Gold hits another record high Precious metal seen as a safe haven

NEW YORK/LONDON — Gold climbed to a third record in a row Wednesday, extending its biggest rally since 2008, setting a high over $1,800 an ounce.
Bullion rose as much as three per cent Wednesday and is up seven per cent this week.
It’s up 20 per cent since June, having broken cleanly above technical resistance from a near three-year trend-channel and putting its ratio to the S&P-500 stock index at the highest since 1988.
But that ratio remains far below its peaks of 1980 and the 1930s, and gold is still below its inflation-adjusted high of nearly $2,500.

“We don’t see anything out there that’s going to reverse the appetite for gold,” said Deutsche Bank commodity strategist Michael Lewis, whose team reaffirmed on Wednesday its forecast for $2,000 an ounce next year, among the most bullish in the market based on a Reuters poll in July.
“Given gold is a financial asset, it’s interesting that it doesn’t look that expensive at these sort of levels.”
Gold’s rise came as a dive in French bank stocks sent new shudders through anxious financial markets and U.S. stocks skidded.
After a one-day respite thanks to the Fed comments to keep interest rates near zero for at least two more years, the rout resumed on Wednesday with the S&P falling more than three per cent.
Friday’s U.S. credit rating downgrade accelerated a slump in risk assets amid an increasingly grim-looking U.S. economic outlook and expanding worries over eurozone debt.
In Europe, concern this time was with France, joining a long list of woes as shares in its banks — among the most exposed to Italian and other peripheral eurozone government debt — slumped as much as 20 per cent in afternoon trade as fears about the currency bloc’s debt crisis moved back to the forefront. President Nicolas Sarkozy called for new fiscal restraint as markets fretted over the possibility that France may be next for a debt downgrade.
With governments and central banks running out of tools to combat the financial and economic distress, few analysts were looking for the rally to end anytime soon.
“The skies would appear to be clear for these safe havens like gold,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group, Greenwich, Connecticut. With the debt woes spilling over into the world’s biggest economics, “we don’t know where this thing is going to stop anymore.”
The Fed’s promise on interest rates near zero supported the view that the opportunity cost of holding non-yielding gold would remain depressed. But it also triggered a fleeting rally in stocks on Tuesday that spurred a round of profit-taking in gold.
Global holdings of gold-backed exchange-traded funds, calculated by Reuters, fell 7.2 tonnes on Tuesday in their first daily decline in 13 sessions.
Gold’s rally has broken it clear of the ascending trend channel that contained prices since late 2008 — the last time it staged an eight-per-cent gain over four days.
But the Relative Strength Index was flashing overbought status at 84, far above the 70-per-cent mark that often signals a correction may be in store. Gold has pulled back both times the index topped that level in the past 12 months.
“When you have a metal that has three or four distinct reasons why it has headed higher, it is very difficult not to be bullish in that environment,” said Mitsui Precious Metals analyst David Jolliet. But he added: “Given how far and how quickly we’ve run up, the move seems somewhat overextended.”

Forex Outlook

The markets appear to be “stabilizing” for the time being after yesterday’s massive sell-off, the 6^th largest down move for stocks in the history of the markets.  Oil has pulled back as well, though gold is sky-rocketing to new daily highs, reaching just under $1780.

There is obvious fear in the marketplace, and what started out as debt concerns both here in the US has become global economic growth concerns.  So right now, the market is unsure who poses the bigger the risk, the US or the Euro zone.  This is reflected in the currency values, as EUR/USD has been trading a range with no clear direction. 

This is in stark contrast to the commodity currencies, which have sold-off greatly lead by the Aussie which is down close to 10% for the week!  On the flip side, the safe havens have received these money flows, with the Swiss franc making new all-time highs vs. Euro and USD.  The Japanese yen is also strengthening despite the attempt to weaken the currency through intervention last week.

The British pound is also trading a range as their economic data weakens and also dealing with the “protests” taking place in London right now.  I’m not sure that the media is giving this the proper attention it deserves, but looting and rioting are taking place as a single incident has ignited the anger over austerity measures.

One of the last bastions of growth in the global economy has been China, and overnight their CPI data came in higher than expected showing inflation of 6.5% which means that they may make further efforts to slow down their economy.  Talk of the global “double-dip” is starting to heat up, as it appears that the soft patch we were dismissing the data as may become a harsh reality.

So it’s the Fed or nothing today, as all eyes are on the FOMC meeting taking place today.  What, if anything, can the Fed do at this point?  Bernanke will clearly attempt to calm fears in the market but at this point it may be difficult to provide the magic pill that everyone so desires.  Instead, the medicine we may be forced to take is a much tougher pill to swallow.

The global banking system while not in great shape is clearly better than in 2008, though European bank exposure to sovereign debt and US bank exposure to a still-declining housing market may make it difficult to bring confidence back.  Money pours into US Treasuries, as it is not certain where to go.

So how do we get out of this mess?  It all comes back to economic growth.  Without it we are doomed and those who think the government can pick up the slack are delusional.  Without job creation form private business, demand will continue to weaken.

So while stocks may be higher to start the morning, do not be fooled into believing a bottom is in.  This saga is far from over, and thankfully politicians are on vacation for the rest of the month so I don’t have to listen to the blame game take place. 

Be cautious and judicious in your trading and use strict risk management principles.  Volatility can be your friend, though it can also be your greatest enemy!

Dollar Set for Weekly Loss After S&P Says May Cut U.S. Rating

July 15 (Bloomberg) -- The dollar headed for its biggest weekly drop against the yen in three months after Standard & Poor’s became the second ratings company this week to say it may cut the U.S.’s top credit grade.

The euro strengthened for a third day against the yen as Italian lawmakers prepared for a confidence vote on an austerity package and before the release of stress tests on European banks. The greenback headed for a second weekly loss against the Swiss franc after S&P said there’s at least a 50 percent chance it will cut the AAA rating within 90 days on risks a stalemate will endure beyond any near-term deal to raise the debt limit.

“Uncertainty about the credit rating and debt-ceiling talk will continue weighing on the dollar,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “The market has a negative view for the dollar.”

The dollar traded at 79.20 yen as of 7:10 a.m. in London from 79.14 yen in New York, headed for a 1.8 percent drop this week, the biggest decline since the five-day period ended April 15. It was at $1.4159 per euro from $1.4143 yesterday. The U.S. currency bought 81.58 Swiss centimes, having declined 2.5 percent this week. The euro climbed 0.2 percent to 112.13 yen.

S&P may lower the U.S.’s long-term rating by one or more notches into the AA category if it concludes Congress and President Barack Obama’s administration haven’t achieved a credible solution to the rising government debt burden and aren’t likely to achieve one in the near future, the company said in a statement dated yesterday.

‘No Way’

Moody’s Investors Service put the U.S. Aaa credit rating on review for a downgrade on July 13, citing concern officials won’t raise the nation’s $14.3 trillion debt limit in time to prevent a missed payment.

There’s “no way to give Congress more time” on lifting the debt limit, Treasury Secretary Timothy F. Geithner said after meeting with Democratic lawmakers on Capitol Hill in Washington. He has repeatedly said the U.S.’s borrowing authority will end on Aug. 2 without congressional action.

Ten-year Treasury yields were little changed at 2.95 percent, after falling to this year’s low of 2.81 percent earlier this week. The 10-year average is 4.06 percent.

The dollar weakened against 10 of its 16 most-traded peers before a U.S. report that economists said will show the cost of living fell in June for the first time in a year, allowing the Federal Reserve to maintain record stimulus without worrying about inflation.

The consumer-price index decreased 0.1 percent, after a 0.2 percent gain in May, according to economists surveyed by Bloomberg News. The so-called core measure, which excludes more volatile food and energy costs, increased 0.2 percent, the survey showed.

Additional Action

The Fed is prepared to take additional action, including buying more government bonds, if the economy appears to be in danger of stalling, central bank Chairman Ben S. Bernanke said July 13. The central bank ended its $600 billion bond-buying program, also called quantitative easing, last month.

“I don’t think QE3 is off the table, and certainly, if there is any opportunity for Bernanke to print money he would do it,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “If we see a softer CPI number over the next couple of months, that would be a catalyst” for dollar weakness.

Confidence Vote

The euro pared this week’s decline against the yen to 2.5 percent before Italian Prime Minister Silvio Berlusconi today faces a final confidence vote on an austerity package that aims to balance the budget in 2014 and shield the nation from the region’s debt crisis. The Chamber of Deputies holds a vote at about 7 p.m. local time to secure final passage of the measure.

The European Banking Authority will release the results of the stress tests for 91 banks as part of an effort to reassure investors the region’s banks have sufficient capital. The assessments are the first by the EBA since it was set up earlier this year. The results will be published from 5 p.m. U.K. time.

“Berlusconi will likely pass the final confidence vote on the austerity plan and that will ease market fears that Italy will be another Greece,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co. “We’ll get the results of stress tests too, which are likely to reduce uncertainty over the region’s banking system. Those may be reasons for buying-back of the euro.”

The EBA can’t force banks to take part, and can’t test for a sovereign default, which policy makers are struggling to avoid.

The yen fell against 12 of its 16 major peers after Japan’s Finance Minister Yoshihiko Noda said he’s watching markets carefully because the currency’s moves have been “one-sided” in the last few days, fueling concern authorities will intervene to sell Japan’s currency to support exporters. Policy makers need to be mindful of the yen’s impact on the economy including corporate sentiment, Noda told reporters today in Tokyo

http://www.forexnews.com/external/?id=62045&r=/category/forex-news/breaking-news/

Dollar Set for Weekly Loss After S&P Says May Cut U.S. Rating

July 15 (Bloomberg) -- The dollar headed for its biggest weekly drop against the yen in three months after Standard & Poor’s became the second ratings company this week to say it may cut the U.S.’s top credit grade.

The euro strengthened for a third day against the yen as Italian lawmakers prepared for a confidence vote on an austerity package and before the release of stress tests on European banks. The greenback headed for a second weekly loss against the Swiss franc after S&P said there’s at least a 50 percent chance it will cut the AAA rating within 90 days on risks a stalemate will endure beyond any near-term deal to raise the debt limit.

“Uncertainty about the credit rating and debt-ceiling talk will continue weighing on the dollar,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “The market has a negative view for the dollar.”

The dollar traded at 79.20 yen as of 7:10 a.m. in London from 79.14 yen in New York, headed for a 1.8 percent drop this week, the biggest decline since the five-day period ended April 15. It was at $1.4159 per euro from $1.4143 yesterday. The U.S. currency bought 81.58 Swiss centimes, having declined 2.5 percent this week. The euro climbed 0.2 percent to 112.13 yen.

S&P may lower the U.S.’s long-term rating by one or more notches into the AA category if it concludes Congress and President Barack Obama’s administration haven’t achieved a credible solution to the rising government debt burden and aren’t likely to achieve one in the near future, the company said in a statement dated yesterday.

‘No Way’

Moody’s Investors Service put the U.S. Aaa credit rating on review for a downgrade on July 13, citing concern officials won’t raise the nation’s $14.3 trillion debt limit in time to prevent a missed payment.

There’s “no way to give Congress more time” on lifting the debt limit, Treasury Secretary Timothy F. Geithner said after meeting with Democratic lawmakers on Capitol Hill in Washington. He has repeatedly said the U.S.’s borrowing authority will end on Aug. 2 without congressional action.

Ten-year Treasury yields were little changed at 2.95 percent, after falling to this year’s low of 2.81 percent earlier this week. The 10-year average is 4.06 percent.

The dollar weakened against 10 of its 16 most-traded peers before a U.S. report that economists said will show the cost of living fell in June for the first time in a year, allowing the Federal Reserve to maintain record stimulus without worrying about inflation.

The consumer-price index decreased 0.1 percent, after a 0.2 percent gain in May, according to economists surveyed by Bloomberg News. The so-called core measure, which excludes more volatile food and energy costs, increased 0.2 percent, the survey showed.

Additional Action

The Fed is prepared to take additional action, including buying more government bonds, if the economy appears to be in danger of stalling, central bank Chairman Ben S. Bernanke said July 13. The central bank ended its $600 billion bond-buying program, also called quantitative easing, last month.

“I don’t think QE3 is off the table, and certainly, if there is any opportunity for Bernanke to print money he would do it,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “If we see a softer CPI number over the next couple of months, that would be a catalyst” for dollar weakness.

Confidence Vote

The euro pared this week’s decline against the yen to 2.5 percent before Italian Prime Minister Silvio Berlusconi today faces a final confidence vote on an austerity package that aims to balance the budget in 2014 and shield the nation from the region’s debt crisis. The Chamber of Deputies holds a vote at about 7 p.m. local time to secure final passage of the measure.

The European Banking Authority will release the results of the stress tests for 91 banks as part of an effort to reassure investors the region’s banks have sufficient capital. The assessments are the first by the EBA since it was set up earlier this year. The results will be published from 5 p.m. U.K. time.

“Berlusconi will likely pass the final confidence vote on the austerity plan and that will ease market fears that Italy will be another Greece,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co. “We’ll get the results of stress tests too, which are likely to reduce uncertainty over the region’s banking system. Those may be reasons for buying-back of the euro.”

The EBA can’t force banks to take part, and can’t test for a sovereign default, which policy makers are struggling to avoid.

The yen fell against 12 of its 16 major peers after Japan’s Finance Minister Yoshihiko Noda said he’s watching markets carefully because the currency’s moves have been “one-sided” in the last few days, fueling concern authorities will intervene to sell Japan’s currency to support exporters. Policy makers need to be mindful of the yen’s impact on the economy including corporate sentiment, Noda told reporters today in Tokyo

http://www.forexnews.com/external/?id=62045&r=/category/forex-news/breaking-news/

Canadian Dollar Loses Ground in Forex Trading

Loonie lower in currency trading

The U.S. dollar is gaining against many major currencies after falling short earlier. The Canadian dollar is losing some ground in forex trading after seeing success against the greenback.

Loonie has been doing well in currency trading, advancing quite rapidly. However, some forex traders believe that the Canadian dollar was overbought. As a result, the loonie is going through a correction.

Also helping the U.S. dollar in forex trading right now is the fact that there is some risk aversion on the latest news about the possibility of a Greek default. As a result, not even slightly higher oil prices have been able to help the Canadian dollar in forex trading.

Canadian Dollar Loses Ground in Forex Trading

Loonie lower in currency trading

The U.S. dollar is gaining against many major currencies after falling short earlier. The Canadian dollar is losing some ground in forex trading after seeing success against the greenback.

Loonie has been doing well in currency trading, advancing quite rapidly. However, some forex traders believe that the Canadian dollar was overbought. As a result, the loonie is going through a correction.

Also helping the U.S. dollar in forex trading right now is the fact that there is some risk aversion on the latest news about the possibility of a Greek default. As a result, not even slightly higher oil prices have been able to help the Canadian dollar in forex trading.

Greek Austerity May Not Be the End of the Problems

Euro zone gets boost from Greek austerity vote

With the way open for another bailout for Greece, the euro zone is getting a boost. The euro is higher in forex trading on the currency market, helped by increased risk appetite.

Between the Greek austerity vote, better news out of the U.S. in terms of home sales, and expectations that China will help out, the euro is doing pretty well.

However, it is important to realize that this isn't over yet. Even with the approval of the Greek government for austerity measures, the solution might not be found. There are still other countries in the euro zone that may face the some problems, and there has to be a way to continue supporting Greece, rather than all of these one-off packages that throw the region -- and the world -- into uncertainty for weeks at a time.

For now, though, crisis seems to be averted. The euro can gain while eyes turn to the U.S. and its debt ceiling and budget issues.

Greek Austerity May Not Be the End of the Problems

Euro zone gets boost from Greek austerity vote

With the way open for another bailout for Greece, the euro zone is getting a boost. The euro is higher in forex trading on the currency market, helped by increased risk appetite.

Between the Greek austerity vote, better news out of the U.S. in terms of home sales, and expectations that China will help out, the euro is doing pretty well.

However, it is important to realize that this isn't over yet. Even with the approval of the Greek government for austerity measures, the solution might not be found. There are still other countries in the euro zone that may face the some problems, and there has to be a way to continue supporting Greece, rather than all of these one-off packages that throw the region -- and the world -- into uncertainty for weeks at a time.

For now, though, crisis seems to be averted. The euro can gain while eyes turn to the U.S. and its debt ceiling and budget issues.

Greek Austerity May Not Be the End of the Problems

Euro zone gets boost from Greek austerity vote

With the way open for another bailout for Greece, the euro zone is getting a boost. The euro is higher in forex trading on the currency market, helped by increased risk appetite.

Between the Greek austerity vote, better news out of the U.S. in terms of home sales, and expectations that China will help out, the euro is doing pretty well.

However, it is important to realize that this isn't over yet. Even with the approval of the Greek government for austerity measures, the solution might not be found. There are still other countries in the euro zone that may face the some problems, and there has to be a way to continue supporting Greece, rather than all of these one-off packages that throw the region -- and the world -- into uncertainty for weeks at a time.

For now, though, crisis seems to be averted. The euro can gain while eyes turn to the U.S. and its debt ceiling and budget issues.

Greek Austerity May Not Be the End of the Problems

Euro zone gets boost from Greek austerity vote

With the way open for another bailout for Greece, the euro zone is getting a boost. The euro is higher in forex trading on the currency market, helped by increased risk appetite.

Between the Greek austerity vote, better news out of the U.S. in terms of home sales, and expectations that China will help out, the euro is doing pretty well.

However, it is important to realize that this isn't over yet. Even with the approval of the Greek government for austerity measures, the solution might not be found. There are still other countries in the euro zone that may face the some problems, and there has to be a way to continue supporting Greece, rather than all of these one-off packages that throw the region -- and the world -- into uncertainty for weeks at a time.

For now, though, crisis seems to be averted. The euro can gain while eyes turn to the U.S. and its debt ceiling and budget issues.

Aussie Struggles in Currency Trading

Australian dollar lower in forex trading

The Aussie is struggling in currency trading on the FX market today, moving lower as concerns about the global economy surface -- and as gold prices drop.

Fears about what is happening in the euro zone are weighing on the Aussie. This is a little odd right now, considering the fact that the euro is rallying right now as forex traders wait for the results of a vote on austerity measures from the Greek parliament.

Indeed, other high beta currencies, including the pound and the euro, have moved higher in forex trading as the U.S. session has opened. Aussie is a bit left behind right now as many traders wait to see what's next.

Aussie Struggles in Currency Trading

Australian dollar lower in forex trading

The Aussie is struggling in currency trading on the FX market today, moving lower as concerns about the global economy surface -- and as gold prices drop.

Fears about what is happening in the euro zone are weighing on the Aussie. This is a little odd right now, considering the fact that the euro is rallying right now as forex traders wait for the results of a vote on austerity measures from the Greek parliament.

Indeed, other high beta currencies, including the pound and the euro, have moved higher in forex trading as the U.S. session has opened. Aussie is a bit left behind right now as many traders wait to see what's next.

Aussie Struggles in Currency Trading

Australian dollar lower in forex trading

The Aussie is struggling in currency trading on the FX market today, moving lower as concerns about the global economy surface -- and as gold prices drop.

Fears about what is happening in the euro zone are weighing on the Aussie. This is a little odd right now, considering the fact that the euro is rallying right now as forex traders wait for the results of a vote on austerity measures from the Greek parliament.

Indeed, other high beta currencies, including the pound and the euro, have moved higher in forex trading as the U.S. session has opened. Aussie is a bit left behind right now as many traders wait to see what's next.

Aussie Struggles in Currency Trading

Australian dollar lower in forex trading

The Aussie is struggling in currency trading on the FX market today, moving lower as concerns about the global economy surface -- and as gold prices drop.

Fears about what is happening in the euro zone are weighing on the Aussie. This is a little odd right now, considering the fact that the euro is rallying right now as forex traders wait for the results of a vote on austerity measures from the Greek parliament.

Indeed, other high beta currencies, including the pound and the euro, have moved higher in forex trading as the U.S. session has opened. Aussie is a bit left behind right now as many traders wait to see what's next.