Gold, platinum near historic highs; uptrend intact Gold prices rose towards historic highs on Tuesday as the dollar stayed weak on expectations of a half-percentage-point cut in U.S. interest rates. The market looked ahead to a slew of U.S. bank results, which could intensify financial market uncertainty and influence the dollar. Any signs of further weakness in the U.S. currency might attract more investors into the precious metals market. Other key metals also advanced, with platinum near record highs and silver keeping within sight of a 27-year peak hit on Monday. Palladium eased but was near a two-month high. "Markets don't go in a straight line so I wouldn't be surprised to see some pullback, but medium term I am still very friendly to the gold market," said Jeremy East, head of metals trading at Standard Chartered Bank.
10 Predictions for 2008: Economy, Dollar & Gold I can’t help but to think that I am setting myself up here. There are so many variables that could throw a wrench into my predictions and tarnish my flawless reputation (cough). Nevertheless, I can’t help but to jump into the 2008 forecasting game and give my readers some ideas for what I believe is in store for 2008. Without further adieu, here are my 10 predictions for 2008: Economic conditions in the U.S. will deteriorate further and we will finally get consensus that the dreaded "R" word is a reality. The fed will intervene and do everything possible to avert it, but it has been delayed for so long that the any fed plans to prop up the economy will ultimately fail.
Wholesale energy prices down, food prices up; 2007 rise largest since 1981 Producer prices fell 0.1% in December, as energy prices declined and food prices gained, the Labor Department reported Tuesday, after last month's gain had raised some concern about inflation. Excluding volatile food and energy, core producer prices grew 0.2%. Economists had expected a gain of 0.2% in December for both the producer price index and the core. "Overall this was a benign report, suggesting little inflationary pressure either at present or down the road," according to a note from Ried Thunberg ICAP. For the full year, producer prices were up 6.3% -- the largest calendar year rise since 7.1% in 1981. Core prices were up 2.0% in the past year.
Citigroup swings to loss on $18 bln write-down Citigroup Inc., the nation's largest bank by assets, ended the suspense on Wall Street over just how bad its results would be, reporting its first quarterly loss since 1998 and slashing its dividend. At the same time, Citi raised more than $12 billion in new capital to bolster its balance sheet. Citigroup swung to a fourth-quarter loss of $9.83 billion, or $1.99 a share, from net income of $5.13 billion, or $1.03 a share, in the year-earlier period. Continued woes in the subprime-mortgage market caused the bank to book pretax write-downs and credit costs of about $18.1 billion. Results for the latest quarter also included a $4.1 billion increase in credit costs in Citigroup's U.S. consumer-loan portfolio.
Retail sales drop 0.4% in December With sales of cars and gas slowing, retail sales fell 0.4% in December, the first decline in six months, the Commerce Department reported Tuesday. Most retail sectors reported falling seasonally adjusted sales in December. Sales of gasoline declined on lower prices, while sales of most kinds of durable goods slumped. Sales at general merchandise stores, furniture stores and food stores increased. Excluding autos, sales fell 0.4% in December. Excluding both autos and gasoline, sales fell 0.2%. The weaker-than-expected data clear the way for an emergency half-point rate cut by the Federal Reserve, to be followed by another quarter-point cut at the regularly scheduled meeting on Jan. 30, wrote Ashraf Laidi, chief foreign exchange analyst for CMC Markets US.
Free money to the rescue Alan Abelson in his "Up and Down Wall Street" column in Barron's writes, "Talk about great entrances! For investors, anyway, they don't make them any better than the memorable one staged by that precocious calendrical infant, 2008. That is, if you're an investor who happens to have a portfolio chock full of gold and overflowing with oil." And if you have your investments aligned with the Fabulous Mogambo Portfolio (FMP), then he is talking about you! Gold! That's all you have! Gold! Lovely, lovely gold! And for the seventh year in a row, the FMP has beaten the piddly results of almost every other money manager in the world, but does The Mogambo get any credit, or even get somebody to make him up a lousy plate of nachos, like I'm asking so much of worthless kids laying around the house all the time? No!
NEW RECORD MONEY GROWTH THREATENS MONETARY INFLATION Broad money supply growth is a strong indicator of pending inflation. The current 15%-plus level of annual growth in an ongoing estimate of M3 -- the broadest measure of the U.S. money supply -- has not been seen since August 1971, when President Richard Nixon closed the gold window. Such foreshadows increasing monetary inflation pressure in the U.S. economy, on top of existing pressures from oil and food prices and a weakening U.S. dollar. In contrast, recent slow growth in the monetary base is not uncommon under current circumstances and does not foreshadow consumer goods deflation. In 25-plus years of econometric modeling and economic forecasting, I found the broadest measure of liquidity in the system tended to be the most meaningful in predicting future inflation, and, under certain circumstances, economic activity.
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