Claudius - Aureus, gold (41-54 C.E., finest known)
Claudius, 41-54 AD. Gold Aureus (7.79 g), Rome mint, struck 41-42 AD. Head of Claudius right, wearing oak wreath. Reverse: Legend in three lines, within oak wreath; EX SC / OB CIVES / SERVATOS. RIC 15; C. 34; BMCRE 16; Von Kaenel 149 (this coin). With a remarkably fine and elegant early portrait. A splendid coin — one of the finest aurei of Claudius in existence! Rare. NGC graded Uncirculated. Millennia, 86
Gold investors clearly saw last week’s price drop as a buying opportunity, as holdings of gold-backed ETFs hit a record highthis week (p.103). Although QE3 would support precious metals prices, it is only ‘icing on the cake’, as more important factors will likely send gold higher this year.
The recent sell-off notwithstanding, we remain bullish into 2012. While the current strength in the USD is a headwind to USD gold prices, we expect aggressive Fed action, including and the likely adoption of QE3 in 1H12, to be positive for gold, even if the USD continues to strengthen. We forecast prices will rise on a quarterly average basis through 4Q13.
In our view, the timing of the sell-off in late December suggests strong selling pressure linked to year-end book squaring, portfolio adjustments and commodity index reweighting. Furthermore, the sell-off also coincided with an especially sharp rally in the TWI of the USD, strong headwind for gold given its USD pricing and quasi-currency function.
While we expect European funding stress to continue in early 2012, recent coordinated actions by six central banks and separate actions by the ECB suggest that non-gold related measures to ease access to USD swaps will be successful, reducing downside pressure on the gold price.
Consequently, gold prices will again depend on whether the four pillars of the original bull market persist: (i) decline in producer hedging (and potentially de-hedging as a positive demand factor); (ii) the decline of DM central bank sales and rise of EM central bank purchases; (iii) the inability of gold mining companies to increase gold supplies materially; and (iv) long-term growth in physical investment demand.
Constrained new gold supply is placing greater emphasis on the increased delivery of above-ground stocks to meet demand. However, in theabsence of central bank sales, and limitations on the size of the available scrap pool, the continuation of physical demand growth from ETFs and coin sales is putting upside tension on the market, ensuring the bull market is sustained into 2012-13.
from: Morgan Stanley Global Reasearch - March 12, 2012 The Commodity Manual
Image on top is my opion on this:
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.
These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.
As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013.
Federal Reserve Actions The Federal Open Market Committee has authorized an extension of the existing temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2013. The rate on these swap arrangements has been reduced from the U.S. dollar OIS rate plus 100 basis points to the OIS rate plus 50 basis points. In addition, as a contingency measure, the Federal Open Market Committee has agreed to establish similar temporary swap arrangements with these five central banks to provide liquidity in any of their currencies if necessary. Further details on the revised arrangements will be available shortly.
U.S. financial institutions currently do not face difficulty obtaining liquidity in short-term funding markets. However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses.