Wednesday, July 9, 2014
Monday, September 10, 2012
Bernanke JACKS UP Gold and Silver
August was an impressive month for precious metals. Both gold and silver broke out of their tight summer ranges and closed at fresh multi-month highs. The breakout occurred as Ben Bernanke delivered his highly anticipated speech at Jackson Hole. Although the Fed Chairman did not specifically name another quantitative easing program, his words appeared to be a closing argument for more central bank action.
Early in the speech, Bernanke claims that large-scale asset purchases can influence financial conditions and reduce concerns about risks such as deflation. He then reminds the audience about the central bank’s quantitative easing programs, which started in November 2008 with the Federal Reserve announcing to purchase $600 billion in agency MBS and agency debt. Since then, the Fed has conducted $2.3 trillion in various bond purchases. To little surprise, the central bank’s own studies have proven this to be helpful to the economy. Bernanke explains, “Model simulations conducted at the Federal Reserve generally find that the securities purchase programs have provided significant help for the economy.” He also says that “it is probably not a coincidence that the sustained recovery in U.S. equity prices began in March 2009, shortly after the FOMC’s decision to greatly expand securities purchases. This effect is potentially important because stock values affect both consumption and investment decisions.”
This is a very telling statement from the Chairman. He is publicly recognizing the wealth effect the Federal Reserve is trying to create by propping up equity markets. While consumers and investors realize something is still wrong with the economy, they can not help but feel somewhat better when their 401k balances are significantly higher than from the 2009 lows. However, those who have purchased hard assets such as precious metals have also felt the wealth effect. Since November 2008, fiat currency devaluations around the globe have paved the way for gold prices to more than double, while silver prices have tripled.
Central banks often receive criticism for higher living expenses due to inflation via money supply increases, but Bernanke defends the Federal Reserve’s monetary actions. He states, “And despite periodic concerns about deflation risks, on the one hand, and repeated warnings that excessive policy accommodation would ignite inflation, on the other hand, inflation (except for temporary deviations caused primarily by swings in commodity prices) has remained near the Committee’s 2 percent objective and inflation expectations have remained stable.”
As usual, Bernanke concluded his speech with the Federal Reserve’s new favorite monetary tactic, jawboning. “The Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” he explains. Bernanke delivered a speech in 2002 that closely resembles what the Federal Reserve has done during the recent financial crisis. Interestingly, he notes that deflation can be staved off by increasing the amount of U.S. dollars in circulation, or even by credibly threatening to do so. Given the central bank’s numerous bond purchasing programs, Bernanke has plenty of credit when it comes to jawboning. However, at some point in time, he will be forced to take more definitive action. When that occurs, gold and silver investors will once again realize the benefits of holding a currency that can not be printed at will.
GFMS Sees Gold Above $1,800/oz Before Year-End
In an update to its April 2012 Gold Survey, GFMS--a research consultancy unit of Thomson Reuters--said it is firmly bullish regarding gold's price trajectory. Investment demand is forecast to be the main driver behind the price rise. In particular, GFMS tipped central bank gold purchases and purchases by Exchange Trade Funds as key factors that are likely to push gold to renewed highs.
The report comes days after spot gold rallied in response to comments made by U.S. Federal Reserve Chairman Ben Bernanke on Aug. 31, which--though not explicitly laying out plans--indicated that the door is wide open for quantitative easing from the U.S. should the economy fail to recover effectively soon. Gold was trading at $1,691.70 a troy ounce Tuesday, broadly flat compared to Monday, but up 2.2% since Aug. 30, the day before Mr. Bernanke's speech.
The consultancy said strong investor demand, particularly from central bank purchases, should result in higher gold prices by the end of the year. "Gold prices should rally, if in a volatile manner, to challenge $1,800/oz before year-end and to trade above $2,000/oz in the first half of 2013 before starting a secular decline later that year," said Philip Klapwijk, global head of metals analytics at the firm, although he noted that he didn't expect gold prices to surpass the 2011 high of just over $1,900/oz before the end of 2012.
Gold demand is forecast to rise 0.1%, or 6 million tons, to 4,509 tons in 2012, buoyed in part by a 3.1% rise in worldwide gold investment to 1,621 tons of gold, or $90 billion worth of gold. Worldwide gold investment, both in volume and value, is forecast to rise more in the second half than the first half as expectations of further economic stimulus packages fan inflation concerns and spur investors to flock to gold as a safe-haven investment.
Meanwhile, gold demand stemming from fabrication and jewelry is forecast to drop 4.4% to 2,758 tons in 2012, largely as a result of a drop in jewelry demand during the first half as India pared back its gold jewelry purchases following the depreciation of the Indian rupee against the U.S. dollar, which caused gold prices to reach very high levels in local currency terms.
On the supply side, a 0.9% rise in mined output to 2,848 tons of gold in 2012 is forecast to just offset a 0.6% decline in old gold scrap to 1,661 tons.
GFMS said gold prices remain well-supported by central bank buying on price dips. It expects the trend to continue at a more muted rate in the second half with net gold purchases of 220 tons from both developed and emerging nations compared to 273 tons in the first half of the year. Central banks have been seeking to diversify their reserves in response to concerns about a weak U.S. dollar.
The consultancy said it expects that gold prices will likely continue rising this year, albeit in volatile trade.
"I think we're on pretty safe ground saying that we've already seen the lows for the year and that firmer prices, particularly towards year-end, are on the cards," said Mr. Klapwijk. Nonetheless, he emphasized, it is unlikely to be plain sailing for the yellow metal, with choppy waters expected during the journey upward.
"We're also expecting a bumpy ride looking ahead--any intensification of the euro-zone crisis or dashing of hopes for further easing by the Fed and you could easily see the rally derailed for a while."
GFMS Sees Gold Above $1,800/oz Before Year-End
In an update to its April 2012 Gold Survey, GFMS--a research consultancy unit of Thomson Reuters--said it is firmly bullish regarding gold's price trajectory. Investment demand is forecast to be the main driver behind the price rise. In particular, GFMS tipped central bank gold purchases and purchases by Exchange Trade Funds as key factors that are likely to push gold to renewed highs.
The report comes days after spot gold rallied in response to comments made by U.S. Federal Reserve Chairman Ben Bernanke on Aug. 31, which--though not explicitly laying out plans--indicated that the door is wide open for quantitative easing from the U.S. should the economy fail to recover effectively soon. Gold was trading at $1,691.70 a troy ounce Tuesday, broadly flat compared to Monday, but up 2.2% since Aug. 30, the day before Mr. Bernanke's speech.
The consultancy said strong investor demand, particularly from central bank purchases, should result in higher gold prices by the end of the year. "Gold prices should rally, if in a volatile manner, to challenge $1,800/oz before year-end and to trade above $2,000/oz in the first half of 2013 before starting a secular decline later that year," said Philip Klapwijk, global head of metals analytics at the firm, although he noted that he didn't expect gold prices to surpass the 2011 high of just over $1,900/oz before the end of 2012.
Gold demand is forecast to rise 0.1%, or 6 million tons, to 4,509 tons in 2012, buoyed in part by a 3.1% rise in worldwide gold investment to 1,621 tons of gold, or $90 billion worth of gold. Worldwide gold investment, both in volume and value, is forecast to rise more in the second half than the first half as expectations of further economic stimulus packages fan inflation concerns and spur investors to flock to gold as a safe-haven investment.
Meanwhile, gold demand stemming from fabrication and jewelry is forecast to drop 4.4% to 2,758 tons in 2012, largely as a result of a drop in jewelry demand during the first half as India pared back its gold jewelry purchases following the depreciation of the Indian rupee against the U.S. dollar, which caused gold prices to reach very high levels in local currency terms.
On the supply side, a 0.9% rise in mined output to 2,848 tons of gold in 2012 is forecast to just offset a 0.6% decline in old gold scrap to 1,661 tons.
GFMS said gold prices remain well-supported by central bank buying on price dips. It expects the trend to continue at a more muted rate in the second half with net gold purchases of 220 tons from both developed and emerging nations compared to 273 tons in the first half of the year. Central banks have been seeking to diversify their reserves in response to concerns about a weak U.S. dollar.
The consultancy said it expects that gold prices will likely continue rising this year, albeit in volatile trade.
"I think we're on pretty safe ground saying that we've already seen the lows for the year and that firmer prices, particularly towards year-end, are on the cards," said Mr. Klapwijk. Nonetheless, he emphasized, it is unlikely to be plain sailing for the yellow metal, with choppy waters expected during the journey upward.
"We're also expecting a bumpy ride looking ahead--any intensification of the euro-zone crisis or dashing of hopes for further easing by the Fed and you could easily see the rally derailed for a while."
Australia Gold Output Recovers in 2Q, Rising 4% on Quarter -Surbiton
April-June production rose 4% to 65 metric tons from 62.5 tons in the first quarter. However, first-half output was down 4% at 261 tons, or roughly 8.4 million troy ounces, partly due to wet weather earlier.
"Producers took advantage of higher gold prices and made the most of their deposits by treating slightly lower grade ore," Sandra Close, a director at Melbourne-based Surbiton, said.
She added that production was set to rise, with several new and rejuvenated mining projects coming on stream later this year and in 2013.
International metals consultancy GFMS last week said Australia's gold output had fallen 5% in the first half of 2012 to 122.5 tons, in part due to a drop in volumes from Newcrest Mining Ltd.'s (NCM.AU) Cadia Valley operations. Production rates at Australia's two largest gold mines--Newmont Mining Corp. (NEM) and Barrick Gold Corp.'s (ABX) Kalgoorlie Super Pit, and Newmont's own Boddington mine--also declined.
Surbiton said in its report that Super Pit remained the country's top producer in the 12 months to June 30, with output of 746,000 ounces. This was followed by Newmont's Boddington mine, which produced 713,000 ounces, and Newcrest's Telfer, which produced 540,115 ounces.
Strong gold prices encouraged companies to mine lower-grade ore bodies and supported takeover activity in Australia. The country is the world's second-largest producer of gold after China.
"Overseas investors are showing considerable interest in Australian gold operations," Ms. Close said. "Lately, there have been various bids and takeovers by overseas companies of both local and foreign-owned gold producing companies."
Singapore-based LionGold Corp.'s (A78.SG) all-scrip bid for Castlemaine Goldfields Ltd. (CGT.AU) closed this week after the company secured a more-than-97% stake. Zijin Mining Group Co. (2899.HK) last month bought control of Norton Gold Fields Ltd. (NGF.AU) in a cash offer that valued the Australian company at roughly A$215 million.
In Australian dollar terms, the gold price rose 1.2% in the first half of 2012, compared with an 0.03% increase in U.S. dollar terms.
Rhiannon Hoyle in Sydney contributed to this article
Gold Pulls Back from Six-Month High
Gold eased on Monday as investors took profits, but the metal stayed near six-month highs after last week's disappointing U.S. payrolls data boosted hopes that the Federal Reserve could unveil new stimulus as early as Thursday.
Palladium also rose 3 percent on better demand expectation after encouraging Chinese vehicle sales data.
Weak Chinese trade data also prompted the bullion selling following three consecutive weeks of sharp gains, which were accelerated by the European Central Bank's bond-buying program last week and possible new Fed actions to stimulate an ailing economy at its two-day policy meeting concluding on Thursday.
Investment in gold-backed exchange-traded products (ETPs) reached a record high last week, while some investors took profits after Friday's data from the U.S. Commodity Futures Trading Commission showed holdings of U.S. gold futures by speculators rose to their highest in a year.
"We could see a pullback in gold at anytime as prices are fairly overbought on a daily basis, and once we hit the $1,800 an ounce level, we think there could be a multi-week congestion," said Mark Arbeter, chief technical strategist at S&P Capital IQ.
Spot gold was down 0.3 percent at $1,731.01 an ounce by 11:40 a.m. EDT (1540 GMT), having risen 2.7 percent last week, racking up a third consecutive weekly increase and its longest stretch of weekly gains since the start of the year.
U.S. gold futures for December delivery were down $6.90 at $1,733.60 an ounce with trading volume set to finish below average, preliminary Reuters data showed.
On weekly charts, gold could complete a very bullish triple-bottom pattern if prices rose above $1,800 an ounce this week, said CitiFX strategists.
Inflation worries have underpinned gold after Friday's much weaker-than-expected U.S. jobs data stoked expectations that the Fed might choose to use a third round of quantitative easing, or printing money to buy government bonds to keep long-term interest rates low.
Gold prices have doubled in the last four years as the Fed implemented the first two rounds of quantitative easing.
INVESTORS POUR IN
Holdings of gold in the major ETPs last week touched a record 72.37 million ounces, having drawn in nearly 2.0 million ounces of metal in a month.
Hong Kong's July gold shipments to China nearly doubled on the year, while exports over the first seven months exceeded total 2011 volumes, suggesting China is well on its way to overtake India as the world's top gold consumer.
Palladium outperformed the rest of the precious metal complex, rising by 2.9 percent on the day to $667.50 an ounce to hold around its highest since early May, helped by a 8 percent jump in Chinese car sales figures for August.
Palladium relies heavily on the Chinese car market, the world's largest, for demand, where it is used in catalytic converters for gasoline-powered engines.
Platinum rose 0.9 percent to $1,596.25 an ounce, while silver edged up 0.1 percent to $33.69 an ounce.
Prices at 11:40 a.m. EDT (1540 GMT)
(Editing by Marguerita Choy)
Palladium also rose 3 percent on better demand expectation after encouraging Chinese vehicle sales data.
Weak Chinese trade data also prompted the bullion selling following three consecutive weeks of sharp gains, which were accelerated by the European Central Bank's bond-buying program last week and possible new Fed actions to stimulate an ailing economy at its two-day policy meeting concluding on Thursday.
Investment in gold-backed exchange-traded products (ETPs) reached a record high last week, while some investors took profits after Friday's data from the U.S. Commodity Futures Trading Commission showed holdings of U.S. gold futures by speculators rose to their highest in a year.
"We could see a pullback in gold at anytime as prices are fairly overbought on a daily basis, and once we hit the $1,800 an ounce level, we think there could be a multi-week congestion," said Mark Arbeter, chief technical strategist at S&P Capital IQ.
Spot gold was down 0.3 percent at $1,731.01 an ounce by 11:40 a.m. EDT (1540 GMT), having risen 2.7 percent last week, racking up a third consecutive weekly increase and its longest stretch of weekly gains since the start of the year.
U.S. gold futures for December delivery were down $6.90 at $1,733.60 an ounce with trading volume set to finish below average, preliminary Reuters data showed.
On weekly charts, gold could complete a very bullish triple-bottom pattern if prices rose above $1,800 an ounce this week, said CitiFX strategists.
Inflation worries have underpinned gold after Friday's much weaker-than-expected U.S. jobs data stoked expectations that the Fed might choose to use a third round of quantitative easing, or printing money to buy government bonds to keep long-term interest rates low.
Gold prices have doubled in the last four years as the Fed implemented the first two rounds of quantitative easing.
INVESTORS POUR IN
Holdings of gold in the major ETPs last week touched a record 72.37 million ounces, having drawn in nearly 2.0 million ounces of metal in a month.
Hong Kong's July gold shipments to China nearly doubled on the year, while exports over the first seven months exceeded total 2011 volumes, suggesting China is well on its way to overtake India as the world's top gold consumer.
Palladium outperformed the rest of the precious metal complex, rising by 2.9 percent on the day to $667.50 an ounce to hold around its highest since early May, helped by a 8 percent jump in Chinese car sales figures for August.
Palladium relies heavily on the Chinese car market, the world's largest, for demand, where it is used in catalytic converters for gasoline-powered engines.
Platinum rose 0.9 percent to $1,596.25 an ounce, while silver edged up 0.1 percent to $33.69 an ounce.
Prices at 11:40 a.m. EDT (1540 GMT)
(Editing by Marguerita Choy)
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