Thursday, June 5, 2014

Gold slumped EUR/USD sank

Gold slumped 28 percent last year on speculation the Federal Reserve would ease stimulus as the economy strengthens. Data due tomorrow may show the U.S. added 215,000 jobs in May, after a report yesterday found service industries grew at the fastest pace in nine months last month, sending the Standard & Poor 500 Index of equities to a record.
The cut was much needed and much anticipated, Andrey Kryuchenkov, an analyst at VTB Capital in London, said today .Bullion will continue trading against the dollar with the press conference ahead and the U.S. nonfarm payrolls tomorrow.
Gold for August delivery lost 0.1 percent to $1,243.30 an ounce by 7:56 a.m. on the Comex in New York. It reached $1,240.20 on June 3, the lowest since Jan. 31. Futures trading volumes were 30 percent below the average for the past 100 days for this time of day, according to data compiled by Bloomberg. Bullion for immediate delivery slipped 0.1 percent to $1,243.05 in London, according to Bloomberg generic pricing.
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EUR/USD sank to a fresh four-month low of 1.3503 after ECB President Draghi unloaded his bag of easing tricks onto the market. It has since stabilized above 1.3530, helped by Draghi's comment that he has now reached the lower bounds of interest rates. EUR/USD is now at 1.3563 and the breakout level on the downside was 1.3580, so any break back above here could see some weak shorts head for the exit.

Wednesday, June 4, 2014

Precious metals, commodities

Traders know the price will change in the different markets. Precious metals, commodities, and currencies are all subject to the same movements of supply and demand and news especially gold.  Many will often see prices drop or go up after a company meets expectations for news. The demand for the shares prior to the release overwhelmed the supply. Sellers will see this and move up prices they were asking for shares. Buyers in  an attempt to own shares, will raise the amount they are willing to pay for them.  The Stochastic Oscillator indicator indicates where prices are closing within a range. You can see the changes in price as this type of news happens.
If precious metals, commodities, and currencies are showing a bullish trend that traders expect to continue they would expect the share price to close at or near to the high of the day or the high from several days. If price closes away from that high, then the buying pressure has weakened, or selling pressure gained. Thus  it is not good for the traders holding the precious metals like gold, commodities, and currencies long. If there is a close that occurs far from the highs, it would show a sell signal on the oscillator.
Precious Metals Gold Investment

U.S. trade deficit

The U.S. trade deficit widened to its highest level in two years in April as imports hit a record high, suggesting trade could be a drag on second-quarter growth. The Commerce Department said on Wednesday the trade gap increased 6.9 percent to $47.2 billion. That was the largest since April 2012 and followed March’s revised $44.2 billion gap.
Economists polled by Reuters had expected the deficit to widen only to $40.8 billion from a previously reported $40.4 billion shortfall. The government also published its annual benchmark revisions with Wednesday’s data. When adjusted for inflation, the deficit increased to $53.8 billion from $50.9 billion in March.Trade subtracted almost a percentage point from first-quarter gross domestic product. The economy contracted at a 1.0 percent annual pace in the first three months of the year.
Imports increased 1.2 percent to an all-time high of $240.6 billion in April. Imports of automobiles, capital goods, food and consumer goods all hit record highs in April. Futures advanced as much as 0.8 percent in New York. Crude stockpiles fell by 1.4 million barrels last week as supplies at Cushing, Oklahoma, the delivery point for WTI, slid 300,000 barrels, the American Petroleum Institute said yesterday. Government data today is forecast to show a 250,000 barrel drop nationwide, according to a Bloomberg News survey. Oil companies concerned over fighting in Libya eastern city of Benghazi are evacuating workers, state-run news agency Lana reported.
Gold is poised to climb for a second straight day after a private report showed U.S. companies added fewer jobs than forecast in May, boosting demand for the precious metal as a haven investment. The 179,000 increase in employment was the smallest in four months and followed a 215,000 gain in April that was less than initially estimated, according to the ADP Research Institute. Gold gained 3.5 percent this year through yesterday amid concern that U.S. economic growth was stalling.Prices slumped 28 percent in 2013 on concern that the Federal Reserve would trim stimulus as the labor market improved. Through June 2, the metal fell for six straight sessions, the longest slump since August, as U.S. equities rose to a record.

Tuesday, June 3, 2014

GBP/USD 6/3/2014

GBP/USD is steady on Tuesday, as the pair trades in the mid-1.67 range late in the European session. On the release front, British Construction PMI slipped in April, dropping to a seven-month low. Nationwide HPI dropped to 0.7% in May, matching the forecast. In the US, there are just three releases, highlighted by Factory Orders.
It’s not often that a key indicator drops and magically recovers a day later. However, this was the case with ISM Manufacturing PMI. The well-respected ISM Business Survey Committee reported on Monday that the key index had softened in May, but has since corrected its reading. The index actually improved to 55.4 points in May, up from 54.9 points a month earlier. As well, Final Manufacturing PMI and ISM Manufacturing Prices improved. This points to an expanding manufacturing sector, which is good news for the recovery. The markets will be hoping for more good news from today’s highlight, Factory Orders.

Gold Prices

Market consensus is for Federal Reserve to start hiking rates from the middle of next year. A review of gold's price performance during the past five episodes of Fed tightening reveals mixed results. Rising rates between 1988 and 1989 coincided with considerable declines in gold prices; the mid- and late-1990s showed relatively benign performance; while gold rallied strongly during the periods between 1986 and 1987 and the early 2000s.

One key feature of the previous tightening cycles was high US inflation. In particular, consumer inflation increased sharply in the late 1970s and early 1980s to as high as 14.8%. This compares with average inflation below 2% over the last five years. Tame inflation in spite of unprecedented easing by the Fed has tempered market expectations for future inflation - right now investors are not too concerned about the threat of rising pricing pressures. Nevertheless, UBS economists have been flagging the upside risks.

Monday, June 2, 2014

May manufacturing index

May manufacturing index shows a broad pullback across sub-components with no bad weather to blame. The declines erase gains made in April, which many economists had attributed to a bounce back from a wintry 1Q. The production subindex slips to 55.2, its lowest since February, while the employment subindex falls to 51.9 after rising to 54.7 in April. One of the only gainers was the price index, rising to 60 from 56.5, with 31% of respondents saying they're paying higher pries for supplies

EUR/USD and GBP/USD

The decline in both EUR/USD and GBP/USD in recent weeks has pushed them into oversold territory, and triggered bullish trading signals on BNP Paribas's STEER model. The bank sees fair value for EUR/USD at 1.3740 and recommends a long position at market, with a stop down at 1.3520. GBP/USD's fair-value is 1.6954, longs from 1.6750 are favored with a stop down at 1.6578. GBP/USD now trades at 1.6748, EUR/USD 1.3610.