Oil rose to a record just below $112 a barrel last Monday and then fell precipitously in the wake of the turmoil surrounding the Bear Stearns buyout. Initially, the dollar fell to a record low against the Euro on fears that other firms might be in financial trouble, but later on Monday oil and most other commodities fell rapidly as traders tried to comprehend a shifting financial landscape.
From a high near $112 oil fell to $102 a barrel on Monday. Tuesday, Wednesday, and Thursday, in a short trading week, were equally as volatile with oil oscillating up to $109 and at one point getting as low as $99.59 a barrel before closing out at just below $102. Overall commodity prices last week saw their biggest drop since 1956.
As with nearly everything else about the financial markets, opinions are mixed as to just what is taking place. Some observers note that much of the drop in commodity prices came because speculators were forced to sell out profitable positions in commodities to meet new margin requirements associated with bailing out Bear Stearns. Others see the weeks events as a signal of tougher economic times ahead that will lead to reduced demand for all commodities.
Goldman Sachs sees oil prices slipping to circa $90 a barrel in the next two months due to seasonal factors and reduced demand. Others are impressed that a massive unwinding of futures positions has still left oil above $100 a barrel. The weekly US stockpiles report showed a less-than-expected growth in crude and gasoline stocks, while distillates continue to slide. Many are now observing that unless the report is wildly at variance with expectations, the US stockpiles report, which until recently drove oil prices, is getting lost in the financial news.
Decoupling
Most acknowledge that the US is entering a period of economic recession which, depending on ones point of view, may last anywhere from months to years. The key question for the oil markets is what will happen to the demand for oil as the US, and those that depend on the US as a market, decline. Last week the EIA reported that US consumption of petroleum products over the last four weeks is down 3.2 percent from the same period in 2007. Despite record prices, however, US demand for gasoline was down by only 0.1 percent in the same period.
Since speculation about the US entering a credit-induced recession became rampant several months ago, conventional wisdom has been that a US recession would soon spread across the world and that demand for oil would slacken as it has in the past. For several months now oil prices have been falling on bad economic news and recovering on good.
During this time there has been much discussion as to whether the economies of Asia and the oil exporting states have become so large and powerful that a recession in the US and parts of Europe will no longer have the same economic impact that it once would. This "decoupling" is at the heart of the debate as to where oil demand will go in the next year or two.
While some US demand for oil products is already declining with a slowing economy plus record high prices for heating oil, diesel and jet fuel and gasoline, so far the reduction in demand is relatively small. Patterns of US oil consumption have changed from what they were 35 years ago, so opportunities and incentives for reduced consumption without major disruptions are few. Thermostats on oil burners can be dialed back, airlines can cut flights and ground inefficient planes, and discretionary automobile travel can be curbed.
However, short of the price-induced conservation measures that have already started, we are probably still several dollars a gallon, or the beginning of actual shortages, away from serious cutbacks in US oil consumption. As the falling dollar has to a certain extent insulated Europe from the recent run-up in oil prices, the situation there is basically similar to that of the US.
Over the weekend, a meeting of Asian central bankers issued a statement saying that while US imports may slow in coming months, growth in Asian intra-regional trade will soften the blow considerably. All this suggests that it will take some very serious economic setbacks before the demand for oil will decline anywhere near as much as it did during the 1970s oil shocks.
Diesel
For the fourth straight week, diesel prices climbed to a new high last week. At a US average of $3.97/gal, prices are now up by $1.29 over the same week last year. The demand for diesel and heating oil in the US is now down five percent from last year. Although crude prices slipped by $10/barrel last week and some are saying we will see lower prices over the next few months, the situation is volatile and there is no assurance that retail prices have peaked.
Distillate fuel inventories dropped by another 2.9 million barrels last week to 113 million barrels, and unlike crude and gasoline inventories, are near the bottom of the seasonal average range. Stocks usually fall at this time of the year as refineries undergo maintenance and there is still a demand for heating oil. Stocks bottom out in May somewhere above 100 million barrels and then start to build for the next heating season.
Underlying the rapid climb in prices is a slowly developing world-wide diesel shortage. Chinese diesel imports hit a record of 6.1 million barrels in January. In February China imported 2.4 million barrels as compared to 219,000 in February 2007. It now appears Beijing will import at least 3.5 million barrels in March. Last week diesel shortages were reported across southeastern China for the second time in six months. Reports of electricity shortages suggest that once again factories will switch on backup diesel generators in order to remain in operation.
As the winter heating season in the northern hemisphere is nearly over, outright diesel shortages are unlikely to develop before next winter. Should spot shortages develop in the US, as they did last fall, environmental regulations on burning higher sulfur motor fuels are likely to be lifted. In the meantime the high prices are causing considerable hardships in the trucking industry and will continue to add inflationary pressure on the US economy.
As worldwide demand for diesel continues to increase, while supplies remain steady at best, it seems likely that debilitating diesel prices and shortages will soon begin to do serious economic damage to the industrialized countries.
Federal energy regulators approved a $700 million LNG terminal for Long Island Sound, a facility which is opposed by the state of Connecticut and other critics. The 1,200-foot-long, 82-foot-high terminal would be built by a consortium of Shell Oil and TransCanada Pipelines Ltd. (3/21, #14)
The U.S. Air Force wants to build a coal-to-liquids (CTL) plant at its Malmstrom base in central Montana as the first project in a nationwide network of facilities to convert coal into aircraft fuel. The high cost of CTL plants plus concerns that the process generates double the greenhouse gases of oil have raised doubts on Capital Hill. Electric utilities recently have scrapped at least four dozen proposed coal-fired power plants over rising costs and the uncertainties about climate change. (3/22, #10)
Australian producer BHP-Billiton has removed all personnel from its Neptune tension leg platform in the deep-water US Gulf after inspections discovered "anomalies in the facilitys hull. (3/22, #11)
In India, strong demand growth and high profit margins have given the country the leeway to absorb a part of input cost hikes in the past. But, as corporate earnings have slowed and economic growth is likely to soften, companies are running out of headroom to absorb further increases in crude oil prices. (3/21, #11)
Wood Mackenzie Consultants said OPEC will only need to increase its production by 2 to 3 million barrels/day by 2012. The rest of the projected increase (10 million barrels/day, barring a major recession) can be met by non-OPEC producers and by gas liquids and non-conventional supplies such as oil sands. They added that OPECs production is set to peak after 2012.
Pemex announced that Mexico's proven hydrocarbon reserves fell 5.1% last year to 14.7 billion barrels of crude oil equivalent. Pemex replaced proven reserves at a rate of 50% last year, compared with 41% in 2006.
In a year when domestic crude oil output continued to decrease and fuel demand in the domestic market climbed, Venezuelan oil exports were seriously hit, dropping 192,000 bpd (6.4 percent) to 2.78 million bpd in 2007.
ASPO-USA and friends are inviting the Massachusetts state legislature and the general public to a special meeting on March 31 in the Massachusetts State House where issues of Peak Oil and its impact on Massachusetts will be presented and discussed.
In February world production of total liquids increased by 175,000 barrels per day from January, according to the International Energy Agencys latest figures. Total world liquids production hit 87.5 million b/d, which is the all-time maximum liquids production. Average global production in 2007 was 85.41 million b/d. In the first two months of 2008 an average of 87.41 million was produced.
courtesy : ibtimes.com
Monday, March 24, 2008
Commodities market cools down, as Dollar gains
The market for gold and other commodities is cooling and it is the dollar that has gained the most. The Reuters-CRB Commodity Index is down 8.4 per cent over last one week.
Fed Chairman Ben Bernanke’s moves to pump in liquidity and save banks from collapse have brought relief at least in currency markets as dollar is up against major currencies after Bernanke's move and buyers are coming back into US government securities.
“We expect dollar to go up and commodity prices to ease off,” said Michael Preiss, Associate Director- Investment Advisory Group, HSBC.
Thanks to stronger dollar investors are now discarding gold as safe haven.
Major global funds including hedge funds have sold commodities across the board fearing a global slowdown.
Crude oil and gold prices have crashed over 9 per cent since March 17 and latest data suggest US crude demand has dropped by 5.10 lakh barrels/day.
There is also speculation in the market that G - 7 nations may have intervene in forex market to stem the dollar's fall.
Global investors are buying dollars and dumping commodities and so the dollar has gained over 3 per cent against Euro and Yen since March 17.
However, investors are still very worried about US recession and analysts say this will help commodities to find a fair value.
Meanwhile traders on Wall Street have started building up expectations that Federal Reserve might cut interest rates by another 50 bps on next April 30th meet.
Fed Chairman Ben Bernanke’s moves to pump in liquidity and save banks from collapse have brought relief at least in currency markets as dollar is up against major currencies after Bernanke's move and buyers are coming back into US government securities.
“We expect dollar to go up and commodity prices to ease off,” said Michael Preiss, Associate Director- Investment Advisory Group, HSBC.
Thanks to stronger dollar investors are now discarding gold as safe haven.
Major global funds including hedge funds have sold commodities across the board fearing a global slowdown.
Crude oil and gold prices have crashed over 9 per cent since March 17 and latest data suggest US crude demand has dropped by 5.10 lakh barrels/day.
There is also speculation in the market that G - 7 nations may have intervene in forex market to stem the dollar's fall.
Global investors are buying dollars and dumping commodities and so the dollar has gained over 3 per cent against Euro and Yen since March 17.
However, investors are still very worried about US recession and analysts say this will help commodities to find a fair value.
Meanwhile traders on Wall Street have started building up expectations that Federal Reserve might cut interest rates by another 50 bps on next April 30th meet.
Fed obliges all, goes all out to save big banks
Gold is back in buying territory after its dramatic correction back to key intermediate trendline support. In the last update we were looking for gold to break out above the $1,000 level. It did and briefly got to about $1030 before it turned tail and dropped precipitously.
Interestingly, the short-lived run at $1030 occurred last Sunday at the time of the Bear Stearns emergency, and the time when the crisis was at its most acute was the point at which gold topped out, which is what one would expect.
The action in both gold and silver early last week was short-term bearish, with gold backing off rapidly after its run at about $1030, leaving behind a bearish "gravestone doji" candlestick on its chart, and silver backed off from a run at its highs early this month, thus marking out a small Double Top. These bearish omens were noted and a warning that a possibly heavy reaction was imminent was posted on the site.
The size of the drop last week appears to have been due to the market suddenly becoming aware of the Fed taking action over a period of time to curtail money supply growth behind the highly publicized faade of big interest rate cuts. If they were and are in fact doing this, it would of course have deflationary implications and deflation is the kiss of death for commodity bull markets.
This issue several very important questions. If they have been and are continuing to do this, then a tug-of-war situation must surely exist between deflationary and inflationary forces, for into the foreseeable future boatloads of new electronically created money are going to have to be created for the line of dominoes of collapsing major banks and other financial institutions, in addition to which other countries and trading blocs are likely to continue their policies of competitive devaluation, and even if the Fed succeeds in curtailing the rate of growth of liquidity it would be a Pyrrhic victory, for the current mess and mayhem in the global financial system DEMANDS rapid liquidity growth, and if it doesnt get it the result would be an almost instant credit gridlock leading to a deflationary implosion. This brings us to the next important point, which is just how much control the Fed actually has in the present situation. One thing is clear and that is that if the Fed does have control of the situation, it has done a decidedly poor job of showing it these past 6 months or so.
The Fed is thought to have about as much control of the current situation as a trucker does whose brakes have failed halfway down a steep canyon - he doesnt have control, he has influence. The truck is going to go over the cliff, we know that, but by skillful handling, he can significantly delay the point at which it hurtles over the cliff. So lets stand back and review the 2 main scenarios; the Fed succeeds in curtailing liquidity, which inevitably leads to a credit freeze and deflationary implosion.
The Fed obliges all comers and goes all out to save the big banks, brokerage houses and mortgage institutions from going under by manufacturing as much electronically created money as they need to avoid insolvency. This, given the gravity of the crisis, would lead to hyperinflation. However, there is a third route, which is a highly unsavory and prolonged period of stagflation, that would involve recession coupled with high inflation. This is essentially a muddle through situation in which deflation and inflation exist side by side - we have already seen this with house prices collapsing even as gasoline prices rise. This would be a situation in which most everyone loses. At this point it is of course not at all clear which of these scenarios will play out, and everyone involved in this giant mess appears to be taking it one day at a time, but what is clear is that gold is certainly set to continue to advance in both the hyperinflation and stagflation scenarios, and even in the deflationary implosion scenario, after a possible initial shock drop when most everything goes into the tank, it should then ascend as it would be "the only game in town".
While the correction in gold and silver was an accident waiting to happen, on account of their being extremely overbought with record levels of bullish sentiment, it appears to have been exacerbated, as we have already noted, due to the deflationary implications of the recent liquidity drain that has caught the markets attention and led to the vicious sell-off this past week. It is the Catch 22 situation with regard to the money supply and the eventual chaos that will result, which should ensure an ongoing bull market in gold and silver as safe haven investments, even if commodities as a whole tank due to a global recession/depression. Lets not forget that gold and silver are REAL MONEY, despite the comprehensive and largely successful campaign over many years by the mainstream financial press to relegate them to the status of mere commodities in the minds of investors.
Interestingly, the short-lived run at $1030 occurred last Sunday at the time of the Bear Stearns emergency, and the time when the crisis was at its most acute was the point at which gold topped out, which is what one would expect.
The action in both gold and silver early last week was short-term bearish, with gold backing off rapidly after its run at about $1030, leaving behind a bearish "gravestone doji" candlestick on its chart, and silver backed off from a run at its highs early this month, thus marking out a small Double Top. These bearish omens were noted and a warning that a possibly heavy reaction was imminent was posted on the site.
The size of the drop last week appears to have been due to the market suddenly becoming aware of the Fed taking action over a period of time to curtail money supply growth behind the highly publicized faade of big interest rate cuts. If they were and are in fact doing this, it would of course have deflationary implications and deflation is the kiss of death for commodity bull markets.
This issue several very important questions. If they have been and are continuing to do this, then a tug-of-war situation must surely exist between deflationary and inflationary forces, for into the foreseeable future boatloads of new electronically created money are going to have to be created for the line of dominoes of collapsing major banks and other financial institutions, in addition to which other countries and trading blocs are likely to continue their policies of competitive devaluation, and even if the Fed succeeds in curtailing the rate of growth of liquidity it would be a Pyrrhic victory, for the current mess and mayhem in the global financial system DEMANDS rapid liquidity growth, and if it doesnt get it the result would be an almost instant credit gridlock leading to a deflationary implosion. This brings us to the next important point, which is just how much control the Fed actually has in the present situation. One thing is clear and that is that if the Fed does have control of the situation, it has done a decidedly poor job of showing it these past 6 months or so.
The Fed is thought to have about as much control of the current situation as a trucker does whose brakes have failed halfway down a steep canyon - he doesnt have control, he has influence. The truck is going to go over the cliff, we know that, but by skillful handling, he can significantly delay the point at which it hurtles over the cliff. So lets stand back and review the 2 main scenarios; the Fed succeeds in curtailing liquidity, which inevitably leads to a credit freeze and deflationary implosion.
The Fed obliges all comers and goes all out to save the big banks, brokerage houses and mortgage institutions from going under by manufacturing as much electronically created money as they need to avoid insolvency. This, given the gravity of the crisis, would lead to hyperinflation. However, there is a third route, which is a highly unsavory and prolonged period of stagflation, that would involve recession coupled with high inflation. This is essentially a muddle through situation in which deflation and inflation exist side by side - we have already seen this with house prices collapsing even as gasoline prices rise. This would be a situation in which most everyone loses. At this point it is of course not at all clear which of these scenarios will play out, and everyone involved in this giant mess appears to be taking it one day at a time, but what is clear is that gold is certainly set to continue to advance in both the hyperinflation and stagflation scenarios, and even in the deflationary implosion scenario, after a possible initial shock drop when most everything goes into the tank, it should then ascend as it would be "the only game in town".
While the correction in gold and silver was an accident waiting to happen, on account of their being extremely overbought with record levels of bullish sentiment, it appears to have been exacerbated, as we have already noted, due to the deflationary implications of the recent liquidity drain that has caught the markets attention and led to the vicious sell-off this past week. It is the Catch 22 situation with regard to the money supply and the eventual chaos that will result, which should ensure an ongoing bull market in gold and silver as safe haven investments, even if commodities as a whole tank due to a global recession/depression. Lets not forget that gold and silver are REAL MONEY, despite the comprehensive and largely successful campaign over many years by the mainstream financial press to relegate them to the status of mere commodities in the minds of investors.
Space Shuttle Columbia built with 40 kilos of gold...
MUMBAI: Gold, as you know, is generally just worn by people to make themselves 'beautiful and ornate.' And many people buy gold as the best investment option.
But the demand for gold is not for beauty and investment alone. Do you know that space shuttle Columbia was constructed using 40 kilograms of gold?
Do you know that without gold, man wouldn’t have visited the moon?
Gold, in the form of sheets 0.15mm thick, is used in space programmes as a radiation shield. Because gold is such an effective reflector, it deflects the burning heat of the sun, according to the World Gold Council.
Gold is central to safe space travel, so it’s demand has obviously grown as the space industry has.
For example, more than 40.8 kilograms of gold was used in the construction of the famous US Columbia space shuttle, mainly in brazing alloys, fuel cell fabrication, coated plastic films and electrical contacts.
But the demand for gold is not for beauty and investment alone. Do you know that space shuttle Columbia was constructed using 40 kilograms of gold?
Do you know that without gold, man wouldn’t have visited the moon?
Gold, in the form of sheets 0.15mm thick, is used in space programmes as a radiation shield. Because gold is such an effective reflector, it deflects the burning heat of the sun, according to the World Gold Council.
Gold is central to safe space travel, so it’s demand has obviously grown as the space industry has.
For example, more than 40.8 kilograms of gold was used in the construction of the famous US Columbia space shuttle, mainly in brazing alloys, fuel cell fabrication, coated plastic films and electrical contacts.
Volatility continues in commodities
By Jon Nadler
The commodities cave-in that started in New York yesterday continued to unfold overnight and throughout the last trading day of this week as fund after fund took the money and ran. What we now have in the making here is the worst week for gold prices in twenty-nine years.
Of course, gold was not an isolated case of landing gear failure this week. Just look at silver, platinum, crude oil, soybeans, copper, coffee, sugar, etc. A sea of red on the price tickers, with losses of from 2 to 5%. Behold the effect of speculative funds having worked their way into relatively tiny markets that were volatile to begin with. "Sector rotation" and then some...
New York spot prices traded under continuing liquidation pressure all day, losing another $29 of value per ounce to $914.00 at last check, and the best thing that can be said about the situation is that prices are near the starting point of their last rally - at $915- and that they are not at the low of $903.60 we saw earlier on. The damage however, is extensive. Silver lost another $1.48 or 8.5%, falling to $16.94 per ounce. Platinum dropped $39 to $1865.00 per ounce and palladium lost $18 to $438.00 as the entire complex was battered by the freefall in gold.
In the interim, the dollar was making additional gains, falling under $1.55 vs. the Euro, and rising to 72.72 on the index. Not spectacular gains for the greenback, but certainly enough to turn its very vocal morticians into the ones with pallid faces for a change. News that Credit Suisse will not likely report a profit after having to write off at least a couple of billion on you-know-what exposure hardly made a dent in today's market. Sentiment has clearly soured for the moment.
The same cannot be said about essential fabrication demand on the other hand. My good friend Albert Cheng over at the World Gold Council in Singapore, noted robust gold demand emerging in Asia on the $130 price froth blow-off and was encouraged about its return. We are willing to bet that those who flat-out rejected the idea that gold jewelry demand had become irrelevant as investment funds stampeded into bullion, are now looking very kindly upon the bazaars of India and the souks of Dubai as the possible safety nets that could prevent a real meltdown in values. What we have had thus far, is a realignment in price and in perceptions, but not one that would yet qualify as a mortal wound to the bull.
Up here in Canada, these woes are just a bit more amplified. The Globe and Mail's Report on Business describes the situation as follows:
"Commodities have been through more than a few bumps over the past several years, but they have always bounced back to new highs. Is this latest bump anything different?
Skeptics have been noting for some time that the fundamentals supporting commodity prices - the strong demand from China, the weak U.S. dollar, the threat of rising inflation and the uncertain geopolitical situation in many parts of the world - no longer explain the rise this year that sent the charts of many commodity prices into an unsustainable parabolic surge.
Speculators, it seems, have been providing the main thrust as they seek refuge from volatility. However, with the U.S. equity market suddenly looking healthier following aggressive rate cuts by the U.S. Federal Reserve, there is likely a rush for the exits now that is also driving the loonie down.
What's for sure is that the consequences of a protracted downturn are nasty. Commodity producers represent about half of the market capitalization of the S&P/TSX composite index, versus just 18 per cent for the S&P 500."
It is wait-and-see at this juncture. While a rebound is still possible, we need to get a better sense of where the unwinding by the longs could take values. The markets are feeding on their own momentum right now and not much in the way of news seems to matter. Fast turns could become routine. Sleepless nights may yet follow.
www.ibtimes.com
The commodities cave-in that started in New York yesterday continued to unfold overnight and throughout the last trading day of this week as fund after fund took the money and ran. What we now have in the making here is the worst week for gold prices in twenty-nine years.
Of course, gold was not an isolated case of landing gear failure this week. Just look at silver, platinum, crude oil, soybeans, copper, coffee, sugar, etc. A sea of red on the price tickers, with losses of from 2 to 5%. Behold the effect of speculative funds having worked their way into relatively tiny markets that were volatile to begin with. "Sector rotation" and then some...
New York spot prices traded under continuing liquidation pressure all day, losing another $29 of value per ounce to $914.00 at last check, and the best thing that can be said about the situation is that prices are near the starting point of their last rally - at $915- and that they are not at the low of $903.60 we saw earlier on. The damage however, is extensive. Silver lost another $1.48 or 8.5%, falling to $16.94 per ounce. Platinum dropped $39 to $1865.00 per ounce and palladium lost $18 to $438.00 as the entire complex was battered by the freefall in gold.
In the interim, the dollar was making additional gains, falling under $1.55 vs. the Euro, and rising to 72.72 on the index. Not spectacular gains for the greenback, but certainly enough to turn its very vocal morticians into the ones with pallid faces for a change. News that Credit Suisse will not likely report a profit after having to write off at least a couple of billion on you-know-what exposure hardly made a dent in today's market. Sentiment has clearly soured for the moment.
The same cannot be said about essential fabrication demand on the other hand. My good friend Albert Cheng over at the World Gold Council in Singapore, noted robust gold demand emerging in Asia on the $130 price froth blow-off and was encouraged about its return. We are willing to bet that those who flat-out rejected the idea that gold jewelry demand had become irrelevant as investment funds stampeded into bullion, are now looking very kindly upon the bazaars of India and the souks of Dubai as the possible safety nets that could prevent a real meltdown in values. What we have had thus far, is a realignment in price and in perceptions, but not one that would yet qualify as a mortal wound to the bull.
Up here in Canada, these woes are just a bit more amplified. The Globe and Mail's Report on Business describes the situation as follows:
"Commodities have been through more than a few bumps over the past several years, but they have always bounced back to new highs. Is this latest bump anything different?
Skeptics have been noting for some time that the fundamentals supporting commodity prices - the strong demand from China, the weak U.S. dollar, the threat of rising inflation and the uncertain geopolitical situation in many parts of the world - no longer explain the rise this year that sent the charts of many commodity prices into an unsustainable parabolic surge.
Speculators, it seems, have been providing the main thrust as they seek refuge from volatility. However, with the U.S. equity market suddenly looking healthier following aggressive rate cuts by the U.S. Federal Reserve, there is likely a rush for the exits now that is also driving the loonie down.
What's for sure is that the consequences of a protracted downturn are nasty. Commodity producers represent about half of the market capitalization of the S&P/TSX composite index, versus just 18 per cent for the S&P 500."
It is wait-and-see at this juncture. While a rebound is still possible, we need to get a better sense of where the unwinding by the longs could take values. The markets are feeding on their own momentum right now and not much in the way of news seems to matter. Fast turns could become routine. Sleepless nights may yet follow.
www.ibtimes.com
Will Gold prices become volatile?
MUMBAI: After weeks of bull run, is the most glittering global commodity--gold--entering into a volatile phase?
Gold prices in India, the most active market for the yellow metal, have been witnessing sharp ups and downs in the last one week. India, the largest consumer of gold, often decides the buying and selling patterns in gold.
On Good Friday, in restricted trading, gold staged a strong recovery by gaining Rs 300 at Rs 12,300 per ten grams on the bullion market on revival of buying by stockists at existing lower levels.
Gold, which recorded a steepest fall of Rs 1,110 in previous day's trading, bounced back as stockists and jewellery fabricators bought the metal. However, silver market remained closed for 'Holi' festival.
Global trend, which normally set a price band here in domestic market, failed to impact on the prices as markets closed on account of "Good Friday".
Standard old and ornaments met with fresh demand and recovered by Rs 300 each at Rs 12,300 and Rs 12,150 per ten grams respectively.
However, sovereign declined by Rs 200 at Rs 10,000 per piece of eight gram. The bullion market will remain closed tomorrow on account of "Holi".
Gold prices in India, the most active market for the yellow metal, have been witnessing sharp ups and downs in the last one week. India, the largest consumer of gold, often decides the buying and selling patterns in gold.
On Good Friday, in restricted trading, gold staged a strong recovery by gaining Rs 300 at Rs 12,300 per ten grams on the bullion market on revival of buying by stockists at existing lower levels.
Gold, which recorded a steepest fall of Rs 1,110 in previous day's trading, bounced back as stockists and jewellery fabricators bought the metal. However, silver market remained closed for 'Holi' festival.
Global trend, which normally set a price band here in domestic market, failed to impact on the prices as markets closed on account of "Good Friday".
Standard old and ornaments met with fresh demand and recovered by Rs 300 each at Rs 12,300 and Rs 12,150 per ten grams respectively.
However, sovereign declined by Rs 200 at Rs 10,000 per piece of eight gram. The bullion market will remain closed tomorrow on account of "Holi".
Will gold prices decline further?
MUMBAI: After a rally in gold that led to the international prices zooming to $1030 an ounce, will gold price reverse direction based on Wednesday's price level of $940 ?
Major Ajay, a financial astrologer who predicted a week ago that a “vertical fall in bullions and metals are expected from March 19” has been proved true. “My prediction has indeed come true,” he told Commodity Online. He said silver will follow gold whose support levels are at US $980-965 upto March 25.
Last week Tobias Merath, head of commodity research at Credit Suisse in Zurich, said that the combination of dollar weakness, negative real interest rates and surging inflation was the ideal environment for rising gold prices.
However, he had warned that the gold price rally was entering a more mature phase and further sharp price rice is unlikely as has happened the earlier months.
The latest surge in gold prices, however, is less impressive when adjusted for inflation. In real terms, bullion would need to be about $2,200 to match the price achieved in 1980 of $850 a troy ounce, according World Gold Council.
Gold tumbled nearly 6 percent to a three-week low on Wednesday, as investors rushed to take profits after a lower-than-expected U.S. interest rate cut and as the dollar trimmed losses.
International analysts are of the view that the dips in gold prices are temporary and it could come back to above $1000 levels soon and sustain at that level. The increasing threat of inflation, lower interest rates which makes dollar less attractive and several key drivers of gold prices are still there.
Major Ajay, a financial astrologer who predicted a week ago that a “vertical fall in bullions and metals are expected from March 19” has been proved true. “My prediction has indeed come true,” he told Commodity Online. He said silver will follow gold whose support levels are at US $980-965 upto March 25.
Last week Tobias Merath, head of commodity research at Credit Suisse in Zurich, said that the combination of dollar weakness, negative real interest rates and surging inflation was the ideal environment for rising gold prices.
However, he had warned that the gold price rally was entering a more mature phase and further sharp price rice is unlikely as has happened the earlier months.
The latest surge in gold prices, however, is less impressive when adjusted for inflation. In real terms, bullion would need to be about $2,200 to match the price achieved in 1980 of $850 a troy ounce, according World Gold Council.
Gold tumbled nearly 6 percent to a three-week low on Wednesday, as investors rushed to take profits after a lower-than-expected U.S. interest rate cut and as the dollar trimmed losses.
International analysts are of the view that the dips in gold prices are temporary and it could come back to above $1000 levels soon and sustain at that level. The increasing threat of inflation, lower interest rates which makes dollar less attractive and several key drivers of gold prices are still there.
Inflation Vs Gold: Complementing each other
The word "INFLATION" covers two very different concepts, and it's important to keep them separate, writes David Galland for Casey Research.
The first concept is monetary inflation, which is when the supply of money increases faster than the supply of goods and services. The other concept is price inflation, which refers to an increase in the overall level of prices for goods and services.
The relationship between the two is the relationship of cause and effect.
Monetary inflation causes price inflation, because an excess of money reduces the value of each monetary unit. But while almost everyone sees price inflation when it happens, few people notice the monetary inflation that causes it.
And so they tend to blame the producers of goods and services for higher prices – rather than the money-creating government that is the true culprit.
Make no mistake; as government spending continues on a steep ascent, piling up debt, there is no question that the government has to continue creating money like there's no tomorrow. This situation is not unique to the United States. Quite the opposite, in fact. The adoption of fiat monetary systems is now universal.
The results of over three decades of unhindered monetary creation are increasingly being felt in a rising tide of price inflation, whether it be the 7.4% increase in producer prices reported by the US in the most recent quarter, or the news just out of China that consumer price inflation now tops 8% and is worsening...or, in the most extreme example, Zimbabwe, where the utter lack of restraint by an insane dictator now burdens that economy with an inflation rate of over 100,000% annually.
Inflation: Global Overview
To get a better sense of things, Casey Research recently conducted a survey of the world's top 30 economies, broken down on a region-by-region basis.
Most pundits focus on commodities as a central culprit in today's higher price inflation. Why are commodity prices rising? There are many reasons, most importantly: supply and demand fundamentals, speculation and a weakening US Dollar, the "universal currency" in which oil, Gold and many other commodities are priced.
Of those factors, supply and demand and speculation are fairly fluid. Which is to say they can vary over time based on politics (a threat to cut off oil sales by Venezuela, a war in the Middle East, legislation favoring bio-fuel production) or for more technical reasons (power shortages impacting mining in South Africa, or the shutdown of the Gulf of Mexico during a hurricane).
This relatively short-term variability largely neutralizes the value of these factors as predictors of future inflation. Simply put: who can know the unknowable?
Instead, we look to longer-term trends. In that regard, two are apparent. The first has to do with the concept of "peak" commodities. While it has been Marion King Hubbert's theory of Peak Oil that has received the most attention, credible arguments can also be made for peak metal (the dearth of major new discoveries), and even peak food. While these arguments have merit, they were beyond the scope of our survey, other than noting them as potentially rising in significance over time.
The second long-term trend is, in our view, of immediate consequence and worth a more detailed discussion: per above, the limitations and risks inherent in the fiat monetary systems now in universal favor around the world. It is this fiat monetary regime – the attempt to manage monetary policy based on flexible guidelines, and without the anchor previously provided by a gold standard – that we believe is the single most important driver of the rising price inflation now apparent around the world.
Simply, while the central banks of a handful of countries are (just) managing to contain inflation through restrained monetary and fiscal policy, the vast majority are finding the task politically inexpedient and are losing control. While we may point with some well-deserved derision at Mr. Mugabe's comedic attempts to paper over his inflation with yet more paper, all nations are currently making the same errors, albeit at differing levels of failure.
To understand this point, we share a simple but accurate way of thinking about inflation as the result of too much money chasing too few goods.
Now we're beginning to get under the hood of the problem, but one further view is necessary to understand what happened in the early 1970s that unleashed the tidal wave of money.
While canceling the gold standard was a US policy decision, its impact was felt around the world. That is because of the historic Bretton Woods agreement struck between representatives of over 40 countries in 1944, as World War II came to an end.
Leveraging its position as "last man standing" following the devastating war, the United States pushed forward a wide-ranging set of agreements – the net result being that, from that point forward, the US Dollar would be the de facto global reserve currency, with all the nations of the world pegging their currencies to the dollar.
New institutions, including the International Monetary Fund and the International Bank for Reconstruction and Development, were fathered at Bretton Woods, but they were nothing more than enforcers for the new regime, ensuring that the other countries stayed in line, buying and selling dollars as needed to maintain a stable peg.
For its part, the US guaranteed Dollar convertibility at a Gold Price of $35 "forever".
But as is inevitable when dealing with governments, "forever" really means "for as long as it is politically expedient." When it became inconvenient, in the late 1960s when the French under Charles de Gaulle decided that they'd prefer to have the Gold, Nixon canceled convertibility.
Once President Nixon canceled that convertibility, which took effect in August 1971, the world's central bankers – left with no other immediately obvious or more viable alternative – continued using the US Dollar as a key component of their reserves. The greenback also continued to be used in international trade, to price globally traded commodities, such as oil.
Yet the end of gold convertibility represented a fundamental change; from that point forward the creation of US Dollars and, by extension, all of the world's currencies, was restrained by nothing more than political expediency.
It is our contention that the size of the politically motivated governmental spending, spending which has no "hard" limiting factor or defined discipline, will continue apace and, in fact, significantly worsen due to compounding interest on government borrowing and the coming wave of irrevocable social commitments – on Social Security and Medicare in the US, for example.
Against the backdrop of a global fiat monetary regime, the only limitation to government spending is that which the politicians believe will be politically unacceptable to a population. This is, generally speaking, no real limitation at all, given that the public is now apathetic about, and numb to, the real world implications of large numbers.
Inflation Baked in the Cake
In light of the cause and effect between monetary inflation and price inflation, and given the clear findings in our Global Inflation Survey, we can only conclude that inflation in both its commonly understood forms is now baked into the proverbial cake.
As investors, that keeps us focused on gold, the world's longest-serving form of money and an investment we have been profitably beating the drum about since 1999. Importantly, a quick scan now finds that gold is rising against a large number of currencies. This is a very useful view of the current inflation trend in that it demonstrates that the trend has expanded considerably beyond just a weakening US Dollar, and is now affecting fiat currencies around the world, almost without exception.
Are we seeing the end of the experiment in fiat monetary systems? It's too early to say one way or another, but it's not too late to shift at least some percentage of your portfolio into physical Gold Investments and, for leverage, gold shares.
The above was excerpted from the Casey Research Global Inflation Survey. The full 38-page survey, which includes commentary by Casey Research chairman Doug Casey – and an interview on the inflation/deflation debate with Casey Research's chief economist Bud Conrad – is available on request here...
Courtesy : BullionVault.com
The first concept is monetary inflation, which is when the supply of money increases faster than the supply of goods and services. The other concept is price inflation, which refers to an increase in the overall level of prices for goods and services.
The relationship between the two is the relationship of cause and effect.
Monetary inflation causes price inflation, because an excess of money reduces the value of each monetary unit. But while almost everyone sees price inflation when it happens, few people notice the monetary inflation that causes it.
And so they tend to blame the producers of goods and services for higher prices – rather than the money-creating government that is the true culprit.
Make no mistake; as government spending continues on a steep ascent, piling up debt, there is no question that the government has to continue creating money like there's no tomorrow. This situation is not unique to the United States. Quite the opposite, in fact. The adoption of fiat monetary systems is now universal.
The results of over three decades of unhindered monetary creation are increasingly being felt in a rising tide of price inflation, whether it be the 7.4% increase in producer prices reported by the US in the most recent quarter, or the news just out of China that consumer price inflation now tops 8% and is worsening...or, in the most extreme example, Zimbabwe, where the utter lack of restraint by an insane dictator now burdens that economy with an inflation rate of over 100,000% annually.
Inflation: Global Overview
To get a better sense of things, Casey Research recently conducted a survey of the world's top 30 economies, broken down on a region-by-region basis.
Most pundits focus on commodities as a central culprit in today's higher price inflation. Why are commodity prices rising? There are many reasons, most importantly: supply and demand fundamentals, speculation and a weakening US Dollar, the "universal currency" in which oil, Gold and many other commodities are priced.
Of those factors, supply and demand and speculation are fairly fluid. Which is to say they can vary over time based on politics (a threat to cut off oil sales by Venezuela, a war in the Middle East, legislation favoring bio-fuel production) or for more technical reasons (power shortages impacting mining in South Africa, or the shutdown of the Gulf of Mexico during a hurricane).
This relatively short-term variability largely neutralizes the value of these factors as predictors of future inflation. Simply put: who can know the unknowable?
Instead, we look to longer-term trends. In that regard, two are apparent. The first has to do with the concept of "peak" commodities. While it has been Marion King Hubbert's theory of Peak Oil that has received the most attention, credible arguments can also be made for peak metal (the dearth of major new discoveries), and even peak food. While these arguments have merit, they were beyond the scope of our survey, other than noting them as potentially rising in significance over time.
The second long-term trend is, in our view, of immediate consequence and worth a more detailed discussion: per above, the limitations and risks inherent in the fiat monetary systems now in universal favor around the world. It is this fiat monetary regime – the attempt to manage monetary policy based on flexible guidelines, and without the anchor previously provided by a gold standard – that we believe is the single most important driver of the rising price inflation now apparent around the world.
Simply, while the central banks of a handful of countries are (just) managing to contain inflation through restrained monetary and fiscal policy, the vast majority are finding the task politically inexpedient and are losing control. While we may point with some well-deserved derision at Mr. Mugabe's comedic attempts to paper over his inflation with yet more paper, all nations are currently making the same errors, albeit at differing levels of failure.
To understand this point, we share a simple but accurate way of thinking about inflation as the result of too much money chasing too few goods.
Now we're beginning to get under the hood of the problem, but one further view is necessary to understand what happened in the early 1970s that unleashed the tidal wave of money.
While canceling the gold standard was a US policy decision, its impact was felt around the world. That is because of the historic Bretton Woods agreement struck between representatives of over 40 countries in 1944, as World War II came to an end.
Leveraging its position as "last man standing" following the devastating war, the United States pushed forward a wide-ranging set of agreements – the net result being that, from that point forward, the US Dollar would be the de facto global reserve currency, with all the nations of the world pegging their currencies to the dollar.
New institutions, including the International Monetary Fund and the International Bank for Reconstruction and Development, were fathered at Bretton Woods, but they were nothing more than enforcers for the new regime, ensuring that the other countries stayed in line, buying and selling dollars as needed to maintain a stable peg.
For its part, the US guaranteed Dollar convertibility at a Gold Price of $35 "forever".
But as is inevitable when dealing with governments, "forever" really means "for as long as it is politically expedient." When it became inconvenient, in the late 1960s when the French under Charles de Gaulle decided that they'd prefer to have the Gold, Nixon canceled convertibility.
Once President Nixon canceled that convertibility, which took effect in August 1971, the world's central bankers – left with no other immediately obvious or more viable alternative – continued using the US Dollar as a key component of their reserves. The greenback also continued to be used in international trade, to price globally traded commodities, such as oil.
Yet the end of gold convertibility represented a fundamental change; from that point forward the creation of US Dollars and, by extension, all of the world's currencies, was restrained by nothing more than political expediency.
It is our contention that the size of the politically motivated governmental spending, spending which has no "hard" limiting factor or defined discipline, will continue apace and, in fact, significantly worsen due to compounding interest on government borrowing and the coming wave of irrevocable social commitments – on Social Security and Medicare in the US, for example.
Against the backdrop of a global fiat monetary regime, the only limitation to government spending is that which the politicians believe will be politically unacceptable to a population. This is, generally speaking, no real limitation at all, given that the public is now apathetic about, and numb to, the real world implications of large numbers.
Inflation Baked in the Cake
In light of the cause and effect between monetary inflation and price inflation, and given the clear findings in our Global Inflation Survey, we can only conclude that inflation in both its commonly understood forms is now baked into the proverbial cake.
As investors, that keeps us focused on gold, the world's longest-serving form of money and an investment we have been profitably beating the drum about since 1999. Importantly, a quick scan now finds that gold is rising against a large number of currencies. This is a very useful view of the current inflation trend in that it demonstrates that the trend has expanded considerably beyond just a weakening US Dollar, and is now affecting fiat currencies around the world, almost without exception.
Are we seeing the end of the experiment in fiat monetary systems? It's too early to say one way or another, but it's not too late to shift at least some percentage of your portfolio into physical Gold Investments and, for leverage, gold shares.
The above was excerpted from the Casey Research Global Inflation Survey. The full 38-page survey, which includes commentary by Casey Research chairman Doug Casey – and an interview on the inflation/deflation debate with Casey Research's chief economist Bud Conrad – is available on request here...
Courtesy : BullionVault.com
What is the future of Gold Futures?
Gold futures plunged $59 to finish at $945.30 an ounce, the biggest single-session loss since June 2006, after hitting a record high of $1,034 an ounce Monday. Spot gold was last down $44 at $937.30 bid. The yellow metal was hit by heavy liquidation of funds when the dollar regained some strength in light of yesterday’s smaller than expected U.S. Federal Reserve rate cut.
“Supports at $985, $975, $960 all gave way, and their failure raises the possibility of revisiting the $915 area -where the latest ascending phase had begun back in mid-January,” said Jon Nadler, senior analyst at Kitco Bullion Dealers. “Should that level not be maintained, there is very little in the way in terms of real brick and mortar until the mid $800's.”
On Tuesday, the Federal Reserve cut the federal funds rate, the interest that banks charge each other on overnight loans, by three quarters of a percentage point down to 2.25%. However, Wall Street had expected a full percentage point. The Fed has been rapidly lowering rates down from 4.25% at the beginning of this year, drawing in speculative fund money.
The U.S. dollar was last up 0.157 at 72.088 on the index. Against the euro, the dollar traded at $1.5598 from $1.5625 yesterday, but actually declined to 99.30 yen from 99.85 on Tuesday.
In stock markets, the Dow fell 293.00 to 12,099.66, the Standard & Poor's 500 index fell 32.32 to 1,298.42 and the Nasdaq composite index fell 58.30 to 2,209.96.
RI posted a link to a commentary on Tuesday by Mike Paulenoff, author of the MPTrader.com, entitled, “Gold to Sell off to $940 on US Interest Rate Cut Decision.” Paulenoff used streetTRACKS Gold Shares [NYSE:GLD] as an example to show that gold peaked and the news about the interest rate reduction on Tuesday would be sold hard. He said that gold would traverse back towards $940.00 and was right.
"With gold already up by more than 19% so far this year, consolidation is healthy and to be expected," said Mark O'Byrne, executive director of Gold & Silver Investments Ltd.
In other metals, copper for May delivery lost 11 cents to $3.63 a pound, June palladium slid $25.2 to $489.65 an ounce, April platinum lost $81 to $1,887 an ounce and May silver ended lower by $1.51 to $18.45 an ounce. Crude-oil futures lost $4.94 to end at $104.48 a barrel.
Courtesy: www.resourceinvestor.com
“Supports at $985, $975, $960 all gave way, and their failure raises the possibility of revisiting the $915 area -where the latest ascending phase had begun back in mid-January,” said Jon Nadler, senior analyst at Kitco Bullion Dealers. “Should that level not be maintained, there is very little in the way in terms of real brick and mortar until the mid $800's.”
On Tuesday, the Federal Reserve cut the federal funds rate, the interest that banks charge each other on overnight loans, by three quarters of a percentage point down to 2.25%. However, Wall Street had expected a full percentage point. The Fed has been rapidly lowering rates down from 4.25% at the beginning of this year, drawing in speculative fund money.
The U.S. dollar was last up 0.157 at 72.088 on the index. Against the euro, the dollar traded at $1.5598 from $1.5625 yesterday, but actually declined to 99.30 yen from 99.85 on Tuesday.
In stock markets, the Dow fell 293.00 to 12,099.66, the Standard & Poor's 500 index fell 32.32 to 1,298.42 and the Nasdaq composite index fell 58.30 to 2,209.96.
RI posted a link to a commentary on Tuesday by Mike Paulenoff, author of the MPTrader.com, entitled, “Gold to Sell off to $940 on US Interest Rate Cut Decision.” Paulenoff used streetTRACKS Gold Shares [NYSE:GLD] as an example to show that gold peaked and the news about the interest rate reduction on Tuesday would be sold hard. He said that gold would traverse back towards $940.00 and was right.
"With gold already up by more than 19% so far this year, consolidation is healthy and to be expected," said Mark O'Byrne, executive director of Gold & Silver Investments Ltd.
In other metals, copper for May delivery lost 11 cents to $3.63 a pound, June palladium slid $25.2 to $489.65 an ounce, April platinum lost $81 to $1,887 an ounce and May silver ended lower by $1.51 to $18.45 an ounce. Crude-oil futures lost $4.94 to end at $104.48 a barrel.
Courtesy: www.resourceinvestor.com
Gold the only loser on Fed impact
NEW YORK: In a surprising development, gold futures plunged Tuesday while almost all other commodities gained over US Fed’s decision to cut lending rate.
Most of the other prominent futures rose broadly, with crude oil, copper and agriculture futures all trading higher.
Gold for April delivery rose $1.70 to settle at $1,004.30 on the New York Mercantile Exchange but pulled back nearly $25 after the Fed's decision. The metal fetched $978.20 an ounce in aftermarket trading, down $24.40.
Though some analysts warn gold is due for a correction, others say it could still move higher first due to economic worries, record high crude prices and a tumbling dollar.
Gold is traditionally viewed as safe-haven investment during times of economic uncertainty and rising inflation.
Other precious metals traded mixed Tuesday. Silver for May delivery fell 34 cents to settle at $19.96 an ounce on the Nymex, while May copper added 6.15 cents to settle at $3.7465 a pound.
Most of the other prominent futures rose broadly, with crude oil, copper and agriculture futures all trading higher.
Gold for April delivery rose $1.70 to settle at $1,004.30 on the New York Mercantile Exchange but pulled back nearly $25 after the Fed's decision. The metal fetched $978.20 an ounce in aftermarket trading, down $24.40.
Though some analysts warn gold is due for a correction, others say it could still move higher first due to economic worries, record high crude prices and a tumbling dollar.
Gold is traditionally viewed as safe-haven investment during times of economic uncertainty and rising inflation.
Other precious metals traded mixed Tuesday. Silver for May delivery fell 34 cents to settle at $19.96 an ounce on the Nymex, while May copper added 6.15 cents to settle at $3.7465 a pound.
Dollar pares losses after Fed cuts interest rate
The dollar pared its losses against the euro and closed in the green after the Federal Reserve's decision to cut interest rates by 75 basis points, less than the market had expected.
Flurry of gloomy economic data from the US continued, as the Commerce Department on Tuesday reported a drop in US housing starts in February by 0.6 percent to a 1.065 million unit annual rate, down from 1.071 million units in January.
In the previous day the greenback had been under selling pressure in reaction to the Fed cutting its discount rate by 25 basis points to 3.25 percent on Sunday
Adding to the pressure on the greenback, the consumer confidence in US recorded a drop. The University of Michigan/Reuters index tracking consumer sentiment dipped to 70.5 in March from 70.8 in February.
Data from the US showed total industrial output fell 0.5 percent in February, much steeper than the expected rate of 0.1 percent.
Another release showed US homebuilders' confidence held steady in March. The National Association of Home Builders (NAHB) Housing Market Index for March remained unchanged at 20.
In a separate report, the US Labor Department said the consumer price index was flat in February against the expectations of a 0.2 % increase.
On Thursday, US Commerce department reported a worse-than-expected 0.6 percent fall in the Retail Sales in February.
The doubts about the effectiveness of the Federal Reserve's efforts also added pressure in to the greenback. Last day, the Federal Reserve had announced new steps to boost liquidity in the banking system.
Stronger-than-expected economic data from the Euro-zone, according to which industrial production posted a 0.9% rise in January and 3.8% rise annually, propped up the European currency to new highs against the Dollar earlier this week.
In a surprise move, the Fed said it would increase the size of its emergency auctions by $40 billion, which means providing $100 billion to primary dealers in US Treasury debt. It also would start a series of term repurchase transactions with the primary dealers that trade securities directly with the Fed, expected to be worth a total of $100 billion.
The Beige Book survey of the Fed reported softening or weakening in the pace of business activity in 8 of the 12 Fed regional districts; and subdued, slow or modest growth in others, confirming the slowdown in US economy since the start of the year.
Federal Reserve Chairman Ben Bernanke had given a grim assessment of the U.S. housing sector, adding to mounting fears of recession.
The Fed had lowered its 2008 growth forecast to 1.3 % - 2 %, from a forecast of 1.8 % - 2.5 % in November.
In a grave effort to prevent a global market meltdown in financial markets and a possible recession in the US economy, the Fed had lowered its lending rate by 75 basis points to 3.50% - a rare move between formal meetings of the central bank's policymakers in January; and again lowered the rate to 3 percent January 30th.
Medium Term Outlook Active trading above 1.4510 is the sign of weakness in dollar. Supports are 1.4630, 1.4755, 1.4788, 1.4966 and 1.5052. Resistances are 1.4450, 1.4320 and 1.4277. More weakness can be expected above 1.4968
In spot, dollar closed at 1.5624 (1.5727) against the euro, after trading in the range 1.5832– 1.5616.
Last day, DEUR June traded in the range 157.45 – 156.01 and closed at 156.23.
Flurry of gloomy economic data from the US continued, as the Commerce Department on Tuesday reported a drop in US housing starts in February by 0.6 percent to a 1.065 million unit annual rate, down from 1.071 million units in January.
In the previous day the greenback had been under selling pressure in reaction to the Fed cutting its discount rate by 25 basis points to 3.25 percent on Sunday
Adding to the pressure on the greenback, the consumer confidence in US recorded a drop. The University of Michigan/Reuters index tracking consumer sentiment dipped to 70.5 in March from 70.8 in February.
Data from the US showed total industrial output fell 0.5 percent in February, much steeper than the expected rate of 0.1 percent.
Another release showed US homebuilders' confidence held steady in March. The National Association of Home Builders (NAHB) Housing Market Index for March remained unchanged at 20.
In a separate report, the US Labor Department said the consumer price index was flat in February against the expectations of a 0.2 % increase.
On Thursday, US Commerce department reported a worse-than-expected 0.6 percent fall in the Retail Sales in February.
The doubts about the effectiveness of the Federal Reserve's efforts also added pressure in to the greenback. Last day, the Federal Reserve had announced new steps to boost liquidity in the banking system.
Stronger-than-expected economic data from the Euro-zone, according to which industrial production posted a 0.9% rise in January and 3.8% rise annually, propped up the European currency to new highs against the Dollar earlier this week.
In a surprise move, the Fed said it would increase the size of its emergency auctions by $40 billion, which means providing $100 billion to primary dealers in US Treasury debt. It also would start a series of term repurchase transactions with the primary dealers that trade securities directly with the Fed, expected to be worth a total of $100 billion.
The Beige Book survey of the Fed reported softening or weakening in the pace of business activity in 8 of the 12 Fed regional districts; and subdued, slow or modest growth in others, confirming the slowdown in US economy since the start of the year.
Federal Reserve Chairman Ben Bernanke had given a grim assessment of the U.S. housing sector, adding to mounting fears of recession.
The Fed had lowered its 2008 growth forecast to 1.3 % - 2 %, from a forecast of 1.8 % - 2.5 % in November.
In a grave effort to prevent a global market meltdown in financial markets and a possible recession in the US economy, the Fed had lowered its lending rate by 75 basis points to 3.50% - a rare move between formal meetings of the central bank's policymakers in January; and again lowered the rate to 3 percent January 30th.
Medium Term Outlook Active trading above 1.4510 is the sign of weakness in dollar. Supports are 1.4630, 1.4755, 1.4788, 1.4966 and 1.5052. Resistances are 1.4450, 1.4320 and 1.4277. More weakness can be expected above 1.4968
In spot, dollar closed at 1.5624 (1.5727) against the euro, after trading in the range 1.5832– 1.5616.
Last day, DEUR June traded in the range 157.45 – 156.01 and closed at 156.23.
Commodities market cools down, as Dollar gains
The market for gold and other commodities is cooling and it is the dollar that has gained the most. The Reuters-CRB Commodity Index is down 8.4 per cent over last one week.
Fed Chairman Ben Bernanke’s moves to pump in liquidity and save banks from collapse have brought relief at least in currency markets as dollar is up against major currencies after Bernanke's move and buyers are coming back into US government securities.
“We expect dollar to go up and commodity prices to ease off,” said Michael Preiss, Associate Director- Investment Advisory Group, HSBC.
Thanks to stronger dollar investors are now discarding gold as safe haven.
Major global funds including hedge funds have sold commodities across the board fearing a global slowdown.
Crude oil and gold prices have crashed over 9 per cent since March 17 and latest data suggest US crude demand has dropped by 5.10 lakh barrels/day.
There is also speculation in the market that G - 7 nations may have intervene in forex market to stem the dollar's fall.
Global investors are buying dollars and dumping commodities and so the dollar has gained over 3 per cent against Euro and Yen since March 17.
However, investors are still very worried about US recession and analysts say this will help commodities to find a fair value.
Meanwhile traders on Wall Street have started building up expectations that Federal Reserve might cut interest rates by another 50 bps on next April 30th meet.
Courtesy: www.ndtvprofit.com
Fed Chairman Ben Bernanke’s moves to pump in liquidity and save banks from collapse have brought relief at least in currency markets as dollar is up against major currencies after Bernanke's move and buyers are coming back into US government securities.
“We expect dollar to go up and commodity prices to ease off,” said Michael Preiss, Associate Director- Investment Advisory Group, HSBC.
Thanks to stronger dollar investors are now discarding gold as safe haven.
Major global funds including hedge funds have sold commodities across the board fearing a global slowdown.
Crude oil and gold prices have crashed over 9 per cent since March 17 and latest data suggest US crude demand has dropped by 5.10 lakh barrels/day.
There is also speculation in the market that G - 7 nations may have intervene in forex market to stem the dollar's fall.
Global investors are buying dollars and dumping commodities and so the dollar has gained over 3 per cent against Euro and Yen since March 17.
However, investors are still very worried about US recession and analysts say this will help commodities to find a fair value.
Meanwhile traders on Wall Street have started building up expectations that Federal Reserve might cut interest rates by another 50 bps on next April 30th meet.
Courtesy: www.ndtvprofit.com
Oil to range between $80-110: OPEC President
The National Association of Realtors said that existing home sales were at an annual rate of 5.03 million units in February, up 2.9% from January's pace and better than expected. Inventories of unsold homes were down 3% to 4.03 million units.
The June U.S. T-bonds dropped 2.05/32nds to 118.51/64ths. May lumber closed up $5.20 at $230.80, the highest close in two weeks.
It was one week ago today that investors in Bear Stearns learned that their shares were being bought by JPMorgan Chase and Company for a paltry $2 per share. Bear Stearns is trading higher today after it was reported that JPMorgan increased its offer from $2 to roughly $10 per share in an attempt to satisfy upset shareholders. The December eurodollars closed down .20 at 97.635, the lowest close in a week.
The June U.S. T-bonds dropped 2.05/32nds to 118.51/64ths. May lumber closed up $5.20 at $230.80, the highest close in two weeks.
It was one week ago today that investors in Bear Stearns learned that their shares were being bought by JPMorgan Chase and Company for a paltry $2 per share. Bear Stearns is trading higher today after it was reported that JPMorgan increased its offer from $2 to roughly $10 per share in an attempt to satisfy upset shareholders. The December eurodollars closed down .20 at 97.635, the lowest close in a week.
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