SPOT MARKET gold prices slipped back below $1750 an ounce while stock markets rallied strongly following the release of better-than-expected US jobs figures on Friday.

The Bureau of Labor Statistics nonfarm payrolls report, published on Friday, shows that the US added a net 243,000 nonagricultural private sector jobs last month. In addition, both November and December’s nonfarm figures were revised upwards. The unemployment rate fell to 8.3%, down from 8.5% the previous month.

Silver prices also fell following the nonfarm announcement, while the US Dollar saw an immediate gain against major currencies such as the Pound, Euro and Yen.

Earlier on Friday Dollar gold prices hit their highest level in 11 weeks at $1762 per ounce, a level not seen since mid-November, following US Federal Reserve chairman Ben Bernanke’s appearance before Congress on Thursday.

“We are not seeking higher inflation,” Bernanke told the House Budget Committee, in response to comments from Republican representative Paul Ryan, who said he was “greatly concerned to hear the Fed recently announce that it would be willing to accept higher-than-desired inflation in order to focus on the [employment] side of its dual mandate.”

“We do not want higher inflation and we’re not tolerating higher inflation,” responded Bernanke, although elsewhere in his testimony he warned that “risks remain that developments in Europe or elsewhere may unfold unfavorably and could worsen economic prospects here at home.”

Fed policymakers revealed last week that a majority of them expects interest rates to remain near zero for at least the next three years. Bernanke added yesterday that the speed and aggressiveness of any future rate rises “may depend to some extent on the balance” between maintaining employment and pursuing price stability.

“These comments lent support to gold,” reckons James Steel, chief commodities analyst at HSBC in New York, noting that the Fed could opt for additional quantitative easing if progress towards full employment was inadequate.

US inflation as measured by the consumer prices index fell to 3.0% in December, down from 3.4% the previous month, but up from 1.1% 12 months earlier.

“As every day goes by, I see deflation in the things you own and inflation in the things you need,” said hedge-fund partner Kyle Bass at a meeting of the University of Texas’s $25.7 billion Investment Management Co. (Utimco) in Austin, Texas on Thursday.

“I’m against selling any of the gold,” Bass said, referring to the $1.2bn which Utimco now owns in physical gold bars after switching out of futures contracts then worth $992m in April 2011.

Over in Europe, Greece’s finance minister Evangelos Venizelos said Thursday that the European Central Bank would need to take losses on its Greek government debt holdings if Greece is to achieve the goal of reducing its debt-to-GDP ratio to 120% by 2020.

Greece is yet to agree a deal with its private creditors over the size of losses they will take. The lack of a deal throws into doubt Greece’s €130 billion second bailout, without which it will be unable to pay out on maturing bonds next month.

“Greece needs a new program, there’s no question about that, but Greece must create the conditions for it,” German finance minister Wolfgang Schaeuble said Thursday.

“We can’t pay into a bottomless pit.”

“Precious metals are enjoying some support from safe-haven demand as issues in the Eurozone once again weigh on investors’ minds,” says Marc Ground, commodities strategist at Standard Bank, who sees resistance for gold prices at $1768 per ounce.

Gold jewelers in India meantime the government to raise the duty drawback – the amount of duty exporters can claim back from the Department of Revenue – applicable to the gems and jewelry sector. The request from the Federation of Indian Exports Organisations follows the government’s decision last month to increase duty on gold bullion imports and switch to an ad valorem tax, which takes the form of a percentage of value rather than a discrete amount by weight.

Heading into the weekend, Dollar gold prices looked set to record their fifth straight weekly gain.
The gold price in Euros meantime was up 1.8% for the week by Friday lunchtime, and closing in on the four-month high touched earlier on Friday at €43,098 per kilo (€1340 an ounce).

Like those for gold, Dollar silver prices also hit their highest levels since November Friday morning, at $34.44 per ounce.

Based on London Fix prices, gold is up nearly 15% since the end of 2011, while silver is up by more than 19%. Despite silver’s rise, however, the world’s largest silver ETF, the iShares Silver Trust (ticker: SLV) has seen its holdings of bullion rise just 0.2% since the start of 2012.

By contrast, the amount of gold held to back shares in the SPDR Gold Trust (ticker: GLD), the world’s largest gold ETF has grown 1.8% over the same period, rising to its highest level since December 20 yesterday at 1277 tonnes.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

By reading Mr. Radomski’s essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Chinese & Indian Gold Demand Rising as Zero Rates “Distort” Investment Markets, “May Kill Credit”

The WHOLESALE-MARKET gold price slipped 0.5% from a new 8-week high in London Thursday morning, while global stock markets stalled after a 3-day rise and commodities also edged back.

The Euro fell from $1.32 on the forex market for the third time this week after chief finance minister Jean-Claude Juncker said new proposals for stemming the currency zone’s debt crisis – agreed at a summit on Monday – were “largely insufficient”.

The gold price in Euros touched €43,900 per kilo, a level breached only five times during the surge to all-time record highs of summer last year.

Beijing meantime said China’s full-year gold mining output in 2011 – all of which was bought domestically, since exports are banned – hit a record 361 tonnes, a rise of 5.9% on 2010.

China’s 2011 gold imports may have reached 490 tonnes, perhaps twice the 2010 level, according to Credit Suisse.

So far in 2012, imports of Gold Bullion to India – the world’s No.1 consumer – have been “significantly above average” reports UBS strategist Edel Tully, despite last month’s doubling of import duties.

The central bank of Vietnam said today it plans to “mobilize” private gold holdings via “credit institutions” which would effectively replace the private operations banned last year.

“For now, gold may well remain volatile,” says Dirk Wiedmann, head of investments at Rothschild Wealth Management, now running some €12 billion ($15.7bn) in client funds.

“[But] it is increasingly attractive as the only truly hard currency…[Our] large positions in gold seek to preserve and grow the real value of our clients’ wealth.”

“We can’t put $100 trillion of credit in a system-wide mattress,” says Bill Gross, founder and co-manager of the giant Pimco bond-funds group. “But [savers and creditors] can move in that direction by delevering and refusing to extend maturities and duration.”

Because interest rates cannot go down from zero, bond prices have little room to rise, says Gross, and so “Zero-bound money may kill as opposed to create credit.

“It may, as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper.”

January’s sharp rise in global stock markets, however, means that “Strategists at the biggest banks are capitulating on their bearish forecasts,” reports Bloomberg today, citing a sharp reversal in predictions and recommendations after last month’s 7% jump in emerging-economy equities.

“We have been increasing exposure to risk assets over the past six weeks,” says Andrew Cole, director of strategic policy for Baring Asset Management’s £9 billion multi-asset portfolios.

“We see a self-help cycle materialising” thanks to the European Central Bank’s long-term banking loans, Cole tells Investment Week after buying £350m in Italian government bonds.

“Italy is not going to go bust and this is our way of getting exposure to the improved liquidity.”

“We believe that the ‘risk off’ attitude of investors which took hold in the second-half of 2011 is largely over,” agrees Angelos Demaskos, chief investment officer of the £35.6 million Junior Gold Fund ($56m) at Sector Investment Managers in London to Proactive Investors earlier this week.

Anyone who “wanted to sell” junior gold mining stocks has already sold, Demaskos believes, “and there is a very strong possibility they will be re-rated to catch up with the underlying commodity.”

Over the last 12 months, Sector Investment’s Junior Gold Fund has lost 9.0% of its value, according to TrustNet.

The physical gold price has risen 29.7% in British Pound terms.

Silver bullion has risen 11.9% over the last year.

“It’s been a good month” for US silver coin demand, says Michael Kramer of authorized US Mint distributor Manfra, Tordella & Brookes, quoted by Kitco News and pointing to January as the second-strongest monthly sales of silver bullion Eagle coins on record.

Demand was “greatly” helped by the launch of new 2012 coins however, Kramer added., because “People always want the brand-new coins, so January sales are always pretty good.”

Adrian Ash
BullionVault

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Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Gold, Stocks and the Euro All Gain in “Risk Asset Recovery” as Positive Manufacturing Data “Confirms China’s Soft Landing”

THE U.S. DOLLAR cost of buying gold climbed to $1750 an ounce Wednesday morning London time – gold’s highest level since early December – while commodity prices also ticked higher and stock markets surged following the release of better-than-expected manufacturing data from several major economies.

Prices for buying silver rallied to $34.01 – though they remained below yesterday’s high.

US Treasury bond prices fell meantime, while the Euro rallied 1.3% against the Dollar.

“Buyers have returned to the Euro, which is helping the situation in gold,” says Ole Hansen, senior manager at Saxo Bank.

“[Gold] had a bit of lackluster profit-taking yesterday but didn’t break anything important on the downside, which helped confirm that being long is back in vogue.”

“I think that going forward, gold is still going to be looking at the US and the Euro zone for direction,” reckons Phillip Futures analyst Ong Yi Ling in Singapore.

The wholesale market price of buying gold in Euros meantime rose to its highest level since September – hitting  €42,864 per kilo (€1333 per ounce) – before dropping ahead of US open.

Based on month-end PM London Fix prices, January saw gold’s biggest calendar month gain in Dollar terms since September 1999. The Dollars-per-ounce price of buying gold was fixed at $1744 yesterday – 13.9% up on the last PM Fix of 2011.

January also marked gold’s best start to a year since 1980, Amanda Cooper at Reuters reports.
Stock markets meantime recorded their best January since 1994, according to Bloomberg, which cites a 5.8% rise for the MSCI All-Country World Index if dividends are included.

“Three things have been behind the recovery in risk assets,” says Mike Ryan, chief investment strategist at UBS Wealth Management Americas in New York.

“Progress on a fiscal compact in Europe, better-than- expected economic data and more accommodative central-bank policies.”

Stock markets gained strongly Wednesday morning too – with the FTSE 100 in London up 1.4% and Germany’s DAX up 2.4% by lunchtime – following news of worldwide manufacturing growth.

China’s manufacturing sector grew in January, according to the official purchasing managers index release, which rose to 50.5 from 50.3 last month (a figure above 50 indicates expansion).

“Today’s data further confirmed a soft-landing story for China,” reckons Ken Peng, economist at BNP Paribas in Beijing.

“However, consumer demand may weaken after holiday effects disappear.”

“New export orders declined,” points out Wei Yao, China economist at Societe Generale.

“Together with a depressed level of backlog orders…the boost in total orders looks temporary, and suggests that manufacturers are not very optimistic about the near-term outlook. Given today’s report, we think year on year export and import growth will prove to be barely positive in January.”

China’s PMI figure “was expansionary, but no so expansionary that we anticipate [monetary] tightening,” says one gold dealer here in London.

“There will be a power transition in Beijing this year,” adds a dealer in Hong Kong.

“I expect maintaining stability at all cost is what this government is going to do.”

Britain’s manufacturing sector also expanded in January, with the PMI coming in at 52.1 – having been below 50 the previous month. Similarly, German manufacturing resumed growth last month, according to its January PMI, which was reported today as 51.0.

Eurozone manufacturing as a whole, however, continued to shrink, albeit at a slower rate, with the PMI rising from 46.9 in December to 48.8 last month.

Similar manufacturing data for the US are released later on Wednesday. The latest ADP Employment Report meantime shows the US added 170,000 private sector jobs in January – down from around 300,000 the previous month. The official nonfarm payrolls data are due to be released by the US Bureau of Labor Statistics on Friday.

Greece’s private sector creditors may be offered a ‘sweetener’ in the form of a bond whose coupon is tied to future economic growth, Bloomberg reports. Negotiations – which Greek finance minister Evangelos Venizelos said yesterday are “one step” from success – stalled last week after parties could not agree on the size of the coupon on new bonds for which existing ones would be swapped.

The government in India – the world’s largest source of demand for buying gold– announced Wednesday it is raising the base import price of gold by 5.7% to $556 per 10 grams. Silver’s base import price will rise 12% to $1067 per kilo. The base import price is the price used to calculate the import duty.

The move follows last month’s switch from discrete to ad valorem taxation, a move which also saw the effective duty on gold almost doubled.

The higher import duties have had a “definite impact” on demand for buying gold in India, according to Harshad Ajmera, proprietor of JJ Gold House in Kolkata.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

By reading Mr. Radomski’s essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

U.S. DOLLAR gold bullion prices looked set to record their largest calendar month gain this century by Tuesday lunchtime in London.

Gold prices hit $1745 per ounce – just less than 14% up on the Dollar gold bullion price set at the last London Fix of 2011.

By this measure, January 2012 looked set to record the fourth-largest calendar month gain in the last three decades, and the biggest since September 1999, the month that saw the signing of the Central Bank Gold Agreement, which limited the sales of gold bullion by signatory central banks.

Stocks and commodities also gained Tuesday, while government bond prices dipped.

“In overnight trade in Asia, we continued to see lackluster physical interest,” says Marc Ground, commodities strategist at Standard Bank.

“[There was] even some scrap gold and silver coming to market from Japanese recyclers…nevertheless, prices held steady.”

Physical volumes on the Shanghai Gold Exchange Tuesday were down 28% on the previous day.
The first day’s trading after Lunar New Year saw “strong physical demand” on Monday, according to one gold bullion dealer in Hong Kong.

Silver bullion prices meantime hovered around $33.80 per ounce – 21.2% up on the start of January.

Industrial manufacturers meantime are set to use over 15,000 tonnes of silver in 2012 – 2.5% more than last year – according to estimates by Barclays Capital. Morgan Stanley meantime reckons investors may invest in 2000 tonnes of silver bullion via exchange traded vehicles – following net selling by such investors of 1300 tonnes last year.

“Silver got hammered [following last April's peak],” says Dan Smith, head of metals research at Standard Chartered.

“Now we’re into a phase where it will do quite well…Appeal comes from its widespread use in both industry and investment. I think it’s relatively cheap.”

“The short-term investment argument is not entirely convincing,” counters David Jollie, strategic analyst at Mitsui Precious Metals in London, citing “weak industrial demand” in places like China.

Chinese silver imports in December were 36% down on their average for the last two years, customs data cited by newswire Bloomberg show.

Here in the UK, seasonally adjusted M4, the broadest money supply measure, fell 1.4% in December – its largest one month drop since the Bank of England began recording the data in 1982. The year-on-year fall was 2.5%.

Net consumer credit in November meantime fell by £377 million – the first net drop since last January and the biggest monthly fall since the data series began in 1993.

“There is clearly a risk that credit constraints may hinder the reallocation of resources required to rebalance the economy,” Bank of England governor Mervyn King said in a speech last week, adding that “there is scope for interest rates to remain low, and, if necessary, for further asset purchases [to facilitate quantitative easing].”

Eurozone unemployment meantime hit a record high last month at 16.5 million people – with the unemployment rate at 10.4% – according to official figures published Tuesday by Eurostat.

“In many cases you find firms continuing to delay investment projects,” notes Citigroup economist Guillaume Menuet.

“For those that are still making profits, hiring is being frozen, and for those which are under pressure to hit results or losing money, job losses are becoming the only solution that they have.”

Elsewhere in Europe, banks are preparing to borrow at least €1 trillion when the European Central Bank holds its 3-Year longer term refinancing operation next month – more than twice the amount borrowed at December’s 3-Year LTRO.

Greece meantime is hoping to conclude a deal with its private sector creditors by the end of the week, Greek prime minister Lucas Papademos said Tuesday. There remained however no agreement among European leaders over what to do about the deterioration is Greece’s fiscal position.

“Greece’s debt sustainability is especially bad,” German chancellor Angela Merkel said Monday.

“You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”

At yesterday’s summit leaders agreed to accelerate the implementation of the €500 billion European Stability Mechanism, the Eurozone’s permanent bailout fund.

There was also endorsement of proposed new deficit rules – although a German suggestion that the EU appoint a budget commissioner to oversee Greece’s finance appears not to be receiving wider support.

“Surveillance of Greece’s progress is normal,” French president Nicolas Sarkozy said, “but there was never any question of putting Greece under guardianship.”

Over in the US, the Commodity Futures Trading Commission, which regulates gold futures and options trading on the New York Comex, has said it is considering new rules aimed at firms using automated and high-frequency trading systems as part of its efforts to implement the Dodd-Frank legislation on financial services.

Venezuela has completed the repatriation of 160 tonnes of gold bullion – around three quarters of its total reserves  that were held in US, European and Canadian banks – newswire Dow Jones reports.

“Venezuela’s gold is now in the hands of Venezuelans, secured by Venezuelans and at the service of all Venezuelans,” said Venezuela’s central bank head Nelson Merentes.

Gold bullion makes up 71% of Venezuela’s total foreign reserves, according to figures from the World Gold Council.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011