13 JUNE 2013: ASIAN MARKET PLUNGES WITH STRONGER YEN

The Dollar plunged to its lowest level in ten weeks against JPY at 94.81, while the Asian stock markets experienced one of its worst one day down falls. All the Asian markets ended in red territory with the Japanese Nikkei 500 index falling as much as 5.3 %. Tumbling Japanese shares accelerated the fall of the Dollar as Nikkei- investors continued to unwind earlier hedges against a weaker Yen. The Dollar has lost 8.6 % since hitting a four year high of 103,74 on May 22.

The latest developments demonstrate the gamble involved in Central Bank’s monetary easing. Investors have snapped up Japanese shares between mid-November and May, as a weaker Yen promised to fatten exporter’s overseas revenues. Now a stronger Yen threatens to do the opposite, leading to further sell-offs in the Nikkei. The tumults in Asia come on top of uncertainty about whether the US Federal Reserve (FED) will pare back its stimulus program buying bonds and treasury bills. Japanese bond selling is adding to the pressure on the currency.

The fall in Asian shares followed a weak session in New York. Dow Jones Industrial was down 0.84 % while the technology heavy Nasdaq lost 1.06. The Dollar lost 0.3 % against a basket of currencies, DXY, ending at 80.741 after falling below 80.651, a level not seen since February. The Dollar has lost 4 % since its three-year high on May 25th. Adjustments in overextended long USD positions rather than a changing perception of US growth and Fed outlook, seems to be behind the weaker Dollar.

Weakness in the Dollar saw the Euro climb to a near four-month high of 1.3370. Euro/USD trades now at 1.3356. It is difficult to explain the stronger Euro, the recession in the Euro zone taken into account. Recent polls show, however, that a majority of analysts believe that ECB will keep the interest rate at the present level. Optimists are also suggesting that the euro zone will return to modest growth later this year.

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12 JUNE 2013: USD/JPY REBOUNDS AFTER STEEP FALL

The Dollar steadied against the Yen on Wednesday, suffering its biggest drop in three years yesterday. USD/JPY trades at 96.44, sinking as low as 95.60 in the previous session. The 2.7 % fall marked the biggest one-day drop in the USD/JPY currency since May 2010. The Dollar continued to slip against the Euro at 1.3307. The Dollar index DXY steadied after slumping to a four-month low of 81.034. The weakened Australian Dollar gained 0.4% and trades 0.9469 to a USD.

Bank of Japan (BOJ) disappointed investors hoping for an extension in the maximum duration of its fixed-rate loans, similar to the European Central Bank (ECB) long term financing operation. Such extension would have been aimed at quelling the volatility in the bond market. The market expected such a move. When that did not happen, the Yen sellers had to liquidate short positions. Yen buying was strengthened by exporters shrinking purchases of the Dollar.

The volatility and tumult in the Japanese bond market have raised worries that it could undercut the Abe government and BOJ’s efforts of monetary easing. USD/JPY had, until the recent turnaround, fallen continuously from 80 to 103.65 Yen to a Dollar. The weaker Yen gave Japanese export a welcomed boost, but most of this advantage has been eaten by the stronger Yen experienced in June.

The US and European stock markets tumbled yesterday on nervousness over FED’s monetary easing exit strategy. Dow Jones and Nasdaq fell from 0.76 to 1.06 %. At the General Assembly of Facebook, CEO, Mark Zuckerberg, faced a barrage of questions about the stock price. Facebook’s shares have fallen 37% since its introduction. In Japan, the Nikkei index fell below 13.000 as the strong Yen dragged exporters down.

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07 JUNE 2013: DOLLAR PLUNGES IN BROAD SELL-OFF

The Dollar plunged against the Euro, Japanese Yen, and other currencies as investors reduced bets on the greenback on concerns that today’s US jobs report will disappoint. Euro/USD trades at 1.3262. American stocks fell in tandem with a weaker USD, but rebounded to end in positive territory. Dow Jones added 0.53 % to climb back above the 15.000 level. Nasdaq gained 0.66 % to 3 424. The changes seem to be technically driven by psychological factors.

A poll amongst economists expects 170 000 new jobs could've been added to the US economy in May with an unemployment rate of 7.5 %. Fear of a weaker than expected job report prompted, however, investors to unwind bets on a stronger Dollar that had been profitable for months. Gold prices, which have been under strong pressure for months, suddenly rose 1 percent to USD 1412 an ounce as investors sold long positions on the Dollar.

The Euro gained after the European Central Bank, ECB, left interest rates unchanged. ECB President, Mario Draghi, stated that further monetary support was unlikely in the near future. ECB has kept interest rates at a record low of 0,5 % waiting for a turnaround in the Euro zone. Bank of England have also chosen to leave their loose monetary policy unchanged. British Sterling, GBP, has jumped against the Dollar at 1,5612 and gained substantially during the last few days from low 1.51 levels.

Concerns that key US job data will disappoint sent the Japanese Nikkei into bear territory in Asia this morning. The Nikkei plunged 1.9 % to a two month low. Nikkei has lost 20 % from a five-and-half-year high, just two weeks ago. Other Asian stocks failed to capitalize on overnight gains in Wall Street. The Asian Pacific MSCI-index fell 0.6 % to its lowest level since November. The fall in equities seem to indicate a stronger appetite among investors for safe haven bonds. The yield on U.S, German and Japanese bonds have risen recently.

Oil prices are higher on the back of a weaker Dollar. Brent crude trades close to USD 104 a barrel, up from the USD 100 mark earlier in the week.

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06 JUNE 2013: YEN JUMPS AS WALL STREET FALLS

The Yen rose sharply early Thursday. USD/JPY dropped to 99.00, up more than one percent since yesterday. Commodity currencies are under strong pressure with the Australian Dollar at a 19-month low. The currency volatility follows a steep fall in US stocks Wednesday extending the previous days sell-off. Dow Jones dipped under 15.000 due to concerns that the US Federal Reserve, FED, may scale down its bond-buying stimulus when the economy is still sluggish.

The sell-off on Wall Street was broadly based with four decliners to one advancing stock. The selling might suggest that the seven-month stock rally is coming to an end. The S&P 500 has fallen 3.6 percent since its peak on May the 21st, one day before Ben Bernanke indicated that FED might taper its stimulus if economic data shows traction. The jobless numbers and unemployment statistics to be presented tomorrow are therefore crucial.

Both Dow Jones and Nasdaq registered their biggest percentage drops in six weeks. Most Asian markets suffered similar falls and slipped to fresh lows. Economic data has recently been mixed. Investors fear that FED will reduce their monetary easing before the economy is back on track, in spite of clear FED statements that the stimulus will continue until unemployment is reduced to 6.5 %. A report yesterday showed that private employers created far less jobs in May than the 160,000 predicted. The figures are a strong argument against changes.

The long term bullish outlook on the USD/JPY remains. Analysts don’t predict steeper falls from here and still see 120 as likely in 6 – 12 months. EUR/USD is resilient, reaching 1.3118 yesterday before falling back to 1.3095. The stronger Euro comes ahead of ECBs policy meeting. ECB will probably consider whether it is necessary to take fresh action in order to secure the expected recovery of the euro zone in the second half of 2013.

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03 JUNE 2013: ASIA FALLS ON PROFIT-TAKING

Asian shares fall on profit taking Monday after recent highs. Uncertainty over how much longer the current US stimulus will continue, still dominates the agenda at the start of a new trading week.China’s last PMI figures (Purchasing Manager’s Index) published during the weekend, creates concern in light of softening domestic and external demands. More US-data this week might give a clue as to growth and demand prospects and will hopefully show some direction in regards to how long the monetary easing will last.

The dollar index rose last week on investors bets that improved data on the US economy would encourage the Federal Reserve (FED) to reduce monetary stimulus, which have boosted investments into riskier assets as emerging market currencies. The South African Rand, Mexican Peso and Hungarian Forint were hardest hit against the dollar in a volatile week in the currency market that saw investors reduce their exposure to risk-related assets.

The New Zealand Dollar fell more than any other developed currency after their Reserve Bank Governor stated that the Kiwi dollar still remained overvalued. Further currency interventions were thus needed to weaken the Kiwi.

The Euro/USD gained substantially last Thursday, but fell back due to the unemployment figures published on Friday. The unemployment rate in the Eurozone hit a fresh record high at 12.2 percent in April. Youth unemployment is reaching alarming levels. Euro/USD trades at 1.3013 in the morning. The President of the European Central Bank (ECB), Maro Draghi, said that the Eurozone economy is on track for a recovery driven by ECBs loose monetary policy, and outside demand.

Japanese Yen is up against USD at 00.48 amid a bout of profit-taking by investors last week. GBP is steady at 1.5217. Oil prices are under pressure, but Brent crude is still trading above USD 100 a barrel. Gold prices are slightly up at USD 1395.

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29 MAY 2013: USD RALLIES ON STRONG DATA

US Dollar rallied against the Euro and Japanese Yen on strong consumer confidence, home prices accelerating to the highest levels seen in seven years. EURO/USD fell to 1.2874 while USD/JPY plunged to 102.58. Dow Jones jumped 92 points to 15.395 while the technology index Nasdaq added 0.62 %. The yield on US 10 years treasuries, simultaneously, reached a one year high.

After three losing sessions, global equity markets performed strongly. The Japanese Nikkei were up 1.3 % on Tuesday after a two day dramatic 10 percent plunge. All the European stock exchanges rose, UK being the strongest, with a 1.83 % increase. English and US markets were closed on Monday due to Memorial Day.

The equity rally came as central bankers in Germany and Japan confirmed their willingness to continue monetary easing. A German member of the European Central Bank (ECB) stated that the loose monetary policies would last for as long as it takes to get the Western European economy back on track. A representative from Bank of Japan issued a similar statement.

These strong statements will probably encourage more risk taking in higher yield assets financed through so called carry trading; cheap loans in Japanese Yen. While increased consumer confidence and higher home prices strengthen the USD, looser ECB monetary policies will lead to a weaker EURO/USD. A fall below the long traded interval,1.28 – 1.32, seems likely.

Japanese Yen is probably going to fall further as the short lived Yen rally indicates. The weakness in the Yen is there to be continued. Currency analysts are predicting within three months 106 Yen to the Dollar, and expect a further plunge to 109 within six months. Bottom levels are as low as 120 – 125 Yen a Dollar and seem likely in 2014.

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07 MAY 2013: BULLISH STOCK MARKETS SET FOR NEW RECORDS

US and Asian stocks reached new record highs as the Japan’s Nikkei average soared 2,8 % on Tuesday morning.  For the first time since June 2008 the Nikkei broke above 14 000 as the market played catch-up from an extended holiday. The strong US jobs data eased concern over the health of Japan’s biggest export market. Japanese exporters as Toyota, Honda and Sony led the rally jumping more than 3 %.

In the US the S& P led by Apple and financials pushed further above 1600. The S & P has gained 13,4 % since the beginning of the year.  Decent earnings together monetary easing and low interests rates have helped the stock markets to new records. As long as the world’s leading central banks are providing markets with liquidity  the stock  rally is most likely going to continue at least in the short term.

Asia is today focusing on Australia where markets are waiting for the Central Bank of Australia’s decision on interest rate. Analysts are split on whether the interest rate would be lowered by a quarter point to a record low of 2,75 %. A jump in stock prices are then predicted. Australian stocks fall 0,4 % prior to the central bank’s verdict.  The Asian Pacific, MSCI-index, was as the Korean Kospi slightly down after big upward jumps on Monday.

In the currency market the Euro is on the defensive Euro/USD trading at 1.3077.  The head of the European Central Bank (ECB), Mario Draghi, stated yesterday that ECB is watching economic data and is ready to take further action if needed. The upcoming German elections in September make changes in the austerity policies unlikely in spite of Germany being under pressure from other EU-members.

While gold, USD 1465,  is losing ground on continued outflows in holdings at the world’s largest gold backed exchange traded funds, SPDR Gold Trust, crude and copper are steady.  Brent crude continues to trade above USD 105 a barrel.

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06 MAY 2013: US JOB REPORT EASES FEARS

The US stock markets reached new highs on Friday. The S&P 500 index smashed through the 1600 mark for the first time in history. All 30 companies on the Dow Jones Industrial Average rose as that benchmark crossed 15 000 for the first time after better than expected jobs reports. Non-farm payrolls increased with 165 000 jobs in April. Analysts forecast was 140 000. The unemployment rate fell to 7,5%, the lowest level since December 2008. Asian stocks spurred higher Monday morning on the US job data.

The better than expected jobs report eased fears about the health of the world’s largest economy which remains on a path of modest, but resilient growth. The Federal Reserve (FED) indicated last week that it is prepared to increase the USD 185 Billion –a-month pace of its third round of quantitative easing. The new figures mean there is little chance for such an increase. The job creation in April was heavily weighted towards the service sector. The production side with construction was shedding 6000 jobs. There is also a dip in average weekly hours from 34,6 to 34,4.

The US job data follow central banks meetings last week. While the US FED expressed readiness to increase monetary easing, the European Central Bank (ECB) informed that if necessary it would consider taking deposit rates negative. The mere fact that the key central banks aired such an opportunity was enough to sustain the rally in stocks, bonds and credit demonstrated by the new records on Wall Street and the positive sentiments in Asia this morning. Decreasing rates meaning that stocks are the most attractive alternative investment.

Oil prices have also been given a boost by the US jobs reports. New York crude (NYMEX) is for the first time in weeks trading above USD 96 a barrel. Brent crude is at 104,50. Copper is in the limelight after a 6,5% rally to USD 7 270 on Friday. Copper has fallen nearly 20 percent in the past three months on worries of a slowing world economy. Japanese yen is falling against the dollar trading at 99,08 yen to a dollar. Euro/USD is at 1.3122.
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03 MAY 2013: ECB RATE CUTS SUPPORT SHARES

EUR/USD lost more than 100 points after the European Central Bank (ECB) decided to cut interest rate with 0,25 % to a historical low of 0,50. The Euro fell immediately on the announcement and  trades at 1.3074. The decision received cheers from  stock markets which rallied in early Asian trade on Friday. In the US Wall street was helped by a sharp fall in last week’s jobless claims which fell to its lowest level in five years.

The smaller number of Americans seeking jobless benefits claims was seen as a sign of a healing job market in spite of the presentation a ray of weak economic data lately. US stocks were also helped by a narrowing trade gap in March.  The fact that both imports and exports fell,  indicate, however, weaker demand, and tells of weakening growth momentum both in the US and globally.

Initial claims for state unemployment benefits dropped with 18 000 last week to seasonally adjusted 324 000. The claims report runs counter to a number of signals of  economic activity softening in  March and April. The data has no direct bearing on the Labour Department’s monthly employment report which is expected later today. It suggests, however, that employers are feeling less pressure to lay off workers even if they have cut back on hiring.

Oil, copper and gold prices traded higher with Brent crude up 2 % to 102,65. The US stock rally was led by tech shares.  Facebook delivered better than expected and rose 5 %. The ECB decision to cut rates for the first time in 10 months helped market sentiment and bolstered the content of the Federal Reserve (FED) statement Wednesday. FED will continue to buy bonds to keep interest low and spur growth. If necessary FED kept the door open for stepping up the purchases. Also the ECB kept options for  further action to stimulate the economy.
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26 April 2013: GBP, GOLD AND SILVER STRONGLY REBOUND

British sterling (GBP) has recovered strongly from the bottom levels of 1.50 reached earlier in April. GBP/USD trades at 1.5432 on better than expected job and economic data, indicating a rebound in GBP’s future. Precious metals are again shining. Silver futures rose 6,5% and trades at USD 24.40 an ounce, two dollars up from the bottom last week. Gold peaked on USD 1476, particularly on Chinese and Indian retailers who see the steep fall in precious metals as a buying opportunity. Also oil and copper prices are higher.

The improved sentiment in commodities and precious metals comes on the top of better US jobless figures. There were 11 000 fewer reported jobless seekers than the week before. The new data is not impressing. The expected 350 000 jobless turned out to be 339 000. The head of the Federal Reserve, FED, Ben Bernanke, dampened optimism stressing market’s volatility and need for emergency measures. While the jobless numbers created a Wall Street rally helped by good quarterly earnings reports, Bernanke talked the equity markets down. Nasdaq and S&P rose modestly nevertheless up for 5th day in row reflecting a stock market running ahead of economic realities.

Asian shares rose again on Friday on the upbeat US labor market data. Samsung posted a record quarterly results in line with expectations ahead of Galaxy S4 debut. The fall in Japanese Yen helped SONY to deliver its best profit in years. The Asian Pacific MSCI-index was up 0,3% reaching a six week high. Analysts see a continued upside in Asia and predict that the stock markets could raise another 10 – 15%. Robust quarterly earnings had Shanghai advance 1 percent. Australian shares benefited by high company yields compared with other countries and was up 0,2%.

The Bank of Japan (BOJ) predicted that the set 2% inflation target will be met in two years. USD/JPY hovers around 99 - 99,50 still unable to reach the 100 mark. Expectations that the European Central Bank, ECB, will lower interest rates from 0,75% at its meeting next week weakened the Euro and strengthened European equities. Market beliefs that global economic stimulus will remain in place helped risk asset markets rebound from a sharp sell-off earlier in April triggered by disappointing US and Chinese manufacturing data.

The German Minister of Finance, Wolfgang Schaeuble, lashed out at the European Commission President, Jose Manuel Barroso, yesterday telling lawmakers that the euro zone’s problems had nothing to do with strict budget discipline. He encouraged “somebody to tell Barroso that”. Schaeuble’s remarks came on the top of a bitter strife between European leaders on the effects of austerity measures hitting especially the periphery of Southern Europe. Germany which favors “balanced budgets” are seen as the major culprit for the austerity measures.
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25 April 2013: Nikkei extends its sharp rally

The Japanese Nikkei index extended previous session’s sharp rally in early trade on Thursday. USD/JPY is steady on 99,41 and continues to lick at the magic 100 level. Euro/USD is 1.3046 up 50 points from yesterday when the Euro dipped under 1,30. The week picture inside the Euro zone points towards European Central Bank (ECB) interest rate cut next week. Both New York (NYMEX) and Brent crude are up. Brent trades at 102.18. Gold jumps 20 dollars to 1447 an ounce in Asian trading.

The Japanese ally is driven by expectations that yen weakness will spur strong earnings for local firms. Nikkei is up 0,3% to 167,10. The Asian Pacific, MSCI-index is also up 0,3%, basically on the belief that weak global economic data will encourage central banks to keep their monetary easing economic stimulus policies. US durable goods orders for March were disappointing, and weighed in on the strength of the dollar which is weaker towards Euro, Yen and other major currencies.

The growing expectations for an ECB interest rate cut helped offset the growth concerns highlighted by US durable goods. Durable goods orders posted its biggest drop in seven months in March. Together with a survey highlighting increasing pessimism among German business leaders in April, future forecasts are bearish. The sentiment in Europe is somewhat strengthened by falling bond yields in indebted countries like Italy and Spain. A possible end to the two months political deadlock in Italy, has further strengthened. A 37 years old has been appointed new Premier and the tenure for their 87 years old President is prolonged.

The US government will on Friday present its report on gross domestic product, GDP. The report is expected to show that the economy grew at a 3% annual in the first quarter rebounding from a 0,4 % gain in the final three months of 2012. For the current quarter an expansion of 1,5% is expected. Raising oil and copper prices indicate a turn towards more positive market sentiment. Gold which fell to USD 1322 after losing 250 dollars in two days, have recovered strongly to 1447.

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23 April 2013: Asia falls on weaker Chinese PMI

Asian shares and other riskier assets lost ground on Tuesday after a preliminary reading showed weaker Chinese manufacturing growth in April. HSBC’s Purchasing Manager’s Index, PMI, fell in April and added to concerns about global growth prospects. HSBC’s report is the first economic indicator for the second quarter of 2013. It follows weaker-than-expected first quarter GDP (Gross Domestic Product) growth and a contraction in export pointing to fragile global demand.

April PMI-numbers fell to 50,5 from 51.6 in March. The numbers are nevertheless higher than February’s 50,4, and in no way disastrous. The April PMI reinforces, however, market concerns about a stagnating and slowing Chinese economy. Stock market rallies especially in the United States have been based on expectations of a stronger US recovery and Chinese growth. The latest PMI takes some of this belief away and is a strong indication that the stock market rally might be over for now.

Both Hong Kong and Shanghai stocks fell. The Shanghai SSE fell 1,4% and the Japanese Nikkei slipped 0,1% after surging up 2,2 percent on Monday; close to a five-years high. After USD/JPY reached 99,95 on April 11, a breakthrough of the 100 mark has been expected. Instead the USD fell back to 98,60 yen after reaching 99,90 in early trade yesterday. Weak US-housing data weighed in on the strength of the dollar. USD firmed against the Euro trading at 1.3043. Comments from the European Central Bank, ECB, suggest the bank might consider lowering interest rates in light of mass unemployment and low inflation.

Gold has recovered strongly from last week’s tumble trading at USD 1427 an ounce. More gold outflows from exchange-traded funds stress, however, a weakened confidence in the precious metal and possible further drops. While gold is slightly up from Monday, silver is losing ground. Copper prices continue to fall with 0,6% on the London metal exchange. Brent crude stays above USD 100 a barrel, but crude futures are pointing down.

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Is a decade-long bull run for gold coming to an end?

Is a decade-long bull run for gold coming to an end?: Arne Treholt, Vice President, Business Development Director at MAYZUS Investment Company discusses Gold prices

Gold prices have suffered their sharpest fall in 30 years over the last couple of days, heightening fears among investors that the decade-long bull run for precious metals, especially gold, is about to end. The dramatic development started on 12th of April with 15thof April as the ugly black Monday for gold lovers. Gold has traded steadily between 1550 and 1615 during the first months of 2013, and then suddenly plunged USD 200. Shocked investors took a deep breath after losing confidence in the metal for which many thought that the sky was the limit.

The volatility of market sentiments was demonstrated early Monday morning as investors debarred gold from its safe haven status in just a few short hours. As a result of the lost confidence in gold, the Japanese Yen (JPY), which had been suffering for the last few months due to aggressive Japanese economic stimulus and monetary easing, briefly regained its position as a safe haven candidate.

The safe haven rally was short lived; USD/JPY jumped from a low 96 to above 98 yen to a dollar in just a few hours. Following a technical upward correction after the steep fall, markets continued to be extremely nervous, showing some similarities with market behavior in 2008 prior to the financial crisis that autumn. After a short rebound the selling pressure on gold continues.

Close market followers could have noticed signals that investors were becoming increasingly skeptical about gold. For many years, it has been taken more or less for granted that gold is going to continue to rise and shine. However, if we look back at the gold graph of the last couple of years, we can see that there have been some worrying signals. Gold prices peaked and reached USD 1406 in early January 2011. There was a technical correction down, but between February and September gold prices rose steadily to USD 1920. A breakthrough of the magic psychological 2000 level seemed to be within reach and many investors betted on that opportunity.

Instead, gold started to correct down steadily and moved sidelong before reaching an autumn peak at 1787 on October 1, 2012. It has been falling down since October with minor upwards technical corrections until it reached 1321 and rebounded to 1382. With the existing strong selling pressure and weak market sentiments there is no reason to believe that USD 1350 represents a bottom.

In addition to the charts, which show a steadily falling curve since September 2011, there have been other reasons for concern. Major international banks have recommended selling gold. There might be numerous reasons why Goldman Sachs, Credit Suisse and Societe General are all in favor of liquidating gold reserves.

The erratic and speculative way international banks have operated over the last few years, from manipulation with labor to excessive greed, demonstrated in both trading and investments, makes one ask, whether their recommendations are a new expression of speculative behavior to their own best benefit? Are gold sales boosted up, so certain market players can buy the precious metal back at strongly reduced prices?

When George Soros recommends selling as he did a few weeks ago, when gold prices were USD 1615, there is a stronger reason for an alert.In spite of the fact that Soros operates on behalf of his own institutions, he was first and foremost considered to be an individual investor. Since the 1960’s it is a good idea for the markets to listen to his predictions and advices. Two years ago, Soros recommended to sell silver for USD 45, after its steady climb from USD 17 a troy oz. Silver peaked at 49,67 and has been continuously falling since, reaching a low of 22,65 on Monday, April 15th, 2013.

Where does gold go from here?
In a short-term perspective, the technical upside correction already seems to have subsided. Gold simply seems to have no steam to lift the precious metal beyond the USD 1400 limit. There is no inflationary pressure to strengthen gold. Ever record-high US stocks have seen gold selling in favor of investments in stock markets, which as long as the monetary easing continues will be a far more interesting investment than placing money in the risky precious metal with market sentiments against it.

The opportunity for central banks selling their gold reserves to finance own assets requests from international lenders as the European Central Bank (ECB) and the International Monetary Fund (IMF) added to the selling pressure on gold. This development was spurred by tiny Cyprus, but the idea was picked up by central banks in countries like Italy and Spain that are also under big pressure.
There are, however, more optimistic outlooks pointing to a strong gold recovery at the end of 2013, even if most analysts seem to agree that it may take time before investors‘ confidence returns to the precious metals market. Gold is on the verge of being oversold. An oversold market shall create a tighter supply/demand fundamentals relation.

Even if stock markets continue to raise, these rallies are artificial and are more based on monetary easing than on economic fundamentals. What is going to happen when the bubble bursts? Could gold then be back shining, considering that some central banks in emerging countries are buying gold to strengthen their reserves?

There might be light in the tunnel for gold prices in the medium and long-term perspective.

Having different opinion on future prices for Gold? At MAYZUS you can test your judgments, read more here.

About the Author:
Arne Treholt, Vice President, Business Development Director at MAYZUS Investment Company

Mr. Treholt began his career as a journalist and foreign correspondent of the Oslo-based daily newspaper Arbeiderbladet in Norway. He then joined the Norwegian Royal Ministry of Foreign Affairs, where he was promoted to the position of Political Secretary to the Minister of Shipping and Foreign Trade, followed by his position as Deputy Minister of Law of the Sea. He held the position of Counselor for Economic Development and Social Affairs at the Ministry of Foreign Affairs, and was member of the Norwegian Mission to the United Nations, New York. Mr. Treholt retired from his diplomatic career and moved to Moscow, where he became CEO of ISMOS Trading, followed by his position of CEO of Rim Investment Management and FMC Securities in Cyprus. Mr. Treholt joined Mayzus Investment Company in June 2009 as Vice President, and he is also in charge of the business development and portfolio asset management of the company. He is the author of five books and numerous articles on economics and politics.

19 April 2013: Volatility reflects bearish mood

Wall Street fell further yesterday after disappointing forecasts by eBay and other heavy weight US-companies. Present quarterly results raise increased doubt on the market’s recent strength. eBay dropped 5,9%, and Apple shares extended their slide from Wednesday breaking the USD 400 level. The S&P technology index fell 1,4% after two sharp declines earlier in the week. The volatility index, Wall Street’s fear index, gained 6,4 as a reflex of increased market nervousness. Other decliners included Morgan Stanley. The flagship bank fell 5,4% adding to the bearish mood.

As global policymakers started their G-20 meetings in Washington yesterday there is growing concern about currency fluctuations and volatility. Key central banks are printing money and pumping new liquidity into markets. This tends to create more speculative bubbles than working places. The yen (JPY) fell broadly Friday morning after the Japanese Finance Minister stated that Bank of Japan’s (BOJ) aggressive monetary stimulus is aimed at defeating deflation. USD/JPY trades at 98,53 with the dollar raising 0,4%.

As the G20 meeting ends today there are deep worries on what easily can develop into a currency war. In its semi-annual report on currency practices US put Japan on notice. Japan’s economic policies are watched closely to ensure that Japan is not aiming at devaluing the yen to gain competitive advantage. Competitors in South East Asia as South Korea are especially concerned. A rapid raise in dollar versus Yen at these level, seems, however, not likely. USD/JPY has already depreciated 20% since last November. A strong short term gain in USD/JPY might, however, occur after the G-20 meeting is over. G-20 is expected to confirm the pledge from February to avoid competitive currency devaluations.

Euro/USD recovered to 1.3068 after a sharp drop during yesterday. In a meeting on Thursday the EU agreed to move ahead with a system of winding down banks without changing EU law. This would give the EU bank resolution mechanism a stronger legal basis. The resolution comes after a stormy debate in the European Parliament where both the EU Commission and the European Central bank came under heavy fire for their handling of the Cyprus banking crisis. In an interview the EU Commissioner for Economic and Monetary affairs, Olli Rehn, stated that changes to EU-treaties are more a long term goal than a condition for a banking union to operate.

The recent plunge in gold prices have led to a rally in India and China to buy gold and silver coins and products. Retail buyers see the steep fall in prices as a buying opportunity. Gold trades at USD 1398 up from a bottom level on 1322 earlier in the week. Silver has rebounded from USD 22,76 to 23,46. It is, too, early, to say whether we are witnessing a more firm upward trend; or increasing prices shall be seen as a natural technical correction.

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18 April 2013: Risks assets broadly slips

Risks assets broadly slipped on Thursday following overnight drop in US and European equities on fears for global growth. Oil prices have dropped substantially. Brent crude fell two dollars trading below USD 98 a barrel. Iran, has asked for an emergency meeting in OPEC, the organization for oil producing states, to discuss the low oil prices as non-OPEC United States is pumping 7,2 million tons a day. This contributes to the imbalance between market demand and supply. Gold dipped further as capital flow out of gold-backed-exchange-traded funds continues.

US-Stocks fell in a broad market sell-off yesterday. The decline in stock prices was led by a sharp drop in Apple which tumbled 5,5% to USD 402,80. Apple has fallen USD 250 since its peak last autumn. A key chip maker, Cirrus, simultaneously presented a disappointing revenue forecast. This together with the slowing demand for Apple products, fueled market worries about a weakening demand for iPhone and iPad. The financial sector was also hard hit by weaker than expected results from Bank of America.

Wednesday’s losses represented the second day of big sell-off during this week. It adds to fears that the market is starting the pullback analysts have been speculating in for months. Expectations have outdistanced economic fundamentals. Monetary easing has additionally injected fresh speculative capital into equities. This development has led to stock rallies without roots in the real economy creating new bubbles.

Investors’ optimism have been based on expectations of a stronger economic growth in China and a recovery in the US. There are positive signs in both markets, but the world economy is still dragged down by an ever deeper recession inside the Euro zone. The plunge in gold and metal prices and a simultaneous sell-off of stocks bear striking similarities with the situation in 2008 where stock markets were running off from realities to end with a hard landing. Bankers’ wild speculations contributed to the misery which led to a financial crisis in the second half of the year where the liberal orientated economic market model was put at serious risk.

Is history in the process of repeating itself?

Nervousness and risk aversion has also plaid into the currency market where the euro come under pressure. Euro/USD fell from Wednesday high on 1.3172 to 1.3043 on talk of more monetary easing by the European Central Bank. USD/JPY trades marginally up at 98,03 indicating a continued slid in the yen and a new test on the symbolic 100 yen a dollar level. The Australian dollar is steady after trimming earlier losses due to the fall in gold and metals and a weaker growth in China.

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17 April 2013: Wall Street lifted by Gold and earnings

US-stocks jumped more than one percent on Tuesday recovering after the worst fall since November. Gold prices rebounded from bottom level on USD 1351 and trades at 1379, but selling levels still persist. The US stock indexes were lifted by good earnings from Coca-Cola and Johnson & Johnson. The bullish sentiment was also helped by inflation data which reinforced expectations that he Federal Reserve will keep the stimulus. After two falling days, Asian stock markets are back in positive territory.

Gold prices jumped 30 dollar during yesterday’s session after falling 8,8% on record volume on Monday. Gold reached 1382, but is still under strong selling pressure as investors rushed to dump gold. Gold prices suffered their sharpest fall since the 1980’ies heightening fears among investors that precious metal’s decade long Bull Run has ended. Silver also fell 11% and trades at 23,42. Silver was trading above USD 35 just a few months ago, and reached nearly the mark USD 50 just two years ago.

The gold selling fever initiated in Cyprus where the government last week stated readiness to sell its gold reserves to help finance IMF and ECB demands for bail-out assets. Rumors indicated that other pressed Southern European countries would follow suit. Faltering European demand and weaker than expected Chinese economic data depressed oil prices. Brent crude fell to a nine-month low and reached USD 98 a barrel bottom. Brent has also recovered and trades again above USD 100.

The Japanese yen (JPY) eased in Asian trading this morning as it succumbs to new pressure as gold recovered. The historic plunge in gold prices coupled with fresh concern about China’s economic growth, saw some investors plunge back in yen as a safe haven reversing the downward trend sparked by Bank of Japan’s aggressive stimulus program. USD/JPY trades at 98,19. The USD has lost ground against the euro which has gained momentum after breaking through the stiff technical resistance at 1.3110/20. Euro is at 1.3173 as Euro bulls shrugged off a report on sharp April-fall in German investor sentiment.

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09 April 2013: Aggressive bond buying sinks JPY

USD/ JPY dropped for the third straight day as the Bank of Japan (BOJ) yesterday started  its aggressive monetary easing program. Following the strategy of the US Federal Reserve (FED), BOJ is buying Japanese bonds for trillion in an effort to stimulate economic growth.  The Japanese government intends to get out of the vicious inflation  circle and  has set a target for 2 % inflation. The bond buying has boosted the Japanese stock market. US stocks also gained yesterday ahead of second quarter earnings session which is expected to show moderate growth.

 USD rallied to its highest level towards JPY seen since 2009, trading at 99,50 yen as BOJ concluded its first bond purchases since announcing the new monetary easing last week. Wall Street slipped in early trading as caution ahead of the quarterly season dominated the sentiment. Stocks turned around and ended in positive territory.  US stocks have rallied strongly over the last months with major indexes hitting record highs. Earnings forecast are predicting a 1,6 % rise in earnings over the last year.

 The Nikkei index in Tokyo jumped 3.1 % and saw its highest level since 2008 as BOJ shall pump  an equivalent to USD 1,4 trillion into bonds over the next two years. These measures  have created a bonanza in the stock and real estate markets. Traders are waiting for a break through of the psychological  100 yen level a dollar.  US 10 years treasury bills fell sharply last week in response to the aggressive Japanese measures.

 Oil prices hitting a 8 month low on Friday, have recovered.  Brent crude is trading at USD 105,55 a barrel, up one dollar from the beginning of the week. Euro/USD has made a strong come back from its low level on 1.2760 last week in the aftermath of the turbulence in Cyprus and the press conference of the European Central Bank (ECB).  Euro/USD is  trading at 1.3050.  British pound, GBP, and other major currencies have also gained ground against dollar. Precious metals led by gold,  USD 1575 an ounce, is also trading higher.

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08 April 2013: Yen slumps as US - job figures hit dollar

 US job figures set alarm bells ringing as the  rise in job recruitment was half the expected. US employers added only 88 000 jobs in March  at a its slowest pace in 10 months.  The job figures published on Friday triggered fresh concerns about a slowdown in the world’s largest economy.  Equity markets fell and might indicate that the last months strong US stock rally has come to an end. Expectations of a fast recovery might have  run  faster than what is economic fundamental realities.

 The dollar plunged in relation to EURO and other major currencies.  The Euro/USD rose to a two week high at 1.3039 stabilizing around 1.30 in early Asian trade today.  The British pound, GBP, hit the strongest level in six weeks at 1.5362 on concerns of the health of the US labour market. Oil prices fell.  Brent crude trades at USD 104,50 a barrel.

 The Japanese yen, JPY also fell dramatically.  USD/JPY trades at 98,52 after he Japanese Central Bank (BOJ) announced strong quantitative monetary  easing measures to combat deflation.  After falling 20 % in some few months, analysts ask how far down the JPY would be permitted to go. Recent developments might encourage investors to shift back to  yen as a funding currency instead of the dollar. The data may encourage more long European currency/yen trading with yen  as the favoured funder.  It might  reinforce the yen’s place  as the favoured carry trading currency.

 The Euro received a boost earlier last week as the European Central Bank held rates at 0,75 % and the ECB President, Mario Draghi,  sought to reassure markets that the Cyprus bailout should not be seen as a template for possible future bailouts in the  eurozone.  In a memorandum of understanding between the parties involved in the bailout; Cyprus, ECB, IMF and the EU-commission, severe budget cuts and privatization of state owned assets are among the measures needed for Cyprus to receive its periodic allotments of bailout money.

 The anger and public fury run high on the island. Adding to the public tension a financing consulting firm, Alvarez & Marshal hired by the Central Bank to make investigations on  the banks behaviour leading up to the crisis, revealed that two of the most senior executives at the Bank of Cyprus may have deleted crucial emails pertaining the bank’s disastrous buying of Greek government bonds just before Greece’s international bailout in 2010.

 While most attention over the last weeks has been directed towards Cyprus, the leak of 2.5 million files containing details of offshore accounts of some of the world’s wealthiest individuals has added fuel to Europe’s debate over the economic crisis.  In a situation where many struggling Europeans are asked to tighten belts and pay more taxes, the political and financial elites of Europe have stuffed their wealth in offshore tax havens as British Virgin Islands, the Cook island and Singapore,  making German, EU and IMF accusations against Cyprus pale in comparison.  The latest money laundering and  tax exemptions accusations  involve reputable Western European banks as Deutsche Bank, and individual top German and French bankers and politicians.

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05 April 2013: Draghi: Cyprus not a template

Cyprus is not a template for other possible banking crisis inside the Euro zone, the president of the European Central Bank, ECB, Mario Draghi stated after the ECB board meeting yesterday. Draghi thereby criticized his own decision where Cyprus banks with the blessing of the ECB, was given the right to confiscate funds on private banking accounts below the guaranteed Euro 100 000. Draghi admitted that the proposal was not very “smart”, and stressed that potential future crises would be handled differently without risk for private account holders and companies. This initial wrong decision was quickly corrected, Draghi added.

It took, however, more than a week before the ECB sponsored proposal was rejected by the Cypriot parliament and a new bailout plan was presented. In the meantime it created confusion and havoc in the global financial markets. The new proposal exempted accounts with a balance below Euro 100 000 and from confiscation and left to foreign account holders, mainly Russians and Ukrainians, to bear the bulk of the bailout burden.

The Euro fall as low as 1.2745 on Draghi’s remarks. Euro/USD later recovered strongly to 1.2933. The way ECB and the EU have handled the Cyprus crisis, has, however, put grave question marks as to Draghi and EU-politicians ability to handle the euro zone problems. The crisis ridden Southern European periphery is dragging further into recession, and the only solution the troika of EU, ECB and the International Monetary Fund, IMF, has been able to come up with is a further vicious circle of reduced economic growth, increased taxes and growing unemployment.

Draghi had suggested yesterday that ECB could slash the interest rate, already at a record low level, even further. In a situation where the currency rates are highly volatile and often jump more than one percent a day, a reduction of the interest rate with 0,25% is not the most convincing argument to get the euro zone back on track. Along with low interest rates quantitative easing has been central banks preferred tool. ECB has heavily been buying national bonds in Italy and Spain to avoid spiraling bond rates.

Bank of Japan which also met yesterday, announced aggressive measures to ease monetary policy. USD/JPY plummeted from 93 to 95,67. BOJ will in the next two years double its holding of bonds and shares in line with the monetary easing policies of the US Federal Reserve (FED). BOJ has also set an inflation target of 2% to stimulate economic growth. BOJ’s plan implies to buy bonds for an equivalent of USD 73 Billion monthly. Fed is in comparison buying for USD 85 billion a month. Wall Street got a lift from BOJ’s surprisingly dramatic stimulus plan. This came along with supportive comments from ECB and FED, suggesting that central bank policies will keep underpinning measures to the benefit of stocks. 

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04 April 2013: ECB under fire for Cyprus handling

Asian stocks fell as worse-than-estimated US economic data spurred concern about the pace of the US recovery as investors speculated whether the Bank of Japan (BOJ) would be able to meet forecast for monetary expansion and an inflation target of 2%. The MSCI Asia Pacific index slid 1% with carmakers as Toyota Motor declining on a stronger Yen. USD/JPY trades at 93.00. Copper prices, a strong indicator for economic growth, sank to its lowest level since August. Gold and silver prices plunged with Gold at USD 1546 an ounce. Oil prices fell two dollar a barrel.

The European Central bank (ECB) is meeting today in the aftermath of a botched attempt to rescue Cyprus. Bank shares have been tumbling across the Euro area and rattled confidence in policy maker’s ability to tame the sovereign debt crisis. With unemployment reaching a record high of 12,5%, doubts are growing about Mario Draghi’s forecast for a second-half economic recovery. The austerity measures prescribed from European bankers and politicians have so far dragged Europe into an even deeper recession.

The disconnect between official low lending rates and those businesses are actually charged, is also a growing concern for the ECB. More than four times as many small businesses in Spain were rejected loans in the second half of 2012 than in Germany or walked away from, too, expansive offers. The excess liquidity in the banking sector has halved over the last half year and lenders in the south European periphery might be in need of more central bank funding.

In front of today’s meeting critical questions are asked on the role ECB plaid in the Cyprus bailout. ECB initially welcomed and supported the Cypriot government’s plan to confiscate funds on all banking accounts including those below Euro 100 000. This was rejected by the Cypriot Parliament. A revised agreement was negotiated a week later under the threat of ECB cutting emergency funding to Cypriot banks. Additionally; capital controls were for the first time in the EU history introduced to avoid capital flight. Free movement of capital is one of the four basic freedoms EU cooperation is built upon.

The confiscation of private accounts and introduction of capital control have damaged investor confidence and banks reputation across the Euro zone. Between March 15 and 27 the Stoxx Europe 600 Bank index dropped 6,8%. The cost of insuring against default on European bank bonds have surged 41% in the same period. Partially responsible for a flawed bailout plan being presented to Parliament, ECB exacerbated markets reactions to the bailout and simultaneously harmed the trust in Europe’s crisis fighting abilities.

Analysts stress that even if the error originated in Cyprus, Euro Finance ministers and ECB’s big miscalculation were to support a flawed plan. This resulted in increased financial stress and uncertainties in global markets. The trust in the Euro was undermined. Whether Mario Draghi and the ECB today would be able to present the right damage limiting response, is an open question.

Three Supreme Court judges appointed by President Nicos Anastasiades will today start investigations into a decade of financial profligacy which brought Cyprus to its knees. They have also a mandate to look into the President’s own affairs after accusations of tipoffs that presumably saved close family for big amounts when of 21 million euros were transferred abroad days before the bailout plan was announced.

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