Summary: Gold regains some lustre while sterling looks stronger...
As the third quarter of the year breathes its last, gold looks chipper, putting in a decent quarterly performance for a gain of almost nine per cent! That's something of a turnaround after a fall of 30 per cent over the preceding three quarters. Behind the rally there was some substantial short-covering, worries about the situation in Syria and some weaker-than-expected US economic data. Add to those issues the game of hardball being played in Washington between Capitol Hill and the White House and there may be legs in the gold rally yet with the dollar looking less attractive.
The biggest influence on oil prices right now is broadly the same key factor influencing gold - the shape of the US economy and the political games in Washington. Set those aside and what you have left is a matter of probable downward pressure despite an apparent upturn in the Chinese economy. Syria is less of an issue; crude supply is actually rising from Libya. And Iran, well after years of 'You never call, you never write...' the phone actually rang. Presidents Obama and Rouhani chatted, presumably not about the weather and the latest scores. Seriously, it was the highest-level contact between the two countries in three decades. It would be nice if it was the start of a continuing dialogue.
As Max Knudsen of ADS Securities recently pointed out to me, in four years trading, since September 2009, effectively +1000 trading days, GBPUSD is showing less than 0.5 per cent difference. That may be about to change. There's been a run of improving economic numbers and even the OECD has sharply raised its growth forecast for the year. The dollar has problems of its own which means, according to Max, that we could see the GBP head for highs last seen in 2011 around $1.6748 before year-end. Maybe, if you are thinking of taking advantage of the mini-property boom happening in London at the moment it may be advisable to buy now rather than wait.
Rupee, don't take your love to town... (just to stick with my penchant for old song lyrics). But after lows against the USD in August, the INR did get a little love and recovered a touch in September thanks partly to the boost to market sentiment from the appointment of Raghuram Rajan as the new Governor of the Central Bank, the Reserve Bank of India on 4 September 2013. The former chief economist of the IMF is known for his famous prediction of the 2008 global financial crisis and is widely tipped to steer the Indian economy back to growth.
However, there is no quick solution to the deficit problems and inflation. The INR is a moving target. Investment banks' forecasts for the next 6-12 months range from a pessimistic INR 70/USD to an optimistic INR 60/USD.
Late September, Reuters reported Finance Minister P Chidambaram as saying the Finance Ministry and the Central Bank were discussing ways to make bank loans cheaper for exporters. India has the world's third largest current account deficit, a not insignificant factor in the INR's troubles!
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