Archive for April, 2011:
How To Use Fibonacci Ratios in the Real World
By Elliott Wave International
What tools help you with the difficult task of identifying the market trend, riding it, and getting out before it reverses?
Consider Fibonacci ratios: Mathematical proportions by which moves on a market chart relate to each other. Fibonacci mathematics is an integral part of Elliott wave analysis; Frost & Prechter’s classic “Elliott Wave Principle — Key to Market Behavior” has an entire chapter on it.
And here’s an excerpt from a free Club EWI report on the subject. Enjoy — and for details on how to read the entire report free, look below.
How To Apply Fibonacci Math to Real-World Trading
(excerpt; full copy here)
By Jeffrey Kennedy
EWI Senior Tutorial Instructor
EWI Senior Commodity Analyst
It’s hard to imagine a wrong way to apply Fibonacci ratios or multiples to financial markets, and new ways are being tested every day. Let’s look at just some of the ways that I apply Fibonacci math in my own analysis. …
Elliotticians often calculate Fibonacci extensions to project the length of Elliott waves. For example, third waves are most commonly a 1.618 Fibonacci multiple of wave one, and waves C and A of corrective wave patterns often reach equality (Figures 7-3 and 7-4).
One approach I like and have used for a number of years is a “reverse Fibonacci” application… (Continue reading this free report now with a free Club EWI password.)
This article was syndicated by Elliott Wave International and was originally published under the headline How To Use Fibonacci Ratios in the Real World. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Gold Rises as US Rates Set to Stay “Exceptionally Low”, Silver Falls in “Post-Fireworks” Trade
By: Adrian Ash, BullionVault
London Gold Market Report
THE WHOLESALE MARKET price to buy gold rose but silver held flat in Asian and London trade on Wednesday, as the Dollar fell, European equities rose, but “peripheral” Eurozone debt sank again, driving credit-default insurance costs up to new record levels.
Crude oil and natural gas prices bucked a drop in the broad commodities market.
US government bonds ticked lower, nudging yields higher, ahead of today’s Federal Reserve interest-rate decision.
“[Although] the Fed is unlikely to embark on further quantitative easing…real interest rates remain exceptionally low and government borrowing high – two factors core to our bullish view on gold.
says the daily note from Standard Bank’s team in London.
“Short term however we would not be surprised to see gold dip lower.”
For the second day running, gold recorded a higher London Fix on Wednesday morning than the previous PM Fix, while silver recorded a drop.
Since the start of 1968, the two metals have moved in the same direction on 69% of all London trading days.
Only once has gold risen but silver fallen for 3 days running, back in May 2003.
“[Precious metals are] basically a struggle between those who think the uptrend has resumed and those who think the retracement is not yet finished yet,” says one Hong Kong dealer in a note, calling Wednesday’s Asian gold and silver trading “quite subdued” compared with the “fireworks” seen since Good Friday.
“Silver’s outperformance is taking a short term breather,” reckons Axel Rudolph in his latest Technical Analysis Research for Commerzbank clients.
“We anticipate a recovery towards the $50 mark in the course of this week.”
Stating that Tuesday’s New York close “confirmed [Monday's] sell signal” for both gold and silver, “the Gold/Silver Ratio has shot higher,” notes the latest technical analysis from Scotia Mocatta.
Falling to a 28-year low at 32.5 last week, the ratio of gold prices to silver prices rose to 33.3 in London trade on Wednesday morning.
“It’s consolidation,” Reuters quotes Matthew Turner at Japanese metals conglomerate Mitsubishi.
“Gold has done a bit better than silver over the last couple of days, but we’re still in a holiday period here in London so trading volumes are not as high as normal and I don’t think there will be a huge move.”
The lethargy in Wednesday’s Asian and London markets contrasts with exchange-traded dealing in New York silver, according to a report in the Wall Street Journal.
“Volume in the silver ETF on Monday reached a record 189 million shares, compared with an unusually low 65 million for the SPDR [Gold Trust ETF],” says the WSJ.
“Trading in the silver ETF was five times that of the 37 million daily average of the first quarter, and blew past its previous daily peak of 149 million shares set in early November.”
Gold futures trading has also lagged a sharp rise in silver-contract volumes, says the Journal. Daily volume in silver futures has more than tripled so far this month compared with April 2010.
“Total outstanding contracts in the silver-options market also reached a record on Monday.”
Monday also saw the iShares SLV Silver ETF hit a new record holding of 11,390 tonnes, before slipping back 1.7% by last night’s close.
Here in London today, the GBS gold ETF announced only its fifth increase in bullion holdings for 2011 to date, with an additional half-tonne of gold swelling the trust’s total to a two-month high of 115 tonnes.
“There are risks in being out of markets as well as in them,” says The Daily Telegraph’s personal finance editor Ian Cowie on his blog, “and today’s bullion bears must bitterly regret calling the top of this bull run all the way up.”
Over in the forex market ahead of the Fed’s announcement on Wednesday – expected to leave both rates and the latest $600bn tranche of quantitative easing unchanged – the Euro and British Pound both touched new 16-month highs vs. the Dollar.
European investors looking to buy gold saw the price little changed from last week’s finish. Euro and Sterling Silver prices traded more than 4% lower.
New data meantime pegged UK economic growth at 0.5% during the first quarter, in line with analyst predictions. So too was this month’s German price inflation, rising to 2.4% year on year.
New Eurozone industrial orders missed consensus forecasts for Feb.
Adrian Ash
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Gold Speculation Called “Routine” as Crude Oil Rises, US Ranked 4th Riskiest Sovereign Debtor
By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF GOLD reversed an overnight dip beneath $1500 per ounce in London on Tuesday morning, trading within 1% of Monday’s new record high at $1518 as European stock markets rose together with major government bonds and energy prices.
Following yesterday’s dramatic Asian trade and greater-than-7% price range, “Silver showed further weakness” according to one Hong Kong dealer, “stretching [his] expectation about how volatile it could be.”
At today’s London Fix – set at $45.48 per ounce – the price of silver bullion had only been higher on four days in history, three of them amid the Hunt Brothers’ Corner of Jan. 1980, and the other being Thursday last week.
“Despite silver setting new nominal record highs in the past week, the Comex net long position [in silver futures contracts] is far from record levels,” says the latest Precious Metals Weekly for ABN Amro from the VM Group in London, “implying that [London-centered] physical trade is driving the price.”
Friday and Monday’s Bank Holidays in the US and UK meant “markets had a chance to go wild on thin volumes,” says one London dealer, but after surging to new record highs gold settled last night at $1510 per ounce – the first drop in 8 trading days, as Russell Browne at Scotia Mocatta notes.
Silver saw a “long legged Doji” chart pattern, Browne adds, “warning of a possible reversal” by touching new highs intra-day but falling back to end the session unchanged.
“There is some good, old-fashioned…[and] routine speculation…in the few commodities that can be stored, like gold,” writes Jeremy Grantham, co-founder and chief investment strategist of the $107 billion GMO asset manager, in his latest letter to clients.
“[But] I believe this is a small part of the total pressure on [raw material] prices, and the same goes for low interest rates. [Instead] we have gone through a profound paradigm shift in almost all commodities, caused by a permanent shift in the underlying fundamentals” as limited supply meets vastly increased demand from Asia’s fast-emerging economies.
“Statistically,” says Grantham, “most commodities are now so far away from their former downward trend that it makes it very probable that the old trend [of steadily falling input prices] has changed.
“[This is ] perhaps the most important economic event since the Industrial Revolution.”
Monday saw shares in Barrick – the world’s largest listed gold mining stock – lose 5% after it successfully bid 14 times last year’s earnings at take-over target Equinox, a copper miner.
Asian investors also sold Chinese loser Minmetals, however, driving it 12% lower in Hong Kong, after it said “the price offered by Barrick is above our most optimistic assessment of value… [and] would, in our view, be value destructive for [our] shareholders.”
Over in Venezuela, meantime, 20 armed robbers broke into, seized control of, but failed to steal any gold from the El Callao facilities of Russian gold mining firm Rusoro.
“They did get into the storage area but they were unable to open the armored security safes” before fleeing the scene, Rusoro’s local security chief told Globovision TV.
In the credit markets, a new report from Deutsche Bank ranks the US government as the world’s fourth riskiest sovereign borrower, behind Greece, Ireland and Portugal, and just ahead of Italy.
Here in London on Tuesday, UBS’s City office asked the decisions committee of the International Swaps & Derivatives Association to say whether the Irish government’s new Credit Institutions Act signals a “restructuring credit event” for Anglo Irish Bank.
The Act orders AIB to buy back certain “subordinated liabilities” from bondholders, potentially triggering bets against the bank’s debt known as credit default swaps.
Yields offered to new buyers of Irish, Greek and Portuguese debt all rose to new post-Euro records on Tuesday morning, as prices continued to fall.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Happy Easter!
Hello everybody. Just a brief post to wish you all a HAPPY EASTER!! 
Cheers,
Alan
Why Silver Will Go UP for Years to Come!
(Floods of paper money!)
Silver Stock Report
1. No nation on earth is using silver as a circulating medium of exchange. The State of Utah is leading the way by making it legal tender.
2. All nations on earth are using paper for money, which is about as wise as building houses out of straw. The amount of paper money is uncountable, and is constantly soaring to new highs. The USA stopped reporting the amounts of money in the banks back in 2006, and the banks in 2008 started depositing a lot of their bailout money with the Fed banks, making it even harder to track. All of that marks the beginning of hyperinflation, which appears to be starting now.
3. The Federal annual deficit, which is how much they spent more than they took in, is $1.66 trillion, or $830 billion for the first half of fiscal 2011. Does that count QEII? What was not counted in that? How reliable are the figures? If the figures are wrong, are the real figures likely to be bigger or smaller, and by how much?
http://tinyurl.com/3ozdljx (April 7th news item)
4. The silver market remains tiny. “World investment rose by an impressive 40 percent last year to 279.3 million troy ounces (Moz), resulting in a net flow into silver of $5.6 billion, almost doubling 2009’s figure.” How reliable are the figures?
http://www.silverinstitute.org/pr07apr2011.php (April 7th news item)
Recap: New US Debt: $830 billion in 6 months.
Recap: New Silver buying: $5.6 billion, all year.
Essay assignment, compare and contrast those two numbers.
Which one is bigger? Which one is smaller?
What is likely to change?
What is likely to stay the same?
If the US government spends new paper money that it does not have, is that inflationary? Will that make the new dollars tend to go down in value? If so, by how much?
Are silver prices likely to go up, as new money buys silver to protect itself? In your opinion, much new money will be likely to buy silver next year? How much do you think the silver price will continue to be driven up, in the next year, by such buying?
Is the US government likely to suddenly balance the budget by next year, or will the spending like a drunken sailor be likely to continue?
If you convince your friends to buy silver, are they more likely to thank you, or not, as certain trends and fundamentals continue?
I strongly advise you to take possession of real gold and silver, at anywhere near today’s prices, while you still can. The fundamentals indicate rising prices for decades to come, and a major price spike can happen at any time.
Sincerely,
Jason Hommel
www.silverstockreport.com
Shift to Physical Accelerates as Gold Rises in Dollars Only, Silver Adds 7.7% for the Week
By: Adrian Ash, BullionVault
London Gold Market Report
THE WHOLESALE PRICE of gold broke fresh US Dollar highs ahead of the long Easter weekend in London on Thursday, but fell against all other major currencies, unwinding this week’s sharp gains entirely for Euro buyers.
The price of gold in British Pounds slipped 1.4% from yesterday’s new all-time highs.
Silver prices extended their Dollar gains to 7.7% for this week alone, breaching $46 per ounce and also reaching new multi-decade and all-time highs vs. the world’s other major currencies.
Goldman Sachs yesterday raised its margin requirements for clients wanting to sell the SLV iShares Silver ETF short to a three full percentage points.
Bullion bank Scotia Mocatta on Wednesday adjusted its “registered” and “eligible” stockpiles at Comex depositories, holding back more than $225m of bullion from being deliverable against futures contracts in a fully client-owned position.
London-listed GBS – the UK’s first exchange-traded gold ETF – today reported its fifth redemption of shares in exchange for physical bullion in as many weeks.
“One unidentified company has the potential to own up to 89% of the lead in warehouses monitored by the London Metal Exchange,” Bloomberg reports, “a position worth $704 million at the current price.”
China’s state-owned Sinopec oil giant meantime suspended all exports of refined oil products, according to the state-run Xinhua news agency, aiming to “to maintain domestic market supplies of refined oil products”.
“Rather than continuously roll the futures contracts, it just became easier and more economical for us to take…the bullion,” said University of Texas investment officer Bruce Zimmerman to CNBC on Wednesday, explaining the US’s second-largest academic fund’s decision to switch from gold futures to a fully allocated gold position.
“The role gold plays in our portfolio is as a hedge against currencies,” Zimmerman said, noting UTIMCO’s large fixed-income exposure.
“The concern is that we have excessive monetary and fiscal stimulus.”
The Euro today hit a new 16-month high vs. the Dollar at almost $1.4650, while world stock markets rose together with major-government bond prices.
US crude oil ticked above $112 per barrel.
“The key element determining gold’s near-term direction right now is the US Dollar,” Bloomberg quotes Edel Tully at Swiss banking giant UBS’s London office.
“[But] sovereign debt concerns in US and Europe, along with inflation fears, provide a good backdrop for gold.”
The International Monetary Fund said yesterday that the global banking sector faces a “wall of maturing debt” totaling $3.6 trillion in the next two years.
Last week it said that developed-world governments have to raise 27%-worth of their annual economic output from the bond markets in 2011, “heightening competition for scarce funding resources.”
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Gold Slips, “Huge Speculation” Makes Asian Silver Market “Dysfunctional” as China’s FX Reserves Top $3 Trillion
By: Adrian Ash, BullionVault
London Gold Market Report
LONDON’S WHOLESALE-MARKET price for gold fell against a rising US Dollar in London on Thursday, dropping back to $1454 per ounce but rising for Euro and Sterling buyers as world stock markets fell alongside commodities.
Major-economy government bond price rose, nudging 10-year US Treasury yields down to 3.44%.
The price to buy silver also fell back Thursday morning, dropping 2.0% after coming within 50c of Monday’s new 31-year highs.
“The interbank silver market [in Asia] is dysfunctional” says one Hong Kong dealer’s note. “Liquidity is getting worse while the price action is getting more exaggerated as a result.”
With ever-more money looking to buy silver, “The furiousness of such moves has been increasing in the past two weeks…[and] the flow in/out of silver is excessive with respect to the capacity of the market.”
Speaking to BullionVault from Chennai about India’s current retail demand to buy silver, “People believe the rumors that silver is going ballistic even from this level,” says Daman Prakash Rathod of MNC Bullion. “[There's] huge speculation here as people have money to invest in physical buying.”
Having earlier heard clients identify the equivalent of $42 per ounce as a key profit target, “On the contrary, $42 silver revived the frenzy of buying.
“It’s a bit calmer now after seeing the correction to $40.”
“The type of demand for silver that we have experienced in the last few months has never been seen before,” says Prithviraj Kothari, president of the Bombay Bullion Association, to the Financial Times.
“Demand has gone up 25% compared to a year ago as people are going crazy for silver because they think it will give them better returns than gold.”
The late-April festival of Akshaya Thrithiya marks the third most auspicious day in the Hindu calendar, and is typically seen as an auspicious time to buy silver and Gold.
“Gold could be supported by some buying interest from Asian countries,” reckons Ong Yi Ling in Singapore Phillip Futures, speaking to Bloomberg.
“Amid high inflation and a lack of investment alternatives, gold could be sought out as a store of value and hedge against inflation.”
The GFMS precious-metals consultancy yesterday said the gold price could easily hit $1600 in 2011, and that the market has most likely “already seen the lows” for the year at $1319 per ounce.
Analysts at French investment bank BNP Paribas this week revised their silver price forecast for 2011, predicting an average of $41.40 an ounce – nearly $6 per ounce above their March 10th forecast – thanks to “both the fabrication and investment sectors.
Thanks to such strong demand to buy silver, “it may end up being the top performer of the precious-metals complex in 2011,” says BNP. The bank warns that future rises in US interest rates may be discounted early by the market, however, “bringing a correction in silver prices earlier than assumed in our forecast.”
New US data on Thursday showed a sharp rise in Initial Jobless Claims but a fall in Continuing Claims.
Factory input prices rose less quickly than analysts feared, but Producer Price Inflation still accelerated to a 12-month high of 5.8%.
New data from China – now the world’s No.2 gold consumer market – meantime showed a surprise jump in bank lending, up by 26% in March from Feb.
Beijing’s central-bank currency reserves surged through the $3 trillion level, the State Administration of Foreign Exchange said.
On the latest official data, its 1054 tonnes of gold bullion reserves fell to just 1.6% of total holdings.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
This is how my Forex VPS solution will look like
Hello.
I know there are a few readers of this blog who happen to trade the Forex market like I do, so I figured I’d also make a post on this blog as well like I did on my dedicated forex blog in regards to the forex vps hosting solution that I’ve been working hard to put together.
I’m glad to report that I’ve been making good progress, and that I can now finally show you screenshots of how the metatrader (MT4 for now and MT5 later) forex trading platform will look like running on a VPS account. Please check them out over at my forex blog:
http://alansforexblog.com/2011/04/07/my-forex-vps-solution-will-look-like-this/
I’d also like to add that if you like to use forex robots (ie automated trading systems often called “expert advisors”) then you’re going to love the VPS platform. It will be simple to upload forex robots to your VPS account and the forex robots will be running on a very reliable Linux based platform in a super high end data center (Rackspace).
So I hope all you forex traders will checkout the above link and the various other related posts regarding this VPS solution.
Have a great weekend everyone!
Cheers,
Alan
Gold & Silver Hold Near Record Highs as ECB Hikes, Portugal Requests Bail-Out, Real Rates Remain “Dangerously” Negative
By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE of gold investment bullion held near Wednesday’s new all-time Dollar highs in London trade this morning, rising toward 3-week highs in Euro terms even as the European Central Bank made good on its promise to raise Eurozone base rates.
The ECB’s move came despite a formal bail-out request late yesterday from Portugal, currently under a caretake government and with a sovereign budget deficit equal to 8.6% of gross domestic product for 2010.
Western stock markets ticked lower early Thursday with crude oil, but government bond prices rose, nudging longer-term interest rates lower.
Silver prices held firm around $39.50 per ounce – a new 31-year high when breached Wednesday morning.
Claiming to be “ahead of the curve” today, ECB president Jean-Claude Trichet repeatedly stated his “core mandate” of providing “price stability for 331 million people” across all 17 nations in the single Euro currency union.
Set today at 1.25% per year, the cost of ECB loans for commercial banks remains sharply negative in real terms at less than half the pace of inflation pegged by the EuroStat data agency for March.
“We have lately been struck by the decline in gold’s sensitivity to fiscal crises among Europe’s peripheral economies,” says the latest weekly commodities analysis from French bullion and investment bank Natixis, noting the recent “strengthening” of the Eurozone’s EFSF stability fund.
“Investors no longer appear to be so concerned that defaults among Europe’s periphery will impact core countries…European investors have not been major buyers of gold since 2009, but given the volumes accumulated between 2008-9, there is increasing scope for some of this gold to find its way back onto the market.”
Gold investment through exchange-traded trust funds (ETFs) has fallen 4% by volume so far in 2011, according to Natixis’ math.
Gold futures trading by bullish money managers and investors has also fallen, with the “net long non-commercial” position dropping by 30% since Oct.
“Moms and dads are moving out, out of gold and into equities,” reckons Jonathan Barratt of Commodity Broking Services in Sydney, speaking to Reuters.
“But our expectation for gold moving higher has more to do with inflationary concerns, I think, particularly in China.”
Here in London, the Bank of England kept its key lending rate at a record low of 0.5% for the 25th month running on Thursday. On the latest UK data, that puts the real rate of interest – after Retail Price Inflation – at a negative 5.0% per year.
UK investors wanting to buy gold today saw the price rise £3 per ounce to £895, just shy of Wednesday’s four-month highs.
Earlier in Tokyo, the Bank of Japan held its key interest rate below 0.1%, surprising analysts with a further ¥1 trillion loan ($11.7bn) to the country’s earthquake-struck north-eastern region.
That takes the Bank of Japan’s total monetary response to the March 11th disaster to the equivalent of $394 billion.
The gold price in Japanese Yen pushed higher to fresh 28-year highs in Tokyo trade on Thursday.
“The most important issue here is Spain,” said Gabriel Stein, director of Lombard Street Research, commenting on the Portuguese bail-out for BBC radio on Thursday morning.
Spain, Greece, Ireland and Portugal make up less than 18% of Eurozone economic output, said Stein, but their banking sectors “are wholly dependent” on liquidity loans from the European Central Bank, accounting “for something like 60%” of the total.
“This [ECB rate rise] will hit them immediately.”
Some 85% of mortgage borrowers in Ireland and Spain are on variable rates, according to the European Mortgage Federation. That rises to perhaps 99% in Portugal, says the FT‘s Alphaville blog.
“Permanently negative real interest rates distort world financial markets dangerously,” writes Anders Åslund, a senior fellow at the Peterson Institute for International Economics.
Blaming the current “oil price shock” on sub-zero real rates across the world, “Central banks should face reality and raise their rates faster and higher,” says Åslund.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Silver “Diverts Attention from Gold” as Chinese Hike Puts Global Interest Rates “In Focus”
By: Adrian Ash, BullionVault
London Gold Market Report
WHOLESALE PRICES to buy gold repeated yesterday’s $10 range on Tuesday, briefly slipping in London beneath $1431 per ounce after the central bank in China – home to the world’s No.2 consumer market – raised interest rates for the second time in 2011.
The People’s Bank’s move took Chinese borrowing rates to 6.31%, with one-year bank deposit rates rising to 3.25%.
China’s March inflation rate, due for release next week, is expected to breach two-year highs above 5.1% according to analyst forecasts.
“Monetary tightening remains the focus for base metals,” says the latest comment from Standard Bank’s commodity team, warning again of over-heated copper prices. But “Precious metals shrugged off fears over an earlier monetary tightening in the US, and continued to climb [on Monday].”
“We won’t see much movement [in prices to buy gold] until Thursday,” reckons Mitsubishi metals strategist Matthew Turner, “when the ECB and the Bank of England will announce their decisions on interest rates.”
Silver had earlier jumped back to Monday’s new 31-year highs above $38.80 per ounce, knocking the Gold/Silver Ratio of their relative prices to the lowest level since Set. 1983 at just over 37 times.
The Reserve Bank of Australia meantime held its key rate at 4.75% for the fifth month running on Tuesday, noting that monetary policy “for the global economy overall…remain[s] accommodative.”
Brent crude oil today dropped $1 per barrel from near 30-month highs, while copper prices also edged lower as government bond yields rose.
European stock markets slipped to stand 0.5% lower on average. The British Pound jumped following news of the strongest service-sector growth in 12 months.
That knocked the price for UK investors wanting to buy gold today some 1.3% lower, nudging 1-week lows at £882 per ounce.
“It’s difficult to say [that silver prices are justified] but certainly they’re well-supported right now,” said Commerzbank head of metals research Eugen Weinberg in Frankfurt to Bloomberg yesterday, commenting on silver’s new 31-year highs above $38.50 per ounce.
“The proximity of the psychological $40 level is attracting speculative, risk-on money” into silver investment, said Weinberg.
“Worldwide industrial demand is also staying strong.”
“Silver continues to attract investor attention away from gold, and given current sentiment, $40/oz looks inevitable in the near term,” say analysts at Swiss investment bank and London market-maker UBS in a note.
“[But] there is the real danger that silver prices have travelled too fast, too soon.”
“We see a lot of demand for silver from China,” says Natalie Robertson, commodities strategist at ANZ in Melbourne, because “with China focusing more on renewable energy, especially after the nuclear crisis in Japan, they will probably be developing a lot more solar panels.”
“Fundamentally, the silver picture looks very strong,” she tells Reuters.
Exchange-traded trust funds holding silver to back the value of shareholder positions saw fresh inflows on Monday, with the iShares ETF product swelling to a record 11,162 tonnes.
Gold ETF positions held flat, however – little changed from May 2010 – while in the leveraged Gold futures market, “activity was less than half the average on Monday, set to be one of the weakest this year,” notes Richcomm Global Services DMCC of Dubai.
Meantime in Washington, Treasury secretary Timothy Geithner has written to US lawmakers, urging them to agree a new debt ceiling before Washington’s breaks its current legal limit of $14.3 trillion 6 weeks from now.
Geithner ruled out selling US gold reserves as a way of helping finance Washington’s spending.
Over in Europe, where the ECB is set to raise its key lending rate at Thursday’s policy meeting, a one percentage increase in borrowing costs “would [add] six extra years” to the debt stabilization schedule in Greece, notes Gary Jenkins at Evolution Securities.
Fellow bail-out recipient Ireland would also see “higher rates…slow down debt reduction,” notes the FT‘s Alphaville blog, reviewing the European Commission’s own research.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
