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Market Nuggets: Summers As Fed Chairman Would Boost 10-Year Note Yields
Friday September 13, 2013 8:17 AM
Japanese newspaper Nikkei says President Obama is likely to name Lawrence Summers as the next chairman of the Federal Reserve. Economists at BNP Paribas estimate that a Summers-led Fed would add an extra 50 basis points to the U.S. 10-year yield. Summers is seen as less sympathetic to quantitative easing, says Brown Brothers Harriman. BNP says the idea of Summers as Fed chairman might overshadow next week’s Federal Open Market Committee meeting. “Even if the Fed does manage a ‘dovish taper’ next week -- $10 billion versus $ 20 billion – U.S. dollar dips could be limited as the focus remains on the Fed succession debate” and fewer U.S. dollar longs, they say. “Given that we expect stronger U.S. data in the months ahead, any dips in the U.S. dollar remain buying opportunities against the low yielders.” A stronger dollar and higher U.S. Treasury yields could be negative for gold as the metal is denominated in dollars and higher Treasury yields offer an alternative to gold which has no yield.
By Debbie Carlson of Kitco News;
[email protected] Market Nuggets: Holiday, Reduced Syrian Tensions, Fed Weigh On Gold – Gartman
Friday September 13, 2013 8:16 AM
Gold prices fell sharply on Thursday, and Dennis Gartman, newsletter editor, says a few reasons are behind the drop. Diplomatic talks to rid Syria of its chemical weapons removed gold’s risk premium, while generally improving economic data likely means the Fed will reduce the amount of bonds it buys as part of QE “and that of course is deleterious to gold. And then there is simply the liquidation of these sorts of assets into Yom Kippur,” Gartman says. He notes the Jewish holiday means that some traders will not be in the markets today, so “the possibility of even greater weakness cannot and should not be under-estimated.”
By Debbie Carlson of Kitco News;
[email protected] Market Nuggets: Selling In Futures Market Behind Gold's Drop
Friday September 13, 2013 8:15 AM
Gold prices fell more than 3% on Thursday as sell stops were uncovered and triggered technical chart-based selling, says Janet Mirasola, managing director of R.J. O’Brien. “Short term traders who had bought into the safe-(haven) rally over $1,400 rushed for the exit,” she says. Commerzbank attributes the losses to selling on the Comex futures market. “Selling pressure has come primarily from the futures market, since (exchange-traded funds) have recorded no further outflows. At just below 200,000 contracts, yesterday’s trading volume on the Comex was significantly higher than on previous days, though this corresponds only to the average level of recent months,” they say. Mirasola says the whippy action in gold is another reason why participants need to be cautious. Since gold peaked recently at $1,433 on Aug. 28, gold is down 9%, she says. “Maybe next time traders will gauge the high level of volatility and the fierce momentum moves that this “safe haven” bet brings putting it firmly in the currency basket and far from a fundamentally based commodity,” she adds.