Gold rises after Italy downgrade unsettles

* Gold rises as correlation with equities erodes

*  Italy  downgrade supportive of higher prices

* Coming up: U.S. existing home sales Wednesday, 1400 GMT

By  Amanda Cooper

LONDON, Sept 20 (Reuters) - Gold was set for its biggest daily gain in over a week on Tuesday, after a downgrade to Italy's credit rating added to the strain on European leaders to solve the region's debt crisis.

In the latest blow to the  euro zone, S& P cut Italy's sovereign credit rating by one notch, saying its economic growth prospects were getting weaker and planned reforms by the government would not help much.

A measure of German analyst and investor sentiment fell to its lowest in nearly three years last month, while  Greece  raced to make more cuts to its vast public sector to convince its international creditors that it can meet its loan conditions.

Gold shrugged off a rise in European  stocks, which would normally reflect a pick-up in investor appetite for risk. But the rise on the stock market was led mostly by so-called defensive shares, which act almost as safe-havens.

Spot gold was last up by 1.5 percent at $1,806.40 an ounce by 1443 GMT, having fallen by nearly 1 percent so far this week, in its third consecutive weekly decline, although analysts said the market was unlikely to fall much further in the current environment of high uncertainty.

" Basically a lot of the supportive factors for gold are still in place, so although we saw a bout of dollar strength (earlier) that took the wholecommodities  complex lower, things like Asian demand are very strong at this point," said Standard Chartered analyst Daniel Smith.

" Gold is rallying ... partly on the European situation, but also because there is this underlying uptrend in demand."

The volatility in gold prices in the past few weeks has deterred some gold investors, as evidenced by the decline in speculative holdings of U.S. gold  futures  < 0#CFTC:> and a fall of nearly 2 million ounces in holdings of the metal in exchange-traded funds over the last month.

NERVES FRAY

Bank of  China  , a big market-maker in China's onshore foreign exchange market, has stopped foreign exchange forwards and swaps trading with several European banks due to the unfolding debt crisis in Europe, causing some distress in market sentiment.

" Increasingly over the last couple of weeks, we've seen stories about how safe something is that is as volatile and that is doing a bit of damage here and has caused a few people to pull out and go on the sidelines," said Saxo Bank senior manager Ole Hansen.

" The $1,765/70 area is reasonable support and that is giving a bit of confidence back to the buyers. But we really have been in a downtrend for the best part of the last couple of weeks and that needs to be broken ... and for that, we need to move back above back above $1,825," he said.

But uncertainty surrounding the outcome of the U.S. Federal Reserve's next policy meeting should whet short-term appetite for the metal, while in the longer-term, robust demand from fast-growing emerging economies was expected to continue.

Gold demand in China, the world's largest gold producer and second-biggest consumer, could rise 10 percent this year as consumers choose the metal as a form of wealth protection, the World Gold Council said on Monday.

Gold is likely to hold steady over the coming day or so as investors await the outcome of the Fed's two-day policy meeting, at which the central bank is widely expected to signal what action it will take to encourage economic growth.

While  markets  are discounting a return to government bond purchases, the Fed has more tools at its disposal to boost consumer spending by keeping interest rates low, which create a supportive environment for gold, which carries no yield of its own and loses out to other dividend- or yield-bearing assets when rates rise.

Spot silver rose 1.5 percent to $40.07, but off the three-week low of $38.95 hit in the previous session.Platinum rose by 0.4 percent to trade at $1,778.50 an ounce, while palladium rose 0.2 percent to $714.97. (Additional reporting by Rujun Shen in Singapore Editing by William Hardy)

 

 

 

Martin Murenbeeld, chief economist at DundeeWealth, says a double-dip recession won't be good for gold prices, but when policymakers react quickly -- which he says they have done in the U.S. -- then the downturn in gold prices is short.

Murenbeeld sees many catalysts for higher gold prices, but the biggest one is money printing. " Liquidity drives gold," he says.

Murenbeeld acknowledges that a large amount of theFederal Reserve's  stimulus stays in excess reserves and argues that money printing in emerging-market nations like China is, in fact, more supportive of gold prices.

" Chinese money supply is 1.5 times larger than the U.S. money supply," he says.

Paul Walker, global head of precious metals at GFMS, a research consultancy recently purchased by Thomson Reuters, says strong demand in India supports higher gold prices.

Walker says that during a recent trip to India he couldn't get into gold stores in some regions because there were so many customers inside eager to buy the metal.

The expert says that India continues to buy on price dips and that there is a lack of scrap gold coming out of the country -- a sign of hoarding.

India " can suck in huge amounts of gold in a very short amount of time," he says, estimating that India could import more than 1,000 tons of gold in 2011 -- " a record level at record high prices."

For comparison,  SPDR Gold Shares(GLD_)  holds 1,251 tons.

Walker also sees bar hoarding and strong coin demand in China as inflation remains high, interest rates remain negative and investors look for a safe place to invest.

He argues that jewelry demand from China and India is actually investment demand. It is less about buying a gold bracelet for a loved one and more about where to stash cash and how to generate the best returns.

" The market is moving in relatively unchartered territory," he says.

 

Finance firms, banks help India consumers to buy more gold

MUMBAI (Commodity Online):  The rising  Gold  price is no longer a worry for Indian jewelry buyers as finance companies and banks are rushing towards them offering loans for purchasing their beloved yellow metal.

New finance schemes to buy gold continue  have been   launched as festival and wedding season gains momentum in the world’s largest gold-loving nation. Gold is gifted within families in India during festivals and wedding occasions.

India has seen 25% spurt in gold prices in the first half of the year but gold sales continued to climb. Seeing this trend, many jewelers in collaboration with banks have introduced many schemes, loan plans to push gold sales. These schemes and plans introduced would help the buyers to buy more jewelry for the cash they possess and remaining could be paid off in installment at low interest rates.

One such plan is ''Swarna Samridhi'' for the Andhra Pradesh market introduced by Jewellery chain Goldplus in alliance with Muthoot Finance.

There are also other plans such as suvarna Lakshmi  Gold  saving scheme introduced by Bhima jewellers, where the buyer can  reserve gold jewellery at current prices and take delivery at a future date.

Some jewellers  have even come out with exchange offers where the buyers can buy the gold worth the price of gold exchanged.

The finance options are available not only for gold but also for other precious metala like  Platinum  and woman’s favourite, diamonds.


Much of the world’s renowned jewellery like Tanishq, D’damas, Joy alukas etc has also introduced many schemes to promote the sales and till now it has proved to be successful.

 

 

GREATEST WEALTH IS HEALTH

 

fofoa.blogspot.com 


SEPTEMBER 16, 2011

  [WEEKEND DIGEST]

 

wealthwire.com 
SEPTEMBER 16, 2011 

 

Silver prices are once again enjoying a run-up as they did from January through April. During that period they doubled and briefly touched $50 an ounce before settling back down to the low $30s. 

As I write, silver prices are back above $40 an ounce and that may be giving you the urge to sell. I would advise that you don’t. This recovery is for real, and it has much further to go.

While I have a price target of $50.00 by years end, I anticipate silver prices will peak at $150 an ounce in 18 months. 

Central banks around the world are pushing lax monetary policies and this leads me to conclude that prices for all commodities (gold and silver in particular) will rise.

We've already seen this happen with gold hitting a record high $1,923.70 an ounce on Sept. 7 and when gold goes higher its baby brother silver quickly follows.

That's reflected in something called the gold to silver ratio, which shows how many ounces of silver it takes to buy one ounce of gold. Traditionally, this ratio acts as a price barometer for the two precious metals. And if you look at it right now, it's easy to see that $150 silver isn't far off. Gold and silver prices traditionally move together because both are considered stores of value in inflationary times and while the world considers gold as the premier store of value, other societies, most notably the Spanish empire in the Americas, Imperial China and Mogul India, used the silver standard and are therefore more focused on silver when inflation threatens. 

In the 19th century silver and gold prices maintained a fairly steady relationship to each other in a ratio of 16 to 1. This was due to the fact that both gold and silver were viewed as currency. However, in the 20th century silver depreciated against gold. This was due to the fact that silver began to be seen as a commodity that was mainly used in industrial applications. While the two metals are chemically very similar, but silver is much cheaper and therefore is more suitable for industrial uses.

By 2010, gold traded well above $1,000 an ounce while silver traded at $12-$14 an ounce or a ratio of close to 80 to 1. This was unsustainable, and it resulted in the price of silver rising in 2010-11. At its peak, silver was trading for $50 an ounce and about a 30 to 1 ratio to the price of gold.

Going forward, we cannot expect the gold/silver price ratio to reach 16 to 1, as it almost did in 1980. 

I believe the reason for this is the use of silver as an industrial metal has fallen off sharply when the price spiked. That freed up silver supplies while investment demand for gold soared. 

The second reason is that the 1980 silver price spike was caused by the  Hunt Brothers' attempt to corner the silver market.  No such attempt is visible today.

So, I believe the peak ratio of silver to gold is much more likely to reach something closer to 25 to 1. 

The peak in gold is yet unknown, but for supply/demand reasons it seems likely to be above $2,500 an ounce - today's equivalent of the 1980 peak, adjusted for inflation - but less than $5,000 an ounce - the 1980 peak adjusted for growth in world gross domestic product (GDP) or money supply. 

That would suggest a silver price peak between $100 and $200 per ounce, with $150 an ounce the most likely outcome. 

In conclusion, the market will not ultimately turn bearish until global monetary policy tightens. With the November 2012 U.S. Presidential election looming large on the horizon, we probably have at least another year of rising prices. However, we may not have two years to wait for politicians decide to get our fiscal house in order.

My recommendation would be to any silver holdings at least until prices reached $150 an ounce.

*Post Courtesy of  investingadvicebygeorge.blogspot.com.

 

 

 

WEEKEND DIGEST 

Forget Operation Twist: Rosenberg Says Bernanke Will Shock Everyone With What Is About To Come

Physical buying helps gold bounce from 2-week low

* Physical interest helps gold bounce

* Evidence of gold lending to raise dollars

By  Pratima Desai

LONDON, Sept 16 (Reuters) - Gold touched a two-week low on Friday on diminishing liquidity concerns before bouncing back, lifted by lingering concern about financial stability and strong physical buying interest from Asia.

Spot gold hit $1,761.94 a troy ounce, its lowest since August 26 but jumped to a session high of $1,792.49 as buying intensified in afternoon trade. It was bid at $1,785.80 an ounce at 1257 GMT compared with $1,788.64 late in New York on Thursday.

Gold started its decline after major central banks' coordinated to ease liquidity constraints on Thursday, which raised cautious hopes that policymakers would announce further action to help support the system.

" Yesterday's announcement has taken away some stress out of the market," said Walter de Wet, analyst at Standard Bank.

U.S. banks have been reluctant to lend dollars to their counterparts in Europe because of the debt crisis.

A shortage of dollars has meant frozen money  markets, which if it continues could hit economic growth as most international trade is carried out in dollars.

" But gold has rebounded nicely from its lows this morning, we've seen fairly decent buying out of Asia," de Wet said.

" Over the past couple of weeks whenever gold falls below $1,800, we've seen good buying, especially in Shanghai."

Traders say the premium for physical over spot in Shanghai was at about $14 compared with normal levels of about $2-$3.

Also a factor behind the morning rally was buying by euro-based investors worried about debt default in the  euro zone.

We view the latest correction in gold as temporary," Deutsche Bank said in a note.

" Gold and silver prices will keep on rising in an environment where concerns towards the global banking system remain, in our view."

NEED DOLLARS

A weaker euro against the dollar as a result of the debt crisis would normally prompt sales of gold, which typically moves in the opposite direction to the U.S.  currency. But that relationship broke down earlier on Friday traders say.

" So long as investors worry about Eurozone sovereign exposure, there will be fear of undercapitalisation amongst banks and risk will likely trade on a heavy note and the euro will suffer accordingly," UBS said in a note.

Receding worries about the liquidity crisis helped boost equity markets, but analysts say investors still favoured cash, often even at the expense of gold.

" The requirement for cash is back. There's evidence of people lending gold in the swap market to raise dollars," a precious metals trader said.

" People are definitely putting a premium on liquidity ... they are choosing to put as much money as they can in cash and other assets including gold will be liquidated."

Investors are also taking profits on gold positions to pay for losses in other markets.

Spot silver was bid at $40.03 an ounce from $39.83 late on Thursday and palladium at $729.75 from $720.75.

Platinum hit $1,762.28 an ounce, its lowest since August 11, as the crisis reinforced worries about the health of global economic growth and demand for autocatalysts.Spot platinum was bid at $1,796.99 an ounce from $1,781.38 on Thursday. (Editing by William Hardy and  Jason Neely)

 

 

 

Peter Schiff - Expect More Inflation, Printing & Higher Gold 

 

  With gold near the $1,800 level and silver close to $40, today King World News interviewed Peter Schiff, CEO of Europacific Capital.  When asked about the action in gold Schiff stated,  “It’s a consolidation, I’m looking for the next move higher.  Governments are going to keep printing, so gold is going to keep rising.  It’s had a significant move, so it has to finish consolidating before the next big move to the upside.”

 

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