I am puzzled by the International Monetary Fund's (IMF) latest growth projections for the euro zone. The forecasts in the World Economic Outlook show a mild recession for the US, with a positive annual growth rate of 0.5 per cent this year and a huge contraction in growth for the euro zone from 2.6 per cent in 2007 to 1.4 per cent.
This is puzzling to me for two reasons. First, what drives the US downturn is an immense property recession in combination with a credit crunch. That is, by and large, not the case in the euro zone despite a number of regional downturns, for example in Spain. Second, the economic news from the euro zone has been persistently better than expected so far and there may be a dynamism at work that is not yet fully understood.
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One possibility is that some of the economic shock transmitters, especially the exchange rate, may work a little slower than they used to. Companies can hedge against short-term exchange rate fluctuation. The euro has also improved its status as an invoicing currency, which may offer euro zone companies some protection. Eventually, of course, the euro zone may run out of luck, but it would have to run out of luck fairly soon for the IMF's forecast of a sharp growth slowdown to prove correct for this year. Now that might still happen, especially if the US were to fall into a black hole. But I just cannot see how the IMF's pessimism on the euro zone can be consistent with its relative optimism about the US.
Resilience
Another possibility is that the euro zone economy may have become a touch more resilient. To be clear: I am no advocate of "decoupling". It is a meaningless metaphor since no region in a globalised economy can be truly decoupled. But even if there can be no decoupling, there remains the perfectly legitimate question whether the relationship between the US economy and the rest of the world in general, and the euro zone in particular, may have changed over the years.
I suspect it has. One of the main economic arguments in favour of the euro was a lower cyclical dependence on the US. While that goal has clearly not been reached in full, it may have been reached in part. For example, Germany, which accounts for more than a quarter of the euro zone's economic output, has coped better with a rising currency than it did in similar episodes of the past. And in one limited respect, we can even talk about "decoupling": European monetary policy is far more independent of the US today than it used to be. The European Central Bank's dogged pursuit of price stability continues to surprise even seasoned central bank watchers, who could not have imagined that the ECB would be able to leave interest rates unchanged during a period in which the Federal Reserve has cut by 300 basis points.
To see how much has changed over the past 10 years, just imagine what would have happened if there had been no euro. The European financial markets would have remained fragmented. Italy would have devalued its lira a long time ago. Spain would probably have announced a devaluation of the peseta right after the recent elections as the depth of its housing crisis became more and more apparent. Portugal and Greece would have devalued three or four times by now. President Nicolas Sarkozy of France might have been tempted to devalue the franc against the Deutsche Mark shortly after his election. Today, the German, Benelux and Austrian economies would have been crippled by a super-hard Deutsche Mark, guilder and shilling, which would have risen not only against the dollar, but also against the franc, the peseta and the lira. The US downturn would have brought havoc to the European economy - as it used to in the past. You remember that other tired old metaphor about the US sneezing and the Europeans catching a cold. Maybe we are now living in a world where the US is catching a cold and the Europeans are sneezing.
Challenges
This does not mean that all is well with the euro zone. On the contrary, I am almost obsessively pessimistic about Germany's economy and the country's inability to create a dynamic services and financial sector. But there can be no doubt that Germany is more robust relative to past performance.
This is in my view not an economic reform story, but the result of macroeconomic regime change. The euro created a large and stabilising internal market, almost as large as the US itself. Of course, the euro zone remains relatively more open than the US. It continues to depend on outside influences more than the US. But my point is that the euro zone is much less sensitive today than its constituent economies were 10 or 15 years ago. Economic forecasters should beware that not all past relationships can be safely extrapolated into the future.
Obviously, there may come a point when a US recession and a persistently weak dollar will affect the euro zone as well. There are several channels through which US economic weakness is transmitted to the rest of the world - bank profits, the stock market, falling exports among others. But these channels take time to work through the system. I would broadly concur with the IMF's 2009 forecast for the euro zone - a growth rate of 1.2 per cent. But for growth to slow down to 1.4 per cent already this year, something dramatic would have to happen that I am not seeing elsewhere in the IMF's forecasts.
Tuesday, April 15, 2008
Bahrain days from extinguishing oil well blaze
Dubai: An oil well fire that started in Bahrain on Saturday could take days to extinguish as the country waits for specialist fire-fighting equipment to arrive, a spokesman at Bahrain's state oil company Bapco said on Tuesday.
Output from Bahrain's onshore 35,000 barrel per day Awali field was unaffected by the fire, which broke out during routine maintenance, said Bapco's acting manager of public relations Mohammed Shehab.
Bahrain has called in a US specialist fire fighting service to extinguish the fire, Shehab said.
A truck hit a wellhead at the oilfield on Friday, causing a gas leak. The gas ignited around midday on Saturday, Shehab said. The high pressure of the gas leak made the fire difficult to extinguish,. The gas was being used for reinjection at the field to boost oil output.
There were no injuries and other wells at Awali continued pumping, he added.
Output from Bahrain's onshore 35,000 barrel per day Awali field was unaffected by the fire, which broke out during routine maintenance, said Bapco's acting manager of public relations Mohammed Shehab.
Bahrain has called in a US specialist fire fighting service to extinguish the fire, Shehab said.
A truck hit a wellhead at the oilfield on Friday, causing a gas leak. The gas ignited around midday on Saturday, Shehab said. The high pressure of the gas leak made the fire difficult to extinguish,. The gas was being used for reinjection at the field to boost oil output.
There were no injuries and other wells at Awali continued pumping, he added.
Oil and rice scale new highs
Sydney: Oil and rice hit record highs on Tuesday, leading gains for commodities as supply concerns intensified while concerns about the US economy and fresh doubts about credit markets eroded confidence in the dollar.
The move back into commodities also lifted gold and other agricultural products.
US crude rose $1.80 to $113.56 a barrel at 1405 GMT, after touching a record high of $113.93.
Oil is up about 18 per cent from the start of the year and is averaging near $100.
London Brent crude was up $1.91 at $111.75, after a record high of $111.85. The May Brent futures contract expired yesterday.
"One thing that is clearly driving the oil price is that the US dollar has gotten substantially weaker in the past several months and quarter," said Richard Batty of Standard Life.
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Opec, which pumps more than a third of the world's oil, says it is producing enough and that a US economic slowdown may weaken consumption in the second quarter.
"Current Opec production at more than 32 million barrels per day will be sufficient to both meet demand growth and contribute to further stockbuilds," the Opec said in its latest Monthly Oil Market report.
Tetsu Emori, fund manager at Astmax Co Ltd, said prices had risen due to automatically placed buying orders once the previous record had been breached.
He sees the next resistance target at $115.
Chicago Board of Trade July rice futures rose to $22.025 a hundredweight in Asian electronic trading after jumping by the 50-cent limit on worries about global supply the previous day.
The tight supply picture was reinforced after Indonesia announced it will curb medium-grade rice exports in an effort to combat inflation, joining other countries seeking to protect domestic supplies.
At the same time the Philippines has said it will enter the market for another 500,000 tonnes in May, the second such tender in as many months as it looks to lock in 2008 requirements ahead of the typically lean third quarter.
Meanwhile, British Prime Minister Gordon Brown urged oil producing countries to act to counter high prices.
Brown, who is due to travel to Washington today for talks with US President George W. Bush, said he planned to discuss collective action to bring down oil prices.
The move back into commodities also lifted gold and other agricultural products.
US crude rose $1.80 to $113.56 a barrel at 1405 GMT, after touching a record high of $113.93.
Oil is up about 18 per cent from the start of the year and is averaging near $100.
London Brent crude was up $1.91 at $111.75, after a record high of $111.85. The May Brent futures contract expired yesterday.
"One thing that is clearly driving the oil price is that the US dollar has gotten substantially weaker in the past several months and quarter," said Richard Batty of Standard Life.
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Opec, which pumps more than a third of the world's oil, says it is producing enough and that a US economic slowdown may weaken consumption in the second quarter.
"Current Opec production at more than 32 million barrels per day will be sufficient to both meet demand growth and contribute to further stockbuilds," the Opec said in its latest Monthly Oil Market report.
Tetsu Emori, fund manager at Astmax Co Ltd, said prices had risen due to automatically placed buying orders once the previous record had been breached.
He sees the next resistance target at $115.
Chicago Board of Trade July rice futures rose to $22.025 a hundredweight in Asian electronic trading after jumping by the 50-cent limit on worries about global supply the previous day.
The tight supply picture was reinforced after Indonesia announced it will curb medium-grade rice exports in an effort to combat inflation, joining other countries seeking to protect domestic supplies.
At the same time the Philippines has said it will enter the market for another 500,000 tonnes in May, the second such tender in as many months as it looks to lock in 2008 requirements ahead of the typically lean third quarter.
Meanwhile, British Prime Minister Gordon Brown urged oil producing countries to act to counter high prices.
Brown, who is due to travel to Washington today for talks with US President George W. Bush, said he planned to discuss collective action to bring down oil prices.
Sterling recovers on Inflation data
Sterling gained against the dollar on Monday as British producer price inflation surged, taking some heat out of Bank of England interest rate cut expectations.
But worry about the rate view limited the gain on cable, in light of ECB’s decision to keep rate steady. Sterling had been under pressure against the dollar after the Bank of England cut rates by 25 basis points. The bank’s decision affected the concerns on credit conditions in UK.
BOE decided to limit cut in 25 basis points because of optimism about the economy after the latest batch of bank write-downs.
A Bank of England official on last week had downplayed the possibilities of a steep rate cut as the central bank tries to control rising inflation.
The UK purchasing managers’ index of the services sector for March came in at a level of 52.1, below February's level of 54.0, according to the release by the Chartered Institute of Purchasing Supply.
Concerns about European exposure to the US sub-prime mortgage crisis remained, as Swiss banking giant UBS and the Deutsche Bank disclosed a combined $23 billion of write-downs for the first quarter, ahead of their scheduled first-quarter earnings announcements.
Bank of England Governor Mervyn King said that the central bank was facing the challenge of balancing the possibility of weaker growth due to the credit crunch, with higher inflation pressures.
Britain risks the prospect of a US-style crash in its house prices as the credit crunch in the financial markets takes its toll of a heavily over-valued property market, the International Monetary Fund warned on Sunday.
Last day in spot trading, sterling closed at 1.9787 (1.9704) against the dollar, after trading in the range 1.9652– 1.9787.
Medium term outlook
Trading below 2.0000 is the sign of weakness. Supports are 1.9800, 1.9600, 1.9385; resistances are 2.0275, 2.0400.
Last day DGBP traded in the range 197.90 – 196.05 and closed at 196.61.
But worry about the rate view limited the gain on cable, in light of ECB’s decision to keep rate steady. Sterling had been under pressure against the dollar after the Bank of England cut rates by 25 basis points. The bank’s decision affected the concerns on credit conditions in UK.
BOE decided to limit cut in 25 basis points because of optimism about the economy after the latest batch of bank write-downs.
A Bank of England official on last week had downplayed the possibilities of a steep rate cut as the central bank tries to control rising inflation.
The UK purchasing managers’ index of the services sector for March came in at a level of 52.1, below February's level of 54.0, according to the release by the Chartered Institute of Purchasing Supply.
Concerns about European exposure to the US sub-prime mortgage crisis remained, as Swiss banking giant UBS and the Deutsche Bank disclosed a combined $23 billion of write-downs for the first quarter, ahead of their scheduled first-quarter earnings announcements.
Bank of England Governor Mervyn King said that the central bank was facing the challenge of balancing the possibility of weaker growth due to the credit crunch, with higher inflation pressures.
Britain risks the prospect of a US-style crash in its house prices as the credit crunch in the financial markets takes its toll of a heavily over-valued property market, the International Monetary Fund warned on Sunday.
Last day in spot trading, sterling closed at 1.9787 (1.9704) against the dollar, after trading in the range 1.9652– 1.9787.
Medium term outlook
Trading below 2.0000 is the sign of weakness. Supports are 1.9800, 1.9600, 1.9385; resistances are 2.0275, 2.0400.
Last day DGBP traded in the range 197.90 – 196.05 and closed at 196.61.
Dollar weakens against euro
The dollar weakened against the Euro on Friday on renewed concerns about the economy after the release of weaker than expected consumer confidence. According to the report, U.S. consumer confidence dropped to its lowest in 26 years.
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence fell to 63.2 in April from 69.5 in March. This was well below economists' median expectation of a reading of 69.0, according to a Reuters poll.
But dollar had shown some recovery against the euro after the comments form ECB chief on Thursday. Dollar recovered from record lows against the euro as European Central Bank President Jean-Claude Trichet expressed concerns over high inflation, sluggish growth and foreign-exchange volatility.
Most of the data’s are supporting the view of weak economy in US. The US Commerce Department revealed the nation's trade deficit expanded unexpectedly by 5.7% to $62.3 billion in February.
In job sector, Initial jobless claims in the US fell 53,000 to 357,000 in the week ended April 5, as reported by the Labor Department. But the four-week average of initial claims rose by 2,500 to 378,250.
Also, continuing jobless claims rose 3,000 to 2.94 million, the highest since July 2004, for the week ending March 29. The four-week moving average of continuing jobless claims increased 36,500 to 2.9 million.
According to a Commerce Department report released on Wednesday, US wholesale inventories increased a more-than-expected 1.1 percent February, while sales fell 0.8 percent.
The National Association of Realtors’ (NAR) pending home sales index for February fell 1.9 percent to 84.6 from 86.2 in the previous month.
Minutes from the Federal Open Market Committee meeting held in March gave a downbeat assessment of the US economy, leaving the possibility of further cuts in US interest rates intact. The minutes also showed that many board members believed a recession in the first half of 2008 was likely amid declining economic growth and financial market stress.
According to the release from US Labor Department last week, non-farm payrolls fell by an estimated 80,000 in March.
Also, the unemployment rate in the US rose to 5.1% in March, the highest since September 2005.
Federal Reserve Chairman Ben Bernanke, in testimony to Congress, had said that the outlook for US economic growth had worsened since January and the possibility of a recession could not be ruled out.
Medium Term Outlook
Expecting a short-term recovery in dollar if it sustains below 1.5725; Supports are 1.5909, 1.6148, 1.6420. Resistances are 1.555, 1.5380, 1.5220 and 1.5110. But if it trades above 1.5910, more weakness can be expected.
In spot, dollar closed at 1.5802 (1.5742) against the euro, after trading in the range 1.5855– 1.5735.
Last day, DEUR June traded in the range 157.11– 158.00 and closed at 157.85.
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence fell to 63.2 in April from 69.5 in March. This was well below economists' median expectation of a reading of 69.0, according to a Reuters poll.
But dollar had shown some recovery against the euro after the comments form ECB chief on Thursday. Dollar recovered from record lows against the euro as European Central Bank President Jean-Claude Trichet expressed concerns over high inflation, sluggish growth and foreign-exchange volatility.
Most of the data’s are supporting the view of weak economy in US. The US Commerce Department revealed the nation's trade deficit expanded unexpectedly by 5.7% to $62.3 billion in February.
In job sector, Initial jobless claims in the US fell 53,000 to 357,000 in the week ended April 5, as reported by the Labor Department. But the four-week average of initial claims rose by 2,500 to 378,250.
Also, continuing jobless claims rose 3,000 to 2.94 million, the highest since July 2004, for the week ending March 29. The four-week moving average of continuing jobless claims increased 36,500 to 2.9 million.
According to a Commerce Department report released on Wednesday, US wholesale inventories increased a more-than-expected 1.1 percent February, while sales fell 0.8 percent.
The National Association of Realtors’ (NAR) pending home sales index for February fell 1.9 percent to 84.6 from 86.2 in the previous month.
Minutes from the Federal Open Market Committee meeting held in March gave a downbeat assessment of the US economy, leaving the possibility of further cuts in US interest rates intact. The minutes also showed that many board members believed a recession in the first half of 2008 was likely amid declining economic growth and financial market stress.
According to the release from US Labor Department last week, non-farm payrolls fell by an estimated 80,000 in March.
Also, the unemployment rate in the US rose to 5.1% in March, the highest since September 2005.
Federal Reserve Chairman Ben Bernanke, in testimony to Congress, had said that the outlook for US economic growth had worsened since January and the possibility of a recession could not be ruled out.
Medium Term Outlook
Expecting a short-term recovery in dollar if it sustains below 1.5725; Supports are 1.5909, 1.6148, 1.6420. Resistances are 1.555, 1.5380, 1.5220 and 1.5110. But if it trades above 1.5910, more weakness can be expected.
In spot, dollar closed at 1.5802 (1.5742) against the euro, after trading in the range 1.5855– 1.5735.
Last day, DEUR June traded in the range 157.11– 158.00 and closed at 157.85.
Dollar weak as Economic concerns remain
The dollar weakened against the Euro on Monday on renewed concerns about the economy.
The Dollar failed to take advantage of better-than-expected Retail Sales data from the US. Data from the US Commerce Department showed retail sales managed to rise 0.2% in March, compared with economists' consensus expectation for a 0.1% decline.
Sentiments in the dollar remained dampened on sustained fears regarding the US Economy, after data showed US consumer confidence sunk to its lowest level in 26 years in early April, according to a report from University of Michigan/Reuters. The US consumer sentiment index fell to 63.2 in early April from 69.5 in March.
Most of the data are supporting the view of weak economy in US. The US Commerce Department revealed the nation's trade deficit expanded unexpectedly by 5.7% to $62.3 billion in February.
In job sector, Initial jobless claims in the US fell 53,000 to 357,000 in the week ended April 5, as reported by the Labor Department. But the four-week average of initial claims rose by 2,500 to 378,250.
Also, continuing jobless claims rose 3,000 to 2.94 million, the highest since July 2004, for the week ending March 29. The four-week moving average of continuing jobless claims increased 36,500 to 2.9 million.
According to a Commerce Department report released on Wednesday, US wholesale inventories increased a more-than-expected 1.1 percent February, while sales fell 0.8 percent.
The National Association of Realtors’ (NAR) pending home sales index for February fell 1.9 percent to 84.6 from 86.2 in the previous month.
Minutes from the Federal Open Market Committee meeting held in March gave a downbeat assessment of the US economy, leaving the possibility of further cuts in US interest rates intact. The minutes also showed that many board members believed a recession in the first half of 2008 was likely amid declining economic growth and financial market stress.
Federal Reserve Chairman Ben Bernanke, in testimony to Congress, had said that the outlook for US economic growth had worsened since January and the possibility of a recession could not be ruled out.
Medium Term Outlook
Expecting a short-term recovery in dollar if it sustains below 1.5725; Supports are 1.5909, 1.6148, 1.6420. Resistances are 1.555, 1.5380, 1.5220 and 1.5110. But if it trades above 1.5910, more weakness can be expected.
In spot, dollar closed at 1.5843 (1.5805) against the euro, after trading in the range 1.5669– 1.5843.
Last day, DEUR June traded in the range 158.28– 156.57 and closed at 157.55.
The Dollar failed to take advantage of better-than-expected Retail Sales data from the US. Data from the US Commerce Department showed retail sales managed to rise 0.2% in March, compared with economists' consensus expectation for a 0.1% decline.
Sentiments in the dollar remained dampened on sustained fears regarding the US Economy, after data showed US consumer confidence sunk to its lowest level in 26 years in early April, according to a report from University of Michigan/Reuters. The US consumer sentiment index fell to 63.2 in early April from 69.5 in March.
Most of the data are supporting the view of weak economy in US. The US Commerce Department revealed the nation's trade deficit expanded unexpectedly by 5.7% to $62.3 billion in February.
In job sector, Initial jobless claims in the US fell 53,000 to 357,000 in the week ended April 5, as reported by the Labor Department. But the four-week average of initial claims rose by 2,500 to 378,250.
Also, continuing jobless claims rose 3,000 to 2.94 million, the highest since July 2004, for the week ending March 29. The four-week moving average of continuing jobless claims increased 36,500 to 2.9 million.
According to a Commerce Department report released on Wednesday, US wholesale inventories increased a more-than-expected 1.1 percent February, while sales fell 0.8 percent.
The National Association of Realtors’ (NAR) pending home sales index for February fell 1.9 percent to 84.6 from 86.2 in the previous month.
Minutes from the Federal Open Market Committee meeting held in March gave a downbeat assessment of the US economy, leaving the possibility of further cuts in US interest rates intact. The minutes also showed that many board members believed a recession in the first half of 2008 was likely amid declining economic growth and financial market stress.
Federal Reserve Chairman Ben Bernanke, in testimony to Congress, had said that the outlook for US economic growth had worsened since January and the possibility of a recession could not be ruled out.
Medium Term Outlook
Expecting a short-term recovery in dollar if it sustains below 1.5725; Supports are 1.5909, 1.6148, 1.6420. Resistances are 1.555, 1.5380, 1.5220 and 1.5110. But if it trades above 1.5910, more weakness can be expected.
In spot, dollar closed at 1.5843 (1.5805) against the euro, after trading in the range 1.5669– 1.5843.
Last day, DEUR June traded in the range 158.28– 156.57 and closed at 157.55.
Gold, Silver will face short term decline
MUMBAI: In current market scenario, everybody can trust in gold thanks to inflation and recession that have led to the collapse of currency domination in many countries. So gold will continue to glitter.
Forecasters are bullish on gold in long term but for the short term, this market may have some more work to the downside.
Normally, gold and silver are the destination of a "flight to quality" during nervous markets, but that was not the case last month. The gold and silver markets fell in the final week of the commodity decline.
Gold surpassed the $1000 mark briefly, but fell to the deflationary forces by declining $100 before recovering in the last full week of March.
Fundamentally, nothing has changed; we still have inflation, we still have abandonment of the Dollar and we still have aggressive buying of gold bullion. The psychology has changed, as the weak "longs" have lost their courage. Importantly, the exchanges have increased the margins on gold so aggressively that the small players have been forced to liquidate.
Technically, gold has broken the "up" trend line that has been intact since the August lows. The intermediate and short-term trends are down, but the major trend remains up. Gold would have to drop below $700 before turning the major trend down.
This market may have peaked for the first half of the year and will remain range-bound during the next quarter.
Silver...will more than likely follow the pattern of gold and the CRB index. The fundamentals have not changed, but the margin requirements have been grossly increased.
Once again, we have politics driving investors from precious metals futures, reminiscent of 1980, when Bunker Hunt was forced from the silver pits. Only five years ago, silver margins were $1500 per contract. That has been increased to $10,000 in the past couple of weeks.
Forecasters are bullish on gold in long term but for the short term, this market may have some more work to the downside.
Normally, gold and silver are the destination of a "flight to quality" during nervous markets, but that was not the case last month. The gold and silver markets fell in the final week of the commodity decline.
Gold surpassed the $1000 mark briefly, but fell to the deflationary forces by declining $100 before recovering in the last full week of March.
Fundamentally, nothing has changed; we still have inflation, we still have abandonment of the Dollar and we still have aggressive buying of gold bullion. The psychology has changed, as the weak "longs" have lost their courage. Importantly, the exchanges have increased the margins on gold so aggressively that the small players have been forced to liquidate.
Technically, gold has broken the "up" trend line that has been intact since the August lows. The intermediate and short-term trends are down, but the major trend remains up. Gold would have to drop below $700 before turning the major trend down.
This market may have peaked for the first half of the year and will remain range-bound during the next quarter.
Silver...will more than likely follow the pattern of gold and the CRB index. The fundamentals have not changed, but the margin requirements have been grossly increased.
Once again, we have politics driving investors from precious metals futures, reminiscent of 1980, when Bunker Hunt was forced from the silver pits. Only five years ago, silver margins were $1500 per contract. That has been increased to $10,000 in the past couple of weeks.
Gold gains amid firm global trend
MUMBAI: Gold climbed up by Rs 155 to Rs 12,225 per 10 grams in the bullion market on Tuesday after two days of holidays in the Indian market.
There was on intense buying by jewellery fabricators and retailers on the back of global reports.
According to traders, fresh buying by jewellery fabricators and retailers for the marriage season and report of firming trend in global markets mainly pushed up the prices.
Standard gold and ornaments met with heavy demand and shot up by Rs 155 each to Rs 12,225 and Rs 12,075 per 10 grams respectively. Sovereign, however, remained flat at Rs 9,900 per piece of eight gram in limited deals.
Trading activity picked up following reports of the precious metal rising to $933 an ounce following weakening dollar against leading currencies and crude oil rising to record high levels.
On the other hand, silver ready lacked necessary buying support and lost Rs 50 to Rs 23,550 per kg, but silver weekly delivery found scattered buying support from peculators and rose by Rs 110 to Rs 23,310 per kg.
Silver coins were traded around previous levels of Rs 26,600 for buying and Rs 26,700 for selling of 100 coins.
But in the global market the gains could be limited as gold has yet to retest the key resistance mark of $950 an ounce after falling from a record high of $1,030.80 an ounce hit on March 17. Platinum bounced, while silver and palladium extended losses.
Gold rose to $926.60/927.40 an ounce from $925.30/926.10 late in New York. It hit an intraday low of $914.10 on Monday before rebounding to hit a high of $931.10 as U.S. oil futures settled around $111 a barrel.
Gold futures were higher on Tuesday in opening trade on the Multi Commodity Exchange of India Ltd (MCX) tracking crude oil on a record high and analysts saw more upsides ahead.
The June gold contract on the MCX was seen trading within a range of Rs 11,920 and Rs 12,140, the IL&FS analyst added. Open interest for June gold on MCX was at 7,130 lots, up from 7,119 on Monday.
Volume on Monday was at 15.67 kg. MCX traded only in the second half of Monday owing to a holiday.
There was on intense buying by jewellery fabricators and retailers on the back of global reports.
According to traders, fresh buying by jewellery fabricators and retailers for the marriage season and report of firming trend in global markets mainly pushed up the prices.
Standard gold and ornaments met with heavy demand and shot up by Rs 155 each to Rs 12,225 and Rs 12,075 per 10 grams respectively. Sovereign, however, remained flat at Rs 9,900 per piece of eight gram in limited deals.
Trading activity picked up following reports of the precious metal rising to $933 an ounce following weakening dollar against leading currencies and crude oil rising to record high levels.
On the other hand, silver ready lacked necessary buying support and lost Rs 50 to Rs 23,550 per kg, but silver weekly delivery found scattered buying support from peculators and rose by Rs 110 to Rs 23,310 per kg.
Silver coins were traded around previous levels of Rs 26,600 for buying and Rs 26,700 for selling of 100 coins.
But in the global market the gains could be limited as gold has yet to retest the key resistance mark of $950 an ounce after falling from a record high of $1,030.80 an ounce hit on March 17. Platinum bounced, while silver and palladium extended losses.
Gold rose to $926.60/927.40 an ounce from $925.30/926.10 late in New York. It hit an intraday low of $914.10 on Monday before rebounding to hit a high of $931.10 as U.S. oil futures settled around $111 a barrel.
Gold futures were higher on Tuesday in opening trade on the Multi Commodity Exchange of India Ltd (MCX) tracking crude oil on a record high and analysts saw more upsides ahead.
The June gold contract on the MCX was seen trading within a range of Rs 11,920 and Rs 12,140, the IL&FS analyst added. Open interest for June gold on MCX was at 7,130 lots, up from 7,119 on Monday.
Volume on Monday was at 15.67 kg. MCX traded only in the second half of Monday owing to a holiday.
Gold will be bullish thanks to higher crude oil price
Gold and silver fell on the last trading day of the week in New York, and on the Indian trading platforms of MCX and NCDEX on speculation that the precious-metals' rally will falter after prices failed to keep pace with crude oil and the euro.
Still, the bullion market is looking strongly positive on account of heavy buying from investment funds, betting on strong returns in the long term. The Euro touched record high against Dollar last week.
The IMF plans to sell 403 Metric Tones of Gold in international market to meet fund requirement that may not support price down side and the G-7 pledged to implement further monetary and fiscal policies to beat global inflation and likelyhood of a recession.
Expect gold to be likely bullish due to higher crude oil price. Expect infusiong of huge number of hedging funds in bullion market againt weaker dollar.
Technical Outlook
The short run technical indicators in bullion are like RSI is natural zone with 60 point which indicate not over bought and over sold position. The average in MACD are above the zero line, suggesting bullishness. The stochastic fast %K (29 ) is higher then %D (20) indicating positive sign for current price, the current price is higher than the 14 days moving average.
Supports are at $924,$912 and $896 and resistance are at $938,$952 and $970.
Rama Chandra Sahu is Senior Commodity Analyst, Voguestock Ltd, New Delhi
Still, the bullion market is looking strongly positive on account of heavy buying from investment funds, betting on strong returns in the long term. The Euro touched record high against Dollar last week.
The IMF plans to sell 403 Metric Tones of Gold in international market to meet fund requirement that may not support price down side and the G-7 pledged to implement further monetary and fiscal policies to beat global inflation and likelyhood of a recession.
Expect gold to be likely bullish due to higher crude oil price. Expect infusiong of huge number of hedging funds in bullion market againt weaker dollar.
Technical Outlook
The short run technical indicators in bullion are like RSI is natural zone with 60 point which indicate not over bought and over sold position. The average in MACD are above the zero line, suggesting bullishness. The stochastic fast %K (29 ) is higher then %D (20) indicating positive sign for current price, the current price is higher than the 14 days moving average.
Supports are at $924,$912 and $896 and resistance are at $938,$952 and $970.
Rama Chandra Sahu is Senior Commodity Analyst, Voguestock Ltd, New Delhi
UP, up and up, no slide for gold
NEW DELHI: Where is the yellow metal heading for? If the present trend is any indication gold may hit $1,100 mark this year itself.
According to Gold Fields Mineral Services (GFMS), the increasing gap between mine production and demand has been pushing gold price up.
GFMS, the London-based consultancy and research company, said the $1,200-mark may not be possible this year.
Last year, the metal breached the GFMS target of $1,000 an ounce and set an all-time record of $1,011.25 on March 17 this year.
According to a press note, the hefty correction in gold prices in the last few weeks did not come as a surprise as the momentum of the earlier gains looked unsustainable.
The current hesitancy does not mean that the bull-run has ended.
The research firm has also warned against irrational exuberance in the gap between mine production and jewellery demand, which is likely to jump from 100 tonnes to around 500 tonnes this year.
The report suggests that the long-term equilibrium price (the price at which the supply of goods matches demand) could be closer to the $600 an ounce-mark.
Last year, western investment fell to just under 160 tonnes as disinvestment in the over-the-counter (OTC) market, chiefly in the first half, countered much of the substantial inflow into other areas such as the physical market, exchange traded funds (ETF) and Futures.
Jewellery demand, however, recorded a year-on-year growth of 22 per cent in the first half, while the second half recorded a drop of 9 per cent with demand falling considerably in the fourth quarter.
This meant the full year’s demand was up 5 per cent at just over 2,400 tonnes. Producer de-hedging proved surprisingly strong in 2007, rising 9 per cent to reach a record of almost 450 tonnes due to a wave of book eliminations and partial buy-backs.
The bulk of the activity took place in the first half of the year. By year-end, the global producer hedge book stood at a about 800 tonnes.
According to Gold Fields Mineral Services (GFMS), the increasing gap between mine production and demand has been pushing gold price up.
GFMS, the London-based consultancy and research company, said the $1,200-mark may not be possible this year.
Last year, the metal breached the GFMS target of $1,000 an ounce and set an all-time record of $1,011.25 on March 17 this year.
According to a press note, the hefty correction in gold prices in the last few weeks did not come as a surprise as the momentum of the earlier gains looked unsustainable.
The current hesitancy does not mean that the bull-run has ended.
The research firm has also warned against irrational exuberance in the gap between mine production and jewellery demand, which is likely to jump from 100 tonnes to around 500 tonnes this year.
The report suggests that the long-term equilibrium price (the price at which the supply of goods matches demand) could be closer to the $600 an ounce-mark.
Last year, western investment fell to just under 160 tonnes as disinvestment in the over-the-counter (OTC) market, chiefly in the first half, countered much of the substantial inflow into other areas such as the physical market, exchange traded funds (ETF) and Futures.
Jewellery demand, however, recorded a year-on-year growth of 22 per cent in the first half, while the second half recorded a drop of 9 per cent with demand falling considerably in the fourth quarter.
This meant the full year’s demand was up 5 per cent at just over 2,400 tonnes. Producer de-hedging proved surprisingly strong in 2007, rising 9 per cent to reach a record of almost 450 tonnes due to a wave of book eliminations and partial buy-backs.
The bulk of the activity took place in the first half of the year. By year-end, the global producer hedge book stood at a about 800 tonnes.
Gold falls again on weak US economic prospects
NEW YORK: Gold prices fell for the second day in succession to close at $US927 an ounce, down by $US4.80 at the COMEX metals division of NYMEX on Friday.
Analysts attributed the reason for the fall back to investor’s decision to lighten their load on new signs of problems in the US economy.
COMEX copper inched up with support coming from firm supply/demand fundamentals keeping the red metal within sight of its all-time highs above $US4.00 a lb.
Active May copper settled 2.05 cents at $3.9445 a lb.
Analysts attributed the reason for the fall back to investor’s decision to lighten their load on new signs of problems in the US economy.
COMEX copper inched up with support coming from firm supply/demand fundamentals keeping the red metal within sight of its all-time highs above $US4.00 a lb.
Active May copper settled 2.05 cents at $3.9445 a lb.
Gold mining coming down in South Africa
Gold production in South Africa, the region with world's largest mining operations, is coming down.
Statistics South Africa said on Friday that reported that gold production in February was down 28% from a year ago with mining operations hurt by a lack of available electricity. June gold fell $4.80 to $927.00.
Statistics South Africa said on Friday that reported that gold production in February was down 28% from a year ago with mining operations hurt by a lack of available electricity. June gold fell $4.80 to $927.00.
Gold, silver fall on more liquidation
NEW YORK: Gold prices fell sharply Thursday mainly on liquidation, profit taking and from a higher US dollar and stronger equities.
June gold fell $US5.70 to settle at $US931.80 a troy ounce on the Comex division of the New York Mercantile Exchange.
In other metals trading, May silver fell US15.7 cents to $US18.043 an ounce, July platinum gained US40c to $US2045 an ounce and June palladium rose $US5.55 to $US468.75 an ounce.
May copper declined US7.6c to settle at $US3.9240 a pound on profit taking.
June gold fell $US5.70 to settle at $US931.80 a troy ounce on the Comex division of the New York Mercantile Exchange.
In other metals trading, May silver fell US15.7 cents to $US18.043 an ounce, July platinum gained US40c to $US2045 an ounce and June palladium rose $US5.55 to $US468.75 an ounce.
May copper declined US7.6c to settle at $US3.9240 a pound on profit taking.
Rush for silver if you want to make moolah!
You know this time around white metal may prove to be a better option for you to invest than in yellow metal. There are several reasons for that. Mainly, according to Jason Homel’s Silverstockreport.com, silver has all the monetary properties of gold, and more.
It is interesting to know this. If you want know the enviable properties of silver, read on. The historic price ratio of silver to gold shows that about 10 ounces of silver would buy one ounce of gold, a 10:1 ratio. Recently, the ratio is about a 50:1 ratio (with silver at $20/oz., and gold at $1000/oz.) As the silver to gold ratio returns to historic values, from 50:1 to 10:1, you may make over 5 times more money investing in silver, than gold!
Silver prices may rise to exceed the 10:1 ratio, for the following reasons: More than all of the silver produced by the mines each year is consumed by industry, which leaves little to no room for substantial investment demand. A marginal increase in investment demand will drive prices sky high.
Most silver is produced as a by-product of mining gold, copper, zinc, or lead. Higher silver prices might not substantially increase the amount of silver mined each year. Consider, in 1980, when silver prices went up to $50/oz., less silver was mined than in 1979!
Higher silver prices may not cause much reduced demand. Why? Because most silver consumed by industry is used in tiny quantities in each application, such as in film or electrical contacts, therefore, rising silver prices will not easily slow down growing industrial demand.
Additionally, as paper money continues to falter, people will buy silver and gold without regard to price, or they will buy simply because prices are going up. Because many investors today are momentum investors, and won’t be able to ignore the gains.
Each year, silver mines produce about 650 million ounces of silver. Around 200 million ounces come from recycling and about 100 million ounces come from investor or government sales. That’s a total of about 1000 million ounces. Of that, about 42% is consumed by industrial use, about 28% consumed by jewellery, about 20% consumed by photography and around 5% consumed in coins and medallions. That’s 95% of total available silver each year.
This implies either a “surplus”, or “investment demand”, of about 5% total. At $20/oz., that’s only $1 billion per year of net investment demand.
Since the 1950s, silver use and consumption, has made silver more rare than gold, in above ground, refined and deliverable forms. Estimates suggest there are 200-300 million ounces of refined, above ground silver available to the market at the present time. There are about 125 million ounces of silver at the NYMEX, the big commodity exchange in New York. The ETF SLV has about 180 million ounces.
Each silver contract at the NYMEX is a promise. There are too many contracts, too many promises to deliver silver that may not exist. Each contract is for 5000 ounces. There are often over 200,000 contracts for 5000 ounces, that’s a total of 1000 million ounces of silver promised to be delivered.
With recent market trends of defaults and bankruptcies, these contracts are at risk of default. Yet, the exchange has only about a third of that in real silver. How can they promise to deliver more silver than exists?
If they fail to deliver silver, then confidence in the world’s entire financial system may collapse. Industrial users of silver may have to shut down their factories. To prevent this, users will bid silver prices much higher.
Due to the risk of default in silver Futures contracts, Jason Homel suggests that you avoid buying Futures contracts, avoid options, and avoid storing your silver with anyone else. Take delivery of your silver, and put your silver in your own safe.
Despite silver's intrinsic properties as money, silver began to lose its status as money starting in the late 1800s, as nations stopped using silver, and started using only gold as money. Over 100 years of this “demonetization” has caused a serious drop in silver’s value, and this trend is about to be reversed as investors re-learn that silver is a great store of value because of its intrinsic properties.
As paper money continues to waver, the neglect of silver’s use as money will end. Once again, silver will be valued based on other measures of value, such as a day’s wage, or a ratio to gold. If silver exceeds its historic value, then perhaps a silver dime, a silver quarter, or a silver dollar will be worth far more than a day’s wage, as it once was.
Will you be hurt if silver and gold prices rise? Not if you own some. Remember, honest weights and measures in commerce produce prosperity. But you must act to benefit from this information.
Don’t wait for silver to rise before buying it. Silver prices could rise by over $20/day to exceed $100/ounce at any time if large funds or billionaires buy with desperation.
(Courtesy: Jason Homel’s Silverstockreport.com)
It is interesting to know this. If you want know the enviable properties of silver, read on. The historic price ratio of silver to gold shows that about 10 ounces of silver would buy one ounce of gold, a 10:1 ratio. Recently, the ratio is about a 50:1 ratio (with silver at $20/oz., and gold at $1000/oz.) As the silver to gold ratio returns to historic values, from 50:1 to 10:1, you may make over 5 times more money investing in silver, than gold!
Silver prices may rise to exceed the 10:1 ratio, for the following reasons: More than all of the silver produced by the mines each year is consumed by industry, which leaves little to no room for substantial investment demand. A marginal increase in investment demand will drive prices sky high.
Most silver is produced as a by-product of mining gold, copper, zinc, or lead. Higher silver prices might not substantially increase the amount of silver mined each year. Consider, in 1980, when silver prices went up to $50/oz., less silver was mined than in 1979!
Higher silver prices may not cause much reduced demand. Why? Because most silver consumed by industry is used in tiny quantities in each application, such as in film or electrical contacts, therefore, rising silver prices will not easily slow down growing industrial demand.
Additionally, as paper money continues to falter, people will buy silver and gold without regard to price, or they will buy simply because prices are going up. Because many investors today are momentum investors, and won’t be able to ignore the gains.
Each year, silver mines produce about 650 million ounces of silver. Around 200 million ounces come from recycling and about 100 million ounces come from investor or government sales. That’s a total of about 1000 million ounces. Of that, about 42% is consumed by industrial use, about 28% consumed by jewellery, about 20% consumed by photography and around 5% consumed in coins and medallions. That’s 95% of total available silver each year.
This implies either a “surplus”, or “investment demand”, of about 5% total. At $20/oz., that’s only $1 billion per year of net investment demand.
Since the 1950s, silver use and consumption, has made silver more rare than gold, in above ground, refined and deliverable forms. Estimates suggest there are 200-300 million ounces of refined, above ground silver available to the market at the present time. There are about 125 million ounces of silver at the NYMEX, the big commodity exchange in New York. The ETF SLV has about 180 million ounces.
Each silver contract at the NYMEX is a promise. There are too many contracts, too many promises to deliver silver that may not exist. Each contract is for 5000 ounces. There are often over 200,000 contracts for 5000 ounces, that’s a total of 1000 million ounces of silver promised to be delivered.
With recent market trends of defaults and bankruptcies, these contracts are at risk of default. Yet, the exchange has only about a third of that in real silver. How can they promise to deliver more silver than exists?
If they fail to deliver silver, then confidence in the world’s entire financial system may collapse. Industrial users of silver may have to shut down their factories. To prevent this, users will bid silver prices much higher.
Due to the risk of default in silver Futures contracts, Jason Homel suggests that you avoid buying Futures contracts, avoid options, and avoid storing your silver with anyone else. Take delivery of your silver, and put your silver in your own safe.
Despite silver's intrinsic properties as money, silver began to lose its status as money starting in the late 1800s, as nations stopped using silver, and started using only gold as money. Over 100 years of this “demonetization” has caused a serious drop in silver’s value, and this trend is about to be reversed as investors re-learn that silver is a great store of value because of its intrinsic properties.
As paper money continues to waver, the neglect of silver’s use as money will end. Once again, silver will be valued based on other measures of value, such as a day’s wage, or a ratio to gold. If silver exceeds its historic value, then perhaps a silver dime, a silver quarter, or a silver dollar will be worth far more than a day’s wage, as it once was.
Will you be hurt if silver and gold prices rise? Not if you own some. Remember, honest weights and measures in commerce produce prosperity. But you must act to benefit from this information.
Don’t wait for silver to rise before buying it. Silver prices could rise by over $20/day to exceed $100/ounce at any time if large funds or billionaires buy with desperation.
(Courtesy: Jason Homel’s Silverstockreport.com)
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