YELLEN APPOINTMENT SHOULD BE GOOD FOR GOLD PRICES - The effect of tapering and budget rows in the US on stocks and currencies has been well documented, but the effect on commodities is harder to pin down - especially on precious metal - gold. So much so, that even US Federal Chairman chairman Ben Bernanke admitted to a Congress a few months ago that he did not understand how gold works.
Mark O'Byrne from Goldcore, which trades in gold, said there was some surprise that gold prices had come back in the last few months given that price increases might have been expected in response to QE and the US government shutdown. "Central banks have been reaffirming their commitment to holding gold. Even Ben Bernanke described it as a form of disaster insurance," Mark O'Byrne said.
"Gold became over-valued during the last government shutdown in the summer of 2011, but much of the heat has come out of that," he believes. "We predicted when gold reached around €1,900 that it might fall by about 50%, but it only came back by 40%. We believe it's still part of a long secular bull market and will continue to increase with ultra-loose monetary policies."
Mark O'Byrne said the appointment of Janet Yellen as Fed chair should be good for gold as she is likely to continue, or even escalate, the bond buying started by Ben Bernanke. The other factor that should have a positive impact on gold, he believes, is the low interest rate environment which will drive investors out of deposits.
MORNING BRIEFS - The former Irish Nationwide Building Society HQ on Grand Parade in Dublin is on the market with a guide price of €13m. It has been placed by the joint liquidators of IBRC and the sale will be handled by property consultants CBRE. The seven storey building comprises an area of over 42,000 square feet.
*** Barack Obama is set to announce Janet Yellen's nomination for chair of the US Federal reserve as early as today.
The 67 year old would become the first woman to run the bank. The expected announcement has caused some volatility with the dollar losing a bit of ground overnight. Although markets appear to have already priced in Yellen's appointment, she is seen as less likely to pull back on the QE stimulus programme which Ben Bernanke was widely expected to pull back on last month but decided against. The minutes of the Fed meeting at which that decision was taken are due to be published later this evening.
*** Yesterday the IMF added its voice to calls on the White House and Congress to resolve the budget impasse. It also called for a resolution to the debt ceiling issue pointing out that a US debt default could seriously damage the global economy. There may be tentative signs of progress on that front. Democrats in the Senate are expected to introduce a bill this week that would give the president the power to raise the US debt limit unless two-thirds of both chambers of Congress disapprove. President Obama said he would negotiate with Republican lawmakers on budget issues, but only after they agree to re-open the government and raise the debt ceiling.
*** Taoiseach Enda Kenny will be among the speakers to address the first Irish Management Institute annual conference since the downturn later this morning. The last one was held in 2008. Today it will hear from Eircom chief executive Herb Hribar, Ireland Rugby Coach Joe Schmidt, and London Business School Professor, Costas Markides. Much attention will be paid to what the Taoiseach has to say on the new budgetary target of €2.5 billion in taxes and cuts announced yesterday.