Gold, Platinum Lead Commodities Into Bear Market on Growth Risk Gold, platinum and silver plunged to their lowest in more than seven months, leading commodities into a bear market, on concern a spreading global economic slowdown will reduce demand for raw materials. Precious metals also slumped as crude oil prices fell and the dollar gained, reducing their appeal as an inflation hedge and alternative investment. Gold has tumbled 22 percent from its record $1,032.70 on March 17. Platinum and silver are down 36 percent and 33 percent from their peaks.
US dollar at 6-mth high as oil, gold decline The U.S. dollar climbed against the euro to its highest since February on Tuesday, rising for a sixth day as worries about a sharp global slowdown hit higher yielding currencies and commodities such as oil and gold. Most Asian stock markets edged lower, despite crude prices retreating for five of the last six days and boosting shares of auto makers and exporters. The potential for further economic weakness weighed on sentiment, particularly after data showed Japan's wholesale inflation at the highest in 27 years.
Russia Calls Off Military Operations in Georgia Russian President Dmitry Medvedev ordered a halt to Russia's offensive in Georgia, saying military action achieved the country's goals. "The aggressor has been punished," Medvedev said on state television. Russia has secured the safety of Russian peacekeepers and citizens in the disputed Georgian regions of South Ossetia and Abkhazia, the president said. Russia sent tanks, troops and warplanes into Georgia on Aug. 8 in what it said was a response to a Georgian offensive on South Ossetia. Russian forces rolled deep into Georgia proper yesterday and took several towns and a military base. Georgian television showed footage today of burning buildings that it reported was a result of Russian bombing of the central city of Gori. The military thrust threatened to draw the U.S. into confrontation with its former Cold War foe. The U.S. backs Georgia's bid to join the North Atlantic Treaty Organization, which Russia views as a security threat. The West views Georgia as a key ally in the region, in part because it has an oil pipeline bypassing Russia.
Ruble, Russian Stocks Surge as Medvedev Halts Georgia Offensive The ruble surged the most in seven years, Russia's Micex Index climbed, and the cost of protecting the country's bonds fell after President Dmitry Medvedev ordered a halt to the military operation in Georgia. The 30-stock Micex erased a decline of as much as 2 percent and oil extended its drop after Medvedev said military actions in Georgia had achieved the country's goals. Russian shares slumped to a 22-month low and the ruble fell the most in more than three years on Aug. 8 as the country sent tanks, troops and warplanes into Georgia in what it said was a response to an offensive on South Ossetia.
Federal Reserve finds deepening credit crisis More banks are tightening lending standards on home mortgages and other consumer and business loans as a deepening credit crisis exerts a heavier toll on the economy. The Federal Reserve said Monday the percentage of banks reporting tighter lending standards rose across various loan types in its July survey. In April, the central bank had found that the percentage of banks reporting tighter lending standards was already near historic highs. The new survey, conducted in early July, found that about 75 percent of the banks surveyed indicated they had tightened their lending standards for prime mortgages. That was up from about 60 percent of banks who said they were tightening lending standards for prime mortgages in the previous survey. The Fed's July survey covered 50 banks which hold about 80 percent of the residential mortgages on the books of all commercial banks.
Credit squeeze getting worse, banks say Most banks less willing to lend to businesses, consumers The credit squeeze worsened in the past three months, the Federal Reserve reported Monday, and most banks expect to keep a lid on credit for the next year at least. Despite all the aggressive moves by the Fed in the past year to ease the flow of credit to the economy, a record percentage of banks were making it more difficult for borrowers in the three months ending in July, the Fed said in its quarterly senior loan officer survey of 52 major banks. A majority of banks tightened their rules for granting loans to businesses and consumers. The survey shows little appetite at banks to lend for home mortgages, credit cards, home equity loans, commercial real estate loans, or commercial and industrial loans. No bank in the survey eased credit terms for any type of loan in the past three months, and only one bank said it anticipated easing standards for consumers in the next 12 months. Tighter credit could slow economic growth, especially consumer spending, economists say. Lack of credit could sink the commercial real estate market, and curb capital investments by businesses. The survey is considered a leading indicator of credit creation in the United States. "This is consistent with our view that consumer spending will slow markedly over the next several quarters," wrote economists for Lehman Bros.
Worry About Stretched Firms, Consumers Hits Debt Markets $$ Like a bad penny, credit-market troubles keep turning up. A range of corporate bonds and securities backed by consumer loans and mortgages have sagged in recent weeks to levels last seen in March, when worries about a financial crisis hit a high. Back then, investors sold most types of risky assets, as the near-collapse of Bear Stearns Cos. raised worries about a broad market meltdown. This time there is much less panic, but concern is building about the health of businesses and consumers.
Fed Says Banks Toughen Lending Standards Amid Slump The Federal Reserve said more banks made it harder to borrow money as defaults and delinquencies on home loans soared and the economy faltered. Most "domestic institutions reported having tightened their lending standards and terms on all major loan categories over the previous three months," the Fed said today in its quarterly Senior Loan Officer Survey. Funds were scarcer for homebuyers and small businesses, credit card loans became tougher to get, and even banks' best customers were subject to greater scrutiny. Tighter credit may delay any recovery in economic growth, which economists forecast will slow well into next year.
Wachovia to cut 600 more jobs than earlier planned Wachovia plans to cut 600 more jobs than previously expected; total now 11,350 Wachovia Corp. said Monday it plans to cut 600 more jobs than it previously expected as it works to reduce expenses in the face of staggering losses tied to mortgage debt. According to its quarterly filing with the Securities and Exchange Commission, the bank now expects to eliminate 11,350 positions, including 6,950 active employees and 4,400 open positions. All of the additional job cuts will be in the bank's troubled mortgage business. Last month, upon reporting an $8.86 billion second-quarter loss, the Charlotte, N.C.-based bank said it planned to eliminate 10,750 positions, including 6,350 active employees, most of them related to mortgages.
Health care costs seen rising 10 percent in 2009 ealth care costs are expected to rise more than 10 percent into next year, according to a survey of insurers by Aon Consulting Worldwide. But that increase is the smallest Aon has seen in six years. Experts say it shows that efforts to tame costs, such as employee wellness or disease management programs, may be paying off. "There's a variety of tactics that employers have been employing over the last 3 to 6 years that has had an impact on the market," said study director Bill Sharon, an Aon Consulting senior vice president. Aon Consulting surveyed about 70 health insurers around the country, including companies such as Aetna Inc. and Cigna Corp. It found that actuaries expect costs to rise an average of 10.6 percent during 12-month rating periods starting this year between April and September.
Wachovia boosts job cuts, probed on derivatives Wachovia Corp, the fourth-largest U.S. bank, said on Monday it expected to eliminate 11,350 jobs, more than it previously disclosed, as conditions deteriorate in the housing market. Separately, Wachovia said the U.S. Securities and Exchange Commission may recommend civil charges against its main banking unit in connection with municipal derivatives transactions. It also said various state attorneys general have issued subpoenas over that matter. The bank said it was cooperating with the probes.
Gold futures close at their lowest level of the year Dollar strength, oil weakness send gold back to as low as $824.50 on Globex Gold futures closed at their lowest level of the year Monday as a decline in oil prices and strength in the dollar sent the precious metal's prices down by more than 4% an ounce in electronic trading. Gold for December delivery dropped $36.50, or 4.2%, to close at $828.30 an ounce on the New York Mercantile Exchange. The contract fell to a low of $824.50 an ounce in Globex electronic trading. That's gold futures' lowest price since late December. It traded at $830 on Globex as of 4:30 p.m. EDT. "Following a feeble and half-hearted recovery attempt, gold prices suffered an even greater wash-out than last Friday's disastrous run to the downside," said Jon Nadler, a senior analyst at Kitco Bullion Dealers. On Friday, gold dropped $13.10 an ounce to chalk up a weekly loss of nearly 6%. The former all-time high of $845 did not appear to have any significant support, and the steep drop in prices "may be very difficult to recover from," Nadler said.
Who is Really Printing Money? A popular mantra among many gold bugs is: "the Fed is printing money." Any actions by the Fed to support liquidity in the markets are touted as "money creation" and consequently "monetary inflation" which causes gold appreciation. If gold does not rise, they proclaim that there is "manipulation" and "conspiracy". It is fair to say that we do not see the picture in such black and white colors. The main source of new money in the economy is not the Fed but the commercial banks. It is the private banks that increase money supply through debt (new credit) creation. During a credit crisis which is characterized by a steep slowdown of credit creation, growth of money supply in the financial system slows as well. It is silly to think that the Fed can replace the whole system of commercial banks by creating money itself from thin air. What the Fed can do is influence money supply by adjusting interest rates creating more or less incentive for the fractional-reserve lending by the commercial banks.
Gold and the Gold Stocks he past month has seen a large disparity open up between gold, the metal, and the gold stocks. For example, the HUI closed on 8-8-08 at 334, the same level it was at shortly before the sub-prime crisis of last year and at which time gold was $660. And yet gold itself closed on 8-8-08 at $860. That is, gold has gone up by $200 over the past year, but the HUI, representing the gold stocks, is at the exact same spot. This is a frustrating and difficult situation, and one’s first impulse is to complain that the universe is unfair. After all, it seems to be a matter of mathematics. As the price of their final product rises, the gold stock’s earnings should rise (at a faster rate). Math says that the gold stocks should go up, but they are not going up.
Investors Pile Back Into The Dollar Currency traders were buying the dollar in droves on Friday, after the European Central Bank's warning about the euro zone economy raised concerns about slowing growth outside of the United States. The greenback hit a five-month high against the euro, on Friday; the 15-nation European currency traded at $1.5321, on Friday morning in London, down from 1.5408, late Thursday in New York.
Japan's Wholesale Inflation Rate Reaches 27-Year High Japan's wholesale inflation rate accelerated to a 27-year high in July, squeezing corporate profits, increasing bankruptcies and threatening the economy's longest postwar expansion. Producer prices, the costs companies pay for energy and raw materials, climbed 7.1 percent from a year earlier after a revised 5.7 percent increase in June, the Bank of Japan said in Tokyo today. The median estimate of 31 economists surveyed by Bloomberg News was for 5.7 percent. More businesses failed because of rising fuel and raw- material costs in the first half of this year than for all of 2007, according to Teikoku Databank Ltd. Tokyo-based Galaxy Airlines Co. said last week that it will stop air cargo services, and Nippon Paper Group Inc. plans to increase prices for the second time this year.
Back to Kenneth Rogoff's Austere Future ust when it seemed the economic discussion couldn’t get any sillier, Kenneth Rogoff, former chief economist at the IMF and now economics professor at Harvard, has channeled the discredited notions about economic growth offered up most prominently by the Club of Rome and President Jimmy Carter in the ‘70s. In 1972, the Club of Rome released The Limits to Growth, which said if economic growth were allowed to continue, the world would run out of food and commodities. In a column last week for the Financial Times titled “The world cannot grow its way out of this slowdown”, Rogoff said much the same, arguing that the “huge spike in global commodity price inflation is prima facie evidence that the global economy is still growing too fast.” Rogoff’s basic message is that in order to insure long-term economic health, we must crash the world economy now. It would be a hard to find a more impoverishing and absurd plan of action.
Oil prices unlikely to drop below $100 bu Dhabi: Crude prices on the international market are unlikely to drop below $100 a barrel in the near term despite shedding almost $33 per barrel in a month, oil market experts told Gulf News on Monday. They say they don't anticipate a full-blown collapse in crude prices despite a slowdown of the US economy, the world's biggest oil importer. Neither do they see a major spike in crude prices due to the latest geopolitical tensions erupting between Russia and Georgia, which has led to Russia resorting to airstrikes and pounding Georgia's capital, Tbilisi. "The oil market doesn't seem to be very perturbed by the happenings in Georgia. There is a downward bias in the oil market that will continue for a little while," said Dalton Garis, associate professor of Economics at the Petroleum Institute in Abu Dhabi.
Oil's Fall Is Econ 101 Nigerian rebels, Iranian saber-rattling, potential Israel-Iran war, hurricane warnings, Venezuelan meddling, Turkish pipelines, BP woes in Russia, all of these at one time have allegedly contributed to the strong oil price. Every time we rallied a couple of bucks, the usual suspects were rounded up and given credit for the rally. And then the biggest actual ruckus of all -- a war between major oil producer Russia and Georgia -- rages on, and oil cascades lower into the escalation. LOWER! If this incursion were to rank with the parade of horribles that allegedly spurred oil from $90 to $148, it would be off the charts. It is the real deal that can interrupt pipelines and cause a calamity in the European market. It should have sent natural gas -- the Europeans live off Russian natural gas -- into the stratosphere, as it should have caused hoarding and a spike even here for recognition that no liquefied natural gas could come here because it would be needed so badly in Europe.
Oil extends its slide on signs of demand slowdown Oil prices finished at a new three-month low Monday after briefly dropping below $113 a barrel mark, as the dollar extended its rebound and more signs emerged that China's energy demand could be leveling off. In earlier trading, oil fluctuated as traders monitored the conflict between Russia and Georgia that some believe could disrupt supplies. But those worries faded to the background as the dollar's recovery accelerated, and as the energy market focused on a report from China that the country's crude oil imports in July were down 7 percent from last year.
Oil Falls Again as the Dollar Strengthens The last couple of days have seen a reversal in the markets: oil prices are down and the dollar is up. Expensive fuel has hurt consumers and businesses for most of the year, while federal officials have sounded the alarm over the ever-weakening value of our currency. But on Monday, oil traded below $113 a barrel, its lowest level since early May. The euro, so strong for so long, tumbled below $1.49, its weakest level since February. The developments, which extended similar moves from Friday, were welcomed on Wall Street, where the Dow Jones industrial average gained nearly 140 points, although the major stock indexes fell back late in the afternoon after the Federal Reserve released discouraging figures on the availability of consumer credit. The Dow was up 25 points and the Standard & Poor’s 500 index advanced 0.51 percent just before the close. But analysts said that favorable moves in oil and the dollar might not be a sign that economic recovery is around the corner. In fact, many pointed to bleaker-than-expected forecasts as the driving force behind the sudden reversals.
Media Ignores Russia's Influence on Oil Prices id you hear this weekend about that giant country that invaded the other country? The business media apparently haven't -- or at least they don't think it's worth a mention. But we'll get to their oily oversight in a moment. First, a review, because it's all part of a pattern. When the oil market was rising, we saw the business media ignore reality and good reason to frame the market as something that would go up forever. Who could forget what The Business Press Maven back in May called the dumbest headline he had seen in his entire misspent life: "Oil Hits $129, Heads for $130."
NY AG expands auction-rate securities probe New York Attorney General Andrew Cuomo said Monday he is expanding his investigation into the collapse of the auction-rate securities market to include JPMorgan Chase & Co., Morgan Stanley and Wachovia Corp. Last week, Cuomo's office and the Securities and Exchange Commission reached settlements that forced Swiss bank UBS to repurchase $18.6 billion in the securities, while Citigroup agreed to buy back $7 billion of the securities. UBS will also pay a fine of $150 million, while Citigroup will pay a $100 million fine. "This is an industrywide problem," Cuomo said in an interview. "This is not about one or two institutions. We are now working with the other players in the industry." Cuomo sent letters to JPMorgan, Morgan Stanley and Wachovia telling them that his office is reviewing the banks' behavior in the sale of auction-rate securities. The attorney general will determine if the banks knowingly misrepresented the safety of the securities when selling them to investors.
Utility Rates Surge Around the U.S. If you think your electric bill was high this summer, wait till next year. The Energy Department predicts that the average residential electricity bill will rise about 10% in 2009 after a 5% increase this year. Of course, those are not spread out evenly across the board, with costs varying from state to state -- and sometimes city to city -- based on a slew of factors. Consumers throughout the Northeast have seen their rates rise dramatically in recent years due to the effects of de-regulation of the utility market there. Dense population and lack of new power lines and infrastructure to meet the region's energy demands also play a part in the higher cost.
China’s Trade Surplus at an 8-Month High BEIJING — China’s trade surplus swelled in July to its highest level in eight months as its trade gaps with the United States and Europe grew despite concern about weaker global demand, according to data reported Monday. Export growth rebounded in July, the customs agency said, after a June slowdown prompted Beijing to bolster tax rebates for struggling textile exporters. “Though we expect a continued deterioration as the year goes on, as American and European consumers stay at home, the resilience of demand for China’s exports is still remarkable,” an economist at Standard Chartered, Stephen Green, said in a report to clients. China’s global trade surplus in July was $25.3 billion, the agency said, up 4 percent from the same month in 2007.
Cost-Cutting in New York and London, a Boom in India GURGAON, India — On the top floor of a seven-story building in this dusty aspiring metropolis, Copal Partners churns out equity, fixed income and trading research for big name analysts and banks. It is a long way from the well-cooled corridors of Wall Street, and quarters are tight; business is up about 40 percent this year alone. “This is one bulge-bracket bank,” said Joel Perlman, president of Copal, pointing toward a team behind an opaque glass wall. “And this,” he said, motioning across a narrow corridor “is another.” The banks edit and add to what they get from Copal, a research provider, then repackage the information under their own names as research reports, pitch books and trading recommendations.
Leaving Wall Street for a Job Overseas Moving boxes have become a common sight at Wall Street firms, where tens of thousands of bankers and traders have been laid off as the credit squeeze drags on. But a few of the people packing up and saying goodbye are holding passports rather than pink slips. And some are being told to move abroad — or else. As Wall Street’s troubles deepen, big investment banks are moving some key employees to increasingly influential hubs of finance in Asia, the Middle East, Europe and Latin America, regions where the banks had already been building up business to tap rising growth potential. This trend is happening alongside another that is funneling jobs from traditional financial centers like New York and London. Because of price pressure, jobs lower down the corporate ladder are moving overseas, especially India.
Putin Criticizes U.S. For Flying Georgian Soldiers Back from Iraq Big Powers Urge Russia to Accept Truce The world's seven largest economic powers on Monday urged Russia to accept an immediate cease-fire with Georgia and agree to mediation over the crisis as Russian forces continued advances into Georgian territory. With conditions deteriorating despite similar repeated calls, Secretary of State Condoleezza Rice and her colleagues from the Group of Seven leading industrialized nations pledged their support for a negotiated solution to the conflict that has been raging since Friday between the former Soviet republic and Russia, the State Department said. "We want to see the Russians stand down," deputy spokesman Robert Wood told reporters. "What we're calling on is for Russia to stop its aggression."
U.S., Europeans Ask UN to Seek End to War in Georgia he U.S., Britain and France asked the United Nations Security Council today to call for an "immediate and unconditional cessation of all hostilities" in Georgia and for Russia to end its military offensive. France took the lead in drafting a resolution on the conflict in Georgia as the Security Council met on the crisis for the fifth time since it began on Aug. 7. The text calls for the "complete withdrawal of Russian and Georgian forces to their positions prior to" that date. The measure, which France circulated to the Security Council's 15 member nations, will urge all sides to "engage immediately in negotiations aimed at finding a peaceful and durable solution." It also will express the council's "intention to take further action, as appropriate," to end the conflict.
Russia steps up its push; West faces tough choices Russian troops stepped up their advance into Georgian territory on Monday, attempting to turn back the clock to the days when Moscow held uncontested sway over what it considers its "near abroad," and arousing increasing alarm among Western leaders. Even as they prepared to convene an emergency meeting of NATO on Tuesday and President George W. Bush denounced the Russian actions in the strongest terms to date, the United States and its European allies faced tough choices over how to push back. They seemed uncertain how to adjust to a new geopolitical game that threatened to undermine two decades of democratic gains in countries that once were part of the Soviet sphere. Russian troops briefly seized a Georgian military base and took up positions close to the Georgian city of Gori on Monday, raising Georgian fears of a full-scale invasion or an attempt to oust the country's pro-Western president, Mikheil Saakashvili. Bush, little more than an hour after returning to Washington from the Olympic Games in Beijing, bluntly warned Russia that its military operations were damaging its reputation and were "unacceptable in the 21st century."
The Rising Stakes In Georgia The point about flash points is just that. They can go off unexpectedly. That is what is happening in Georgia, where hostilities between the government and Russian-supported secessionists in the breakaway region of South Ossetia threaten to get out of hand, which is to everyone's detriment. Georgia says it has taken control of the capital of South Ossetia by force in order to break a secessionist movement that wants to unite South Ossetia with North Ossetia, which is in Russia, into one autonomous region under Russian sovereignty.
Russia intensifies attack on Georgia 'Massive' bombings, imminent tanks rebuff call for cease-fire Russian planes, troops and artillery units pounded the Georgian city of Gori in a "massive" attack, Georgian officials said Monday as the three-day war over an ethnic enclave in Georgia appeared to escalate. "There was massive bombing of Gori all evening and now we are getting reports of an imminent attack by Russian tanks," said ministry official Shota Utiashvili, who was quoted early Monday in a report by Agence France-Presse. Gori is in Georgia, south of the border with South Ossetia, the disputed region that prompted the bloody conflict. Georgia on Sunday said it was withdrawing troops from the embattled region of South Ossetia as part of a cease-fire proposal meant to stop an expanding war with Russia.
Russia gives Georgia an ultimatum SENAKI, Georgia: Russia issued an ultimatum to Georgia on Monday to disarm its troops along the boundary with the pro-Russian separatist enclave of Abkhazia as Russian tanks rolled across the internal border and occupied a military base in western Georgia. The move was a sign that fighting could escalate on a second, western front after the conflict initially broke out last week around South Ossetia, the separatist enclave farther east.
Russia Presses Into Georgia; Bush Is Sharp in Criticism SENAKI, Georgia — Russian armored vehicles rolled 25 miles into western Georgia and took up positions at a military base here early Monday after issuing an ultimatum to Georgia to disarm its troops, along the boundary with the separatist territory of Abkhazia. Georgian soldiers on the road to Tbilisi, the capital, escaped a burning armored vehicle outside Gori on Monday. The Russian military advances represented the first time Russian forces invaded Georgia proper in the four-day-old conflict, which has unnerved the West and resurrected some Cold War anxieties. Georgian officials said Russian troops had moved into several other cities in western Georgia, holding out the prospect that fighting could escalate on a second front. President Bush, little more than an hour after returning to Washington from the Olympics in Beijing, bluntly warned Russia that its military operations were damaging its reputation and were "unacceptable in the 21st century."
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
RSS![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/quotes_7a.gif)