How to Grow Your Emergency Fund While Paying Off Your Debts

It is a sobering experience when you are trying to pay off your debts while at the same time continuing to grow your emergency fund. It is easy enough to put your emergency fund temporarily on hold but too often than not getting back to a savings program can slip away from you. In the end, you may be less in debt but if an emergency arises it will all be for naught as your decreased debt will simply skyrocket without a sufficient emergency umbrella. The goal in an economically challenging time is to be able to work out a plan to be able to lower your debt while increasing your emergency fund at the same time.

Move Your Credit Card Debt

Unless you have such a horrible credit score that no company will give you a break, look into moving your entire credit card balance to a zero or less than your paying interest bracket. It makes no sense to be shelling out for a fifteen, seventeen even twenty or more interest rate when your emergency fund is making a two percent or so interest. In essence it is costing you money to save and pay off at once. A zero percent credit card, even if it is only for six months to a year will help you get ahead.

Use your Credit Sparingly

The evil cycle of paying off your debt while still creating debt feels like it is an unavoidable necessity. The truth is that if you put away your credit card and paid for a majority of your purchases with cash or debit then it will not be so discouraging when you start to see your debt numbers decrease.

Create Dedicated Income

A few extra hours a week working a second or third job dedicated to your financial strength may be somewhat of an inconvenience but worth the effort. All income from this additional job should be solely used for debt payoff and emergency fund deposits. You will not have to change your lifestyle all that much (except for your allotted time to work) and it will give you a set number to apply to your finances so the light at the end of the tunnel is more accessible.

Visualize

By writing your goal numbers on a piece of paper and putting them in plain sight for you to see every day will keep your mind’s eye visualized. When you are in a shopping situation this number will pop into your head like a stop light making you think twice before buying potentially unneeded items.

All it takes is a little bit of focus and future planning to be able to concentrate on your dual mission. In the long run, when you accomplish your goal you will not only be amazed at your resilience but you will most likely avoid getting into the same situation in the future.

 

About the Author: Matt Tomasino is a full-time writer with a focus on perosnal finance, health, and education. He is also writes medical coding content for growing career guides.

Palm oil likely to stay at current levels

CRUDE palm oil (CPO) futures on Bursa Malaysia Derivatives are likely to stay on current levels with an upside bias this week.


Dealers said the market was anticipated to start on a bullish note on talk that a major plantation company was recording lower output this month.

Jim Teh, a senior trader with Interband Group of Companies, said physical prices were expected to stay above RM2,800 despite higher stock levels.

The market would remain cautious over the European and US debt crisis while a neigbouring country's decision to reduce its tax on palm oil exports to reduce inventories might trigger a price war, he added.

Compared with the previous week, the August 2011 contract increased RM17 to RM3,138 per tonne, while September 2011 and October 2011 went up RM25 each to RM3,141 and RM3,140 per tonne respectively. November 2011 ended the week at RM3,139.

The weekly turnover declined to 20,235 lots from 22,251 lots while open position decreased to 135,015 contracts from 136,602 contracts.

On the physical market, July South ended the week at RM3,160 per tonne. - Bernama

Oil Trades Near Highest in a Week After U.S. Labor Data, Weaker Dollar

Oil traded near the highest level in one week in New York after jobless claims in the U.S. rose more than forecast, weakening the dollar and making crude attractive for protecting against inflation.

Futures for September delivery advanced as high as $98.83 a barrel, reversing an earlier decline to $97.20, as the Labor Department said that applications for jobless benefits in the week ended July 16 increased by 10,000 to 418,000. The U.S. currency dropped 0.5 percent to $1.42 against the euro, making dollar-priced assets such as crude appear cheaper. Oil fell earlier on signs of slower manufacturing in China, the world’s largest energy consumer.

Crude for September delivery was at $98.71 a barrel in electronic trading on the New York Mercantile Exchange, up 31 cents, at 1:38 p.m. London time. It gained as much as 0.4 percent, having earlier tumbled 1.2 percent.

Brent oil for September settlement on the London-based ICE Futures Europe exchange was at $118.04 a barrel, up 11 cents.(Bloomberg)

Treasuries Fall Amid Speculation Greek Bonds Will Get European Guarantee

Treasuries fell for a second day amid speculation governments in Europe may guarantee Greek bonds to make it easier for the European Central Bank to accept a default on the debt, damping U.S. bonds’ refuge appeal.

U.S. yields fluctuated earlier gains after Luxembourg Prime Minister Jean-Claude Juncker said a selective default for Greece was still a possibility. Initial jobless claims increased more than forecast last week. The Treasury will auction $13 billion of 10-year inflation-protected securities today and announce the sizes of three note sales due next week.

“The market is saying it’s optimistic a deal will get done,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “For today, we will be trading off of what’s going on in Europe.”

Yields on benchmark 10-year notes increased four basis points, or 0.04 percentage point, to 2.97 percent at 8:47 a.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent securities maturing in May 2021 dropped 11/32, or $32.44 per $1,000 face amount, to 101 10/32.

Thirty-year bond yields rose five basis points to 4.29 percent.(Bloomberg)

Gold May Climb Toward Record Price After Signal on Bond Default by Greece

Gold may climb toward a record in New York on demand for a protection of wealth after European officials signaled Greece may default on government bonds as part of a second bailout.

Luxembourg Prime Minister Jean-Claude Juncker said he couldn’t rule out the “possibility” of a so-called selective default on Greek debt. Germany and France will present an agreement on addressing Greece’s debt crisis at a meeting today. Holdings of the metal in exchange-traded products rose 0.1 percent to a record 2,122.6 metric tons yesterday, data compiled by Bloomberg data show.

While the agreement “raises the chances that a solution will be presented, there is no reason for euphoria,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said in a report. “Several attempts at finding an agreement have already failed. Against this backdrop, gold remains in demand among investors.”

Gold for August delivery rose $2.20, or 0.1 percent, to $1,599.10 an ounce by 8:01 a.m. on the Comex in New York. The metal reached an all-time high $1,610.70 on July 19. Immediate- delivery gold was little changed at $1,598.40 in London after reaching a record $1,610.10 two days ago.

Gold is up 13 percent this year, heading for an 11th straight annual gain, the longest winning streak since at least 1920 in London. The MSCI All-Country World Index of equities gained 2.8 percent in 2011, the Standard & Poor’s GSCI Index of 24 commodities is up 9.9 percent and Treasuries returned 3.5 percent, according to a Bank of America Merrill Lynch index.

Investment Demand

“Investment demand is still very strong as there are still many uncertainties in the global economy,” Dick Poon, precious metals trading manager at Heraeus Ltd., said by phone from Hong Kong. “We see a lot more scrap emerging in the market this week, which has offset some of the investment demand.”

Euro-area government chiefs will convene today for the second time in a month as they aim to break a deadlock over a new Greek rescue. German Chancellor Angela Merkel and French President Nicolas Sarkozy reached an agreement on Greece after seven hours of talks in Berlin and details will be released at today’s summit in Brussels.

Separately, two officials familiar with talks on the rescue for Greece said governments may provide a guarantee on the nation’s debt in the event of a default.

 

Debt Limit

Barack Obama’s administration signaled it may accept a short-term increase in the U.S. debt limit only if it’s combined with a major agreement to cut the deficit. President Obama met with top congressional Democrats as the Aug. 2 deadline for raising the $14.3 trillion debt limit nears.

“As the U.S. and Europe appear to move nearer towards solving their debt problems, gold may face some selling pressure,” said Steven Zhu, operations manager at Yinjian Futures Co. “Until there are clear signs that everything is good in the world, we favor gold as a safety play.”

Silver for September delivery in New York rose 0.8 percent to $39.865 an ounce. Palladium for September delivery gained 0.7 percent to $798.95 an ounce. Platinum for October delivery was up 0.3 percent at $1781.50 an ounce.(Bloomberg)

Uganda’s Oil Potential Arouses International Interest

The French Ambassador to Uganda has said that the exploration for oil in the country is a key opportunity for Uganda’s government to press ahead with its development agendas.

Speaking during celebrations to mark the French National Day in Kampala, Ambassador Aline Kuster-Menager said, "Exploitation of the country’s oil resources offers a unique and key opportunity for Uganda to boost its development with new and substantial financial resources," The Monitor reported.

Recent discoveries of vast oil reserves, particularly the oil rich Albertine Graben, with estimated reserves of at least 2.5 billion barrels of oil, mean Uganda is set to become a key oil producer on a part with other African oil producing nations, such as neighboring Sudan, Angola, Nigeria and Equatorial Guinea. Some estimate place the Albertine Graben reserve as high as six billion barrels of recoverable oil.

On the basis of such reserves, government analysts estimate that Uganda will be able to support production of over 100,000 barrels of oil per day for the next two decades.

To exploit these resources, the government has signed several leasing contracts with international companies. The French energy giant Total has been granted a large chunk of the rights of exploitation in the Albertine Graben.

The Tullow Oil exploration has already confirmed Albertine Graben reserves of 2.5 billion barrels of oil. As hydrocarbons have been encountered in 51 out of the 55 wells drilled by Tullow Oil, the developments have put Uganda's discovery rate at 92.3 percent. (oilprice.com)

Forex: The capacity to divide the UK's MPC

The minutes of the July MPC meeting reflected the recent slowdown in activity, but the balance of dissenters remained unchanged; two members voting for an immediate rate increase of 25bp and Posen continuing to argue for more quantitative easing. In the discussion that followed it seems that the hawks, even though they acknowledged the recent soft-patch, feared that this would also impact supply conditions. In other words, more long-term unemployment and more factories closing down would mean that the overall potential of the economy is also reduced.

It’s in this area that the main divisions appear to lie. On the other side, it’s also this spare capacity argument that is seen as the main downside risk by those wanting to keep rates steady, namely that: “demand growth would not be sufficiently strong to soak up the pool of spare capacity in the economy”. For both sides, the trouble is that spare capacity is notoriously difficult to measure, knowing both just how much there is at the present moment in time and how it is likely to develop.


The next key focus will be the quarterly Inflation Report next month. The sense from these minutes is that we are not likely to see a significant softening of the Bank’s stance on inflation, not least when it is more likely than not that we see headline inflation move above 5% in the coming months. The Bank will be sweating but, for now, looks unlikely to put rates up whilst the economy remains so fragile. Sterling has largely priced in this scenario and, with rate hikes off the agenda in the US and moving in that direction in the eurozone, rate expectations have subsided substantially as a driver of currencies. The trouble is for sterling is that it’s struggling to benefit from the ebb and flow of the risk trade, the longer-term debt problems of the US and the eurozone - not a million miles away from what could come to beset the UK.(Fx Pro)

Forex: Markets settling on hope

There are two hopes that are underpinning markets right now. The first is that we are on a home straight on the US debt ceiling negotiations, with a new bi-partisan deal on the table. The second is that EU leaders, at their summit tomorrow, will start to pull together to ensure a credible second bail-out for Greece. It’s not an easy feeling though, which partly explains why institutional cash holdings are so high at present; there’s just too much uncertainty out there, much of it caused by politicians. That said, we’ve seen some return of risk appetite in the past 24 hours, the CHF losing some ground (albeit from still lofty levels) and the Aussie regaining some of its resolve. For now though, the euro is unable to show its usual resilience, with too much hanging on tomorrow’s summit.

Commentary

Positive signs in US debt discussions. The major political parties in Washington are still very much absorbed in negotiations concerning both the lifting of the USD14.3trln debt ceiling and enacting a long- term plan to deal with America’s fiscal obesity. Most promising is the plan presented by a bipartisan group of five senators who have tabled a ‘grand bargain’, shorthand for a substantive medium-term fiscal plan of the type that the President favours. This aims to cut the deficit by USD 4trln over the next ten years, with USD 1trln of tax increases included. The underlying assumption of both the currency and the treasury market is still that Washington will enact a meaningful extension of the debt limit before the August 2nd deadline. This still appears a reasonable assumption, notwithstanding the fact that it is fast approaching midnight. For instance, the 10yr treasury yield is currently below 3%, whereas three months ago it was close to 3.5%. Should Washington manage to raise the debt ceiling in a meaningful way before early August, even with strong conditionality, then this could be positively received by both the dollar and the treasury market.


Strong German data no longer cause for celebration. The latest ZEW data for Germany showed the current situation remaining near the historical highs, rising from 87.6 last month to 90.6 in July. This was offset partially by the decline in the economic sentiment balance, from -9.0 to -15.1. It used to be the case that strong German data was taken as a sign of strength for the eurozone as a whole. Now though, with the economic fortunes across the euro area so diverse, strong data from Germany simply reaffirms these differences and also strengthens the political division, with Germans less keen to cede their fortunes to the rest of the eurozone. Nevertheless, in the ever evolving roundabout of eurozone policy-making, this may yet happen. The issue of common-bonds appears to be returning. Not surprisingly, it is more the peripheral nations that are holding them up as part of the solution, although so far the likes of Germany have firmly rejected the idea. Still, greater fiscal union (and, to a degree, political union as well) remains one of the exit routes from the current crisis, the alternative being some sort of fracture of the single currency. As such, the fact that common bonds could be discussed should be welcomed, although it’s a shame that, once again, we are returning to something that was kicked into the long grass months ago. Furthermore, the effectiveness of this solution will have been diminished by the passing of time, the hole from which the eurozone has to escape being ever deeper.


Aussie recovers despite dovish RBA minutes. For those attempting to profit from trading the Aussie recently, it has been an incredibly fraught and frustrating experience. Indeed, as we have been suggesting for a while now, it could be contended that the best strategy for traders to adopt is a more opportunistic one, where the time horizon for trades is much shorter and stops are much tighter than under normal circumstances. With the Aussie confined to a very narrow trading range of 1.04-1.10 for more than three months now, those traders who have sold near the top (of the range) and bought near the bottom will likely be the happiest. It turned out that the RBA Minutes were actually fairly dovish, with the bank observing that the global economy had slowed over recent months, the domestic consumer remained very cautious and the housing market remained soft. On monetary policy, the RBA believes that it has time to assess the degree of threat that inflation poses for the economy, and that the current mildly restrictive policy stance was still appropriate. More recently, overnight trade has seen the currency nudge towards the 1.0750 area, helped by the decent tone to Asian stock markets.

Looking Ahead

Wednesday: CN: Conf. Board Leading Indicator, July, GE: Producer Prices YoY (previous 6.1%, expect 5.5%), UK: Bank of England Minutes to July meeting, US: Existing Home Sales MoM, June (previous -3.8%, expect 2.9%).

Thursday: UK: Nationwide Consumer Confidence, July (previous 55, expect 49), EC: PMI Manufacturing advance, July (previous 52.0, expect 51.5), PMI Services advance, July (previous 53.7, expect 53.2), UK: Public Sector Net Cash Requirement, June (previous GBP 11.1bn, expect GBP 17.0bn), Retail Sales inc Auto Fuel MoM, June (previous -1.4%, expect 0.7%), US: Initial Claims (previous 405k, expect 410k), House Price Index MoM, May (previous 0.8%, expect 0.2%).

Friday: AU: Import Price Index QoQ, 2Q (previous 1.4%, expect -1.1%), GE: IFO Business Climate, July (previous 114.5, expect 113.6), EC: Industrial New Orders MoM, May (previous 0.8%, expect 0.8%)
Source: Bloomberg

GBP-CHF: More Weakness Seen

Further weakness is expected for the pound-Swiss franc currency pair (GBP-CHF) after its selloff this past week.

The selloff was triggered by a loss of the 1.3260 level, the pair's previous 2011 low. The cross currency pair has now resumed its long-term downtrend.

The 1.3000 psychological level is expected to be the next support area. The pound-Swiss franc could take a breather from its declines here and possibly even recover.

However, if GBP-CHF breaks through this critical level, further weakness will build up toward the 1.2900 and 1.2800 psychological levels.
The pound-Swiss franc's weekly relative strength index (RSI) is bearish and pointing lower, suggesting further declines.

Alternatively, on any corrective recovery from its present price levels, the pair's broken support at 1.3260 should reverse roles as resistance and turn it back lower in the direction of its long-term downtrend.
Other resistance is located at the 1.3500 and 1.3400 psychological levels and 1.3612, the pair's June 13 low. All in all, the pound-Swiss franc cross currency pair remains broadly biased to the downside in the long term.

Gold hits record high

LONDON: The price of gold surged to a record high of nearly US$1,588 an ounce in London on Wednesday, as investors switched into the metal for safety from the eurozone debt crisis, traders said.

The price of gold reached US$1,587.97 an ounce on the London Bullion Market, beating the previous record of US$1,577.57 set on May 1.

"Gold hit a new all-time high today as investors continue to fret over the European sovereign debt situation," said analyst Ian O'Sullivan at trading firm Spread Co, noting that the metal has risen for eight days in a row.

"With Italy, Spain, Ireland and Portugal worries intensifying and now the Fed minutes suggesting some members were thinking about the need for additional easing, investors have just hit the panic buy buttons this week.

"We think that gold may top out here for a while and pull back to US$1,520-US$1,540, before an assault on the US$1,600 level," he added.

EU governments are scrambling to fight debt contagion choking Italy and Spain, amid mounting sentiment that Greece could default on its debt despite a massive EU-IMF rescue.

"The heightening of sovereign debt uncertainty in Europe has provided a boost to gold prices despite the seasonal weakness in demand," said Barclays Capital anlayst Suki Cooper.

Added to the mix, Moody's rating agency unexpectedly slashed Irish government bonds to junk status on Tuesday, which sent borrowing costs to the highest levels since Ireland joined the eurozone.

The International Monetary Fund and European Union rescued Ireland last year with an enormous emergency loan. Since then, fellow debt-laden eurozone nation Portugal has also been forced to seek an EU-IMF bailout, while Greece's rescue has been deemed insufficient.

"After Greece and Portugal, Ireland is now the third eurozone country whose government bonds have been assigned a "junk" rating by at least one rating agency," Commerzbank analysts said in a note to clients.

Gold won further support from better-than-expected second-quarter economic growth for Asian powerhouse China, which is a major consumer of commodities.

China said on Wednesday that its economy expanded at a slower but still robust pace in the second quarter as Beijing battles to bring politically sensitive inflation under control.

Gross domestic product in the world's number two economy grew 9.5 per cent year-on-year in the April-June period, the National Bureau of Statistics said, as policymakers clamped down on bank lending to tame soaring prices.

The figure was higher than the 9.4 per cent growth forecast in a poll of analysts by Dow Jones Newswires, but slower than the 9.7 per cent posted in the first three months of the year and 9.8 per cent in the fourth quarter of 2010. --AFP

Comex Gold Turns Higher on Day as U.S. Dollar Index Backs Off, Crude Oil Rallies

Comex gold futures prices have moved modestly higher in late-morning dealings Tuesday. The U.S. dollar index has backed well off its daily high and crude oil futures prices have rallied above unchanged on the day--both of which helped push gold prices higher. Safe-haven buying interest is also featured in gold, amid the deteriorating situation regarding the European Union sovereign debt crisis. August gold last traded up $4.30 an ounce at $1,553.50. December silver last traded down 25.4 cents an ounce at $35.46. (kitco.com)

Australia to Invest $10 Billion in Renewable Energy

Australian taxpayers will front the bill for what will be the biggest single investment in renewable energy ever. During negotiations of a new carbon price and diversion away from renewable energy subsidies, interests groups led by the country’s Greens and rural independents ensured that a significant potion of the investment be made into clean energy projects. The total $10 billion renewable energy investment will be carried out over a five-year period slated to begin 2013-2014.

The Australian government is forming a new Clean Energy Investment Corporation that will manage the public funds for renewable energy projects that otherwise could not acquire loans through traditional channels like banks. The corporation will be independently run by a board of directors.

Clean Energy Investment Corporation will make loans or take equity shares in projects with returns on investment being reinvested. The revenues will be split into two streams to appease both the Greens and Labor parties. The first will fund only renewable energy projects such as wind, solar and geothermal, while the second will make money available for hybrid vehicle purchase.

The company will also invest in manufacturing businesses that provide parts for renewable energy projects, such as wind turbine and solar cell manufacturers. However, no funds will be granted for carbon sequestration or clean coal initiatives.

The clean energy corporation will be joined by a new independent agency to direct and manage $3.2 billion in existing government grants for renewables and biofuels, including the large-scale solar flagships program. Known as ARENA, the agency will also get future funds through dividends paid by the clean energy corporation and a potential share of revenue from the carbon price via any reduction in compensation for trade-exposed industries after 2014-15.

The Australian government believes that upward of $20 billion will be spent on renewable energy projects in Australia in the next decade, and $100 billion by 2050.(oilprice.com)

Germany Improving East African Trade Ties from Energy to Food

Germany’s foreign policy is now focusing on two bilateral issues of profound interest to both sides. Energy for Germany, food for Africa.

For the second time since taking office in 2005, German Chancellor Angela Merkel is amidst a lengthy visit to Africa. The German government’s website commented on the voyage, "The federal chancellor's purpose in making the journey is to show that relations with Africa go far beyond conventional cooperation over development."

Among the countries visited by Chancellor Merkel are Kenya, Angola, and Nigeria. Merkel will be the first German federal chancellor to visit Angola and the first German government leader since Helmut Schmidt to visit Nigeria, Africa’s largest and most prosperous black African nation.

Both Angola and Nigeria are highly dependent on oil exports and in urgent need of developing and diversifying their energy infrastructures, an area in which Berlin sees opportunities to assist both nations to broaden their economies and expand their electricity grids. In 2008 under a Merkel initiative Germany announced an energy partnership with Angola which is now to become operational, Germany is interested in potential long-term supplies of Angolan liquefied natural gas, while in Nigeria, German firms are involved in developing the country's energy infrastructure.(oilprice.com)

US Energy Stocks: This Week's Winners and Losers

Key Energy Services(KEG_), EV Energy Partners(EVEP_), Tesoro(TSO_) and Complete Production Services(CPX_) were top performers last week, while J.A. Solar(JASO_), Forest Oil(FST_) and Trina Solar(TSL_) eroded substantial value.

Among the advancers the past week, Key Energy Services and EV Energy Partners topped the charts, gaining 10.9% and 10.8%, respectively.

Tesoro rose 10.7% over the week, as Barclays Capital has raised the stock's rating to overweight from equal weight with a target price of $37 per share. Tesoro's Los Angeles refinery, temporarily shutdown, is ramping up towards normal operations.

Complete Production Services rose 10.1% after J.P. Morgan rated the stock overweight with a target price of $42 per share.

InterOil(IOC_) and SunPower (SPWRA_) gained 9.8% and 9.5%, respectively.

Oil States International(OIS_) moved up 9.3% as CLSA has raised the stock's rating to buy from outperform. The brokerage has raised the target price to $95 per share from $94.

Halliburton advanced 9% this week.

G.T. Solar (SOLR_) rose 8.7% after receiving equipment orders worth $81.7 million from two customers in Asia. The orders were for equipment to produce poly-silicon used in the manufacture of solar cells.

Among other movers, Patterson-UTI Energy(PTEN_) advanced 8.6%, RPC Inc(RES_) rose 7.7%, Superior Energy Services(SPN_) grew 7.7% and Seacor Holdings(CKH_) added 7.4%,

Helmerich & Payne(HP_) moved up 7.4% last week after signing agreements to build and operate 12 FlexRigs, for delivery to eight exploration and production companies during fiscal 2012.

Oceaneering International(OII_) gained 7.1% during the week.

National-Oilwell Varco(NOV_) piled 6.8% on plans to acquire Ameron International, a manufacturer of fiberglass-composite pipes for a consideration of $85 per share in all an all-cash transaction valuing Ameron at $772 million, or 7.1 times its estimated 2012 EBITDA.

Other winners included Whiting Petroleum(WLL_) up 6.6%, while Continental Resources(CLR_) gained 6.3%. Atlas Energy(ATLS_) rose 6.2%, whereas Anadarko Petroleum (APC_) and Schlumberger(SLB_) gained 6.1% each. Nexen (NXY_) improved 6.0%, Concho Resources(CXO_) piled 5.8% and YPF (YPF_) advanced 5.8%.

J.A. Solar Holdings was the top lagger, shedding 8.2% as a drop in polysilicon prices could affect the company's competitiveness. The company has signed long-term purchase contracts with producers like GCL-Poly Energy Holdings and Wacker Chemie.

Forest Oil Corporation shed 7.5%.

Trina Solar declined 5.6% as Zacks has maintained a sell on the stock.(The Street)

Gold Pops, Silver Sputters on Weak Jobs Report

Gold prices were popping Friday after an unexpected and disappointing June jobs report in the U.S. triggered a flight to safety.

Gold for August delivery was adding $11.50 to $1,542.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,546 and as low as $1,525 while the spot gold price was jumping $9.40, according to Kitco's gold index.

Silver prices were down 3 cents to $36.50 an ounce trading more as an industrial metal, where slowing growth and demand are issues, rather than as a safe haven investment. TheU.S. dollar index was adding 0.31% at $75.14 and the euro was down 0.76% vs. the dollar.


A severely disappointing jobs number in the U.S. triggered a flight to safety into gold as investors dumped stocks headed into the weekend. In June the U.S. added only 18,000 jobs and only 54,000 private sector jobs while the unemployment rate rose to 9.2%. The employment rate can rise because more people enter the work force but in June it rose because there were just more people unemployed. Currently there are 7.5 million people collecting unemployment benefits.

The shock of the number was so severe because many analysts upgraded their job outlook based on Thursday's ADP employment report, which said the private sector added 157,000 jobs in June. Deutsche Bank had predicted that the unemployment rate would fall to 9% and raised private job expectations by 60% to 200,000 from 125,000. These kind of high expectations were slaughtered after the reading which was helping gold prices.

"Today's game changing figures ... [makes] gold increasingly attractive," says George Gero, senior vice president at RBC Capital Markets. "Technically gold is now looking like $1,575 resistance, $1,525 support, with $1,555 closing price a possible technical buy-point." Gold's record close was achieved May 2nd at $1,557.10 an ounce. Gero does point out that the one thing gold is lacking is higher open interest, otherwise known as long positions.

Before the jobs number, the metals had been in wait and see mode. After a powerful three day rally, gold and silver prices were up 3.2% and 8%, respectively, and some investors were taking profits. For some analysts, prices still have a lot more to prove.(The Street)

Gold, Silver Prices Take a Breather

Gold for August delivery was losing $1.30 to $1,527.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,534.90 and as low as $1,524.20 while the spot gold price was down 60 cents, according to Kitco's gold index.

Silver prices were up 16 cents to $36.08 an ounce while the U.S. dollar index was adding 0.51% at $75.41 and the euro was down 0.42% against the dollar.


Despite a stronger U.S. dollar, better-than-expected June same-store sales and stronger U.S. employment data, gold and silver prices were holding onto recent gains. The safe haven metals shrugged off a 25 basis point rate hike from the European Central Bank and the People's Bank of China. Typically when countries take steps to raise rates and tame inflation, gold and silver become less attractive as safe haven assets as the local currency is beefed up.

Gold and silver have been bucking this trend, as investors believe the rate hikes in Europe and China won't have a significant impact on inflation. Speculation is that inflation in China could rise to 6.2% in June, which would mean interest rates are still negative 2.7%.

Gold and silver are attractive in negative interest rate environments as the value of cash is eroded, which makes the metals a safer place to store wealth. The Bank of England left rates unchanged at 0.5% at its meeting Thursday despite the fact that prices rose 4.5% in May.

Gold prices have risen $46 this week on persistent Eurozone sovereign debt fears, the latest rally driven by a Moody's downgrade of Portuguese debt to junk. Some investors are using the two-day climb to take profits in gold but James Moore, research analyst at FastMarkets.com says "the return of Eurozone debt concerns and improved technical picture will lend further support the both gold and silver in the coming sessions," which is providing a floor of support for prices. (kitco.com)

Gold May Drop as Strengthening Dollar, Chinese Rate Increase Erode Demand

Gold may decline in New York as a stronger dollar and higher interest rates in China curb demand for an alternative investment.

China said it will raise interest rates from tomorrow for the third time this year after inflation accelerated to the fastest pace since July 2008. The dollar gained against the euro after Moody’s Investors Service cut Portugal’s credit rating to junk status, stoking speculation the nation will need a second bailout. Gold typically moves counter to the greenback.

There is “bearish pressure from potentially higher interest rates,” which increase the opportunity cost of holding bullion, said Filip Petersson, an analyst at SEB AB in Stockholm. “It all comes down to the real interest rate, will it rise or fall? Dollar strength is normally bearish for gold prices.”

Gold for August delivery fell $1, or 0.1 percent, to $1,511.70 an ounce by 8:01 a.m. on the Comex in New York. Immediate-delivery gold was 0.3 percent lower at $1,511.15 in London.

Gold is up 6.4 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London. Europe’s debt crisis helped bullion futures reach a record $1,577.40 on May 2.

Moody’s Investors Service yesterday slashed Portugal’s rating four levels to Ba2 with a negative outlook. The decision came two months after Portugal got a 78 billion euro aid package ($112 billion). The cut may further strain relations between the rating companies and European Union policy makers, who are trying to ensure their plan for investor involvement in a new Greek bailout doesn’t trigger a default.
Budget Reduction

The Obama administration and congressional leaders are working to complete a deal on a long-term budget reduction package by July 22. President Barack Obama said he opposes a deficit-cutting measure that would only allow for a short-term increase in the U.S. debt limit as he called a meeting tomorrow with lawmakers to work toward fixes in the government’s finances.

The president’s comments yesterday were the second time in less than a week that he has come to the podium to publicly push lawmakers to secure a deal that addresses basic solutions to deficit spending while averting a first-ever U.S. default on its obligations.

“Portugal’s four-notch ratings downgrade is a reminder that Europe’s debt problems are far from solved,” Edel Tully, a London-based analyst at UBS AG, said in a report. “The focus is increasingly on the U.S. debt ceiling debate. An increasing focus on U.S. fiscal worries should also lead to safe-haven and diversification bids.”

Silver for September delivery fell 0.6 percent to $35.19 an ounce in New York. Palladium for September delivery slipped 0.8 percent to $769.65 an ounce. Platinum for October delivery was down 0.4 percent at $1,735.80 an ounce. (Bloomberg)

Crude Oil Mid-Week Analysis for the week of 4th July, 2011

After a two-day consolidation, August crude oil surged to the upside. The rally was set up by last week’s closing price reversal bottom at 89.61 and penetration of several technical points on the daily chart.

The key area which was successfully tested on the weekly chart was the retracement zone at 94.98 to 90.13. This area represented 50% to 61.8% of the range from the May 2010 bottom at 74.43 and the May 2011 top at 115.52.

The first upside resistance on the weekly chart was reached on Tuesday at a steep Gann angle down from the 115.52 main top at 97.52. A penetration of this level will indicate strength and the potential for a 50% test of the last break from 115.52 to 89.61. This target is 102.57.

Investor sentiment rose on Tuesday following the U.S. holiday. Two events triggered renewed optimism by investors for higher prices. Firstly, Barclay’s raised its 2012 forecast for Brent and U.S. crude oil, and secondly, Saudi Arabia slightly reduced the price of oil it charges to its Asian customers.

A rise in U.S. factory orders in May also triggered renewed demand as investors increased bets the U.S. economy would strengthen during the second half of the year.

Despite the outlook for improving fundamentals on the demand side of the equation, news that Portugal’s debt rating was sliced may renew fears of contagion in the Euro Zone. This could increase demand for the U.S. Dollar as a safe haven investment, thereby putting pressure on commodities like crude oil.

The technicals and fundamentals both support continued strength in crude oil the rest of the week, however, the up move may be muted if the debt situation in Portugal causes the Euro to tumble and safe haven currencies to rise.
Factors Affecting Crude Oil This Week:

• Less than a week since Greece approved its austerity measures, in a move that underpinned crude oil prices, renewed interest in Portugal’s debt issues may dampen gain in the crude oil market. Oil traders will have to watch this event unfold on a day-to-day basis. This uncertainty may not be enough to derail the rally in crude oil, but it may be enough to slow down the current upside momentum.

• Wednesday’s normal U.S. Energy Dept. oil inventory report has been delayed until Thursday due to the U.S. holiday. Domestic crude oil stocks are expected to show a decline of 2.3 million barrels.

• On Thursday, the European Central Bank meets to discuss monetary policy. Expectations are for a 25 basis point hike, however, a recent slow down in the Euro Zone economy may prompt the ECB to refrain from further hikes for several months. A weak outlook for the Euro Zone economy by the ECB may hurt demand for crude oil.

• Traders should watch for potential volatility because of conflicting analyst oil reports. Earlier this week, Barclays raised its 2012 forecast, however it left its 2011 forecast unchanged for Brent, but cut it for U.S. crude. Citigroup is predicting Brent may fall to $90 by September, but rise longer-term if Saudi Arabia cuts production and increased supply from the recently released strategic petroleum reserve oil.

• The U.S. Non-Farm Payrolls report on Friday is expected to show an increase of 87,000 jobs. A bearish number will indicate the economy is slowing. This could mean less demand for crude oil. (Commodities Mansion)

MRCB JV is PDP for The River of Life project

Malaysian Resources Corp Bhd (July 4, RM2.22)
Maintain trading buy at RM2.20 with fair value of RM2.58: Last Friday, Prime Minister Datuk Seri Najib Razak launched the much anticipated River of Life (ROL) project, which aims to revitalise and transform Kuala Lumpur's dirty rivers. The RM4 billion project is divided into three parts — river cleaning, beautification and land development along the river.

In late February 2011, MRCB announced to Bursa Malaysia that the Ekovest–MRCB joint venture had received a letter of intent (LoI) from the government for the ROL project.

The LoI indicates the intention of the government to obtain the services of the Ekovest-MRCB JV as the project delivery partner (PDP) for the Entry Point Project (EPP) identified in the Greater Kuala Lumpur/Klang Valley National Key Economic Area (NKEA) under the Economic Transformation Programme (ETP). In late March, MRCB entered into an agreement with Ekovest to set up a 40:60 JV company known as KL Bund Sdn Bhd to undertake the ROL project.

The river cleaning project will involve a 110km stretch of the Klang river basin with the target to improve water quality from its current Class III to Class IIB, which would make the river suitable for recreational activities by 2020. The river beautification project will involve a 10.7km stretch of riverbank from Titiwangsa to Brickfields in Kuala Lumpur.

It was reported that a sum of RM3 billion has been allocated for the clean-up with the balance for beautification. For the river beautification project, Kuala Lumpur City Hall held a River of Life master plan competition that ended on June 15. It has short-listed five of the 22 entries. Three are from international companies with two from local planning companies.

The master plans are currently available for the public to view and vote on. A panel of expert jurors has been appointed to assess the plans. The winning plan will be based on a combination of votes from the public (20%) and the jurors (80%) with the winning proposal to be announced on July 30.

As for the land development along the river, potential government land will be identified and tendered out to private developers through competitive bidding.

As we have yet to understand the exact scope of MRCB's involvement in the ROL, we are unable to estimate the project's financial impact of the project on MRCB. Nevertheless, we believe the project will provide a sizeable future earnings enhancement to MRCB. We maintain our "trading buy" recommendation at an unchanged fair value of RM2.58 based on sum-of-parts valuation.

Apart from being PDP for the project, with its expertise and track record in river cleaning and rehabilitation projects, we do not rule out the possibility of MRCB being appointed as one of the contractors to undertake the river cleaning project. — OSK Research, July 4 (The Edge Property)

Upside priced in for most property developers

Two research houses have turned cautious on the local property sector which has enjoyed a good run-up for almost two years.

RHB Research Institute and Kenanga Investment Bank have cut the sector to "neutral" from "overweight" in the past week, reminding clients that history show a property upcycle normally lasts for only two years.

"We believe now is appropriate to be watchful on property stocks as well as the sector outlook as we are now almost two years into the upcycle," RHB wrote in a note on Monday, July 4. "If what we project is true — that the property upcycle will gradually come off in 2012, though the physical market is likely to remain strong until year-end — current valuations appear to be on the high side, as property stocks typically price in six to nine months ahead."

The anticipated softening next year, RHB said, could be triggered by concerns over higher risk profile due to liquidity-driven massive credit growth; further monetary and regulatory tightening measures; rising inflation; and negative sentiment from regional property sector downgrades.

In a note dated June 30, Kenanga said that smaller developers under its coverage like Hunza Properties and Eastern & Oriental Bhd have showed a decline in sales year-to-date, though the bigger boys — S P Setia, IJM Land and Mah Sing Group — are still targeting strong sales growth of between 15% and 35% this year.

"We wonder if we will see new highs post-2011," Kenanga said.

RHB also has reservations on developers embarking on aggressive landbank expansion. "Land prices are getting more expensive now, and the window to launch and rapidly sell property products is getting shorter. The resulting impact will be slower landbank turnaround time and higher holding costs," RHB said.

Moreover, expectations of higher interest rates and more stringent policies for the sector would likely dampen demand and limit developers' ability to raise selling prices.

That, in turn, could result in a price war as players undercut each other to unload their inventory, RHB said.

"In a worse case scenario, take-up rate could take longer to achieve a satisfactory level," it said, cutting target prices for most property counters under its coverage. S P Setia's fair value was reduced to RM4.67 from RM4.88 previously, while Mah Sing is now deemed fairly valued at RM2.90, down from RM3.15 before. RHB has also slashed its target price for YNH Property Bhd to RM2.14 from RM2.31 and for Paramount Corp Bhd to RM2.23 from RM2.41. For the sector, RHB only retained an "outperform" for IJM Land and KSL, valuing them at RM3.28 and RM2.40 respectively.

Kenanga, on the other hand, told clients it will maintain an "outperform" on S P Setia and Mah Sing "for one more quarter" on expectations of significant news flow. Its target prices, however, had been lowered to RM4.68 (from RM4.93) for S P Setia and to RM2.87 (from RM3.13) for Mah Sing.

It also reckon there's limited upside for the Kuala Lumpur Property Index as the gauge was trading at a price-to-book value of about 0.86 times, higher than the five year average of 0.77 times.(The Edge Property)