Gold traded within 1.1 percent of a 27-year high on speculation the Federal Reserve will cut interest rates, boosting bullion's appeal as an alternative investment. The dollar fell to a record low against the euro as traders bet the Fed will reduce its benchmark interest rate by a quarter- percentage point, dimming the allure of U.S. assets. Gold has had a correlation of 0.79 against the euro-dollar exchange rate this month. A figure of 1 would indicate the two move in lockstep. ``If they move interest rates lower, the scope for the dollar to move higher would be limited and that would help gold,'' Michael Widmer, head of metals research at Calyon in London, said in an interview today.
Precious metals trading company Hinde Capital has launched a hedge fund which will solely invest in gold and gold related securities, because it believes gold is one of the most deeply undervalued assets. Although gold in London yesterday hit a high of US$794.4 an ounce, co-fund manager Ben Davies explained that while the asset is high on a nominal closing basis, on an inflation adjusted basis it should really be around US$1,800 to US$2,000. He added that on this basis gold is not as high as it was, for example, in the late 1970s and US$2,500 is not an unrealistic level for the metal to reach. Davies, a former head of London trading at RBS Greenwich, points out that the gold sector is much smaller than the equity sector, with a total market cap of only about £200bn. The sector is likely to grow as investors reallocate to the asset amid credit concerns and to protect against rising inflation.
GORDON Brown has cost the taxpayer more than £3billion by selling off half of Britain’s bullion reserves just before the price of gold rocketed. As Chancellor, he sold 400 tons of gold between 1999 and 2001, raising £2.3billion to fund his lavish spending plans. This week, as bullion drew near a 28-year high price, experts calculated the loss to the Treasury resulting from his decision at £3.1billion. The massive shortfall is only £2million less than £3.3billion lost under John Major during Black Wednesday in 1992. With analysts forecasting that the price of gold will continue to rise until at least the end of the decade, Mr Brown’s decision could turn out to be one of the most costly failed gambles in Treasury history.
If you've listened recently to some prominent Wall Street economists, the U.S. economy in the next two quarters is going to slip from the jaws of the credit crunch, hurdle the tiger-trap of the housing slowdown, swing across boiling oil prices, and land on its feet having narrowly escaped a recession. But many economists are skeptical. They say that this scenario of the economy as swashbuckling hero from a classic B movie isn't very realistic. Instead, they are seriously concerned that the economy soon could slip into a recession. Economists are advising investors to ignore all festivities planned after the third-quarter gross domestic product report is released on Wednesday morning. That report is expected to show growth over 3% in the July-September quarter.
As analysts ponder the U.S. Federal Reserve's next move on interest rates, currency investors ponder the likely market reaction, and the consensus for both is that it's a matter of degree, not direction. Just as no one is expecting an interest rate hike Wednesday, no one is betting on a sustained dollar rally this quarter, either. And just as bad economic or corporate headlines -- or even record-high crude oil prices -- rarely seem to derail stock market rallies these days, nothing the Fed delivers is likely to halt the greenback's slide. Whether the Fed cuts its benchmark a quarter percentage point, as expected, or a half-point --or even not at all -- the dollar is likely to bear the near-term brunt of the market's kneejerk reaction either way, and then move in one direction: down.
China's worst fuel crisis in two years spread to the capital and other inland areas by Wednesday, and one man was killed in a brawl at a petrol station queue, upping pressure on the government to intervene. Diesel shortages in China's political heart, which escaped previous supply crunches unscathed, highlight tensions between the government and its increasingly independent oil firms about who should pay for the country's generous fuel subsidies. Top refiner Sinopec on Wednesday pledged more supplies and bought additional diesel fuel abroad, but it may fall to Beijing to end the stand-off by raising domestic prices, easing taxes, promising another year-end pay-off -- or simply strong-arming suppliers into selling more fuel at a loss.
The reviews are in on GOP presidential candidate Ron Paul’s appearance on the Tonight Show. Posters at LewRockwell.com and DailyPaul.com write that the show was a success for Ron Paul. He was relaxed, humorous and apparently in his element. Jay Leno was prepped, courteous and interested. From a campaign standpoint, Ron Paul’s appearance on national programs such as the Tonight Show are most important to the campaign which still needs to establish name recognition for Jeffersonian conservative candidate. Fund-raising apparently receives a considerable boost following such appearances. According to thestressblog.com, the line of people hoping for a ticket to see Ron Paul was the longest "in recent memory." A video of the program can be seen at thestressblog.com, along with a succinct summary of some of the highlights.
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