Gold below $1,200 needed for ‘new equilibrium’

www.cfb.ae

A drop in gold prices below $1,200 an ounce may precipitate a fresh round of production cuts in the mining sector aimed at re-balancing the market, strategists told CNBC. Although the short-term view on gold remains overwhelmingly negative – with nearly three quarters of respondents in this week's CNBC gold sentiment survey forecasting further weakness for bullion – many say prices may start stabilizing below $1,200 – levels where a supply response from the mining sector may kick in.

"Gold production may fall at prices below $1,200 as it becomes uneconomical for many mines to operate profitably," said Mark O'Byrne, Founder and Executive Director of Dublin-based bullion dealer GoldCore.

An estimated 36 percent of the South African gold industry is loss-making even at today's spot prices, O'Byrne said, adding that 28 percent of the country's gold miners failed to turn a profit in the third-quarter, based on a gold price of $1,330.

Curbs on mine supply, according to UBS strategists Giovanni Staunovo and Dominic Schnider, "should come with the gold price decline toward the marginal cost of production."

  UBS estimates that 10 percent of supply "on a cash cost basis would be loss-making at a price between $1,050 and $1,150/oz. At this level, the gold market should be adequately balanced and find a new equilibrium," they said.

Edmund Moy, Chief Strategist at Morgan Gold and a former director of the U.S. Mint, said major gold miners such as Toronto-based Barrick Gold are already starting to scale back production.
The world's largest producer by sales, Barrick sold three Australian mines this year and Chief Executive Officer Jamie Sokalsky said the company is in talks to sell more assets.

"Many miners have been reducing their capacity like Barrick," Moy said but warned that "if demand for physical gold picks up in the U.S., it will take miners quite a while to re-open their shuttered mines and produce gold."

CNBC's latest survey of market sentiment showed 74 percent of respondents (20 out of 27) expect prices to fall this week, 15 percent (4 out of 27) say prices will trade around current levels while 11 percent (3 out of 27) say prices will rise. Spot gold staged a modest recovery on Monday, climbing 0.5 percent to just under $1,250 after falling earlier to $1,227.34, its lowest level since July 8 after Iran and major western powers struck an initial agreement on Sunday aimed at limiting Tehran's nuclear program in return for sanctions relief. Gold slipped on the perception that the deal lessens the risk of tensions in the Middle East, reducing gold's appeal as a safe-haven.

ETF outflows
Bullion has fallen about 25 percent so far this year, reflecting concerns that the U.S. Federal Reserve will start winding down its stimulus program as the economy improves. Accommodative monetary policy tends to cheapen the U.S. dollar, making gold more affordable for buyers paying in other currencies.

  "With Fed tapering imminent – and likely to be pulled forward to December if anything – the path of least resistance remains lower and honestly I'm surprised we're not sitting at $1,200 already," said Tom Essaye, a former NYSE floor trader, now President of Florida-based Kinsale Trading LLC, publisher of The 7:00's Report. "The next major catalyst in gold is inflation, but we're still months or quarters from that appearing in the stats."

Investors continue to liquidate holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund (ETF) and a key measure of investor sentiment, as gold grinds lower.
Holdings fell 4.50 tons to 852.21 tons last Friday, the sharpest drop since Nov. 1 and stood at their lowest since February 2009.

UBS expects more selling. "Once the schedule of the upcoming Fed taper becomes clear – we expect this to start in March 2014 – ETF outflows should intensify." The Swiss bank expects fund outflows of more than 300 tons over the next 12 months.


While futures and options flows combined with Asian demand have been strong enough to offset "modest" ETF outflows in recent months, "we advise investors not to count on these factors once ETF outflows intensifies," UBS said.

A stronger U.S. stock market performance – reflecting a propensity amongst investors to take on more risk – has also undermined the case for gold and the correlation will likely remain a drag on prices, survey respondents said.

Dow industrials eked out a slim gain on Monday to end at another record high, after the Nasdaq topped 4,000 for the first time in 13 years and then slipped to close below that level, Reuters reported. The S&P 500 is up 26.4 percent for the year and the Dow has risen seven weeks in a row.
"Gold continues to be an innocent victim of the frenzy on Wall Street," said Jeff Nichols, managing director at American Precious Metals Advisors. Gold's appeal may return, however, once investors realize that "super-stimulative" monetary policies pursued by major central banks are creating over-priced stock valuations out of kilter with fundamentals.

"Sooner or later, when the bubble bursts, equity investors will really lose their heads and gold stands to benefit, if not at first, certainly as the dust settles on Wall Street," he said.
Scott Carter, the chief executive officer of Los Angeles-based Lear Capital and a long-term gold bull, questioned whether the "wild gains" in the stock market – exemplified by the Dow over 16,000 – are sustainable.

"Let's pause for a moment and think about how outrageous that really is," Carter said. "We are living in a simulated reality. Investors are acquiring and holding gold because they know that the market bubble will burst."

Carter added: "Gold remains a hedge, a protection strategy, a diversification tool, and a long-term savings shelter. It has historically always done its job."

Contact Us:

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.cnbc.com

Why the Meltdown in Copper Prices this Week is Very Important for Precious Metals, and Equities Markets...

www.cfb.ae

The technical breakdown in Comex copper futures this week is not only an ominous clue for the red metal, but it's also a bearish signal for the entire raw commodity sector. December Comex copper futures prices this week dropped sharply and hit a three-month low. A bearish downside technical "breakout" occurred on the daily chart for the copper futures market, to suggest still more downside price pressure in the near term.

See on the monthly continuation chart for nearby Comex copper futures that prices have been trending lower for nearly three years and are on the verge of a downside breakout below key longer-term chart support at the $3.00 level.

Copper is a critical industrial metal used in construction worldwide. The fact copper prices dropped sharply this week is an early warning signal that construction activity worldwide could be flagging.
Indeed, history also shows copper market price moves can lead similar moves in the U.S. stock indexes. Along with the recent solid price downtrend in Nymex crude oil futures, the copper market meltdown this week suggests the raw commodity sector, in general, remains firmly controlled by the bears.

Importantly, the price action in copper and crude oil recently also corroborates the growing worries of worldwide deflationary price pressures.

Veteran commodity market watchers know that deflation is the archenemy of commodity markets.

www.cfb.ae

Contact Us:

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.marketwatch.com

Physical Demand Could Determine Gold Price Direction...

www.cfb.ae

How the physical market reacts to gold’s drop under $1,300 an ounce Friday could determine next week’s price direction for the precious metal, market watchers said.
December gold futures fell Friday, settling at $1,284.60 an ounce on the Comex division of the New York Mercantile Exchange, down 2.2% on the week. December silver fell Friday, settling at $21.317 an ounce, down 2.4% on the week. 

In the Wsj News Gold Survey, out of 34 participants, 18 responded this week. Of these, four see prices up, while 12 see prices down and two see prices sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Gold prices fell under $1,300 after a much stronger-than-expected U.S. October nonfarm payrolls report. The Labor Department said 204,000 jobs were created in October, nearly double the expectations going into the report. September and August employment numbers were revised up by a combined 60,000, while the unemployment rate rose to 7.3% from 7.2%. That was likely an effect of the shutdown.

Analysts said they expected the federal shutdown to have impacted the jobs figures, but the Labor Department said survey responses appeared normal. One downside to the higher-than-expected figures was that labor participation, which showed the lowest reading since 1978.

Gold market watchers said prices fell on thoughts that the stronger jobs report, along with Thursday’s higher-than-expected gross domestic product data, mean the Federal Reserve may consider tapering its bond-buying program known as quantitative easing, earlier than expected.
Andrew Busch, founder and editor of The Busch Update, said the Fed may still be cautious even with the economic improvement.

“The U.S. economy is creating jobs and wage gains sufficient for the Fed to begin tapering in December if they want. They will most likely be cautious again and wait until January.  For the markets, this data along with the Q3 GDP supports the view that the U.S. economy has returned to being the major engine of global growth,” he said. 

Whether gold continues to fall next week depends on physical demand, which has been largely absent lately, said Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA in Geneva, Switzerland. How Chinese and Indian buyers act on Monday will be critical in determining price direction.

“Monday is going to be really important. If there’s no improvement on demand in the physical front, prices could fall to $1,250,” he said. Physical buyers have been disinterested in gold because the market’s recent range-bound trade between roughly $1,350 and $1,275, he said. If prices slip out of the current range, that could spur physical interest, Nabavi said. Part of the problem, though, is the overhang of supply on the market which has outweighed demand.

Kevin Grady, owner of Phoenix Futures and Options, agreed. “If the market breaks support at $1,270-$1,275, prices could fall to $1,250. The key is the $1,250 area and if any physical buying comes up. We’ve seen that happen before,” he said.

George Gero, vice president with RBC Capital Markets Global Futures and a precious metals strategist, said now that it is almost mid-November, it will be time to watch the jewelry industry and see what trends emerge of the December holiday season.
He said he’s “not too optimistic on prices” for next week because of the jobs data, but expects some bargain hunting to come in which may limit the downside. 

Grady mentioned that open interest in gold futures rose when prices fell on Thursday, which is generally a sign of new short positions established and is considered bearish. Given how speculative traders increased their net-long positions in the most recent Commodity Futures Trading Commission’s commitments of traders report, there could be more long liquidation ahead, he said.
Looking toward next week, the U.S. economic calendar is light. Greater attention will be turned to China. Weekend economic data to be released include industrial production, fixed asset investment, retail sales and consumer price index data.

Additionally, between Saturday and Tuesday the historic meeting in Beijing, the Communist Party Third Plenum takes place which could have long-term ramifications for commodities markets. Details of what the plan might be are unknown, but China-watchers said focus is likely to be on financial, tax and social security reforms.

However, Barclays and Nomura analysts aren’t expecting a lot of details or decisive action immediately. That could mute the immediate impact on markets. However, the longer-term impact will be more important.


“The stakes are high for commodity markets. If Chinese policymakers decide on a set of moderate reforms while protecting robust economic growth, we expect the impact on commodities would be neutral to positive, as the recent strength in Chinese demand was supported by strong infrastructure spending. However, if the government sets out plans to rebalance the economy more forcefully, sentiment toward commodities demand, especially base metals, could turn negative,” Barclays said.

Contact Us:

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

Twitter set for volatile debut after IPO raises $1.8 billion

www.cfb.ae

Twitter Inc could face volatile trade in its debut Thursday on the New York Stock Exchange, analysts said, but they remained enthusiastic after the money-losing social media company priced its IPO above the expected range.

The microblogging network priced 70 million shares at $26 on Wednesday evening, above the targeted range of $23 to $25, which had been raised once before. The IPO values Twitter at $14.1 billion, with the potential to reach $14.4 billion if underwriters exercise an over-allotment option.

If the full overallotment is exercised, as expected, Twitter could raise $2.1 billion, making it the second largest Internet offering in the U.S. behind Facebook's $16 billion IPO last year and ahead of Google Inc's 2004 IPO, according to Thomson Reuters data.

The focus now turns to the first day of trading, with some analysts expecting a small price pop. Even with the share price increase, Twitter has approached its offering more cautiously than Facebook, which raised both the price and the number of shares offered before its IPO only to see the price fall substantially at the outset.

Twelve-month price targets on Twitter's stock range from $29 to $54.
Brian Wieser, an analyst at Pivotal Research Group who valued Twitter this week at $29 a share, said the stock appears to have strong institutional investor support and could easily close over $30 a share on its first day.

But he warned that trading could be volatile, given that Wall Street has struggled to value an unorthodox social media company with a newfangled business model.

"There's still so much uncertainty and it's so difficult to even identify how big the opportunity is," Wieser said. "Twitter will make Netflix look like General Electric as a bellwether of stability."
Twitter boasts 230 million global users, including heads of state and celebrities, but it lost $65 million in its most recent quarter and questions remain about long-term prospects.

It also lacks the ubiquity of Facebook or the "stickiness" factor that keeps people checking the No. 1 social network on a daily basis. A Reuters-Ipsos poll last month showed that 36 percent of people who signed up for a Twitter account say they do not use it.

Moshe Cohen, a professor at Columbia Business School in New York, said pressure on the company could quickly mount if shares lose steam out of the gate. "Twitter, as a company with no expectations of making profits for several years, needs its investors to have faith," Cohen said. "If that stock starts to show some negative momentum from the beginning, it could last for a while."

Twitter, however, is listing amid the strongest market for U.S. IPOs since 2007, with equity markets soaring and uncertainty around the U.S. debt ceiling subsiding at least temporarily.
A number of recent IPOs have doubled on their first day of trading, including Container Store Group, restaurant chain Potbelly Corp and software company Benefitfocus Inc.

Twitter hiked its target IPO price on Monday from an initial range of $17 to $20. All of the proceeds from the IPO will go directly to the company, with no insider selling taking place.

Two sources said Twitter's underwriters will allocate roughly 20 percent of the offered shares to retail investors, while the vast majority of the remaining shares will go to large, "long-only" funds.
Goldman Sachs Group Inc, which beat arch-rival Morgan Stanley in gaining the lead position on the Twitter IPO, tops the list of U.S. technology bookrunners this year with an 18.3 percent market share, up from 11 percent a year ago when it ranked fifth, according to Thomson Reuters data.

Morgan Stanley and JPMorgan Chase & Co also led the IPO.
AVOIDING FACEBOOK'S MISTAKES
Twitter has focused on avoiding many of the pitfalls that plagued Facebook during its $16 billion IPO last May. The company priced shares more conservatively than Facebook did and listed on the New York Stock Exchange rather than the Nasdaq.

Trading glitches and the increase in both the price and number of shares in the Facebook offering contributed to a sustained decline from the $38 IPO price, with the shares taking more than a year to recover.

The high level of interest stoked by Twitter's road show spurred speculation in recent days that its bankers could raise the price again significantly higher than $25, but they ultimately did not.
"I'm glad they didn't take it up higher, as speculated," said Suntrust Robinson Humphries analyst Robert Peck. "It still provides enough upside for investors and provides a nice contrast to Facebook."

CHALLENGES REMAIN

Despite Twitter's massive valuation, some analysts have expressed concerns about whether it can sustain user growth and continue to ramp up advertising sales at a rapid clip.
Twitter, which has extensively courted large brands, still generates relatively little revenue per user compared with Facebook, while the majority of its users are located outside the United States in countries such as Indonesia or Brazil, which are less lucrative digital advertising markets.

During its road show over the past week, Twitter executives assured investors that the company could wring more money out of international users and smaller businesses by opening offices abroad and expanding its self-serve advertising products.

"Twitter has clear similarities to Google, Facebook and LinkedIn, but we would argue that Twitter exceeds these alternatives on the basis of its branded ad potential," Evercore Partners analysts said in a note, as they initiated coverage with an "overweight" rating and a price target of $43.
"The distinction in how Twitter charges advertisers stands to deliver higher than expected ad revenues and ARPU in the years to come." Analysts, however, say the company could encounter a slew of regulatory and policy hurdles in foreign countries as it expands.

Twitter said last month that its third-quarter revenue more than doubled to $168.6 million, but its net loss widened to $64.6 million from $21.6 million a year earlier as costs ballooned.
Twitter's expenditures will likely continue to rise as it expands its international presence and continues to invest in infrastructure and acquisitions.

Twitter's well-known intellectual property vulnerabilities could also force the company to invest heavily to expand its patent portfolio, as Facebook has done since going public. Twitter disclosed Monday that it had received a letter from International Business Machines Corp accusing the social media company of infringing on at least three U.S. patents.
Twitter is set to trade on the New York Stock Exchange on under the ticker TWTR.

Contact Us:

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

Damac Tests Appetite for Dubai Property With U.K. IPO Plan...

www.cfb.ae

Damac Properties Development Co., a Dubai-based housing developer, plans to raise as much as $500 million in a U.K. initial public offering that will test appetite for the emirate’s recovering property market.

Al Firdous Holding and Sahira Co., controlled by Damac founder and chairman Hussain Sajwani, will offer global depositary receipts in a new company called Damac Real Estate Development Ltd. in the IPO. Each GDR will be worth three ordinary shares of the company.

Damac has started projects including Hollywood-themed apartment towers and a Trump International golf course this year as Dubai’s property market recovers from a 2008 real estate crash that brought the sheikhdom to the brink of bankruptcy. The pace of the revival has prompted regulators to take steps to guard against a repeat of the bubble.

“There will definitely be appetite because Damac is a proxy to Dubai’s real estate, which is recovering at the moment,” Taher Safieddine, an analyst at Shuaa Capital PSC. “They have witnessed the boom and bust and managed to come out of the crisis relatively in a good shape.”

Damac has assets valued at $2.3 billion and it made a first-half profit of $332 million, up from $212.1 million in all of 2012, according to the filing. Gross profit margins averaged 44 percent in the three years through 2012 and 64 percent in the first half of this year, the filing said.

Dubai Focus

“Our biggest operations will continue to be in Dubai,” Sajwani said in an interview today. “The Middle East as a territory, especially Saudi Arabia where we have already developments and operations, will continue to grow for us.”

While Damac tends to be focused on building and selling homes, investors will compare the company’s valuation to Emaar Properties PJSC, Shuaa’s Safieddine said. Emaar, Dubai’s biggest publicly traded developer, generates much of its income from leasing malls and operating hotels, providing a cushion in downturns, he said. Emaar’s shares surged 63 percent this year.

Citigroup Inc. and Deutsche Bank AG along with Samba Capital and Investment Management Co. and VTB Capital Plc are managing the IPO, according to the statement.

Sajwani will remain Damac’s chairman and chief operating officer, according to the filing. Dubai’s decision to increase property-sale fees to 4 percent will have little effect on sales because the rate is still below countries in Europe and Asia, Sajwani said.


Damac, which partnered with Italian fashion house Fendi SpA and Paramount Pictures Corp. is expanding outside its home market with towers in cities across the region including Abu Dhabi, Riyadh, Jeddah, Beirut, Amman and Baghdad.

Contact Us:

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.bloomberg.com

Gold Weaker On Profit Taking, Bearish Outside Markets; FOMC On Deck

www.cfb.ae

Gold prices ended the U.S. day session moderately lower Tuesday. A lack of fresh, bullish fundamental news and a looming FOMC statement kept buyers on the sidelines. Some profit taking from recent gains was also featured Tuesday. The key “outside markets” were in a bearish daily posture for the precious metals Tuesday—a firmer U.S. dollar index and weaker crude oil prices. December Comex gold was last down $6.50 at $1,345.70 an ounce. Spot gold was last quoted down $7.20 at $1346.50. December Comex silver last traded down $0.023 at $22.515 an ounce.

The market place awaits the results of the U.S. Federal Reserve’s Open Market Committee meeting, which began Tuesday morning and ends early Wednesday afternoon. There will be no press conference by Fed Chairman Bernanke after this meeting. The FOMC is expected to leave U.S. monetary policy unchanged, but as usual traders and investors will be closely parsing the FOMC statement, looking for any clues on the timing of upcoming changes in policy.

Most in the market place presently believe the Fed will not start to cut back on its monthly bond purchases until early next year—most likely the second quarter at the earliest. This scenario favors the raw commodity market bulls, including the precious metals markets. Any hints at this week’s FOMC meeting that the “tapering” of monetary policy could come sooner than the second quarter of 2014 would likely be bearish for most markets.

There was a heavy slate of U.S. economic data released Tuesday and it was a mixed bag for markets. The highlight was a weaker consumer confidence index for October, amid the U.S. government shutdown. The confidence data did give the gold market a brief lift, but it did not last long.
The U.S. dollar index was firmer Tuesday on more short covering after hitting a 10.5-month low last Friday. Meantime, Nymex crude oil futures were lower and hovering not far above the recent two-month low.

The London P.M. gold fix is $1,346.75 versus the previous P.M. fixing of $1,361.00.
Technically, December gold futures prices closed nearer the session low Tuesday. The gold market bulls and bears are still on a level near-term technical playing field. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,375.40. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,300.00. First resistance is seen at this week’s high of $1,361.80 and then at $1,375.40. First support is seen at Tuesday’s low of $1,339.80 and then at $1,300.00.

December silver futures prices closed near mid-range Tuesday amid chart consolidation. The silver bulls and bears are on a level near-term technical playing field. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $23.445 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $21.00. First resistance is seen at this week’s high of $22.715 and then at last week’s high of $21.91. Next support is seen at Tuesday’s low of $22.30 and then at $22.00.


December N.Y. copper closed up 75 points at 327.70 cents Tuesday. Prices closed near mid-range. Bulls and bears are on a level near-term technical playing field. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at the October high of 335.50 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the October low of 321.50 cents. First resistance is seen at 328.55 cents and then at 330.00 cents. First support is seen at Tuesday’s low of 324.60 cents and then at last week’s low of 323.40 cents.

Contact Us:

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.marketwatch.com

U.S. Political Stalemate Remains Focus For Gold Market; FOMC Minutes On Tap...

www.cfb.ae

Barring a weekend political agreement, the gold market will remain focused on the partial U.S. government shutdown and political quagmire next week, analysts said.
Several said this should be more supportive for gold now that the dispute has turned into a several-day affair, as opposed to some standoffs in the past that were resolved at the last minute before a major deadline.

The current shutdown in the U.S. is the result of a lack of agreement over a continuing resolution on the budget, which led to a shutdown of so-called non-essential services on Tuesday, analysts said. Further, the market is starting to look ahead toward the Oct. 17 date by which the Treasury has said it will hit its borrowing authority, meaning another potential political fight over the debt ceiling.

Other factors that could influence the market next week include minutes of the last meeting of the Federal Open Market Committee and the return of Chinese buyers after a week-long holiday.
This week, gold eased despite the partial U.S. government shutdown. The December contract lost $29.30 for the week, or 2.2%, to settle Friday at $1,309.90 an ounce on the Comex division of the New York Mercantile Exchange. December silver slipped 7.9 cents to $21.752.

Some market participants were puzzled that gold couldn’t tick higher despite the U.S. shutdown. Traders offered several theories. Sean Lusk, director of commercial hedging with Walsh Trading, pointed to the absence of Chinese buying since that country was observing an extended holiday, temporarily taking away one of the world’s two largest physical buyers of the metal. And, he continued, recent downgrades of gold outlooks by investment banks may have dented some investor enthusiasm.

Others said gold prices may have already factored in the shutdown prior to this week, while others still suggested veteran traders may have viewed the political battle as largely posturing for lawmakers’ constituencies, expecting them to eventually allow the government to re-open.

Whatever the case, many anticipate the metal will get a lift if the political stalemate and U.S. government shutdown goes into a second week. Of 21 respondents in the weekly News Gold Survey, 10 see prices up next week, while six see prices down and five see prices sideways or unchanged.

With the government already shut down, the approaching debt-ceiling deadline adds another concern for investors since there will be worries that credit agencies could downgrade U.S. debt, Lusk said. Standard & Poor’s did so during the last major battle over the debt ceiling back in 2011.
“Right now, we’re just trading off of chart points here – support and resistance – because there is nothing else to really trade off,” Lusk said, citing the dearth of U.S. economic data since agencies such as the Labor Department are not releasing reports during the shutdown.

“But as we get into next week and this thing extends, and there is no deal today or over the weekend, I feel we’re going to trade higher. We will get some temporary safe-haven buying.”
Spencer Patton, chief investment officer for Steel Vine Investments, concurred. Conversely, both men would envision gold retreating if Republicans and Democrats suddenly found a middle ground and struck a compromise.

“If there is no resolution, I expect that to be bullish for gold,” Patton said. “If there is a resolution, I expect that would be bearish for gold since that would take some of the uncertainty out of the market.”
Based on some of the comments coming out of the Republican camp, Patton added, he suspects that any agreements on the continuing resolution on the budget and debt ceiling may come at the same time. “But I don’t think that will happen for another two weeks,” he added.

Meanwhile, if the partial U.S. government shutdown continues, that means no more economic data from government agencies. As it was, Friday’s key monthly September report on non-farm payrolls was delayed.

Under such a scenario, there may be an increased emphasis on Wednesday’s scheduled release of minutes of the Federal Open Market Committee meeting that ended Sept. 18. A spokesman for the Federal Reserve told world News that the Fed remains open and the minutes should be released. Several analysts explained that the Fed is not considered a part of the government and does not rely upon Congress for funding.

The FOMC meeting ending Sept. 18 was the one at which policy-makers opted to leave their $85 billion-per-month bond-buying program, known as quantitative easing, in place when expectations had been for a modest tapering.

“If there is no agreement in the U.S., then I would guess the minutes of the FOMC next Wednesday should not be good for the dollar,” said Afshin Nabavi, head of trading with MKS (Switzerland) SA. This, in turn, should be supportive for gold, he continued. The yellow metal tends to move inversely to the greenback.

Lusk said it is doubtful that the FOMC members would taper at their meeting at the end of October with the government shut down, meaning furloughs of many workers, and since no more government reports are coming out to offer fresh insight into the economy. “I think the $85 billion per month is going to be kept in place,” he said.

Meanwhile, a week-long Chinese holiday will end next week, bringing potential buyers of physical metal back into the market, observers said. “That should provide some kind of support,” Nabavi said.
Technical-chart considerations also will play a role in what happens to gold, as always, several observers said.


“This week’s dip below $1,300 put a technical dent in the fundamental perspective that the financial uncertainty facing markets over a U.S. government shutdown should prompt gold to soar,” said Ralph Preston, principal with Heritage West Financial. “Gold needs to rapidly close back over the 50-day moving average at $1,343 or risks losing momentum and following back below $1,275.”

Contact Us:

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.wsj.com