Malaysia Gold Investment

After a relatively quiet period throughout most of yesterday, Gold rallied in the wake of the FOMC decision and the subsequent press conference given by Fed Chairman Bernanke. As we anticipated, there were no real surprises. The Fed Funds rate remained unchanged and the Fed stated its commitment to QEII, but made it clear that it does not intend to expand monetary stimulus. Bernanke also reiterated the Fed’s view that inflationary pressures from rising commodity prices are temporary, and do not warrant a change in the course of monetary accommodation. He did however, caution that “if inflation persists or if inflation expectations begin to move” that the Fed “would have to respond”. Since the Fed’s announcement was as expected our view on gold remains the same. We still believe that upside towards year-end is a strong possibility, given that real interest rates remain low, government borrowing is high and global liquidity though easing is still growing. However, from a fundamental pers

Gold are expected to maintain their upward trends in the near-term, with gold advancing toward $1,540 resistance. Support will come from easy monetary policy, a lack of serious spending cuts, and inflows of investment. In our 2011 outlook, we looked for a price range in gold of $1,250-$1,550 for the year, with a peak around mid-year. After the disappointing spending cuts of the Congressional FY11 budget deal secured on Apr 11th, we noted that we were considering raising our forecast upper range based on a lack of spending-cutting credibility by both the President and House Republicans. We didn’t make an increase because we thought that the end of QE2 could still lead to incremental tightening and thus price pressure. However, yesterday’s indication from Fed Chairman Bernanke regarding the maintenance of accommodative monetary policy at least through Sep is more than we can accept and still argue for a potential $1,550 peak. Therefore, we’re incrementally raising our upside objective to

The Gold market is very quiet and range-bound ahead of the Fed FOMC meeting today. While we expect no surprise in Mr Bernanke’s press conference following the decision. The Fed’s Fund rate is to remain unchanged and indications should be that there will be no further quantitative easing after the current bond purchase program has been completed. Because the Fed is unlikely to embark on further quantitative easing does not change our view on gold. We still believe the metal may find upside support towards year-end. Real interest rates remain exceptionally low and government borrowing high. These tow factors are core to our bullish view on gold. Short term however we would not be surprised to see gold dip lower. We believe fundamentally gold should see a pull-back first before the next move higher. We see value in gold on approach of $1,450. Gold support is at $1,500 and $1,493. Resistance is at $1,516 and $1,525.

Gold will witness an environment today that is nearly as positive as has recently been the case, but we favor taking on a more cautious tone today. The market will look for support from the potential that the Fed leaves monetary policy accommodative at tomorrow’s meeting, ongoing tensions in the Middle East, and to inflows of investment in order to keep the rally in motion. Gold has long-term resistance at $1,540/oz. Opposing pressure will be offered by signs that silver has entered a speculative frenzy due to wide price swings and from yesterday’s 9.2% hike in silver margins by the CME. We had been treating both gold as positive affairs in the last few weeks, but would go neutral in the short-term until the markets settle down a bit. The second focus of the market will be the Fed. An article in yesterday’s WSJ suggested that the Fed is discussing how to raise rates rather than when to raise them. The article was a change from Thursday’s suggestion in the paper that Fed Chairman Bernan

The environment for Gold trade should remain favorable this week, with a fresh focus on the Fed likely to offer strong support. Gold prices should advance toward $1,540/oz over the next couple weeks, while silver could easily rise toward $50/oz. Support will come from accommodative monetary policy, tensions in the Middle East, a weaker dollar, and signs of investment inflows. First-notice in silver is on Friday and any potential squeezes could keep it buoyed. Thursday’s news regarding Scotia Mocatta’s registered silver inventories could do the same. Moderate pressure will come from overbought conditions and strength in the stock market, but we think these will be fairly minor. We favor trading gold and silver as positive trading affairs, and maintaining our long position in July platinum from $1,740. We’ve been unable on our long gold recommendation for the last week. The focus this week will be on the FOMC meeting on Tuesday and Wednesday, with a policy decision to be communicated on

Despite a resurgence in risk appetite (equities are up across the globe and emerging market currencies are strengthening), Gold continue to benefit from steady safe-haven demand. Gold posted another record high, for the fifth consecutive day, while silver pushed to the highest price seen since January 1980, before easing slightly lower. Even PGM, the laggards in recent weeks, have posted some strong gains. The main impetus appears to be concerns over rising inflation, leading investors into Gold as a means of protecting their wealth. Lingering concerns over the Eurozone debt situation (speculation is that the Greek fiscal restructuring might occur as early as this weekend) and the Libyan stalemate are also making for healthy interest in precious metals. Extended dollar weakness (a trade-weighted basis the dollar currently stands at 16-month low) is another factor providing support for the metals. We expect the impetus to remain to the upside today. However, markets are relatively illiq

Overnight there was little movement in the gold price as bulls found it difficult to break through the $1,500 level. A quiet trading session saw the price confined to a $10 range. Resistance was short lived however with a combination of dollar weakness and fresh buying this morning finally propelling gold above $1,500 during London trade. Fears that the global economic recovery might be in jeopardy, sparked by S&P’s ratings outlook downgrade of the US, have been dispelled by strong corporate earnings results and a steady improvement in US housing data. US Treasury Secretary Geithner’s assurances that the government was making progress towards a deficit-reducing budget might also have emboldened markets. He even ventured so far as to say in a television interview that the US would “absolutely” keep its AAA credit rating. Despite the general sentiment appearing to have shifted to a risk-on stance, precious metals are still managing to gain ground. Part of this can be explained by res

The announcement that S&P has changed the US credit rating outlook to negative, broadened the appeal of gold and silver has an alternative investment amid fears of a faltering global recovery. This added to the risk-off sentiment stemming from continued unrest in the MENA region, and the ongoing fears over the Eurozone region’s lingering sovereign debt problems. Gold soared within touching distance of $1,500, before profit-taking spurred a fall below $1,490 during Asian trade. Interestingly, silver was not leading the charge the time around, with erratic price action curbing the metal’s gains as investors appeared to ignore the market. With risk aversion at heightened levels and the dollar weakening, we expect gold and silver to enjoy continued support today, although the $1,500 mark proves a significant psychological barrier for gold. Gold support is at $1,482 and $1,470. Resistance is at $1,503 and $1,510.

Growing fears of rising inflation and a weak dollar continue to benefit gold and silver at the start of the week. Inflation-hedge buying is providing the main impetus for gold and silver, although a reduced appetite for risk is also playing its part. Chinese authorities raised reserve requirements over the weekend (to take effect on 21 April), the seventh consecutive increase since October last year. The move was not surprising off the back of March price data released on Friday which revealed that a) consumer inflation stands at 5.4% y/y, the highest level since August 2008, and b) producer inflation which also came in higher than expectations (consensus 7.2% y/y) at 7.3% y/y, indicating strengthening pipeline inflationary pressures. Gold and silver have shrugged off the promise of more aggressive Chinese monetary conservatism. The reaction of platinum and palladium is in line with base metals, and could be ascribed to concerns over industrial demand in China should authorities contin

During late afternoon trade yesterday, in particular gold and silver, enjoyed support from growing fears of rising inflation and extended dollar weakness. The trade-weighted dollar index drifted to a low of around 74.7, a level last seen in December 2009. After the ECB’s rate hike last week and Fed members’ comments, together with the Fed’s Beige book indicating that the US central bank would be staying the current course of monetary accommodation, investors have been drawn to the euro in anticipation of a widening US-Eurozone interest rate differential. Speculation that Chinese consumer inflation would be closer to 5.3% y/y (rather than the consensus expectation of 5.2% y/y) also pushed precious metals markets higher on inflation-hedge buying. As it turns out, China’s price data revealed that consumer inflation for March stood at 5.4% y/y, well above expectations and the highest level since August 2008. Producer inflation also came in higher than expectations (consensus 7.2% y/y) at 7

In general, the Fed’s Beige Book was read as favourable to maintaining the current course of monetary accommodation. To this end, the impact on Gold was minimal. The report showed that manufacturing continued to improve modestly, with “slight gains” in consumer spending. While inflation pressures off the back of rising commodity prices was mentioned, the lack of wage pressure implies no significant change to the Fed’s outlook for inflation. Consequently, this does not warrant any consideration being given to withdrawing monetary stimulus, as yet. The release of Chinese monetary supply and credit extension data this morning, in that it bested market expectations should provide some short-term support for commodities. In addition, the unexpected increase in China’s foreign reserves (currently $3,044.7bn, from $2,991.4bn) should provide support for Gold from a global liquidity perspective. Investor speculation that the Fed will lag the ECB in raising interest rates has led to a weaker dol

As oil prices dropped dramatically yesterday (fuelled by concerns that higher oil prices would result in demand destruction, implying a deterioration in the global growth outlook), Gold tracked the rest of the commodities complex lower. However, as the Asian markets opened this morning, some resilience was evident among the Gold, in particular gold and silver. This recovery from yesterday’s fall has been steady, although the complex is far from yesterday’s highs. A weaker dollar and a recovery in oil prices are providing support for gold and silver. As usual, it is silver which is benefiting the most, with large volumes indicating that technical buying is largely responsible for the gains. For PGM, sporadic demand has managed to lift prices, although this group still looks vulnerable. Eurozone industrial production for February, although disappointing expectations, has shown an improvement on January (7.3% y/y, compared to 6.3% y/y respectively). The release of the Fed’s Beige book lat

After ending last week on a high note, Gold have run into some light selling into the start of this week. Market participants are tentatively seeking out riskier positions, which has reduced safe-haven demand for precious metals. In addition, after the recent rally some investors are starting to feel that precious metals might be overbought (especially silver), which has led to some profit-taking. Once again, with not much in terms of data flow today, comments by Fed members, this time Dudley and Yellen (scheduled to speak at events later today) may prompt some activity in Gold markets. Should any comments increase speculation that Fed members are becoming increasingly polarised on the issue of monetary accommodation, we could see volatility in Gold. We still foresee that as the deadline for QEII draws near, increased uncertainty and speculation among market players concerning the possible paths the Fed might follow could result in increased volatility in Gold prices. For the week ah

Along with the other commodity groups, Gold have enjoyed the support coming from a weaker dollar, after yesterday’s rate hike by the ECB. A clear indication that the moves are mostly driven by the forex market is that in euro terms, precious metals prices remain largely unchanged. Although some profit-taking was evident, short-covering managed to push prices higher. With not much in terms of data flow today, comments by Fed members Fisher and Lockhart (scheduled to speak at events later today) may be seized upon. Should any comments increase speculation that Fed members are becoming increasingly polarised on the issue of monetary accommodation, we could see some volatility in precious metals markets. As highlighted previously, we foresee that as the deadline for QEII draws near, increased uncertainty and speculation among market players concerning the possible paths the Fed might follow could result in increased volatility in Gold prices. Gold support is at $1,459 and $1,449. Resistan

After a relatively lacklustre trading day in New York, Gold ran into some selling at the open of Asian markets. Platinum and palladium were the hardest hit, with fund liquidations suspected on both NYMEX and TOCOM. For the most part though, Asian trading volumes were light as participants took to the sidelines in anticipation of today’s ECB rate decision. Other global markets will most likely follow suit, with not much activity expected as participants await the ECB decision later today. It is widely expected (given the explicit signals from the ECB) that rates will be hiked by 25 bps, therefore, the actual decision should not spark much activity. However, the tone of the announcement will be looked at for an indication of whether this is a one-off or forms part of continued policy of monetary tightening. The latter might raise fears of future inflation and contribute to some Gold buying as an inflation hedge. In addition, sings of further rate hikes in Europe could lead to some dollar

Gold continued to benefit from safe-haven demand through most of yesterday’s trade. Technical buying and short covering added further impetus to gold and silver prices as the New York session opened. With the re-opening of Asian markets, some profit-taking was evident as Chinese investors returned after two days of holiday. However, this was not enough to significantly reverse gains. As anticipated, the negative impact on prices in response to the increase in China’s lending and deposit rates was short-lived. However, in the long term, as the real economy begins to feel the affects of monetary policy (we find a lag of about 12-18 months), the effect on commodities should become evident. Amongst the Gold, it is platinum and palladium that are worst affected by tighter monetary policy in China (although base metals are affected far more). Whilst assuring that the Fed was unlikely to change the current asset purchase plan expiring in June, the release of FOMC minutes revealed an increasin

Gold shrugged off fears over an earlier monetary tightening in the US, and continued to climb yesterday. The support for prices is largely attributable to persistent global uncertainty in the form of the ongoing conflict in Libya (and unrest in other parts of MENA), a renewed focus on the European sovereign debt situation (Moody’s has most recently downgraded Portugal’s sovereign rating), and a stronger oil price (Brent is back at $120) that has stoked fears over global inflation. Bernanke’s comments that the Fed views the increase in inflation driven by commodity prices as transitory is good from a liquidity perspective, as it implies that the fears over an earlier exit from the Fed’s monetary accommodative stance are unwarranted. The downside is that this might deter Gold buying by investors with an inflation-hedge motive. For now, we believe that the liquidity view still dominates, and together with the MENA political tensions and Eurozone fiscal issues, should continue to support G

According to last week’s CFTC data, gold’s net speculative length remains largely unchanged w/w. The futures market positioning remains largely natural for gold. However, we still see gold’s bias to the upside on a 12-month basis. Last week, COMEX non-commercial longs in gold increased by13 tonnes, from 788 tonnes to 801 tonnes. The shorts have increased by a mere 2 tonnes, to 113 tonnes. The net non-commercial, or speculative position currently stands at 688 tonnes, still well below the 800 tonnes plus of Q3:10. The speculative position as a percentage of open interest (OI) is at 31.8%, in line with the average level of 33% over the past two years. We believe that the current speculative length reflects gold’s range-bound trade ($1,400 to $1,450) over the past two months. While the futures market is not overly bullish on gold, the physical market is still a steady buyer of gold. This buying interest is not exceptionally strong but certainly persistent. Also, the physical market is onc

Gold, which are closely linked to liquidity, there is also risk of a really good employment number. We believe that a sell-off in especially gold would be a kneejerk reaction rather than a fundamental shift. As pointed out yesterday, the market may interpret a good number as a sign that the Fed will start to decrease their balance sheet. However, the Fed's balance sheet is only about a third of global liquidity (as we measure it). We measure global liquidity as the Fed's Balance sheet plus global FX reserve holdings. Therefore, if the Fed contracts their balance sheet by 5%, global liquidity declines by only 1.5%. 5% of the Fed's balance sheet is large — $130bn. We also note that the other component in our measure of global liquidity — FX reserve holdings — is likely to continue to grow. In fact, global FX reserve holdings are up 3.5% YTD. FX reserve holdings make up two-thirds of total liquidity. The physical market remains a net buyer of gold, with some scrap coming to th

Yesterday saw some weakness across the Gold, most likely in response to strengthening initial US employment numbers. Challenger job cuts data showed a 36.6% y/y fall (from a 20% y/y increase in previously). ADP figures revealedthat 201k jobs were added. This might’ve buoyed optimism over the US economy and strengthened fears over monetary tightening. Hawkish comments by Fed members Hoenig and Bullard added to these concerns. As highlighted yesterday, uncertainty and increased speculation concerning US monetary tightening, could see volatility in Gold markets increase as the QEII deadline of June draws near. This could be particularly acute next as investors attention will be drawn to the issue as the ECB prepares to hike rates. For now, markets are more firmly focused on the unrest in Libya and concerns over the European debt situation. The results of the Irish Central Bank’s stress tests will be crucial to market sentiment. Consensus predicts that banks will have to raise an additiona