Gold Prices Still Responding To Fed Stimulus...

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Precious metals diverged this morning with gold climbing by $5.25 to trade at 1339.95, and silver has declined by 17 cents to trade at 20.275.  Gold futures declined on profit-booking, marking their first decline in 4-sessions just after the metal’s biggest one-day price gain in more than a year. Prices mostly traded in a range, as investors weighed the US Federal Reserve’s next move on monetary stimulus against the prospects for demand amid higher prices.

A report in Bloomberg yesterday, said that they are expecting the Fed to reduce its monthly asset purchases in September to 68 billion from the current 85 billion. Gold has recovered about $150 from a three-year low of $1,180.71 an ounce hit on June 28, after the US Federal Reserve said it would only start phasing out its stimulus once it was sure the economy was strong enough to stand on its own. This allayed fears of imminent cuts to the Federal Reserve’s monthly bond purchases, which is tantamount to printing money and supports gold’s appeal as a hedge against inflation.

The dollar traded lower against the euro and pared gains against the yen in a thin volume trade on Tuesday, as investors adjusted positions with technical levels in the absence of any economic data to drive direction. The combined government debt of 17-euro zone nations rose to 92.2% of gross domestic product, the highest in its history – in the first quarter of 2013, despite stringent austerity measures deployed in the region since the beginning of the financial crisis.

The base metals complex traded on a positive note as a result of a rise in risk appetite in the global market sentiments. Further, weakness in the US dollar acted as a positive factor for prices.
However, sharp upside in prices was capped on the back of LME inventories scenario and compounded by the scandal in inventory prices and Goldman. The Federal Reserve faces new pressure to explain why it lets banks trade raw materials and control supplies after congressional witnesses said regulators can’t really grasp what lenders are doing in industrial businesses.

Copper prices traded on a positive note in the yesterday’s trade increased around 0.5 percent on the back of decline in LME copper inventories around 0.4 percent which stood at 632050 tons.  Further, weakness in the DX coupled with upbeat global markets supported an upside in prices.


Traders can expect the base metals group to trade on the back of weak global markets. Further, strength in the DX will act as a negative factor. Additionally, a decline in China’s manufacturing data which is at 11-month low will exert downside pressure in prices. However, a sharp downside in prices will be cushioned or reversal can be seen on account of expectations of favorable manufacturing and services PMI data from the eurozone. Markets are expecting to see a climb towards 50 for eurozone PMI’s a miss could see some volatility in the marketplace.

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News Source: www.reuters.com 

Fed bond-buying could be more aggressive than new timeline: Dudley...

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The Federal Reserve's asset purchases would be more aggressive than the timeline Chairman Ben Bernanke outlined last week if U.S. economic growth and the labor market turn out weaker than expected, the influential head of the New York Fed said on Thursday.

Pushing back hard against market concerns over the withdrawal of quantitative easing, William Dudley stressed in a speech that the newly adopted timeline for reducing the pace of bond buying depends not on calendar dates but on the economic outlook, which remains quite unclear.

Turning to the question of when the Fed will ultimately raise interest rates, Dudley, a close ally of Bernanke, went so far as to say that recent market expectations for an earlier rate rise are "quite out of sync" with the statements and expectations of the policy-making Federal Open Market Committee."Economic circumstances could diverge significantly from the FOMC's expectations," Dudley told reporters at a briefing at the New York Fed's headquarters in downtown New York.

"If labor market conditions and the economy's growth momentum were to be less favorable than in the FOMC's outlook — and this is what has happened in recent years — I would expect that the asset purchases would continue at a higher pace for longer," he said.

Following a Fed policy meeting last week, Bernanke surprised markets by saying the central bank expected to reduce the $85-billion monthly pace of bond buying later this year and to end the QE3 program altogether by mid-2014, if the economy improves as expected.Global markets have since fallen sharply, with yields on the 10-year U.S. Treasury spiking to near a two-year high.
Dudley, who has a permanent vote on monetary policy, repeated and backed the timeline Bernanke articulated last Wednesday.

But he appeared to want to bolster efforts by some of his Fed colleagues this week to calm investors' worries that less Fed accommodation will hurt the slow U.S. and global economic recovery.
The labor market, which the Fed is targeting with QE3, "still cannot be regarded as healthy," Dudley said, adding "there remains a great deal of slack in the economy."

He expects Gross Domestic Product growth of about 2.1 percent this year, about the same as it has been since the recession ended in 2009. But Dudley expects that to pick up next year.

LEANING AGAINST HIGHER RATES

Frustrated with fitful U.S. recovery from the Great Recession, the central bank has kept the federal funds rate near zero since late 2008 and has promised to keep it there at least until the unemployment rate falls to 6.5 percent from 7.6 percent now, as long as inflation stays below 2.5 percent.
Even under the timeline for reducing QE3, "a rise in short-term rates is very likely to be a long way off," Dudley said.

"Not only will it likely take considerable time to reach the FOMC's 6.5 percent unemployment rate threshold, but also the FOMC could wait considerably longer before raising short-term rates," he said.
According to futures contracts at the Chicago Board of Trade, traders had pushed forward expectations for the first interest-rate hike to late 2014 despite published forecasts that show most Fed policymakers don't expect to tighten until 2015.The Fed's two main stimulus efforts - QE3 and low rates - are tied in different ways to sustainable economic growth.

Dudley and others at the central bank have long complained that U.S. government spending cuts and higher taxes could undercut the U.S. recovery, which has stumbled in each of the last few years.
Economic growth was revised lower on Wednesday to a below-average 1.8 percent in the first quarter, another worrying sign for the world's largest economy.

"I continue to see the economy as being in a tug-of-war between fiscal drag and underlying fundamental improvement, with a great deal of uncertainty over which force will prevail in the near-term," Dudley said.

Contact Us:

Asad Rasheed
Direct:04-3841906
Email:asad@cfb.ae
Email:info@cfb.ae

For more information please visit our website century financial brokers.

 Here are some useful links that you can follow:

Here is a CFB blog that gives useful daily Gold Analysis on dailybasis.

You can also follow CFB on facebook (useful advice on posts regularly)

Here is another blog that provides regular news and information and is very useful for Forex Signals.

News Source: www.reuters.com