Posts by "stationdealer"

Fed maintains status quo

As expected, the Federal Reserve kept its benchmark Fed Funds rate at near-zero, citing that low inflationary trends, a still-weak job market and a generally struggling economy will compel the central bank to keep exceptionally low levels... for an extended period.



While it reiterated its "extended period" language in its statement, Action Economic (AE) reported, The Fed did change the opening sentence, as expected, stating that the "economic recovery is proceeding."

But the Fed also said the labor market is improving gradually, compared to "beginning to improve," in April.

Other than those, AE indicated, there weren't any major changes in the statement. For example, though household spending is "increasing," it is still being constrained by "high unemployment, modest income growth, lower housing wealth, and tight credit."

AE also indicated that The Fed noted housing starts remain at "depressed levels" and financial conditions have become "less supportive, largely reflecting developments abroad." The Fed remains sanguine on inflation.


As expected, Thomas M. Hoenig, a Fed hawk, again dissented against the statement, AE added.

The weak job and housing markets have been and will likely continue to be concerns keep Fed policy accommodative, said Alan Gayle, senior investment strategist for RidgeWorth Investments. Typically the Fed emphasizes domestic factors when setting domestic monetary policy, so any mention of EuroZone debt problems or budgetary shifts [would have been] a noteworthy development in the FOMC minutes.]

Paul Ashworth, senior US economist at Capital Economics found the statement marginally more dovish and that it is is likely to push market expectations even more closely into line with our long-held view that the fed funds rate will remain at near zero until 2012.

At the start of this year, he noted, the fed funds futures market had the first rate hikes priced in for the second half of 2010 and by the end of 2011 rates were expected to climb to 2.4%.

Now the first rate hike isn't priced in until mid-2011 and rates are expected to end 2011 at only 0.8%, he said.

Interestingly, The Fed statement made no explicit mention of China's revaluation of the Yuan, nor the budget deficit crisis in the Eurozone, although the rather vague phrase developments abroadwas used.

Sean Snaith, an economist at The University of Central Florida noted prior to the release of the statement that I will be interested to see if a mention of the Yuan makes it into the statement. I think it will be discussed but may not be included in the statement.

In addition, the Fed dropped no hints about when they might start to consider tightening. Many economists believe the central bank will keep rates at historic lows for at least the remainder of this year, and perhaps well into next year.

Indeed, as the unemployment rate hovers around the 10% level, and the housing market remains crippled, Ben Bernanke perhaps wants to tread very carefully by not jeopardizing what has become an extremely fragile recovery.

Aussie will remain caved in with this new Kevin Rudd fiasco, specially if he doesn't get the majority vote.

Eurchf yet another level 13575 good entry incase someone has'nt gotten in. Go with a smaller lot increase over break of 13660.

Good Morning,

Well, nobody expected an inquisition in...Spain, again. Yet, that is exactly what throngs of financial media reporters did following rumours of a Greek-style bailout package being prepared on behalf of the country by the IMF/EU teams. The media's chief weapons; persistent questioning of the authorities, as seen for example, in the El Economista. Will Spain cave in? Will it be able to outline budget trimming measures that satisfy targets? Will the euro be subjected to more torture? Whither Gallegolandia? As they say: "Quin Sabe?"

And then, there is the upcoming Friday meeting between Spanish PM Zapatero and IMF chief Strauss-Khan... A tete a tete that is sure to have the paparazzi in tow. Denials ensued, both from the Spanish finance ministry as well as the IMF. However, the bond end euro vigilantes tried to equate rumour smoke with actual debt problem fire and brought out...the rack, interrupting the rally in the euro which had blossomed over the past few days. The common currency retreated to under 1.23 and eurozone bonds exhibited beads of sweat in the wake of the speculations on Spain. The jitters are as palpable as any being felt at a dramatic corrida.

In other news from the Old World, inflation gained traction in the eurozone last month (to 1.6%), mainly in the wake of the declines suffered by the currency of the realm. Meanwhile, unemployment claims fell in the UK and job creation showed 5,000 positions being added as the British economy appears to be weathering the recession and working through its own recovery process.

Gold prices held steady overnight against such a background of uncertainty. US inflation-tracking figures as will be revealed in today's PPI and tomorrow's CPI data are not expected to provide much in the way of enthusiasm for gold bulls, according to Kitco News' own Debbie Carlson.

Ms. Carlson quotes Mr. Jim Smitherman, a commodities broker at Coquest Inc., as having said that "the attitude in the markets concerning inflation is "steady as she goes. Inflation data is tame and should remain so for the remainder of the year. I think the Fed will maintain its current policy for the foreseeable future. Commodity prices in general are lower over the last six months and barring a collapse in the dollar I would expect them to remain that way. Those calling for inflation right around the corner have been doing so for 2 years now. How far away is this corner? I think it is a long ways away."

As regards the gold/euro play these days, it is becoming apparent that at least some aggressiveness among speculators as regards pouncing upon the euro and piling further into bullion is still on the decline. Call it habituation. It may provide a cushion under current prices as few dare exit positions just yet, however it also limits fresh safe-haven shopping sprees as upside potential is being questioned following the possible pivot point that 1.20 on the euro has thus far shown to be. Thus, yesterday's gains in bullion remained in the price equation this morning and only small-scale selling was manifest early on Wednesday.

Spot metals dealing in New York opened with a $0.50 gain in gold which was quoted at $1234.90 the ounce. The action was rather subdued but players were keeping an eye on the Spanish rumour-mill nevertheless. Apprehensions that the EU debt issues could translate into difficulties for the US economic recovery are still preoccupying the trade.

Physical gold offtake continues on the lackluster side of things, with Indian buyers having crossed their arms for a third day this week and manifesting a predilection to buying the yellow metal at under $1220.00 the ounce. Meanwhile, flows of scrap bullion have shown signs of gaining traction in the wake of last week's foray above the $1250 mark once again. While we may not get the traditional summer doldrums following next week's solstice, any lull in the European theatre may possibly provide profit-takers with an opportunity to do just that.

Meanwhile, what is Russia -whose international reserves are the world's third largest- buying in order to reduce its US dollar and euro exposure? Not that certain asset that some folks expected, to be sure. According to Bloomberg News, "Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. dollar and euro." Bloomberg also reports that "U.S. dollars account for 47 percent of Russia's reserves, while euros make up 41 percent, British pounds 10 percent and Japanese yen 2 percent, Ulyukyaev said in November. The central bank has reduced dollars from 50 percent in 2006, when euros accounted for 40 percent and the remaining 10 percent was in yen and pounds. Russia's international reserves, the world's third biggest, reached $458.2 billion on June 4."

Nearly one year ago, Russian PM Medvedev regal

As long as oil, Euro, Aussie show signs of going down and CHF & yen still showing strength Gold is likely to stay up. Plus us housing like i mention two months back is back on a roll down the hills of weaker demand. The most favoured asset class naturally is prefer as precious metals or currencies and bonds. As far currencies are concerned all are in shambles or weathered.

Some people are calling this gold rush as a precious metal asset bubble. But increase in price of gold wont be consider as an bubble till we have individuals running for it as a safety or value vested stock. Fortunately most common people are still not seen buying gold even after 3 years of new highs in gold and gold stock. For which reason i still think the price in gold is to rise 1300-1350 is totally achievable.

What could tip it, believe it or not the BRICs