23 June 2014 - Gold investors: Let this cycle be your guide |
- 23 June 2014 - Gold investors: Let this cycle be your guide
- 23 June 2014 - Gold rises on inflation fears
- 21 June 2014 - World stocks at record high, gold holds gains as dollar dips
- 21 June 2014 - Gold, silver rise for third straight day
| 23 June 2014 - Gold investors: Let this cycle be your guide Posted: 23 Jun 2014 04:02 AM PDT From:http://www.mining.com/web/gold-investors-let-this-cycle-be-your-guide/ Frank Holmes - U.S. Global Investors | June 22, 2014 U.S. Global Investors recently welcomed Doug Peta, an economist from BCA research, to our offices. He presented some interesting research regarding the Fed Funds Rate Cycle, and in turn, what that research could mean for gold. I wanted to share points from his presentation, as well as our own in-house research, to help you understand the positivity we see for the precious metal looking towards 2015. Where are we now? Below is a chart from BCA showing the Fed Funds Rate Cycle. In essence, this chart neatly illustrates what the interest rate cycle imposed by the U.S. Federal Reserve looks like. The red circle indicates where we are right now: Phase IV, also known as the "easing" phase of the monetary policy that was enacted in 2008 in the U.S., better known as quantitative easing (QE). As we know, the Fed enacted QE to stimulate our nation's economy. Right now we're benefitting from our placement in Phase IV of this cycle because it is in this phase that the Fed is able to keep interest rates low, keep reserve requirements low and continue printing money. Similarly, when money is "easy," businesses can find funding for projects and consumers have easier access to credit. Historically, Phase IV (as well as the shift towards Phase I) are the best for equity investors because stocks usually rise during these two positions in the cycle. Why these phases are good for gold, too. We have been in Phase IV of the Fed Funds Rate Cycle for a few years now, and are expected to remain here into 2015. Eventually the Fed will have to start tightening again and raise rates, although the numbers should remain relatively low for a while. Once this begins, we will move into Phase I. When it comes to the performance of gold and gold stocks, history indicates good times are ahead based on where we are in the cycle. Take a look at the tables below showing median returns during the cycle dating back to 1970 and 1971. You'll see that for gold and gold stocks, Phase IV and Phase I both show the highest median returns. The reason for the high returns during these two phases is because of "easy money." Tight money, which is what Phase II and III are based upon, is typically bad for gold investors. When money is tight, we don't have inflation, and investors don't need to turn to gold as a hedge against inflation. Without inflation there is no need to hedge. Another reason we've traditionally seen gold investors benefitting during Phases IV and I of the cycle is that when money is easy, interest rates are low, meaning less opportunity cost for holding the precious metal. To help illustrate, imagine putting your money in a savings account and earning 5 percent on it. Well, the opportunity cost of keeping gold under your mattress would be giving up that 5 percent that you could be earning elsewhere. When your savings account yields next to nothing, some reason, why not just buy some gold? This pattern is worldwide. The trends we see in the Fed Funds Rate Cycle are not only U.S. specific. This same idea carries through to the stimulative policies of the European Central Bank and Japan. More countries around the world are applying monetary stimulus programs much like the U.S., while moving away from more restrictive policies. Remember that restrictive policies relate to tightening, which is bad for gold, and stimulative policies relate to easing, which is good for gold. Right now, gold could use a pick-me-up, and here's why. Over the last several years we've seen slowing money supply growth in many E7 countries. E7 refers to seven countries with emerging economies including China, India, Brazil, Mexico, Russia, Indonesia and Turkey. It's these countries that drive the Love Trade for gold, primarily China and India, which purchase the metal for religious and cultural celebrations. With less money being spent or borrowed, not only did the Love Trade begin to slow, global GDP growth also began to slow as you can see below. The good news is, as we see various countries applying monetary stimulus, including emerging markets, we can expect this to contribute to global GDP growth. In 2014, global GDP is expected to grow by 3.2 percent, according to the World Bank's latest projections. Similarly, the money supply of the United States has been a steady grower and the money supply in the E7 countries is also expected to reverse course; right now it is growing again but at a slower rate. The U.S. data suggests that a new easing cycle is starting in Europe, Japan and emerging markets. A pickup in economic activity in the E7, especially the big gold consumers, is yet another positive sign for the yellow metal. Real interest rates are headed lower for most of the world as well. As money supply grows, countries eventually feel inflationary pressures. This will hold true in the U.S. as we move into 2015 and back into Phase I. All of these changes can lead to a declining confidence in paper money, yet another good sign for gold. An interesting side note. I have noticed that recent articles in both Money Magazine and the New York Times use an array of gold images to illustrate wealth. It seems that while some may debate whether gold is money, gold remains an enduring symbol of wealth. Source:http://www.mining.com/web/gold-investors-let-this-cycle-be-your-guide/ |
| 23 June 2014 - Gold rises on inflation fears Posted: 23 Jun 2014 03:59 AM PDT From:http://www.thehindubusinessline.com/features/investment-world/real-assets/article6139034.ece?utm_source=RSS_Feed&utm_medium=RSS&utm_campaign=RSS_Syndication RAJALAKSHMI NIRMAL June 22, 2014 Weak rupee and the haven demand following crisis in Iraq may keep gold prices up in the short term Gold prices in India continued their strong surge. The MCX spot gold index rallied 4 per cent for the week ended June 20. Strong international prices, plus a weak rupee, helped the metal. Though the rupee has been gaining against the dollar, the rally in crude oil prices last week pulled it lower. Spot prices of the yellow metal in the international market rose by 3 per cent and ended at $1,314.8 per troy ounce after the US Federal Reserve's dovish stance on interest rates. Silver prices ended at $20.87, up 6 per cent. Platinum prices too rose and ended at $1,456.8, up 1.6 per cent. Though the Fed Reserve reduced its bond purchases by another $10 billion (to $35 billion), it left interest rates unchanged. This led to speculation of a rise in inflation, sending gold bulls on a rampage. The US Dollar index slipped from 80.50 to 80.37 on Friday. However, SPDR Gold Trust — the world's largest gold backed ETF — continued to see outflows and failed to garner investor interest. The fund's holdings dropped from 787.08 tonnes in the beginning of the week to 782.62 tonnes on Friday. China's Gold Association said on Thursday that the country's gold consumption may be flat to negative in the current year. It is reported that though gold jewellery consumption may continue to be robust in China, gold bar demand will be sharply lower. Domestic market The MCX gold futures contract rose 4 per cent to ₹27,668 (for 10 gram) last week. MCX silver futures rallied 6 per cent higher to end at ₹44,570 (for 1 kg). The rally in bullion prices was supported by a weak rupee. The currency slipped from 59.85 against the dollar to 60.18 last week. Higher crude oil prices in the international market stoked fear of increase in inflation and higher CAD. With the Government increasing railway passenger fares and freight charges last week, analysts worry that inflation could rise further. A weak rupee will bolster returns on gold. According to industry sources, the Government can cut import duty on gold in the upcoming Budget by 2-4 per cent. If import duties on gold drop, it will bring down landed price of gold in the country. This will see the metal's future contract prices also adjust accordingly. You can, therefore, book profit on your short position towards the Budget. Cues from the US This week will be packed with data releases in the US. On Tuesday, the data on new home sales is out. On June 25, durable goods order and GDP data (for the first quarter) are expected. Thursday will see the weekly jobless claim data release. Traders with short positions in gold need to keep an eye on developments in Iraq. If tensions rise, safe haven demand for gold will rise. The US Federal Reserve in its meeting last week reduced its growth estimates for the economy from 2.8 to 3 per cent to between 2.1 and 2.3 per cent. So, the market is already bracing for lower growth and higher inflation in the US which can bring back the lost demand for gold — the classic safe haven. On the chart The sharp rally in gold prices past the psychological mark of $1,300 per troy ounce is a bullish signal. This opens up the possibility of the price moving higher to $1,340 and $1,350 this week. MCX gold (₹27,668) may continue to rise too. The targets on the upside are ₹28,000 and ₹28,700. If the rupee shows some strength against the greenback the contract may drop to ₹26,600 and ₹25,800. MCX silver (₹44,570) saw a very sharp pullback last week. The short-term trend is now positive. If the contract manages to cut past ₹45,500, then it can go even to ₹46,700. The support levels are ₹43,000 and ₹41,700. Source:http://www.thehindubusinessline.com/features/investment-world/real-assets/article6139034.ece?utm_source=RSS_Feed&utm_medium=RSS&utm_campaign=RSS_Syndication |
| 21 June 2014 - World stocks at record high, gold holds gains as dollar dips Posted: 22 Jun 2014 05:56 PM PDT SYDNEY: An index of global stocks nestled near record highs on Friday while gold celebrated its biggest one-day rise in nine months as markets wagered monetary policy would stay super loose in the United States, Europe and Japan for a long time to come. Investors had piled into bullion while selling U.S. government debt on the premise the Fed might be comfortable with higher inflation if it meant faster economic growth. Spot gold was enjoying the view at $1,315.00 an ounce having been as far as $1,321.70 at one stage on Thursday when it climbed 3.3 percent. Traders also said a major hedge fund had cut back a large short position in the precious metal which pushed prices above $1,300 an ounce and tripped a host of stop-loss buy orders. Stocks were in demand with MSCI's all-country world index, which includes about 85 percent of global investable equities, passing its previous all-time high set in November 2007. Japan's Nikkei ended steady after touching a fresh five-month peak, while the broader brought its gains to more than 10 percent in just the past four weeks. "The good mood is still lingering," said Kyoya Okazawa, head of global equities at BNP Paribas. "Not just foreign investors but also long-term domestic investors like pension funds have been buying as well." MSCI's broadest index of Asia-Pacific shares outside Japan ran out of steam, easing 0.4 percent on losses in South Korea and China. Financial spreadbetter IG expected Britain's FTSE 100 to open up 0.1 percent, while Germany's DAX and France's CAC 40 were seen little changed. Wall Street had finished mixed, though data on jobless claims and regional U.S. manufacturing continued to show improvement. The Dow had ended up 0.09 percent, while the S&P 500 gained 0.13 percent and the Nasdaq lost 0.08 percent. The revival in risk appetite follows Wednesday's decision by the U.S. Federal Reserve to recommit to keeping rates near zero for some time to come. Crucially, Chair Janet Yellen sounded unconcerned by inflation despite a recent pick-up in price pressure, surprising many who had thought the central bank would take a more hawkish turn. TAKING INFLATION PROTECTION "The dismissal of the recent up-shift in inflation readings as 'noise' was the biggest revelation," said William O'Donnell, head of U.S. government bond strategy at RBS. "The Fed leadership is so unsure about the sustainability of the recovery that they are willing to wait for economic growth numbers and labor market indicators to beat them over the head before they consider removing emergency stimulus." As a result the market has pushed out the day when the Fed might hike its funds rate, while also taking insurance against higher future inflation by buying gold and selling longer-dated Treasuries. Futures contracts that aim to map the course of the Fed funds rate again suggest no lift in rates until at least mid-2015. The June contract for next year now implies a rate of 31.5 basis points compared to 37.5 on Wednesday. Currently the funds rate is around 9 basis points. Investors are also demanding higher returns on long-term U.S. debt to compensate for the risk of higher inflation, so steepening the yield cure. Yields on 30-year bonds have swung up to 3.46 percent, from a low of 3.35 percent early in the week, while rates on 10-year paper reached 2.62 percent. In currencies, the Norwegian crown stole the limelight by plunging over 2 percent on Thursday after the country's central bank hinted at the possibility of a cut in interest rates, stunning markets that had wagered the next move would be up. The dollar surged to 6.1197 crowns NOK= in its biggest one-day gain in more than a year, while yields on short-term Norwegian debt tumbled 20 basis points. Moves elsewhere were pedestrian in comparison, with the dollar soggy on the yen at 101.88 JPY= while the euro edged up on the dollar to $1.3624. The dollar also lost ground against a basket of major currencies, while the British pound reached heights not seen since late 2008 above $1.7000. Brent oil was close to a nine-month high above $115 a barrel on concerns heavy fighting in Iraq could limit oil supply from OPEC's second-biggest producer. The U.S. crude oil futures contract for August eased 7 cents to $106.12 a barrel.- Reuters |
| 21 June 2014 - Gold, silver rise for third straight day Posted: 22 Jun 2014 05:54 PM PDT From:https://in.news.yahoo.com/gold-silver-rise-third-straight-201422327.html Associated PressBy The Associated Press | Associated Press – Sat 21 Jun, 2014 Gold and silver prices rose for a third straight day, following the Federal Reserve's decision to keep interest rates low for the immediate future. Gold rose $2.50, or 0.02 percent, to $1,316.60 an ounce while silver rose 30 cents, or 1.5 percent, to $20.95 an ounce. The Fed said Wednesday that it plans to keep interest rates low until at least next year to help the U.S. economy recover. The announcement helped keep the dollar lower, giving investors an incentive to buy precious metals. Copper also rose Friday, gaining 4 cents, or 1.4 percent, to $3.12 a pound. Platinum for July delivery fell $17.20, or 1.2 percent, to $1,457.30 an ounce and Palladium fell $16.40, or 2 percent, to $822.20 an ounce. In other commodities trading, oil rose 83 cents to $107.26 a barrel. Natural gas fell 5 cents, or 1.2 percent, to $4.53 per thousand cubic feet. Wholesale gasoline futures were little changed at $3.13 a gallon. Home heating oil was also flat at $3.05 a gallon. In crops contracts, wheat fell 8 cents, or 1.4 percent, to $5.85 per bushel and corn rose 3 cents, or 0.6 percent, to $4.53 a bushel. Soybeans rose 4 cents, or 0.3 percent, to $12.32 a bushel. Source:https://in.news.yahoo.com/gold-silver-rise-third-straight-201422327.html |
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