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Gold & metals

NEW YORK (Nov 8) Gold futures topped $1,800 an ounce for the first time in almost seven weeks on concern that European leaders will be unable to contain the region’s debt crisis, fueling demand for the precious metal as a haven.

Italian Prime Minister Silvio Berlusconi failed to muster an absolute majority on a routine parliamentary ballot today, fueling more calls for his resignation. Federal Reserve Chairman Ben S. Bernanke signaled more monetary stimulus may be needed to cut unemployment, while the European Central Bank last week unexpectedly lowered interest rates. Gold has rallied more than 11 percent since the end of September.

“The turmoil in Europe has brought the fear trade back to gold,” Lance Roberts, the chief executive officer of Houston- based Streettalk Advisors, said in a telephone interview. “Also, a renewed wave of policy easing by central banks is helping gold.”

Gold futures for December delivery rose 0.5 percent to close at $1,799.20 an ounce at 1:47 p.m. on the Comex in New York, after touching $1,804.40, the highest since Sept. 21. Prices fell to $1,785.70 in after-hours trading.

Earnings growth in Europe will stagnate in 2012 as governments rein in spending and banks shrink their balance sheets, according to Gary Baker, the London-based head of European equity strategy at Bank of America Corp.

“Fundamentals are stronger than before, with the EU crisis more complicated than before,” Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said in a report. “Retracements and corrections are possible as we climb above $1,800, but stay invested.”

Extended Rally

Berlusconi offered to resign as soon as Parliament approves austerity measures in a vote next week, Italian President Giorgio Napolitano said tonight in an e-mailed statement after meeting Berlusconi in Rome.

Bullion is in the 11th year of a bull market, and futures reached a record $1,923.70 in New York on Sept. 6 as investors sought to diversify away from equities and some currencies. The precious metal has gained 27 percent this year.

Silver futures for December delivery advanced 0.9 percent to close at $35.153 an ounce on the Comex, rising for the second straight day.

Gold steady on mounting Italy debt worry

Ben Davies - Gold & Silver to Hit New Highs Within Months

 

  With gold closing in on the $1,800 level and silver near $35, today King World News interviewed Ben Davies, CEO of Hinde Capital, to get his take on where the gold & silver markets are headed.  When asked about the action in gold and silver, Davies remarked,  “No doubt we cleared the market from the correction over the last month.  In many ways you can say that we are responding to the easing of financial conditions by central banks around the world, from the ECB to the Swiss, to the Australians.  Al have cut by 25 basis points or are indicating they will supply more currency to the markets.”

 

 

SINGAPORE, Nov 8 (Reuters) - Gold prices hovered above
$1,790 on Tuesday, after soaring more than 2 percent in the
previous session, supported by safe haven demand as Italy took
centre stage in the euro zone debt crisis. 	
    	
    FUNDAMENTALS	
    * Spot gold edged down 0.2 percent to $1,792.09 an
ounce by 0007 GMT, easing from a 6-1/2-week high of $1,798.09
hit in the previous session.	
    * U.S. gold GCcv1 inched up 0.2 percent to $1,793.90.	
    * Italian government bond yields soared to near 15-year
highs, putting the euro zone's third largest economy front and
centre of the region's debt crisis, despite efforts by
policymakers scrambling to stem growing contagion.
 	
    * Italian Prime Minister Silvio Berlusconi defied huge
pressure to resign, while Greek politicians struggle to agree on
a new prime minister.  	
    * The world's biggest gold-backed exchange-traded fund, SPDR
Gold Trust , said its holdings rose 0.85 percent from the
previous session to 1,255.66 tonnes by Nov. 7, the highest in
more than two months. 	
    * For the top stories on metals and other news, click
 , or 	
    	
    MARKET NEWS	
    *  The threat of more intervention by Swiss authorities kept
the franc under pressure early in Asia on Tuesday, while the
euro struggled to gain traction against the dollar as debt fears
in the euro zone shifted focus to Italy from Greece. 	
    *  U.S. stocks closed a volatile, lightly traded session
slightly higher on Monday, with sentiment continuing to shift
with the latest headlines from Europe. 	


  

Gold uptrend continues on Europe debt crisis

Jim Rogers: Gold will eventually end with a bubble

By Eric McWhinnie
On Tuesday, Greek Prime Minister George Papandreou surprised European leaders when he called for a referendum on the new aid package for Greece. Since then, the referendum has already been cancelled. It was the latest drop in the roller coaster ride that’s called Europe. Concerns continue to mount on how Europe to fix Greece, and after that Italy. Unfortunately, between all the headlines and rumors concerning Europe, nothing has really changed. Europe is in a world of hurt that will  Lead  to either a total overhaul of the financial system, or more money printing. Considering  Goldfutures hit a six-week high at $1,765 on Thursday, precious metal investors are preparing for the latter.

Currently, it appears that officials are content with a temporary solution that will extend the status quo. This will result in more bailouts and money printing. The EFSF, which was hailed as the solution to fix the sovereign debt crisis, still remains unfunded. German Chancellor Merkel says hardly any countries in the G20 have said they will participate in the EFSF. In addition to more interest rate cuts from the ECB, Europe will turn to money printing to fund their so-called solution because no one is willing to cough up the money. Even if the ECB does not print, it appears that the IMF is standing on call. Dow Jones reports, “World leaders may mandate the International Monetary Policy to print more of its special currency to help solve the euro zone crisis, according to several people familiar with the matter.

Asking the IMF to print more of its Special Drawing rights, essentially an IOU that countries can exchange for cash, is one of the ways the Group 20 industrialized and developing countries is considering supplementing European efforts to stem a debt crisis threatening to spark a global financial meltdown and another recession.” In the absence of aggressive debt write downs and restructuring for several countries, all roads lead to money printing.

Gold is viewed as a hedge against inflation, deflation, and any other monetary skeletons hiding in the economic closet. Although gold is off its all-time record nominal high of $1,924, the case for higher gold prices almost seems bullet proof. When the Federal Reserve first announced its QE1 program in late 2008, gold was near $800 per ounce.

Since then, gold has been pushed sharply higher by the Fed’s QE2, a record-low interest rate guarantee until at least mid-2013, and Operation Twist. The Bank of England has also launched QE programs of their own. When the euro zone receives a major bailout from the printing presses, it is likely to send  Gold  prices well north of $2,000, and that’s just a baseline scenario.

The better scenario from the global debt crisis for gold investors is a worldwide race to devalue currencies, all in the name of sparking growth. This is already playing out, as seen by the recent Japanese yen and Swiss franc intervention. Another QE program from the Fed would also add fuel to the fire. Considering the potential to have a world of fiat currencies devalue and lose confidence at a record pace, the upside potential in gold almost seems unlimited.

However, even the bull run of gold will eventually come to an end. Jim Rogers explains, “Gold will move into a bubble eventually. All long-term bull markets in every asset wind up in a bubble.” Although he predicts a coming bubble, it could be years away. “I fully expect a bubble. Not for a few years but all bubbles look the same. And I hope I’ll be smart enough to recognize the bubble when it comes,” he says.

According to John Williams, economist and editor of Shadowstats.com, for gold to reach its previous real inflation adjusted high, it would have to climb to about $7,000. Mr. Williams measures inflation using the same formula from 1980, as opposed to the current Boskin Commision revised CPI formula. Given that gold is now available on a global scale, and countries such as China and India are buying up the metal, gold may even overshoot Mr. Williams’ figure.

Although it may seem unlikely in the near future, gold investors still need to consider a worst case scenario for gold. Such as scenario would include governments and central banks all over the world becoming responsible, which means painful spending cuts and wiping out debt. At the current pace, this appears to be unlikely any time soon. However, like Jim Rogers explained, gold will eventually end with a bubble. Investors should prepare accordingly.


If you would like to receive more professional analysis on equity miners and other precious metal investments, we invite you to try our premium service free for 14 days.

 

'Gold may rise further than the year-end target of $1900'

By Ole S Hansen
The political shenanigans played out by the Greek Prime Minister this week renewed worries about the health of the European financial system. Mr. Papandreou initially called for a referendum which could have led to Greece rejecting the debt plan agreed to just a few days ago. This could have triggered an unruly default which would have had serious consequences for the Euro area and beyond.

In the end the referendum was scrapped after other European leaders in no uncertain terms told Greece that it was not going to get any more money if the referendum passed and it would effectively amount to a decision on whether Greece would remain in the Euro zone.

In a spectacular resemblance to 2008 the European Central Bank under the new President Draghi slashed official rates by one quarter of a percent, just a few short months after having raised them. All previous rate changes in the ECB’s twelve-year history have all been “pre-announced” while this one came out of the blue highlighting the worries about downside risks to growth, which are now taking hold within the region.

Traders across all asset classes struggled to make heads or tails of all the headlines and events of the week with volatility staying at elevated levels making trading increasingly difficult. The decision to scrap the Greek referendum, the ongoing G20 meeting and the ECB rate cut however all helped risk sentiment ahead of the weekend with stocks and commodities winning back some of what was lost earlier.



Against this backdrop commodities gave back some of the gains from the previous couple of weeks with the Reuters Jeffries CRB index losing 0.7 percent. The dollar recovered sharply as euphoria turned to despair thereby removing the support commodities normally receive from this adverse relation. The soft sector, especially cotton,  Sugar  and coffee, was knocked back while  Gold  having fully recovered from the September onslaught regained some of its safe haven status, while some geopolitical tension supported oil.

Gold receives fundamental and technical boost
Gold received a boost from renewed worries about the stability of the Eurozone and the Euro. Some analysts raised the possibility that the European Central Bank, much against the wish of some of its members, could begin some sort of quantitative easing in order to help pull the Eurozone out of the deep freezer. Real bond yields (adjusted for inflation) remain negative in more than half of the G20 nations thereby supporting non interest/dividend paying assets like gold.

Having spent the last month recovering from the sell-off during September this week saw a move back above 1,700 dollars which pleased both technical and fundamental traders with most now believing the worst is behind us. During the previous two major corrections since 2008 it took 6 1/2 and 5 months respectively to climb back to a new high. Considering the latest correction was the greatest of the three we would therefore be surprised to see a new high before year end. Further consolidation seems to be in order ahead of our year-end target of 1,900 with gold already showing an impressive 24 percent return on the year.


Spot gold, source Bloomberg



(The author is senior commodity strategist at Saxo Bank)

 

 

'Gold may rise further than the year-end target of $1900'

By Ole S Hansen
The political shenanigans played out by the Greek Prime Minister this week renewed worries about the health of the European financial system. Mr. Papandreou initially called for a referendum which could have led to Greece rejecting the debt plan agreed to just a few days ago. This could have triggered an unruly default which would have had serious consequences for the Euro area and beyond.

In the end the referendum was scrapped after other European leaders in no uncertain terms told Greece that it was not going to get any more money if the referendum passed and it would effectively amount to a decision on whether Greece would remain in the Euro zone.

In a spectacular resemblance to 2008 the European Central Bank under the new President Draghi slashed official rates by one quarter of a percent, just a few short months after having raised them. All previous rate changes in the ECB’s twelve-year history have all been “pre-announced” while this one came out of the blue highlighting the worries about downside risks to growth, which are now taking hold within the region.

Traders across all asset classes struggled to make heads or tails of all the headlines and events of the week with volatility staying at elevated levels making trading increasingly difficult. The decision to scrap the Greek referendum, the ongoing G20 meeting and the ECB rate cut however all helped risk sentiment ahead of the weekend with stocks and commodities winning back some of what was lost earlier.



Against this backdrop commodities gave back some of the gains from the previous couple of weeks with the Reuters Jeffries CRB index losing 0.7 percent. The dollar recovered sharply as euphoria turned to despair thereby removing the support commodities normally receive from this adverse relation. The soft sector, especially cotton,  Sugar  and coffee, was knocked back while  Gold  having fully recovered from the September onslaught regained some of its safe haven status, while some geopolitical tension supported oil.

Gold receives fundamental and technical boost
Gold received a boost from renewed worries about the stability of the Eurozone and the Euro. Some analysts raised the possibility that the European Central Bank, much against the wish of some of its members, could begin some sort of quantitative easing in order to help pull the Eurozone out of the deep freezer. Real bond yields (adjusted for inflation) remain negative in more than half of the G20 nations thereby supporting non interest/dividend paying assets like gold.

Having spent the last month recovering from the sell-off during September this week saw a move back above 1,700 dollars which pleased both technical and fundamental traders with most now believing the worst is behind us. During the previous two major corrections since 2008 it took 6 1/2 and 5 months respectively to climb back to a new high. Considering the latest correction was the greatest of the three we would therefore be surprised to see a new high before year end. Further consolidation seems to be in order ahead of our year-end target of 1,900 with gold already showing an impressive 24 percent return on the year.


Spot gold, source Bloomberg



(The author is senior commodity strategist at Saxo Bank)