Gold Heads for Biggest Weekly Gain in 19 Months; Platinum Drops Gold, little changed in London, headed for its biggest weekly advance in 19 months as lower U.S. interest rates may revive investor demand for the metal as an alternative to the dollar. Platinum dropped from a record. The dollar traded near a three-week low against the euro on speculation U.S. economic growth will slow, forcing the Federal Reserve to lower interest rates. Gold has climbed 45 percent since the Fed in August announced a policy shift to contain the subprime mortgage collapse. ``It's been six months this week since the Fed started cutting interest rates and gold has gone nuts,'' said Adrian Ash, head of research of London-based BullionVault, a gold dealer that holds about six tons of gold for customers in vaults in London, Zurich and New York. ``The more the Fed promises cheaper money, the more people will choose an alternative to the dollar.''
Ouch! This Gold Trend is Relentless Time to ‘fess up. I’ve been horribly, horribly wrong on gold. So much so that now I’m afraid of being labeled a contrarian indicator! So let’s see, in December I thought I saw a tentative double top in gold… which didn’t materialize. Instead, gold paused by trading sideways for a month and then continued blazing higher and higher: To be fair, a double top formation is only triggered when the neckline (the dotted line on the graph above) is pierced. Since that didn’t happen, we didn’t officially have a double top, at least according to the widely accepted definition within technical analysis. That doesn’t absolve me as I’ve been skeptical of a continuing gold bull market. And I’ve been wrong, wrong, wrong. Gold’s climb has been unrelenting. Just yesterday it closed at $949.20 on the Merc, taking it within a nugget’s throw of $1000.
Demand for gold up by 26 per cent as China becomes second-biggest market With the start of the Year of the Rat, Chinese have been forming queues across the country to buy solid gold rodents. Last year they queued to buy solid gold pigs. The surging desire for the precious metal from increasingly well-off Chinese fuelled a 26 per cent increase in demand in 2007. The soaring price of gold, which hit a record $948.60 an ounce yesterday, has failed to dim the Chinese rush. China's demand climbed to 326.1 tonnes, supplanting the United States as the world's second-largest gold consumer and exceeded only by India. Of the total, 302.2 tonnes were bought for jewellery, the World Gold Council said, marking the first time that jewellery demand in China had exceeded the 300-tonne mark.
Rescues for Homeowners in Debt Weighed Prodded in part by some of the nation’s biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses. Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’sEconomy.com. Administration officials say they still oppose any taxpayer bailout for either people who borrowed more than they could afford or banks that made foolish loans during the height of the speculative bubble in housing.
Philly Fed continues to weaken in Feb. Factory activity in the Philadelphia region continued to weaken in February, and the outlook for future activity hit its lowest level in 28 years, the Philadelphia Federal Reserve said Thursday. The Philly Fed index fell to -24 in February from -20.9 in January. This is the lowest level since February 2001, shortly before the last recession. Readings below zero in the diffusion index indicate contraction in the region's factories. A larger negative number means that contraction is gaining momentum. Economists expected the index to rebound to about -10. The index had plunged in January from 1.6 in December and analysts believed the drop was overstated.
Goldman Sachs likely to cut about 1,500 jobs Goldman Sachs Group will likely cut about 1,500 jobs this year, an unusually high number for the investment firm, The Wall Street Journal reported Thursday on its Web site, citing executives, former partners and executive recruiters. The newspaper reported the cuts, which began a few weeks ago and will continue through early March, are an aggressive response to mounting troubles in the firm's leveraged lending and investing portfolios.
It's Time to Dump the Federal Reserve The credit storm which began in July when two Bear Stearns hedge funds were forced to liquidate, has continued to intensify and roil the markets. Last week the noose tightened around auction-rate securities, a little-known part of the market that requires short-term funding to set rates for long-term municipal bonds. The $330 billion ARS market has dried up overnight pushing up rates as high as 20% on some bonds – a new benchmark for short-term debt. Auction-rate securities are now headed for extinction just like the other previously-vital parts of the structured finance paradigm. The $2 trillion market for collateralized debt obligations (CDOs), the multi-trillion-dollar mortgage-backed securities market (MBSs) and the $1.3 asset-backed commercial paper (ABCP) market have all shut down, draining a small ocean of capital from the financial system and pushing many of the banks and hedge funds closer to default.
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