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European markets rebounded today after three successive days of losses to end a negative week on a positive note.

News that EU finance ministers had agreed a temporary increase in the bailout fund to either €700bn or €800bn, depending on who you happen to speak to, barely registered a response from markets, given how widely expected it was.

Equities were already trading in positive territory as the statement came out and while they look set to finish the quarter broadly higher they look set to finish the week lower. Today's long awaited Spanish budget turned out to be every bit as brutal as had been promised. Cuts to the tune of €27bn were signalled as taxes were raised on income as well as corporate revenues. Energy prices were also increased, with full range of details to be presented next Tuesday in the Spanish parliament.

Worst performer on the FTSE is pharmaceutical giant Shire Pharmaceutical (SHP LN) dropping sharply after its Lialda drug failed in clinical trials, dashing expectations of imminent sales of $2bn. Vodafone (VOD LN) has also slipped back after the Indian government once again threatened to impose a retroactive tax on its Indian business, despite the Indian Supreme Court ruling in the company's favour earlier this year.

On the plus side, mining stocks have led the gainers bouncing back after recent losses, with Rio Tinto (RIO LN) and Antofagasta (ANTO LN) leading the way. Best performer is industrial pump maker Weir Group (WEIR LN), despite a broker downgrade from Panmure while engineering giant GKN (GKN LN) was also higher.

U.S. markets opened higher this morning after last night's late pullback from the lows set the tone for this morning's open in European markets. Blackberry owner RIM shares opened higher despite posting another quarterly loss, this time to the tune of $125m.

U.S. economic data set the tone once again coming in somewhat mixed with personal income coming in slightly below expectations at 0.2% while personal spending jumping much more than expected to 0.8%. Chicago Purchasing Managers data for March came in below expectations replicating the other regional data seen this week in the manufacturing sector. More concerning prices paid came in higher while total orders dropped.

In company news credit card company Visa, MasterCard have warned of a 'massive' security breach, which may involve more than 10 million cards.

The best performer today has been the Norwegian Krone which has pushed higher after the Norwegian central bank announced it would be keeping its daily currency purchases for April at the same level as March, wrong footing markets who in light of this month's interest rate cut had anticipated an increase. The Swedish krona has also continued its recent gains on the back of recent data as speculation about imminent rate cuts diminished.

The worst performers have been the Australian dollar which has continued its recent weaker tone ahead of next week's RBA meeting, as traders pare long positions ahead of the April meeting. The Euro has had a slightly more positive tone but continues to find progress above 1.3380 difficult to sustain, as traders remain sceptical about Europe's ability to deal with its problems. The Pound has shrugged off disappointing consumer confidence numbers hitting its highest levels this year against the US dollar after triggering stops above 1.6000.

Gold prices have rallied somewhat on the back of a weaker U.S. dollar but remain confined to a range between $1,600 and $1,700 levels.

Oil prices have also recovered on the back of a slightly firmer tone in weaker markets and a weaker US dollar.

Copper prices continue to find support at the bottom end of their recent range around $3.76, rebounding strongly on the back of today's weaker U.S. dollar ahead of Chinese manufacturing PMI data, which is due early on Monday morning.

U.S. Dollar gold bullion prices hit $1669 an ounce ahead of US trading, more or less in line with where they started the week.

Stocks and commodities edged higher and US Treasuries dipped, while the Euro gained ahead of today's Eurozone finance ministers' meeting in Copenhagen.

Silver bullion meantime rose to $32.61 – a gain of 1% from the start of the week.

Heading towards the end of the first quarter of the year, gold bullion prices looked set to record their highest ever quarter-end London Fix in Dollars, Euros and Sterling.

Silver meantime avoided a fourth straight losing quarter, positing gains of 15% in Dollars, 11% in Sterling and 11.6% in Euros.

However, most of the net gains in gold and silver for Q1 came in the first week of January, with gold having fallen sharply since gold failed to break $1800 last month.

"The physical market has stopped playing an important supportive role," one Singapore dealer told news agency Reuters this morning.

"There is so much physical material, yet we don't see any good offtake, as people are worried that it's not the right time to invest in gold now...we don't expect to see real physical demand until prices drop below $1600."

Many Indian gold dealers remained on strike Friday, having closed their stores for the past fortnight following the Union Budget on March 16 which doubled the import duty on gold bullion and introduced a 1% tax on gold jewelry sales.

India's government has said it is reviewing the gold sales tax, but finance minister Pranab Mukherjee says the import duty hike will not be reversed.

India imported an estimated 969 tonnes of gold bullion in 2011, according to World Gold Council data.

Including gold bullion imports in its trade figures may be "overestimating" India's current account deficit problem, according to Rajeev Malik, senior economist at Asia-Pacific investment group CLSA.

"Although it is technically correct to include gold imports and exports in the current account balance as per IMF guidelines," Malik says, "we peg the 'overestimation' of the current account deficit due to net gold imports to be around 20 to 30%."

"The close to $200 billion in imported gold over the past decade does not represent a drain on India's resources," adds Taimur Baig, chief economist India, Indonesia and Philippines at Deutsche Bank.

"Rather [it is] a diversification of India's wealth into precious metals."

One senior gold industry figure, Rajan Venkatesh of bullion bank Scotia Mocatta, suggested this week that the Indian government could encourage gold certificates and other measures to encourage people to deposit gold with the banking sector.

Turkey meantime, which like India has a current account deficit and satisfies much of its gold consumption via imports, is also considering proposals designed to encourage the growth of gold deposit accounts in its banking sector.

"Turkey has historically been affected by repeated currency crises and resultant inflationary pressures, hence households traditionally hold substantial amounts of gold," says the latest precious metals note from French bank Natixis.

This week, Turkey raised the proportion of Turkish Lira reserves banks can hold as gold from 10% to 20% – while cutting the proportion of foreign exchange reserves that can be held as gold from 10% to zero.

Combined with the move to encourage gold deposits with banks, the moves represents "an easing of monetary conditions, as well as enabling the Turkish banks to bolster their balance sheets through the use of a cheap source of capital," says Natixis.

Back to Friday, and "focus is firmly on the Eurozone," says a note from Marc Ground, commodities strategist at Standard Bank.

"We expect precious metals to follow the gyrations of the Euro/Dollar as markets react to speculations and/or announcements on this front."

Eurozone finance ministers were today expected to approve combining the €440 billion temporary European Financial Stability Facility with the €500 billion permanent European Stability Mechanism when the latter becomes operational in July.

The move is aimed at raising Europe's so-called 'firewall' against sovereign debt contagion, which was identified at last month's G20 meeting as a prerequisite for additional International Monetary Fund aid.

"If the investors deem the plan as sufficient in reducing near-term Eurozone liquidity issues, we believe risk assets including gold may benefit," says a note from HSBC today.

Since many Eurozone policy announcements have already been leaked, however, any moves in gold and silver prices are likely to be "knee-jerk reactions, rather than signal a new longer-term trend" says Standard Bank's Ground.

Spain, which was hit by a general strike yesterday, was due to unveil a so-called austerity budget Friday.

Norway's $610 billion sovereign wealth fund meantime – which owns 2% of all European stocks – is to cut its exposure to Europe from 60% of its assets to 40%, the Financial Times reports.

Iran has been helping Syria to ship oil to China in defiance of Western sanctions, Reuters reported today

Ben Traynor
BullionVault

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it

If EU leaders think that their plan to boost the bailout fund, by using monetary gymnastics, to a total €740bn, will somehow persuade markets that they are starting to get on top of the current crisis, then they could well be in for a rude awakening, despite the Euro’s rally in Asia and the likelihood that equity markets will open higher this morning.
 
Once again the politics is getting in the way of a quick solution and bond markets are reflecting that truth with Spanish 10 year yields once again pushing up towards 5.50%, as unrest in the country grows just as the new government tries to push through a new austerity budget that by the government’s own admission will be very harsh.
 
Plans for cuts of €35bn will be implemented which will place an even greater burden on the creaking economy, already buckling under 23% unemployment and nearly 50% youth unemployment. This in a week when ratings agency Standard and Poor’s reminded the markets that Greece will in all probability need a second bailout, and further debt restructuring.
 
With growth forecasts for 2012 being slashed across the board in Europe markets are understandably nervous that European leaders lack the ability to come up with a solution that all can agree upon this weekend.
 
In Germany the economy continues to appear to be unaffected by the travails of the rest of Europe as unemployment yesterday showed another drop to new lows, falling to 6.7%.
 
Despite this positive data, retail sales in Germany in recent months have cratered declining 3 months in a row, declining on average at over 1% a month since December. Today’s figures for February are expected to show a gain of 1.2%, partly reversing January’s 1.6% decline.
 
Eurozone consumer prices will also be watched for any signs of rising inflation, especially in light of the recent record high oil prices, with March prices expected to slip back from 2.7% to 2.5%.
 
The Pound continues to hold up despite a raft of disappointing data numbers and headlines yesterday, as house prices fell, along with mortgage approvals, while M4 money supply also weakened despite the extra QE that has been pumped into the system since October, which would seem to suggest that the QE is proving to be ineffective.
 
UK Gfk Consumer confidence for March worsened coming in at -31 below the previous -29 as consumers continued to struggle with higher fuel prices, though this poll was sampled before the budget. The weak number combined with this week’s disappointing data could well raise speculation of more QE from the Bank of England in May.
 
In the U.S. the latest PCE numbers for February, the Fed’s preferred inflation targeting measure is expected to remain unchanged at 1.9%, on an annualised basis, while personal income and spending are expected to continue to improve, rising 0.4% and 0.6% respectively.
 
The final Chicago Purchasing Managers index for March will be particularly closely watched given the number of manufacturing indicators that have missed expectations this week, with expectations of a slight weakening from 64 to 63.
 
University of Michigan confidence for March on the other hand is expected to improve to 74.8, from 74.3.
 
EURUSD – yesterday’s dip to 1.3250 didn’t follow through on the downside as quickly as would have been expected which suggests once again we could well see a rebound, however as long as we stay below 1.3385, the high for this week then we should continue to see further weakness. Three days of lower highs and lower lows does encourage, but a move above 1.3385 would then target 1.3490. A break of 1.3250 support could well open up a move to this weeks low at 1.3190, followed by 1.3130.
 
GBPUSD – the cable continues to play the broader range between 1.5800 and 1.6000 with yesterday seeing a rebound back through 1.5920/30 and retargeting the 1.6000 area seen earlier this week. Only above 1.6000 retargets 1.6170, the October highs. If 1.5820 were to give way then we could well see a move towards the 1.5610 level which is the 50% retracement level of the entire up move from the 1.5240 lows to the 1.5990 highs.
The 1.5920/30 level now becomes support and a barrier to a return move to 1.5820.
 
EURGBP – once again the failure to push through 0.8400 prompted a fall back towards the 0.8320 support area. If we can break back below that level then we’re back looking at this months low at 0.8280, and then onto the January lows at 0.8220.
 
USDJPY – yesterday’s range in the dollar yen was a slightly tighter one with buying interest tapering off around the 83.20 level, however it managed to find support around 82.60. While above the 81.90 area we could well see a return to the double top at 84.10/20, however last week’s drop saw a bearish engulfing weekly candle which suggests in the short term a period of consolidation towards the cloud support at 80.60 remains possible on a break below 81.90. In the medium term we could well have seen a short term top, but the bias remains for a longer term move higher, while US 10 year yields remain firm.

The softer tone in equity markets in recent days has carried on where it left off yesterday, as economic data continues to disappoint, prompting traders to pull money off the table at the end of a significantly positive quarter.

Today's assessment of the outlook for the Euro area big three economy's didn't offer much comfort with the organisation stating that it expected a technical recession in Germany, France and Italy. The OECD also announced that it expected Q1 growth in the UK to be negative to the tune of 0.4%, also signalling a technical recession in the UK as well.

This assessment does appear to be at odds with recent data, especially in the UK and Germany, however with economic data remaining weaker and Eurozone leaders not really addressing the issue of an increased bailout fund, markets continue to slip lower.

EU leaders are expected to announce a temporary increase to €700bn by using the remainder of the EFSF; however it remains to be seen whether it will be enough to persuade the IMF to free up more funds.

The biggest fallers have been from the financials, retailers and oil and gas sectors, with Marks and Spencer (MKS LN) the biggest faller after sector peer H&M reported Q1 numbers that missed expectations by some distance. Banks were also down as bond yields across Europe started to rise again with Spanish 10 year yields in particular pushing back above 5.4%, with Barclays (BARC LN) and RBS (RBS LN) both lower.

On the plus side, International Power (IPR LN) is higher after the "will they, won't they" dance-a-thon with GDF Suez finally looks as its on, with the French company confirming a 390p a share cash approach for the remaining 30% interest in the company it does not own. Imperial Tobacco (IMT LN) is also a gainer after reporting improved numbers for H1.

U.S. markets followed in Europe's footsteps opening lower after U.S. weekly jobless claims missed expectations, coming in at 359k, above the 350k expected while last week's numbers were revised substantially higher from 348k to 364k. U.S. Q4 final GDP number came in unrevised at 3% despite speculation in some quarters that it could get revised upwards.

In earnings news electrical retailer Best Buy reported Q4 earnings of $2.47c a share above expectations of $2.16c, while also reporting that it would closing some 50 stores as it restructures parts of the business.

In M&A news Swiss drug company Roche upped its bid for U.S. gene sequencing company Illumina to $51 a share from $44.50. Blackberry owner Research in Motion is expected to report Q1 earnings after the bell tonight with expectations low given the propensity for the company to disappoint.

Falling U.S. bond yields have seen the U.S. dollar slip back against the yen as the Japanese currency from this current bout of risk aversion. The U.S. dollar and pound are the next best performers while the Australian dollar is at the bottom of the pile sliding back sharply in the wake of yesterday's comments by Australian Treasurer Wayne Swan and ahead of next week's RBA meeting, where there is renewed speculation of a possible rate cut.

The Euro has also slid back sharply hurt by rising bond yields, despite a solid Italian bond auction, weighed down by disappointing economic and business confidence data.

Germany's unemployment rate continues to fall but markets chose to ignore that on a day when Spain came to a standstill because of a general strike, while a downbeat view of the European economy by the OECD didn't help.

The Pound surprisingly has held up quite well despite a sharp drop in mortgage approvals for February, though net consumer credit for February did rise more than expected, doubling from January's figures.

Copper prices have continued their recent weakness weighed down by general risk aversion and a stronger US dollar.

Yesterday's rising inventory data gave the black gold a helping hand on its way lower with U.S. prices pushing to one week lows on speculation that the SPR taps could well be opened after comments on French radio by France's PM Fillon, that markets can "reasonably expect" a release. Brent prices continue to be slightly stickier on the back of geopolitical concerns.

Gold prices have also slid back on the firmer U.S. dollar and this week's failure to get above the $1,700 level.

Markets look set to open lower again this morning as continued wrangling over an increase in the size of the new EU bailout fund (ESM) beyond the current ceiling of €500bn, has dominated headlines over the past few days.

Today sees the start of the two day meeting of EU finance ministers in Copenhagen with talk last night that agreement had been reached to allow the combining of the ESM by allowing the EFSF to run for an extra year, thus boosting it to €740bn, with a view to it being signed off tomorrow. The purpose in trying to get some form of increase agreed is to persuade the IMF to help out to a much greater amount than it is currently committed to. It remains to be seen whether any action agreed at the meeting will be enough to convince the IMF or the markets for that matter given the continued deterioration in economic conditions in Europe.
 
Ratings agency Moody’s didn’t aid the overall sentiment by downgrading several Portuguese banks late last night, aligning them with the ratings of Portuguese government bonds.
 
In Spain protests against austerity continue with a general strike today while Italy is expected to sell up to €8bn of new tranches of 5 and 10 year bonds at lower yields than previously. .
 
In Germany it seems likely that the economy will continue to remain insulated from the old wind of recession and high unemployment with March unemployment figures expected to remain at 6.8%, with a 10k month on month reduction.
 
In the UK the outlook continues to look uncertain after yesterday’s GDP numbers revealed a deeper contraction in Q4 than firstly originally thought, with disposable incomes dropping at their largest rate for 30 years over the 12 month period.
 
Today’s mortgage approvals data for February is likely to slip back slightly from January’s 58.7k to 57.2k, however this relatively high level can once again be put down to the imminent expiry of the stamp duty holiday.
 
Consumer credit is also likely to remain low for February with a figure of £200m expected, slightly higher than January’s £100m, as consumers cut back in the face of shrinking incomes and rising fuel costs.
 
Yesterday’s miss on February durable goods data saw U.S. markets slip back and it seems unlikely that today’s final U.S. Q4 GDP number will materially alter investor sentiment with respect to the durability or otherwise, of the U.S. recovery. It is expected to come in unchanged at 3%, however there has been speculation in some quarters that the figure may get revised up to 3.2% on the back of adjustments to recent data, with some sources citing higher health spending, amongst other items. Any adjustments are likely to be quite small and even if they aren’t, are unlikely to have a lasting effect on market sentiment given that this data is pretty out of date now.
 
Weekly jobless claims are likely to have more of an effect if they miss expectations; however they are still expected to stay around the 350k level.  
 
EURUSD – the failure to conclusively break below the 1.3290 level yesterday keeps the risk marginally tilted towards the upside, after this week’s high of 1.3385. The euro continues to find support at progressively higher levels with trend line support from the March lows at 1.3005 coming in at 1.3260. A break of this support could well open up a move to this weeks low at 1.3190, followed by 1.3130. This week’s high at 1.3385 is initial resistance followed by the 1.3490 highs for this year.
 
GBPUSD – yesterday’s break below the 1.5920 level saw the pound slide back to 1.5840, just above the 1.5820 broader support zones. If 1.5820 were to give way then we could well see a move towards the 1.5610 level which is the 50% retracement level of the entire up move from the 1.5240 lows to the 1.5990 highs. The 1.5920/30 level now becomes resistance and a barrier to a return move to 1.6000.
 
EURGBP – the 0.8370 level gave way yesterday targeting a move back to the 0.8400 level which capped the advance. While below the 0.8400 level the focus remains for a move towards a retest of the January lows at 0.8220, though for now we would need to see a move back towards the larger support area at 0.8320. Above 0.8400 retargets the 0.8425 area.
 
USDJPY – yesterday’s range in the dollar yen was a slightly tighter one with buying interest tapering off around the 83.20 level, however it managed to find support around 82.60. While above the 81.90 area we could well see a return to the double top at 84.10/20, however last week’s drop saw a bearish engulfing weekly candle which suggests in the short term a period of consolidation towards the cloud support at 80.60 remains possible on a break below 81.90. In the medium term we could well have seen a short term top, but the bias remains for a longer term move higher, while US 10 year yields remain firm.

European markets have spent the day somewhat becalmed and slowly drifting lower as investors weigh up disappointing Q4 GDP revisions from France and the UK, while at the same time digesting a rather disappointing U.S. durable goods number.

Comments from European leaders, particularly Italian PM Monti that the worst of the European sovereign debt crisis was behind them suggest that once again politicians remain complacent to the problems bubbling beneath the surface throughout Europe, and particularly Spain, where there has been talk about the country needing a bailout.

If the crisis really were ebbing then markets would in all likelihood be quite a bit higher than they are now, and as such investors will likely remain cautious as we head towards the end of a positive month and quarter. This will likely remain the case while policymakers slowly edge towards an agreement on a slightly bigger fiscal firewall, that many investors think will ultimately prove to be totally inadequate in the event of another fiscal shock.

The main gainers have been the more defensive sectors with health care and technology shares showing the best gains, led by Shire Pharmaceuticals (SHP LN) and Sage Group (SGE LN).

On the downside, mining and commodity stocks have borne the brunt of the losses along with the insurance sector; RSA (RSA LN) was the worst performer following a broker downgrade from Panmure Gordon, as well as trading ex-dividend, with sector peer Prudential (PRU LN) also lower on ex-dividend.

Softer oil and copper prices has seen the mining sector slide back with Fresnillo (FRES LN), Vedanta Resources (VED LN) and Antofagasta (ANTO LN) leading the sector lower. Russian steelmaker Evraz (EVZ LN) is also lower after missing profit expectations for 2011 by nearly one third.

U.S. markets opened around the flat line after U.S. durable goods for February missed expectations, coming in at 2.2%, below expectations of a 3% rise. The mixed European picture has filtered through to the American markets with little in the way of new drivers as we head into the end of what has been a very positive quarter. In earnings news, Family Dollar Stores reported a record second quarter for its latest fiscal year, with a gross profit increase of 6.2%, with EPS coming above expectations of $1.15c a share, at $1.17c.

The Australian dollar has been the worst performer today on the back of weaker copper prices, as well as concern over a darkening economic outlook after Australian Treasurer Swan announced much tighter spending plans for 2012/2013, in the wake of a slowdown in the Australian economy.

The Pound has also been hit after UK Q4 GDP was revised lower to -0.3% with a larger drop in household disposable income largely attributable to higher inflation and fuel costs as well as low wage growth. The poor figures have also raised the prospects of further QE from the Bank of England, despite the fact that there is no evidence that current measures are helping in any way. Weaker oil prices have also seen the Norwegian krone and Canadian dollar slip back.

Oil prices have slipped back on talk that France, UK and the U.S. are once again in talks about releasing emergency reserves of oil in an attempt to drive oil prices down from their record highs, particularly against the euro and the pound. Higher crude oil inventories have also helped keep a lid on U.S. prices after a rise in stockpiles to 7.1m barrels, above expectations of 2.6m.

Copper prices have also moved sharply lower, though still within the triangular consolidation of the last two months, as global economic data continues to show weakness while a weaker print on U.S. durable goods orders for February hasn't helped either.

Gold and silver prices have also displayed a markedly softer tone after the yellow metal failed to get above the key resistance at the $1,700 level, which is where the 200 day MA currently comes in.

Wholesale gold prices dropped to below $1680 an ounce Wednesday morning – 1% down on their high for the week – after failing a day earlier to break the $1700 barrier.

Silver prices drifted below $32.50 per ounce – a 2.3% drop from Tuesday's peak – while stocks and commodities traded sideways and US Treasuries ticked lower.

Oil prices eased slightly after the French energy minister said France "is favorable to the suggestion" that the US and UK could release strategic oil stocks in an effort to lower the spot price of oil.

US policymakers meantime should not be complacent that recent signs of recovery will continue, US Federal Reserve chairman Ben Bernanke said in a US television interview Tuesday.

"We haven't quite yet got to the point where we can be completely confident that we're on a track to full recovery," Bernanke said.

"It's far too early to declare victory."

On Monday, Bernanke said that "continued accommodative policies" were needed to support the US labor market. Stock markets rallied immediately following those comments on Monday, as did gold prices.

"Our economists believe that the market has been too aggressive in pricing in Fed rate hikes in 2013, while the Fed is more likely to push the hikes out to 2014 as indicated by [Monday's] speech [by Bernanke]," says a note from Barclays Capital.

"We believe low interest rates and longer-term inflationary pressures should remain supportive for gold prices."

Goldman Sachs meantime has reiterated its 12 month gold price forecast of $1940 per ounce. By contrast, precious metals consultancy CPM Group has said it does not expect gold to set new highs this year.

Here in Europe, the Eurozone crisis "is almost over", Italian prime minister Mario Monti said Wednesday.

"Things have stabilized in Europe," concedes Glenn Levine, Sydney-based senior economist at Moody's Analytics, "and it's in their interest to be optimistic but the muddle-through is still on... anyone who pretends to know if we are out of the woods yet is clearly kidding themselves or misleading their audience."

Here in the UK, the economy shrank by more than previously through in the fourth quarter of last year, according to revised figures published Wednesday. Q4 GDP fell 0.3% from the previous quarter, compared to the previously reported 0.2% fall, according to the Office for National Statistics release.

By comparison, revised US GDP figures due out tomorrow are expected to confirm the American economy grew in Q4.

"Why is their recovery better than ours?" asked Bank of England Monetary Policy Committee member Adam Posen in a speech of that title on Tuesday.

Posen, who has voted for more quantitative easing at fifteen of the last eighteen MPC meetings,  went on to cite differences in government fiscal tightening as one factor that explains "a sizeable share of the growth differential between the US and UK."

Over in India, finance minister Pranab Mukherjee said Tuesday he will not reverse the recent rise in import duties. Many Indian gold dealers have closed in protest and remain on strike.

"Until the Indian jewelers reopen their shops, Indian gold demand will remain weak," says a note from HSBC.

"The dip in Indian demand may be partly offset by better Chinese physical demand as Shanghai premiums [over Spot Gold] remain high."

In China meantime, after India the world's second-largest gold consumer, stock markets saw their biggest falls in four months Wednesday, Bloomberg Businessweek reports.

The falls came after the country's largest copper producer, Jiangxi Copper, reported an 18% drop in earnings and investment bank Societe Generale said consensus estimates for Chinese companies were "far too optimistic".

"Investors had expected earnings to be weak but they are still below expectations," says Larry Wan, head of investment at Union Life Asset Management in Beijing, which manages over $2 billion worth of assets.

"Moreover, shares have already risen quite a bit this year on monetary easing expectations."

March sales by the US Mint of gold American Eagle bullion coins – produced explicitly for gold investment purposes – are already more than double the total for February. However, the nearly 1.4 tonnes sold represents a 40% drop on the March 2011 figure, and looks set to be the lowest March total since 2007.

Sales of silver bullion American Eagles meantime have breached the 10 million ounce mark, equivalent to 311 tonnes. By comparison, the US Mint sold 12.4 million ounces in the first three months of 2011.

Ben Traynor
BullionVault

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it

After the Bernanke induced gains of the early part of the week European markets look set to open lower this morning as a sense of proportion returns to the markets, and concerns about Spain and Italy’s fiscal outlook return .
 
Concerns about Spain continue to dominate after data showed that the economy was slipping back into recession in 2012, while the government remained committed to slashing spending across the board in an attempt to meet Brussels targets of a deficit of 2012 of 5.3% of GDP.
 
While there does appear to be some progress on the firewall question with Germany reported to be slowly moving towards some combination of the EFSF and ESM progress on the firewall question to a total of €740bn, there is widespread concern that even that will not be enough if contagion spreads beyond Greece and Portugal.
 
Germany probably mindful of its own triple “A” rating, which was reaffirmed last night by Moody’s, continues to hold the line on this amount, but OECD secretary general Angel Gurria warned yesterday that a figure in excess of €1trn would be needed to send a signal to the markets, that firewall should be “the mother of all firewalls”.
 
Pressure is beginning to build however with the IMF already twitchy about increasing its contributions, while the OECD has now had its say while outgoing eurogroup head Juncker also made the point that opponents of an increase risked leaving the euro exposed to contagion pressures.
 
It would appear that Germany is slowly being backed into a corner as markets realise that the fiscal adjustments being insisted on by Berlin are making the problems in southern Europe worse, not better. The current opposition to further bailouts in the German parliament could well soon be tested if it looks like the current bailout fund looks insufficient in averting contagion pressures.
 
This morning French Q4 GDP was confirmed at 0.2%, however it is widely accepted that this was a quirk, and that in Q1 the French economy slipped into contraction, if recent data is any indication.
 
In the UK the final Q4 GDP number is expected to be confirmed at -0.2%, which would be unusual in the sense that in recent times there have usually subsequent revisions of the headline figure, while in this case there hasn’t at all. Business investment is expected to improve slightly from -5.6% to -5.4%, with market reaction likely to be muted given that these numbers are pretty well much priced in with expectations high that Q1 will see a bounce back. Initial signs are encouraging as we head into the end of the first quarter.
 
German CPI for March is expected to slow down despite rising energy costs, where oil prices hit euro area record highs, coming in slightly lower, and dropping from 2.5% to 2.3%.
 
In the U.S. the recent recovery in economic data will be once again be tested with the latest data on big ticket items with the latest February durable goods orders, with expectations high that we could well see a bounce back with a rise of 3%, from January’s rather nasty 3.7% drop.
 
EURUSD – a marginal new peak at 1.3385 yesterday, however the euro appears to be struggling to put distance between itself and the break out level at 1.3290/00. The 1.3490 highs for this year remain the next key resistance, however momentum does appear to be starting to wane, which suggests we may not get there. A break back below the 1.3290/00 level retargets last weeks low at the 1.3135 area, on the way back to the 1.3000 level.
 
GBPUSD – the pound hit the 1.6000 level yesterday but was unable to break above it, slipping lower again. A break above the 1.6000 level retargets the October and November highs at 1.6170. The 1.5920 level now remains a key support on the downside while a break below could well retarget the 1.5820 level. Once below that the 1.5610 50% retracement of the entire up move from the 1.5240 lows to the 1.5990 highs remains a key support.
 
EURGBP – still in the broader range with the 0.8370 level keeping a lid on any rally for now, though the 0.8400 level remains the larger level and as such the single currency remains range bound with support around the 0.8320 area. While below the 0.8400 level the focus remains for a move towards a retest of the January lows at 0.8220, on a break below the 0.8280 level. Above 0.8400 retargets the 0.8425 area.
 
USDJPY – yesterday’s rally in the dollar saw buying interest taper off around the 83.40 level. The broader resistance remains at the double top at 84.10/20, but last week’s drop saw a bearish engulfing weekly candle which suggests in the short term a period of consolidation towards the cloud support at 80.60. In the medium term we could well have seen a short term top, but the bias remains for a longer term move higher, while U.S. 10 year yields remain firm.

The relatively quiet economic docket coupled with a lack of any real conviction that further QE may be forthcoming has left the broad European market struggling to extend yesterdays gains.

Should additional easing occur, it will likely surprise the bond markets which - taken in context against equity markets - have not reacted to the rumours.

Main headlines surrounded that of state backed bank RBS (RBS LN) and the potential sell off by as much as a third to an Abu Dhabi wealth fund outfit. The bank as a result, has spent much of the day at the top of the FTSE adding 4.58% with Standard Chartered (STAN LN) and Barclays (BARC LN) also gaining by 2.07% and 2.95% respectively.

Fighting for bottom place much of the day, Compass Group (CPG LN) and Resolution (RSL LN) have both seen a decline of over 3%. Compass Group falling on the admission that H1 sales growth would be slower than that of last year. Resolution had fallen by as much as 7% intra-day upon the revelation that it would exercise a stock spilt but has pulled back somewhat.

The release of the CBI survey this morning showed that British retail sales had steadied this month rising from -2 in February to 0.

With muted wage growth and potentially higher oil prices stoking inflation fears, its likely that growth in this area could remain elusive from some time to come.

Stateside, markets opened up in early trade but the release of the consumer confidence numbers temporarily stalled additional upward momentum.

While the U.S. confidence data came in at 70.2 from against expectations of 70.0, the fact that its a decrease on last month's number could be cause for concern and has pushed European markets lower.

The Richmond Fed Manufacturing index also failed miserably to lift investors coming in at a shockingly low number of 7 against an expectation of 18.

Sterling has been the best performer in the currencies today rising to 1.60 against the dollar for the first time since November last year as the residual effect of Bernanke's comments impacted the greenback.

The Japanese yen was overall the worst performing currency with rumours abound that the BOJ could indulge in further currency weakening this week. The release of the Japan inflation numbers on Thursday may underpin this as yet unsubstantiated marker chatter.

Gold remains solid following yesterdays rally supported by its 200 day MA testing the $1691 level which has been acting as a barrier to further upside.

Copper has dipped back today on the back of a stronger dollar trading in a narrowing range the metal is well supported by the 200 day MA.

Oil prices have slipped back despite news of a bombing in a Sudan oil field. Expectations are that tomorrows supply reports will show a rise in crude stocks.

The spot market gold price traded just below $1700 an ounce for most of Tuesday morning in London – over 4% up on its low last week – before heading lower just ahead of the US markets open as the US Dollar regained some of the ground it lost on Monday following comments by Federal Reserve chairman Ben Bernanke.

The silver price rose to $33.25 per ounce – a 6.8% gain since its week's low last Thursday – before it too eased.

The US Dollar Index, which measures the Dollar's strength against other major currencies, hit its lowest level since the start of the month Tuesday. Longer-dated US Treasuries dipped, while European government bonds gained despite warnings that the sovereign debt crisis has not been resolved.

European stock market gains were relatively muted Tuesday morning, compared to those of the preceding Asian and US sessions, while commodities were broadly flat.

Yesterday saw the gold price move back above its 200-day moving average – which by PM London Fix prices stood at $1682 per ounce Monday afternoon in London – after Bernanke spoke of the need for "continued accommodative policies" and said that the labor market "remains far from normal" despite recent signs of improvement.

"Bernanke was back on solidly dovish ground again," say Standard Bank currency analysts Steve Barrow and Jeremy Stevens.

"Rightly, or wrongly, the market seems to think that his comments could imply another loosening of [policy] via some form of QE3," they added, referring to the possibility of a third round of quantitative easing.

"Fed likely to hint at QE3 in April meeting," said Bill Gross, managing director of world's largest bond fund Pimco, via the fund's Twitter account.

Physical gold demand meantime "has shot higher as demand from South-East Asia in particular increased with gold below $1,650 over the past few days, no doubt providing support to the gold price when investor sentiment turned bearish," says Walter de Wet, commodities strategist at Standard Bank, citing the bank's Gold Physical Flows Index.

Over in New York, the world's largest gold ETF, the SPDR Gold Trust (GLD), added 6 tonnes to its gold holdings yesterday.

Also in New York, today sees the expiry of April options on Comex gold futures contracts, with a lot of open interest – both bullish and bearish – clustering around the $1700 an ounce mark. The last options expiry date on 23 February saw gold prices jump to a then 3-month high.

Economic growth meantime "is stalling" in Europe, according to Angel Gurria, secretary-general of the Paris-based Organisation for Economic Co-operation and Development.

"Market confidence in the Euro area is fragile," says the OECD's 'Economic Survey of the Euro Area 2012, published today.

"The outlook for growth is unusually uncertain and depends critically on the resolution of the sovereign debt crisis."

Eurozone finance ministers are due to meet this Friday where they are expected to agree an increase in the size of the single currency's so-called 'firewall' by combining the existing temporary bailout fund with the new permanent one that launches in July, after Germany dropped its opposition to such a move.

"Everybody knows [the combined fund] is not going to be big enough," says Robert Crossley, head of European rates strategy at Citi.

"But less inadequate is a good thing."

"The Eurozone remains insolvent," adds Jim Leaviss, head of retail fixed income at M&G Investments.

"Growth is still a problem."

Germany's Deutsche Bank meantime has overtaken France's BNP Paribas to become Europe's largest bank, as a result of adding to its assets while other banks have been shrinking their balance sheets, according to newswire Bloomberg.

The likelihood that the German government would support its largest bank in the event of a crisis was cited by Fitch in December when the ratings agency gave Deutsche a stable outlook.

"We haven't solved the too-big- to-fail challenge in this country," says Ralph Brinkhaus, a member of Germany's finance committee as well as chancellor Angela Merkel's CDU party.

"That problem becomes all the more a matter of concern the bigger the bank is...and in the case of Deutsche Bank, is becoming."

A Morgan Stanley co-authored report has suggested that banks worldwide will look to reduce the size of their balance sheets by $1 trillion over the next two years.

Here in the UK, Abu Dhabi's ruling family is in talks with the British government about buying a stake in the 83%-taxpayer-owned Royal Bank of Scotland, news agency Reuters reports.

The gold price could "peak at well over $2000" an ounce, Mark Cutifani, chief executive of gold mining firm AngloGold Ashanti said Tuesday.

Turkey's central bank today raised the proportion of domestic currency reserves Turkish banks can hold as gold from 10% to 20%, while simultaneously lowering the proportion for foreign exchange reserves from 10% to zero.

Turkey is one of a number of countries facing current account deficits and exchange rate problems that have recently turned their attention to gold.

Ben Traynor
BullionVault

(c) BullionVault 2011

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