Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Thurs 11.08.2007
Gold eyes all-time high on currency crisis Gold has surged to $846 an ounce on fears of a dollar collapse and signs of spreading credit crisis in the United States, coming within a whisker of the all-time high seen at the end of the 1970s inflation era. Warnings by a top Chinese official that the Beijing intends to switch part of its $1,430bn reserves from dollars to "stronger currencies" appears to have lit the fuse under an explosive mix of record oil prices, rising global inflation, and mounting concerns that the world financial system is coming unglued. "We're seeing a loss of confidence in all paper currencies, but above all in the dollar," said Hans Redeker, currency chief at BNP Paribas. The apparent failure of the US Treasury's $75bn rescue plan for sub-prime mortgage securities and the risk of mass downgrades on US bond insurers has caused a rush for safe-haven investments
Gold Bull Market Just Beginning as Gold Price Surges Towards $2,000 Should you do like Jim Rogers and sell your house in order to buy yuan? Or sell all your dollar investments in order to buy the euro…or gold? Well, maybe…Our guess is that the dollar has further to go…down. And gold has further to go…up. "Unless there’s some new Paul Volcker waiting in the wings," said old friend Marty Weiss over dinner last night, "it’s hard to see what could save the dollar." "Is there some new Paul Volcker warming up somewhere?" we asked rhetorically. "No…" Volcker saved the US dollar in the early ’80s…by putting up interest rates and tightening credit. He barely got away with it then. Now, it would be impossible. Even with the Fed’s current ‘open bar’ policy, a lot of people are drying out, sobering up, and getting cranky.
Investors will drive silver prices higher SILVER prices, which touched a 27-year high of $16.19/oz on Wednesday, will be driven higher by additional investment inflows into the metal, GFMS said in its interim Silver Market Review. Precious metals consultancy GFMS said silver will trade in a range of $13.20 to $16.50 over the next 12 months because of fresh investment inflows. The silver price has caught a ride on the coattails of gold in recent weeks. The gold price has shot up to 28-year highs and is hovering under the all-time high of $850/oz. The spot gold price hit a high of $845.50 on Wednesday. "It's a one-way street at the moment. Strong oil prices, a weaker dollar, subprime issues and a rush into safe-haven -- everything is supporting," Jeremy East, global head of metals trading at Standard Chartered Bank is quoted as saying by Reuters.
China's hint of diversifying reserves keeps dollar falling The dollar continued its free fall Wednesday after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves. "The dollar sell-off was sparked by concern that foreign central banks' diversification away from dollar assets may accelerate," said Paresh Upadhyaya, who helps manage currency assets at Putnam Investments in Boston. "The momentum to sell the dollar still persists, and I expect further dollar weakness before year's end." The dollar is "losing its status as the world currency," Xu Jian, a central bank vice director, told a conference in Beijing. "We will favor stronger currencies over weaker ones, and will readjust accordingly," Cheng Siwei, vice chairman of China's National People's Congress
Morgan Stanley reports new subprime-related hit Investment bank Morgan Stanley reported late Wednesday that it was taking a new $3.7 billion hit from exposure to subprime-mortgage securities, the latest sign that the global credit crisis hasn't subsided. Morgan Stanley said that it had $12.3 billion of subprime-related exposure on its balance sheet at the end of August. That left the firm capable of losing $10.4 billion if all those securities defaulted, leaving nothing left. Its potential losses -- or its net exposure -- related to these securities declined at the end of October to $6 billion, Morgan added. In the two months since the end of August, the fair value of the investment bank's subprime-related exposures has dropped further, cutting revenue by $3.7 billion, Morgan Stanley announced after the markets closed.
AIG quarterly net falls 27% as subprime crisis bites American International Group reported a 27% drop in third-quarter net income late Wednesday as the subprime mortgage crisis pushed the insurance giant's results below Wall Street expectations. The company's shares fell 2.8% to $56.28 during late-trading. That extended losses of 6.5% during regular action, before the insurer reported results. The stock is now trading at its lowest level since July 2006. AIG said net income came in at $3.09 billion, or $1.19 a share, vs. $4.22 billion, or $1.61 a share, a year earlier. Adjusted net income, which excludes net realized investment gains and losses and other items, was $3.49 billion, or $1.35 a share, the company reported.
Fed policymaker promises FOMC won't raise rates in December It will take years for the subprime mortgage market to recover, but other financial markets are already showing signs of healing from the paralysis of August, said St. Louis Federal Reserve President William Poole on Wednesday. "Recent weeks show clear progress," he said. The Fed's rate cuts have helped the healing process by restoring investor confidence, but no one can be certain whether the Fed will need to cut rates again, he said. The strength of consumer spending will be a determining factor. Only one thing is certain: The Fed won't raise rates at its next meeting in December, he said, an unusually bold statement for a Fed policymaker to make. Poole is a voting member of the Federal Open Market Committee this year.
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