How Easing Policy is Important at This Time

This morning, I read this articles on bullion report, i find some interesting news related to financial markets these days. Share with you this:

"The Federal Reserve will be meeting next week and all eyes will be focused on the potential for another round of monetary easing. Speculation abounds as to the scope and depth of their actions, but most analysts are working on the assumption that at least $500 billion in Treasuries will be picked up over the next five months. Considering the global economic climate and the link between gold and the U.S. dollar, what could this easing mean for precious metals moving forward?





Easing is a banking tool that is meant to stimulate economic activity. The Federal Reserve would aim to do this with a round of Treasury purchases. This would keep them on their current course of reducing interest rates and trying to jumpstart the money supply. With these purchases, they get excess reserves to make new money. The effect can be what the name implies – it gives the banks and the economy some breathing room.

The risks to easing run the gamut between the potential for hyperinflation and the chance that the easing will not be long or deep enough to achieve the desired stimulus results. In the present environment, both situations would likely represent a bane to the Federal Reserve and a boon to gold and other precious metals.

Debasing the U.S. dollar by increasing the money supply would likely spur additional interest in gold and other precious metal investment. After all, inflation serves to devalue a regular savings account. The trick to this, and the hope of the Federal Reserve officials who support this course of action, is that the global stage will negate the effect of this round of easing. Basically, if all the other central banks are doing it, there will be no one single losing currency. This kind of “competitive devaluation” might temper the reaction from the market. The caveat is that the increase in money supply on a global level would still be a possible motivator for investors who jump on gold as an inflation hedge.

Even if the inflation-situation does not come into play, or it is successfully combated, there is still an overwhelming amount of debt created by round after round of stimulus aimed at spurring economic activity. This has increased the demand for certain investments – like gold – amid flimsy fundamentals for other financial assets. It will probably mean more business for precious metals as investors seek havens if the stimulus fails and this second round of easing isn’t enough to bolster employment and economic growth.

It will be interesting to see what the Federal Reserve commits to, following next week’s meeting. Guesses seem to be centered on the possible commitment from officials to buy up $100 billion in Treasury debt per month for the next five months. This headline may already be priced into the markets, but recent gains in the dollar set up an interesting situation. The drop in gold prices on the strengthening U.S. currency could have set up perceived value entry points ahead of any additional official announcements. According to a story from Reuters, gold traders in India were already scooping up the metal on lower prices amid their festival and wedding season peaks. (1)

It seems unlikely that the Federal Reserve will fall short of the market expectations. Doing so at this point would bump up the dollar but it would jolt other financial markets in the process. Officials have not been working this hard for this long to rock the boat, despite some member objections to another round of stimulus. To quote Ben Bernanke’s own speech from the beginning of 2009, “The global economy will recover, but the timing and strength of the recovery are highly uncertain.” With this in mind, the effort they could be announcing next week will probably fall in line with their actions thus far. Commit to maintaining a response that adds liquidity and stimulus but keep the door open. This means giving a nudge and a wink but not committing to huge purchases right away. Look for officials to nibble at easing, not gobble.

Summary

There is probably no quick fix to housing and employment issues, but there has been strong effort to repair things since the 2007 start of the crisis. The cumulative efforts of the Federal Reserve could see results at some point, after all, employment is seen as a lagging indicator of the health of an economy. However, until there is a solid compass point that shows tangible recovery and economic strength, fear will still prevail. Fear of economic troubles and fear of future inflation issues as a direct result of continuing stimulus. This means that there is still a proverbial basket of issues from which investors can pull a potential catalyst for higher gold prices.

The Fundamentals For Gold and Silver Trading

There are four important factors, you should think about when trading metals, especially, trading gold and trading silver.

The first fundamental is the relationship between demand and supply current metals. If the demand is excess the supply, the metals price will go up and vice versa. So, you must keep track the moving on futures market to get information.

The second fundamental for the precious metal prices would be low or negative interest rates. If the return on bonds, stocks, real estate and others derivatives is lower than the influence of inflation, the trend to buy gold and silver and others commodities futures like cotton commodity, oil futures, corn commodity…

Another fundamental is the status of the whole economic. In case, there are wars or invasion and serious inflation, investors will change channel investment into precious metals because people are fear that it is safer than other assets. It can easily exchange into other currencies.

The fourth fundamental- the last one is the strength of the USD. As we know, US is famous as the home of gold in the world, so if the US currency is weaken than other major currencies, investor will chase to buy gold.

In conclusion, these above fundamentals are very necessary for who attend to invest in metals commodities. This investment can give many profits and take your money out also. therefore, you should consider all factors can affect your business. Trading in futures and options involves in substantial risk of loss and good chances.

Necessary Tips For Bellies Trading

There are three tips you should care when intend to be a belly trader in pork bellies as well as lean hogs.

The first tip is that practicing trade in paper. This is a practical tool that can help you get confidence in the future market. Thanks to this time, you can know some typical symbol like tick size, daily price limits, so that you can be more skillful in using tools in your trading

The second thing you should care is getting advice from a commodity broker. A practical broker will advise you his experience in futures market, he knows which one is good, which one is bad for trading.

The last tip is you educate yourself. No one can help you if you do not try your hard to learn, you can get your own knowledge by getting newsletter on some commodity websites, e books.

These are basic tips I get and would like to share with all of you, hope it can partly help you success in lean hogs options.

Commodity

Long time ago, i have not visit this blog for some private reason, so now i am come back and hope to see and post useful information for commodity blogger.

As other posts, i focus on commodity news in futures trading market and some basis definition about some commodity items.

Today, i will share the report about gold and us dollars.

Gold prices that are familiar to most traders are quoted in US dollars. This link to the US dollar is quite different from a century ago. When paper dollars first made an appearance, they were backed by gold and silver. The exact amounts specified in the Coinage Act of 1837 were 24.75 grains of gold and 371.25 grains of silver. It takes 480 grains to make a troy ounce. This bimetallic standard, as it was known, was dropped in 1900 when the Gold Standard Act set the dollar as 23.22 grains of gold or $20.67 for a troy ounce.

The quantity of grains per dollar was lowered on more than that single occasion. In the 1930s, it was 13.71 grains which put the price per troy ounce of gold at $35. By the early 1970s, a troy ounce of gold was over $40 and President Nixon had ended the redemption of currency for gold. The currency was allowed to float. When the Federal Reserve began to increase the money supply the value of the US dollar fell. This kind of currency depreciation, not just in the United States but also in other countries, is often cited as a reason for the increased value of gold.

The recent fallout from the housing and credit issues have contributed to another round of currency depreciation and some historic gains in the US dollar. The lack of imminent economic recovery could fuel several issues to move the US dollar and gold by extension.

The first factor to consider is the effort to stimulate confidence and economic growth. The Federal Reserve has pledged to keep historically low interest rates and various forms of stimulus money and programs have been set into motion by the US government. This has led to an influx of money and an even wider deficit. Sure, other nations across the globe have the same issues which can sometimes bolster dollar investment. But generally speaking, these efforts have pared back the value of the dollar, contributing to the gain in gold prices. These efforts have not borne fruit yet, and that kind of flop can affect general investor and consumer confidence. That leads to the second factor to be aware of, the investor’s perception of the US economy.

The average investor needs to have confidence that the economic condition in the United States is improving; otherwise, there will be hesitation when it comes to moving investment direction. For most people, the fear of the collapse in the stock market and other markets brought a general exodus from those assets and a plunge into precious metals. Every bad or benign economic report will continue to weigh on those investors. A true signal of recovery and sign of how long the good times will last will be needed to inspire more investors to profit taking and an exit from gold positions.

Commodity News This Week

U.S. Economy

The U.S. Census Bureau said that wholesale sales were up 1.3% in January and up 10.5% from a year ago. Inventories were down .2% in January and down 9.7% from a year ago.
The U.S. Treasury sold $21 billion of 10-year T-notes at a median yield of 3.70% with a bid-to-cover ratio of 3.45. They also posted a budget deficit of $220.9 billion in February, roughly as expected. The June U.S. T-bonds ended down 4/32nds at 116.10/32nds.
Economists surveyed in the Blue Chip Economic Indicators newsletter said that real GDP will be up 3.1% in 2010 and up 3.0% in 2011.
The Mortgage Bankers' Association said that its index of mortgage applications was up .5% last week. The rate on a 30-year fixed rate mortgage averaged 5.01%.

Grains and Cotton

The USDA's 2009-2010 U.S. ending stocks estimate of:Corn was increased from 1.719 to 1.799 billion bushels.Soybeans was reduced from 210 to 190 million bushels.Wheat was increased from .981 to 1.001 billion bushels.Sugar was increased from 1.055 to 1.075 million tons.Cotton was reduced from 3.3 to 3.2 million bales.
The USDA's 2009-2010 world ending stocks estimate of:Corn was increased from 134 to 140 million tons.Soybeans was increased from 60 to 61 million tons.Wheat was increased from 196 to 197 million tons.Cotton was reduced from 52 to 51 million bales.
The USDA also said today that China bought 110,000 tons of U.S. soybeans for 2010-2011. May soybeans closed up 10.5 cents at $9.58.
A smaller palm oil crop in Malaysia is boosting prices for soybean oil (see article). May soybean oil closed up .72 at 41.02, the highest close in eight weeks.
July wheat fell 7.75 cents to $4.945, the lowest close in five months, after today's increase in the U.S. and world ending stocks estimates.

Livestock

The USDA raised its average 2010 price estimate for choice steers from 88 to 89.5 cents per pound. June cattle closed down .60 at 91.72.
The USDA raised its average 2010 price estimate for barrows and gilts from 47.5 to 48.5 cents per pound. June hogs were up .17 at 80.65.

Orange juice

The USDA raised its estimate of the 2009-2010 Florida orange crop from 129 to 131 million boxes, but lowered the projected juice yield from 1.56 to 1.53 gallons per box at 42.0 degrees Brix. May orange juice was down .0020 at $1.4695.
Sugar May sugar closed down .63 at 19.69, the lowest close in seven months, with more talk that upcoming sugar crops will ease the shortage. Brazil's sugarcane harvest is due to begin at the end of this month.

Energies

OPEC's monthly Oil Market Report shows an increase in the 2010 world oil demand estimate from 85.12 to 85.24 million barrels per day. Yesterday, the U.S. Energy Department predicted 85.5 million barrels per day. May crude oil finished up .57 at $82.43.
The U.S. Department of Energy (DOE) said that crude oil supplies were up 1.4 million barrels last week to 343.0 million barrels. Supplies of gasoline were down 2.9 million barrels and heating oil supplies were down 500,000 barrels.
The DOE also said that refinery use fell from 81.9% to 80.7% of capacity last week. Over the past four weeks, gasoline demand was up .5% from a year ago while distillate demand was down 4.1% from a year ago.


Metals


April gold fell $14.20 to $1,108.10, blamed on technical selling.


Currencies


The U.K.'s Office for National Statistics said that its index of production was down .4% in January and down 1.5% from a year ago.
Japan's Cabinet Office said that machinery orders were down 3.7% in January. The March Japanese yen dropped .0070 to 1.1047.
Is world trade improving? China's government said that exports were up 46% in February from a year ago while imports were up 45%.

Source: http://www.dailyfutures.com/