Gold Traders Prepare For Federal Reserve Decision

Gold Traders Prepare For Federal Reserve Decision
Gold Traders Prepare For Federal Reserve Decision
Gold is bouncing between small gains and losses in the morning session with no specific direction or support. Volumes remain low as traders prepare for the Federal Reserve meeting and rate decision on Wednesday. Gold is holding at 1075.30 well above its winter trading level. Asian markets dropped across the board on Monday, as investors remain focused on the mid-week decision from the U.S. Federal Reserve. The Japanese and South Korean exchanges were in negative territory amid the regional selloff.

The Nikkei 225 eased 461 points, or 2.4 percent, to 18,768 and the Topix was down 33 points, or 2.12 percent, at 1,516 despite a better-than-expected quarterly Tankan Survey, a broad measure of business sentiment, released by the Bank of Japan before the market open. Australian stocks lost ground on low commodity prices, with bank and resources plays firmly in the red. The main ASX 200 index was down 55 points, or 1.09 percent, at 4,974 with energy and materials sectors down 2 and 1.45 percent respectively.

Wall Street traded lower on Friday. The Dow Jones was down 309.54 points, or 1.76 percent, at 17,265. The S&P 500 was down 40 points, or 1.94 percent, at 2,012 while the Nasdaq fell 111.7 points, or 2.21 percent, to 4,933.

Gold looked set for another muted trading session on Friday but was headed for the seventh weekly drop in eight weeks as investors positioned for a looming U.S. rate hike. Silver is trading below the $14 price level showing weakness as base metal demand continues to decline. Silver is holding at 13.905 gaining 15 points in the early session. Platinum is trading at 846.75 gaining 0.65% in the Asian session. Silver saw gains as high as 0.15%

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The US dollar remains supported against the majors but gains considerably against Asian currencies in today’s session as markets adjust to a risk off scenario. US dollar index is trading at 97.70, depreciating marginally against the majors on Friday but is likely to rebound going into the FED meeting this week.

Last week, gold prices declined by 1.1 percent to close at $1074.5 per ounce. Prices edged lower and was vulnerable to further weakness as the dollar rebounded ahead of a widely anticipated U.S. interest rate rise next week. Weakness in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation. Higher rates should dent demand for non-interest-paying gold, which has already lost 9 percent of its value this year and is on track for its third year of losses.A slide in crude oil’s drop to its lowest in almost seven years as OPEC continues to pump near-record amounts of oil to defend market share – also prevented gold from reaching higher levels. Upbeat U.S. jobs data, growth and optimism in the US economy and low investment demand also acted as a negative factor.

commodity prices 2016

Copper remained in the green after reversing from multiyear lows last week. Copper is trading at 2.119 up by 7 points.  Copper marched to a two-week high on Friday, with investors closing out bearish positions as the dollar weakened and following comments that the economy of top metals consumer China may be on the mend. Copper was set for a second weekly gain while battery metal lead touched its highest level in 1-1/2 months. Short covering occurred after China’s National Bureau of Statistics said the Chinese economy was showing early signs of recovery. An initial rate rise is already priced into markets and investors are looking ahead at the scope for further rate increases, which may be limited, analysts said. Base metals except Aluminium traded positive last week as dollar index weakened by around 0.8 percent providing support to the prices. While on the other hand, an announcement of production cuts by the mining companies was supportive for the base metals pack.

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Crude Oil Plunges on Oversupply Fears

3XL pumpjack silhouettesFebruary WTI crude oil futures broke below $36.00 per barrel last week for the first time since February 2009. It settled at $35.62, down over 10% for the week. The weak close put the market in a position to challenge the December 2008 bottom at $32.40.

Brent crude finished at $37.94 per barrel, down 12 percent for the week. It closed below $38 a barrel for the first time since December 2008 and is now in a position to challenge its next major targets at $36.20 and $34.00. The latter being reached in June 2004.

The catalyst behind the selling was OPEC’s plan to continue to produce more oil than the world can consume, adding to the growing supply glut. Traders also reacted to a report from the International Energy Agency (IEA) that warned global oversupply of crude oil could worsen next year.

The IEA report warned that demand growth was starting to slow. “Consumption is likely to have peaked in the third quarter and demand growth is expected to slow to a still-healthy 1.2 million bpd in 2016, as support from sharply falling oil prices begins to fade”, the IEA said in its monthly oil report.

The week-ended with Baker-Hughes announcing that the U.S. oil rig count had fallen by 21.

The severe drop in oil prices triggered the worst break in the S&P 500 Index since the middle of August, while the Dow Jones Industrial Average and the NASDAQ Composite had their worst week in a month. The major averages ended the week with losses of more than 3 percent, with the NASDAQ Composite the worst performer, off about 4 percent for the week.

The sharp sell-off in the U.S. equity markets fueled a flight-to-safety rally in the March 30-Year U.S. Treasury Bonds. The aggressive buying drove the market to 157’17, its highest level since October 27.

December U.S. Dollar Index futures finished lower for the week, mainly driven by position-squaring ahead of the widely expected U.S. interest rate hike on December 16.

The USD/JPY plunged to its lowest level since November 3. The catalyst behind the selling pressure was the sharp break in U.S. equity indices. Investors who sold stock bought the Japanese Yen to pay back loans from Japanese banks in a move known as the carry trade.

The NZD/USD surged last week despite an interest rate cut by the Reserve Bank of New Zealand. The central bank cut rates to 2.5 percent from 2.75. The rate cut brought the interest rate level down to its lowest level in about 2 years, and fully reversed the hiking cycle which the central bank engaged in the first half of 2014.

The RBNZ statement said the monetary policy needs to be accommodative. It also said that the central bank believes inflation will reach the 1 to 3 percent target at current interest rate levels. The RBNZ also forecast that the target would be reached in early 2016. These statements suggested that the central bank is finished cutting rates and this was the catalyst behind the rally.

The AUD/USD finished the week 2.4% lower as investors turned their focus to the U.S. rate hike and concerns about appetite for riskier assets. At one point during the week, the Aussie spiked higher after the government reported that the total number of people with jobs rose 71,400 in the month, which easily beat expectations of a fall of 10,000. 

 

HSBC Say Austerity Pressure is Off

HSBC have said that governments in the euro area have benefited from the European Central Banks’ (ECB) Quantitative Easing (QE) programme, and expect fiscal expansion next year, in their latest report on the euro area.

Due to the EUR 60 billion per month asset buying QE programme, interest payments on government bond yields are almost 25% lower  in the euro area, than what was expected a year ago, according to the bank.

HSBC estimate that as much as 275 basis points have been taken off Portuguese 10 year yield spread, versus the price of German bonds, since the beginning on 2012.

The same model that was designed by HSBC, has also assessed that 135 basis points has fallen from Italian 10 year gilts, a further 120 base points from Spanish bonds, and 25 bonus points from France.

Governments to Spend More

Governments are set to spend the gains that they have made from interest payments HSBC believe.

Next year, a net fiscal expansion of 2.3% is predicted for Italy, with the French spending at a slightly more conservative rate of 0.9%, compared to 2015.

In Germany, public spending is set to increase by 4%, and HSBC argued in their report that QE has ended a debilitating cycle of austerity, lower growth, and the needs for more austerity, particularly for the most indebted countries.

The European Commission has also been turning a blind eye to fiscal ‘misdemeanours’, with the increase of spending. If Commission rules were more stringently enforced, then only Germany would be within fiscal terms.

The Stability and Growth Pact, which applies to all European Union countries, states that the budget deficit must be no greater than 3% of GDP.

HSBC revealed in their report that they believe the Commission is being lenient due to mitigating factors, such as the surge in asylum applicants, increased threats of terrorism, and the rise of political parties that can be viewed as being anti-European.

HSBC Positive About Increased Spending

As opposed to fiscal profligacy that led to a sovereign financial crises, the escalation of government spending will be a step forward in the short term, the bank opined. 

Exports and investments are still being weighed down by weak global growth, HSBC said that further austerity would damage European economies.

The report read: “The fiscal and monetary policy mix so far has actually been more favourable than in the UK, US, or Japan, during their QE periods. Debt sustainability is looking better. It is also welcome that, for once, a good chunk of the increased spending is in Germany.”

Money Should be Used Wisely

Any increases in government spending should ensure that there is a spur to private sector activity, and business investment.

Political factors may hinder that, as HSBC said that due to the unpopularity of many governments, they have simply spent more money, without concentrating on creating growth.

As public sectors grow, there is clear sign of tax exhaustion, and there is little help that is arriving to boost domestic demand in the euro area.

Government debts as a result of this are likely to climb higher, and that could lead to increased vulnerability in the event of a change of policy from the ECB.

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Markets Metals & Miners

Markets Metals & Miners
Markets Metals & Miners
US markets spent Wednesday on a roller coaster ride, with the Dow up 200 points and then down 100 points traders seemed uncertain where they wanted to go. Oil prices continued to weigh on markets as traders seem edgy as the Federal Reserve meeting draws closer. The Dow Jones eased 0.4 per cent at the close of trade, while the S&P 500 slid 0.8 per cent and the tech-heavy Nasdaq slumped 1.5 per cent. The Dow had jumped around 1 per cent near the opening bell before crude’s retreat hit hard.

M&A activity also impacted trade as a mammoth $170 billion-plus merger of equals between Dow Chemical and DuPont was seen close to being sealed. The two chemicals giants surged over 10 per cent and remain on track for record-setting days.

Across the Atlantic, France’s CAC 40 slid 1 per cent, while Germany’s DAX 30 gave back 0.8 per cent as investors continued to sell-off European stocks in the wake of last week’s ECB meeting. Outside the Eurozone, the UK’s FTSE 100 inched down 0.1 per cent, with its fifth straight day of losses coming despite sharp gains for mining stocks.

Dual-listed mining giants BHP Billiton and Rio Tinto both soared close to 4 per cent in London trade, while Glencore recovered 4.6 per cent. The latter is no longer the worst performer on the FTSE 100 this year, with rival Anglo American claiming that unwanted honor overnight. The two firms have tanked over 70 per cent in 2015.

The stock-market rout in the last three sessions, fuelled by the oil slump, has pushed many international equity indexes over two standard deviations below their 20-day moving average.

global markets

Asian stocks slipped on Thursday as weak oil prices continued to feed global growth worries, while the euro held solid gains after a policymaker poured cold water on market expectations of more easing by the European Central Bank. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.3 percent.

Japan’s Nikkei fell 1.3 percent to hit a five-week low and Australian shares dropped 1.5 percent.     Chinese and Indonesian shares were the only gainers, with the CSI300 rising 0.7 percent and the Jakarta Composite advancing 0.2 percent.

Gold reversed recent gains to fall $2.50 in the Asian session reaching 1074.00 while silver took cues from gold but remained at the $14 trading level. Gold moves in the opposite direction to the dollar, against which it is used as a hedge. Holdings in SPDR Gold Shares  – which accounts for more than 40% of the total ETFs traded – have fallen by 62.7 tonnes since mid-October when inflows sent total holdings briefly back above 700 tonnes. Total holdings have now fallen to 634.6 tonnes or 20.4 million ounces worth $22 billion. Once the largest ETF in the world, in June this year GLD dropped out of the top ten with assets under management more than $50 billion below its 2011 peak.

Holdings have fallen to the lowest since 19 September 2008. The collapse of Wall Street investment bank Lehman Brothers sparked the global financial crisis occurred September 15 that year. Total assets in the dozens of gold-backed ETFs listed around the world dropped to 1,465.2 tonnes on Monday according to Bloomberg data. Global ETF vaults held a record 2,632 tonnes or 93 million ounces of gold in December 2012.

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Copper saw a bit of light gaining 3 points. 2.069 inching up to the top of its December trading range. Soft demand is clearly not helping commodity prices. China and other emerging markets like Brazil have slowed dramatically in recent quarters, lowering their appetite for things like steel, iron ore and copper. This means markets are bracing for more plant closure and announcements like the one announced by Anglo American. In the U.S., roughly 123,000 jobs have disappeared from the mining sector, which includes oil and energy workers, since the end of 2014, according to government statistics. It’s also likely some companies won’t survive the depressed pricing environment. Financial trouble for commodity companies have already lifted global corporate defaults to the highest level since 2009, according to Standard & Poor’s Ratings Services.

 

 

Major Decisions Taken at Economic and Financial Affairs Council Meeting

The European Union’s Economic and Financial Affairs Council (ECOFIN), has made a number of significant decisions in their latest meeting in Brussels.

A directive on cross border at rulings was agreed, which is designed to improve transparency on tax rulings from member states, and how that the tax system will be dealt with.

The council also discussed corporate tax avoidance measures, and further adopted conclusions of a code of conduct on business taxation, and the implementation of OECD work on tax base erosion and profit sharing (BEPS).

Progress was also reviewed on international anti BEPS aspects of a proposal, for an EU common consolidated corporate tax base.

Progress Made on Capital Markets Union

A agreement was also reached at a committee level on the development of securitisation market in Europe, part of the broader plans for a capital markets union.

Proposals for unlocking sources of finance, particularly for SMEs and start up companies, will be negotiated with the European Parliament.

Pierre Gramegna, minister for finance of Luxembourg and president of the Council, said: “The securitisation market has stalled, and if we are to revitalise it we must proceed quickly. We consider this dossier to be of crucial importance to the European economy.”

Council makes Tax Agreements on Liechtenstein, San Marino and Switzerland

Finance ministers also made a pact with Liechtenstein and Switzerland on taxation, and  a deal was signed with San Marino directly after the council meeting.

All of the agreements are in place to clamp down on tax evasion, requiring an automatic exchange of information on private savers.

The aim is to enable tax authorities to enhance their access to cross border information, over savers’ accounts.

Germany Trade Figures Down in October

Official figures have revealed that Germany’s exports and imports increased in volume by 3.3% and 3% respectively.

Although compared to September, exports decreased by 1.2%, and imports plunged down even further by 3.4%.

The foreign trade balance reported a surplus of EUR22.5 billion, a year on year increase by EUR 1 billion.

Provisional results released by the Bundesbank, revealed that the current account of the balance of payments showed a EUR 23 billion surplus for October, this is a rise of EUR 1.4 billion from a year ago.

The figures are calculated from supplementary trade items, services, and primary and secondary incomes.

In a further breakdown of the trade figures, Germany dispatched EUR 62.7 billion worth of goods to the rest of the European Union, receiving EUR 55.3 billion in return.

Compared to a year ago, exports to European Union countries rose by 6.4%, and imports by 3.3%.

Within the euro area, goods exported reached EUR 39.3 billion, an increase of 5.8%, while there was a 2.4% rise, totalling EUR37 .4 billion.

For countries that do not belong in the euro area, the amount of goods that flowed from Germany was EUr23.5 billion, a significant hike of 7.4% from October 2014.

Imports for Germany from these countries also increased by 5.3%, reaching EUR 17.9 billion.

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GDP Increases in Euro Area and Across European Union

GDP in the euro area and the European Union has increased by 0.3% and 0.4% respectively in the third quarter for this year, in comparison to the previous quarter, according to Eurostat figures.

The growth was slightly down on the second quarter, as GDP rose by 0.4% in the euros area, and 0.5% in the European Union.

Year on year, there was more positive news, as GDP grew by 1.6% in the euro area, and across the whole of the European Union, by a higher 1.9%.

Eurostat also released comparative figures with the United States, and in the third quarter, growth was 0.5%.

Year on year, across the Atlantic there was a higher rate of growth, compared to the euro area and the European Union, with a rise of 2.2%.

Although this was down from the year on year figure for the second quarter, where growth stood at 2.7%.

Romania Tops Growth Chart

Romania grew at a faster pace than any other European Union member state, accelerating to 1.4% for the third quarter.

They were followed by Croatia on 1.3%, Malta 1.1%, Latvia on 1%, and 0.9% growth was recorded in Poland and Slovakia.

Unsurprisingly, growth in Greece fell the most by 0.9%, Finland were reported the next lowest figures of -0.5%, as their economic problems continued.

Estonia also suffered a minus score of 0.5%, and  Denmark experienced a negative figure of minus 0.1%, completing the list of those who contracted between July and September.

Out of the traditionally larger European economies, the United Kingdom grew by 0.5%, while Germany and France just climbed above the European Union average, with growth of 0.3%.

Spain can celebrate a more successful third quarter, as economic activity reached 0.8%, although this was slightly down on the 1% growth for the second quarter.

Euro Bounces Back Up Against US Dollar

The euro has enjoyed a successful morning against the US dollar, currently the euro is buying $1.084, a leap from $1.08 yesterday morning.

Since the raft of announcements from the European Central Bank last week, the euro has wiped out some of the lost value that it has suffered against the dollar this year.

The euro has also climbed against the pound in the past 24 hours, and is now buying at £0.722, from below the £0.717 mark.

Last week saw the euro reach its highest value against the pound since October.

UK and Germany Report Mixed Data

Official figures from Germany have reported a 2% rise in manufacturing turnover for October compared to September.

Domestic turnover increased by 2.6%, and there was a rise of 1.5% in business with foreign customers.

Sales to euro area countries were 1.7% below the preceding month‘s level, while sales to other countries reached 3.7% above the September figures.

The current growth in the sector represents clear progress, as there was a 1.2% decrease in turnover for September compared to August.

In the UK the British Retail Consortium accountants KPMG have reported flat retail figures, despite November’s Black Friday sales.

Sales in November at stores open for more than a year fell 0.4%, from the same month in 2014.

Romania City Gate

Gold Reacts To Technicals While Copper To Fundamentals

Gold Reacts To Technicals While Copper To Fundamentals
Gold Reacts To Technicals While Copper To Fundamentals
Gold tumbled Tuesday morning giving up $6.40 following declines in the North American session on Monday. Gold is trading at 1068.80 after soaring above $1086 on Friday after the release of a much better than expected jobs report from the US. Gold gained 2.3 percent on Friday after slumping to a near-six-year low earlier in the week. Typically robust data would have sent gold lower as it would support a rate hike, but investors on Friday chose to cover their shorts.

Gold may seek a support around $1,064 per ounce before retesting a resistance at $1,084, as suggested by its wave pattern and a Fibonacci retracement analysis. It seems the bounce from Dec. 3 low of $1,045.85 is against the trend falling from Jan. 22 high of $1306.20, as it paused around the resistance at $1,084, the 14.6 percent Fibonacci retracement on the trend. However, the bounce may have not completed, as it will consist of three waves, with the third wave yet to develop. The current second wave labeled b could end around $1,064, the 7 percent level. A break above $1,084 could lead to a gain to the 23.6 percent level at $1,107 as predicted by Wang Tao a Reuter’s market analyst.

Investor sentiment has been downbeat. Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, tumbled 0.65 percent to 634.63 tonnes on Monday, the lowest since September 2008. Elsewhere, China likely added nearly 21 tonnes of gold to its reserves in November, according to Reuter’s calculations from central bank data on Monday. The central bank’s biggest purchase in five months failed to provide much support for the gold price. China’s gold reserves rose by nearly 21 tonnes last month, the biggest purchase since it began disclosing monthly data on the stockpile earlier this year, central bank data showed on Tuesday. Gold reserves stood at 56.05 million fine troy ounces at the end of November, up from 55.38 million at end-October, according to the People’s Bank of China (PBOC). In tonnage terms, reserves totaled 1,743.35 tonnes at the end of last month, an increase of 20.8 tonnes from October.

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Industrial metals tumbled this morning to touch recent lows with copper actually able to show a 2 point gain as the greenback tumbled. Weak Chinese export data weighed heavily on the metal markets. Copper prices slipped on Monday as worries about weak demand growth in top consumer China and expectations of surplus metal were reinforced by a strong dollar. Copper is trading at 2.047. A higher dollar makes commodities more expensive for non-US firms, a relationship used by funds to trade copper.

China accounts for nearly half of global copper consumption estimated at about 23 million tonnes this year. Analysts estimate demand growth for copper in China has slowed this year to around 2.5 percent from more than 7 percent last year. “Producers need to cut more to try to balance the market, but that isn’t happening.” China’s investment and industrial production numbers for November are due on Saturday. This morning data showed that China’s trade with the rest of the world continued to shrink in November, in the latest negative sign for growth in the world’s second-largest economy. China’s exports fell in November for the fifth consecutive month, as weak global demand continued to weigh on the world’s largest manufacturing nation. Imports were better than expected—though they remained weak—leading to another sizable monthly trade surplus.

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Volatile Week Ends with Euro Sharply Higher and Crude Oil Set Up for Major Move

US DOLLARLast week was a volatile week for Forex, commodity and stock markets. The price action was driven by an OPEC production decision, a U.S. Non-Farm Payrolls report, but most of all by a softer-than-expected stimulus decision by the European Central Bank.

The week ended with the release of a stronger-than-expected U.S. Non-Farm Payrolls report for November. The strength of the report just about guarantees the Fed will raise rates at its next meeting on November 16. This now raises concerns about the timing of future rate hikes.

The labor report showed Non-Farm Payrolls increased by 211K, beating the 201K estimate. Average hourly earnings fell slightly from 0.4% to 0.2%, meeting the estimate. The unemployment rate remained steady at 5.0%.

Crude oil prices fell sharply on December 4 after the Organization of the Petroleum Exporting Countries (OPEC) agreed to keep pumping crude at current production levels in order to retain market share and raise its output ceiling despite a global supply glut.

OPEC sources said it had agreed to raise its output ceiling to 31.5 million barrels per day at its meeting in Vienna, in what appeared to be an effective acknowledgment of existing production.

Previously, the cartel had a production ceiling of 30 million barrels a day, however, members have been producing closer to 31.5 million bpd, according to market estimates. It was reported last week that OPEC supply rose in November to 31.77 million bpd from 31.64 in October.

According to sources, cartel members made no mention of a production target in their final statement. However, OPEC President Emmanuel Ibe Kachikwu told reporters that members saw no need to mention a hard figure but there had been agreement to maintain a ceiling that reflects “current actual production.”

The direction of the market will now be determined by trader reaction to the psychological $40.00 level that has provided support for nearly four months.

The EUR/USD finished higher for the week after posting a huge reaction to the European Central Bank’s new stimulus package. The news was so unexpected that it produced a range of 1.0539 to 1.0980, or a greater than 4% reaction. The move was fueled by short-covering.

The week started with the Euro under pressure against the U.S. Dollar. Some of the weakness was fueled by comments from Fed Chairwoman Janet Yellen who indicated to Congress’s Joint Economic Committee that she was ready to raise rates at the Fed’s policy meeting on December 16. She also added that the divergent monetary policies of the U.S. and other countries was among the reasons the Fed was likely to lift rates slowly after the first increase.

On November 4, the ECB triggered a wild response in the markets after it announced a stimulus package that was smaller than investors had anticipated. The response by the market to the stimulus package – which included expanding the ECB’s bond-purchase program and cutting an already negative deposit rate to encourage lending – indicated that investors had concluded that it was insufficient.

ECB President Draghi feels that the level of stimulus is sufficient and that the new stimulus package needs time to work. He also said that “QE is here to stay” and that the central bank can re-calibrate the program if needed. 

Industrial Producer Prices Down Say Eurostat

Industrial producer price for the euro area have fallen by 0.3% for October according to the latest figures released from Eurostat.

For the whole of the European Union, prices also fell by at a slower pace of 0.2%.

Month on month there was a 0.1% fall for the euro area and the European Union, in comparison to the prices for September.

For October this year, in contrast to a year ago, producer prices fell by 3.1% and 3.5% for the euro area and the European Union respectively.

Energy Major Part of Price Fall

 In the breakdown of how the prices have fallen, energy and intermediate goods both were reduced by a month on month 0.4% in the euro area.

Non-durable consumer goods also suffered a price fall of 0.2%, while prices remained stable for both capital goods and consumer goods.

Excluding the depreciating  lower energy prices, producer prices across industry fell by 0.2%.

In the European Union, intermediate goods were the most negative influence on prices, falling by 0.4%.

Energy followed next, with a reduction of 0.3%, and non durable consumer goods fell by 0.1%.

In a carbon copy of the euro area, prices remained stable for both capital goods and consumer goods. And excluding energy prices, the industry costs fell by 0.2%.

Ireland had to take the lowest producer price fall of 1.1%, and they were followed by Spain and Hungary that both saw their industry expenses reduced by 0.7%.

The only price increases that Eurostat found were in Sweden, which had the highest increase of 0.7%, and their neighbours Denmark saw prices lift by 0.5%. While Estonia enjoyed a rise of 0.4%, and France also saw a slender rise of 0.1%.

Figures Follow Inflation Falls

The industry prices were in keeping with the flash estimate that inflation has fallen by 0.1% in the euro area for November, the same inflation figure that was recorded for October.

At the ECB policy meeting, which will take place today, boosting inflation to the European Central Bank’s 2% target, will be one of the priorities to be discussed.

An increase in the Quantitative Easing programme is expected to be announced  in the attempt an increase in prices via the money supply, alongside a cut in the deposit rate for holding euros, possibly down to 10 base points.

Deal Made with Liechtenstein Over Bank Accounts

The European Parliament has endorsed a deal between the European Union and Liechtenstein, that will provide barriers to EU citizens holding money in bank accounts, to hide their assets from the tax authorities.

Starting in 2018, there will now be an automatic free flow of information on bank accounts of residents from both parties.

Last month it was agreed that tax fraud had to be stamped down upon. And the information that will be exchanged will include information on incomes, interest and dividends, account balances, and proceeds from the sale of financial assets.

Member states and Liechtenstein tax regimes will now be able to identify the taxpayers concerned, administer and enforce their tax laws in cross-border situations, and assess the likelihood of tax evasion being perpetrated.

Also, it is hoped that any further investigations on tax fraud and evasion cases will be avoided.

industry

Gold Traders Run For The Hills

Gold Traders Run For The Hills
Gold Traders Run For The Hills
Gold traders have finally accepted the Federal Reserve rate increase even though inflation remains mellow around the globe. Gold has been slowly easing as the bears take hold. Gold fell $3.20 in the morning session to trade at 1050.60. The consensus among investors is that the Fed will raise rates at its December 15-16 meeting. That thesis was reinforced Wednesday, when Fed Chair Janet Yellen indicated that the U.S. economy is on track for an interest rate hike this month, though she was careful to point out that the Fed will need to review any upcoming data before making a final decision.

Gold fell 0.2 percent to $1,050.80 an ounce. It dipped to as low as $1,050.25 in the previous session, the lowest since February 2010.  Fed Chair Yellen said on Wednesday she was “looking forward” to a U.S. interest rate rise that will be seen as a testament to the economy’s recovery from recession.

In her remarks to the Economic Club of Washington, Yellen expressed confidence in the U.S. economy, saying job growth through October suggested the labour market was healing even if not yet at full strength.  Though she made no explicit reference to rising rates in December, markets read her comments as supportive of the first U.S. rate hike in nearly a decade at the U.S. central bank’s policy meeting later this month. Gold, as a non-interest-paying asset, would not benefit from higher rates.

Following her comments, the dollar jumped to its highest in 12-1/2 years against a basket of major currencies on Wednesday, while equities fell. U.S. gold futures slid to $1,049.40 on Wednesday, the lowest since October 2009. Silver, platinum and palladium also followed gold lower. Silver is holding below the all-important $14 price level.

gold prices

Traders have been unwinding USD longs, ahead of event risk this week: the European Central Bank policy meeting tomorrow December 3, and U.S. Non-farm Payrolls on Friday. However the downside of gold price remains vulnerable to macro shocks are that data or market action, as NFP approaches and so does the Federal Reserve’s meeting on December 16. Goldman Sachs Group Inc. forecast gold at $1,000 in a year as rates climb, according to a Nov. 18 report. Prices will average $995 next year amid a strong dollar, according to Citigroup Inc.

Industrial metals remain weak after disappointing Chinese manufacturing PMI data and the strength of the US dollar. Copper dipped 8 points falling towards the $2 price level. Copper is trading at 2.037. Copper price nearly pared all gains of the last two sessions after U.S. Institute for Supply Management’s manufacturing index dropped to the lowest since 2009. The Shanghai Composite closed today’s trading up 2.33 percent. Prior to the US data, metals made a comeback following low Chinese PMIs and lack of commodity recovery.

copper

ECB Release Latest Access to Finance Report for SMEs

Small and Medium sized enterprises (SMEs) in the euro area were less concerned about access to finance in order to grow their businesses, according the European Central Bank’s (ECB), Survey on the Access to Finance of Enterprises (SAFE) report.

Avenues to financing was only the most important issue for 11% from the 11,226 companies who responded for the survey, which was taken for April to September this year.

Finding customers, as in the previous SAFE report, remained the most pressing problem, with 25% concerned about the volume of business that their companies would receive.

The availability of skilled labour, increases in cost and production, competitive pressures, and the presence of regulations completed the list of current apprehensions.

ECB Release Latest Access to Finance Report for SMEs
ECB Release Latest Access to Finance Report for SMEs

Report Highlights Country Divergence

Unsurprisingly Greek SMEs reported that finance access was the most difficult hurdle  which they faced, with 30% who said that they had experienced problems.

In Ireland and the Netherlands, 13%  revealed that they were most worried about finance.

In contrast only 7% concurred with this in Germany, Austria, and Finland, despite their poor economic growth results throughout this year.

Demand for Bank Loans and Overdrafts Reduced

There was a fall in the amount of SMEs in the euro area who reported that their need for a bank loan had increased, from 3% in the previous report to 1%.

In Belgium, Finland, Germany and Netherlands, there was a fall in SMEs who said that there was a falling need for external finance, amid an environment of strong internal sources of finance.

There was also positive news for the relationship between the banking sector and SMEs, as there was increase in the availability of bank financing

Also, fixed investment and working capital were the two main areas where SMEs used their capital.

Turnover Increase in Euro Area

There was positive news for SME, as the net turnover across the euro area improved by 17%, which was felt across most countries. Greece again suffered the most, recording a turnover decline.

Rising labour and ‘other’ costs were seen as prohibitive by the respondents, as 41% and 34% respectively said that this was an issue, but this was down from the last SAFE report.

In net terms, only 1% of SMEs stated that profits have declined, a significant fall from the 10% from the last report.

Euro Area Inflation Stable

In a flash estimate, the euro area inflation is expected to be 0.1% in November, no change in a month on month comparison to October. 

Food, alcohol and tobacco is having the most positive influence on inflation with a rise of 1.5%, although that is a slight drop of 0.1% from October.

Services prices have also increased by 1.1%, a 0.2% drop month on month, while non energy industrial goods were slightly higher on 0.5% in November, compared with 0.6% for October.

Once again energy prices have has a significant impact on inflation as a whole, with a decrease of 7.3%, although that is a reduction from the minus 8.5% figure for October.

The ECB is highly likely to consider measures to boost inflation at its policy meeting tomorrow.

 

Strong Dollar, Rate Increase And Geopoltical Tensions Affecting Metal Trading

Strong Dollar, Rate Increase And Geopoltical Tensions Affecting Metal Trading
Strong Dollar, Rate Increase And Geopoltical Tensions Affecting Metal Trading
Gold prices took a big hit in the Asian session falling $13.80 in the Asian session. Gold remains weak at 1055.90 while silver gave up 13 points to trade below the $14 price level. Platinum fell $8.85 to 827.60. Gold’s monetary value fell to its lowest point in about six years. Due to what industry analysts say is a strengthening U.S. dollar, an expected rate hike from the Federal Reserve and an apparent Chinese stock market slump, the precious metal’s prices temporarily fell to a longtime low of $1,051 an ounce.

The commodity’s price closed at $1,055.90 Friday. The price indicates gold’s decline in popularity since reaching its highest price of $1,890 in 2011. The metal hit its lowest value in Feb. 2010 at $1,045 an ounce. The drop is suggested to have occurred due to a possible rate hike to be decided by the Federal Reserve in the coming weeks. In preparation, investors have decided to sell before they are affected. Reserve executives will meet starting Dec. 15 to discuss the decision.

Investors have been selling their gold holdings in recent weeks on anticipation that the Federal Reserve will raise interest rates for the first time since 2006. Fed officials in late October signaled that they would use their December 15-16 policy-setting meeting to review whether the US economy has recovered enough to warrant tighter monetary policy. Many investors expect gold to struggle once rates climb as it doesn’t pay interest and costs money to hold.

gold

The strength of the US dollar continues to weigh on global metals with copper trading at new lows last week. After the Chinese government announced that it would be restocking its strategic reserves metal prices recovered a bit only to reverse and begin to decline on Friday after stocks in China declined 5% on news of new investigations by regulators into irregularities in the country’s largest brokers. Copper dipped 15 points as the greenback continued to climb this morning. Traders are closely monitoring Chinese manufacturing PMI data due tomorrow.

Increasing tension between Russia and Turkey caused investors to purchase metals and other commodities to hedge against the geopolitical risk, the report said. However, the added demand won’t solve the ongoing oversupply problems in the copper market. Domestic refined copper production in October increased 0.6 percent year-on-year to about 690,000 tons, according to data from the National Bureau of Statistics in November.  China also approved about $100 billion worth of new infrastructure projects in late October and early November, Reuters said on Friday. Increasing tension between Russia and Turkey caused investors to purchase metals and other commodities to hedge against the geopolitical risk. However, the added demand won’t solve the ongoing oversupply problems in the copper market. Domestic refined copper production in October increased 0.6 percent year-on-year to about 690,000 tons, according to data from the National Bureau of Statistics in November. China also approved about $100 billion worth of new infrastructure projects in late October and early November, Reuters said on Friday. 

copper

Eurostat Publishes Table for Economic Imbalance Indicators

Eurostat have revealed the Macroeconomic Imbalances Procedure (MIP) scoreboard, which is part of the ‘sick pack’ set of regulations that have been in place for the past four years, as adopted by the European Council and Parliament.

The scoreboard is designed to provide the support for the annual Alert Mechanism Report, that is released by the European Commission.

The report details the in-depth analysis which is required for member states, whose economic performances in specific areas have started to cause concern.

There are 14 separate categories that are highlighted by the report, that are  the most relevant for the early detection of economic imbalances.

This year, three further labour market indicators have been added to the original list, the include activity rate, long term unemployment, and youth unemployment.

Alongside Eurostat, the data is compiled by the European Commission and the International Monetary Fund.

MIPS Scores Reveal Member State Differences

The Netherlands can celebrate the most positive news for its current account balance, over a three year average of its GDP, with a score of  10.9%, over the threshold mark of -4/6%.

The most worrying figures came from Cyprus, who posted a score of -4.9%, followed by the United Kingdom, traditionally one of Europe’s strongest economies, on a minus score of 4.3%.

For the net international investment position, the threshold level is -35%, the Netherland again scored the highest on 60.8%, followed by Belgium on 57.2%, notably Germany scored 42.3%.

Cyprus were the least influential in this category with a minus score of 139.8%, perhaps unsurprisingly Greece recorded the second lowest figure of -124%.

Eurostat Publishes Table for Economic Imbalance Indicators
Eurostat Publishes Table for Economic Imbalance Indicators

Export Market Share Figures Show Many Below Threshold

In total 18 countries fell below the threshold figure of -6% for the net level of export market share.

Cyprus again finished lower than any other member state country, falling to -26.7%, followed by Finland, who have suffered poor economic figure throughout this year, on -24%.

There was far better news for the Baltic nations, as Lithuania secured the highest export increase of 35.3%, with Estonia recording  a 24.5% increase. Eastern Europe was also bolstered by Romania who posted a 21.5% export share level.

Surprisingly Germany suffered a loss of 8.3% in its global export share, alongside the 8.7% loss that the UK posted, France also fell below the threshold as world wide trade was reduced by 13.1%.

Euro Falls to Below 1.6 level to US Dollar

The Euro has fallen to its lowest level against the US Dollar for the past three months, as it precipitated to below the $1.6 mark.

At 1030 AM GMT, the euro was trading at 1.058$, as the speculation has grown surrounding an expansion of the Quantitative Easing programme by the European Central Bank, and an interest rate cut.

Also the US economy also received encouraging news with a third quarter economic growth revised up to 2.1%, a 0.6% increase from the original figures that were released.

Against the pound there was a different story, as the euro climbed to the £0.705 this morning GMT, before being pulled down to still a relatively high £0.703.

U.S. Holiday Limits Price Action in Forex, Commodity Markets

US DOLLARVolatility and volume were down in the financial markets on Thursday due to the U.S. Thanksgiving holiday. U.S. banks and major exchanges were closed leading to the absence of several major players in the Forex markets. Trading took place on several electronic platforms but there was very little price action. The markets, for the most part, straddled the previous day’s close.

The GBP/USD finished lower, but remained inside yesterday’s range. The market was being supported by comments from the previous day by Chancellor George Osborne. The Chancellor announced that controversial changes to tax credits would be scrapped altogether. Osborne also predicted that Britain’s economy would grow by 2.4 percent this year.

On Friday, the U.K. will release the latest Second Estimate GDP. It is expected to show a reading of 0.5%. The same as last quarter. U.K. Preliminary Business Investment is expected to show a reading of 1.5%.

When the Forex markets reopen on Friday, the focus will be on the EUR/USD. Earlier in the week, this Forex pair plunged on the news that the European Central Bank policymakers were looking at widening the scope of their bond buying or implementing a two-tier penalty charge on banks that leave cash with the ECB. Specifically, the central bank is considering purchasing regional bonds and even buying bundled loans with a risk of non-payment.

January crude oil prices finished lower on Thursday after mounting a strong comeback during Wednesday’s session. The market is currently up over $2.00 from the low posted earlier in the week at $40.41. Short-covering in response to comments from the Saudi Cabinet helped put in the week’s low.

Oil trimmed losses on Wednesday after the Energy Information Administration said U.S. crude oil inventories rose 961,000 barrels last week. Analyst and traders were looking for a 1.1 million barrel rise. The rise was also smaller than the 2.6 million barrel increase reported late Tuesday by the American Petroleum Institute.

February Comex Gold finished slightly better on Thursday. Prices continued to work sideways, forming a possible support base, according to technical analysts. Despite the bullish reaction by the U.S. Dollar to the steep drop in the Euro, the gold market remained relatively calm. 

HSBC Report Points to ECB Inflation Hope

In a report on the European Central Bank (ECB), the HSBC bank has dissected the bank’s agenda, with an inflation rise one of the biggest priorities.

HSBC believe that the markets doubt the willingness of the ECB to tackle the inflation problem, of reaching the desired 2% threshold.

Also, the euro area is unresponsive to economic slack, and therefore recovery.

As inflation falls, it becomes embroiled in various formal and informal rules in pricing contracts, that are linked to future prices for inflation today, HSBC said.

Even if economic recovery begins to accelerate at pace, inflation could still remain lower than 1%, if inflation expectations are dislodged.

The best means to hike inflation HSBC believe, is to push the exchange rate down, resulting in import prices being increased.

Growth Forecasts May Be Revised Upwards

The ECB will have enough ammunition to act on inflation, as the September growth projections are down for 2017 at 1.7%, below target.

Economic growth for this year may be revised upwards, since the last projections were made, as there has been a rise in expectations. For the first two quarters growth figures were raised from the original forecasts.

Recent figures from the Markit Purchasing Manager’s Index revealed that activity in euro area business activity rose by 0.5% from October to November. The highest monthly gain in five years.

The growth figure for the next two years HSBC expect to remain largely unchanged.  Even if the composition of growth alters, with exports and investments falling, which are then compensated by higher public spending.

The influx of asylum seekers may also result in higher public spending, as demonstrated by Germany in the third quarter of this year.

Inflation outlooks may be changed by the anticipation of lower oil prices, for 2016 the inflation forecast is 1.1% from the ECB, 0.1% higher than put forward by HSBC.

Expectation of Deposit rate Cut

In their report, HSBC opined that the cutting of the bank deposit rate would be an effective tool, in pushing the euro down.

Additionally, a negative deposit rate could have the effect of funnelling excess reserves, from the balance sheets of core euro area countries to more peripheral ones.

Although HSBC warned that negative interest rates can be counter productive, as you would not want to cause a run on the euro.

Despite that view, HSBC are expecting a reduction in the deposit rate of about 10 basis points at this stage, with a further ten point cut next year.

QE likely to be Extended

Quantitative Easing (QE) is expected to be expanded to act as a counter force to the downward pressures on the euro.

The size of the asset programme may face constraints, due to the comparably small size of the German bond market, and that there is a collective action clause over new euro zone issuance.

Due to this stipulation, the ECB must remain a minority shareholder to avoid being in discussions on debt restructuring.

Increasing the asset purchase rate is now difficult HSBC believe, and that the ECB  could alter the QE timeframes.

Even facilitating an open ended QE market, and tying asset purchases to their inflation mandate of around the 2% benchmark.

HSBC Report Points to ECB Inflation Hope
HSBC Report Points to ECB Inflation Hope

Gold Volumes Low & Strong Data Keep Trading Mute

Gold Volumes Low & Strong Data Keep Trading Mute
Gold Volumes Low & Strong Data Keep Trading Mute
Gold climbed a bit in the Asian session as it usually does adding $1.50 to reach 1071.50 after taking a significant fall on Wednesday. US data out yesterday secured an interest rate increase by the Fed at its December meeting. The big question is now how large and how often, after Goldman Sack’s has predicted 4 rate increases by the end of 2016. The US dollar soared and held above the 100 price level most of the day to move into the holiday at 99.83 after traders sold late in the day as they closed out positions before leaving on holiday.

American factory orders for long-lasting or durable goods rebounded in October to show the first increase in three months, led by a surge in demand for large, commercial airplanes. Meanwhile, the number of people who applied for U.S. unemployment benefits fell by 12,000 to 260,000 in the week before Thanksgiving, indicating that the labor market is continuing its steady path to recovery.

Wednesday’s data keep the Fed on track to raise rates in December, particularly as they “offer a strong gauge of the employment situation, which means we could see a 200,000 job gain in November’s jobs report next Friday.

U.S. markets will be closed Thursday for Thanksgiving Day. Stocks will open for a half-day on Friday. No economic data are scheduled for release on either day.

gold

Safe haven trades eased on Wednesday after diplomacy rather than war will resolve the dispute between Turkey and Russia. Gold rose Tuesday, edging up from a nearly six-year low after Turkey’s downing of a Russian warplane near the Syrian border stoked geopolitical fears and triggered an appetite for gold and other assets perceived as havens during conflict. 

In other metals trade, palladium rose $9.80 to trade at $560.30 an ounce, while platinum rose $6 or 0.5%, to $849.50 an ounce.

Copper rebounded off its lows to trade at 2.080 adding 28 points as traders took advantage of weak prices and positive US data to support the metal. Copper fell yesterday, dragged lower by a stronger dollar.  Copper closed down 1% at $2.0490. A stronger dollar puts pressure on copper, which is priced in the U.S. currency and becomes more expensive to foreign buyers when the buck rises.

Prices for the metal are down around 28% since the beginning of the year, dogged by the dollar’s strength and an economic slowdown in China, the world’s biggest copper consumer. Though copper now trades at its lowest level in more than six years, market participants are wary of trying to pick a bottom.

copper

Markit Study Reports Hike in Business Activity

Euro area businesses are celebrating their fastest rates of activity in four and a half years, according to the latest Markit purchasing managers’ index (PMI).

The economics survey provider, revealed that  their index rose from 53.9 in October to 54.4 for November, in their first flash estimate.

The main indicators of why businesses have seen an expansion of their output include new orders, and a growing backlog of work that needs to be completed.

Another positive  aspect of the data, was that the economic improvements has been broadly based across several business sectors.

The service sector exhibited the largest amount of growth, where business grew by the fastest level since May 2011, and burgeoned from 54.1 to 54.6 between October and November.

This increased the employment in the sector, by the largest monthly gain in five years Market revealed.

Manufacturing output growth has also gathered pace, climbing to as three month high, and recorded the most significant increase on order books since April last year.

The PMI score for manufacturing was 52.8, a leap of 0.5 points from October.

As the demand environment has improved, factory employment has also spiralled upwards, as companies deal with raised capacity.

Germany and France Have Polar Opposite Figures in Survey

Growth in the German economy accelerated to the largest high in three months, which Markit said was fuelled by the a the best monthly improvement in gaining new business for two years.

The report also said that gains that were made in the service sector, were offset by a slowing down in manufacturing.

Although there was increased employment figures for both sectors, this resulted in the biggest gain in unemployment in nearly four years.

This conclusion was reached, despite official figures that only revealed  a moderate third quarter growth in the economy of 0.3%, that was released last week.

In contrast, there was far less for France to be positive about, as weak data was reported for their economy.

Business activity rose by its slowest rate for three months, which was largely a reflection of poor service sector growth. Despite a slightly faster rise in new orders, manufacturing output also slowed down in France.

Markit Study Reports Hike in Business Activity
Markit Study Reports Hike in Business Activity

Expansion Comes Outside of Biggest Euro Area Economies

Interestingly, Markit found that the largest business activity rises were to be found outside of Germany and France, traditionally the two most influential economies in the euro area.

Since the 2008 financial crises, the survey found the second steepest rise in output from the remaining 17 countries in the currency bloc.

Employment levels outside of France and Germany, also increased by the joint-largest gain since July 2007.

Despite this upturn, ongoing deflationary patterns were also found. Average prices for goods and services both fell, albeit marginally, at a rate that is unchanged from October.

Input costs also barely rose, which was mostly linked to the continuing fall in energy prices.

Euro Comes Back Against the US Dollar

After falling to its lowest figure in a month against the US dollar yesterday, the euro has enjoyed a recovery by jumping up to $1.066 in the early hours of this morning GMT. This was before being pulled down slightly to $1.064.

The euro has bounced back, as the US economy has received some negative data, with a fall in home re-sales reported for October.

Markit’s PMI index for the US was in contrast to the favourable figures for the euro area, as the PMI in the manufacturing sector disclosed the weakest figures for 25 months.

Compared to the pound, the euro has steadily climbed to a peak £0.705 mid way through this morning  GMT. This was after the euro hit a 24 hour nadir of approaching the £0.699 mark yesterday morning.

Fed Minutes Raise Concerns Over Future Rate Hikes

FEDERAL RESERVEThe key market driver last week were the minutes from the last U.S. Federal Reserve meeting. U.S. equity prices jumped after the release of the minutes. The U.S. Dollar drifted lower, leading to a two-sided trade the rest of the week in the foreign currency and metals markets.

The minutes showed that many members of the Federal Open Market Committee believe a rates hike next month would be appropriate. Traders read the minutes to indicate the Fed is strongly leaning towards a December rate hike, but issues came about whether the Fed knows what the appropriate rate is. Additionally, with the absence of guidance, investors are concerned over future rate hikes which the Fed only said would be “gradual”.

The break in the U.S. Dollar served as proof that the rate hike was fully priced in, but it also indicated that the uncertainty of the future rate hikes could mean the dollar is currently overvalued.

The AUD/USD spiked to a two-week high last week as traders reacted to the FOMC minutes released on November 18. The minutes reiterated the expectation that interest rates would rise at its December meeting, however, U.S. Dollar investors expressed concerns about the timing of future rate hikes. Shorts covered aggressively as investors primarily ignored the steep drop in commodity prices.

The New Zealand Dollar rose after minutes to the last Federal Reserve policy meeting showed an interest rate hike was still likely in December without offering more guidance, prompting some traders to book profits following a recent break. 

Last week, government data showed New Zealand producer prices rose in the September quarter, with output prices increasing at a slower pace than input prices as manufacturers were hit by higher import costs from a weaker currency. 

Lower crude oil prices and the Fed minutes underpinned the USD/CAD. The rally could extend further if oil prices continue to decline this week ahead of the key OPEC meeting on December 4.

The GBP/USD posted a two-sided trade last week before finishing lower. The Forex pair actually reached its low for the week at 1.5154 after the release of the U.K.’s latest consumer inflation report. The U.K.’s inflation rate as measured by the Consumer Prices Index remained at -0.1% in October, according to the Office for National Statistics. The news dampened expectations of a rise in interest rates any time soon.

Earlier in the month, the Bank of England said that rates would not rise until well into next year. In its latest quarterly Inflation Report, released a couple of weeks ago, the BoE said that inflation was unlikely to rise to 1% until the second half of next year, while it would be two years before it reached its 2% target.

The EUR/USD posted a two-sided trade. The less-hawkish Fed minutes helped support the market. However, gains were limited and the market broke after European Central Bank President Draghi put an end to it by reiterating that additional stimulus was coming.

Draghi ended the rally when he said the ECB is ready to act quickly to boost anemic inflation in the Euro Zone. Draghi said, “If we decide (on Dec. 3) that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible.”

At its next meeting on December 3, the ECB is expected to unveil a series of steps designed to stimulate the economy. These include changes to the ECB’s asset purchase program and deposit rate. 

U.S. Dollar Stumbles on Concerns About Timing of Future Fed Rate Hikes

US DOLLARThe Euro and British Pound rallied on Thursday while gold and crude oil firmed at times, all due to the weaker U.S. Dollar. The weakness in the dollar started on Wednesday with the release of the FOMC minutes. According to some traders, the dollar failed to gain traction because the minutes revealed a less-hawkish Fed than the central bank’s monetary policy statement. The price action suggests that it may take more than next month’s expected Fed rate hike to drive it higher.

Although the minutes stated that a U.S. rate hike in December may now be “appropriate”, a move that drove Treasury yields higher, it failed to ignite a rally in the U.S. Dollar. EUR/USD short-sellers appear to have used the release of the minutes as an excuse to book profits. This triggered a short-covering rally that carried over into today. Similar price action took place in the GBP/USD.

The price action in the U.S. Dollar may also mean that a December rate hike has been fully-priced into the value of the dollar. If this is the case then investors are already looking beyond the first rate hike.

December Comex Gold futures bounced off a multi-year low because of the weaker U.S. Dollar. Like the Euro, traders used the Fed minutes as an excuse to trim their short positions. Technical factors also contributed to the price rise since today’s session began with the precious metal in extremely oversold territory as suggested by several popular indicators.

The weaker U.S. Dollar failed to support January Crude Oil prices as investors continued to focus on the global supply glut. The recent price action suggests that investors still believe that there will eventually be a balance between supply and demand, but that there are too many downside risks to initiate long positions at current price levels.

In other news, weekly initial jobless claims came in at 271,000 and the Philadelphia Fed Manufacturing survey for current activity came in for November at 1.9, its first positive reading in three months.

Several Fed speakers could move the markets later in the session. Atlanta Fed President Dennis Lockhart is set to speak at the DeKalb Chamber of Commerce in Georgia at 12:30 p.m. ET, and Fed Vice Chairman Stanley Fischer will be at the San Francisco Fed at 4:45 p.m. ET, discussing emerging Asia.

Earlier today, Cleveland Fed President Loretta Mester, said on CNBC’s “Squawk Box” that policymakers are not boxed in on rates and that she doesn’t think the Fed is beyond the curve.

In summary, today’s price action was primarily driven by the weakness in the U.S. Dollar which was fueled by worries about the timing of future rate hikes. A December rate hike appears to be a done deal to most traders, however, the market now wants to know when the next one is coming. 

Analysts Predict $1000 Gold In 2016

Analysts Predict $1000 Gold In 2016
Analysts Predict $1000 Gold In 2016
Gold gained almost $7 in the Asian session to trade at 1075.60 for no fundamental reasons. The US dollar eased after the release of the FOMC minutes late on Wednesday even though the minutes supported the rate increase in December. The US dollar was trading near a high of 99.85 during the day but declined to 99.25 in the morning. Prices were trading sideways as another bomb scare in Europe and gunfire in Paris fuelled tentative safe-haven bids, but a firm dollar kept a lid on prices that hit their lowest in nearly six years on Wednesday afternoon.

SPDR Gold Trust GLD, the world’s largest gold-backed exchange traded fund, said its holdings stood at 661.94 tonnes, remain unchanged from previous business day. Holdings of the largest silver backed exchange-traded-fund, New York’s iShares Silver Trust SLV, stood at 9867.78 tonnes, remain unchanged from previous business day.

Gold prices  rebounded on today from their lowest in more than five years the previous session as the dollar fell back, releasing its stranglehold on commodities and making gold more affordable for buyers paying with other currencies.  Federal Reserve officials on Wednesday continued to flag December as a likely time for interest rates to rise after seven years near zero, with two expressing confidence they will be able to pull off a rate hike smoothly despite fears of an abrupt market reaction.

gold

“I’m convinced that the start of the rate hike cycle will see relative dollar weakness as investor money flows into other regions and other types of investment, away from the U.S. where the cost of capital – and doing business will also grow,” said Chief Investment Officer Jonathan Barratt of Ayers Alliance in Sydney. He added that a rate increase could also boost gold’s appeal as a hedge against inflation.

Precious metals are expected to slide below the $1000 level in the first half of 2016 after the Federal Reserve raises interest rates and the US dollar gains, according to BMI Research, a unit of Fitch Group. Expectations for gradual tightening will cushion the fall, with prices then returning to trade at about 1,000 and above, said John Davies, global head of commodities research.

goldman sachsGold has lost about 9 per cent in 2015, dropping to a five- year low, as Fed policy makers prepare to raise borrowing costs for the first time since 2006, curbing the appeal of the metal because it doesn’t pay interest. Most investors now expect an initial hike next month, with minutes of the Fed’s October meeting, released on Wednesday, strengthening that outlook. Goldman Sachs said last month a December rate rise would probably hurt bullion. Goldman forecast gold at $1,050 in six months and $1,000 in a year as rates climb, according to an Oct 21 report. Renee Haugerud, founder of New York-based hedge fund Galtere, said in an interview on “Bloomberg” this week, bullion may fall to $900 to $1,000 due to the rising US dollar.

us dollar