Gold in Demand

May 12, 2010

Most markets have settled down.  The dollar rose 0.3% against sterling and the yen, shows no change relative to the euro and Aussie dollar, and has slid 0.5% against the Canadian dollar, 0.2% against the Swiss franc, and 0.1% relative to the kiwi.

Equities recovered 1.2% in Indonesia, 0.8% in Singapore, 0.6% in China and Australia but fell 0.4% in South Korea and 0.2% in Japan.  In Europe, the German Dax gained 1.2%, the Paris Cac is 0.4% higher, but the British Ftse has eased 0.1%.

Ten-year gilt and JGB yields slid 3 basis points and 1 bp, while the 10-year German bund yield is 1 basis point firmer.

Gold, up 1.7% to $1241.20 per ounce, is the day’s big mover. Oil eased 0.3% to $76.17 per barrel.

The Bank of England released a new quarterly Inflation Report.  Inflation two years from now is projected near 1.5%, that is below the 2% target, so an easing bias is implied.  Growth forecasts above 3% both next year and in 2012 look overly optimistic considering the fiscal austerity that Prime Minister David Cameron of the Conservative Party, intends to implement.  Cuts will arrive within two months.

Euroland first-quarter GDP and industrial output figures were released.  Real GDP in the euro area rose 0.2% from 4Q, an acceleration from no growth in the fourth quarter, and by 0.5% from 1Q09 after dropping 2.2% between 4Q08 and 4Q09.

  • GDP also expanded 0.2% in Germany (1.5% on year) and the Netherlands (0.1% on year).
  • Quarter-on-quarter growth was faster in Portugal (1.0% and 1.7% on year) and Italy (0.5% and 0.6% on year).
  • GDP rose just 0.1% in France (1.2% on year) and Spain (minus 1.3% on year).
  • Greek GDP fell 0.8% (not annualized) for a second consecutive quarter and by 2.3% from the first quarter of 2009.
  • Industrial production in the euro area increased 1.3% in March and by 6.9% from a year earlier.  That was almost twice as much as expected.

First-quarter GDP in the Czech Republic edged up 0.2% and 1.2% from a year earlier.  Hungarian GDP was 2.0% lower in 1Q10 than a year before.  Romanian GDP fell 0.3% last quarter, less than the 1.5% drop in 4Q09, and the on-year drop of GDP narrowed to 2.5% from 6.9% in the year to 4Q09.

The French current account deficit in March of EUR 4.8 billion was 37% wider than the month before.  French consumer prices rose 0.3% in March to stand 1.7% above the year earlier level.  Consumer prices in Portugal firmed 0.4% on month and 0.7% on year in April. Dutch industrial production rose 2.0% on month and 6.9% on year in March.

British unemployment on a claimant basis fell 27.1K last month, bringing the three-month cumulative decline to 99.9K.  The jobless rate on a claimant basis was 4.7%, down from 4.8% in March, 4.9% in February and 5.0% in January.  But on an ILO basis, joblessness rose to 8.0% in 1Q10 from 7.8% in the final quarter of 2009.  Wage earnings including bonus pay accelerated to an on-year rate of 4.0% in 1Q10 from 0.6% in 4Q09, but regular pay, that is excluding bonuses, rose 1.9% last quarter after an on-year 1.2% advance in 4Q09.

Switzerland’s PPI/import price index went up 0.6% last month and by 0.8% from April 2009.  That was the first on-year increase since late 2008. 

Japan’s Ministry of Finance confirmed there was no currency market intervention last quarter.  The last intervention occurred in early 2004.  Japanese international reserves rose $4.158 billion last month after declining by $8.364 billion in March.  Japan’s index of leading economic indicators rose 4.4 points in March to 102.8, highest since August 2006.  The coincident and lagging indices were at their respective highest levels since May 2008 and March 2009.

Filipino exports grew 43.7% in the year to March, the highest on-year pace in 29 years.

Indian industrial production was 13.5% greater in March than a year earlier.

Australian mortgage approval data were disappointing with a drop of 3.4% in March, the 8th decline in nine months.

The Bank of Korea retained a 2.0% benchmark interest rate as expected.

U.S. and Canadian trade data will be released today.  The U.S. monthly federal deficit is also due, while Canada will report house prices.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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