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Gold hits 2-week highs after central banks act
* Price at two-week highs as dollar falls
* Options market highlights optimism for 2012
* Coming up: U.S. weekly jobless claims 1330 GMT
By Amanda Cooper
LONDON, Dec 1 (Reuters) - Gold steadied at two-week highs on Thursday after a coordinated effort by the world's largest central banks to unlock the credit markets and prevent a global financial meltdown gave investors confidence to cut their holdings of cash.
The U.S. Federal Reserve, the European Central Bank and the central banks of Canada, Britain, Japan and Switzerland said they would lower the cost of existing dollar swap lines by 50 basis points from Dec. 5, and arrange bilateral swaps to provide liquidity for other currencies.
Gold was last flat on the day at $1,746.40 an ounce by 1244 GMT, having risen to a session peak of $1,754 earlier, its highest since Nov. 17. Gold rose 1.9 percent in November, clocking up a seventh month of gains so far in 2011, but was still 9 percent below September's lifetime high at $1,920.30.
" What matters now are statements from politicians and central bankers and so on and it's news flow rather than data flow that is driving this market," Matthew Turner, analyst at Mitsubishi, said.
" This was bullish because it was inflationary and I think that is the distinction that gold is suffering under and that is why some of those correlations have broken down," he said.
Gold's correlation with copper is close to 66 percent now, up from around -10 percent in late September, while that with the dollar index is at -53.0 percent, compared with 3.0 percent at that same time.
" Inflation is positive for base metals and equities and gold, which is when you get this risk-on correlation, whereas deflation is bad for gold and bad for base metals."
Gold can often gain in an environment of rising price pressures as it can help protect an investment portfolio from the impact of inflation, as it rises in line with other assets.
The market has turned more bullish on the longer-term prospects for the gold price, regardless of the headwind posed by the stronger dollar or greater investor optimism, which can cut the need for gold as a safe-haven asset.
The bulk of open interest in gold call options, which give the owner the right, but not the obligation to buy the gold at a set price by a set date, in 2012 is clustered at $2,000 an ounce.
Indeed, for options expiring in late December < 0#GCF2+> , open interest on calls at $1,800 an ounce has risen tenfold in the space of a month, to 3,248 lots. For options on the most-active February futures contract < 0#GCG2+> , where a lot of interest is on bearish put options, holdings of $2,000 and $,1800 calls rose by close to 20 percent last month.
FOLLOWING STOCKS
European equities recovered from earlier losses to trade broadly flat on the day. Gold's correlation with European shares reached its most positive in a year by the end of November, trading around 65 percent, meaning gold is more likely to move in tandem with shares.
The euro steadied, pulling back from Wednesday's highs hit after the coordinated action by the central banks. However, speculation the European Central Bank could aggressively cut rates could temper gains in the single European currency.
Gold priced in euros was last down 0.2 percent on the day at 1,295.42 euros an ounce, after having gained almost 5 percent in November, its largest monthly rise since August.
" There is a twofold impact on gold from the joint policy response from central banks. First, a substantial increase in the demand for dollar swap facilities would mean further expansion of the Fed's balance sheet, if lending is not sterilised, and would effectively be another form of easing," wrote UBS analyst Edel Tully.
" The downward pressure this puts on the dollar is clearly to gold's benefit. Second, to the extent that the cheapening of dollar funding costs limits the possibility of a liquidity crunch, it is also beneficial for gold. We only need to look back to 2008 for a reminder that a dollar funding crisis is not gold's friend," she said.
Gold tumbled to its weakest in nearly a month last week after declines in equities sparked a sell-off in the bullion markets to enable investors to cover losses in other markets.
Retail investors have been cautious, with dealers in Asia reporting hesitation by jewellers to buy in such a turbulent environment.
Premiums for physical delivery in Hong Kong XAU-HK-PREM have this week fallen to their lowest in three months, although forecasts for demand in China, the world's second-largest consumer of gold after India, anticipate continued strength.
China's gold consumption will be around 750 tonnes this year, Albert Cheng, a managing director for the World Gold Council, told an industry conference in Shanghai on Thursday.
In other precious metals, silver, which fell nearly 4 percent in November, was last up 1.0 percent on the day at $33.14 an ounce.
Platinum was up 0.1 percent at $1,553.75 an ounce, while palladium rose 2.1 percent to $618.72 an ounce. (Additional reporting by Rujun Shen in SINGAPORE Editing by Anthony Barker)
* Gold to gain more to $1,765/oz-technicals
* Coming Up: U.S. Jobless claims 1330 GMT
By Lewa Pardomuan
SINGAPORE, Dec 1 (Reuters) - Gold hit a 2-week high on
Thursday as gains in equities and the euro prompted buying from
speculators after major central banks took coordinated action to
prevent the euro-zone debt crisis from igniting a global
economic meltdown.
The U.S. Federal Reserve, the European Central Bank and the
central banks of Canada, Britain, Japan and Switzerland said
they would lower the cost of existing dollar swap lines by 50
basis points from Dec. 5, and arrange bilateral swaps to provide
liquidity for other currencies.
Gold edged 0.1 percent down to $1,744.20 an ounce by
0650 GMT after climbing to $1,749.89 an ounce, its highest since
Nov. 17. Gold ended November with a 1.9-percent rise, the
seventh month of gain so far this year, but it was still 9
percent below a lifetime high above $1,920 hit in September.
" Gold is up alongside other risk assets. Sentiments are
positive after the central banks' action and the huge rally in
Wall Street last night," said Ong Yi Ling, an analyst at Phillip
Futures in Singapore.
" I would say the next level of resistance for gold will be
the $1,800 level."
U.S. gold was also steady at $1,744 an ounce after
rallying nearly 2 percent on Wednesday.
Shares in Asia jumped to two-week highs on Thursday,
building on strong global gains after the world's six major
central banks moved to tame a liquidity crunch for European
banks by providing cheaper dollar funding.
The euro's upside, however, may be capped by speculation the
European Central Bank will cut rates aggressively at its Dec. 8
policy meeting and perhaps venture into more bond buying, as
Europe's debt crisis remained unresolved.
Gold tumbled to its weakest in nearly a month last week
after declines in equities blamed on the debt crisis in Europe
prompted investors to cash in on bullion to cover losses.
Although a rebound in equities helped restore gold's safe
haven appeal, some retail investors remained cautious, while
jewellers were likely to wait for prices to stabilise or fall
from recent highs.
" I think people are still cautious. Each time gold tries to
approach $1,800, then it falls down. I don't see buying from
investors. There is only buying from speculators," said a dealer
in Hong Kong.
" I don't think China will be buying gold at this level. They
may come back to buy again if gold falls back to $1,700."
China's gold consumption will be around 750 tonnes this
year, Albert Cheng, a managing director for the World Gold
Council, told an industry conference in Shanghai on Thursday.
China's HSBC Purchasing Manager's Index dropped to a
32-month low in November, suggesting factory activity shrank in
the face of softening demand both at home and abroad, a trend
that may have triggered the country's first policy easing in
nearly three years late on Wednesday.
SINGAPORE, Dec 1 (Reuters) - Spot gold prices traded
steady on Thursday, retaining their 1.7 percent gain in the
previous session, as joint action by the world's major central
banks to boost dollar liquidity spurred rallies in commodities
and equities.
FUNDAMENTALS
* Spot gold edged up 0.1 percent to $1,748.46 an
ounce by 0022 GMT, after finishing November with a 1.9-percent
rise, the seventh month of gain so far this year.
* The U.S. Federal Reserve, the European Central Bank and
the central banks of Japan, Britain, Canada and Switzerland
joined force to provide cheap dollar funding to European banks
facing a credit crunch.
* U.S. gold also inched up 0.1 percent to $1,748,
building on a rally of nearly 2 percent on Wednesday.
* China's central bank cut reserve requirements for
commercial lenders on Wednesday for the first time in three
years, seen as a policy shift to ease credit strains and shore
up an economy running at its weakest pace since 2009.
* Platinum group metals also moved higher, encouraged by
rallies in prices of industrial metals. Spot palladium
gained 1.5 percent to $615.25, but eased from a two-week
high of $622.50 hit in the previous session. Spot platinum
rose nearly 1 percent to $1,567.50.
MARKET NEWS
* U.S. stocks surged on Wednesday, and Asian shares rose on
Thursday, after major central banks agreed to make cheaper
dollar loans for struggling European banks to prevent the
euro-zone debt woes from turning into a full-blown credit
crisis.
* The euro and commodity currencies stayed sharply higher in
Asia on Thursday while the dollar languished after major central
banks took steps to ease a credit squeeze stemming from the euro
zone debt crisis.
* Top central banks move to avoid global liquidity crunch
* China in surprise move to inject cash
* Dollar falls sharply, equities, euro rise
By Susan Thomas
LONDON, Nov 30 (Reuters) - Gold rose to the highest in almost two weeks on Wednesday after top central banks announced a co-ordinated move to avoid a global liquidity crunch, and the dollar fell.
Centrals banks from the world's leading economies, including the U.S. Federal Reserve and the European Central Bank, said they had agreed to lower the cost of existing dollar swap lines by 50 basis points, as well other measures.
Spot gold rose more than 2 percent to $1,749.54, its highest since Nov. 17. It was $1,744.79 per ounce at 1525 GMT, from $1,714.29 late in New York on Tuesday.
U.S. gold rose 1.8 percent to $1,744.50.
Gold had reversed losses earlier after China moved to ease credit strains, by cutting the reserve requirement ratio for its commercial lenders for the first time in nearly three years.
" Today's central bank decisions - both from the Fed, ECB and other western banks, and separately from the People's Bank of China - are unambiguously good for gold in that they're inflationary," said Matthew Turner, precious metals strategist at Mitsubishi. " Gold tends to go up when the inflationary outlook worsens."
" The outlook remains dependent on such actions, who knows what the central banks will do next - probably not even the central banks themselves," he added.
Traditionally, gold can benefit in times of economic or financial market uncertainty, because of the protection it can offer if inflation picks up and because of its immediate convertibility into hard currency.
But in recent weekSS it has shrugged off its safe haven status, and tended to move in tandem with riskier assets, like equities.
The Chinese measure and the coordinated move by the major central banks of the developed world come amid growing concern that the global economy is on a slippery slope as the euro zone struggles to decisively tackle its two-year-old debt crisis.
The measures increased appetite for risk, lifting stocks and the euro, and leading investors to dump the safe-haven dollar. A weaker dollar makes gold less expensive for holders of other currencies.
Data also showed U.S. private sector jobs increased in November, further fueling the market's taste for risk.
" In the last couple of weeks gold has been behaving like a risky asset, and equities and commodities are up," Commerzbank analyst Daniel Briesemann said.
" We have seen that phenomenon since the last big gold price drop in September there has been a very high correlation between equities and gold."
The precious metal is currently more positively correlated to the stock markets than it has been at any time in the last year.
STILL WORRIED
But concerns about the euro zone remain.
Two years into Europe's sovereign debt crisis, investors have fled the euro zone bond market, European banks are dumping government debt, south European banks are bleeding deposits and a recession looms, fuelling doubts about the survival of the single currency.
While euro zone ministers have agreed to ramp up the firepower of their rescue fund, they couldn't say by how much, and may turn to the IMF for more help as a leap in Italy's borrowing costs pushed the region closer to financial disaster.
" We are now looking at a true financial crisis - that is a broad-based disruption in financial markets," Christian Noyer, France's central bank governor and a governing council member of the European Central Bank, told a conference in Singapore.
Italian and Spanish bond yields resumed their inexorable climb towards unsustainable levels on Wednesday, as markets assessed the rescue fund boost as inadequate.
Palladium rose more than 5 percent to a high of $622.50, and was $608.22 at 1526 GMT. Silver was up 1.9 percent at $32.51, platinum rose 1.1 percent to $1,547.49 (Additional reporting by Rujun Shen and Amanda Cooper editing by William Hardy)
By Craig C. CalvinNovember 30, 2011GOLD REACHES TWO-WEEK HIGH S& P SEES SHIFT IN ASIA’S FAVOR Prices for Gold, Silver, Platinum, and Palladium all ended up for the day, with Gold reaching a two-week high and gaining for a third straight session. Gold’s boost comes from investors encouraged by plans from central banks around the world to cut costs on borrowing to improve financial liquidity.
According to Standard & Poor’s (S& P), the credit downgrade of six major financial institutions here in the U.S. and the contrasting upgrades of banks in China reflect a shift in the global banking landscape in Asia’s favor. Ritesh Maheshwari, S& P’s lead analytical manager of financial services ratings across the Asia-Pacific region, said, “Money is flowing into emerging markets, so the health of their financial systems is continuously improving, whereas in the West, banks are battling with so many issues.” S& P’s view is that banks in North America and Europe find themselves in greater danger of turmoil in the financial market, while Asia-Pacific banks have experienced relative stability.
With eurozone finance ministers still meeting to discuss possible solutions to Europe’s debt crisis, Economic and Monetary Affairs Commissioner Olli Rehn is warning that “we are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union.” Although ministers did reach an agreement Wednesday to use the European Financial Stability Facility (EFSF) bailout fund in a more aggressive manner, markets have not responded optimistically. Meanwhile, bond yields in Spain and Italy began to raise again toward levels considered unsustainable today, and stocks and the euro lost ground in the wake of S& P’s credit downgrade of several major banks.
At 4:15 p.m. (CST), the APMEX precious metals spot prices were:
- Gold - $1,751.00 - Up $34.10.
- Silver - $32.86 - Up $0.92.
by Ryan Schwimmer November 30, 2011
WORLD’S CENTRAL BANKS COOPERATE TO HELP ECONOMY
In early-morning trading, precious metals are gaining on good economic news. U.S. private-sector jobs grew by 206,000 for November, well above estimates. Global central banks reached an agreement to lower dollar-swap ratios to “ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” according to a statement released simultaneously by the U.S. Federal Reserve, the European Central Bank, the Bank of England, the Bank of Japan, and the Swiss National Bank.
For the first time in almost three years, China’s central bank cut the reserve requirement ratio (RRR) for its commercial lenders. The hope is that the move will ease credit strains and strengthen an economy which is showing signs of weakening. “It's a surprising move the market was not expecting the central bank to (cut RRR) so fast,” said Shi Chenyu, an economist with the investment banking unit of Industrial and Commercial Bank of China. China currently is like the engine powering the world’s economic car keeping China’s economy strong is good for the Chinese people and for the rest of the world.
In the eurozone, talks continued among European Union finance ministers who are meeting in Brussels, Belgium. They are trying again to put a cap on the crisis. European Council President Herman Van Romuy said, “The trouble has become systemic. We are witnessing a full-blown confidence crisis.” Also, some international companies are creating backup plans in the case of a eurozone breakup. Andrew Morgan, president of Diageo Europe, said, “We’ve started thinking what it (a breakup) might look like. If you get some much bigger kind of … change around the euro, then we are into a different situation altogether. With countries coming out of the euro, you’ve got massive devaluation that makes imported brands very, very expensive.”
At 8:06 a.m. (CST), the APMEX precious metals spot prices were:
- Gold - $1,747.70 – Up $30.80.
- Silver - $32.61 – Up $0.67.
* Top central banks move to avoid global liquidity crunch
*
China cuts RRR in surprise move to inject cash
* Dollar falls sharply, equities, euro rise
By Susan Thomas
LONDON, Nov 30 (Reuters) -
Gold rose to the highest in almost two weeks on Wednesday after top central banks announced a co-ordinated move to avoid a global liquidity crunch, and the dollar fell.
Centrals banks from the world's leading economies, including the U.S. Federal Reserve and the European Central Bank, said they had agreed to lower the cost of existing dollar swap lines by 50 basis points, as well other measures.
Spot gold was up 1.8 percent at $1,746.59 per ounce at 1403 GMT, off a high of $1,746.80, its highest since Nov. 17.
Gold had reversed losses earlier after China moved to ease credit strains, by cutting the reserve requirement ratio for its commercial lenders for the first time in nearly three years.
Stocks and the euro moved higher, and the dollar fell sharply. A weaker dollar makes gold less expensive for holders of other
currencies.
Data also showed U.S. private sector jobs increased in November, further fueling the market's appetite for risk.
" In the last couple of weeks gold has been behaving like a risky asset, and equities and commodities are up," Commerzbank analyst Daniel Briesemann said.
" We have seen that phenomenon since the last big gold price drop in September there has been a very high correlation between equities and gold."
The precious metal is currently more positively correlated to the stock markets than it has been at any time in the last year.
Traditionally, gold has tended to benefit in times of economic or financial market uncertainty, because of the protection it can offer if inflation picks up and because of its immediate convertibility into hard currency.
Two years into Europe's sovereign debt crisis, investors are fleeing the
euro zone bond market, European banks are dumping government debt, south European banks are bleeding deposits and a recession looms, fuelling doubts about the survival of the single currency.
" Europe is still looking like it's probably heading for a recession next year, and that issue is not going away," said David Wilson, director of metals research and strategy at Citi.
SKEPTICISM
" We still think there's an enormous amount of skepticism that people don't think that Europe is going to deliver," said Rob Ryan, FX strategist at BNP Paribas in Singapore.
While euro zone ministers have agreed to ramp up the firepower of their rescue fund, they couldn't say by how much, and may turn to the IMF for more help as a leap in Italy's borrowing costs pushed the region closer to financial disaster.
U.S. gold < GCcv1 rose 1.5 percent to $1,740.
Palladium rose more than 5 percent to a high of $622.50, and was $612.47 at 1354 GMT. Silver was up 1.03 percent at $32.22, platinum up 0.9 percent at $1,545.24 (Additional reporting by Rujun Shen and
Amanda Cooper editing by William Hardy)
* Physical buying muted as prices stand above $1,700
* Spot gold could rise to $1,743 - technicals
* Coming up: Euro zone Nov inflation 1000 GMT
By Rujun Shen
SINGAPORE, Nov 30 (Reuters) - Gold reversed early
gains in thin trade on Wednesday, pressured by a firmer dollar
at the expense of the euro as investors watched euro zone
nations struggling to contain the region's two-year-old debt
crisis.
European Central Bank governing council member Christian
Noyer said the situation in Europe has significantly worsened,
threatening global financial markets, after euro zone finance
ministers agreed to ramp up the power of their rescue fund but
failed to provide details.
The dollar index gained 0.4 percent while the euro
edged down 0.4 percent against the greenback.
" There is a lot of worry about markets turning very
distressed, meanwhile people wonder if that will bring more
central bank actions as economic forecasts get more and more
dire," said a Singapore-based trader.
The prospect of easing monetary policy in Europe and other
key economies around the world could potentially support the
sentiment in gold, as rising inflation down the road makes
gold's appeal as a good inflation hedge stronger.
A Reuters poll showed that economists expect the European
Central Bank will cut interest rates next week and throw more
funding lifelines to stressed banks toiling against the euro
zone debt crisis.
Spot gold rose as much as 0.7 percent to a more than
one week high of $1,726 and breached above the 100-day moving
average at $1,720.45, before giving up gains to fall 0.4 percent
to $1,707.46 an ounce by 0802 GMT.
U.S. gold lost 0.4 percent to $1,707.
Technical analysis suggested spot gold could rise to $1,743
during the day after it has cleared a resistance at $1,716, said
Reuters market analyst Wang Tao.
Trading volume was thin, as some funds have squared
positions to lock profit ahead of the year-end and others have
cash tied up elsewhere.
" There is not going to be massive exposure until the new
year," said the trader.
On the gold forwards market, one-year lending
rates on the London interbank market rose to its highest since
June 2010, suggesting rising cost of carrying gold and tight
liquidity in the market.
Trading on Asia's bullion market remained muted, as buyers
have retreated to the sidelines as prices rebounded above
$1,700.
Premium on gold bars in Hong Kong were steady in the range
of $1 to $1.50 an ounce above spot prices, dealers said.
" Gold is likely to be range-bound between $1,700 and $1,750
as what's happening in Europe remains the centre of focus," said
Peter Fung, head of dealing at Wing Fung Precious Metals in Hong
Kong.
In India, the world's largest gold buyer, consumers have
been delaying purchases, even cashing in hoarded gold, as local
gold prices held near record highs as a result of a weak rupee.
SINGAPORE, Nov 30 (Reuters) - Gold prices held steady
on Wednesday, as investors continue to watch developments in
Europe after euro zone finance ministers agreed on expanding the
bloc's rescue fund and proposed to ask the IMF for help.
FUNDAMENTALS
* Spot gold rose as much as 0.6 percent to a more
than one week high of $1,725 and breached above the 100-day
moving average at $1,720.54, before easing to $1,718.89 an ounce
by 0044 GMT.
* U.S. gold edged up 0.3 percent to $1,718.50 in
thin volume.
* Euro zone ministers agreed on Tuesday to ramp up the
firepower of their rescue fund but couldn't say by how much and
raised the possibility of asking the International Monetary Fund
for more help after Italy's borrowing costs hit a euro lifetime
high of nearly 8 percent.
* A Reuters poll showed that economists expect the European
Central Bank will cut interest rates next week and throw more
funding lifelines to stressed banks toiling against the euro
zone debt crisis.
* Americans shook off some of their concerns about the
economy this month but a surprise fall in house prices in
September underscored the weak foundations of the recovery.
MARKET NEWS
* The Dow and S& P 500 advanced for a second day on Tuesday
as stronger-than-expected consumer confidence data and hopes for
further progress on a solution to Europe's fiscal mess bolstered
sentiment.
* The euro barely budged in Asia on Wednesday as the market
gave a guarded reception to details on the euro zone's new
lending facility and on proposals to expand funding for the IMF
so it could lend to troubled members such as Italy.
DATA/EVENTS
0500 Japan Construction orders yy Oct 2011
0530 India Quarterly GDP yy Jul 2011
0700 Germany Retail sales yy real Oct 2011
0855 Germany Unemployment rate sa Nov 2011
1000 EZ Inflation, flash yy Nov 2011
1315 U.S. ADP national employment Nov
1445 U.S. Chicago PMI Nov
India M3 Money Supply
* Gold rises with equity markets for second day
* US gold open interest lowest since April
* Investors briskly roll futures forward
* Coming up: U.S. ADP national employment index Wednesday
By
Frank Tang and Amanda Cooper
NEW YORK/LONDON, Nov 29 (Reuters) - Gold rose for a second
consecutive session on Tuesday, extending the previous day's
rally, as strong physical demand and a weaker dollar amid
economic optimism lifted the precious metal.
Bullion -- a traditional safe haven which has recently
followed riskier assets -- tracked equities' gain on a rebound
in U.S. consumer confidence and as investors across the board
eyed further progress on a solution to Europe's debt crisis.
Overall market liquidity in U.S. gold futures fell to its
lowest level since April, data from the most recent U.S.
futures regulator showed, while investors continued to shore up
bullion holdings by buying gold-backed exchange traded funds.
" It's all the macroeconomic events that are driving every
single market including gold, not market fundamentals" said Ron
Lawson, partner of commodities investment firm LOGIC Advisors.
" The fundamental reasons for owning gold are as good today
as they were when gold was trading $300 to $400 lower."
Spot gold was up 0.5 percent at $1,719.10 an ounce
by 3:00 p.m. EST (2000 GMT).
Open interest, a liquidity gauge, dropped to a seven-month
low during the week ended Nov. 22, U.S. Commodity Futures
Trading Commission (CFTC) figures showed, as managed money
including hedge funds and other speculators trimmed its net
long position in gold futures and options.Lawson said that the open interest in gold futures dropped
as some investors were turned off by counterparty risk after
the demise of the now-defunct futures broker MF Global.
Meanwhile, gold holdings in exchange-traded funds hit a new
record high last week, rising by more than 2.2 million ounces
in just one month to around 70 million ounces, almost
equivalent to total mine supply this year.
U.S. December gold futures settled up $2.60 at
$1,713.40 an ounce. Volume was over 10 percent above its 30-day
average, preliminary Reuters data showed, boosted by a brisk
contract rollover ahead of December's first-notice day on
Wednesday, traders said.
The higher-than-norm turnover was boosted by the closing
out of the December contract and the initiation of the new
benchmark February, which counted two lots traded.
Gains in commodities across the board led by crude oil and
grains also helped lift gold.
HSBC metals analyst James Steel said that record retail
sales after the U.S. Thanksgiving day holiday last week implied
good jewelry demand for gold and silver and strong seasonal
buying.
EURO JITTER, TECHNICALS EYED
Analysts said economic uncertainty also underpinned gold,
as euro zone ministers struggled to boost their rescue fund and
looked to the IMF for more help after Italy's borrowing costs
hit a euro lifetime high of nearly 8 percent.
Earlier in the session, gold failed to extend gains after
running into technical resistance at $1,719 an ounce near its
100-day moving average, a key technical support it breached
early last week.
" Gold is trading very technically. With the contradictory
information out of Europe, the market's on edge...and that thin
volume has exacerbated the volatility," said Leon Westgate,
analyst at Standard Bank.
by Craig C. Calvin November 29, 2011
EUROZONE MINISTERS STRUGGLE TO SAVE THE EURO EXECUTIVE WARNS OF DEBT CRISIS OUTCOMES
Since the Mid-Day Gold & Silver Market Report, the price of Gold has continued to climb, experiencing its second session of gains and ending higher than it has in more than a week. Gold prices were aided by a weakness in the U.S. dollar. Prices for Silver and Palladium also have increased since the Mid-Day Report, with Platinum being the only metal to see a slight drop.
Finance ministers from the eurozone gathered at the headquarters of the European Union today in a frantic effort to rescue the euro and, by extension, protect the rest of the world’s economy from a debt-related financial collapse. The 17 ministers discussed possible ways the eurozone could bounce back from its ongoing debt crisis, including ideas for changes to existing zone rules that previously were considered off limits. The European debt crisis has engulfed Portugal, Ireland, and Greece, and many analysts fear Italy, which has the third-largest economy in the eurozone, will be next.
Pimco Co-Chief Executive Officer Mohamed El-Erian is warning investors to prepare for three possible outcomes from Europe’s debt crisis. Despite Wall Street’s seeming optimism over a solution for the European Union’s financial woes, El-Erian cautioned in an interview that there is still more that must be done, and that investors should be ready for the possibility of some unpleasant outcomes. The three scenarios El-Erian posited were a breakup of the eurozone (which El-Erian said would be “incredibly disruptive not just for Europe but also for the global economy”), the adoption of uniform financial reforms for eurozone members, and a “middle ground” scenario in which some countries default on their debt obligations and then leave the European Union. El-Erian said, “We are no longer looking at what we call a traditional bell curve where there is one dominant outcome. We’re looking at a curve that is much flatter and has much fatter tails. Investors have to test different exposures to that new distribution. That’s what happens when you put sovereign risk at play.”
At 4:02 p.m. (CST), the APMEX precious metals spot prices were:
- Gold - $1,717.00 - Up $4.50.
- Silver - $31.95 - Down $0.29.
Gold is king!
* Gold steady above $1,700/oz, demand for cash key
* ETF holdings at record
* Euro zone remains in focus
By Amanda Cooper
LONDON, Nov 29 (Reuters) - Gold steadied above $1,700 an ounce on Tuesday, a day after its second best session of the month, along with a recovery in risk assets such as stocks with which gold is trading more closely than at any time in the last year.
Italy's borrowing costs hit a euro lifetime peak of nearly 8 percent on Tuesday as pressure on euro zone finance ministers intensified to staunch a two-year-old debt crisis that is blighting the world economy.
European equities edged up, paring earlier losses, while the euro was roughly flat on the day after the European Central Bank struggled to attract enough deposits from banks to offset its purchases of peripheral debt, which tempered any price rises in gold.
The correlation between the gold price and the European stock market is at its most positive in a year, while the correlation of gold and copper is near its highest since the final quarter of 2010, meaning gold is more likely to move in step with these assets.
Spot gold was last quoted up 0.15 percent at $1,713.60 an ounce by 1450 GMT, having risen from an intraday low of $1,703.25. On Monday, gold gained nearly 2 percent in its second-largest one-day gain in price this month.
Gold has also come under pressure from investors hungry for cash, despite a rise in traditionally gold-supportive risk aversion, as seen in a 30 percent jump in the VIX options volatility index in the past month.
" Clearly the requirement for cash is very much at the fore and that is cancelling out any fresh investment. You'd have thought that with things as they are at the moment, if ever there was a time when gold was going to be on its highs, at least on the crosses, it would be now. And that's clearly not the case at the moment," Simon Weeks, head of precious metals at Scotia Mocatta, said.
" Whether you're optimist or pessimistic, everyone needs cash at the moment and I'd think that while that process is in play, rallies are going to be hard won."
Euro zone leaders face increasing pressure from other countries and rating agencies to solve the debt crisis, which threatens to split up the single-currency bloc and slow the global economy, causing distress in financial markets.
Yet since hitting a record $1,920.30 an ounce in September, gold has fallen by 10.7 percent, under pressure from the weakness in the euro against the dollar and the growing desire among investors to preserve their wealth with cash rather than hard assets.
So far in 2011, the gold price has risen by more than 20 percent and is set for its eleventh consecutive yearly price gain.
" In the short term, we fear gold could go a bit lower actually, but this would be exclusively driven by weaker equity markets and weaker commodity markets, because of the increasing risk aversion," Commerzbank analyst Daniel Briesemann said.
" If you have a look further out for the next six, or even 12 months, we think gold is very well supported around its current levels and even more buyers should find gold attractive at these levels," he added.
Gold holdings in exchange-traded funds hit a new record high last week, rising by more than 2.2 million ounces in just one month to 69.993 million ounces, almost equivalent to total mine supply this year, highlighting investor demand for an alternative to currencies, stocks or bonds.
The euro zone crisis has driven investment in gold-backed exchange-traded assets so high that newcomer Source now owns the world's sixth largest physically-backed gold product and sees no need to promote it actively outside Europe and the Middle East.
In other precious metals, silver was down 0.5 percent on the day at $31.93 an ounce.
Platinum was last down 0.1 percent at $1,537.14 an ounce, while palladium was up 1.3 percent on the day at $579.97 an ounce. (Additional reporting by Rujun Shen in Singapore editing by Jason Neely)
* Trading slows ahead of year-end holidays
* Aggressive monetary policy could help boost gold
* Coming Up: Euro zone finance ministers' meet
By Rujun Shen
SINGAPORE, Nov 29 (Reuters) - Spot gold held steady
above $1,700 per ounce on Tuesday, as investors watch a meeting
of euro zone finance ministers later in the day in hopes that
European policymakers will take decisive steps to tackle the
region's debt crisis.
Finance ministers of the euro zone are expected to
approve details of leveraging the European Financial Stability
Facility rescue fund to help prevent contagion in bond markets,
and release a vital aid lifeline for Greece.
Euro zone leaders face increasing pressure from other
countries and rating agencies to solve the two-year-old debt
crisis, which threatens to split up the single-currency bloc and
sink the global economy, causing distress in financial markets.
" We remain bullish on gold, because we think the solutions
are going to need more aggressive monetary policy, which will be
positive for gold," said Jeremy Friesen, a commodities
strategist at Societe Generale in Hong Kong.
But gold is unlikely to stage new highs as trading activity
slows ahead of the year-end, with traders booking profits and
moving to the sidelines of the market before the holidays.
" I wouldn't be surprised that we don't see much strength
towards the end of the year, but into 2012 we should see
aggressive monetary policy being reflected in prices of gold,"
Friesen added.
Spot gold traded flat at $1,712 an ounce by 0720 GMT,
after staging its biggest one-day rally in three weeks on Monday
with a climb of nearly 2 percent.
U.S. gold edged up 0.1 percent to $1,712.70.
Market participants continue to watch the euro zone's bond
market, currencies, and moves by central banks in Europe, the
United States and elsewhere for clues to monetary policy shifts.
In the absence of major breaking news, gold is likely to
move around $1,700 until the end of the year, traders and
analysts said.
Managed money, including hedge funds and other speculators,
trimmed its net long position in gold futures and options during
the week ended Nov. 22, and the open interest fell to its lowest
level since early April.
But holdings of the world's largest gold-backed
exchange-traded fund, SPDR Gold Trust, remained unchanged
at 1,297.324 tonnes, their highest since early August.
Price-sensitive physical buyers again moved to the sidelines
after prices rebounded above $1,700, dealers said.
Spot palladium led the precious metals complex with a
rise of 1.1 percent, to $579.23, rebounding from a 7-1/2-week
low of $561.25 hit on Nov. 25.
By Ryan SchwimmerNovember 29, 2011EUROPE IS BAD, BUT SO IS U.S. ANALYSTS STILL LOVE GOLDGold prices have risen after an overnight dip, and stock futures have pulled back slightly from early gains. The stock market is rising mainly based on hopes that European leaders will be able to solve the debt problem in the region. After a bond sale, Italy’s borrowing costs rose to nearly 8%, far beyond the level most economists consider unsustainable. European markets and the euro slipped earlier on a report that France would be downgraded from Standard & Poor’s AAA credit rating. Yet, with this news from Italy and France, U.S. stock futures are gaining based on optimism out of the euro zone.
The last thing the U.S. can do is look down on the euro zone for the continually spreading crisis. The Associated Press explains that the European debt crisis is echoed in the U.S. by American leaders’ inability to conquer its own debt crisis. Nariman Behravesh, chief economist with IHS Global, said, “[The fact is] that politicians in both areas have taken what is an inherently manageable problem and turned it into a crisis by their actions or lack of actions.” He continued, “The worry is that Europe will have what’s referred to as a ‘Lehman moment.’ That would be a problem for the U.S.” because of how interconnected global finances are.
Gold continues to shine in analysts’ eyes. Commerzbank analyst Daniel Briesemann said, “If you have a look further out for the next six, or even 12, months, we think gold is very well supported around its current levels and even more buyers should find gold attractive at these levels.” Jeremy Friesen of Societe Generale said, “We remain bullish on gold, because we think the solutions are going to need more aggressive monetary policy, which will be positive for gold. … Into 2012 we should see aggressive monetary policy being reflected in prices of gold.”
At 8 a.m. (CST), the APMEX precious metals spot prices were:
- Gold - $1,710.90 – Down $1.60.
- Silver - $31.87 – Down $0.36.
SINGAPORE, Nov 29 (Reuters) - Spot gold held steady
above $1,700 per ounce on Tuesday, supported by hopes that
European policymakers will take decisive moves to tackle the
euro zone debt crisis ahead of a finance ministers' meeting
later in the day.
FUNDAMENTALS
* Spot gold edged down 0.1 percent to $1,708.29 an
ounce by 0027 GMT, after staging its biggest one-day rally in
three weeks on Monday with a nearly 2 percent climb.
* U.S. gold was little changed at $1,709.30.
* Finance ministers of the euro zone will meet on Tuesday
and are expected to approve details of leveraging the European
Financial Stability Facility rescue fund to help prevent
contagion in bond markets, and release a vital aid lifeline for
Greece.
* Germany and France stepped up a drive on Monday for
coercive powers to reject euro zone members' budgets that breach
EU rules, and the United States kept up the drumbeat of demands
from the rest of the world for decisive action.
* Managed money, including hedge funds and other
speculators, trimmed its net long position in gold futures and
options during the week ended Nov. 22, as the price of bullion
lost almost 5 percent to below $1,700 an ounce.
MARKET NEWS
* U.S. stocks rebounded from seven days of losses on Monday
as investors used the latest effort from European leaders to
resolve the region's debt crisis as an opportunity to cover
short positions.
* The euro and commodity currencies looked set to
consolidate overnight gains in Asia on Tuesday, having been
boosted by hopes that European officials will finally make some
progress in tackling their debt crisis this week.
By Stephanie ChandlerNovember 28, 2011WILL INFLATION PUSH GOLD OVER $2,000?Precious metals prices have held steady this afternoon as the dollar grew weaker on the hope that the euro would be saved by a stronger fiscal union needed to avoid a debt crisis. Sharing his opinion of the recent moves in gold, Oliver Purshce, co-portfolio manager of the GMG Defensive Beta Fund, said, “Great retail U.S. news you’ve got some positive momentum out of Europe to a certain extent there is a little bit of short covering and the fourth piece is China. … What will drive prices higher are fears of inflation … if you see the ECB print money, the Federal Reserve (ease), China change monetary policy -- that would all be supportive of $2,000 gold prices.”
President Barack Obama made a statement earlier today that the U.S. is ready to step in to help with the European debt crisis, stating that this is of “huge importance.” It would be interesting to see how the U.S., which is plagued with its own debt and inability to create an effective budget, might assist a continent in its attempts to remedy its own crises and budget problems.
At 3:57 p.m. (CST), the APMEX precious metals spot prices were:
- Gold price - $1,714.80 – Up $28.30.
- Silver price - $32.16 – Up $1.08.
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