Oil, Natural Gas, Gold, Silver Decline: Commodities at Close

February 10, 2012, 5:46 AM EST

By Christian Schmollinger

Feb. 10 (Bloomberg) — The Standard & Poor’s GSCI gauge of 24 commodities
fell 0.5 percent to 676.80 at 6:05 p.m. Singapore time. The UBS Bloomberg CMCI
index of 26 raw materials climbed 0.5 percent to 1,617.156.

CRUDE OIL

Oil fell from the highest level in three weeks, trimming a
weekly advance, as concern that Europe’s debt crisis will worsen and curb global
commodity demand countered signs of an economic recovery in the U.S.

Crude for March delivery fell as much as 71 cents to $99.13 a
barrel in electronic trading on the New York Mercantile Exchange and was at
$99.33 at 4:21 p.m. Singapore time. The contract rose a third day yesterday,
climbing 1.1 percent to $99.84 for the highest close since Jan. 19. Prices are
up 1.5 percent this week and 15 percent higher the past year.

Brent oil for March settlement slid 72 cents to $117.87 a barrel
on the ICE Futures Europe exchange. The European benchmark contract’s premium to
New York-traded WTI was at $18.54, compared with $18.75 yesterday and a record
$27.88 on Oct. 14.Crude markets: NI CRMKTS <GO>

NATURAL GAS

Natural gas for March delivery fell 0.2 percent after gaining
1.2 percent yesterday on forecasts for colder-than- normal weather, and after
Chesapeake Energy Corp. reiterated plans to cut output by as much as 1 billion
cubic feet a day. Stockpiles dropped 78 billion cubic feet in the week ending
Feb. 3, the Department of Energy said yesterday. That left storage at 2.89
trillion cubic feet, 33 percent above the five-year average. U.S. natural gas
market: NI NUSMKT <GO>

OIL PRODUCTS

Benchmark naphtha swaps for March rose $11.45, or 1.1 percent,
to $1,014.95 a metric ton, according to data from PVM Oil Associates Ltd., a
broker. Prices have gained 5.4 percent this week, the biggest increase since
Oct. 14.

Gasoil’s premium to Asian marker Dubai crude fell 13 cents, or
0.7 percent, to $17.85 a barrel, according to PVM. This crack spread increased 1
percent this week.

Jet fuel traded at a discount of 65 cents below gasoil from 60
cents yesterday. This discount has widened from 10 cents a week earlier. The
spread between the fuels has been negative since Jan. 16, signaling it is
unprofitable to produce aviation fuel over diesel. Oil products market: {NI
OPAMKT <GO>}

PRECIOUS METALS

Gold for immediate delivery dropped 0.5 percent to $1,720.13 an
ounce by 9:09 a.m. in London. Prices are down 0.4 percent this week. Gold for
April delivery was down 1.1 percent at $1,722.10 on the Comex in New York.

Silver for immediate delivery fell 0.7 percent to $33.6575 an
ounce. It’s the best-performing precious metal this year, with a gain of 21
percent, and ETP holdings at 17,667.4 tons are the highest since May, Bloomberg
data show.

Palladium slid 1 percent to $704 an ounce after reaching a
four-month high of $718.50 yesterday. Assets held in ETPs, which stood at 55.25
tons yesterday, have risen 6.6 percent this year, beating gains in other
precious metals holdings. Precious metal markets: NI PCMKTS <GO>

BASE METALS

Copper for delivery in three months dropped as much as 1.1
percent to $8,660 a metric ton on the London Metal Exchange, before trading at
$8,670 by 3 p.m. Shanghai time. The contract is heading for a 1.2 gain this
week. It climbed to $8,765 yesterday, the highest since Sept. 16. March-delivery
copper on the Comex fell 0.9 percent to $3.9445 a pound.

On the LME, aluminum fell 0.6 percent to $2,275.75 a ton, zinc
declined 1.2 percent to $2,134 a ton, and lead dropped 0.6 percent to $2,208 a
ton. Nickel was little changed at $21,500 per ton, and tin lost 0.6 percent to
$25,250 per ton. Base metals markets: NI BMMKTS <GO>

GRAINS, SOFT COMMODITIES

Cocoa for May delivery dropped 1.5 percent to settle at $2,244 a
metric ton at 12:09 p.m. on ICE Futures U.S. in New York. Earlier, the price
touched $2,203, the lowest for a most- active contract since Jan. 10.

Raw-sugar futures for March delivery rose 0.2 percent to 24.53
cents a pound on ICE. Earlier, the price reached 24.89 cents, the highest since
Jan. 26. The commodity has climbed 5.3 percent this year.

Arabica-coffee futures for March delivery tumbled 1.8 percent to
$2.16 a pound, the biggest drop since Jan. 23.

In London futures, cocoa fell and robusta coffee and refined
sugar advanced on NYSE Liffe.

March-delivery wheat fell as much as 1.2 percent to $6.3825 a
bushel, the lowest level since Jan. 30, on the Chicago Board of Trade and was at
$6.42 by 2:34 p.m. Singapore time. The contract lost 2.2 percent yesterday, the
biggest drop since Jan. 12. Futures are set for a 2.8 percent decline this week.
Soft commodity markets: NI SOMKTS <GO> Grain markets: NI GRMKTS
<GO>

To contact the editor responsible for this story: Alexander Kwiatkowski at
akwiatkowsk2@bloomberg.net

LONDON |  Fri Feb 10, 2012 6:08am EST

By Jan Harvey

(Reuters) – Gold prices slipped in Europe on Friday as the euro eased from a two-month high, coming under pressure as the optimism sparked by Greece’s agreement of the austerity measures it needs in order to receive a second rescue package dissipated.

Euro zone finance ministers are seeking further measures from Greece before signing off on a second bailout, keeping the threat of a chaotic default alive and pressuring risk appetite.

Spot gold was down 0.8 percent at $1,716.49 an ounce at 5:25 a.m. ET, while U.S. gold futures for February delivery were down $21.30 an ounce at $1,719.90.

“Gains in the U.S. dollar and consistent disappointment from the European Union regarding the Greece debt deal are curbing any gains in gold,” said Pradeep Unni, senior analyst at Richcomm Global Services.

“Even if a debt deal does come out, the complications are far from over. With an over 26 percent unemployment rate in Greece, austerity means further job cuts, and tax increases,” he added. “The key point on pensions are still to be finalized.”

Gold is still up 10 percent this year as traders bet U.S. monetary policy will remain accommodative this year. It rose above $1,750 an ounce on Thursday after Greek leaders agreed to a deal on reforms needed to avoid a default, lifting the euro.

But the single currency eased back 0.2 percent against the dollar on Friday. Eurogroup chairman Jean-Claude Juncker said a further 325 million euros of spending cuts needed to be found by Greece and, with Greek elections looming, political assurances were needed that the plan would be implemented.

European shares fell, dragged lower by banks on concerns about the outcome of the euro zone debt crisis, while safe-haven German government bonds rose.

Oil prices also slipped on Friday in line with other markets, though they are expected to remain firmly underpinned by ongoing tensions with Iran, the world’s fourth-largest crude oil producer.

INDIAN DEMAND FIRMS

Physical gold demand from the world’s biggest bullion consumer, India, improved on Friday as prices eased back from two-month highs. “Demand is better than the last two days as prices have cooled off a bit,” said one bullion dealer in Mumbai.

Also positive for prices, the biggest operator of U.S. futures exchanges, the CME Group, on Thursday lowered trading margins for a range of commodities contracts, including gold, silver and platinum.

“In August and September of last year, CME almost doubled the margin within just a few weeks, thereby contributing to the sharp fall in the price of gold,” Commerzbank said in a note.

Indonesia is to ban exports of some raw materials, including gold and silver as well as base metals like copper and tin, from 2014, the Mineral Resources Ministry said on its website.

Indonesia was the world’s seventh-largest gold producer last year with output of 115 tonnes, according to metals consultancy GFMS, and produced 6.9 million ounces of silver in 2010, making it Asia’s fourth-largest miner of the metal.

Silver was down 0.8 percent at $33.60 an ounce. Spot platinum was down 0.6 percent at $1,642.49 an ounce, while spot palladium was down 1.3 percent at $697.30.

President Jacob Zuma squashed more than two years of talk on Friday about the nationalization of South Africa’s massive mining sector, saying state control or ownership of the mines in the world’s biggest platinum producer could not work.

However, South Africa’s mining sector – the fifth-biggest in the world by value – faces the prospect of higher taxes and royalties as the government tries to squeeze out better returns for the country’s 50 million people.

“Had the ANC promoted a pro-nationalization agenda we believe the impact on PGM prices would have been very bullish as foreign investment and quite possibly professional expertise would have deserted the country, with a commensurate negative impact on production,” said HSBC in a note.

“As it stands we believe the report is still modestly bullish. Higher taxes on producers are bound to curb investment and production to some degree, all other factors being equal.”

(Reporting by Jan Harvey; Editing by Alison Birrane)

By Lukanyo Mnyanda and Emma Charlton

Feb 10, 2012 4:51 AM ET

Investors are sticking with German government debt amid concern that unlimited three-year cash from the European Central Bank won’t end the region’s debt crisis.

The yield on 10-year bunds, perceived to be the among the region’s least risky government debt, has averaged 1.90 percent since Dec. 8, when the ECB announced the three-year loan plan, compared with 3.34 percent over the past five years. Bund yields have held close to their record low of 1.64 percent even as theStoxx Europe 600 Index has rallied 26 percent from last year’s low and 7.5 percent this year.

“There’s still a lot of skepticism as to whether Europe can pull this off,” said Elwin de Groot, a market economist at Rabobank Nederland in Utrecht, the Netherlands. “While some money is flowing into the periphery and causing a decline in spreads, bund yields have been relatively stable. This is not a trade that’s consistent with a crisis resolution scenario.”

Bund rates remain low even after Greece’s government agreed yesterday on austerity measures required for a 130 billion-euro ($173 billion) financing package, needed to avert an economic collapse that may spark a fresh wave of contagion in the euro area. Greece faces a 14.5 billion-euro bond payment on March 20.

Investors also are wary about the health of the financial system after banks took 489 billion euros of three-year loans at 1 percent last month from the ECB. The central bank will offer a second tranche of loans on Feb. 28.

Bunds Outperform

Germany’s 10-year yield has climbed 17 basis points, or 0.17 percentage point this year, to 2 percent as of 9:40 a.m. London time. In the same period in 2011, it jumped 35 basis points to 3.31 percent, as investors shifted to higher-yielding assets. Bunds finished last year with the best returns since 2008, when the collapse of Lehman Brothers Holdings Inc. triggered the global financial crisis.

German bonds handed investors a loss of 1.1 percent this year, less than the 2.3 percent decline by U.K. gilts, according to indexes compiled the European Federation of Financial Analysts Societies and Bloomberg. Treasuries, also perceived as the safest assets, have declined 0.6 percent, the indexes show.

Spanish two-year notes have rallied since Dec. 8, pushing yields down more than 2 percentage points to around 2.70 percent. German two-year rates dropped two basis points in the same period.

ING Group Cuts

ING Group NV, the biggest Dutch financial-services company, said yesterday it cut government bond holdings by 1.3 billion euros in the quarter that ended in December, compared with the previous three months, “largely due to a reduction in Italian and Spanish exposures.”

German yields are unlikely to rise as there’s still “no closure” on the sovereign debt crisis and the region’s politicians continue “muddling through,” said Alex Johnson, the London-based head of portfolio management at Fischer Francis Trees & Watts, which has $54 billion in assets.

“The material issue remains concerns around sovereign indebtedness and the extent to which bunds represent a safe haven in the current environment,” said Johnson, adding that lower yields will be supported by speculation that the ECB will do more to revive the 17-nation economy.

‘Significant Challenges’

The euro area probably will contract this year by 0.5 percent with recessions in crisis-hit Greece and Portugal, compared with a 2.3 percent expansion in the U.S., according to Bloomberg surveys of economists. Europe is also likely to underperform the U.K., which is forecast to grow by 0.5 percent, the surveys show. The region’s economy may fail to grow or show a “recession in certain phases” of this year, ECB council member Ewald Nowotny said on Jan. 30.

“Europe has still got massive, significant challenges,”William Low, head of global equities at Scottish Widows Investment Partnership, said in an interview at his Edinburgh office on Feb. 3. “You’ve still got an issue of imbalanced growth with Europe, you still have an issue of the availability of credit and the willingness of financial institutions to provide credit to the private sector.”

The German 10-year yield climbed yesterday to its highest since Dec. 13 as Greek politicians announced their agreement, clearing the way for a deal for creditors to cut the nation’s debt and win its second rescue in two years. Discussions between the Greek government and the so-called troika, the European Commission, ECB and International Monetary Fund succeeded and political leaders agreed with the result, Prime Minister Lucas Papademos’s office said in an e-mailed statement yesterday.

Premature to Cheer

“It would be premature to cheer these headlines before we know what is really behind the announcement,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “As long as we remain in a situation where we have ratification and implementation risks ahead, the 10-year bund yield should stay within this range of 1.80 percent and 2 percent.”

Germany’s government debt will equal 81 percent of gross domestic product this year, according to the latest set of European Commission forecasts. That compares with 121 percent for Italy, 198 percent for Greece and 118 percent for Ireland. European rules require euro-region nations to limit their debt-to-GDP ratio to 60 percent.

“The risk scenarios are absolutely intact, even though risky assets are rallying,” said Gianluca Ziglio, an interest-rate strategist at UBS AG in London. “The possibility that the Greek situation could get worse means there’s a lot of European demand for bunds as a precautionary asset.”

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at  dtilles@bloomberg.net.

By Jan HarveyLONDON |

Thu Feb 2, 2012 8:13am EST

(Reuters) – Gold prices retreated from earlier eight-week highs above $1,750 an ounce on Thursday as the dollar strengthened and equity markets eased, but the metal remained underpinned by strong investment appetite.

Spot gold was little changed at $1,743.74 an ounce at 1213 GMT, against $1,743.70 in New York late on Wednesday, while U.S. gold futures for February delivery eased $2.10 to $1,747.40. Gold earlier peaked at $1,753.20, its highest since December 8.

Gold has risen nearly 12 percent this year after the Federal Reserve pledged to hold U.S. interest rates at rock bottom for an extended period, keeping the dollar under pressure and the opportunity cost of holding non-interest bearing bullion low.

“We have a new short-term uptrend,” said Andrey Kryuchenkov, an analyst at VTB Capital. “There is enough investor appetite as it seems many who fear missing the next leg up in gold are ready to move in.

“I reckon most markets will take a breather today ahead of non-farm payrolls tomorrow, but it seems gold could well push to $1,760,” he added. “Small-scale buying is yet supportive.”

An early rise in stock markets and the euro ran out of steam on Thursday, with the single currency hitting session lows against the dollar after a media report cited Eurogroup head Jean-Claude Juncker as saying debt swap talks with Greece were very difficult. .EU

Worries over the euro zone debt crisis had driven gold sharply higher for much of last year even as they weighed on the euro. Towards the end of the year, however, the metal behaved more like a commodity, tracking equities lower as risk appetite retreated and suffering from strength in the dollar.

Underlying confidence in gold’s ability to push higher in a low interest rate environment has allowed it to rise this year even in times when other assets are under pressure.

“While gold’s 20-day rolling correlation with risk has jumped back into positive territory, the level continues to hover near the lower end of the range,” said UBS in a note.

“Gold appears in the process of convincing investors that its stint as a hybrid between a safe haven and a risk asset is coming to an end. The next test would be if we get any negative surprises out of Europe.

“While downward pressure on EUR/USD would weigh on gold, the yellow metal’s ability to hold up better than other assets would be another signal that it is recovering its safe-haven characteristics,” the bank added. “The performance of gold priced in euros should also offer clues.”

Euro-priced gold was up 0.5 percent at 1,331.35 euros an ounce and is up more than 10 percent this year.

CRISIS MODE

The chief executive of Newcrest Mining, the world’s No. 3 gold producer, said he expected gold to trade between $1,500 and

$2,500 an ounce in the next five years and retain its safe haven status for as long as the world’s financial system remains in crisis mode.

On the physical markets, demand by the world’s biggest gold consumer, India, edged higher as strength in the rupee made the precious metal cheaper for local buyers. The wedding season is underway in India and will last until May.

The biggest global producer of gold, China, said its production of the metal rose to a record 360.95 tonnes last year. Its domestic demand far outstripped that figure, however.

Among other precious metals, silver was down 0.5 percent at $33.50 an ounce. Spot platinum was up 0.2 percent at $1,614.74 an ounce, while spot palladium was down 0.4 percent at $691.72 an ounce.

Platinum has outperformed gold so far this year, rising nearly 16 percent since end December. As well as benefiting from rising appetite for commodities, the metal has taken support from expectations that South African production could be disrupted this year by mine stoppages.

Price-positive news also filtered through from the demand side of the market. Most platinum and palladium is consumed by the car industry for use in catalytic converters.

“Platinum and palladium benefited yesterday from better than expected vehicle sales figures in the United States,” said Commerzbank in a note.

“On an annualized and seasonally adjusted basis 14.13 million vehicles were sold in January, almost 12 percent more than in the previous year.”

(Reporting by Jan Harvey; editing by Jane Baird)

FEBRUARY 2, 2012, 6:14 A.M. ET

By Polya Lesova

U.S. stock futures were slightly down on Thursday ahead of data on weekly jobless claims and testimony by Federal Reserve Chairman Ben Bernanke on the state of the economy.

Futures on the Dow Jones Industrial Average fell 4 points to 12649 and those on the Standard & Poor’s 500 stock index was off 0.50 point to 1319.25. Nasdaq 100 futures fell 1 point to 2486.50.

The blue-chip Dow index rose 0.7% on Wednesday, snapping a four-day losing streak, after manufacturing data from China and the euro zone buoyed sentiment.

Investors are awaiting data Thursday on weekly jobless claims, which are due at 8:30 a.m., EST. Shortly after the stock market opens, Fed chief Bernanke will begin his testimony to the U.S. House Budget Committee. His comments on the economy will be closely watched. Numerous companies are set to report earnings Thursday, including Dow Chemical Co. (DOW), Merck & Co. (MRK) and Mastercard Inc. (MA).

European stock markets swung between small gains and losses on Thursday, while miners rallied after Xstrata PLC (XTA.LN) confirmed it’s in talk with Glencore International PLC (0805.HK, GLCNF, GLEN.LN) about a potential merger of equals. Glencore already owns a 34% stake in Xstrata, whose shares soared 9% on the deal news. Glencore’s shares advanced 4.8% in London trade.

In Spain, the Treasury sold nearly 4.6 billion euros ($6.1 billion) of debt on Thursday, with yields declining compared to previous auctions. France, meanwhile, sold 7.96 billion of government bonds in an auction.

In the currency markets, the euro edged down against the dollar to $1.3148. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, was flat at  78.935 compared to 78.925 in late North American trading on Wednesday.

In premarket trading, shares of Green Mountain Coffee Roasters Inc. (GMCR) rallied 21% after the firm’s quarterly earnings exceeded analyst expectations.

Shares of Qualcomm Inc. (QCOM), which makes mobile-phone chips, rose nearly 5% in preopen trade after the firm reported Wednesday a sharp increase in fiscal first-quarter profit and revenue and its forecast for the current quarter topped analyst forecasts.

-By Polya Lesova; 49 69 29725517; AskNewswires@dowjones.com

By James O’Toole@CNNMoney

February 2, 2012: 7:32 AM ET

NEW YORK (CNNMoney) — The U.S. job market stumbled out of the gates in 2012 — at least according to one report.

Planned job cuts for the month of January totaled 53,486, according to a report from outplacement consulting firm Challenger, Gray & Christmas. That’s a 28% increase from December and the highest total since the 116,000 cuts announced in September

Leading the way were financial firms and retailers, which announced lay-offs totaling 7,611 and 12,426, respectively. Cuts of seasonal retail workers typically don’t show up in the report, Challenger said.

The Challenger report follows data Wednesday from payroll processor ADP saying that the private sector added 170,000 jobs in January, down sharply from 292,000 in December.

American Airlines plans to cut 13,000 jobs

The reports from Challenger and ADP come ahead of the government’s highly anticipated monthly jobs report, due Friday, though their figures aren’t always reliable predictors of the government’s numbers.

Economists surveyed by CNNMoney expect the Labor Department’s data to show that 130,000 jobs were added last month, with 150,000 from the private sector and a loss of government jobs. That would mark a sharp slowdown in hiring versus December, when 200,000 jobs were created.

The unemployment rate is expected to rise to 8.6%.

By Veronica Brown

LONDON |Tue Jan 31, 2012 6:58am EST

(Reuters) – Gold prices rose on Tuesday on a weaker dollar and were on course for their biggest monthly rise since August, raising the possibility of a climb toward last year’s record high of just over $1,900 per ounce.

Sentiment for gold at the end of January compares starkly with late December, when prices dropped by more than 10 percent in their biggest monthly fall since the collapse of Lehman Brothers in an investor dash for cash.

A $400 price drop from last September’s record $1,920.30 had left investors questioning whether gold had ended an 11-year rally.

Gold was up 0.6 percent at $1,740.80 an ounce by 6:43 a.m. ET, having earlier touched $1,744.80 – its highest since mid-December and up some 11.2 percent on the month to date.

The euro rose against the dollar on hopes for a Greek debt restructuring deal that would help the country avoid a disorderly default, possibly setting itself up for a test of a key chart level. A weaker dollar makes gold cheaper for holders of other currencies.

While recovering global share prices and hope of a deal for Greece tempered gold’s safe-haven gloss on Tuesday, concerns about Portugal following a similar path to Greece and data pointing to a poor first quarter in the euro zone kept the background environment supportive.

More broadly, bullion was benefitting from a favorable monetary policy backdrop, with a jump of almost 5 percent last week after the U.S. Federal Reserve pledged to keep interest rates near zero until at least late 2014.

“Interest rates remain low, euro zone problems persist, the situation in Portugal got worse yesterday … and now that we broke through $1,740 it looks like prices might go up,” said Alexander Zumpfe, a precious metals trader at Heraeus in Germany.

A top U.S. Federal Reserve official said on Monday he would have preferred a more optimistic statement on the U.S. economy, after the central bank painted a grim picture of the recovery last week and forecast ultra-low interest rates.

“With gold starting 2012 at a cracking pace … gold may be poised to set fresh highs this year but much earlier than many – ourselves included – would have expected.” Ross Norman, chief executive of Sharps Pixley, said in a note.

PORTUGAL YIELDS BREACH 17 PERCENT

Portugal’s 10-year government bond yields fell sharply on the day but remained in sight of 17.0 percent, close to euro-era highs of around 17.4 percent, stoking the fears that Lisbon may become the next Athens.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Portugal, Italy, Ireland sovereign bond spreads: link.reuters.com/mac36s

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

“Sentiment seems to have improved quite tremendously, I would say. We are now into more bullish territory, more than ever, with the Fed providing enough fundamental support,” said Dominic Schnider, head of commodity research at UBS Wealth Management.

“I think we have good reasons to believe we are going to test $1,805. The Fed was clearly the most important event,” he added.

Gold has gained for the last four weeks, with a spike in prices before the Lunar New Year holidays being driven partly by Chinese buying.

“Before the Chinese New Year really started, we’ve seen quite strong gold exports from Hong Kong to China. Apparently Chinese demand was very solid,” said Schnider.

The most active U.S. April gold contract rose $7.80 an ounce to $1,742.30 an ounce.

Greece and its private creditors realize the need for it to avert a financial collapse and are close to a deal on restructuring Greek sovereign debt, Luxembourg Finance Minister Luc Frieden said on Tuesday.

Silver added 0.9 percent to trade at $33.77 an ounce after rising to $33.95 on Monday, its strongest since mid-November. Platinum and palladium also firmed.

Holdings of the world’s largest silver-backed exchange-traded fund, iShares Silver Trust (SLV.P) rose about 1 percent to 9,608.95 tonnes by Monday, from 9,510.70 tonnes on Friday.

Traders and investors were also watching for further developments at South African miner Impala Platinum (IMPJ.J). It said on Monday its Rustenburg operations remained shut after the majority of workers staging an illegal strike over wages failed to return to work.

(Additional reporting by Lewa Pardomuan in SINGAPORE; Editing by Jane Baird)

Tue Jan 31, 2012 7:44am EST

By Robin Emmott

BRUSSELS, Jan 31 (Reuters) – Euro zone unemployment has risen to its highest level since before the euro was introduced, data showed on Tuesday, a day after EU leaders promised to focus on creating millions of new jobs to try to kickstart Europe’s floundering economy.

Joblessness among the 17 countries sharing the single currency rose to 10.4 percent in December, on a par with an upwardly revised November figure, the EU’s statistics office Eurostat said in its release of seasonally-adjusted data.

It was the highest rate since June 1998, before the euro was introduced in 1999.

“We’re looking at a further increase over the coming months, so that is worrying,” said Martin van Vliet, an economist at ING. “Look at Greece, where unemployment is some 20 percent, and it is 23 percent in Spain. At a certain point this could lead to political unrest.”

After two years of debt crisis and budget austerity, the number of Europeans out of work has risen to 16.5 million people, with another 20,000 people without a job in December from the month before.

At a summit on Monday, Europe’s leaders tried to shift the debate from fighting the debt crisis to reviving growth in a bloc that produces 16 percent of global economic output.

They are looking to deploy up to 82 billion euros of unspent funds from the EU’s 2007-2013 budget in an attempt to boost employment. But most economists expect scant progress while the euro zone’s high debtors are compelled to persist with harsh austerity programmes under a new ‘fiscal compact’.

Citigroup dubbed the German-inspired pact for stricter budget discipline, agreed by 25 EU leaders on Monday, as a “compact for low growth”, while one European diplomat has said that it “essentially makes Keynesianism illegal.”

Even with a pro-growth plan, a growing gap between the wealthy nations of northern Europe and those of the poorer, less productive south overshadows any EU-wide jobs policies implemented from Brussels.

Germany’s unemployment rate fell to 6.7 percent in January, separate figures showed, a new record low since figures for unified Germany were first published.

Austria boasted the euro zone’s lowest jobless rate at 4.1 percent in December, followed by the Netherlands at 4.9 percent.

But unemployment in Spain reached a new high of 22.9 percent in November and December. In Greece, joblessness was 19.2 percent for October, the latest data available. Unemployment reached 13.6 percent in Portugal in the final month of 2011.

“ALARMING” YOUTH UNEMPLOYMENT

High joblessness is a blight on the European economy, and youth unemployment is a particular problem, especially in Spain, where almost half of young people cannot find full-time work.

A spokeswoman for European Commission President Jose Manuel Barroso said on Tuesday pan-EU youth unemployment was “unacceptable” and “alarming.”

Even in non-euro zone Britain, one of the world’s top 10 economies, youth unemployment is almost three times that of Germany, at 22 percent of under 25s. That figure reaches 24 percent in France and 30 percent in Italy.

“For me this is the most painful aspect of the whole situation we’re facing in Europe, this great divergence on the labour market. Because if unemployment in Germany is falling, we may see less preparedness to help out the rest of the euro zone,” Van Vliet said.

After years of falling unemployment, the 2008-2009 global financial crisis destroyed job creation prospects in Europe and the ensuing sovereign debt crisis has only worsened the outlook.

In the 27-nation European Union, the number of jobless has risen steadily from a recent low of 7.1 percent of the working population in 2008 to 9.9 percent in December — some 23.6 million people.

Economists say it could reach 11 percent by mid-2012.

“It’s very important that we don’t forget the growth and the jobs,” Danish Prime Minister Helle Thorning-Schimdt told reporters as she arrived at the half-day summit on Monday. “Everything starts and ends with growth and jobs,” she said.

Published January 31, 2012| Reuters

The euro, shares and commodities all gained on Tuesday encouraged by hopes  for a Greek bond deal this week and after European leaders backed a pact that is  hoped will tackle the underlying causes of the region’s debt crisis.

Greek Prime Minister Lucas  Papademos said negotiators had made “significant progress” in talks to  strike a restructuring deal on government debt and aimed to have a definitive agreement by  the end of this week.

The euro was up 0.4 percent to $1.3180, edging towards a six-week high of  $1.3235 hit last week as the Greek debt fears eased.

Optimism about a Greek deal, seen as necessary to release the bailout funds  needed to prevent a messy debt default in March, also calmed rising fears that  Portugal might need a second rescue as Lisbon’s borrowing costs soar.

“It seems the market is pushing Portugal down the same path as Greece, and  bond holders are now coming to the reality that they may have to write-off some  of their Portuguese debt holdings further down the line,” Chris Weston,  institutional dealer at IG Markets, said.

The pan-European FTSEurofirst 300 index of top shares was up 0.5 percent at  1,035.89 points. Banks were among the top gainers as debt fears receded and amid  signs liquidity will get a boost at next month’s European  Central Bank three-year loan tender.

“The market is currently keeping aside the various risk factors like the  possibility of a Portuguese debt restructuring on hopes of more liquidity  injection by the major central banks,” said Sebastien Galy, FX strategist, at Societe  Generale.

The U.S. Federal  Reserve kept the door open for more quantitative easing and a Reuters poll  showed the ECB will allot 325 billion euros at its next long-term refinancing  operation on Feb 29.

The pan-European FTSEurofirst 300 index of top shares was up 0.5 percent at  1,035.89 points, with banks among the top gainers.

As Greek debt fears receded and Asian markets extended their strong start to  the year the MSCI world equity index rose 0.6 percent to 317.44, and is on track  for a rise of around six percent for January.

BUDGET DEAL WELCOMED

The new fiscal pact approved by 25 of the 27 countries in the European  Union on Monday sets strict new measures on sovereign budget discipline,  intended to prevent a repeat of the massive overspending behind the region’s  debt crisis.

The deal sent the price of German debt futures down 22 ticks to 139.45 as  demand for one of euro zone’s safest and most liquid assets eased from recent extremes.

“The move that we are seeing is based on the idea that at least the  politicians didn’t disappoint investors too much,” said Michael Leister,  strategist at DZ Bank.

The EU agreement was seen helping stall Monday’s selling pressure on Italian  debt. Ten-year yields fell 8 basis points to 6.02 percent, while the Spanish  equivalent eased 2.5 basis points to 4.79 percent.

Portugal’s 10-year government bond yields were around 17.1 percent after  breaking through the 17 percent level on Monday, to reach euro-era highs of  around 17.4 percent, stoking the fears that Lisbon may become the next  Athens.

On the economic front though data continues to show a worsening picture for  much of the region although the powerful German economy continues to do  well.

Italy’s seasonally adjusted unemployment rate rose in December to 8.9 percent  from an upwardly revised 8.8 percent in November, reaching its highest level  since records began in 2004. That follows a rise in Spain’s jobless rate to 22.9  percent in the fourth quarter.

Germany’s unemployment rate fell for a second consecutive month in January,  dipping to 6.7 percent and marking a new record low since figures for unified  Germany were first published, data showed.

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Fri, Jan 27, 2012

Post by Michael Montgomery, Silver Reporter

Silver prices have made gains over the past two trading sessions with prices now solidly over the $30 per ounce psychological resistance level. The white metal’s gains are largely attributed to a weaker US dollar, rising oil prices and the recent statements by the Federal Reserve on interest rates and inflation. However, a key statement made by the Fed which is being overlooked may be a bearish factor for precious metal prices going forward.

On the day, spot silver traded up $0.20, to close at $33.47 per ounce. Prices tested the $34 mark with a session high of nearly 33.80.

Wednesday’s announcement by the Federal Reserve revealed that interest rates would be kept at their current near zero level until at late 2014. This loose fiscal policy has been the key argument of silver and gold bugs.

Precious metal bulls jumped on the announcement, equating the continuation of the historically low interest rates as being equal to that of a new QE program, or at least QE2.5. The market reacted, buying silver and gold as an anti-inflation hedge.

However, the Fed statement also contained language that stands as a major counterpoint to the hyper-inflation argument.

“The US central bank made it clear (for the first time really) that it is targeting the former at 2% and the latter at 4 to 5 percent. Neither figure is set at a level that would warrant runaway prices in inflation hedges or interest-sensitive assets,” stated Jon Nadler, for Kitco.

Ben Bernanke stated that inflation rates for 2012 are likely to fall below their target of 2 percent. In addition, the Fed also stated that it was not targeting a specific unemployment figure.

“Both of the foregoing statements are very negative for gold and silver. The Fed gave us a clear signal to sell gold and silver, but nobody listened… Investors are conditioned by the first QE and QE2. In both cases, gold and silver ran…” stated Nigam Arora, in an article on Marketwatch.

While the low interest rates and loose fiscal policy are a supportive factor for precious metals in the very short term, the lack of inflation predicted through at least 2014 may be negative.

The debate over the real rate of inflation is a hotly contested issue. However, inflation has yet to explode as many precious metal bulls have been prognosticating since the economic collapse in 2008.

If inflation does indeed stay below the 2 percent target through 2014, the arguments made by Nadler, Arora and others is one worth noting.

Going forward the silver bulls have a technical advantage. Investors should continue to look for silver to trade inversely to the US dollar, and in line with oil prices. “Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the October high of $35.68 an ounce,” stated Jim Wyckoff, for Kitco. The downside breakout objective is a closing price below $31.00 per ounce.

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