TOKYO, July 31 (Reuters) – The dollar struggled on Monday, wallowing near a 2-1/2-year low against the euro, weighed down by U.S. political uncertainty and uninspiring U.S. data that added to doubts about whether there will be another Federal Reserve rate hike this year.
Growth in the world’s largest economy picked up to 2.6 percent in the second quarter, matching expectations of economists polled by Reuters, but growth in the first quarter was revised down to 1.2 percent.
U.S. labour costs also rose less than expected in the second quarter, data on Friday showed, adding to concerns that inflation will remain low. “It is easy for uncertainty to increase about the Fed’s ability to raise rates next year if inflation remains low. We could see the dollar head below 110.00 yen under such circumstances,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.
Deepening U.S. political uncertainty was also expected to keep the greenback on the defensive.
President Donald Trump on Friday replaced his White House chief of staff, Reince Priebus, installing retired General John Kelly in his place in a major shake-up of his top team. “The replacement of Priebus could be a turning point for the Trump administration. ‘Trump risk’ could now begin to take its toll on U.S. equities, which have been doing well until now, and in turn weigh on the dollar,” Ishikawa at IG Securities said.
Hopes that the Trump administration will implement tax reforms and economic stimulus in the near future, seen as dollar-positive factors, also faded after the U.S. Senate on Friday failed to dismantle Obamacare in another political setback for the president. The euro was steady at $1.1743 , after the previous day’s surge brought it closer to $1.1777, a 2-1/2-year high set on Thursday.
The U.S. currency was down 0.15 percent at 110.525 yen after touching 110.475, its weakest since mid-June.
The dollar index against a basket of six major currencies was 0.2 percent higher at 93.413 , trimming some losses after dropping 0.6 percent on Friday.
The pound was little changed at $1.3134 and in close reach of a 10-month high of $1.3159 scaled on Thursday. Sterling has been buoyant against the broadly weaker dollar, supported by hopes that Britain will exit the European Union under a transitional deal. (Editing by Kim Coghill)
Another bullish call for gold comes with yet another call for a financial meltdown, this time from famed investor Jim Rogers.
The best-selling author expects the next financial crisis to be the “worst” he has ever seen.
“We’ve had economic problems in the U.S. or in North America every four to eight years since the beginning of the Republic so to say that we’re going to have a problem is not unusual,” he told Kitco News from the Freedom Fest conference in Las Vegas.
“I would expect it to start this year or the next…and it’s going to be the worst in your lifetime and my lifetime.”
But, even as Rogers expects gold prices to be “explosive” once this crisis hits, he said he is still not accumulating the yellow metal.
“I’m not buying gold and have not bought gold. I own gold and have owned gold for years but I’m not buying or selling it at the moment.”
“If and when gold goes down a lot, or under $1,000, I hope I’m smart enough to buy more gold because in the end, gold is going to go up a lot because when people lose confidence in governments and paper money, they always put their money in gold and silver.”
Rogers cautioned investors to be “very careful” as they look for ways of protecting themselves ahead of the next financial downturn.
“There are a few ways to protect yourself but it’s going to be a mess,” he said. “People should invest only in what they themselves know a lot about.”
What are Rogers’ investments of choice right now?
“A lot” of U.S. dollars and agriculture, he said.
As for cryptocurrencies, Rogers said they seem to be topping out and he would prefer to stick to the sidelines.
“It looks bubble-ish when you see the kind of price action in bitcoin and now you’re having new ICOs [initial coin offerings] at least one a week now and exploding when they come out – that’s bubble action,” he said.
(Kitco News) – Demand for gold in India has been slow to come back after falling sharply last year.
But, a revival back to 800-900 tonnes a year is in the cards for the country, said managing director at World Gold Council India.
Some blame the slump in the demand on the Indian government’s continuous push for more transparency. Yet, WGC’s Somasundaram PR is convinced the effects are only temporary.
“Government in India is not anti-gold. It has two overall objectives: One is to increase the tax base, and the second is to promote transparency in trade and commerce,” Somasundaram told Kitco News in a telephone interview.
The government has passed numerous new laws in the last couple of years that might have discouraged some consumers from purchasing gold, Somasundaram said.
In the short-term, WGC sees gold demand staying around 650 – 750 tonnes in 2017.
“The demand will come back, but it could take one or two years before it is back up to 800-900 tonnes a year,” he noted.
Consumer purchases of the yellow metal tumbled down 22% to 674 tonnes in 2016, down from 863 tonnes reported in 2015.
During that time in India, one major change included the demonetization of all 500 and 1,000 rupee bank notes. “This helped to bring out a lot of cash people held as part of unaccounted wealth, but created a lot of issues in the process,” he noted.
Earlier, the government also made it public knowledge that only 2% of Indians actually pay income taxes. To address this, India implemented a law, forcing anybody who buys anything for more than $3,000 to provide their tax number.
The latest measure impacting gold has been the introduction of 3% GST tax that became effective on July 1 and aims to help with traceability of transactions.
These steps created a fear of buying gold, as people were too scared to give out their tax number, WGC India managing director said.
“I don’t think all the factors that affected demand in 2016 have completely been dissolved.
People are still hesitant to give their tax number for purchases, while cash purchases are still restricted,” he stated.
But, Somasundaram is “very optimistic,” believing that demand will come back and the gold market will be much better off with a more traceable and legal system.
“This drive is going to take gold out of the shadows of black money and help mainstream gold. Our view is certainly that trade will not have any option but to get more organized,” he said.
Accomplishing this won’t be an easy task, as India is still very much a cashed-based economy. A PwC report from 2015 showed that 98% of all transactions in India in volume terms were done in cash.
Plus, about 70% of gold in India is sold through an unorganized segment, head of the WGC India pointed out, adding that on average 10-20% of gold is being smuggled into the country illegally.
But, there are clear signs of improvement. In the last ten years, organized gold trade expanded from 5% to 30% in India, added Somasundaram.
Even before the GST tax was introduced this year, a lot of people saw the benefit of dealing with organized trade versus the illicit segment.
“Consumers were led to believe that they benefited by not paying a tax on gold, but smuggling channels were just lining their pockets. Whatever consumers thought they were saving in tax, they would lose in purity and price,” Somasundaram explained. “With the GST putting additional pressure on the trade system, consumers and traders will be left with no choice but to see the benefits of working legitimately.”
Here Is Why Gold Demand Will Rise
One of the major drivers for demand is the growing middle class and the popularity of golden jewelry during wedding seasons.
“India will be saving one third of its income and part of those savings will flow into gold. When incomes go up, gold demand also goes up. Also, 60% of jewelry demand comes from weddings. We have 10 million weddings every year on average. This is not going to go away in a country where more than 60% of its people are below the age of 25,” Somasundaram said.
Acceptability of gold in banking and financial transactions is also on the rise. “Gold as a means of collateral for a loan is one of the most accepted forms,” he said.
Another interesting fact is that the 250 million people currently living below the savings threshold in India will enter the middle class and become savers in the next five years, according to Somasundaram.
“One gram of gold per person translates into 250 tonnes,” he said.
Currently, total gold holdings in India equal to about 23,000-24,000 tonnes, which translates to about one trillion dollars.
How was it decided that elements like Gold are worth so much money and that elements like Aluminum are practically worthless?
The question is almost more about economics than geology.
Prices are not set by any one organization, but are a balance between the cost of producing a mineral (extracting it from the ground and purifying it) and what people are willing to pay for it. Gold is very rare and relatively expensive to produce, so the base price must be fairly high. If lots of people want to use gold and are trying to buy it, they will have to compete with each other for the gold and that will drive the price up. If not so many people want the gold, the price will stay closer to the actual cost of production. Aluminum is much more common in the earth’s crust than gold (8% of Earth’s crust), so it is cheaper to produce. Iron (another cheaper one) makes up 5% of Earth’s crust.
If you want more information on this, I would try asking an economics teacher.
There are two major factors that go hand in hand to determine the value of different elements:abundance & popularity. Another major factor is work.
Elements that are very abundant such as Aluminum are very cheap. This is because aluminum can be found everywhere. Although Gold is still quite abundant because of its popularity it has become very valuable. There are some elements that are not very abundant and are not very valuable –but as popularity of these elements increases, so does the value. An example of this is Ruthenium.
Now work, a person’s time is of some value so if a lot of work goes into mining or harvesting different elements this adds to the value of these elements as well.
This answer is going to involve both some chemistry and some economics, so get ready!
The key here is rarity — rare things are more valuable. If you have a friend who collects baseball cards, he can tell you that a Babe Ruth card from 1930 is worth thousands of dollars because there are very few of them around, whereas a Derek Jeter card from 2001 isn’t worth much at all because almost anybody can find one. It’s the same thing with precious metals — gold is a very rare element, so it’s more valuable than common elements such as iron.
Rarity also lets gold work well as a currency. Currencies only function well if they have a relatively stable ‘volume’ (when economists talk about volume, they mean the total amount in circulation). This is why the US Government controls the supply of dollar bills so there are only a certain number in circulation at any given time. If everyone could just print their own money, it would quickly lose value and be a worthless currency (think about it — right now you’d take $10 to mow your neighbor’s lawn, because you can then use that $10 to buy something else. But if you can just print your own $10, you’ll no longer accept dollars as payment for any service you perform). Gold is really hard to come by — you can’t just go dig up a bunch of gold in your back yard — so it has a stable volume and therefore maintains a relatively constant value. We are still mining gold, so the global volume of gold is increasing, but only very slowly.
The other reason gold works so well as a currency is chemical — gold is one of those metals that do not readily oxidize, so gold coins will maintain a constant weight. Iron coins wouldn’t work very well — if you aren’t careful with them, your money will rust away. Copper coins aren’t especially good either, because when they oxidize they will gain some weight (from the extra oxygen atoms). So if the weight of a copper coin will depend on how old it is and how long it’s been sitting out in the air and turning into copper oxide. If you want a currency to be based on the weight of coins (which is really the only option) this is bad news.
So gold is rare, has a fairly stable volume, and doesn’t rust away. This makes it a useful currency and so it was our primary currency for thousands of years (actually until the 1970s when President Nixon stopped the direct link between the value of the US Dollar and the value of the US gold reserves).
You might have noticed that I have used iron instead of aluminum as a counterexample to gold. Humans have only been able to isolate aluminum from bauxite ore relatively recently, so it was not around in ancient times to compete with gold. If it had been, it might have actually fared quite well — aluminum is a very handy metal that is harder and lighter than gold, so it makes better tools and weapons. It’s also not terribly common — most of our aluminum comes from a few mines in Australia, I believe. But aluminum does oxidize (although only very slowly) so gold would still have the upper hand there.
This is a very interesting question. Gold is relatively rare in the earth’s crust, and particularly because of its value in making jewelry, it has always been worth a lot of money. Aluminum is very common, and is nowadays, easily formed as the pure metal, so it is not very cheap. However, about 150 years ago, the current process of extracting aluminum from its oxide did not exist, and it was actually more expensive than gold. So it is important to recognize that the process by which an element is obtained plays a big part in what it costs.
Rarity is definitely one issue. H2O is not very expensive because there is a lot of it around. Silver and Gold on the other hand, like, say, diamonds are very rare. On top of that, the usefulness of a substance makes its price high. Au (gold) is very useful because it has some excellent chemical properties (very inert) and also its malleable and can be worked as body decoration (rings and bracelets etc.) Diamonds have industrial use because they are very hard and are good abrasives.
So the common elements of rarity and usefulness to humans make for their great worth. Al(aluminum) is all over the place …about 15% of any rock is Al2O3…hence its very common and easy to get.
The price of metals depends on their value to humans, their availability, and how difficult it is to extract them. Gold has always been valued because it is pretty; it does not tarnish, so you can make statues and jewelry and it does not turn black with age; it is soft so you can mold it, and it melts fairly easily. It has been used in jewelry and worship for thousands of years. Aluminum is more abundant, and lighter than gold, but is getting depleted from the ground, so it’s getting more expensive, but is not considered a precious metal.
The short answer is because the market says so. Over the course of thousands of years of trial and error, consenting adults engaging in commercial acts settled on it to perform the function of money. Why did people choose gold? Because, over time it was identified as having the greatest liquidity of all possible contenders. A person bringing a relatively illiquid item to market could swap it for gold, secure in the knowledge that he could later use that gold to get whatever he wanted. So for example if someone wanted to get rid of a boat, they could exchange it for gold, knowing that they would be able to reuse the gold later to buy something else.
The element gold was probably chosen for the following reasons:
Rarity. Gold constitutes only about 5 parts per billion of the Earth’s crust. It is also difficult, dangerous and expensive to extract. Anyone who has actually been down a mineshaft knows just how precious a metal it is.
Indestructibility. Gold doesn’t tarnish or decay.
Density. Gold doesn’t take up much space. All the gold mined in human history amounts to about 130 thousand metric tons, an amount which would only fill about a 100 foot cube if gathered in one place.
Malleability and divisibility. You can stretch it, pound it thin, and divide it into multiple tiny amounts.
Controlled expansion. This is the most important quality. Gold can only be produced in limited quantities, currently at a peak rate of about 2,500 metric tons, or roughly 2%, each year. No matter what wars or social programs urgently need funding.
You must also remember that gold is not valuable to all cultures. The Maya had plenty of gold but didn’t value it highly. They used various shells to act as currency.
(Kitco News) – Gold continues to see range-bound trading and this lack of direction is likely to stick at least until the end of the year, this according to one gold-focused research team based in the U.K.
“We expect gold prices to remain in a period of consolidation,” analysts from Metals Focus said in the Precious Metals Weekly report released Tuesday.
“In our view, it will be difficult for prices to ‘escape’ such rangebound conditions before the market benefits from some clarity on details of U.S. fiscal stimulus, probably sometime later this year.”
Despite rallying to four-week highs earlier in the week, gold prices have cooled off Tuesday on profit-taking and the U.S. dollar index lifting on more upbeat U.S. economic data. August Comex gold futures last traded at $1,250.10 an ounce, down 033% on the day.
However, the analysts remain bullish beyond 2017, with several factors working on resuming gold’s “recovery.”
“Crucial to this view is that we are skeptical towards the thesis that fiscal accommodation in the U.S. will see the country’s growth accelerate materially,” they noted, adding that any uncertainty from the Trump administration would also boost safe-haven gold.
What’s more, they pointed out that monetary policies are likely remain “(broadly) highly accommodative,” while nominal and real interest rates would remain “very low,” which would also bode well for the metal.
“The above factors should offer gold a boost later this year, especially given that institutional investment in gold has so far remained light in absolute terms and even more so when it comes to its share of overall investable assets,” they said.
“With equity prices looking increasingly expensive, particularly when compared against gold, the risk-reward arguments should lead to at least a partial rotation back in favor of the yellow metal.”
Gold is currently trading under moderate pressure today, as market participants seek to pull short-term profits. Gold has been in a defined rally mode, which began around July 9th. From the first week of June to the first week of July, gold prices lost roughly $100 in value before finding support at $1203 per ounce.
Gold prices found significant support at $1200, and the rally that followed has taken gold prices as high as $1259 per ounce. That intraday high was achieved in trading yesterday and since that point has been trading under pressure, moving to lower pricing. As of 4 PM EDT, gold futures are trading at $1249.60, a loss of $4.70 on the day. This is the first occurrence since the beginning of this current rally in which gold has lost value for two consecutive days.
Traders are possibly squaring positions as they await the conclusion of this month’s FOMC meeting, which will include a written statement tomorrow. Although it is highly expected that the Fed will stay the course, market participants are looking for any information detailing the timeline and method of the Fed’s desire to begin to liquidate its $4.5 trillion portfolio.
Three River Evening Star Formation Identified
Based on our current technical studies we have identified a Japanese candlestick pattern called a “Three River Evening Star.” Japanese folklore says that there were three rice farmers separated by a river which joined between their lands. One day the farmers began fighting for control of each other’s land. The battle continued for many days until one farmer managed to take over one of the other farmer’s rice fields. The farmer who gained control of two rice farms had a distinct advantage and was able to take over the last rice farm.
According to Investopedia, a Three River Evening Star is a bearish candlestick pattern consisting of three candles that have demonstrated the following characteristics: The first candle is a large green candle (this occurs when the market closes above the open) located within an uptrend. The middle candle is a small bodied candle that can be either green or red that closes above the first green candle. The last candle is a large red candle (this occurs when the market closes below the open) that opens below the star and closes near the center or below the first green candle.
The Three River Star pattern (morning and evening) can reveal key reversal pivot points after defined rallies occur. However, a confirming candle is critical in determining the completion of this pattern. In the case of an evening star, the confirming candle would be a strong price decline immediately following the three-candle pattern.
For those who would like more information, simply use this link to go to our website, or to sign up for a free trial.
Wishing you as always, good trading,