Tuesday, August 16, 2011

Gold Futures Rise in New York, Halts Slide, as Weaker Dollar Boosts Demand

Gold futures gained for the first time in three sessions as the dollar’s decline revived demand for the metal as an alternative investment.
The greenback headed for the biggest drop in three weeks against a basket of six currencies. Gold climbed to a record $1,817.60 an ounce on Aug. 11 as escalating debt woes in the U.S. and Europe drove global stocks markets lower. Credit risk fell today, and equities climbed.
“The weaker dollar is definitely providing some support” to gold, Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “The market will likely remain rangebound as people are returning to equities because of positive economic numbers.”
Gold futures for December delivery rose $15.40, or 0.9 percent, to settle at $1,758 at 1:39 p.m. on the Comex in New York. The price fell 2.3 percent in the previous two sessions. The metal has jumped 45 percent in the past year.
The MSCI All-Country World Index of equities climbed for the third straight session after a report showed Japan’s economy shrank less than forecast. U.S. retail sales rose the most in four months in July, while applications for jobless benefits were the lowest since April, reports last week showed,
Global equities plunged last week to the lowest since September after Standard & Poor’s lowered its credit rating for the U.S. from AAA, stoking concern that the global economic recovery may be at risk.
Gold ‘Standout’
The “uncertainty in financial markets, whether from the growth outlook or the ongoing sovereign-debt crisis, is expected to remain a benefit to perceived safe-haven commodity assets, of which we believe gold is the standout,” Morgan Stanley analysts, led by Hussein Allidina in New York, said today in a report.
Silver futures for September delivery rose 19.3 cents, or 0.5 percent, to $39.307 an ounce on the Comex.
On the New York Mercantile Exchange, palladium futures for September delivery fell $1.85, or 0.2 percent, to $746.35 an ounce. Platinum futures for October delivery climbed 50 cents to $1,797.20 an ounce.
To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
Source: http://www.bloomberg.com

Sunday, August 7, 2011

Gold, silver emerge best bets in last 1 year

MUMBAI: Last year, if you had adhered to the age-old advice to invest in precious metals when the chips are down for the global economy, you would be rolling in the moolah today. Investments in gold and silver have yielded the best returns during the current period of uncertainty, which began in January 2010 with economic troubles arising out of the ballooning debt in the European Union.

Consider this: Since January 1, 2010, if one had bought silver worth Rs 1 lakh, that investment would now be worth Rs 2.25 lakh. If the same was invested in gold, it would have been worth Rs 1.44 lakh. True, silver has given much better returns than gold, but the same might not be repeated year after year. Compared to this, the sensex has barely moved. In case you had played it safe and had put the same amount in a bank FD, it would have maounted to nearly Rs 1.12 lakh now. While gold is currently hovering around Rs 24,000 per 10 gram, silver, after touching Rs 75,000 per kg, is now down at about Rs 61,600.

Precious metals, especially gold, for long has been considered a hedge against inflation and also one of the best bets in uncertain times, which continue to play out with even the US joining the league of nations negotiating substantial economic head winds. The outlook for the yellow metal for the next few years also paints a rosy picture . India is the largest consumer of gold and recent analyst reports suggest that the demand for the precious metal can only go northward.

The same factors that got gold to the current record high level, is also expected to keep it going for some more time. "Higher level of insecurity , weak US dollar, low interest rate in most countries around the world and lack of alternate investment options are driving up gold prices," said Jayant Manglik, president , Religare Commodities. His advice.

"For retail investors there is still something to buy. One should buy at dips, say after gold prices fall about 4% after a rally and then wait for it to rally again and book profit when the gain is about 15-20 % annually," Manglik said.

The idea that the demand for gold in India could defy Newton's law of gravity, i.e. what goes up comes down, at least for a couple of decades, is based purely on the country's demography, a report by the World Gold Council says. About 50% of India's 1.2 billion population is below 25 years of age. Going by the numbers, it is estimated that over the next decade, every year there would be about 1.5 crore weddings in the country . And since gold is an integral part of most Indian weddings , this itself will create an additional demand of about 500 tonne of gold annually , the report said.

And this is over and above an estimated 500 tonne of gold that would be transferred between the families involved in each wedding. If the WGC's estimates are extrapolated at present prices of about Rs 24,000 per tola, about Rs 1.2 lakh crore will be spent each year on buying gold for weddings alone. For the sake of comparison, with that kind of money every year one can buy half of RIL or nearly the whole of SBI at current prices.
Source: http://economictimes.indiatimes.com

Gold heading for $1850 this year as rising global risk giving gold a lift

Gold rallied to a fresh all time high of over $1640 today following a rash of poor economic data from the US, Europe and China which suggests that the global economy growth is sliding.

Despite news that the US had tentatively reached an agreement to extend the debt ceiling, this important news seems to have now been eclipsed with the markets also very much concerned that the US may see a downgrading by credit agencies. In short, persistently weak economic data coupled with rising global risk sentiment is giving a lift to gold.

The markets focus has been very much on the US over the last fortnight but not exclusively so. Italian and Spanish 10 year bond yields are back above 6% (last was 6.14% and 6.31% respectively) with many market observers seeing 7% very much as a ceiling which would trigger margin calls and potentially a crisis in those important countries.

News that both the Korea and Greek Central Banks had both acquired gold has provided a powerful indicator that investor interest is not the only factor driving the market higher. The switch into gold by Central Banks is very much a reversal of the policy a decade ago and with concerns about the ratings attached to US debt that momentum can only intensify.

Looking ahead we see the momentum amongst gold buyers being maintained and fully expect gold to achieve $1850 this year. Gold is a barometer and it is giving a very clear signal - that signal is saying that there are some deep and fundamental economic issues that remain unresolved and it does not see the political will or courage to make the changes that are necessary. 
Source: http://www.mineweb.com

US debt still a threat to global economy: China media

BEIJING: The United States’ debt woes still threaten the global economy despite a last-minute deal struck by the White House and political party leaders, China’s main official newspaper said on Tuesday, nonetheless adding there was no short-term escape from the dominance of the dollar.

The comments were published by the People’s Daily, the chief paper of China’s ruling Communist Party, in anticipation of a final debt deal reached in Congress between Republicans and Democrats.

“Although the United States has basically avoided default, its sovereign debt problems remain unresolved. They have merely been pushed off, and there is a tendency for them to grow,” a brief commentary in the paper said of the U.S. debt deal.

“This has cast a cloud over U.S. economic recovery, and also increased the risks and perils facing the world economy.”

Such comments in an official Chinese newspaper do not necessarily reflect the conclusive views of top leaders. But these latest wary comments echo other recent critical remarks in official media from Beijing, which is worried about its big holdings of dollar assets.

The House of Representatives on Monday approved a last-gasp deal to raise the U.S. borrowing limit in a decisive step toward averting a catastrophic debt default by the world’s largest economy. The Senate will vote on the deal on Tuesday. and it will then go to the desk of President Barack Obama.

As the largest creditor to the United States, China has repeatedly urged Washington to protect its dollar investments, estimated to account for about 70 percent of its $3.2 trillion in foreign exchange reserves, the world’s largest.

But Chinese officials have avoided publicly commenting on the debt showdown in Washington.

The People’s Daily said the credibility of U.S. treasury debt had been damaged since the outbreak of the sub-prime mortgage crisis, but other economies still have no way of shaking off dependence on the dollar.

“Although confidence in U.S. debt has suffered a short-term fall, and credit agencies could downgrade its rating, its basic credibility has not altered,” said the paper.

It added that “the dollar remains a hard currency that all countries have no choice but to accept.”

The official China Daily said Beijing is likely to view the plan as a positive step in restoring investor confidence in the dollar and the U.S. bond market.

“The agreement is likely to avert default by Washington and it certainly is a relief for China,” Chen Daofu, a researcher at the State Council’s Development Research Centre, was quoted as saying by the newspaper.

Several Chinese economists fretted that the world’s largest economy is still saddled by a mountain of debt.

Zhu Baoliang, chief economist at a government think-tank the State Information Centre, said a $1 trillion reduction in the U.S. fiscal deficit over the next 10 years was not enough to avert another debt crisis in future.

“As alarm over a debt default eases, China will not suffer any immediate impact,” he was quoted as saying in the China Daily. “But any impact would eventually be seen in the long term.”

Although the deal prevented a sudden shock to the U.S. economy, Li Xiangyang, a researcher at the Chinese Academy of Social Sciences, said U.S. politicians in the future could ignore creditors’ interests while pursuing domestic politics.

To escape the dollar trap, China must stop investing its foreign exchange reserves in dollar assets in future, he said.

“The raising of the U.S. debt ceiling is a double-edged sword for China,” Li wrote in an article published in the People’s Daily’s overseas edition.
Source: http://www.thenews.com.pk/