Gold prices to increase again?

A new US central bank policy QE3 would likely depreciate the US dollar & send gold soaring again.

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Economics

Gold bugs tout price gain on dour US data

Weak employment data makes QE3 likely
7/06/2012
Nuntawun Polkuamdee

Foreign funds will return to investing in gold as a safe haven with the euro-zone debt crisis worsening and the US economy weakening, causing gold prices to possibly reach US$1,900 an ounce this year.

Kasemtas Dardarananda, an MFC Asset Management fund manager in the global equities department, said gold will start gaining again now that the US unemployment rate and other key economic data were worse than market expectations.

The latest survey of US and world financial institutions added more pressure on the US Federal Reserve to launch a third quantitative easing (QE3), with calls from Morgan Stanley and Societe Generale.

Market analysts all agree the possibility of another round of QE is as high as 80%. Fewer than 100,000 jobs were added in April, with the same last month, making it likely the government will use stimulus to push economic growth to 3%. An unemployment rate of 7% in 2014 is a goal, down from 8.2% currently.

The QE3 scheme will likely involve purchasing nine-month maturity housing bonds to motivate the stagnant property market.

Since the subprime crisis in late 2008, when economic data in Bloomberg's Possibility of Monetary Stimulus Index (see graph) passed 90%, a stimulus always occurred.

Because these stimulus packages inject liquidity into the economy, depreciating the US dollar, commodity prices for items such as gold are expected to rise sharply, said Mr Kasemtas.

Long-term trends for gold prices are still positive due to the depreciation of key global currencies. US interest rates [are] likely to remain near zero until 2014 [with] low inflation.

Central banks continue to buy gold as a foreign asset reserve instead of high-risk currencies, but exploration and production costs of gold mining are rising.

Analysts see an average price of gold by the end of the year at $1,840 an ounce. Investors should make gold about 10% of their total investment, he said.

The capital market remains under pressure because the Greek political issue could worsen the euro-zone situation. If the Syriza Party, which is against the bailout package, wins the election, then the bailout with the European Central Bank and the International Monetary Fund may be reconsidered, which may cause Greece to exit the EU.

In this case, risk asset value would drop sharply, and Greece and the EU would be substantially damaged. Greece would face a liquidity problem including an inability to pay government salaries and other fixed expenses. Greece would stop payment of debts causing EU financial institutions to lose more than 200 billion (7.85 trillion baht) or 2% of Europe's economy.

"The most important factor is deposits flowing out from Greece and the euro periphery, which will cause bankruptcies and damage all around the EU," said Mr Kasemtas.

The hope is Greece will stay in the EU and a party that supports the bailout package will win and set up a government, reducing assets' high risk.

(Source: Bangkok Post, Economics, Gold bugs tout price gain on dour US data, Weak employment data makes QE3 likely, 7/06/2012, Nuntawun Polkuamdee, link) 

Gold Markets Vocabulary

gold - (See Wikipedia)
gold bugs - investors who are very excited about buying gold (bullish on gold) (See Wikipedia)

tout - try to make people believe in something or buy something (persuade)

dour - not pleasant or nice; gloomy, unhappy 
data - facts or information used for making calculations or decisions ข้อมูล
dour US data - US economic statistics that show that the economy is not doing well

Gold bugs tout price gain on dour US data

fiscal stimulus - a temporary increase in government spending or tax cuts to get the economy moving again after an economic downturn
stimulus - Same as "fiscal stimulus"

stimulus to push economic growth
stimulus packages - a group of programs that the government spends on

quantative easing - a new monetary policy used by the US central bank (the Fed) after 2008 crisis that injects money into the economy to get the economy growing again: "an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank buys financial assets to inject a pre-determined quantity of money into the economy. This is distinguished from the more usual policy of buying or selling government bonds to keep market interest rates at a specified target value. A central bank implements quantitative easing by purchasing financial assets from banks and other private sector businesses with new electronically created money. This action increases the excess reserves of the banks, and also raises the prices of the financial assets bought, which lowers their yield... Quantitative easing can be used to help ensure inflation does not fall below target" (See Wikipedia)

QE3 (third quantitative easing) - a possible third round of quantitative easing to provide fiscal stimulus to the US economy

scheme - a plan that is developed by a government or large organisation in order to provide a particular service for people แผนการ โครงการ
the QE3 scheme

launch - to start something เปิดโครงการ, เริ่มต้น, เริ่มทำ
launch a third quantitative easing (QE3)

round - one event in a series of events
round of QE
another round of QE
the possibility of another round of QE

employment - 1. the number of people who have a paid job in an economy; 2. having a paid job;
employment data
weak employment data - when there are few new jobs and many people without jobs

weak employment data makes QE3 likely

funds - money needed or available to spend on something เงินทุน
foreign funds

safe haven - a safe place to be; a safe place to keep your money

debt - an amount of money that you owe หนี้
crisis - an urgent, difficult or dangerous situation วิกฤตการณ์ วิกฤต
euro-zone debt crisis - the crisis happening in Europe now

Foreign funds will return to investing in gold as a safe haven with the euro-zone debt crisis worsening and the US economy weakening, causing gold prices to possibly reach US$1,900 an ounce this year.

global - throughout the world ทั่วโลก
equities - stock shares in a company that represent partial ownership of the company หุ้น
global equities - all the stocks around the world

unemployment - the number of people without a job (See Wikipedia) การตกงาน   การว่างงาน
unemployment rate

key - important คนสำคัญ
key economic data

expectations - what people think will happen in the future  การคาดคะเน
market expectations - what buyers and sellers in a market think will happen in the future

Kasemtas Dardarananda, an MFC Asset Management fund manager in the global equities department, said gold will start gaining again now that the US unemployment rate and other key economic data were worse than market expectations.

survey - 1. presents a summary and sampling of a large subject; 2. gathering information about what people think about different subjects (public opinion) by asking large numbers of people questions and counting their answers, and then using statistics, graphs, and tables to present results การสำรวจความเห็น  (See Wikipedia)

latest - most recent
latest survey - the most recent survey

institutions - large and important organizations, such as universities or banks สถาบัน
financial institutions - banks and other organizations like banks

US Federal Reserve - the US central bank that controls the supply of money and credit in the eocnomy as well as interest rates (See Wikipedia)

pressure - trying to force someone to do something; when people are being pushed or forced to do something
pressure on the US Federal Reserve

The latest survey of US and world financial institutions added more pressure on the US Federal Reserve to launch a third quantitative easing (QE3), with calls from Morgan Stanley and Societe Generale. Market analysts all agree the possibility of another round of QE is as high as 80%. Fewer than 100,000 jobs were added in April, with the same last month, making it likely the government will use stimulus to push economic growth to 3%. An unemployment rate of 7% in 2014 is a goal, down from 8.2% currently.

maturity - the length of the life of an asset
nine-month maturity housing bonds

property - land and the buildings built on the land
property market

stagnant - not moving (here: people not buying and selling, prices depressed)
stagnant property market.

motivate the stagnant property market - make the property market start moving again (people buying and selling again, prices increasing) 

subprime crisis - the world economic crisis that began in late 2008
late 2008 - later in the year 2008, in the last months of the year 2008

The QE3 scheme will likely involve purchasing nine-month maturity housing bonds to motivate the stagnant property market.  Since the subprime crisis in late 2008, when economic data in Bloomberg's Possibility of Monetary Stimulus Index (see graph) passed 90%, a stimulus always occurred.

inject - put into; to introduce something new that is necessary or helpful to a situation or process ฉีด
liquidity - the availability of cash in the economy (through loans) to businesses and consumers (to meet their needs) สภาพคล่อง
inject liquidity into the economy

depreciating - when a currency loses its value and becomes cheaper (this makes the countries exports cheaper) การลดลงของค่าเงิน
depreciating the US dollar

commodity - a good sold in large quantities (each unit having the same prices)

expected - believe will happen คาดว่า (จะเกิดขึ้น)
expected to rise sharply

Because these stimulus packages inject liquidity into the economy, depreciating the US dollar, commodity prices for items such as gold are expected to rise sharply, said Mr Kasemtas.

positive - 1. above zero; 2. hopeful and confident, or giving cause for hope and confidence ซึ่งมองในแง่ดี; 2. good ที่ดี
term - a period of time

long-term trends for gold prices are still positive

depreciation - when things become less valuable over time

currency depreciation - when the value of a currency (becomes less valuable compared to other currencies)
depreciation of key global currencies

interest - payments made for the use of another's money for a period of time
US interest rates likely to remain near zero

inflation - the level of prices rising in the economy as a whole ภาวะเงินเฟ้อ

Long-term trends for gold prices are still positive due to the depreciation of key global currencies, US interest rates likely to remain near zero until 2014 and low inflation.

asset - something owned by a person, company etc., particularly money and property ทรัพย์สิน
reserve - kept for use for something or someone ที่จัดสรรไว้ สำรอง
reserve - something currently not being used but that can be used when needed สำรองไว้
buy gold as a foreign asset reserve

risk - the possibility that something dangerous or unpleasant might happen ความเสี่ยง
high-risk currencies

exploration - when you search and find out about something การสำรวจ, การค้นหา
exploration costs of gold mining are rising
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)

Central banks continue to buy gold as a foreign asset reserve instead of high-risk currencies, but exploration and production costs of gold mining are rising. Analysts see an average price of gold by the end of the year at $1,840 an ounce. Investors should make gold about 10% of their total investment, he said.

capital - money invested in a business (See glossary)
capital market - stock and bond markets and other similar markets

issue - a subject that people discuss or argue about ประเด็น

bailout - helping someone out of difficult situation by giving them money (See glossary) ช่วยไม่ให้ธุรกิจล้มละลาย
bailout package - a set of actions taken and money given to bailout an organization

election - the process of choosing a person or a group of person for a position, especially by voting elect (v) electoral (adj) synonym: the polls การเลือกตั้ง

reconsidered - think again about some issue

exit - leaving a place ทางออก
exit the EU - leave the EU

The capital market remains under pressure because the Greek political issue could worsen the euro-zone situation. If the Syriza Party, which is against the bailout package, wins the election, then the bailout with the European Central Bank and the International Monetary Fund may be reconsidered, which may cause Greece to exit the EU.

face a liquidity problem
fixed expenses - things an organization always has to pay for (no matter what happens)

In this case, risk asset value would drop sharply, and Greece and the EU would be substantially damaged. Greece would face a liquidity problem including an inability to pay government salaries and other fixed expenses. Greece would stop payment of debts causing EU financial institutions to lose more than 200 billion (7.85 trillion baht) or 2% of Europe's economy.

factor - a fact or situation which influences the result of something ปัจจัย

periphery - the outer edge of something
the euro periphery - countries on the outer edge of the EU (like Greece)

bankruptcies - end of life for companies
support - help; help something happen

"The most important factor is deposits flowing out from Greece and the euro periphery, which will cause bankruptcies and damage all around the EU," said Mr Kasemtas. The hope is Greece will stay in the EU and a party that supports the bailout package will win and set up a government, reducing assets' high risk.