnes. But minus sales by Germany and Italy again this year, most analysts agree that banks will fall short of the 500-tonne quota.
Dennis Gartman, editor of The Gartman Letter, told subscribers in today’s Letter that the IMF needs the income and “we are not surprised by the announcement, although we suspect that others are.”
He noted that the agreement would not be finalized until April, “so the real pressure upon gold shall not come until then ... for the moment we have to report that the market has ‘taken’ this news very, very well indeed.”
This morning, New York spot gold prices opened only marginally lower, showing a $1.40 loss at $921.90 after having traded in a band of from $920 to $928 overnight. Currently, spot gold is trading down $1.60 at $921.60.
James Moore, precious metals analyst for TheBullionDesk.com, said in an e-mailed market update this morning that dip buying is expected to provide ongoing support in the market. He expects gold to challenge the metal’s $936.80 high, “although the approval of IMF gold sales by G7 members may dampen some of the metals bullishness.”
Jon Nadler, senior analyst for Kitco Bullion Dealers, said it is a bit too early to call the issue a win or a loss for gold since the precise size, timing and methodology of the disposals is still unknown.
“Opinion remains divided as to whether the proposed sale will or will not impact gold market prices and/or psychology at a time when the yellow metal is trading within $10 of its all-time peak,” said Nadler.
He suggested that readers continue to watch the U.S. dollar and equity markets as prime movers for the precious metal, however, added “we will not ignore the developments on the IMF front and consider them ‘case closed.’”
With an annual deficit of about $400 million and a looming global economic slowdown, it stands to reason why the IMF wants to sell some of its gold. The fund is spending $1 billion a year but only bringing in $600 million, while holding 103.4 million ounces (3,217 metric tonnes) of gold worth about $92 billion at current prices - up from $23 billion just 5 years ago.
Italian Economy Minister Tommaso Padoa-Schioppa, also the head of the IMF’s steering committee, said at the meeting between Britain, China, France, Germany, Italy, Japan and the U.S. that “there was an acceptance among the G-7 that resources should be raised by selling gold ... the current gold price means a flow of income can be ensured.”
He said the agreement would be finalised in April and would complement spending cuts being drawn up by the IMF under new Managing Director Dominique Strauss-Kahn. But any sales of the IMF's gold must be approved by 85% of the organization's total voting power.
The United States, as the largest single member nation, and the largest single contributed of the IMF's gold, holds a crucial 17% of that 85% voting power and can effective veto the proposal. The U.S. previously blocked an attempt to sell IMF gold to the market formally in 1999 and informally 2005.
Matt Turner, metals analyst for VM Group, said the G7 meeting basically implies that the administrations of the countries involved are happy with the plan, but the “U.S. Congress is yet to give its authorisation.”
“So it's not clear whether it will pass Congress - for various reasons they might not agree,” he added.
In 1999, for instance, the U.S. Congress blocked on-the-market gold sales for debt relief citing concerns about the impact on the gold price as well as a broad belief that the gold belonged to the members and any surplus should be returned to them. Some were even against any IMF funding, preferring the Fund to be slimmed down or closed entirely, according to Turner.
As a result, in December 1999, the Executive Board authorized off-market transactions in gold of up to 14 million ounces to help finance IMF participation in the Heavily Indebted Poor Countries Initiative. Off-market transactions involving a total of 12.9 million ounces of gold were carried out between the IMF and two member nations, Brazil and Mexico.
This weekend’s announcement follows a recommendation in late January by an esteemed group of eminent persons, including former Fed Chairman Alan Greenspan and current President of the European Central Bank Claude Trichet, advocating on-the-market sales of up to 400 tonnes of gold by the IMF as means to finance ongoing costs.
In a report submitted to the IMF Executive Board today, the Committee, headed by Bank of International Settlement head Sir Andrew Crockett, concluded that the IMF's current income model, which relies heavily on the interest it earns from loans to member nations, is “no longer appropriate.”
At that time, the fund estimated gains about $6.6 billion in revenue with the sale of 400 tonnes (12.9 million ounces) at $500/oz. Investment of the proceeds would yield approximately $195 million per year, assuming a real rate of return of 3%, according to the committee. At $900/oz gold, revenue would increase to about $11.5 billion.
However, the Committee made clear that it wanted the gold sales to be limited to 400 tonnes sold in a way that didn't disrupt the market, much like gold sold consistent with the European Central Bank Gold Agreement (EGA), which limits sales to 500 tonnes per year.
“So the assumption was that they would have a bit of Germany's unused quota, or it might spill over into another EGA,” said Turner.
So far in the fourth agreement year of the EGA, European signatories have reported sales of about 118.6 tonnes, although some January sales have yet to be posted. Current estimates suggest gold sales through January total a little more than 131 tonnes. But minus sales by Germany and Italy again this year, most analysts agree that banks will fall short of the 500-tonne quota.
Dennis Gartman, editor of The Gartman Letter, told subscribers in today’s Letter that the IMF needs the income and “we are not surprised by the announcement, although we suspect that others are.”
He noted that the agreement would not be finalized until April, “so the real pressure upon gold shall not come until then ... for the moment we have to report that the market has ‘taken’ this news very, very well indeed.”
This morning, New York spot gold prices opened only marginally lower, showing a $1.40 loss at $921.90 after having traded in a band of from $920 to $928 overnight. Currently, spot gold is trading down $1.60 at $921.60.
James Moore, precious metals analyst for TheBullionDesk.com, said in an e-mailed market update this morning that dip buying is expected to provide ongoing support in the market. He expects gold to challenge the metal’s $936.80 high, “although the approval of IMF gold sales by G7 members may dampen some of the metals bullishness.”
Jon Nadler, senior analyst for Kitco Bullion Dealers, said it is a bit too early to call the issue a win or a loss for gold since the precise size, timing and methodology of the disposals is still unknown.
“Opinion remains divided as to whether the proposed sale will or will not impact gold market prices and/or psychology at a time when the yellow metal is trading within $10 of its all-time peak,” said Nadler.
He suggested that readers continue to watch the U.S. dollar and equity markets as prime movers for the precious metal, however, added “we will not ignore the developments on the IMF front and consider them ‘case closed.’”
Gold futures finish higher
Precious metals ended stronger across the board Monday as gold futures gained on a slumping dollar and rising crude oil, platinum futures hit a record high on producer news and silver and palladium reached contract highs.
Comex April gold rose $4.40, or nearly 0.5%, to settle at $926.70 a troy ounce on the Comex division of the New York Mercantile Exchange.
March silver rose 36 cents, or more than 2.1%, to settle at $17.47 an ounce after hitting the contract's high of $17.595.
Meanwhile, Nymex platinum futures set an all-time record and palladium futures on the exchange hit a contract high on "continued bad news out of South Africa".
April platinum rose $55.40 to settle at $1,939.40 after hitting an all-time high of $1,949 an ounce. Meanwhile, March palladium settled $2.55 higher at $443.40 an ounce after hitting a contract high of $448.50 overnight.
Anglo Platinum Ltd. (AMS.JO), the world's largest platinum producer, Monday said production of the metal would decline for a second year in 2008 as a power shortage in South Africa added to safety-related problems that upset output last year.
The Johannesburg-based company produced 2.47 million ounces of refined platinum last year, a 12% decrease from 2006 due largely to shutdowns of operations in South Africa following a spate of fatalities.
The company said refined production for 2008 would be about 2.4 million ounces, with about 30,000 ounces already lost to power cuts and a further 120,000 ounces expected to be squeezed by reduced power supplies.
Comex April gold rose $4.40, or nearly 0.5%, to settle at $926.70 a troy ounce on the Comex division of the New York Mercantile Exchange.
March silver rose 36 cents, or more than 2.1%, to settle at $17.47 an ounce after hitting the contract's high of $17.595.
Meanwhile, Nymex platinum futures set an all-time record and palladium futures on the exchange hit a contract high on "continued bad news out of South Africa".
April platinum rose $55.40 to settle at $1,939.40 after hitting an all-time high of $1,949 an ounce. Meanwhile, March palladium settled $2.55 higher at $443.40 an ounce after hitting a contract high of $448.50 overnight.
Anglo Platinum Ltd. (AMS.JO), the world's largest platinum producer, Monday said production of the metal would decline for a second year in 2008 as a power shortage in South Africa added to safety-related problems that upset output last year.
The Johannesburg-based company produced 2.47 million ounces of refined platinum last year, a 12% decrease from 2006 due largely to shutdowns of operations in South Africa following a spate of fatalities.
The company said refined production for 2008 would be about 2.4 million ounces, with about 30,000 ounces already lost to power cuts and a further 120,000 ounces expected to be squeezed by reduced power supplies.
China will drive global market for Gold
Technically, gold futures contracts are showing a bearish rising wedge pattern so there is the imminent risk of a minor correction now.
I say minor and not major, because I just can’t see gold retreating all the way back to $800 an ounce. I just think that such a significant retreat, given the vast problems in the global economy, and particularly in the U.S., has a very small probability.
My downside projections for a correction are somewhere within the $850-$860 range if we see a correction, but should gold retreat to this range, I believe that this retreat will be very short lived as savvy investors will definitely view such a correction as a buying opportunity and jump into the market at this point to drive the price of gold higher again.
As far as the “gold is too high” believers, even if gold doesn’t retreat by $40 or $50 an ounce, I believe that even at $900 an ounce, long term buyers of gold and those that have already been buying for years will be just fine adding to their current gold bullion positions at this price.
At every step of the way during this current gold bull run, gold has been “too expensive”. It’s been “too expensive” at $400 an ounce, at $500 an ounce, at $600 an ounce, at $700 an ounce, at $800 an ounce, and now at $900 an ounce. The fact is that this gold bull run has a long long way to run.
As far as why I believe any such correction, if it happens, will be very short-lived, China provides some of the answers.
A gold futures market just opened up in Shanghai on January 9th, with apparently plans for a silver futures market on the way as well. The Shanghai futures market may not have a lot of impact for now in the global market for gold, but it is an important global development as it definitely raises visibility of gold as an investment vehicle in China.
With A-shares (shares of Chinese stocks available only in the Chinese mainland) still trading at ridiculous valuations and at 80% premiums to their H-shares counterparts (the shares of the exact same Chinese stocks that trade in Hong Kong), Chinese investors that are now sitting on 300% to 400% profits on their stock portfolios in just several years will be well served to take their profits and seek a new home for much of that capital.
I say minor and not major, because I just can’t see gold retreating all the way back to $800 an ounce. I just think that such a significant retreat, given the vast problems in the global economy, and particularly in the U.S., has a very small probability.
My downside projections for a correction are somewhere within the $850-$860 range if we see a correction, but should gold retreat to this range, I believe that this retreat will be very short lived as savvy investors will definitely view such a correction as a buying opportunity and jump into the market at this point to drive the price of gold higher again.
As far as the “gold is too high” believers, even if gold doesn’t retreat by $40 or $50 an ounce, I believe that even at $900 an ounce, long term buyers of gold and those that have already been buying for years will be just fine adding to their current gold bullion positions at this price.
At every step of the way during this current gold bull run, gold has been “too expensive”. It’s been “too expensive” at $400 an ounce, at $500 an ounce, at $600 an ounce, at $700 an ounce, at $800 an ounce, and now at $900 an ounce. The fact is that this gold bull run has a long long way to run.
As far as why I believe any such correction, if it happens, will be very short-lived, China provides some of the answers.
A gold futures market just opened up in Shanghai on January 9th, with apparently plans for a silver futures market on the way as well. The Shanghai futures market may not have a lot of impact for now in the global market for gold, but it is an important global development as it definitely raises visibility of gold as an investment vehicle in China.
With A-shares (shares of Chinese stocks available only in the Chinese mainland) still trading at ridiculous valuations and at 80% premiums to their H-shares counterparts (the shares of the exact same Chinese stocks that trade in Hong Kong), Chinese investors that are now sitting on 300% to 400% profits on their stock portfolios in just several years will be well served to take their profits and seek a new home for much of that capital.
Silver imports hit as demand slumps
MUMBAI: Silver may survive a demand slump soon with the harvesting season approaching and the increase demand during the wedding season.
Demand for imported silver has been weak for some months following the rise in prices.
Silver prices are up nearly 10 per cent in 2008, with near month Futures on the Multi Commodities Exchange (MCX) having seen a 21-month high on February 1 at 21,980 rupees per kg.
During the past few months there has been no import of silver.
If the silver prices come down to Rs 17,000-19,000 per kg, the demand may increase.
Silver prices have risen, tracking gold, as fears of a slowdown in the US economy, credit market problems and a weakening US dollar led investors to flock to the metals as a safe bet.
The traditional silver to gold price ratio of 1:16 had widened as gold has risen faster.
Also rising gold prices could draw investors into silver, specially if gold rises to $1,000 ounce, making the yellow metal unaffordable.
Rising demand for industrial use of silver could also help push silver to Rs 23,000 on the MCX by the month-end and a Further rise to Rs 28,000-30,000 rupees at the year-end.
The March contract on the MCX traded at Rs 21,416, up Rs 156 from the previous day.
Demand for imported silver has been weak for some months following the rise in prices.
Silver prices are up nearly 10 per cent in 2008, with near month Futures on the Multi Commodities Exchange (MCX) having seen a 21-month high on February 1 at 21,980 rupees per kg.
During the past few months there has been no import of silver.
If the silver prices come down to Rs 17,000-19,000 per kg, the demand may increase.
Silver prices have risen, tracking gold, as fears of a slowdown in the US economy, credit market problems and a weakening US dollar led investors to flock to the metals as a safe bet.
The traditional silver to gold price ratio of 1:16 had widened as gold has risen faster.
Also rising gold prices could draw investors into silver, specially if gold rises to $1,000 ounce, making the yellow metal unaffordable.
Rising demand for industrial use of silver could also help push silver to Rs 23,000 on the MCX by the month-end and a Further rise to Rs 28,000-30,000 rupees at the year-end.
The March contract on the MCX traded at Rs 21,416, up Rs 156 from the previous day.
G7 urges OPEC to raise output
TOKYO: In an effort to control the ever-increasing crude oil price, the G7, Group of leading industrial nations has urged OPEC to raise production.
The G7 conceded that rising world demand and geopolitical concerns have contributed to elevated oil prices.
The G7 reiterated the need for producers to enhance refinery capacity and improve energy efficiency. They also said countries should avoid artificially lowering domestic energy prices through fiscal measures, as they work against the market-based adjustment of energy demand as well as rising gas emissions.
The cartel said it has asked the International Monetary Fund to conduct further research on the factors behind the recent surge in oil prices and its effects on the global economy.
World oil prices rose above US $100 a barrel at the start of the year, but have since dropped on an assumption that a US economic slowdown will depress global demand.
The finance ministers and central bank governors from Britain, Canada, France, Germany, Italy, Japan and the United States has just concluded their one-day meeting in Tokyo.
The G7 conceded that rising world demand and geopolitical concerns have contributed to elevated oil prices.
The G7 reiterated the need for producers to enhance refinery capacity and improve energy efficiency. They also said countries should avoid artificially lowering domestic energy prices through fiscal measures, as they work against the market-based adjustment of energy demand as well as rising gas emissions.
The cartel said it has asked the International Monetary Fund to conduct further research on the factors behind the recent surge in oil prices and its effects on the global economy.
World oil prices rose above US $100 a barrel at the start of the year, but have since dropped on an assumption that a US economic slowdown will depress global demand.
The finance ministers and central bank governors from Britain, Canada, France, Germany, Italy, Japan and the United States has just concluded their one-day meeting in Tokyo.
Gold, silver investors: Kindly keep a watchful eye!
By Julian D W Phillips
Gold & silver mining stocks have badly lagged the precious metals markets. Many gold & silver investors are very frustrated at what seems to be the poor performance of gold & silver mining stocks over the last couple of years.
When compared to the performance of silver and Gold Prices themselves, even the Junior's have not performed to their full potential. Why not?
Increasing political uncertainty in the countries where some gold & silver mining companies operate has raised doubts about their profitability. Emerging nations have also sought to increase taxes and royalties paid by the gold & silver miners. This does indeed hit profit margins, so why price the high profits expected from high Gold Prices in too early?
As doubts about the future of the US and global economy were raised in late 2007, and overall stock market indices fell after discounting a tremendously rosy future for corporate America, so gold & silver mining shares also suffered. They will continue to suffer for as long as this view is held.
Long-term investors are usually institutions that have to produce a return for their future pensioners or clients. These returns come from capital gains (meaning rosy future capital and income expectations) and also from income. With the very high price/earnings ratios we saw in the stock markets in 2007, the emphasis has shifted almost completely away from income to capital gain.
But now the harsh reality has become apparent – that the future is not so bright for stocks and that the dividend-flow is hopelessly low. So the unbridled enthusiasm of former times to buy shares, including gold & silver mining companies, has dimmed tremendously.
Gold & Silver Miners Hit by Interest Rates
Gold & silver mining stocks were also hurt by a now old-fashioned formula that started to raise its head again as we saw interest rates in the capital markets rise sharply last year.
The relationship between overall rates of return on fixed-interest securities and on shares showed that while capital values may have fallen, the return on new money invested rose along with interest rates. But then throw in inflation – currently surging worldwide – and these rates did not look good either.
So no wonder investors are rushing in search of new homes for their money, such as cash or short-term T-bills, rather than stock-market equities!
Mining shares including even gold & silver producers also suffer in this change of investment climate. Overall, the lower risk of fixed investments performed as well, if not far better, than overall equities. But now toss in inflation and both begin to look poor.
You may well now retort, "But the mines will do better than other sector equities!" And you would be right, but when?
Take a look at what a gold or silver mine will earn from last year's silver and Gold Market, and then ask yourself what price was this based on? We are now beginning 2008, so what price will this year's income be based on?
The company will decide earning after tax and whether or not to pay dividends based on the average price of gold or silver in the company's accounting year. It is not the Gold Price on any particular day in 2008. But investors have a tendency to assume that today's price will be the average going forward, and that the share price should therefore reflect today's gold & silver prices.
Watch the Gold Price to Track the Gold Miners
Savvy gold & silver investors need to keep a watchful eye on the average price, not the day-to-day spot price, because it is the average which will dictate their total return.
But as gold & silver mining investors, we must also beware falling equity markets. The rosy future is no longer in front of us, not unless we actually see hope reappear after the US government stimuli of interest rate cuts & tax stimulus have taken effect, which may be some months in coming. So we turn back to the grimy reality of income earned on our investments, which rises in importance as capital appreciation wanes.
Look at the gold & silver miners, and ask:
Will the mines pay a dividend or are they extending the life of the mine at the expense of dividends?
Will dividends come in the future, if so when?
Will the mining company's policies lead to capital appreciation?
It is total return we are after, and that varies with the investment climate and expected return on investment.
You could reply, correctly that gold & silver mining shares have a rosy future, and they will pay rising dividends too, and so they should. (Be sure to check company policy on their website to confirm it, however!). But the real joy of the gold & silver mining stocks will come when other sector shares are looking at a dull future, while Gold Investments are not.
What makes us confident in gold & silver mining stocks if other equities look disappointing in the face of a possible global recession?
During the fall of 2008, and once equity markets have seen the worst of their drops, good investors will be looking around for shares set to behave well during and after further losses of broader stock market value. With gold & silver prices rising steadily – much faster than even the gold miners' rising costs – but still enjoying a long upwards path ahead, gold & silver mining stocks are on a path to growing income. And as the reality of the average gold & silver price rising turns into present income, so gold & silver shares will become attractive.
If the precious metals and Gold Bullion continue to evolve into a sector that is seen as a more than a volatile, speculative corner of the stock market, then – contrary to other equities – we will see gold & silver mining stocks outperform.
But before that happens, investors have to be convinced that the rising silver and Gold Price are here to stay, and that present prices of gold and silver will hold. Here at the Gold Forecaster, we believe they will!
Printer friendly version
Gold & silver mining stocks have badly lagged the precious metals markets. Many gold & silver investors are very frustrated at what seems to be the poor performance of gold & silver mining stocks over the last couple of years.
When compared to the performance of silver and Gold Prices themselves, even the Junior's have not performed to their full potential. Why not?
Increasing political uncertainty in the countries where some gold & silver mining companies operate has raised doubts about their profitability. Emerging nations have also sought to increase taxes and royalties paid by the gold & silver miners. This does indeed hit profit margins, so why price the high profits expected from high Gold Prices in too early?
As doubts about the future of the US and global economy were raised in late 2007, and overall stock market indices fell after discounting a tremendously rosy future for corporate America, so gold & silver mining shares also suffered. They will continue to suffer for as long as this view is held.
Long-term investors are usually institutions that have to produce a return for their future pensioners or clients. These returns come from capital gains (meaning rosy future capital and income expectations) and also from income. With the very high price/earnings ratios we saw in the stock markets in 2007, the emphasis has shifted almost completely away from income to capital gain.
But now the harsh reality has become apparent – that the future is not so bright for stocks and that the dividend-flow is hopelessly low. So the unbridled enthusiasm of former times to buy shares, including gold & silver mining companies, has dimmed tremendously.
Gold & Silver Miners Hit by Interest Rates
Gold & silver mining stocks were also hurt by a now old-fashioned formula that started to raise its head again as we saw interest rates in the capital markets rise sharply last year.
The relationship between overall rates of return on fixed-interest securities and on shares showed that while capital values may have fallen, the return on new money invested rose along with interest rates. But then throw in inflation – currently surging worldwide – and these rates did not look good either.
So no wonder investors are rushing in search of new homes for their money, such as cash or short-term T-bills, rather than stock-market equities!
Mining shares including even gold & silver producers also suffer in this change of investment climate. Overall, the lower risk of fixed investments performed as well, if not far better, than overall equities. But now toss in inflation and both begin to look poor.
You may well now retort, "But the mines will do better than other sector equities!" And you would be right, but when?
Take a look at what a gold or silver mine will earn from last year's silver and Gold Market, and then ask yourself what price was this based on? We are now beginning 2008, so what price will this year's income be based on?
The company will decide earning after tax and whether or not to pay dividends based on the average price of gold or silver in the company's accounting year. It is not the Gold Price on any particular day in 2008. But investors have a tendency to assume that today's price will be the average going forward, and that the share price should therefore reflect today's gold & silver prices.
Watch the Gold Price to Track the Gold Miners
Savvy gold & silver investors need to keep a watchful eye on the average price, not the day-to-day spot price, because it is the average which will dictate their total return.
But as gold & silver mining investors, we must also beware falling equity markets. The rosy future is no longer in front of us, not unless we actually see hope reappear after the US government stimuli of interest rate cuts & tax stimulus have taken effect, which may be some months in coming. So we turn back to the grimy reality of income earned on our investments, which rises in importance as capital appreciation wanes.
Look at the gold & silver miners, and ask:
Will the mines pay a dividend or are they extending the life of the mine at the expense of dividends?
Will dividends come in the future, if so when?
Will the mining company's policies lead to capital appreciation?
It is total return we are after, and that varies with the investment climate and expected return on investment.
You could reply, correctly that gold & silver mining shares have a rosy future, and they will pay rising dividends too, and so they should. (Be sure to check company policy on their website to confirm it, however!). But the real joy of the gold & silver mining stocks will come when other sector shares are looking at a dull future, while Gold Investments are not.
What makes us confident in gold & silver mining stocks if other equities look disappointing in the face of a possible global recession?
During the fall of 2008, and once equity markets have seen the worst of their drops, good investors will be looking around for shares set to behave well during and after further losses of broader stock market value. With gold & silver prices rising steadily – much faster than even the gold miners' rising costs – but still enjoying a long upwards path ahead, gold & silver mining stocks are on a path to growing income. And as the reality of the average gold & silver price rising turns into present income, so gold & silver shares will become attractive.
If the precious metals and Gold Bullion continue to evolve into a sector that is seen as a more than a volatile, speculative corner of the stock market, then – contrary to other equities – we will see gold & silver mining stocks outperform.
But before that happens, investors have to be convinced that the rising silver and Gold Price are here to stay, and that present prices of gold and silver will hold. Here at the Gold Forecaster, we believe they will!
Printer friendly version
Gold, Silver Futures Increase on Demand for Inflation Hedge
Gold futures rose to a one-week high after energy costs climbed, boosting the appeal of the precious metal as a hedge against inflation. Silver extended a rally to the highest since 1980.
Crude-oil futures rose as much as 3.2 percent today after climbing by the same amount last week. Gold surged 31 percent last year as consumer prices rose the most since 1990, sparked by a 57 percent gain in oil prices.
``Gold prices are responding to the surge in energy prices,'' said Tom Hartmann, a commodity analyst at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``There's a bit of anxiety in the market. Higher crude prices have always been supportive of gold during this bull market.''
Gold futures for April delivery increased $4.40, or 0.5 percent, to $926.70 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $931, the highest for a most-active contract since Feb. 1. The metal has gained 11 percent this year.
Silver futures for March delivery jumped 36 cents, or 2.1 percent, to $17.47 an ounce. Earlier, the price reached $17.595, the highest since December 1980. The metal has climbed 17 percent this year.
Crude oil climbed as high as $94.72 a barrel. Valero Energy Corp. shut a Delaware refinery because of a power failure late yesterday. Venezuela, the U.S.'s fourth-biggest source of oil, also threatened to halt shipments. The price reached a record $100.09 a barrel on Jan. 3.
Gold's gains were limited after the Group of Seven officials meeting in Tokyo said they supported the International Monetary Fund's effort sell its gold reserves in order to invest in higher-yielding assets.
``The mere announcement is bearish of gold,'' said Dennis Gartman, economist and editor of the Suffolk, Virginia-based Gartman Letter.
The IMF is the third-largest holder of gold reserves behind the central banks of the U.S. and Germany. The IMF has 3,217 metric tons of gold in its reserves, according to the World Gold Council.
Courtesy - Bloomberg.com
Crude-oil futures rose as much as 3.2 percent today after climbing by the same amount last week. Gold surged 31 percent last year as consumer prices rose the most since 1990, sparked by a 57 percent gain in oil prices.
``Gold prices are responding to the surge in energy prices,'' said Tom Hartmann, a commodity analyst at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``There's a bit of anxiety in the market. Higher crude prices have always been supportive of gold during this bull market.''
Gold futures for April delivery increased $4.40, or 0.5 percent, to $926.70 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $931, the highest for a most-active contract since Feb. 1. The metal has gained 11 percent this year.
Silver futures for March delivery jumped 36 cents, or 2.1 percent, to $17.47 an ounce. Earlier, the price reached $17.595, the highest since December 1980. The metal has climbed 17 percent this year.
Crude oil climbed as high as $94.72 a barrel. Valero Energy Corp. shut a Delaware refinery because of a power failure late yesterday. Venezuela, the U.S.'s fourth-biggest source of oil, also threatened to halt shipments. The price reached a record $100.09 a barrel on Jan. 3.
Gold's gains were limited after the Group of Seven officials meeting in Tokyo said they supported the International Monetary Fund's effort sell its gold reserves in order to invest in higher-yielding assets.
``The mere announcement is bearish of gold,'' said Dennis Gartman, economist and editor of the Suffolk, Virginia-based Gartman Letter.
The IMF is the third-largest holder of gold reserves behind the central banks of the U.S. and Germany. The IMF has 3,217 metric tons of gold in its reserves, according to the World Gold Council.
Courtesy - Bloomberg.com
Canada's Dollar Falls as Carney Signals More Interest-Rate Cuts
Canada's dollar declined as the new central bank governor signaled the benchmark lending rate will be cut further, underlining the view that the economy will slow this year. Government bonds rose.
The Canadian dollar fell back below par with its U.S. counterpart and was lower against all 16 most actively traded currencies, dropping about 0.7 percent against the Japanese yen.
Bank of Canada Governor Mark Carney signaled over the weekend in Tokyo, where he was attending a meeting of finance ministers and central bankers from the Group of Seven nations, that bank policy makers will cut interest rates in coming months as slowing export growth threatens Canada's economy. The next interest-rate decisions are scheduled for March 4 and April 22.
``Carney reaffirmed the market expectations regarding the future rate moves,'' said Maria Jones, a currency strategist at TD Securities in Toronto. ``That's to some extent weighing on the Canadian dollar.''
Canada's currency, known as the loonie after the image of the bird on its one-dollar coin, fell 0.3 percent to C$1.0016 at 4:03 p.m. in Toronto, from 99.89 Canadian cents per U.S. dollar on Feb. 8.
The Bank of Canada has lowered rates twice since December and said last month it will probably need to cut them again as the slowdown in the U.S. spills across the border. The U.S. consumes about 80 percent of Canada's exports. Carney, who became the governor on Feb. 1, said he agrees with the assessment.
`Additional Stimulus'
``The effects of the slowing U.S. economy will lead to additional downward pressure on Canada's export growth,'' Carney said. ``I'm comfortable with the statement that additional monetary stimulus is likely to be required in the near term.''
Canada's key lending rate was lowered Jan. 22 to 4 percent, and the central bank will cut it to 3.25 percent by June, according to the median forecast in a Bloomberg survey.
The yield on Canada's 10-year bond declined about 4 basis points, or 0.04 percentage point, to 3.79 percent. The price of the 4 percent government security due in June 2017 rose 30 cents to C$101.67.
The currency pared its losses after crude oil rose to a one- month high as Valero Energy Corp., the biggest U.S. refining company, shut its Delaware refinery because of a power failure late yesterday.
``The Canadian dollar has found a little sweet spot'' between a penny above and below parity, said Jack Spitz, director of foreign exchange trading at National Bank of Canada, in Toronto. A spike ``in the crude oil prices is providing some strength to the currency.''
The loonie rose about 1 percent on Feb. 8 when the government said the economy created 46,400 jobs in January, four times more than the forecast in a Bloomberg survey.
``Carney also discounted the importance of one data point in the decision-making,'' said Jones, referring to the jobs report. She said the currency may fall to C$1.0130 in a month.
The currency also declined as traders sold assets from higher-yielding countries after Group of Seven officials warned of further financial-market turmoil.
Courtesy - Bloomberg.com
The Canadian dollar fell back below par with its U.S. counterpart and was lower against all 16 most actively traded currencies, dropping about 0.7 percent against the Japanese yen.
Bank of Canada Governor Mark Carney signaled over the weekend in Tokyo, where he was attending a meeting of finance ministers and central bankers from the Group of Seven nations, that bank policy makers will cut interest rates in coming months as slowing export growth threatens Canada's economy. The next interest-rate decisions are scheduled for March 4 and April 22.
``Carney reaffirmed the market expectations regarding the future rate moves,'' said Maria Jones, a currency strategist at TD Securities in Toronto. ``That's to some extent weighing on the Canadian dollar.''
Canada's currency, known as the loonie after the image of the bird on its one-dollar coin, fell 0.3 percent to C$1.0016 at 4:03 p.m. in Toronto, from 99.89 Canadian cents per U.S. dollar on Feb. 8.
The Bank of Canada has lowered rates twice since December and said last month it will probably need to cut them again as the slowdown in the U.S. spills across the border. The U.S. consumes about 80 percent of Canada's exports. Carney, who became the governor on Feb. 1, said he agrees with the assessment.
`Additional Stimulus'
``The effects of the slowing U.S. economy will lead to additional downward pressure on Canada's export growth,'' Carney said. ``I'm comfortable with the statement that additional monetary stimulus is likely to be required in the near term.''
Canada's key lending rate was lowered Jan. 22 to 4 percent, and the central bank will cut it to 3.25 percent by June, according to the median forecast in a Bloomberg survey.
The yield on Canada's 10-year bond declined about 4 basis points, or 0.04 percentage point, to 3.79 percent. The price of the 4 percent government security due in June 2017 rose 30 cents to C$101.67.
The currency pared its losses after crude oil rose to a one- month high as Valero Energy Corp., the biggest U.S. refining company, shut its Delaware refinery because of a power failure late yesterday.
``The Canadian dollar has found a little sweet spot'' between a penny above and below parity, said Jack Spitz, director of foreign exchange trading at National Bank of Canada, in Toronto. A spike ``in the crude oil prices is providing some strength to the currency.''
The loonie rose about 1 percent on Feb. 8 when the government said the economy created 46,400 jobs in January, four times more than the forecast in a Bloomberg survey.
``Carney also discounted the importance of one data point in the decision-making,'' said Jones, referring to the jobs report. She said the currency may fall to C$1.0130 in a month.
The currency also declined as traders sold assets from higher-yielding countries after Group of Seven officials warned of further financial-market turmoil.
Courtesy - Bloomberg.com
Platinum Rises to Record on Supply Concerns; Palladium Steady
Platinum soared to a record as Anglo Platinum Ltd., the world's biggest producer of the metal, said its output will decline for a second year. Palladium was little changed after reaching the highest since 2001.
Anglo Platinum said today that platinum production will drop to 2.4 million ounces this year, partly because of electricity shortages in South Africa. Output fell 12 percent to 2.47 million ounces last year after a series of fatal accidents disrupted mining.
Platinum futures for April delivery climbed $32, or 1.7 percent, to $1,916 an ounce at 10:49 a.m. on the New York Mercantile Exchange. Earlier, the price surged to $1,930, the highest ever for a most-active contract. Before today, the metal was up 24 percent this year, outpacing gold and silver.
``We wouldn't be surprised to see a try at $2,000 next week, given no signs of a top,'' Robin Bhar, a London-based analysts at UBS AG, said in a report.
Palladium futures for March delivery fell 20 cents to $440.65 an ounce. Earlier, the price reached $448.50, the highest since Dec. 28, 2001. Before today, the metal climbed 17 percent this year.
Platinum and palladium are used in jewelry and auto catalysts. Some investors buy the metals as an alternative to currencies, equities or bonds.
Most mines in South Africa, source of about three-quarters of global platinum supplies, were closed for five days last month because of blackouts. Eskom Holdings Ltd., the state-owned utility, has told major customers it won't have sufficient capacity to guarantee adequate power until 2013.
Courtesy - (Bloomberg)
Anglo Platinum said today that platinum production will drop to 2.4 million ounces this year, partly because of electricity shortages in South Africa. Output fell 12 percent to 2.47 million ounces last year after a series of fatal accidents disrupted mining.
Platinum futures for April delivery climbed $32, or 1.7 percent, to $1,916 an ounce at 10:49 a.m. on the New York Mercantile Exchange. Earlier, the price surged to $1,930, the highest ever for a most-active contract. Before today, the metal was up 24 percent this year, outpacing gold and silver.
``We wouldn't be surprised to see a try at $2,000 next week, given no signs of a top,'' Robin Bhar, a London-based analysts at UBS AG, said in a report.
Palladium futures for March delivery fell 20 cents to $440.65 an ounce. Earlier, the price reached $448.50, the highest since Dec. 28, 2001. Before today, the metal climbed 17 percent this year.
Platinum and palladium are used in jewelry and auto catalysts. Some investors buy the metals as an alternative to currencies, equities or bonds.
Most mines in South Africa, source of about three-quarters of global platinum supplies, were closed for five days last month because of blackouts. Eskom Holdings Ltd., the state-owned utility, has told major customers it won't have sufficient capacity to guarantee adequate power until 2013.
Courtesy - (Bloomberg)
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