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The hedge fund group Hedge of Glory forecasts gold prices to go down from November 17-21. Retail sales increased in the US in October, driving up treasury yields and the US dollar. Meanwhile, falling oil prices reduced demand for gold as an inflation hedge. Additionally, European banks will repay €1.95 billion in ECB crisis loans, contracting the money supply and potentially causing the euro to depreciate against the strengthening dollar. With several factors pushing the dollar higher and demand for gold lower, the group expects gold prices to decline over the evaluation period.

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28 views

Last Digest

The hedge fund group Hedge of Glory forecasts gold prices to go down from November 17-21. Retail sales increased in the US in October, driving up treasury yields and the US dollar. Meanwhile, falling oil prices reduced demand for gold as an inflation hedge. Additionally, European banks will repay €1.95 billion in ECB crisis loans, contracting the money supply and potentially causing the euro to depreciate against the strengthening dollar. With several factors pushing the dollar higher and demand for gold lower, the group expects gold prices to decline over the evaluation period.

Uploaded by

Dheeya Nuruddin
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Group Name: Hedge of Glory

Weeks Covered: Nov1-Nov 15

Evaluation Period: November 17-21


Overall Forecast Price Direction for Evaluation Period:Down

Dollar Advances on Sales as Treasuries Decline


With Gold
Writer: Stephen Kirkland and Oliver Renick
Date: November 14, 2014
Source link: http://www.businessweek.com/news/2014-11-13/most-asian-futures-riseamid-dow-record-oil-extends-drop
Summary:
Dollar strengthened by 0.7 % to 116.57 yen, marking a seven-year high against the Japanese
currency. Meanwhile, treasuries declined as yield on 10-year bonds increased by 3 basis points
to 2.37%. Main factors included positive US retail report in October which showed that retail
sales increased for the month (0.3% increase from a 0.3% decrease last month), better
corporate earnings and positive US economic data after the end of Feds QE program. At the
same time, dollar grew against 12 other currencies--Dollar spot index rose 0.4 percent last
week.
Effect on Gold Price over Evaluation Period:
Direction

Down

Explanation

There has been an increase in retail sales in October in the United States,
which led to an increase in the yield of treasury and stronger US dollar.
Also, despite global slowdown, the S&P 500 rallied 9.5 percent after a sixmonth low in October, and it has exceeded the expected corporate
earnings and economic data. Because of this, confidence in the U.S.
economy boosted. All of these resulted to a strengthened dollar, which
decreases the demand for gold as it is now more expensive to buy, and at
the same time, booming economy lowers demand for safe-haven
assets--effectively decreasing the price of the gold.

PRECIOUS - Gold down on drop in oil prices,


bright US outlook
Writer: Frank Tang and Jan Harvey
Date: 13 November 2014, 2:55 p.m. EST

Group Name: Hedge of Glory


Evaluation Period: November 17-21
Weeks Covered: Nov1-Nov 15 Overall Forecast Price Direction for Evaluation Period:Down
Source link: http://www.reuters.com/article/2014/11/13/markets-preciousidUSL3N0T34M120141113

Summary:
Oil prices slumped resulting to golds decreased demand as an inflation hedge. Also, the
continued outflow from gold backed exchange traded funds (ETF) signifies further possible
inclined losses of gold. The 4 percent drop in oil prices is revealed by government data that US
crude build up rose at the delivery point for crude futures. Oil prices plummeted about 30
percent since Brent Crude hit a June high above $115 on fears of an oil oversupply.
Effect on Gold Price over Evaluation Period:
Direction

Down

Explanation

Oil having a strong correlation with gold, has been a good tool in
predicting gold prices. With the slumping price of oil, it has decreased
golds appeal as an inflation hedge. Prices of oil partly account for
inflation, thus, the fall of the latter means that there is a lower demand for
gold as a safe haven. This is also supported by outflow from gold backed
exchange traded funds (ETF). Thus, with the strong correlation of oil and
gold prices, reduced prices of oil bring the price of gold to go down.

Banks to return 1.95 billion euros in crisis loans


to ECB next week
Writer: John O'Donnell
Date: 14 November 2014
Source link: http://uk.reuters.com/article/2014/11/14/uk-ecb-banks-repaymentidUKKCN0IY17420141114?feedType=RSS&feedName=businessNews
Summary:
Next week, 1.95 billion euros will be returned by banks in crisis loans to the European Central
Bank after it started offering lenders new four-year loans at cheap rates in September. It will
hand out another tranche on December 11. For now though, it is still cheaper for banks to rely
on the ECB's regular refinancing operations, where they can fund themselves at record low
rates of 0.05 percent. As a result, the ECB's first offer of the new loans, known as TLTROs, fell
flat last month, with banks taking just 82.6 billion euros, less than expected.

Group Name: Hedge of Glory


Weeks Covered: Nov1-Nov 15

Evaluation Period: November 17-21


Overall Forecast Price Direction for Evaluation Period:Down

Effect on Gold Price over Evaluation Period:


Direction

Down

Explanation

With the 1.95B euros in crisis loans to be repaid to ECB on Nov 19,
money supply in Europe will decrease. As a result of this contraction
in money supply, deflation is expected to occur that may cause
depreciation in euros value. Since euro is negatively correlated to
dollars, its depreciation will imply dollars appreciation. Given that
gold is denominated in dollars, the currencys appreciation will make
gold more expensive than before, making the demand for it to
decline. In effect, the commoditys price will be pushed downwards.

Overall Position
Forecast over the evaluation period: Down
Given our preceding analysis, we expect gold prices to go down. The strengthening of the US
dollar, the slump in oil prices, and the contraction in Europes money supply are the major
factors that drive the gold prices down. The increase in retail sales led to increase in treasury
yield. The bright outlook on the US economy and the depreciation of the Euro strengthened the
dollar. Likewise, the drop in oil prices further pushes the prices to decrease.

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