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Saudi Arabia has gone on the offensive against Iran to protect its interests.  Their involvement in Syria is the first battle in what is going to be a long bloody conflict that will know no frontiers or limits.

Ongoing Disorders in the island kingdom of Bahrain since February of 2011 have set off alarm bells in Riyadh.  The Saudis are convinced that Iran is directing the protests and fear that the problems will spill over the twenty-five kilometer long COSWAY into  oil rich Al-Qatif, where The bulk of the two million Shia in the kingdom are concentrated.  So far, the Saudis have not had to deal with demonstrations a serious as those in Bahrain, but success in the island kingdom could encourage the protestors to become more violent.

Protecting the oil is the first concern of the government.  Oil is the sole source of the national wealth and it is managed by the state owned Saudi Aramco Corporation.  The monopoly of political power by the members of the Saud family means that all of the wealth of the kingdom is their personal property.  Saudi Arabia is a company country with the twenty-eight million citizens the responsibility of the Saud Family rulers.

The customary manner of dealing with a problem by the patriarchal regime is to bury it in money.  King Abdullah announced at the height of the Arab Spring that he was increasing the national budget by 130 billion dollars to be spent over the coming five years.  Government salaries and the minimum wage were raised.  New housing and other benefits are to be provided.  At the same time, he plans to expand the security forces by sixty thousand men.

While the Saudi king seeks to sooth the unrest among the general population by adding more government benefits, he will not grant any concessions to the eight percent of the population that is Shia. He takes seriously the warning by King Abdullah of Jordan back in 2004 of the danger of a Shia Crescent that would extend from the coast of Lebanon to Afghanistan.  Hezbollah in Lebanon, Assad in Syria, and the Shia controlled government of Iraq form the links in the chain.

When the Arab Spring reached Syria, the leaders in Riyadh were given the weapon to break the chain.  Appeals from tribal leaders under attack in Syria to kinsmen in the Gulf States for assistance could not be ignored.  The various blinks between the Gulf States in several Syrian tribes means that Saudi Arabia and its close ally Qatar have connections that include at least three million people out of the Syrian populations of twenty-three million.  To show how deep the bonds go, the leader of the Nijris Tribe in Syria is married to a woman from the Saud Family.

It is no wonder that Saudi Foreign Minister Prince Saud al-Faisal said in February that arming the Syrian rebels was an “excellent idea.”  He was supported by Qatari Prime Minister Hamad bin Jassim al-Thani who said, “We should do whatever necessary to help [the Syrian opposition], including giving them weapons to defend themselves.”  The intervention has the nature of a family and tribal issue that the prominent Saudi cleric Aidh al-Qarni has turned into a Sunni-Shia War by promoting Assad’s death.

The Saudis and their Qatar and United Arab Emirate allies have pledged one hundred million dollars to pay wages to the fighters.  Many of the officers of the Free Syrian Army are from tribes connected to the Gulf.  In effect, the payment of wages is paying members of associated tribes.

Here, the United States is not a welcomed partner, except as a supplier of arms.  Saudi Arabia sees the role of the United States limited to being a wall of steel to protect the oil wealth of the Kingdom and the Gulf States from Iranian aggression. In February of 1945, President Roosevelt at a meeting in Egypt with Abdel Aziz bin Saud, the founder of modern Saudi Arabia, pledged to defend the kingdom in exchange for a steady flow of oil.

Since those long ago days when the U.S. was establishing Pax Americana, the Saudis have lost their trust in the wisdom or the reliability of American policy makers.  The Saudis urged the U.S. not to invade Iraq in 2003 only to have them ignore Saudi interests in maintaining an Iraqi buffer zone against Iran.  The Saudis had asked the U.S. not to leave a Shia dominated government in Baghdad that would threaten the Northern frontier of the Kingdom, only to have the last American soldiers depart in December 2011.  With revolution sweeping across the Middle East, Washington abandoned President Mubarak of Egypt, Saudi Arabia’s favorite non royal leader in the region.

Worried by the possibility of Iranian sponsored insurrections among Shia in the Gulf States, the Saudis are asserting their power in the region while they have the advantage.  For thirty years, they have been engaged in a proxy war with the Islamic Republic of Iran.  Syria is to be the next battlefield, but here, there is a critical difference from what were minor skirmishes in Lebanon, Yemen, and elsewhere.  The Saudis with the aid of Qatar, and the UAE is striking at the core interests of Tehran; and they have through their tribal networks the advantage over an isolated Islamic Republic.

Tribal and kinship relations are being augmented by the infusion of the Salafi vision of Islam that is growing in the Gulf States.  Money from the Gulf States has gone into the development of religious centers to spread the fundamentalist belief.  A critical part of the ideology is to be anti-Shia.

Salafism in Saudi Arabia is promulgated by the Wahhabi School of Islam.  The Wahhabi movement began in the eighteenth century and promoted a return to the fundamentalism of the early followers of the Faith.

The Sauds incorporated the religious movement into their leadership of the tribes.  When the modern state of Saudi Arabia was formed, they were granted control of the educational system and much else in the society in exchange for the endorsement of the authoritarian rule.

When the Kingdom used its growing wealth in the 1970s to extend its interests far from the traditional territory in the battle against the atheistic Soviet Union, the Wahhabi clergy became missionaries in advancing their ideology through religious institutions to oppose the Soviets.  More than two hundred thousand jihadists were sent into Afghanistan to fight the Soviet forces and succeeded in driving them out.

There is no longer a Soviet Union to confront.  Today, the enemy is the Islamic Republic of Iran with what is described by the Wahhabis as a heretical form of Islam and its involvement in the Shia communities across the region.  For thirteen centuries, the Shia have been kept under control.  With the hand of Iran in the form of the Qud Force reaching into restless communities that number as many as one hundred and six million people in what is the heart of the Middle East, the Saudis see a desperate need to crush the foe before it has the means to pull down the privileged position of the Saud Family and the families of the other Gulf State rulers.

The war begins in Syria where we can expect that a successor government to Assad will be declared soon in the Saudi controlled tribal areas even before Assad is defeated.  The territory is likely to adopt the more fundamentalist principals of the Salafists as it serves as a stepping stone to Iran Itself.  It promises to be a bloody protracted war that will recognize no frontier and will know no limits by all of the participants.

Source: http://oilprice.com/Geopolitics/Middle-East/The-Endless-War-Saudi-Arabia-Goes-on-the-Offensive-Against-Iran.html

By. Felix Imonti for Oilprice.com

Reliable internal measures tell a story investors need to know

By Elliott Wave International

Anyone who enjoys eating fruit knows there’s a fine line between ripe and over-ripe.

If it sits in the fruit bowl too long, over-ripe turns rotten.

As experienced investors know, the stock market goes through similar phases. An overbought, or over-ripe, market can spoil quickly.

Take a look at this chart for example (wave labels removed), and ask yourself, is the stock market on the verge of spoiling?

The Aug. 10 Financial Forecast Short Term Update provides commentary to go with the chart.

[An] indicator that has moved to an overbought condition is 10-day NYSE Trin (advance/decline ratio divided by the up/down volume ratio). Wednesday’s close [Aug. 8] was .937, which was the most overbought level since March 26, when 10-day Trin closed at .900 (see gray vertical line). That was five days prior to the April 2 S&P top. It’s certainly possible that Trin becomes even more overbought prior to a market high, but it doesn’t have to. Current levels are the exact opposite of those that attended the August, October and November 2011 lows, as marked on the left side of the chart.

EWI also looks at several other internal measures.

A healthy bull market sports broad participation among different sectors and indexes. Up days are consistently accompanied by high volume; momentum is strong.

The indicators EWI watches suggest this market is indeed overbought and still ripening.

What does the true state of the economy mean for your investments? EWI’s free report, The Economic Rot Beneath, reveals important economic numbers that you are not currently reading in the mainstream headlines – but you should be. For instance, did you know stocks priced in real money (gold) are down 87%? Or that U.S. manufacturing jobs are half of what they were in 1979? Or that housing starts per capita are back to 1922 levels? Learn what’s really going on in the U.S. economy. Download your free report now >>

Once you have decided to become a Forex trader in Singapore, then you need to get ready to work hard during the first months. This is not because you are in Singapore, the country has one of the most free economies of the world making it easier for anyone to have a business, but due to the fact that Forex can be quite difficult to learn and make profits if the trader does not know what he is doing. So, the Singapore trader should be ready to learn Forex trading and if necessary, be ready to put in a lot of hard work so that he can understand what is required to be successful in the Forex trading business. Though it might sound like a lot of hard work for the Singapore Forex trader, it will all be well worth it. When people spend more than 10 years in getting themselves ready for the job that they seek, the Singapore Forex trader should be ready to put in at least 2 years of work so that he can achieve the success in Forex trading that he yearns for.

Once he has achieved noticeable success as a Forex trader, the word about the Singapore trader usually gets around very quickly and he is then likely to be sought by a lot of businesses like banks, hedge funds and companies that undertake hedging
services on behalf of the clients. This throws open a lot of opportunities for a Singapore Forex trader to choose from and this would ultimately mean a lot of benefit for the trader as most of these jobs is very likely to be high paying jobs.

The Singapore trader can choose to train himself on Forex trading or he can approach any of the several Forex training schools that are available in Singapore. After a period of careful consideration of all aspects of the training like duration, timings and cost, the trader can choose to join the school and get to understand the nuances and learn Forex trading from the best of trainers. Once the training is complete, the trader should take time in building his skills and then trying out his skills on a demo account. This helps the Singapore trader to iron out his deficiencies and build confidence in himself and the strategies that he uses. Once he has had a successful demo, the next stage is to move on to a small live account and slowly build the account and also build a good trading record as well. It is important that the trader builds a good trading history for at least a year if he is serious about making a career in trading.

Once he has achieved that, he can then go out and show his trading history to others to seek jobs and funds and thus move to the next level of Forex trading in Singapore.

Article by Investment U

Most of you buy stocks. You hang on to them for anywhere from a few minutes to a few decades. You hope they’ll go up and then you sell for a profit. Buy low, sell high… that’s what we’ve been taught.

But there are other investors who do the opposite – they sell high and buy low. Sounds similar, but it’s a very different strategy. It’s known as shorting stock. A short seller sells the stock first and buys it back later. If the stock is bought back at a lower price, the investor makes money.

Here’s how it works…

Let’s say an investor shorts 100 shares of Facebook (Nasdaq: FB) at $18.

If he buys Facebook back at $12, he’ll make $600, because he bought it at $12 and sold it at $18, even though he did it in the reverse order.

However, if Facebook rallies to $24, he’ll lose $600. He’ll have bought the stock at $24, but sold it at $18.

Remember, though, the sale took place first.

In order to sell a stock that an investor doesn’t have, he has to borrow it from his broker. Sometimes, stock isn’t available to borrow, in which case the investor can’t short the stock.

It’s an aggressive strategy, one that has unlimited risk.

Think of it this way: When an investor buys a stock, the most he can lose is the amount invested. The stock can’t go below zero. However, a shorted stock can go up indefinitely. Imagine what an investor would have lost if he shorted Apple (Nasdaq: AAPL) at $30?

How to Profit From a Short Squeeze

Shorting is a way to take advantage of a stock that falls in price. But because of the extra risk, it’s not for everyone.
However, investors who are bullish on a stock can take advantage of short sellers in a move that’s known as a “short squeeze.”

When a stock that’s heavily shorted starts to rise, existing shorts “cover” or buy the stock back to avoid suffering big losses.

That extra buying by short sellers covering their positions leads to more demand for the stock and pushes it north in what’s known as a short squeeze. Investors who own a heavily shorted stock that gets squeezed sometimes find themselves with a stock moving sharply higher.

Here’s a recent example.

Repros Therapeutics (Nasdaq: RPRX) is a small-cap biotech company. Over 20% of Repros’ float is sold short. That’s a huge percentage.

So last week, when Repros’ stock was moving higher, it’s very likely that shorts started covering their shares, pushing the stock even further skyward…

Above is a chart of Repros. Look what happened on August 30^th.  There was no news on the stock that day, but as the stock advanced, buyers piled in, moving the price well above $12.  Because there were so many shorts in the stock, it is likely that some of them bought back shares to close their position and limit their losses, which added fuel to the fire.

Today, the stock continued to advance above $14. The stock is up nearly 40% in five days – again on no news. That’s likely a short squeeze.

When I was an analyst at a contrarian research firm, the only stocks any of us were allowed to put a “Buy” rating on were those with at least 10% of the float sold short. It was a way of stacking the odds in our favor so that if the stock did start rising, there was another source of demand to push it still higher.

Let’s take a look at a few stocks that could squeeze the shorts if they get going in the right direction:

iStar Financial (NYSE: SFI), which offers financing to the commercial real estate industry, has 21% of its float sold short. The stock is near the top of its yearlong range. If it breaks out above $7.75, you might see short covering that would propel the stock higher.

Movie theater chain Regal Entertainment Group (NYSE: RGC) has a whopping 32% of its float sold short. That means one out of every three shares have been shorted.

Here’s an interesting figure – nearly 26 million shares of Regal have been shorted. Yet the stock only trades about a million and a half shares a day on average. What happens if the company has a strong earnings report or the stock makes a new high on its own?

With Regal also close to its 52-week high, a breakout could fuel a wave of short covering. And considering that 17 times the average daily volume has been sold short, it wouldn’t take that much short covering to ignite the stock higher.

Understanding the forces that can push a stock higher increases your chances of success. And when you own a stock, there’s nothing more satisfying that squeezing someone’s shorts. Well, you know what I mean.

Good Investing,

Marc

Editor’s Note: In the premium edition of today’s newsletter, Marc tells a select group of our readers about one of his favorite short squeeze candidates. It’s the stock of a small biotech firm with a 13.5% short float, which he’d be happy to own regardless of whether the short squeeze comes to fruition.

In fact, he told me its cash flow and profits are projected to grow 48% per year over the next five years. For more information on Marc’s recommendation today and how to upgrade your subscription for just $5, click here.

Article by Investment U

Article by Investment U

Is this drought of Biblical proportions?

Well, I doubt they’ll still be talking about this for the next two millennia – but it may get some discussion for a few decades.

Drought is referred to as the “creeping disaster.” It doesn’t hit you hard and in the face like a tornado or hurricane. It wears you down, slowly but surely, over time. However, what we’re experiencing now is more hare-like than tortoise-esque…

From mid-June to mid-July, the amount of farmland lost to drought has been astounding. Over this period, the percentage of land under the category of severe drought increased from 17% to 39%. The reason? We’ve hit a perfect storm of nasty crop weather. There’s been little rain, and 2012 is scheduled to go on as the hottest year ever recorded.

Reports from the U.S. government state that this is the largest drought since 1956. More than half the country is experiencing somewhere between moderate to extreme drought. Before long we should all expect to see this drought hit the economy, raising the prices of everything from food to gas.

Since many investors aren’t comfortable with trading commodities or futures contracts, I’ve identified a great stock play on this below. But first, let me discuss how this drought is affecting commodity prices.

How Has This Hit Commodity Prices?

Expect commodities to enter a bull market, with grain futures leading the way. The Standard & Poor’s GSCI gauge of 24 raw materials was up last week about 1.2% to 677.29 – that’s the highest since the spring. It’s skyrocketed 21% from this year’s lowest close back on June 21.

In August alone soybeans reached a new all-time high of $17.1275 a bushel, while corn set a record at $8.49 a bushel. In June, the Department of Agriculture decreased its corn harvest forecast by 27%. It also went on to say that it estimates almost 40% of the U.S. corn crop is in bad shape.

Sudakshina Unnikrishnan, a London-based analyst at Barclays Plc stated, “The grains have been the strongest performing subsector in commodities the past few months, and that has purely been driven by supply-side considerations and the U.S. drought in particular.”

Goldman Sachs Thinks Rally Will Continue

In the middle of June, Goldman Sachs Group Inc. moved to a “near-term overweight” recommendation in commodities. Earlier this month they held steadfast on forecasts for a rally where corn would reach $9 a bushel, soybeans could reach $20 a bushel and wheat could see $9.80 a bushel by November.

Goldman analyst Damien Courvalin wrote, “We expect soybean prices to outperform to ration resilient export demand in the face of critically low U.S. supplies, corn prices to rally to secure sufficient ethanol demand destruction and wheat prices to underperform corn prices on relatively higher supplies.”

According to the USDA, U.S. corn production may drop to 10.78 billion bushels, a six-year low, while the soybean harvest at 2.69 billion bushels would be the smallest since 2007. Crops are in the worst condition since 1988, a year when the corn harvest tumbled by 31% because of drought.

An Easy Way to Play It…

A lot of times when people talk about the commodities market, they talk about how they’re going to play commodity futures. All you may know about the commodities markets is what you remember from the movie Trading Places, where Dan Aykroyd and Eddie Murphy put the Dukes out of business by means of a false orange juice “crop report.”

Almost 30 years later, most people who’ve seen the movie still don’t know how they got rich and were able to hang out on the tropical island with a young Jamie Lee Curtis. So I’m going to give you a less complicated play on the matter…

The one company you want to take a long hard look at is Darling International (NYSE: DAR). This 130-year-old company is in the rendering business.

Never heard of the rendering business? A lot of people haven’t. Rendering means you render down animals into oils and proteins used by agricultural, leather and chemical firms. It also recycles cooking oils and baking waste used by commercial businesses into high-energy animal feed parts and commercial oils. It’s the largest and the only publicly traded rendering company. It’s up around 25% year-to-date.

Darling has put itself in this position through the rollercoaster ride known as animal feed prices. The agricultural world uses its tallow, yellow grease, and meat and bone meal products as alternatives to corn and soybeans. So now you get it…

They stand to make a killing with the prices of corn and soybean going crazy the next few months.

Diversifying Outside of Animal Feed

The company has also found itself in a strong position in the bio-fuel industry as an alternative to vegetable oils.

Darling, when it first entered the fray in the biodiesel business, had to deal with a two-edged sword. On the technology side, they faced a temperature problem. In the beginning, biodiesel made from animal fat worked as long as the temperature was above 50 degrees. Anything colder produced a block of rendered animal “stuff.”

The problem was solved by UOP – a division of Honeywell International Inc. (NYSE: HON) – which gave Darling a hydro-treating process to correct the problem.

As far as marketing and distribution were concerned, the problem was getting a foot in the door of an industry controlled by heavyweights. But to their good fortune, three years ago Valero contacted Darling and said it was interested in working with them to expand its alternative energy portfolio. The move into fuels doesn’t just expand their business opportunities – it also presents a hedge against its feed business.

When I first looked at the company, I saw it as a good play against this “blitzkrieg” drought we’ve faced this summer. However, now that I’ve done more research, it’s probably a solid long-term play.

Good Investing,

Jason

Article by Investment U

By The Sizemore Letter

ECB President Mario Draghi fired his “big bazooka” on Thursday, or at least that is how the market interpreted his press conference comments.

The ECB would engage in potentially unlimited “outright monetary transactions,” meaning that the ECB would buy as many short-term bonds as it takes to keep yields manageable. To drive home his point that he means business, Draghi added with rhetorical flourish that “the euro is irreversible.”

NOT SO FAST BUDDY

We shall see. We’ve been made promises before only to be disappointed later by failure to execute. “Irreversible” may or may not include an eventual Greek exit. And far more critically, Spain and the bailout institutions remain in a sort of standoff; Spain will not be given a bailout (including the ECB bond buying) until it submits to strict conditions, but Spanish Prime Minister Mariano Rajoy will not request a bailout until he knows in advance what the conditions will be. Presumably, negotiations have been going on behind closed doors between Spain and the bailout institutions.

BIG BOUNCE IN SPANISH ETF

In any event, the markets are taking the meeting as an unambiguous positive. My recommendation last week–the iShares MSCI Spain ETF ($EWP)–has enjoyed a phenomenal bounce, as have most risky assets.

Barring an unexpected twist from the German Constitutional Court on September 12, I think we could be looking at a monster rally to finish the year in most risky assets.

REACH FOR RISK

I recommend investors add a little risk to their portfolios on any pullbacks. And I’d start with an allocation to emerging markets. The iShares MSCI Emerging Markets ETF ($EEM) should benefit handsomely from a revival in investors’ animal spirits.

DON’T MISS OUT

Be on the lookout for unexpected ripples coming out of Europe. But don’t let fear keep you from participating in what could be the best rally of the past several years.

This article first appeared on TraderPlanet.

No related posts.

By TraderVox.com

Tradervox.com (Dublin) – The 17-nation currency rose to its strongest in two-months against the Japanese currency after Mario Draghi, the European Central Bank President, rolled out a plan to purchase government bonds from countries with high borrowing cost. The announcement spurred demand for riskier assets, causing the US dollar and the yen to weaken against commodity related currencies. The greenback fell prior to a report expected to show a slowing pace in US hiring. The euro had earlier weakened against the greenback on speculation the euro zone will register an economic contraction this year.

According to Charles St-Arnaud, who works as a Foreign Exchange Strategist in New York at Nomura Holdings Inc, the Draghi’s announcement has helped to reduce the tail risk of another intensification of the debt crisis. In his statement to investors, Charles, indicated that the worst might be over for the euro-dollar pair albeit for the short term. He said that the pair might continue to fall in the long term as there are other risks involved in effecting the plan. The announced pushed the Standard & Poor’s 500 Index up by 2 percent, boosting the demand for commodity related currencies.

The US currency fell against currencies such as the Canadian, Australian, and the New Zealand dollars as speculation rose about the slowing labor market in the US, spurring concerns that the Fed will work towards implementing another round of quantitative easing. The Canadian dollar increased by 0.8 percent against the dollar to trade at 98.27 Cents per US dollar. The Australian dollar advanced by 0.9 percent while the Kiwi advanced by the same margin. The Dollar Index dropped by 0.2 percent to 81.103, showing that the currency has dropped against six of its most traded counterparts.

On the other hand, the euro rose by 0.8 percent against the yen to exchange at 99.60 at the close of trading in New York yesterday. It had earlier touched 99.81 which is the strongest it has been since July 5. The euro advanced by 0.2 percent against the US dollar to trade at $1.2631 at the same time.

Disclaimer
Tradervox.com 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 Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

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London Gold Market Report
from Ben Traynor
BullionVault
Friday 7 September 2012, 07:30 EDT

SPOT MARKET prices for buying gold rose to $1698 an ounce Friday morning, in line with where they started the week, while stock markets also rose, following yesterday’s announcement of the European Central Bank’s bond market intervention plan.

US Treasuries fell, while commodities were broadly flat, with the exception copper, which posted gains. Copper traders are now more bullish than at any time since last October, according to a survey by newswire Bloomberg, which sites “mounting speculation” about central bank stimulus measures, such as a third round of quantitative easing (QE3) from the Federal Reserve.

A day earlier, gold hit its highest level in six months at $1713 per ounce Thursday, although it fell following the publication of a stronger-than-expected ADP Employment Report, a precursor to today’s official August nonfarm payrolls release.

“There is definitely long liquidation going on after the ADP number,” says one trader in Singapore.
“People spent the whole of yesterday buying gold and it is a bit overcooked up here. Now we have good data and the market is struggling to see how it can get a bad [nonfarm] payrolls data.”

“The consensus expectation for today’s nonfarm payrolls is 130,000 [jobs added in August],” says a note from Rabobank this morning, “although in reality it may [now] have been revised upwards…the final clues for today’s nonfarm payrolls were positive, at least for the economic recovery, not for the chances of QE3.”

Prices to buy silver meantime climbed to $32.40 per ounce this morning – on course for a 2% weekly gain – while on the currency markets, the Euro rose to its highest level in more than two months, a day after ECB president Mario Draghi announced the new Outright Monetary Transactions program, aimed at tackling the Eurozone crisis by buying distressed Eurozone sovereign bonds.

“OMTs will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the Euro,” Draghi told Thursday’s press conference.

There will be “no ex-ante limits” on the size of OMTs, Draghi added.

“This is your bazooka,” Organisation for Economic Cooperation and Development chief Jose Angel Gurria told the Financial Times yesterday, having used that phrase earlier in the week when urging the ECB to act.

OMTs will target debt of up to three years in maturity, Draghi said, and will also be fully sterilized – meaning the ECB will sell other securities to absorb the liquidity created.

In addition, OMT purchases will be subject to conditionality, meaning governments would have to enter into some form of bailout program with at least the possibility of bond purchases by the European Financial Stability Facility, or its scheduled permanent successor the European Stability Mechanism. Governments that fail to fulfill their bailout commitments could face a withdrawal of ECB support.

Benchmark 10-Year Spanish bond yields fell to their lowest level since April this morning, dipping below 5.7% – two percentage points below their high in July. Italian 10-Year yields hit a six-month low at just over 5%.

Neither Italy nor Spain has formally requested a bailout, although Spain’s government agreed a €100 billion credit line in June to finance the restructuring of its banking sector.

Germany’s Constitutional Court is due to rule next Wednesday on whether or not the creation of the ESM is at odds with German law.

“Investors still view gold as a non-paper currency and I don’t think anything the ECB said or did yesterday has changed people’s psyche,” says Simon Weeks, head of precious metals at Scotia Mocatta.

“Really they just kicked the can down the road.”

In Switzerland meantime, the central bank may be considering a de facto devaluation of the Swiss Franc, moving its price floor for the Euro-Franc exchange rate from SFr1.20 to SFr1.30, FT Alphaville reports.

Over in China, the world’s second-biggest gold buying nation behind India last year, Beijing has approved 1 trillion Yuan worth of infrastructure spending, equivalent to around $158 billion.

“With clear signs of a worsening slowdown of economic growth, China’s central government has finally taken real actions,” says Bank of America Merrill Lynch economist Lu Ting.

“They are clearly stepping up the infrastructure investment push to help boost confidence and revive growth,” adds Zhang Zhiwei, chief China economist at Nomura in Hong Kong.

“We believe the decision for the Chinese government to intensively announce these projects over the past two days signals a significant change in its policy stance from the incremental and reactive approach to a more decisive and proactive approach.”

In November 2008, China announced a 4 trillion Yuan stimulus package as a response to the global financial crisis.

The deputy governor of India’s central bank meantime has again cautioned Indians against buying gold, following comments he made in July.

“Because interest rates are very low, people are investing in gold,” said KC Chakrabarty on Friday.
“But the poor should never invest in gold for whenever they have purchased gold, it either lands up in the temple or in the hands of the moneylender or, at the most, it may be given away during a daughter’s marriage.”

Earlier this week, key figures in India’s bullion industry expressed fears that gold import duties may be hiked for the third time this year.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

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+

(c) BullionVault 2012

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.

By TraderVox.com

Tradervox.com (Dublin) – South pacific dollars gained against major peers as Asia Stocks rallied on the European Central Bank bund purchases decision spurred risk demand in the market. The Australian dollar advanced against the greenback for the first time in almost a week as jobless rate in the country declined last month, indicating that employers in the mining sector are still hiring. The Labor Department report released yesterday showed that unemployment declined from 5.2 percent to 5.1 percent against the market expectation of an increase to 5.3 percent.

Kit Juckes, who heads the Foreign Exchange Research department at Societe Generale SA in London, said that the Australian dollar is seen to be defying market fundamentals. He cited that the global manufacturing is declining as US data has shown in the recent times. The two south pacific dollars increased as the Standard & Poor’s 500 Index gained by 2 percent, the strongest since August 3. The advance against the US dollar was also supported by speculations that the Fed may add stimulus. The US Labor Department will release its job report today. Andrew Slater, has predicted that the Aussie will be supported today as the market evaluates the ECB bond-purchasing plan; the risk-on mood will keep the Aussie and Kiwi strong.

The MSCI Asia Pacific Index of stocks advanced by 1.8 percent today following a 1.9 percent gain yesterday in the World’s MSCI Index. The Thomson Reuters & Jefferies CRB Index of row materials also increased for the first time since August 31 by 0.2 percent. The Australian dollar advanced by 0.2 percent to $1.0307 in Sydney after increasing by 0.9 percent to $1.0284 yesterday in New York. It advanced by 0.3 percent against the yen to touch 81.37 yen after it had increased 1.3 percent to 81.10 yen yesterday in New York.

The New Zealand dollar added 0.1 percent today in Sydney against the greenback to trade at 80.25 US cents. It had gained by 0.9 percent yesterday in New York to exchange at 80.15 US cents where it gained 1.5 percent against the Yen to trade at 63.20. It has advanced by 0.2 percent today in Sydney to trade at 63.34 yen.

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Article by AlgosysFx Forex Trading Solutions

With market confidence on a high as the effects of the European Central Bank decision yesterday compounds with speculations on the labor market figures from the US, the Canadian dollar is set to bow down to its higher-yielding Australian counterpart. This is despite a shortfall in trade balance for the Land Down Under. A buy bias is apt to be
considered today as the markets come to a close this week.

Yesterday, ECB President Mario Draghi showed up market participants after announcing that the central bank would undertake a potentially unlimited program of short-term bond buying to ease funding pressures on governments that sought help. He, of course, had indebted nations Spain and Italy in mind, as woes have accompanied the two nation’s bond yields for some time now. The ECB chief made it clear however, that strict conditionality would apply as the central bank required countries to
make formal applications, where conditions must be met before any bonds would be bought. On a good note, the region’s central bank agreed to lower collateral requirements for banks in bailout countries, while still keeping the main refinancing rate unchanged at 0.75 percent.

Financial markets reacted positively to this bit of good news, as the Asian equities headed towards their biggest daily gain in six weeks, while European shares followed up its rally from yesterday. Adding to the positive mood of the markets was the decrease in US jobless claims, reported by the labor department. Filings for insurance claims amounted only to 365,000 last week, beating the 369,000 median estimate and 12,000 lower than the 377,000 upwardly revised data for the prior week.

Today, aside from residual effects of the ECB policy measure, which awaits a crucial meeting by the region’s financial ministers next week, investors are intent to look at jobs data from North America today. A weaker pace in hiring in August is forecast by analysts – only as much as 123,000, which compares with July’s labor data of 163,000. Though some economists are pricing in an actual result in the 120,000 to 150,000 region, a lack of jobs growth could still pressure the US Federal Reserve to act on the economy, and provide the much expected quantitative easing that the markets have been clamoring for. Such could further boost risk confidence today.

With the AUDCAD on a bullish correction since trades were directed by a strong bearish rally in early August, the skirmish between the two ComDolls could be detrimental to the Loonie currency. According to Bloomberg News, Australian government bonds fell, pushing the yield on 10- year government debt to its highest level since August 29. The rate advanced 10 basis points to 3.20 percent. The advance in rates was the biggest since August 16.

A long position is recommended for the AUDCAD, considering the above-mentioned factors. There is likelihood of price corrections however, on questions over
whether the ECB plan can save Italy and Spain. More so, Canadian employment change is perceived to show that the nation has added 9,900 to the labor market though unable to influence the 7.3 percent jobless rate as much.

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