Gold Rises, Heading for Best Year Since 1979; Silver Advances Gold rose in London, heading for its best year since 1979, as higher oil prices and a weaker dollar spurred demand for the metal as a hedge against inflation and as an alternative investment. Silver also advanced. Crude oil is on course for the biggest annual appreciation in eight years, while the euro gained against the dollar for a sixth consecutive trading session. Gold will probably average $800 an ounce next year, compared with $696 this year, according to the median estimate of 37 traders, analysts and investors surveyed by Bloomberg News. ``The major driving force for gold this year has been the weaker dollar,'' Bernard Sin, chief gold trader at MKS Finance, one of Switzerland's four precious-metals refiners, said by phone from Geneva today.
Gold to Pass Record in 2008 on Inflation, Survey Says Gold will rise to a record in 2008, increasing for an unprecedented eighth consecutive year, as investors seek protection from accelerating inflation, metals analysts say. Gold will probably average $800 an ounce, compared with $696 this year, according to the median estimate of 37 traders, analysts and investors surveyed by Bloomberg News. Gold has gained 30 percent to $827.20 an ounce in London this year, its best year since 1979, when the Iranian revolution crippled crude- oil exports and U.S. inflation surpassed 13 percent. ``I do see gold hitting a new high at some point in the first half,'' said UBS AG's John Reade, who is tied as the most- accurate analyst in the London Bullion Market Association's 2007 gold-price forecast.
U.S. November new-home sales fall 9% to 647,000 Sales of new U.S. homes fell by a more-than-expected 9% in November to a seasonally adjusted annual rate of 647,000, the Commerce Department reported Friday. On average, economists surveyed by MarketWatch were expecting new-home sales to drop to a seasonally adjusted annual rate of 710,000 in November. At the same time, October's sales rate was revised downward, the data show. Sales in October were revised to rise by 711,000, or 1.7%. They were previously estimated to have risen to a seasonally adjusted annual rate of 728,000. The monthly report is very volatile, and the government says it can take up to five months to establish a new trend in sales.
Citi may write down $18.7B, Goldman analysts say When Citigroup warned in early November that it was likely to write down its portfolio by $8 billion, or €5.51 billion, to $11 billion in the fourth quarter because of exposure to bad loans, investors recoiled at the size of the losses. Some now say those early estimates appear drastically understated.Citigroup Inc. could write off as much as $18.7 billion in the fourth quarter, wrote Goldman analysts William F. Tanona, Betsy Miller and Neil C. Sanyal in a note to investors late Wednesday. If it does, they say, the bank may be forced to lower its dividend by 40 percent.Citi has about $55 billion in exposure to subprime mortgages, about $43 billion of which are collateralized debt obligations, or CDOs, that have mortgages underlying them.
Credit Crisis? Just Wait for a Replay What if it’s not just subprime? As 2007 ends, it seems that the financial world shakes every time a company reveals some new exposure to the disastrous world of subprime mortgage lending. But just how different was subprime lending from other lending in the days of easy money that prevailed until this summer? The smug confidence that nothing could go wrong, and that credit quality did not matter, could be seen in the many other markets as well. That was particularly true in the corporate loan market. Loans were cheap, and anyone worried about losses could buy insurance for almost nothing. It was not an environment that encouraged careful lending.
Crunch Time for American Consumers The subprime mortgage crisis is merely the tip of a very large iceberg. Beneath the surface lies not only a sea of tenuous loans to prime borrowers, but also an assortment of other liabilities backed by auto loans and credit card debit. Now that home equity extractions, "zero percent auto financing" and "zero interest" credit card rollovers are much harder to come by, Americans must do without the credit lifelines that have previously kept them afloat. Similar to the home buying market, lax lending standards in the automobile marketplace have led to gross distortions that must be painfully corrected. For years standard practice allowed millions of car buyers to trade in old cars (that were worth less then outstanding loans), and roll the balances into new low interest rate loans for new cars.
Bankers rush to raise capital Merrill Lynch is the latest American bank to go to the sovereign wealth funds of the Far East for finance. Will the UK banks be forced to follow suit? This week's $5bn (£2.5bn) injection into Merrill Lynch from Temasek Holdings was just the latest bail-out by Asian and Middle East investors as the credit crunch forces the giants of Wall Street to replenish their capital positions.Including Switzerland's UBS, stakes taken by state investment funds in investment banks in the past month have hit nearly $30bn – and still fears persist. Goldman Sachs analysts said on Wednesday that Citigroup might have to cut its dividend even after its $7.5bn capital injection from Abu Dhabi.
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