Accelerating growth in Asia saves the week for commodities

A relatively quiet week in the market place with riskier assets getting a boost from stronger than expected economic data out of China, Australia and Japan.

As appetite for risk returned the dollar retraced some of its recent gains. Government debt sale by Spain and Italy was well received leading to a narrowing of spreads over German government bonds. This was still not enough to drive the Euro back above the important 1.2150 level versus the dollar indicating continued nervousness about the sovereign debt situation and the worry that it may spread east.

The Reuters Jefferies CRB Index had a good week rising 2.8 percent but stays stuck in a range between 247 and 259. Soft commodities such as sugar and coffee both rose more than seven percent while broad based gains seen across the other sectors. Natural gas reached its initial upside target at 5.00 before running into profit taking losing one percent on the week.

WTI Crude oil rose 3.5 percent on the week with buyers returning as the dollar lost ground. The move above 75.80 proved short lived and range trading remains the favored strategy until further clarification about demand and the direction of the dollar becomes clearer. Retail sales in the U.S. came out weaker than expected putting the energy sector under some selling pressure into the weekend as worries about a double dip recession still lingers.

Technically WTI Crude for July delivery has still not managed to break any significant upside levels. Keep an eye out for a close above 75.80 which would signals renewed strength towards 78.50. Support is located at 72.75 followed by 69.50.

Gold rallied to a new record at 1,252 but resistance held and profit taking followed. Total holdings in gold ETFs continues to rise at an amazing rate reaching 65.4 million ounces or more than 2,000 tons.

Warren Buffett this week joined George Soros in describing gold as being in a bubble situation. Soros who himself is long of gold, contrary to Buffett, back in January called gold the “ultimate asset bubble”. He also at the same time stated that it was great riding a bubble as even though they could be rather messy when they pop a lot of money could be made riding them.

If indeed the current situation can be described as a bubble it is also worth looking at the characteristics of a typical bull market bubble. The top of a bubble is usually marked by a final surge that explodes higher.
Considering gold is “only” up 12 percent year to date such a move remains to be seen. In the meantime weak long positions may head for the exit on a move below 1,195 while the long term investor probably will remain invested above the long term trend line support at 1,145.

We are cautious of further progress at this time given the unprecedented amount of funds invested in gold, especially through ETFs as mentioned. Going against the trend at this juncture is probably premature but investors should have an exit level defined should a sell off occur. Resistance at 1,250 is firm with a move above signaling an extension towards trend line resistance at 1,375. Support at 1,195 followed by 1,165 and 1,145.

The gold to silver ratio has decreased recently from 70 (Gold price / silver price) down to 67 signaling silver outperformance. This could continue, at least short term, as the silver chart looks less toppish with further room to go before major resistance is met.

The price of Corn finally found some support this week as the monthly supply and demand data from the USDA showed an unexpected drop of this year’s stockpiles. The single biggest contributor to this drop could be found in the rising ethanol production which is used as a fuel substitute. Currently US congress has set a limit of 10% ethanol mixed into petrol but major ethanol producers have asked regulators to increase this limit to 12%.

Falling prices due to near perfect growing conditions in the Midwest have been the main focus until now. The corn future for December delivery at one stage showed a loss for the year of 20% before finding support at 353, the September 2009 low.

This announcement lends further support to the long corn short wheat ratio trade. During the past month corn has outperformed wheat by 10 percent and with the ethanol story finally having an impact this outperformance look set to continue. One word of caution is news that Australia, the fourth largest wheat exporter, is facing a potential threat from the worst locust plaque in more than two decades.

Resistance on December corn can be found at 372 followed by 392 and 400 while support is at 353.

Robusta coffee which is used in instant coffee and blends rallied strongly Thursday and Friday on signs of reduced supplies from Vietnam. Exports from the world’s biggest grower of that variety fell 20% from a year earlier leaving European stockpiles lower. Arabica, the finer quality coffee, primarily from Brazil and traded in New York rose 7 percent on the back of the 11 percent gain reported on Robusta.

Having traded as low as 1,282 dollar per metric tons back in March the price for September robusta reached 1,538 on Friday as traders and hedgers scrambled for cover. Once the market stabilizes new sellers will probably emerge given the size of the recent rally and long term fundamentals which points to the market being well supplied.

Copper had its first decent weekly gains since the sell off began back in April. The weaker dollar looks like the main driver behind the move although Chinese export figures which jumped to a five year high also helped sentiment. Although we saw growth accelerating in the Asia this week, we are concerned that China will hit the brakes harder than the market currently forecast. Should this materialize we could see base metals suffer as we head towards Q3 and Q4. We see the risk of copper dropping quite substantially towards the end of the year, retracing much of the gains made since Q1 of 2009.

Tax Umbrella Companies - Is it Worth You Using One?

If you are thinking of casting off from the shores of being permanently employed and heading into the potentially stormy, but nonetheless lucrative, waters of contracting or freelancing, then you need to consider how you will set up your new business so as to minimize your long term tax liabilities, while maximizing your income and making it simple for your clients to deal with you. Your choices are to set-up a limited company or to operate under what is called an tax umbrella company. Setting up a limited company, in which you are the director and only shareholder, is the most tax efficient way of working, and means that you can claim back a wider range of expenses, such as equipment and software costs. The downside to setting up a limited company is the extra work involved. There is a lot more paperwork to fill in, and you will need to hire a lawyer and an account to look after your affairs, which can make the process quite costly.

So, if you want to focus solely on your work, and to bring in as much income as possible, then using a tax umbrella company is the better option. What they do is take care of your invoicing, payments and tax contributions. They do this in the same way as your previous employers did. They literally follow exactly the same processes. Technically, you are employed by them, but that is only for tax purposes, and not in a practical sense. Obviously, they have no control over you, and cannot tell you what to do or how many hours to work. The tax umbrella company will pay you weekly, fortnightly or monthly (whichever you agree on when signing a contract with them), and the funds will show up in your chosen bank account, minus your tax contributions and the umbrella company's fees. The umbrella company should only take a set fee (again agreed on before you sign a contract), and not a percentage of your earnings.

Social Media: Addiction Possibility for Your Teen

What do you think happens when 200 college students unplug…totally? This isn’t a trick question or a funny joke. It is exactly what happened at the University of Maryland. The International Center for Media and Public Agenda conducted a study, “Twenty-four Hours Unplugged,” in which 200 students were required to quiet their cell phones, laptops, desktops, netbooks, Kindles, iPads, televisions, radios. No surfing, no chat, no email, no Twitter, no Facebook, no Mafia Wars.

Not surprisingly, the experiment didn’t go over well with the students. They got cranky. They blogged about it afterward. According to the website A Day Without Media, those 200 students went overboard in describing their experience. Each was asked to write 300 words on the experience (60,000 total) but they had a lot more to say, to the tune of 111, 109 words. Many of those words included the reasons why they did not complete the 24 hours. What? There were some who couldn’t go 24 hours without the tether?

Some of the sadder responses:

• I ONLY USE NEWSPAPERS TO CLEAN MY WINDOWS
• EMAIL IS THE ONLY KIND OF MAIL I’VE EVER SENT
• THERE ARE 11 TVS IN MY HOUSE
• MY TV IS ON 24 HRS A DAY
• I SENT OVER 7000 TEXTS LAST MONTH

These responses go to show you how much phones, computers and televisions have invaded our life, to the point of not knowing what to do when they are not available. (Hello, a hike anyone? Picnic at the beach? Visit the museum? Visit the folks?) Students complained of feeling isolated, became anxious and fidgety, almost like withdrawl from an addiction. Many had never driven or exercised without music. They couldn’t set up a date, organize a softball practice or even a study group without what many think of as their “lifelines.” They had no way of knowing what was going on in the world, no Google News, no sportcasters with the latest MLB or NHL scores, no recent Lindsay Lohan sightings.

There were, of course, some good excuses for breaking the silence: one student had 3 of his textbooks as e-books. No ebooks meant no studying, and no research project was going to keep him from doing his homework. But these were few and far between.

According to the ICPA, “The major conclusion of this study is that the portability of all that media stuff has changed students’ relationship not just to news and information, but to family and friends — it has, in other words, caused them to make different and distinctive social, and arguably moral, decisions.”

I don’t happen to think that this is just a teen or twenty-something phenomenon. I took a trip last weeken, just an overnight to my nieces’ volleyball tournament, without my laptop. It’s the first time in four years that I have traveled without it, and I have to admit that it was painful. My work requires I be tethered to a computer to monitor breaking news and do assignments. It has accompanied me to the mountains, the lake, the desert, and even Las Vegas. I don’t go a day without it. I even brought it to my nephew’s wedding earlier this month so that I could download the pictures I was taking. But when I left it at home last weekend, I felt bereft. I could not pull out my SD card and check the action photos I was taking, couldn’t live stream the event for my brother who was sitting at home waiting for updates, or check Yelp for a good restaurant. So I understand what they were going through.

I don’t consider it an addiction for myself, but for those who live and breathe IM and texting, play Farmville and Mafia Wars, watch every episode of Law & Order or every bout of MMA available, for those who never shut off their phone, shut down their computer, or turn off the TV, then the possibility of addiction does exist. So beware. Watch your kids for signs of overuse, and then take them out to play, to hike, to get an ice cream. Offer them alternatives to the electronic world.

Gold "Crisis Protection" Proven as Eurozone's Greek Bail-Out Begins

THE PRICE OF GOLD retained a slight weekly gain as the close approached in London on Friday, trading above $1141 an ounce while the Euro bounced – and world stock markets rose – following Greece's formal request for a joint European and IMF bail-out.

Gold priced in Euros spiked within 0.3% of April 9th's record, hitting €27,743 per kilo before easing back as the single currency rose.

British investors looking to buy gold, the price held at £743 an ounce – 0.3% higher from last Friday's finish – after UK data showed the economy growing half-as-fast as analysts forecast between Jan. and March, adding just 0.2% year-on-year.

Crude oil and broader commodities were little changed.

"Greece is asking for the activation of the support mechanism," said a letter sent this morning by finance minister Papaconstantinou to the European Commission, fellow Eurozone states, and the European Central Bank.

"The moment has come," Greek premier Papandreou told reporters, apparently catching the European Commission unawares.

First it denied receiving a formal bail-out request. Then the EC said it will take "some time" to trigger the rescue, currently agreed at a maximum €45 billion (£60bn).

Thursday had seen Greek bond prices sink to new crisis-lows, driving the yield offered by two-year debt above 10%.

As Greek bonds rallied on Friday, German Bund prices ticked lower alongside UK and US Treasury debt.

Germany's Dax rose 1.4% by lunchtime in Frankfurt. Athens' stock market jumped almost 2%.

"Although gold's Dollar-price may still be 6% below its late-2009 highs, in Euro terms gold prices are up 6% from their Dec-09 peak," notes Patrick Artus' team at French bank Natixis.

"This demonstrates gold's ability to protect investors from crises that debase their own currency, but not those of other sovereign issuers."

"German investors have not been put off by the all-time high expensiveness of gold in Euro-terms," reports Wolfgang Wrzesniok-Rossbach from Hanau-based refinery group Heraeus.

"The Greek financial crisis continues to drive investors here to the yellow metal."

Industrial demand, in contrast, "has shown a slight reduction in demand – current price levels appear to be simply too high," says Wrzesniok-Rossbach.

"Even at record prices of almost €865 an ounce" however, scrap-gold flows into the refinery "have slowed down in recent days," he adds.

Over in the credit-insurance market, the cost of protecting Portuguese government bonds also slipped back on Friday – together with Greek credit-default swaps – from yesterday's new record highs.

"The market believes that Greece will be forced to restructure its debt," says Simon Derrick at Bank of New York Mellon in London, and "The logic of such a situation for [Greek bond] investors is also simple enough:

"There is no last mover advantage in such a circumstance.

"We also note outflows just starting to build from Portuguese debt in recent days," Derrick is quoted by the FT's Alpha blog, "although they are still relatively modest."

Precious-metals analyst Walter de Wet at Standard Bank also notes fears of Euro-debt contagion today, writing "We doubt [the Greek rescue] would be enough to lift concerns over sovereign debt levels in certain European countries."

Even though the physical market is currently "quiet and directionless", de Wet reports, "Underlying uncertainty should continue to support gold."

Biggest job gain in 3 yrs pushes up interest rates

NEW YORK (AP) -- The biggest increase in jobs in three years pushed interest rates to their highest level since before the worst days of the credit crisis in 2008.

With the stock market closed for Good Friday, investors had a shortened day of trading in the bond market to react to the Labor Department's report that employers added the most jobs in March since before the recession began in December 2007.

Treasury prices fell after the report, sending their yields higher. Bond prices tend to fall as investors' confidence grows and demand for safe-haven investments wanes.

The yield on the 10-year Treasury note rose to 3.94 percent from 3.87 percent late Thursday, its highest level since last June and the latest sign of confidence that the U.S. economy is recovering. The yield on the 10-year note is tied to many kinds of consumer loans. The increase could raise borrowing costs for mortgages and other debt.

Chik Quintans, a certified mortgage planner at Atlas Mortgage Inc. in Lynnwood, Wash., said rates have gone up following the jobs report. The rate on a 30-year fixed mortgage Friday was 5.125 percent, up from 4.875 late Thursday. Less than two weeks ago, the rate was about 4.75 percent.

Barclays Capital Research called the increase in hiring by private employers "solid." Other analysts also said the numbers were encouraging, pointing to a higher open when stock trading resumes Monday.

"The bond market seems to have taken it as a very positive number," said Andrew Neale, head of portfolio management at Fogel Neale Partners in New York.

It was an unusual day for investors, with the biggest economic news of the month coming out on a holiday for stock markets in U.S. and Europe.

Stock futures contracts rose in an abbreviated session of electronic trading. U.S. investors will get their first taste of how the upbeat report will drive stocks when trading in Asia begins late Sunday. Dow Jones industrial average futures and Standard & Poor's 500 index futures each rose about 0.3 percent.

The yield on the 10-year note is approaching 4 percent, a level that hasn't been seen since October 2008, just before the financial crisis peaked. The 10-year's yield went as high as 4.09 percent that month, before plummeting as low as 2.06 percent in December 2008 as the credit crisis erupted and investors poured money into bonds as they cut back their exposure to risk.

Friday's trading was the closest the yield has been to 4 percent since June, when it reached 3.96 percent.

The Labor Department said employers added 162,000 jobs in March. Economists had forecast an increase of 190,000 jobs. However, private employers accounted for most of the growth. Some analysts had forecast that temporary government hiring for the 2010 census would play a bigger role.

The dollar rose as confidence increased about the U.S. economy. The ICE Futures US dollar index, which measures the dollar against six currencies, rose 0.6 percent.