Gold moves lower on FOMC statement, Indian demand slowdown-Forex Brokers

 Gold moves lower on FOMC statement, Indian demand slowdown..

Gold futures eased lower Wednesday, as pro growth statements from the FOMC weighed on the precious metal

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,640.65 a troy ounce during U.S. trade, easing down 0.19%.    

Gold futures were likely to find short-term support at USD1,613.55 a troy ounce, the low from April 4 and resistance at USD1,658.95, the high from April 16.

The Federal Open Market Committee stated that it expects economic growth to remain moderate over the coming quarters and then to increase gradually.

In addition, the Fed boosted its outlook for growth and is slightly more optimistic on employment adding to the gold bearish sentiment.

Gold prices ended higher on Tuesday as investors were relieved when a successful auction sent yields on Dutch debt lower, a day after the government in the Netherlands collapsed in a crisis over budget cuts.

However gains were limited after an auction of Spanish short term government debt saw the country’s borrowing costs almost double, while Italy’s borrowing costs rose to the highest level since January after an auction of government bills.

Although gold’s appeal as a safe haven is boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal in recent months.

A weakening euro and stronger dollar have weighed on gold instead.

In other news, Indian gold demand has slipped despite the Akshaya Tritiya festival this week further adding to the worldwide bearish sentiment on the yellow matter

Elsewhere on the Comex, silver for July delivery plunged 0.84% to trade at USD30.55 a troy ounce, while copper for July delivery gained 0.63% to trade at USD3.70 a pound.

Asad Khan
Financial Analyst  (CFB) Trading Team

Oil Falls to Lowest Since February Before U.S. Jobs Data

Oil fell below $100 a barrel for the first time since February as U.S. employers added fewer workers than forecast, stoking concern that demand won’t be enough to cap inventories at their highest level in 21 years.
Futures declined as much as 4.9 percent after Labor Department figures showed payrolls climbed 115,000, the smallest gain in six months. The median estimate of 85 economists surveyed by Bloomberg called for a 160,000 advance. Elections in France, Greece, Italy and Germany this weekend may determine how the region’s governments respond to Europe’s financial crisis.
“The oil market remains focused on the economy,” said David Greely, head of energy research at Goldman Sachs Group Inc. in New York. “The economic news from Europe and the U.S. has been a little disappointing. It looks like the U.S. is growing a little slower than we expected.”
Crude oil for June delivery dropped $4.57, or 4.5 percent, to $97.97 a barrel at 1:51 p.m. on the New York Mercantile Exchange. The contract touched $97.51, the lowest level since Feb. 10. Prices are down 6.6 percent this week, heading for the biggest weekly decline since September.
Brent oil for June settlement fell $3.13, or 2.7 percent, to $112.95 a barrel on the London-based ICE Futures Europe exchange. The contract reached $111.76, the lowest level since Feb. 2. The European benchmark contract’s premium to New York futures widened to $14.98 from $13.54 yesterday.
The jobless rate fell to a three-year low of 8.1 percent, and earnings stagnated. The participation rate, which indicates the share of working-age people in the labor force, fell to 63.6 percent, the lowest level since December 1981, from 63.8 percent.

Labor Participation

“The only reason that the jobless rate went down was that the labor participation rate fell to the lowest level since 1981,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “This is going to weigh on the crude market and especially on equities.”
Euro-region services and manufacturing output contracted more than initially estimated in April. A euro-area composite index based on a survey of purchasing managers in both industries dropped to 46.7 from 49.1 in March, London-based Markit Economics said today. That’s below an estimate of 47.4 published on April 23.
French voters go to the polls May 6 in a final runoff between President Nicolas Sarkozy and Socialist challenger Francois Hollande and Greeks will pick a new government in a national election the same day. There will be local elections in Germany and Italy.

‘Show Cracks’

“The European situation continues to be a drag on the market,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “There are elections this weekend that could have a major impact on policy. The U.S., which had been holding up pretty well, is starting to show cracks.”
The Standard & Poor’s 500 Index declined 1.4 percent. The Standard & Poor’s GSCI Index of 24 commodities was down 2.5 percent. The drop was led by crude.
Oil in New York climbed to a five-week intraday high of $106.43 on May 1 after a report showed that U.S. manufacturing increased at the fastest pace in 10 months.
“Volatility has returned to the market,” Greely said. “We’re going to remain in a choppy range through the second quarter and then move higher in the second half of the year as the U.S. and Chinese economies improve.”
The fall in prices accelerated after breaking through technical support along its 100-day moving average, data compiled by Bloomberg showed. The indicator stands at $102.36 a barrel today. Buy and sell orders tend to be clustered near chart-support levels.

Oil Supply

U.S. crude stockpiles increased 2.84 million barrels to 375.9 million in the seven days ended April 27, the most since September 1990, according to an Energy Department report May 2. Domestic output gained 8,000 barrels a day to 6.12 million, the highest level since November 1999, the report showed.
Gasoline consumption fell 0.3 percent to an average 8.66 million barrels a day in the four weeks ended April 27, leaving demand 4.7 percent lower than a year earlier, according to the department.
“We’re now focused on weak demand and high inventory levels,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Sobriety has returned to the market with Iran tension easing. Oil above $100 is not sustainable with the economy in this condition.”
Oil in New York has fallen 12 percent from a March 1 intraday peak of $110.55 a barrel as tensions have eased between Iran and Western nations over the country’s nuclear program.

‘Psychological Number’

“This is the biggest psychological number on the board for both investors and consumers,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Falling below $100 will have a major impact on consumer confidence as it signals some relief from high prices.”
Gasoline for June delivery dropped 8.56 cents, or 2.8 percent, to $2.9644 a gallon in New York. The contract touched $2.9407, the lowest level since Feb. 8.
The national average retail price of unleaded regular gasoline in the U.S. fell 0.1 cent to $3.802 a gallon yesterday, according to a daily survey by AAA, the country’s largest motoring organization. That’s down from $3.936 on April 4.


Asad Khan
Financial Analyst  (CFB) Trading Team

Forex Daily Outlook May 3 2012

US Unemployment claims, US ISM Non-Manufacturing PMI and EU rate decision are the major market-movers. Let see what awaits us today.

In the US, Unemployment Claims measuring the number of Americans filing initial claims for unemployment benefits. The recent readings were disappointing with a higher than expected claims of388,000 in the previous week while expected a smaller figure of 374,000. This time a drop to 381,000 is anticipated.

Later in the US, ISM Non-Manufacturing PMI, measuring sentiment and economic conditions among Service sector managers, dropped more than predicted to56.0 in March from57.3 in February while expected to decline to 56.9. Nevertheless this reading still indicates expansion.

Later on in the US, Prelim Non farm Productivity, measuring labor output in the manufacturing sector excluding the farming industry, gained 0.7% in the fourth quarter of2011. A Drop of 0.4% is expected for the first quarter of 2012.

More in the US, Prelim Unit Labor Costs, measuring price of labor in the non farm industries, increased by 1.2% in the fourth quarter of 2011, from a 2.1% decline in the third quarter while anticipated a smaller gain of 0.9%. Another increase of 2.7% is predicted for the first quarter of 2012.

Moreover in the US,John William President of the Federal Reserve Bank of San Francisco and Dennis Lockhart, President of the Federal Reserve Bank of Atlanta are scheduled to speak in Santa Barbara. As FOMC voting members clues may be provided on future monetary policy and interest rates.

Also in the US, Natural Gas Storage increased to 47 billion last week from 25 billion in the week before. A similar figure is predicted.

Finally in the US, Challenger Job Cuts, the number of job cuts that were announced by employers over the past month, -8.8% is likely similar to the last report.

In Europe, French Industrial Production, monthly measurement to vale the total manufacturers, mines, and utilities output, due to rise up 0.30% on March up to 0.70% now.

Later in Europe, Producer Price Index (PPI) the producers price change for finished goods and services on the past month no change is predicted and  0.60% is due to remain.

More in Europe, Minimum Bid Rate. ECB maintained interest rates at 1.0% in April as expected and is likely to keep rates unchanged this time. An important ECB Press conference will follow the release of the Minimum Bid Rate.

In Great Britain, Nationwide House Price Index (HPI); housing industry’s important indicator to value the selling price change of mortgages homes backed by Nationwide, decreased 1.0% in March following 0.4% gain in the previous month while an increase of 0.3% was predicted. This time a 0.6% gain is expected.

Later in Great Britain, Services Purchasing Managers’ Index (PMI); Monthly Survey to value the business conditions like employment, new orders, supplier deliveries, inventories and so on, decreased less than predicted reaching55.3 in March after53.8 in February. A further decline to 54.4 is anticipated,

Later on in Great Britain, Halifax HPI increased 2.2% in March from 0.4% drop in February while a decline of 0.3% was anticipated. A 1.2% increase is predicted this time.

 Asad Khan
Financial Analyst  (CFB) Trading Team

 

Yields rise as Spain sells 2.52 bln euros of bonds...

The Spanish government sold more bonds than it planned Thursday, but saw borrowing costs rise. The government auctioned a total of 2.52 billion euros ($3.31 billion) of bonds, exceeding its target range of 1.5 billion to 2.5 billion euros. Spain sold 978.9 million euros of three-year bonds at a yield of 4.04%, up from 2.62% in a previous sale. Bids exceeded supply 2.88 times versus 2.37 times at the last auction in March. Spain also sold 764.5 million euros of five-year bonds, producing an average yield of 4.75% and a bid-to-cover ratio of 3.69. A previous sale in February saw a yield of 3.57% and a bid-to-cover of 2.7. A sale of 773 million euros of bonds maturing in 2017 saw a yield of 4.96% and produced a 3.1 bid-to-cover.

Asad Khan
Financial Analyst  (CFB) Trading Team

European Unemployment Rate Rises to Highest in Almost 15 Years.

European Unemployment Rate Rises to Highest in Almost 15 Years...

Euro-region unemployment rose to the highest in almost 15 years and manufacturing contracted for a ninth month, adding to signs the economy continues to weaken.

The jobless rate in the 17-nation euro area increased to 10.9 percent in March from 10.8 percent in February, the European Union’s statistics office in Luxembourg said today. That’s the highest since April 1997, when the rate reached a record high, according to Bloomberg News data going back to 1990. A manufacturing gauge in the region fell to 45.9 in April from 47.7 in March, Markit Economics said.

The European Central Bank will probably keep its benchmark interest rate at a record-low 1 percent tomorrow, according to all 58 economists in a Bloomberg survey. ECB President Mario Draghi said on April 25 that European leaders need to create a “growth compact” as spending cuts across the region damp activity and prompt a backlash among citizens.

The euro-area jobless rate in March matched the median forecast of 31 economists in a Bloomberg survey. The number of people out of work in the region rose by 169,000 from February to 17.4 million.

In the 27-nation European Union, the unemployment rate was 10.2 percent in March, unchanged from the previous month and up from 9.4 percent in March 2011.

Spain had the region’s highest unemployment rate in March, at 24.1 percent, with Greece at 21.7 percent, the report showed. The lowest rates were in Austria and the Netherlands, at 4 percent and 5 percent respectively.

Asad Khan
Financial Analyst (CFB) Trading Team

DAILY FOREX FUNDAMENTAL OVERVIEW 1st may

DAILY FOREX FUNDAMENTAL OVERVIEW

EUR

“We fear things are likely to get worse before they get better”

Spain sank into recession in the first quarter of 2012. The economy contracted 0.3 per cent, after shrinking by the same amount in the previous quarter, Madrid-based National Statistics Institute data showed on Monday.

“We fear things are likely to get worse before they get better,” Martin van Vliet, a senior euro-region economist at ING Bank in Amsterdam said in a note.

“The recession will almost certainly deepen in the coming quarters, pushing unemployment to even more dramatic highs.”

“The wheels are very clearly coming off the economy,” Jefferies economist David Owen said.

“It wouldn't surprise me to see a very significant decline in GDP both in the second and third quarters this year, and it's still reasonably easy to envisage GDP to be down about 1.5 percent this year.”

USD

“What was encouraging [in the personal income report] was that the income numbers improved. Our expectation is that job growth does increase gradually”

- Peter Newland, an economist at Barclays Capital Inc.

U.S. consumer spending was boosted by higher than expected incomes, said the Bureau of Economic Analysis on Monday. Household purchases increased 0.3 per cent. Incomes gained 0.4 per cent, the most in three months.

“This report sets up fairly well for the second quarter,” said Peter Newland, a U.S. economist at Barclays Capital Inc. in New York.

“What was encouraging was that the income numbers improved. Our expectation is that job growth does increase gradually” this quarter, he said.

“The trend is good from the perspective that incomes are outpacing spending, so we don't see consumers dipping into savings as much,” said Kathy Lien, head of research at GFT Forex.

“Of course, markets like increased spending, but in this situation it's a healthy trend in terms of reducing household debt levels,” she said.

GBP

“This is year three of a global recovery, yet growth is still anemic”

- Jonathan Plant, market analyst at Liberum Capital Ltd.

U.K. stocks closed lower on Monday.

The benchmark FTSE 100 Index lost 0.68%, or 39.33 points, to 5,737.78. The FTSE All-Share Index declined 0.64%, or 19.30 points, to 2,984.67.

“This is year three of a global recovery, yet growth is still anemic,” said Jonathan Plant, market analyst at Liberum Capital Ltd. in London.

“Conditions feel like May 2010 with an absence of bid or offer in the equity market. This is a macro- rich week. The globe continues to be attached to the austerity- growth pendulum.”

CHF

“Investors are still reluctant to act and want more clarity amid continuing uncertainty”

- Peter Buergler, a trader at Luzerner Kantonalbank AG

Swiss stocks declined on Monday.

The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies, retreated 0.33%, or 20.02 points, to 6,096.34. The broader Swiss Performance Index fell 0.12%, or 6.79 points, to 5,697.40.

“The stock markets are in a kind of conflict between good quarterly results of companies and economic data that tend to be worse than expected, especially in Europe,” said Peter Buergler, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland.

“Investors are still reluctant to act and want more clarity amid continuing uncertainty.”

JPY

“We’re quite optimistic about Asia”

- Adrian Zuercher, a fund manager at Credit Suisse Asset Management

Banks in Japan were closed in observance of Showa Day.

Japanese stocks retreated on Friday. The Nikkei 225 lost 0.43%, or 40.94 points, to 9,520.89. The broader Topix fell 0.72%, or 5.83, to 804.27.

Asian stocks closed in green on Monday.

“We’re quite optimistic about Asia,” said Adrian Zuercher, a fund manager at Credit Suisse Asset Management in Hong Kong.

“It’s clear that China and the rest of Asia will be generating a higher growth rate compared to the rest of the world.”

Asad Khan
Financial Analyst (CFB) Trading Team

Australia cuts interest rates as economy slows

The decision by the Reserve Bank of Australia follows the release last week of relatively weak inflation data. Economists had widely predicted a cut of only a quarter percentage point.

Australia's slowing economy has pushed the country's central bank to slash interest rates by 0.5 percentage points to 3.75%, in a sign that the eurozone crisis and the cooling in China are affecting the global economy.

Tuesday's cut was larger than most foreign exchange traders had anticipated and is expected by some analysts to be followed by several more cuts before the end of the year.

The decision by the Reserve Bank of Australia follows the release last week of relatively weak inflation data. Economists had widely predicted a cut of only a quarter percentage point. The last interest rate cut was in December.

"This decision is based on information received over the past few months that suggests that economic conditions have been somewhat weaker than expected, while inflation has moderated," the Reserve Bank governor, Glenn Stevens, said in a statement.

Like Brazil and other economies that have boomed in recent years on the back of commodity exports, Australia has suffered from a high exchange rate and rampant property price boom.

The high-value Australian dollar has generated billions of dollars for mining companies during a long boom largely fuelled by China's demand for iron ore, coal and natural gas.

But the strength of the currency, which has added to the cost of exports, has undermined more price-sensitive industries such as agriculture, tourism and manufacturing, which have suffered as mining has grown.

Economists have accused Australia's government of allowing the economy to become a "one-trick pony" with an over-reliance on mining and vulnerable to a downturn in Chinese manufacturing.

Stevens said a slowdown in demand from China was partly to blame for the weaker economic outlook.

Over the past year house prices have slumped as mortgage rates have increased and consumer spending tightened.

Michael Blythe, chief economist with Australia's Commonwealth Bank, said the central bank was probably hoping to provide "a positive shock to consumer and business confidence by doing a bit more than people were expecting".

Last week, the Australian Bureau of Statistics released figures showing the annual inflation rate to March was 1.6%, down sharply from 3.1% a year earlier. The reserve bank's target inflation rate for the year is 2% to 3%.

The bank cited the inflation data and a subdued housing market as reasons behind its decision. Stevens also noted slowing growth in the world economy, singling out the more moderate pace of growth in China and continuing tough conditions in Europe.

Sales of new homes fell to their lowest level in more than a decade in March, dropping 9.4% from a month earlier, the nation's Housing Industry Association said on Monday. Housing prices in the country's capital cities are down 4.5% from the same period a year ago, the statistics bureau reported.

The housing association's chief economist, Harley Dale, had called for the bank to cut rates by half a percentage point.

"The Bank needs to send a clear signal that it is back on the case of assisting an economy that is clearly weaker than it anticipated in 2012," Dale said.

Asad Khan
CFB (Trading Team)