Here’s a very good interview of the Wall Street Journal’s Simon Constable on the significance of central bank gold purchases, i.e., what it means to the ordinary gold owner.

Link

July 5 (Reuters) — Gold prices rose towards two-week highs on Thursday, with investors reluctant to make big bets after pricing in an expected European Central Bank (ECB) rate cut, with investors moving on to focus fully on key U.S. jobs data on Friday.

Spot gold was up 0.2 percent at $1,618 an ounce by 1004 GMT, treading water along with equities and the euro, also little changed ahead of the ECB meeting, where policy makers are likely to cut rates to a record low to contain the debt crisis.

Bullion is up more than 1 percent on the week, potentially heading towards its first back-to-back weekly gains since late February.

“I think the ECB is priced in — it’s been a case of buy the rumour all week and now probably some profit taking on the announcement,” Societe Generale analyst Robin Bhar said.

“The market would really need something big like a Fed move – not the ECB or Bank of England which is a bit more of a minor consideration.”

Friday’s June U.S. employment data is likely to reflect the impact of the euro zone crisis and weak economic data and this could encourage the Federal Reserve to take more measures to stimulate economic growth.

[Source]

July 5 (MarketWatch) — China’s central bank on Thursday unveiled a surprise interest rate cut, lowering borrowing and deposit rates while also enabling banks greater leeway in setting their own lending rates at a discount to the benchmark.

The People’s Bank of China lowered its one-year yuan deposit rate 25 basis points, or a quarter percentage point, to 3% and its one-year lending rate by 31 basis points to 6%, according to a statement posted on its website.

The central bank also announced more relaxed rules on lending for commercial bans, allowing lending rates to be set as low as 70% of the benchmark rate, down from 80% currently.

The move, the second rate cut in a month, was seen as part of efforts to prop up lending after data showed credit growth in an apparent stall in June. It also comes on a day when the European Central Bank cut interest rates by a quarter-point and the Bank of England extended an asset purchase program by 50 billion pounds.

[Source]

JK Comment: Here we go again…that’s two out of three of the world’s largest economies that are easing/providing stimulus.

July 5 (MarketWatch) — Europe’s major central banks delivered a further round of monetary stimulus in the face of a deepening slowdown Thursday, with the European Central Bank cutting its key lending rate to a record low and the Bank of England embarking on additional quantitative easing.

Earlier, the Bank of England’s Monetary Policy Committee voted in London to boost its asset purchases by 50 billion pounds ($78.1 billion), bringing the total size of the program to £375 billion. The bank said it expected the purchases to take four months to complete.

The ECB, however, surprised investors somewhat with its decision to cut the deposit rate to zero. Several economists had forecast the ECB would hold the rate steady or to at least hold it above zero, fearing a more aggressive cut could hurt bank profits and weigh on already-weak private-sector lending.

The Bank of England, in a brief statement accompanying its rate announcement, focused on a deteriorating economic picture.

“U.K. output has barely grown for a year and a half and is estimated to have fallen in both of the past two quarters. The pace of expansion in most of the United Kingdom’s main export markets also appears to have slowed. Business indicators point to a continuation of that weakness in the near term, both at home and abroad,” the bank said in a statement accompanying the decision.

[Source]

July 5 (MarketWatch) — In another signal of a deteriorating U.S. economy, the services sector grew at its slowest pace since January 2010, according to an index released Thursday.

The Institute for Supply Management said its services index dropped to a reading of 52.1% in June from 53.7% in May.

While not the disappointment that the ISM manufacturing gauge was earlier this week, the services index came in below the 52.9% expected in a MarketWatch-compiled economist poll. The manufacturing sector is typically seen as reacting more quickly to changes in the U.S. economy than the services side. Read more on ISM manufacturing.

Readings above 50% indicate expansion, and major components in the index were still holding above that level.

[Source]

July 5 – Marketwatch -

European Central Bank President Mario Draghi on Thursday said further downside risks to euro-area growth have materialized and indications for the second quarter point to weakened growth and heightened uncertainty. Inflationary pressure has been dampened by the risks to growth, he said. The ECB on Thursday cut its benchmark lending rate by a quarter of a percentage point to a record-low 0.75% as expected. It also lowered the deposit and marginal lending-facility rates. “Beyond the short term, we expect the euro-area economy to recover gradually but see momentum dampened by number of factors,” said Draghi at a press conference. Such factors include tensions in euro-area sovereign-debt markets and high unemployment, which will weigh on underlying growth momentum, he said. “Risks surrounding the euro area continue to be on the downside.

[Source]

Visit the link here to view remaining quantities and prices:

03-Jul (USAGOLD) — Gold surged definitively back above the $1600 level in overseas trading, underpinned my rising expectations of further central bank easing. The ECB is widely expected to cut its refi rate by 25 bps later in the week. Additionally, the BoE is likely to boost its asset purchase target by about £50 bln. While the FOMC doesn’t meet again until the end of the month, yesterday’s terrible ISM print (though offset somewhat by today’s reported rise in May factory orders) has once again raised the likelihood of some additional Fed measures as well.

This would all be in addition to the measures agreed to at last week’s EU Summit, which essentially amounts to a form of QE (using the bailout funds to buy sovereign periphery debt) and a European version of TARP (pumping bailout funds directly into the Spanish banking system). You may recall that QE1 and TARP in the US back in 2008 effectively ended the financial crisis inspired deleveraging sell-off in gold, catapulting the yellow metal from 681.65, back above $1000 for good, and ultimately on to the current all-time high of 1920.50.

With the yellow metal convincingly above the 20- and 50-day moving averages once again, a more constructive technical tone seems to be developing. The next significant resistance level to be watching is the early-June high at 1640.72, which is bolstered by the 100-day moving average at 1639.76. With gold still in the lower half of the broad 1920.50/1522.40 range, even with the recent gains, these prices may still prove to be the bargain of the summer.

• US factory orders +0.7% in May, above market expectations of unch, vs negative revised -0.7% in Apr; inventories -0.2%.
• UK M4 Money Supply – Final (sa) -0.1% m/m in May and -4.1% y/y.
• UK CIPS Construction PMI tumbled to 48.2 in Jun, vs 54.5 in May.
• Eurozone PPI slows more than expected; -0.5% m/m in May to 2.3% y/y, vs 2.6% y/y in Apr.
• Hong Kong retail sales value 8.8% y/y in May, vs 11.4% y/y in Apr.
• RBA holds Official Cash Rate steady at 3.5%, in-line with expectations.

02-Jul (USAGOLD) — Gold retreated in overseas trading on Monday as the euro fell and the dollar rebounded amid dissipating optimism about the ‘grand bargain’ reached at last week’s EU Summit. After all, what transpired last week was just another kick of the can down the road. And while one might argue that steps toward a tighter banking union are steps toward a more integrated Europe, the measures agreed to do little to address the underlying imbalances that precipitated the crisis.

By early New York trading however, the yellow metal was on the mend and had traded briefly back above the $1600 level. With the euro still under pressure and the greenback underpinned, it would seem that the safe-haven appeal of gold is reasserting itself. The 20 and 50-day moving averages have converged just below $1600, marking this area as important resistance.

With a new record high in the eurozone unemployment rate of 11.1% and inflation moderating, the ECB is widely expected to cut its refi rate by 25 bps on Thursday. There is also a camp that thinks the ECB will only adjust the deposit rate at this meeting, discourage banks from hoarding cash and keeping some powder dry in case the ‘europhoria’ from the summit completely evaporates.

• US manufacturing ISM fell to 49.7 in Jun, well below expectations of 52.0, vs 53.5 in May; prices 37.0, vs 47.5 in May.
• US construction spending +0.9% in May, above market expectations of +0.2%, vs positive revised +0.6% in Apr.
• Eurozone unemployment rate edged to a new record high of 11.1% in May, in-line with expectations, vs 11.0% in Apr.
• Turkey Q1 GDP 3.2% y/y, vs 5.2% y/y in Q4-11.
• Switzerland retail sales improves to +6.2% y/y in May, vs upward revised +0.2% in Apr.
• Switzerland SVME Manufacturing PMI rose to 48.1 in Jun, vs 45.4 in May.
• Eurozone Markit PMI – Manufacturing was revised higher to 45.1 in Jun, beating expectations of 44.8, vs 44.8 previously.
• UK CIPS Manufacturing PMI rose to 48.6 in Jun, beating expectations of 46.1, vs 45.9 in May.
• South Korea CPI slipped to 2.2% y/y in Jun, vs 2.5% in May.
• Japan Tankan Index (Large Manufacturers) -1 in Jun, vs -4 in May; Large Non-Manufacturers index rose to 8, vs 5 in May.
• China HSBC/Markit PMI – Manufacturing slipped to 48.2 in Jun, vs 48.4 in May.

02-Jul (Reuters) — Gold prices eased on Monday after the previous session’s sharp rally, surrendering gains along with the euro and other commodities as a bounce lent to the financial markets by European Union plans to tackle the debt crisis petered out.

Gold surged 3 percent on Friday, its biggest one-day rise since June 1, after euro zone leaders agreed at a summit on measures to cut borrowing costs in Italy and Spain and shore up the region’s banks, leading to a broad financial market rally.

It has since surrendered some gains, but lingering optimism over the summit’s outcome, reflected in gains in stock markets and falling Spanish and Italian bond yields, provided support.

[source]

June 29 – CNBC – VIDEO

Link

JK Comment: Rogers makes a pretty simple recommendation here: “Buy hard assets”. A must watch take on today’s news out of Europe and subsequent move in, well, everything.

by Mohamed El-Erian
Once again, after a painful learning process and motivated by the best of intentions, European leaders gather in crisis management mode. Important decisions are taken but, again, they appear to fall short of the dramatic breakthrough required to get ahead of a crisis that eats away at the integrity of the region’s historic integration project.

…Without additional measures, it seems inevitable it will only be a matter of time until European leaders gather again for a crisis management meeting; and they will find the challenges even more onerous.

[source]

PG View: The massive ECB LTROs bought a couple weeks of relief for beleaguered European markets, the initial announcement of the €100 bln Spanish bank bailout garnered support for a single trading day, so focusing the might of the EFSF/ESM bailout facility on the problem should be good for what? A month? Less?