Dollar Declines on Lawmakers Optimism

By (Dublin) – US Treasury Secretary Timothy F. Geithner is due to meet congressional leaders in a meeting set to discuss the fiscal cliff. This has caused the dollar to decline to 0.4 percent from its weakest level this month. According to Kengo Suzuki, a Tokyo-based currency strategist at Mizuho Securities Co, the fiscal cliff will lead to a dollar off while the US GDP figures will boost risk appetite which will spur yen selling.

Lawmakers have boosted the optimism of a possible of a solution to the fiscal cliff issue which has lead to the Dollar Index declining for the second day. The fiscal cliff, which will take effect in January, has boosted safety demand in the market. The yen has dropped against most of its major trading peers as Asian Stocks gained prior to a report expected to show US Gross Domestic Product expanded more than the market had previously estimated.

The Dollar Index used by the Intercontinental Exchange Inc to measure the US Dollar against other six major trading peers, dropped by 0.1 percent to 80.277 yesterday. The MSCI Asia Pacific Index of shares increased by 0.9 percent boosting demand for higher yielding assets.

Mitul Kotecha, the global head of Foreign Exchange strategy in Hong Kong at Credit Agricole Corporate and Investment Bank, said that investors are being driven by the headlines, with risk appetite increasing as positive news on the fiscal cliff are released. Mitul also added that currencies will continue to track the improvements in risk but they are likely to remain within range. The developments in the fiscal cliff issue came after the US House Speaker John Boehner indicated that he is optimistic that the lawmakers will avert the situation.

The US Dollar traded at $1.2954 against the 17-nation currency during the midday trading in Tokyo yesterday from its close of $1.2953 in New York the previous day. The greenback had touched its lowest on this month Nov 27 of $1.3009, which was last reached on Oct 31. The Japanese currency was little changed against the euro at 106.45 and 82.18 against the greenback.

Disclaimer is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at are those of the individual authors and do not necessarily represent the opinion of or its management. 

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USDCAD moves sideways in a narrow range between 0.9905 and 0.9960

USDCAD moves sideways in a narrow range between 0.9905 and 0.9960. The price action in the range is likely consolidation of the downtrend from 1.0055. Resistance is located at the upper line of the price channel on 4-hour chart, as long as the channel resistance holds, the downtrend could be expected to resume, and another fall to test 0.9874 support is possible after consolidation. On the upside, a clear break above the channel resistance will suggest that the downtrend from 1.0055 has completed at 0.9905 already, then the following upward movement could bring price to 1.0100 area.

Daily Forex Forecast

William Knox D’Arcy: The Greatest Australian You’ve Never Heard Of


The story of the man who built one of Australia’s greatest ever small-cap mining fortunes and changed the course of history should be an unforgotten legend of risk, adventure and unimaginable riches.

But today practically nobody knows his name.

Today’s Money Morning will resurrect this amazing tale – and remind us all of the potential profits than come from calculated punts and a healthy dose of vision.

‘The most influential Aussie who ever lived’

The greatest Australian you’ve never heard of is William Knox D’Arcy.

In August this year the Queensland State Government inducted D’Arcy into its Business Leaders Hall of Fame. He was one of six inductees. The award was recognition for ‘his major contribution to the success of the Mount Morgan gold mine and the international significance of his role in the discovery of oil in Persia.’

You could forgive D’Arcy for feeling a little peeved that it took 95 years for him to get some official recognition. Then again, it was a government award – but it still seems like a shocker even by that standard.

If you love geography and history you’ll know Persia is largely today’s modern Iran. Persia is also the location of the Middle East’s first oil find – thanks to our man D’Arcy’s money and appetite for risk.

This is the reason that historian Geoffrey Blainey recently said, ‘William Knox D’Arcy is, almost by definition, the most influential Australian who has ever lived. He is a giant figure on the world stage.’

That probably seems like a pretty big call. But you’ll soon see why. D’Arcy didn’t start with a lot of money. In fact, he had no significant wealth to speak of.

But we’re getting ahead of ourselves here. We need to backtrack, because D’Arcy didn’t make his first big money – and it was BIG – in oil. It was in gold.

When You Take a Risk…and Win

Born in England, D’Arcy’s father had brought out the family to Australia when D’Arcy was 17. In time, D’Arcy became a small time lawyer in the Queensland town of Rockhampton.

D’Arcy loved to punt on the horses and play cricket.

We don’t know what his luck was like at the track but he sure got lucky – almost unbelievably lucky – the day two gold prospectors walked into his office and slapped a bag of stone on his desk.

The two men were the Morgan brothers.

The Morgan brothers chose D’Arcy for no other reason than they had been told by their banker they needed a lawyer. D’Arcy didn’t have any expertise in mining or metals. The sample had come from about twenty miles out of Rockhampton at a place called Ironstone Mountain.

A sample was sent off and showed a high level of gold.

Recognising the chance to ride what could be a great thing, D’Arcy bought into the project with a single £500 stake. In fact, D’Arcy was essentially gambling with borrowed money, probably from his wife’s family.

Less than two years after the gold started to flow the Morgan brothers – who had renamed Ironstone Mountain Mount Morgan – decided to sell out. They thought the ore was rich at the surface but sparse at depth. So, the Morgan brothers cashed out.

But by this time D’Arcy must have thought he knew better. He kept buying until he owned around 36% of the shares.

It turns out the Morgans had made a terrible mistake. Not only was Mount Morgan rich with gold at the surface, but it was rich with gold at depth too. It was just that the initial digging at depth had missed it. After further exploration, the miners found the rich gold vein and the mine and Rockhampton boomed.

Geoffrey Blainey wrote about this in his book The Rush that Never Ended:

‘Ten years after the finding of Mount Morgan the return on the actual capital invested was over 200,000 per cent and dividends had exceeded £3 million.’

The shares rocketed over 1,600% at the peak of the mania surrounding the mine. But not everyone got rich from Ironstone Mountain. The original freeholder who owned the land didn’t get fabulously rich. The Morgan brothers made money, but missed out on a fortune. But the speculators did get rich.

Over the next 100 years the mine would produce nearly 8.8 million ounces of gold, 1.3 million ounces of silver and 387,000 tonnes of copper. At today’s prices, the gold alone would be worth nearly $15 billion.

This would prove to be one of the richest gold mines in Australian history and turn its investors into millionaires. The phenomenal gush of dividends would finance D’Arcy’s luxury living on the scale of European aristocrats and royalty. And, of course, his discovery of oil in the Middle East.

And best of all for D’Arcy, he didn’t have to lift a finger, let alone swing a pick axe.

He soon became one of the richest men in Australia. We don’t know what Rockhampton was like in the 1880′s. But there clearly wasn’t enough of interest to make him stick around. He sold his law firm, and left for England in 1887.

And as any millionaire is bound to do, he bought a mansion and two country estates. He had his own private box at the Epsom racecourse (King Edward of England had the only other one). D’Arcy never worked again. He and his wife became a fixture of London ‘society’, famous for their lavish parties.

D’Arcy had turned a small, speculative investment into a life-changing fortune. But he didn’t lose the speculative streak in his nature. After striking it lucky and making a fortune…he decided to do it again. This time it would reshape the history of the world for the next century…

From Aussie Gold…to Persian Oil…to the Hall of Fame

D’Arcy was smart enough to see a big change happening in the world when many were missing it. He saw a bright future for oil, especially thanks to the latest invention: the motor car.

And if there was going to be an industry based on an internal combustion engine, there needed to be more oil. And that would mean a bigger oil industry. Also, if the British could find a strategic source of oil it would give them a huge advantage.

By 1900, years of high living had taken its toll on D’Arcy’s finances. The company manager of Mount Morgan told him the mine’s best days were gone and his shares were overvalued. The dividend cheques began to shrink.

Looking for other opportunities, in 1901 D’Arcy was approached to invest in oil exploration in Persia. The gambler in him came out. If this opportunity was even half as good as Ironstone Mountain he could make a second fortune. So he took his chance. He bought a concession that covered 480,000 square miles of the country and was good for sixty years.

D’Arcy employed and sent out what would prove to be his key man, a tenacious geologist and engineer called George Reynolds. He would labour away for seven long years and find practically nothing. The project would nearly send D’Arcy bankrupt.

It seemed a reasonable bet that there would be oil in Persia because oil was known to seep to the surface. But finding a commercial field in the heat and the desert with little to no infrastructure and hostile locals was another thing altogether.

Persia had crushed many other hopeful schemes and enterprises before. From Daniel Yergin’s The Prize:

‘It was not a reasonable business proposition. Even the estimate for expenditures was to be grossly understated. At the outset, D’Arcy had been advised that it would cost ten thousand pounds to drill two wells. Within four years, he was to be out of pocket in excess of two hundred thousand pounds.’

D’Arcy was eventually forced to go to his London bankers and take out a huge overdraft, putting up his shares in Mount Morgan as collateral. That created a problem. The shares were falling as investors caught on to the fact the mine was no longer as rich in gold.

But it was still rich in copper, which had been ignored in the hunt for more and more gold. Luckily for D’Arcy, copper would save the mine. The copper would keep the dividend money flowing so that, along with the loans from London, D’Arcy could keep his men drilling in Persia.

But by 1905, D’Arcy wanted out. False starts, endless overruns, dry wells and trouble plagued his Persian oil play. He resolved to sell his concession. He turned to the French Rothschilds.

But around that time the British government was considering switching its Navy fuel from coal to oil. At the time Britain only had a limited source of oil within the Empire.

Seeing the opportunity, the British Government arranged to buy into D’Arcy’s concession via Scottish company Burmah Oil. This happened with days to spare. It was much needed capital. When you consider D’Arcy didn’t have a proven oilwell, let alone anything like an operating company, it was a lifesaver. But that wasn’t the end of the drama.

Three years later Burmah Oil had lost a lot of money for little return in Persia just like D’Arcy had before them.

The directors of Burmah Oil eventually caved in and cabled George Reynolds in May 1908 to cease drilling. But Reynolds must have known he was closer than ever before. He ignored the order and kept drilling. Six days later they struck oil. It was a gusher, drenching the drillers. A few days later, a second well hit oil. There was oil in Persia and D’Arcy’s team had found it.

D’Arcy’s fortune soon rocketed back up to its previous stratospheric level. Britain had a secure supply of oil that would influence the direction of both World Wars. Not only that, but the discovery of Persian oil formed the ‘Anglo-Persian’ oil company, which later became British Petroleum (BP), currently one of the world’s largest integrated oil companies.

Bottom line: the quest to find, secure, and produce this oil fundamentally altered the 20th century…and it all began with a gold mine in Queensland and a speculator named William Knox D’Arcy.

As one biographer, Margaret Carnegie, wrote, it was ‘a fitting monument to an achiever who took big risks and stood fast.’

And that’s what this story is really all about.

Great fortunes can be achieved no matter who you are. You just need to be willing to recognise a good opportunity when you see one…and be willing to take a risk.

Kris Sayce has just finished a presentation on this very idea. It will be in your inbox tomorrow. He says there are great opportunities to back in 2013. Stay tuned.

Callum Newman

Contributing Editor, Money Morning

From the Port Phillip Publishing Library

Special Report:
Retire Rich, Happy and Free From Money Worries

Daily Reckoning:
Secession Fever in the USA

Money Morning:
Why I’m Bullish on These Beaten-Down Stocks

Pursuit of Happiness:
The End of 797 Years of Legal Precedent

Diggers and Drillers:
Why You Should Invest in Junior Mining Stocks

Australian Small-Cap Investigator:
Why Speculating On Small-Cap Stocks is Your Best Bet in a Rigged Market

William Knox D’Arcy: The Greatest Australian You’ve Never Heard Of

Why It’s Possible to Buy AND Sell This Market


Yesterday, a lot of stocks on the Aussie market went up…

…but a lot of stocks on the Aussie market went down too.

And many others did, well, nothing much. They went up a bit, then down a bit (or vice versa), but ended the day where they had started.

For some investors and analysts (including your editor) this action says ‘buy’. For others (including Murray Dawes) it says ‘sell’.

What’s an investor to do?

In fact this seemingly contrary advice often leads to us getting questions like this from readers, ‘How come you’re telling me to buy stocks when Murray says the market is about to crash? I’m confused.’

It’s a fair question, and we’ll answer it today…

Many investors make a common mistake.

They look at the market as though it’s black or white…it’s up or down…it’s a bull market or a bear market.

But you shouldn’t look at the market like that.

The ‘market’ isn’t just one big lump. It’s not like a school of fish that switches directions at the same time.

You’ve got the stock market, bond market, foreign exchange (FX) market, commodity market, derivatives market, property market…and hundreds of other markets.

And within those broad markets there are different sectors or sub-markets, such as utilities, finance, and resources in the stock market; government, semi-government and corporate in the bond market…

In the FX market there are major and minor currency pairs; base metals, precious metals and agricultural commodities in the commodity market; CFDs, options and futures in the derivatives market; and residential and commercial property in the property market.

You get the point.

And then within these sub-markets there are further sub-markets and then individual tradeable assets.

The point is, just because BHP Billiton [ASX: BHP] goes up in the stock market, doesn’t necessarily mean the silver price goes up in the commodity market.

Heck, just because BHP goes up, doesn’t mean other stocks have to go up.

However, that’s only a third of the story. The other two-thirds involve risk and asset allocation…

Do This Before You Even THINK About Buying a Stock

We won’t cover this in fine detail because we’ve gone through each of these in detail before. Just go to the Money Morning website and search for ‘punting money’ or ‘asset allocation’ and you’ll find the relevant articles.

But to put it simply, before you even look at the various markets you need to look at your finances.

You need to total up your savings and work out how much money you want to put in each investment. This is the ‘safe money’ and ‘punting money’ that we’ve written to you about in the past.

This is where you allocate 70-80% of your savings in cash, term deposits, dividend stocks, and gold and silver. This is money you can’t afford to lose…money you’re investing for the long term.

This is how we manage our family wealth. We’ve got money in cash and term deposits, and money in dividend stocks. We don’t ever plan on selling out of any of those investments – although that’s not to say we don’t review them.

You should plan to keep hold of these investments regardless of whether the economy is going up, down or sideways.

Aside from this you should have your ‘punting money’. How much you allocate to your punting fund comes down to your attitude to risk. That’s why we look at risk and asset allocation together.

If you’re happy with a lot of risk then you’ll allocate less to your ‘safe money’. If you’re risk averse then you’ll allocate more to your ‘safe money’.

And it’s here where you may think there’s confusion between your editor’s message to buy stocks against Murray’s message to short sell stocks.

The fact is, as odd as it may seem, the two strategies aren’t mutually exclusive. Murray looks at the market for big macro-economic moves. He’s looking at what the central bankers are up to, the latest economic releases, and what policy makers are doing in Canberra or Washington DC.

He then looks to place big leveraged bets to take advantage of short-term moves.

Why You Should Speculate to Build Wealth

To a large extent, when we’re researching stocks for Australian Small-Cap Investigator we don’t care much for central bankers, economic data, or dumb policy decisions.

We tend to focus on longer-term trends. We look at some of the most speculative stock positions available on any market – small-caps. We’re not looking for small short-term gains.

We’re looking for huge gains. We’re looking at companies that are developing a breakthrough technology, exploiting a market trend, or exploring for an undiscovered resource.

We look back at history to some of the wealthiest people, most of them got where they did by taking risks…by speculating. Many probably risked more than they should. People like John Templeton and William Knox D’Arcy.

Yet we’re not saying people should go ‘all in’ on small-cap stocks. We believe investors should understand the risks and then take a meaningful but calculated punt. That’s why we suggest allocating 5-15% of your savings in this end of the market.

If you punt on the right stocks at the right time it’s possible to make a fortune. In short, these are the kind of stocks that could either go belly up…or could make you a 300%, 400% or 500% gain.

And that’s the thing, because you can make such big gains, you only need to use a small amount of capital. And because small-cap stocks can take longer to reach their full potential, you also have to sit through some of the shorter-term broad market moves.

Right now, we’re looking at hundreds of small-cap stocks trading at bargain-basement prices. Yet only a handful of them will make the kind of explosive gains we’re looking for. It’s our job to try and find those stocks.

Yes, You Can Short-Sell and Buy Stocks at the Same Time

So, we get it. We know it can sometimes appear confusing when one editor says buy when another says sell, the key point is to look at the advice in context with your overall wealth.

To our way of thinking there’s no contradiction with the advice to use some of your cash to short-sell lumbering blue-chip stocks today, while at the same time trawling the bottom of the market for beaten-down small-cap gems.

We hope that helps.


PS. By the way, as Callum said in his story on William Knox D’Arcy, there are a number of things D’Arcy did to build his fortune. But in a report we’re due to release tomorrow, we’ll reveal the single most important wealth-building strategy that turned D’Arcy from a provincial lawyer to one of the world’s richest men.

From the Archives…

Why You Should Always Be Looking to Buy Small Cap Stocks
23-11-2012 – Kris Sayce

China is Now the World’s Biggest Gold Producer – and Consumer
22-11-2012 – Dominic Frisby

The Stock Market Gets Squeezed
21-11-2012 – Murray Dawes

Buy Quality Gold Stocks That Have the ‘Right Stuff’
20-11-2012 – Dr. Alex Cowie

Picking the Hot Commodity Stocks of 2013
19-11-2012 – Dr. Alex Cowie

Australian Small-Cap Investigator:
Why Invest in Small Cap Stocks and Why Now?

Why It’s Possible to Buy AND Sell This Market

With the Economy Recovering, Are Higher Rates Imminent?

By The Sizemore Letter

Quietly, under the radar, all signs are pointing to a strong recovery in the housing market.  Sales of both previously occupied homes and new homes rose sharply last month, as did building permits.   Building permits are up a whopping 22% over the past year.

Mortgage applications are rising. And prices are rising in most markets. We’ve even seen improvement in billings from architects.

You wouldn’t know it from watching the news or from talking to the average American—who remains deeply pessimistic about housing and the economy in general—but we have the makings of a mini-boom in housing that should go a long ways towards stabilizing the U.S. economy.

Remember, in addition to the jobs in construction and finance that a strong housing market creates, there are the spillover effects.  A strong housing market makes it easier for Americans to sell their homes and move for a better job opportunity.  It’s impossible to calculate with any accuracy, but some portion of our 7.9% unemployment rate is “frictional” unemployment, which means that would-be workers are not able to take available jobs because they are not mobile enough to take them.

What does all of this mean for interest rates—and for a resumption in the bull market in equities?

So much of the recent recover y in home prices has been due to low mortgage rates.  Housing is affected by rates the same way that bonds are.  Lower interest rates mean higher home prices for a given monthly payment.  So, if mortgage rates rise too quickly, they can nip this would-be recovery in the bud.

This is something that bears watching, but for now it doesn’t concern me.  I do expect rates to rise from their current lows, but I do not expect them to return to pre-crisis levels any time soon.  As Japan has proven, inflation and interest rates can remain subdued for years following a major asset bubble.

It is a simple case of supply and demand.  When there is a large supply of money but comparatively little demand for it in the form of loans, the price of money—in this case the interest rate—falls.  This was the case for Japan during its two lost decades, and it is the case in America and Europe today.  A deleveraging private sector is more than compensating for a spendthrift government to reduce the total amount of debt.  Add to this Bernanke’s insistence on keeping quantitative easing measure in effect until we see a real fall in the unemployment rate, and you have a recipe for continued low rates, housing recovery or not.

Where does this leave the stock market?

Worries about higher taxes have hit dividend-paying stocks in the weeks following the election, and I expect tax loss selling by high-net-worth investors to keep a lid on prices for the remainder of 2012.

But in a world of low yields, dividend paying stocks are still going to be the best option for most investors.  My favorite dividend-focused ETF is the Vanguard Dividend Appreciation ETF ($VIG), which yields a modest 2.11% in dividends.  But unlike bond coupon payments, VIG’s payout will rise over time.  The ETF’s holdings consist of stocks that have raised their dividend for a minimum of 10 consecutive years—which means they raised them throughout the chaotic years of 2008 to the present.   The ETF’s cash payout is up 13% year over year, and I expect continued strong boosts in the years ahead.

Disclosures: Sizemore Capital is long VIG. This article first appeared on MarketWatch.

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The post With the Economy Recovering, Are Higher Rates Imminent? appeared first on Sizemore Insights.

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Tunisia holds rate, economy recovers, inflation may rise

By Central Bank News
    Tunisia’s central bank held its benchmark interest rate steady at 3.75 percent as the economy continues to improve gradually but inflation could rise in coming months.
    Banque Centrale de Tunisie, which raised its rate in August by 25 basis points, said the pressure on prices and the balance of payments warrants watching and financial balances must be preserved.
    Tunisia’s consumer prices rose 0.8 percent in October from the previous month for an annual rise of 5.3 percent, down from September’s 5.7 percent due to lower food prices, the bank said, adding:
    “It is worth noting that certain provisional indicators augur for the return of a rise in inflation in coming months.”
    Tunisia’s central bank does not have a specific target for inflation, but the governor said last month that the bank would tolerate inflation of up to 5 percent.
    Tunisia’s economy has been gradually improving this year after contracting by 2.2 percent last year following political unrest that triggered the Arab Spring across North Africa.
    The central bank said the economy expanded by an annual 2.6 percent in the third quarter for a 3 percent expansion in the first nine months, with agriculture, services, mining and energy improving.
    “By contrast, pressure from lethargic external demand keeps on affecting production in  manufacturing industries and exports because of the persistence of economic and financial difficulties in Tunisia’s main partner countries in the European Union,” the bank said.
    Tunisia’s trade deficit rose in the first 10 months of the year with the current account deficit widening to 6.9 percent of Gross Domestic Product, up from 5.8 percent in the same 2011 period. Foreign reserves also declined to the equivalent of 94 days of imports as of Nov. 26 compared with 113 days at the end of 2011, the bank said.
    The outstanding balance of deposits in Tunisia’s banking sector rose by 5.4 percent in the first 10 months from the same period last year, the central bank said.
    In its statement, Tunisia’s central bank made no mention of consumer credit, which has concerned the bank. Since October, the central bank has required commercial banks to hold reserves equal to the amount of new consumer credit issued to contain inflation.

Playing the Long Term trends in a Stock- ASPS Sample

David Banister –

How many times have you bought a stock and then a few weeks perhaps have gone by and you get frustrated with lack of real net movement?  You see all kinds of other stocks moving every day and finally you give up, sell your stock and go chase another one. Inevitably what happens in many cases is you find out later that your instincts were right and your research was correct, as the stock you gave up on finally takes off leaving you frustrated.

Sometimes it helps to understand the long term picture of  a stock cycle and try to determine where you may be at in the big picture. This way you may be more willing to sit on a stock a bit longer, understanding it may need some time to work off a prior large move to the upside.  Stocks often consolidate in fibonacci periods of time, as those revolve mainly around sentiment related to the stock or the company itself.  You can see big up moves that come out of nowhere and last for several weeks, and then many weeks of consolidation or mild decline.  These are actually crowd behavioral movements playing out as sentiment swings from too bearish to overly bullish and back again.

In the sample below we outline ASPS, a strong growth company in the right sector at the right time.  We can’t be sure that this stock will break out to the upside, but we do like the fundamentals and the catalysts ahead.  At ATP we look for both technical and fundamental marriages as it were, and then do our best to time the entry and exits accordingly. ASPS plans to spin out two divisions as a stock dividend to shareholders in the next 30 days or so, and we think that will catalyze the shares as sentiment turns north.

In the meantime, the stock trades between 100 and 107 per share frustrating anyone who expects an immediate pop.  Taking a look at a multi month chart with weekly views we can see that this actually has been consolidating for several weeks in a normal pattern.  In this case the 20 week moving average line seems to be the bogey for this stock cycle for ASPS, and as we approach that line we may see a shift back north in sentiment.  Should we be wrong, we will know if the stock breaks down materially from this crowd pattern in play now.

Stock Trading Alert

Above is the chart as of November 29th, let’s see how it plays out: Be sure to read our article about “Buying in the Trenches” as well. Disclosure: Our ATP service has recommended a long position in ASPS within the past few weeks.

Go to and subscribe by using coupon code AD499ATP in the coupon code field at the bottom of the sign up form. Sign up for quarterly and the discount will be applied at checkout, and you will get The Market Trend Forecast for free as well.

All information herein is not to be considered an offer to buy or sell any security. Consult a professional advisor before making investment decisions. The ATP service is currently covering this position and we may tell our subscribers to buy, sell, or hold at any time. This information is for educational purposes only and should not be relied upon for accuracy or projections. Do your own due diligence and be aware of your risk profile at all times.


Gold’s Comex Drop “A Test of Downside Interest”, Fat Finger Trade “Not to Blame” for Selloff

London Gold Market Report
from Ben Traynor
Thursday 29 November 2012, 07:15 EST

WHOLESALE gold bullion prices rose to $1725 an ounce Thursday morning, recovering some ground after yesterday’s sharp drop during US trading, as stocks, commodities and the Euro also gained and US Treasury bond prices fell.

Silver climbed to $33.87 an ounce, 2.7% up on yesterday’s low but 0.9% down on this week so far.

Gold fell more than $30 an ounce in an hour Wednesday, dropping 1.5% in just a few minutes. Gold trading volume on the New York Comex futures and options exchange was more than double its 250 day average, according to Reuters.

Silver also fell Wednesday, with Bloomberg reporting the highest silver Comex volumes since May 2011, although silver rebounded more quickly than gold and was back to within a few cents of its pre-crash level by the time US markets closed.

“[Yesterday’s move] puts our bullish view into jeopardy,” says Scotiabank technical analyst Russell Browne.

“We shall shift to neutral should support at $1705 be broken.”

“We don’t think anything has materially changed for gold,” adds a note from UBS.

“Essentially the metal is back to where it was trading last week. This is another test of downside buying interest but it also highlights the commitment issues that reside when the market attempts to climb higher.”

Online gold exchange BullionVault saw the number of customers adding to their gold holdings triple on Wednesday compared to a day earlier.

The volume of bullion held by gold exchange traded funds meantime rose to a fresh all-time high Wednesday, according to Bloomberg data. The world’s biggest gold ETF SPDR Gold Shares (GLD) also saw holdings set a new record at just over 1347 tonnes, a 1.2 tonnes rise from the previous record set a day earlier.

A spokesman for Comex operator CME Group denied yesterday’s fall in gold prices was the result of a so-called ‘fat finger’ trade, a term used to suggest human error. Nor was stop logic triggered, the spokesman added, meaning that the fall was not sufficiently rapid to trigger a pause on CME’s electronic Globex trading platform.

“Gold probably saw some additional pressure from technical stop loss selling,” CME’s mid-session gold report said Wednesday, “as the gold market fell through a series of key chart points.”

“Some players blamed the lack of fiscal cliff progress undermined gold and other commodities,” added the exchange operator’s end –of-day gold market report.

“But if that was the focus of the trade one might have expected gold to have bounced more significantly into the President’s White House Press conference.”

President Obama yesterday urged voters to use social media website Twitter to put pressure on their representatives in Congress to reach a deal on the so-called fiscal cliff of tax rises and spending cuts currently scheduled for the end of the year.

“We don’t have a lot of time here,” Obama said. “We’ve got a few weeks to get this thing done…the Senate’s already passed a bill that keeps income taxes from going up on middle class families. Democrats in the House [of Representatives] are ready to vote for that same bill today. If we can get a few House Republicans to agree as well, I’ll sign this bill as soon as Congress sends it my way.”

Republican Congressman Tom Cole of Oklahoma suggested this week that Republicans should support the bill.

“We all agree that we’re not going to raise taxes on people who make less than $250,000,” said Cole.

“We should just take them out of this discussion right now, continue to fight against any rate increases, continue to work honestly for a much bigger deal.”

Republican House Speaker John Boehner rejected Cole’s suggestion Wednesday. Boehner added however that he is optimistic a deal can be agreed.

Treasury secretary Timothy Geithner will today hold talks with Congressional leaders on the subject.

US hedge fund SAC Capital meantime was issued with a so-called Wells Notice by the Securities and Exchange Commission Wednesday, informing SAC that it will face charges over insider trading.

The world’s number four gold producer Gold Fields announced today that it plans to spin off two of its South African mining sites as part of a business restructuring. The two sites, Beatrix and KDC, have both been affected by strike action in recent weeks.

Ben Traynor

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+

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Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


USD/JPY: Better US Prospects and Weak Exports Wane the Yen

Before the debate of Shinzo Abe, the front-runner to become the next prime minister, and incumbent Yoshihiko Noda regarding polices of Japan, benchmark bonds advanced for a second day. Japanese shares consequently fell from a six-month high while the Japanese yen strengthened by 8 pips against the American dollar. In today’s Asian session, the weight of Japan’s export slump is expected to drag down the Yen.

A structural story is believed occurring in the Japan as the nation has lost the competitiveness of its exports, where Japanese are deemed to find themselves in very serious problems if they fail to dig themselves out.  The total shipments are said to be 53.5 Trillion for January through October, which is down by 2.3 percent from the same period in the previous year. In effect, a negative contagion to trade and industry leads Japan to continuously suffer its worst year for exports.

Meanwhile, the release of the Beige Book brings better prospects for the US dollar. The American economy was stated to have a modest growth with hiring to remain steady as well even if the Federal Reserve reported to do little to calm concerns about slow growth and high unemployment. Consumer spending also increased at a moderate pace in most districts as jobs are added, leading manufacturing activities to immense and forecasting a 2 percent annualized rate of growth in Q3.

Thus, the political, financial and economic turmoil of Japan versus the anecdotal evidence of recovery of the US economy encourages that a long position be made for the USDJPY pair.

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