By
Sharps Pixley Ltd -
Fri 07 Sep 2012 03:50:08 CT
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Metals
After rising 4.64 percent in August, the U.S. Comex gold futures rose a
further 1.06 percent in September to close at $1,703.2 on 6 September.
Month-to-date, the S&P 500 returned 1.81 percent, the Euro 50 Index
surged 3.45 percent and the Euro/Dollar Index rose 0.41 percent. The
Dollar Index fell 0.11 percent in September after falling 1.73 percent
in August.
The world has high hopes of further global stimulus as recent economic
data from the U.S., Euro area and China all show a weakening trend. The
high unemployment rate in the U.S. and uncertainty in the Euro crisis
have impacted spending and investment plans elsewhere. The U.S. August
ISM index dropped 0.2 point to 49.6 with new orders and employment index
also dropping. The Euro area PMI was revised down in August while the
Chinese August HSBC PMI fell to a three-year low, raising doubt of the
government's 2012 growth target of 7.5 percent.
External markets rallied big on 6 September when the ECB Governor Draghi
unveiled the details of his much-anticipated bond purchasing program
although the measures were leaked the day before. The ECB will buy
unlimited amount of short-dated bonds with maturities up to three years
while "sterilizing" the bond purchase to keep the money supply neutral.
The ten-year bond rates of Italy, Spain and Portugal rallied 25 to 39
bp upon the announcement. The ECB action will buy some time for the big
borrowers in Europe such as Italy and Spain to prevent their borrowing
costs from blowing through the roof. While in the short-term borrowing
costs may be lowered, the underlying competitiveness issues of the Euro
zone are still not addressed.
Traders have positioned themselves for a good month in gold in
September. According to Bloomberg, gold open futures contracts jumped
to a three-month high as of 31 August while the gold-backed ETPs
holdings surged to an all-time high of 2,471.97 metric tons as of 6
September. Festival demand in India and expectations of ECB measures
also caused the gold bar price in India to touch an all-time high of
Rupee 32,300 per 10 grams on 6 September.
In the coming days, market will likely focus on the U.S. non-farm
payroll data on 7 September, Chinese industrial production data on 9
September, the German constitutional court ruling on ESM on 12
September, the U.S. FOMC monetary policy announcements on 13 September
and the Eurogroup's decision on Spanish debt purchase on 15 September.
Austin Kiddle
Sharps Pixley, London
www.sharpspixley.com
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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.