SAN FRANCISCO (MarketWatch) -- Gold futures closed lower Monday, pressured by some strength in the U.S. dollar and a retreat in oil prices, but the precious metal held its ground above the $880-an-ounce level after gaining more than 3% last week.
"Gold is watching while the dollar weakens ... and is battling to find direction," said Julian Phillips, an analyst at GoldForecaster.com. The market has not responded well to the recent record oil prices and to Monday's weaker dollar, he said in emailed comments.
— Julian Phillips, GoldForecaster.com
"We are headed into the quiet season for gold [May to the end of August] but at any moment, reports of another systemic fracture in the financial system could liven it up as happened last year when the sub-prime crisis emerged from the shadows," Phillips said.
Gold for June delivery closed at $884.90 an ounce on the New York Mercantile Exchange, down 90 cents for the session. It climbed as high as $888.80.
For the moment, gold remains capped by trend-line resistance at the $890 mark, said James Moore, analyst at TheBullionDesk.com.
"Given the metal's reaction to pockets of dollar strength, it seems gold will find it tough to rally significantly," Moore said in a research note.
On the currency markets Monday, the dollar rose against some of its currency rivals in the aftermath of a weekend Wall Street Journal report that U.S. officials are attempting to put a floor under the greenback.
A shift in language in the statement that followed last month's meeting of Group of Seven finance ministers and central bankers highlighted concerns over excess volatility in currency markets.
This was interpreted at the time as meaning European officials were worried about the weak dollar's impact on euro-zone exporters. An unnamed U.S. Treasury official, however, said the change was pushed by Washington as part of an international effort to halt the dollar's slide, according to the Journal. See Currencies.
In energy trading, crude-oil futures fell, retreating after their record-breaking run in which they rallied more than 8% last week. Crude for June delivery closed down $1.73 at $124.23 a barrel in New York. See Futures Movers.
Bullish factors stay in place
The weakness in gold prices follows last week's gain of 3.2%, or $27.80.
"Many of the factors that have supported the bull market for the precious metals remain in place," according to analysts from Natixis Commodity Markets Ltd.
"Inflationary pressures associated in part with the dramatic rise in commodity prices are continuing; uncertainty in the financial markets as the sub-prime crisis continues to unravel remains an issue," they said in a second-quarter metals review issued Monday.
And another supportive factor is the "increasing acceptance of commodities as an asset class," they said.
All of these have been contributing to gold's price climb, but "these positive fundamentals do not necessarily justify a straight progression for precious metals prices," they said.
Natixis expects prices for gold to average $875 in 2008. That suggests that it may have already seek a peak for the year, when prices briefly exceeded $1,000 per ounce, the analysts said.
In other metals trading Monday, July silver futures tacked on 32 cents to end at $17.23 an ounce and July copper added 3 cents to finish at $3.75 a pound. July platinum tacked on $21.50 to close at $2,123.30 an ounce and June palladium added $2.95 to close at $446.80 an ounce.
Natixis expects silver prices to shadow, but slightly under perform gold. It predicts that silver prices will average $16.50 for this year, which "implies slightly weaker prices as the year progresses," they said.
Monday, May 12, 2008
Gold Slips as "Sea Change" Spied in Forex Market, Inflation for UK Factories Hits 23%
THE SPOT PRICE OF GOLD slipped $10 early in London on Monday, trading below $890 per ounce as world stock markets ticked higher and government bonds sold off.
The Euro picked up 1.5¢ against the Dollar from last week's two-month beneath $1.5300.
Crude oil slipped 0.5% from a new overnight record above $126 per barrel.
"Although financial markets are more optimistic about the outcome of the credit crisis," notes Walter de Wet in his latest Gold Market note for Standard Bank in Johannesburg, "current concerns are rising inflationary pressures and higher interest rates."
This week both Ben Bernanke of the US Federal Reserve and Jean-Claude Trichet of the European Central Bank will speak on the economic outlook, notes de Wet – and "the market will want their thoughts on the inflation/growth trade-off."
This week also brings a slew of global inflation data, with producer-price and consumer price data due from both the United States and Europe between now and Thursday.
Today China said its cost of living rose at a near 12-year record last month. Food prices rose by more than one-fifth from April '07.
Here in the United Kingdom, manufacturers suffered a 23.1% rise in input prices last month according to the Office for National Statistics, the sharpest producer-price inflation on record.
"The consumer slowdown will mean that retailers will be forced to absorb the bulk of these cost increases in their margins," reckons Paul Dales at Capital Economics in London.
Corn and wheat prices continued to rise in early trade Monday after wet, cold weather in the America mid-west delayed planting yet again at the weekend.
In the New South Wales region of Australia, in contrast, some 48% of the state is now in drought, meaning that the "winter crop may yet again be savaged" according to NSW's minister for primary industries.
"Although the outlook for the Gold Price is looking up again," says today's Gold Market note from Mitsui in London, "it is important to note that since the middle of March, this market has been trending downwards.
"The trend line comes in at $895 on the spot Gold Price. Look for a clear and confirmed break of this level to point to higher prices."
The latest Gold futures data, released Friday evening, showed the total number of contracts outstanding growing by 1.6% in the week-to-Tuesday, reaching a seven-week high.
But open interest still remains almost 25% below January's record high.
Over on the currency markets, "there is kind of a sea change taking place at the moment," believes Mitul Kotecha at Calyon investment bank in London. The net-position of forex speculators has turned bearish on the Euro – and bullish on the US Dollar – for the first time in two and a half years.
"It's probably the early sign of perhaps a more sustained turnaround," reckons Kotecha, repeating the new consensus that the Federal Reserve's much-signaled pause in cutting US interest rates will put a floor beneath the Dollar.
The broad Dollar Index has now gained 3.7% from its record low of March 17th – the day that Gold hit its new record high of $1,032 per ounce. Gold also hit record highs vs. the Euro, British Pound, and the Canadian and Australian Dollars that day, too.
Now the Fed is expected to keep interest rates on hold for the time being, rather than slashing them further. But this apparently pro-Dollar stance leaves the rate of interest for US cash savers at half the rate of US consumer inflation.
Real interest rates, after accounting for current growth in the cost of living, stand at minus 2%.
"It certainly wouldn't be wise for someone to take all of their money out of the stock market and put it in foreign currencies," believes Jeff Dobyns, manager for Raymond James Financial Services in Brentwood and Nashville, speaking to the Tennessean.com this weekend.
"It's probably too late in the game. Now might be a good time to sell. Whenever anyone says it's off the charts, that's a good indication it's getting ready to change."
In the stock market Monday, however, MBIA – the bond insurance giant that lost 87% of its value since May 2007 – reported its third quarterly loss on the run for the Jan. to March period, running a net loss of $2.4 billion.
Here in London, losses by the UK's three largest banks will reduce their combined tax payments for last year by £2.5 billion ($4.9bn) according to the Financial Times.
That's more than 5% of the corporation tax receipts forecast for 2007-08.
"In the US, the credit turmoil has led to a 13.6% in corporate tax receipts," the FT goes on.
The Euro picked up 1.5¢ against the Dollar from last week's two-month beneath $1.5300.
Crude oil slipped 0.5% from a new overnight record above $126 per barrel.
"Although financial markets are more optimistic about the outcome of the credit crisis," notes Walter de Wet in his latest Gold Market note for Standard Bank in Johannesburg, "current concerns are rising inflationary pressures and higher interest rates."
This week both Ben Bernanke of the US Federal Reserve and Jean-Claude Trichet of the European Central Bank will speak on the economic outlook, notes de Wet – and "the market will want their thoughts on the inflation/growth trade-off."
This week also brings a slew of global inflation data, with producer-price and consumer price data due from both the United States and Europe between now and Thursday.
Today China said its cost of living rose at a near 12-year record last month. Food prices rose by more than one-fifth from April '07.
Here in the United Kingdom, manufacturers suffered a 23.1% rise in input prices last month according to the Office for National Statistics, the sharpest producer-price inflation on record.
"The consumer slowdown will mean that retailers will be forced to absorb the bulk of these cost increases in their margins," reckons Paul Dales at Capital Economics in London.
Corn and wheat prices continued to rise in early trade Monday after wet, cold weather in the America mid-west delayed planting yet again at the weekend.
In the New South Wales region of Australia, in contrast, some 48% of the state is now in drought, meaning that the "winter crop may yet again be savaged" according to NSW's minister for primary industries.
"Although the outlook for the Gold Price is looking up again," says today's Gold Market note from Mitsui in London, "it is important to note that since the middle of March, this market has been trending downwards.
"The trend line comes in at $895 on the spot Gold Price. Look for a clear and confirmed break of this level to point to higher prices."
The latest Gold futures data, released Friday evening, showed the total number of contracts outstanding growing by 1.6% in the week-to-Tuesday, reaching a seven-week high.
But open interest still remains almost 25% below January's record high.
Over on the currency markets, "there is kind of a sea change taking place at the moment," believes Mitul Kotecha at Calyon investment bank in London. The net-position of forex speculators has turned bearish on the Euro – and bullish on the US Dollar – for the first time in two and a half years.
"It's probably the early sign of perhaps a more sustained turnaround," reckons Kotecha, repeating the new consensus that the Federal Reserve's much-signaled pause in cutting US interest rates will put a floor beneath the Dollar.
The broad Dollar Index has now gained 3.7% from its record low of March 17th – the day that Gold hit its new record high of $1,032 per ounce. Gold also hit record highs vs. the Euro, British Pound, and the Canadian and Australian Dollars that day, too.
Now the Fed is expected to keep interest rates on hold for the time being, rather than slashing them further. But this apparently pro-Dollar stance leaves the rate of interest for US cash savers at half the rate of US consumer inflation.
Real interest rates, after accounting for current growth in the cost of living, stand at minus 2%.
"It certainly wouldn't be wise for someone to take all of their money out of the stock market and put it in foreign currencies," believes Jeff Dobyns, manager for Raymond James Financial Services in Brentwood and Nashville, speaking to the Tennessean.com this weekend.
"It's probably too late in the game. Now might be a good time to sell. Whenever anyone says it's off the charts, that's a good indication it's getting ready to change."
In the stock market Monday, however, MBIA – the bond insurance giant that lost 87% of its value since May 2007 – reported its third quarterly loss on the run for the Jan. to March period, running a net loss of $2.4 billion.
Here in London, losses by the UK's three largest banks will reduce their combined tax payments for last year by £2.5 billion ($4.9bn) according to the Financial Times.
That's more than 5% of the corporation tax receipts forecast for 2007-08.
"In the US, the credit turmoil has led to a 13.6% in corporate tax receipts," the FT goes on.
Mining's Glittering Future
For investors looking to ride the growth of emerging economies, no sector has produced more spectacular results than once-sleepy mining and minerals. Boosted by soaring demand from China, India, and other fast-growing countries, commodities producers have racked up huge revenue and profit gains even as other companies have faltered in the wake of the credit crunch and slowing Western economies.
Topping the list of high-fliers are Rio Tinto (RTP), which ranks No. 7 on this year's European BusinessWeek 50, and its rival and would-be suitor, BHP Billiton (BHP), which ranks No. 24. Both have benefited mightily from a boom that has seen the price of base metals and minerals double or triple in the past 18 months. Shareholders have benefited as well: Rio Tinto shares are up 84% in the past 12 months, while BHP Billiton's are up 54%.
The surge of cash into both companies' coffers has allowed them to open new mines and acquire rivals. And last November it prompted the most audacious consolidation play of all: BHP proposed to acquire Rio Tinto for an eye-popping $142 billion in stock, which offer Rio swiftly rejected [BusinessWeek.com, 11/9/07]. Two months later, China's largest aluminum maker, Chinalco, and Pittsburgh-based Alcoa (AA) raised the ante by plunking down $14 billion for a 12% stake in Rio [BusinessWeek.com, 2/01/08]. The value of BHP's offer has now risen to $160 billion, but Rio continues to resist it.
Commodities Bubble? Despite such gigantic valuations -- and the drama of a drawn-out takeover bid -- analysts see still more potential. Charles Cooper, mining analyst at London's Evolution Securities, figures both BHP and Rio have strong growth prospects, particularly in their core iron ore businesses. Iron prices are expected to increase an additional 40% to 60% this year alone, and BHP and Rio together control almost 40% of the world's production.
There's also room for their share prices to appreciate. Jeremy Gray, mining analyst at Credit Suisse (CS), reminded investors in a recent research note that the cost of lead -- up 200% since January, 2007 -- has risen at twice the rate of BHP's share price over the same period. "Mining equities have underperformed and a catch-up appears imminent," Gray says.
To be sure, some observers worry about a commodities bubble. If Western financial volatility and economic weakness spread to emerging economies, demand for raw materials could slacken just as BHP and Rio bring new mines online. Thanks to such increases in capacity, the supply of raw materials inevitably will catch up with demand at some point. But one surprising factor that could keep prices high well into 2010 is a global shortage of equipment, transportation capacity, and qualified engineers to oversee new projects.
Fighting Over Their Companies' Futures The protracted mating dance between BHP Billiton and Rio Tinto also could be a distraction to management. Rio continues to spurn the offer, but market-watchers expect BHP may sweeten the deal with a cash component. Complicating matters is the fact that the hostile bid has led to public animosity between Rio CEO Tom Albanese and his BHP counterpart, Marius Kloppers.
With so much at stake, it's no wonder Albanese and Kloppers have turned the fight over their companies' futures into a personal competition. Buoyed by strong demand from emerging markets, BHP Billiton and Rio Tinto are at the forefront of the mining sector's 21st century gold rush. And that has earned them, once again, a place in the European BW 50.
Topping the list of high-fliers are Rio Tinto (RTP), which ranks No. 7 on this year's European BusinessWeek 50, and its rival and would-be suitor, BHP Billiton (BHP), which ranks No. 24. Both have benefited mightily from a boom that has seen the price of base metals and minerals double or triple in the past 18 months. Shareholders have benefited as well: Rio Tinto shares are up 84% in the past 12 months, while BHP Billiton's are up 54%.
The surge of cash into both companies' coffers has allowed them to open new mines and acquire rivals. And last November it prompted the most audacious consolidation play of all: BHP proposed to acquire Rio Tinto for an eye-popping $142 billion in stock, which offer Rio swiftly rejected [BusinessWeek.com, 11/9/07]. Two months later, China's largest aluminum maker, Chinalco, and Pittsburgh-based Alcoa (AA) raised the ante by plunking down $14 billion for a 12% stake in Rio [BusinessWeek.com, 2/01/08]. The value of BHP's offer has now risen to $160 billion, but Rio continues to resist it.
Commodities Bubble? Despite such gigantic valuations -- and the drama of a drawn-out takeover bid -- analysts see still more potential. Charles Cooper, mining analyst at London's Evolution Securities, figures both BHP and Rio have strong growth prospects, particularly in their core iron ore businesses. Iron prices are expected to increase an additional 40% to 60% this year alone, and BHP and Rio together control almost 40% of the world's production.
There's also room for their share prices to appreciate. Jeremy Gray, mining analyst at Credit Suisse (CS), reminded investors in a recent research note that the cost of lead -- up 200% since January, 2007 -- has risen at twice the rate of BHP's share price over the same period. "Mining equities have underperformed and a catch-up appears imminent," Gray says.
To be sure, some observers worry about a commodities bubble. If Western financial volatility and economic weakness spread to emerging economies, demand for raw materials could slacken just as BHP and Rio bring new mines online. Thanks to such increases in capacity, the supply of raw materials inevitably will catch up with demand at some point. But one surprising factor that could keep prices high well into 2010 is a global shortage of equipment, transportation capacity, and qualified engineers to oversee new projects.
Fighting Over Their Companies' Futures The protracted mating dance between BHP Billiton and Rio Tinto also could be a distraction to management. Rio continues to spurn the offer, but market-watchers expect BHP may sweeten the deal with a cash component. Complicating matters is the fact that the hostile bid has led to public animosity between Rio CEO Tom Albanese and his BHP counterpart, Marius Kloppers.
With so much at stake, it's no wonder Albanese and Kloppers have turned the fight over their companies' futures into a personal competition. Buoyed by strong demand from emerging markets, BHP Billiton and Rio Tinto are at the forefront of the mining sector's 21st century gold rush. And that has earned them, once again, a place in the European BW 50.
Power demands pushing metal prices up
WASHINGTON, May 12 (UPI) -- A global increase in energy demands have triggered price jumps in metals, as power shortages from Chile to South Africa have limited production, analysts say.
The power it takes to run an aluminum smelter in China could supply 2 million people with enough power for a year, The Washington Post reported Sunday.
Power shortages have contributed to price increases in platinum, aluminum, and copper, up 24, 21 and 26 percent this year respectively, the report said.
"There will be a sustained level of risk from power shortages in the commodities markets," Michael Lewis, the head of commodities research at Deutsche Bank told the Post.
"We are pricing bigger supply losses as a result," he said.
The demand for metals may have waned in the United States, where consumer spending is down, but emerging markets are keeping global demand intact, analysts said.
"To allow China and India to have a middle class, we need to go back to the drawing board and boost investments in power infrastructure, " Francisco Blanch, a commodities researcher at Merrill Lynch said.
"And if this doesn't happen, we're going to see even more brown-outs," Blanch said.
The power it takes to run an aluminum smelter in China could supply 2 million people with enough power for a year, The Washington Post reported Sunday.
Power shortages have contributed to price increases in platinum, aluminum, and copper, up 24, 21 and 26 percent this year respectively, the report said.
"There will be a sustained level of risk from power shortages in the commodities markets," Michael Lewis, the head of commodities research at Deutsche Bank told the Post.
"We are pricing bigger supply losses as a result," he said.
The demand for metals may have waned in the United States, where consumer spending is down, but emerging markets are keeping global demand intact, analysts said.
"To allow China and India to have a middle class, we need to go back to the drawing board and boost investments in power infrastructure, " Francisco Blanch, a commodities researcher at Merrill Lynch said.
"And if this doesn't happen, we're going to see even more brown-outs," Blanch said.
Dollar Bulls Gain Control as Euro May Be Near Peak
(Bloomberg) -- For the first time since December 2005, futures traders are turning bullish on the dollar.
The difference in the number of wagers by hedge funds and other large speculators on a gain in the greenback versus the euro, known as net longs, was 21,315 on April 29, figures from the Commodity Futures Trading Commission in Washington show. There were net-short positions in each of the previous 123 weeks. At the same time, traders have stepped up their purchases of options that profit from the dollar's appreciation.
The measures are making long-suffering proponents of the dollar optimistic that this time the currency's rally may hold, especially if the Federal Reserve's Open Market Committee refrains from additional interest-rate cuts. The Dollar Index traded on ICE Futures in New York, which tracks the currency against six trading partners, is up 3.7 percent from an all-time low of 70.698 set on March 17.
``There is kind of a sea change taking place at the moment,'' said Mitul Kotecha, head of foreign-exchange research in London at investment bank Calyon, whose forecasts on the euro-dollar exchange rate in the first quarter were more accurate than those of the two biggest currency traders. ``It's probably the early sign of perhaps a more sustained turnaround.''
The Dollar Index fell 0.1 percent to 73.006 by 10:19 a.m. in London. The dollar has appreciated 3.3 percent to $1.5493 since dropping to $1.6019 per euro on April 22, the lowest since the European currency's debut in 1999. The dollar will strengthen by the end of the year to $1.50, according to the median estimate of 40 strategists surveyed by Bloomberg News.
Gaining Traction
The dollar's rebound gained traction last month after the Open Market Committee said ``substantial'' rate cuts since September would help foster growth. U.S. employers also eliminated fewer jobs in April than forecast by economists.
Meanwhile, a slide in business confidence in Germany and France, which account for about half the euro-region economy, renewed speculation the European Central Bank will reduce rates this year. An end to lower rates in the U.S. and the possibility of cuts in Europe raises the appeal of dollar-denominated assets.
``The recent shift to a neutral FOMC stance and from a very hawkish European Central Bank stance, together with U.S. data pointing to a stagnation rather than a deep contraction, have already contributed to the dollar's rally,'' said Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman Inc. Chandler said he expects the dollar to reach $1.44 per euro by year-end.
Rate Futures
Interest-rate futures on the Chicago Board of Trade show an 84 percent chance the Fed will keep its target unchanged at 2 percent when policy makers next meet on June 25, with the balance of the odds calling for a quarter-percentage point cut.
The ECB will lower its 4 percent main refinancing rate to 3.75 percent by the end of September and 3.50 percent by year- end, according to the median estimate of 31 economists surveyed by Bloomberg.
As declining home sales and mortgage losses curbed economic growth, investor sentiment grew so negative on the dollar that even longtime pessimists such as Jim Rogers, chairman of Rogers Holdings, say the U.S. currency is due to rebound.
``I expect a nice rally in the American dollar because so many have been bearish on the American dollar, including me,'' he said on May 8 in Singapore. Rogers, who co-founded the Quantum fund with George Soros in the 1970s and correctly predicted the start of the commodities boom in 1999, cited the benefit of surging prices for U.S. agricultural products.
Contrarian Indicator
Futures can be viewed as a contrarian indicator because traders often rush to reduce positions when momentum in a currency shifts. The last time net longs were this high, in December 2005, the dollar was nearing the end of a one-year, 13 percent rally versus the euro. It weakened 11 percent in 2006 and depreciated by the same amount in 2007.
``It is more likely than not that reasons for speculators returning to selling the dollar will be greater than reasons for them to sell the euro,'' said Derek Halpenny, head of global- currency research in London at Bank of Tokyo-Mitsubishi UFJ Ltd., who expects the euro to reach a record high within three months. ``I see risk that the ECB doesn't do anything this year and expect the Fed will ease again in 2008.''
Between May 2005 and the end of that year, futures traders were net long the dollar versus the euro 73 percent of the time. The U.S. currency gained 7.9 percent in that period.
Call Options
Net-short positions versus all currencies fell to $10 billion in the week ended April 29, from $22 billion in the prior period, according to CFTC data tracked by Morgan Stanley. Speculators had net-long bets on the dollar versus the pound and the euro. Hedge funds and other large speculators were net-short the euro for a second week in the period ended May 6.
In another bullish signal for the dollar, demand for one- month options that grant the right to sell the euro is greater than for those allowing for purchases. The so-called risk- reversal rate had a 0.44 percentage point premium for euro puts relative to calls on May 9.
As recently as March, demand for call options was greater than put options. On Jan. 28, the premium for euro calls reached 0.495 percentage point, the highest since April 2007.
``We may very well have seen the bottom in the dollar,'' said Stephen Jen, the global head of currency research at Morgan Stanley in London, who forecasts the dollar will rise to $1.40 per euro by year-end. ``The dollar has regained some traction lately. Against the euro, the U.S. dollar is around 25 percent undervalued.''
The difference in the number of wagers by hedge funds and other large speculators on a gain in the greenback versus the euro, known as net longs, was 21,315 on April 29, figures from the Commodity Futures Trading Commission in Washington show. There were net-short positions in each of the previous 123 weeks. At the same time, traders have stepped up their purchases of options that profit from the dollar's appreciation.
The measures are making long-suffering proponents of the dollar optimistic that this time the currency's rally may hold, especially if the Federal Reserve's Open Market Committee refrains from additional interest-rate cuts. The Dollar Index traded on ICE Futures in New York, which tracks the currency against six trading partners, is up 3.7 percent from an all-time low of 70.698 set on March 17.
``There is kind of a sea change taking place at the moment,'' said Mitul Kotecha, head of foreign-exchange research in London at investment bank Calyon, whose forecasts on the euro-dollar exchange rate in the first quarter were more accurate than those of the two biggest currency traders. ``It's probably the early sign of perhaps a more sustained turnaround.''
The Dollar Index fell 0.1 percent to 73.006 by 10:19 a.m. in London. The dollar has appreciated 3.3 percent to $1.5493 since dropping to $1.6019 per euro on April 22, the lowest since the European currency's debut in 1999. The dollar will strengthen by the end of the year to $1.50, according to the median estimate of 40 strategists surveyed by Bloomberg News.
Gaining Traction
The dollar's rebound gained traction last month after the Open Market Committee said ``substantial'' rate cuts since September would help foster growth. U.S. employers also eliminated fewer jobs in April than forecast by economists.
Meanwhile, a slide in business confidence in Germany and France, which account for about half the euro-region economy, renewed speculation the European Central Bank will reduce rates this year. An end to lower rates in the U.S. and the possibility of cuts in Europe raises the appeal of dollar-denominated assets.
``The recent shift to a neutral FOMC stance and from a very hawkish European Central Bank stance, together with U.S. data pointing to a stagnation rather than a deep contraction, have already contributed to the dollar's rally,'' said Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman Inc. Chandler said he expects the dollar to reach $1.44 per euro by year-end.
Rate Futures
Interest-rate futures on the Chicago Board of Trade show an 84 percent chance the Fed will keep its target unchanged at 2 percent when policy makers next meet on June 25, with the balance of the odds calling for a quarter-percentage point cut.
The ECB will lower its 4 percent main refinancing rate to 3.75 percent by the end of September and 3.50 percent by year- end, according to the median estimate of 31 economists surveyed by Bloomberg.
As declining home sales and mortgage losses curbed economic growth, investor sentiment grew so negative on the dollar that even longtime pessimists such as Jim Rogers, chairman of Rogers Holdings, say the U.S. currency is due to rebound.
``I expect a nice rally in the American dollar because so many have been bearish on the American dollar, including me,'' he said on May 8 in Singapore. Rogers, who co-founded the Quantum fund with George Soros in the 1970s and correctly predicted the start of the commodities boom in 1999, cited the benefit of surging prices for U.S. agricultural products.
Contrarian Indicator
Futures can be viewed as a contrarian indicator because traders often rush to reduce positions when momentum in a currency shifts. The last time net longs were this high, in December 2005, the dollar was nearing the end of a one-year, 13 percent rally versus the euro. It weakened 11 percent in 2006 and depreciated by the same amount in 2007.
``It is more likely than not that reasons for speculators returning to selling the dollar will be greater than reasons for them to sell the euro,'' said Derek Halpenny, head of global- currency research in London at Bank of Tokyo-Mitsubishi UFJ Ltd., who expects the euro to reach a record high within three months. ``I see risk that the ECB doesn't do anything this year and expect the Fed will ease again in 2008.''
Between May 2005 and the end of that year, futures traders were net long the dollar versus the euro 73 percent of the time. The U.S. currency gained 7.9 percent in that period.
Call Options
Net-short positions versus all currencies fell to $10 billion in the week ended April 29, from $22 billion in the prior period, according to CFTC data tracked by Morgan Stanley. Speculators had net-long bets on the dollar versus the pound and the euro. Hedge funds and other large speculators were net-short the euro for a second week in the period ended May 6.
In another bullish signal for the dollar, demand for one- month options that grant the right to sell the euro is greater than for those allowing for purchases. The so-called risk- reversal rate had a 0.44 percentage point premium for euro puts relative to calls on May 9.
As recently as March, demand for call options was greater than put options. On Jan. 28, the premium for euro calls reached 0.495 percentage point, the highest since April 2007.
``We may very well have seen the bottom in the dollar,'' said Stephen Jen, the global head of currency research at Morgan Stanley in London, who forecasts the dollar will rise to $1.40 per euro by year-end. ``The dollar has regained some traction lately. Against the euro, the U.S. dollar is around 25 percent undervalued.''
Platinum hits 2-week high
SINGAPORE: Platinum jumped to its best level in more than two weeks on Friday on speculative buying ahead of the launch of new platinum exchange-traded notes, while gold held near a one-week high on firm euro and record high oil.
The two ETNs -- UBS E-Tracs Long Platinum ETN and UBS E-Tracs Short Platinum ETN -- will start trading soon on the NYSE Arca platform, according to CNBC television and NYSE Euronext exchange data.
Dealers also reported platinum purchases in Japan, Europe and the United States as auto makers stocked up for their second-quarter requirements, but the metal was still more than $200 below a lifetime high of $2,290 an ounce hit on March 4.
Spot platinum rose as high as $2,043 an ounce, its highest since April 18, up from $2,008.50/2,028.50 late in New York on Thursday. "Automobile makers start to buy, therefore the price will increase rapidly. By the end of May, the price may be $2,100," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.
But jewellery makers weren't buying because of the high prices, using recycled metal instead to meet demand, said Sonoda. Platinum's major industrial use is in catalysts, particularly in diesel catalysts, as it helps cleanse environmentally damaging fumes from motor exhausts. It is also used in jewellery.
The benchmark platinum contract for April 2009 delivery on the Tokyo Commodity Exchange rose 187 yen per gram higher at 6,590 yen. Gold hit a high of $884.55 an ounce, not far from Thursday's one-week high of high at $885.25 an ounce, before dipping to $883.80/884.80 an ounce, still up from $881.40/882.60 an ounce late in New York. "The euro has reversed after finding some support around the 1.5821 region.
That provides some support for gold," said Adrian Koh, an analyst at Phillip Futures in Singapore. "Higher oil prices and the platinum news are also supportive. So basically, it's a string of good news for gold." The euro edged up to $1.5414 after rebounding from a two-month low on reduced expectations for European Central Bank rate cuts. Oil spiked to another record near $125 a barrel on Friday on fund buying.
In the physical market, steady purchases from jewellers in Indonesia, Thailand and Vietnam pushed up premiums for gold bars to 80 US cents an ounce to the spot London prices in Singapore, from 75 cents last week India, the world's largest gold consumer, was active an buyer earlier this week ahead of Akshaya Tritiya, a festival when many Hindus buy gold with the belief it will give them lasting prosperity Gold futures for June delivery on the COMEX division of the New York Mercantile Exchange added $2.8 an ounce to $884.9 an ounce.
The two ETNs -- UBS E-Tracs Long Platinum ETN and UBS E-Tracs Short Platinum ETN -- will start trading soon on the NYSE Arca platform, according to CNBC television and NYSE Euronext exchange data.
Dealers also reported platinum purchases in Japan, Europe and the United States as auto makers stocked up for their second-quarter requirements, but the metal was still more than $200 below a lifetime high of $2,290 an ounce hit on March 4.
Spot platinum rose as high as $2,043 an ounce, its highest since April 18, up from $2,008.50/2,028.50 late in New York on Thursday. "Automobile makers start to buy, therefore the price will increase rapidly. By the end of May, the price may be $2,100," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.
But jewellery makers weren't buying because of the high prices, using recycled metal instead to meet demand, said Sonoda. Platinum's major industrial use is in catalysts, particularly in diesel catalysts, as it helps cleanse environmentally damaging fumes from motor exhausts. It is also used in jewellery.
The benchmark platinum contract for April 2009 delivery on the Tokyo Commodity Exchange rose 187 yen per gram higher at 6,590 yen. Gold hit a high of $884.55 an ounce, not far from Thursday's one-week high of high at $885.25 an ounce, before dipping to $883.80/884.80 an ounce, still up from $881.40/882.60 an ounce late in New York. "The euro has reversed after finding some support around the 1.5821 region.
That provides some support for gold," said Adrian Koh, an analyst at Phillip Futures in Singapore. "Higher oil prices and the platinum news are also supportive. So basically, it's a string of good news for gold." The euro edged up to $1.5414 after rebounding from a two-month low on reduced expectations for European Central Bank rate cuts. Oil spiked to another record near $125 a barrel on Friday on fund buying.
In the physical market, steady purchases from jewellers in Indonesia, Thailand and Vietnam pushed up premiums for gold bars to 80 US cents an ounce to the spot London prices in Singapore, from 75 cents last week India, the world's largest gold consumer, was active an buyer earlier this week ahead of Akshaya Tritiya, a festival when many Hindus buy gold with the belief it will give them lasting prosperity Gold futures for June delivery on the COMEX division of the New York Mercantile Exchange added $2.8 an ounce to $884.9 an ounce.
Gold demand low as prices remain firm
India's gold demand remained low on Monday as prices remained firm, prompting buyers to wait for a fall, dealers said.
"The demand has come down after good sales during Akshaya Tritiya," said Dipen Mandelia, director of Ahmedabad-based LKS Bullion Import and Export Pvt Ltd.
Akshaya Tritiya, an auspicious festival for buying gold, ended on Thursday.
Domestic gold prices erased early losses and moved higher in afternoon trade.
People are cautious of high prices and they are keeping themselves away from the market, said Ashwin Choksi of Mumbai-based Jamnadas M. Choksi Jewellers.
Some people are now shifting to diamond jewellery as prices are comparatively stable there, he said.
"The demand has come down after good sales during Akshaya Tritiya," said Dipen Mandelia, director of Ahmedabad-based LKS Bullion Import and Export Pvt Ltd.
Akshaya Tritiya, an auspicious festival for buying gold, ended on Thursday.
Domestic gold prices erased early losses and moved higher in afternoon trade.
People are cautious of high prices and they are keeping themselves away from the market, said Ashwin Choksi of Mumbai-based Jamnadas M. Choksi Jewellers.
Some people are now shifting to diamond jewellery as prices are comparatively stable there, he said.
Gold bounces back on global cues
old prices bounced back on the bullion market here on Monday on renewed demand from stockists on the back of higher global advices.
Silver also inched up on mild demand from industrial users.
Some of the investors might have shifted to equity market for early gains, traders said.
Standard gold (99.5 purity) shot up by Rs 75 per 10 grams to Rs 11,995 from the last weekend's level of Rs 11,920. Pure gold (99.9 purity) also rose by a similar margin to Rs 12,055 from Rs 11,980.
Silver ready (.999 finess) moved up by Rs 30 per kilo to Rs 23,415 from Rs 23,385.
In the London market, gold was fixed higher in the morning at USD 882.50 per ounce as against USD 876.00 per ounce.
Silver also inched up on mild demand from industrial users.
Some of the investors might have shifted to equity market for early gains, traders said.
Standard gold (99.5 purity) shot up by Rs 75 per 10 grams to Rs 11,995 from the last weekend's level of Rs 11,920. Pure gold (99.9 purity) also rose by a similar margin to Rs 12,055 from Rs 11,980.
Silver ready (.999 finess) moved up by Rs 30 per kilo to Rs 23,415 from Rs 23,385.
In the London market, gold was fixed higher in the morning at USD 882.50 per ounce as against USD 876.00 per ounce.
Will India ban futures trading in Gold?
NEW DELHI: Less a than week after the Indian government banned futures trading in commodities like rubber, chana, soya oil and potato, a section of bullion traders are pressing for a similar ban on gold futures.
On Sunday, the All India Sarafa Association, an umbrella body for bullion traders, sent a memorandum to India's Prime Minister Manmohan Singh and Finance Minister P Chidambaram asking for an immediate ban on futures trading in gold and silver.
According to the Assoication President Sheel Chand Jain, gold prices are going up and up these days becuase of futures trading, and the speculative trading undertaken by commodity players.
"The gold market in India has become unstable thanks to sudden rise and fall in the prices of yellow metal. In fact, the price flutuation in bullion prices, many times in a day, has created instability in the minds of consumers and adversely affected the bullion trade in India," Jain said.
Therefore, he said just as the government banned futures trading in agri commodities like rubber and soya oil, it is high time the government acted fast to ban forward trading in gold and silver.
Jain pointed out that India is the largest consumer of gold in the world, and futures trading has not helped the common man. "Gold prices have been volatile becuase of futures trading. People in India are genuine buyers of gold. But they are left high and dry these days because of the high prices of gold," he said.
Jain said the Association will meet Finance Minister Chidambaram to request him to ban futures trading in gold.
On Sunday, the All India Sarafa Association, an umbrella body for bullion traders, sent a memorandum to India's Prime Minister Manmohan Singh and Finance Minister P Chidambaram asking for an immediate ban on futures trading in gold and silver.
According to the Assoication President Sheel Chand Jain, gold prices are going up and up these days becuase of futures trading, and the speculative trading undertaken by commodity players.
"The gold market in India has become unstable thanks to sudden rise and fall in the prices of yellow metal. In fact, the price flutuation in bullion prices, many times in a day, has created instability in the minds of consumers and adversely affected the bullion trade in India," Jain said.
Therefore, he said just as the government banned futures trading in agri commodities like rubber and soya oil, it is high time the government acted fast to ban forward trading in gold and silver.
Jain pointed out that India is the largest consumer of gold in the world, and futures trading has not helped the common man. "Gold prices have been volatile becuase of futures trading. People in India are genuine buyers of gold. But they are left high and dry these days because of the high prices of gold," he said.
Jain said the Association will meet Finance Minister Chidambaram to request him to ban futures trading in gold.
Gold rises above $882 as dollar falls
NEW YORK: Continuing its upward journey, gold rose to $882.10 a troy ounce on the Comex division of the New York Mercantile Exchange on Thursday.
June gold raised $10.90 to settle at $ 882.10 as the US dollar fell and the euro gained.
As gold was closing, the euro was up to $1.5411 from $1.5396 yesterday. At the same time, the ICE Futures US dollar index was down 0.13 per cent.
July silver rose 17.5 cents to $16.87 an ounce. July platinum raised $73.30, or nearly 4 per cent, to settle at $2042.30 an ounce while June palladium gained $10.15, or more than 2 per cent, to close at $435.90. The most-active July copper contract fell 4.65c to settle at $3.7875 a pound, hurt by technical sales.
June gold raised $10.90 to settle at $ 882.10 as the US dollar fell and the euro gained.
As gold was closing, the euro was up to $1.5411 from $1.5396 yesterday. At the same time, the ICE Futures US dollar index was down 0.13 per cent.
July silver rose 17.5 cents to $16.87 an ounce. July platinum raised $73.30, or nearly 4 per cent, to settle at $2042.30 an ounce while June palladium gained $10.15, or more than 2 per cent, to close at $435.90. The most-active July copper contract fell 4.65c to settle at $3.7875 a pound, hurt by technical sales.
Gold falls below $ 872 on sturdy dollar
NEW YORK: Gold prices fell Wednesday after a three-day winning streak as the dollar rebounded against the euro.
Gold futures for June delivery dropped $6.50, or 0.7%, to $871.20 an ounce on the Comex division of the New York Mercantile Exchange. The price gained 3.1% in the previous three sessions.
Silver futures for July delivery declined 16.5 cents, or 1%, to $16.695 an ounce. The price gained 0.6% in the past week and 22% in the past 12 months.
Silver will average $15.76 this year and $12.80 in 2009, UBS said today in a quarterly report. Futures averaged $13.47 in 2007.
The dollar rose on speculation the Federal Reserve may raise interest rates to curb inflation. Gold has climbed 26% in the past year, reaching a record $1033.90 an ounce on March 17, after sliding borrowing costs sent the dollar to an all-time low against the euro.
The dollar rose as much as 1.1% today against the euro after dropping 0.7% in the previous two sessions. The Fed cut interest rates 3.25 percentage points to 2% from September to April. The euro hit $1.6019 on April 22, the highest ever. The currency traded as low as $1.5366 today.
Gold rallied 31% last year when consumer prices rose 4.1%, the most since 1990. Crude-oil futures climbed to a record for a third time this week, touching $123.56 a barrel.
Gold futures for June delivery dropped $6.50, or 0.7%, to $871.20 an ounce on the Comex division of the New York Mercantile Exchange. The price gained 3.1% in the previous three sessions.
Silver futures for July delivery declined 16.5 cents, or 1%, to $16.695 an ounce. The price gained 0.6% in the past week and 22% in the past 12 months.
Silver will average $15.76 this year and $12.80 in 2009, UBS said today in a quarterly report. Futures averaged $13.47 in 2007.
The dollar rose on speculation the Federal Reserve may raise interest rates to curb inflation. Gold has climbed 26% in the past year, reaching a record $1033.90 an ounce on March 17, after sliding borrowing costs sent the dollar to an all-time low against the euro.
The dollar rose as much as 1.1% today against the euro after dropping 0.7% in the previous two sessions. The Fed cut interest rates 3.25 percentage points to 2% from September to April. The euro hit $1.6019 on April 22, the highest ever. The currency traded as low as $1.5366 today.
Gold rallied 31% last year when consumer prices rose 4.1%, the most since 1990. Crude-oil futures climbed to a record for a third time this week, touching $123.56 a barrel.
Gold rises to Rs 11,820 on buying spree
Gold rose to Rs 11,820 per 10 gram mainly on heavy buying by stockists and jewellery fabricators prior to Akshayatrithiya here at the bullion market on Wednesday.
Precious metal prices surged further by Rs 150 again on firming trend in overseas markets.
Standard gold and ornaments rose by Rs 150 each to Rs 11,820 and Rs 11,670 per 10 gram respectively. Sovereign held unchanged at Rs 9875 per piece of eight gram.
Silver also rose further on brisk buying by funds. Silver ready rose further by Rs 320 to Rs 22,620 per kg and weekly-based delivery by Rs 500 to Rs 22,450 per kg.
Silver coins, on the other hand, continued to be asked at previous levels of Rs 26,600 for buying and Rs 26,700 for selling of 100 pieces.
The buying activity picked up on reports that the gold rose in Asia for a fourth day as crude oil traded near 122 dollar a barrel, boosting the appeal of the precious metal as a hedge against inflation.
Gold has gained 5.2 per cent this year in overseas markets, while oil soared 27 per cent. Bullion for immediate delivery gained 5.03 dollar to 881.43 dollar an ounce. The domestic bullion market normally take guidance from global markets.
Precious metal prices surged further by Rs 150 again on firming trend in overseas markets.
Standard gold and ornaments rose by Rs 150 each to Rs 11,820 and Rs 11,670 per 10 gram respectively. Sovereign held unchanged at Rs 9875 per piece of eight gram.
Silver also rose further on brisk buying by funds. Silver ready rose further by Rs 320 to Rs 22,620 per kg and weekly-based delivery by Rs 500 to Rs 22,450 per kg.
Silver coins, on the other hand, continued to be asked at previous levels of Rs 26,600 for buying and Rs 26,700 for selling of 100 pieces.
The buying activity picked up on reports that the gold rose in Asia for a fourth day as crude oil traded near 122 dollar a barrel, boosting the appeal of the precious metal as a hedge against inflation.
Gold has gained 5.2 per cent this year in overseas markets, while oil soared 27 per cent. Bullion for immediate delivery gained 5.03 dollar to 881.43 dollar an ounce. The domestic bullion market normally take guidance from global markets.
IMF approves sale of 403.3 tons of gold reserves
WASHINGTON: The IMF on Tuesday approved the sale of 403.3 tons of gold reserves as part of a financial overhaul that will allow the Fund to generate revenues from a variety of sources.
IMF Managing Director Dominique Strauss-Kahn said "With this decisive endorsement, the Fund's members have once again demonstrated their support for reforming key components of the institution's framework, including its financial structure".
The sale, amounting to some 12 percent of the IMF's gold reserves, could yield around 11 billion dollars.
This would help finance a reorganization of the institution as it seeks to survive a downturn in lending to troubled countries, its main income source.
As more and more developing countries began rejecting financial aid, the IMF is trying to find new ways that can provide steady sources of income to it. The institution faces a budget shortfall of some 140 million dollars for the fiscal year 2008 that ends on April 30.
IMF Managing Director Dominique Strauss-Kahn said "With this decisive endorsement, the Fund's members have once again demonstrated their support for reforming key components of the institution's framework, including its financial structure".
The sale, amounting to some 12 percent of the IMF's gold reserves, could yield around 11 billion dollars.
This would help finance a reorganization of the institution as it seeks to survive a downturn in lending to troubled countries, its main income source.
As more and more developing countries began rejecting financial aid, the IMF is trying to find new ways that can provide steady sources of income to it. The institution faces a budget shortfall of some 140 million dollars for the fiscal year 2008 that ends on April 30.
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