Gold Predicted to Slide

Hedge funds have pushed the net-long positions of gold to levels which have not been realized for nearly two years. There are also conflicting opinions on what will happen to this valuable metal for 2015.

Speculators purchased gold for the fourth straight week aggressively while silver was bought for nearly 12 weeks although the position has not been extended, based on data provided by Bank of America (Merrill Lynch).

The bank announced indicators imply investors are upbeat for precious metals. This point of view is propped up by investment banks and economists. Yet, targets where gold will end up by the end of the year are contradictory.

Gold prices went up more than one percent last week and topped $1,300 for every troy ounce for the very first time going back to the third quarter of 2014.

Commodity analysts are convinced high gold trading is related to the raised projections for 2015 gold bullion prices to the middle $1,200s level from the $1,220 estimate at the end of last year.

Gold recovered after losses following the weakness of the US dollar and equities. Gold futures for settlement in February climbed nearly $15 to sell at $1,295 per troy ounce.

China Inflation Drops to Five-Year Low

The yearly consumer inflation rate of China hit fell to a five-year trough last month while factory deflation even aggravated.

This stresses the country’s intensifying economic weakness and puts pressure on policymakers to infuse additional stimulus to fortify growth.

Threats of deflation are increasing for the second-biggest economy in the world because of the property sector’s dip and prevalent factory congestion aggravated by doubtful global outlook and sliding prices of commodities.

Beijing has to provide additional policy support after the National Bureau of Statistics announced that the country’s CPI increased 0.8 percent in January. This was the weakest report since of November 2009.

Chinese economists believe that factory depression continues to be a sizeable worry.

Producer price index decreased 4.3 percent in January which is more than the 3.8 percent plunge predicted by analysts. Price cuts have already undermined the profitability of local manufacturers.

The People’s Bank of China is perceived to relax policy some more following its move to cut down bank reserve preconditions for the first time after more than two years. It can be a protective action versus capital outflows.

Stock indexes in the mainland rose approximately one percent after this data was released.

Meanwhile, the surged of food price rises waned from 2.9 percent last December to 1.1 percent in January and contributed to approximately 80 percent of inflation decline.

Consumer prices went up two percent in 2014 which is below the goal of 3.5 percent as deflation fears worsened.

Beijing may reduce GDP targets to seven percent in 2015.

US and Japan Talk FOREX

The finance ministers of the United States and Japan both reiterated that monetary policies of nations must not be formulated to manipulate FOREX rates.

Secretary of Treasury Jack Lew and Finance Minister Taro Aso were firm on this stand, sources from the US government said.

In the past, Group of Seven finance chiefs agreed that monetary measures should bolster domestic economies without homing in on currency rates.

The two officials said they conform to accords made by the G-7 in relation to exchange rates during the Group’s meeting in Istanbul, Turkey.

They met during the breaks of the two-day Group of 20 finance leaders’ conference.

However, this was initially denied by the Japanese delegation even as the US Department publicized details about the meet.

The two ministers dealt with the currency issue at the point when denigration is increasing in Congress that monetary easing by Tokyo is being utilized to reduce yen’s value against the US dollar.

The US Department of Treasury said they also discussed the global economy’s performance and progress in conciliation for the free trade scheme of the Trans-Pacific Alliance wherein both countries are involved.

The 12 countries belonging to this bloc are hoping to settle the concord which will include 40 percent of the international economy.

Commodity Currencies Gain Ground

Commodity currencies achieved reasonable gains following the recovery of oil prices and minimal drop of the US currency.

CAD and NZ dollars performed well in trading sessions where all principal currencies stayed within manageable range.

Meanwhile, the US dollar slackened to C$1.2428 from a peak of C$1.2545. The kiwi moved ahead (74 cents) up from $0.7325 and remained between $0.7288 and 0.7453.

The single currency was not affected significantly by the current negotiations regarding the Greek debt arbitration.

The euro recovered ($1.1326) after it found support during a one-week low of $1.1270.

However, it declined to 133.67 first versus the Japanese yen before it recovered to 134.31. The US dollar moved to 118.54.

The US note was softer at 94.568 and was not far from a high of 11 years which is 95.481.

Speculations that the central bank is determined to increase interest rates contributed partly to the recovery of the US dollar.

In Asia, concentration is on inflation data from China for the month of January. 

There can be apprehensions about China’s economic growth but this is also seen optimistically by some markets.

Greece Default Update

The leftist government of Greece tweaked its economic program one week ahead of high-risk global talks with hardly a sign of a forthcoming agreement with international creditors.

Several days prior to the meeting of EU ministers, the Greek cabinet met to discuss details of the crucial policy speech by Prime Minister Alexis Tsiaris.

The speech outlines his legislative agenda and is expected to be watched furtively worldwide.

The cabinet considers a "stop-gap program" until June to meet urgent needs of its citizens affected by said austerity measures, according to government sources.

Greeks reportedly want their government to strengthen the economy, create a national reform program for fair taxation, combat tax evasion and corruption, and make public administration highly effective.

The government vowed to finish off austerity and possibly reduce the huge debt of the nation and sought temporary subsidy from its partners in the EU.

The Euro region’s part of the nation’s large financial arrears (240 billion euro) will run out at the end of February and Athens is seeking a quick deal or likely extension.

Credit rating agencies said Greece is headed towards default of its loans which can bring about its exodus from the EU.

Germany expects Greece to present a plan for debt repayment and economic reforms during the meeting of euro area finance ministers.

Greece will likewise be at the forefront of G20 finance ministers’ discussion in Istanbul on Sunday.

Greece is qualified for another trance of 7.2 billion euro in loans as part of the bailout plan that was formulated in 2010.

Under the proposed covenant, Greece is asking for 1.9 billion euro (in terms of profits) by the ECB and consent to issue supplementary short-term debt.

US Oil Strike Expands

Leaders of the striking United Steelworkers labor union announced the industrial action of oil refinery workers will include an additional two plants early because of unjust labor practices by management of oil firms.

Stoppages are expected in Indiana and Toledo, Ohio which brings to 11 the number of plants and refineries or 13 percent of refining capacity in the United States.

The union’s statement cited refinery owners bannered by Royal Dutch Shell ignored health and safety concerns of laborers and bargained in bad faith bargaining. These included refusal to negotiate regarding compulsory subjects; unwarranted delays in providing information; obstructed negotiations; and, threats against workers who planned to take part in the mass actions.

The Shell company spokesperson claimed it was not aware of inequitable labor practice charges filed against it by the labor department.

However, spokesman Ray Fisher said it was bent on addressing all issues by way of collective bargaining.

This is the seventh day of the walkout which started last January 31. The number of workers has reached around 5,400 as of today. Oil companies will still operate all plants except one by contracting interim replacement workers.

Gold and Silver Futures Decline

Gold and silver futures plunged to a three-week slump with the growth of US payrolls. This development adversely affected the appeal of precious metals.

Gold dropped 5.6 percent from a five-month peak last January as the US economy gained footing in futures and traded below the moving average of 200 days. Global equities recovered further dampening the metal’s attraction as alternative form of investment.

The economic strength of the economy has hurt gold.

Gold futures for settlement in April abated 2.2 percent to remain at $1,234.60 per ounce at the New York COMEX. The price reached $1,228.20 which is the lowest for the most active contract since January 15. Gold dropped 3.5 percent during the week.

Last month, gold gained eight percent after central banks in Europe and Asia came up with stimulus measures while speculation spread that the US Central Bank will have to wait for a while before raising interest rates due to slack foreign economies.

Gold went up 70 percent from December of 2008 to June of 2011 after central banks bolstered money supply on an unparalleled degree and prompted concerns that inflation will hasten.

According to the China Gold Association, the country’s demand plummeted to 886.1 metric tons in 2014 from a high 1,176.4 tons during the previous year.

Silver futures (March settlement) plunged 2.9 percent to $16.694 at the COMEX.

The price reached $16.545 which is the lowest since January 12.