New Delhi: The Indian stock market seems to have developed a liking for the US dollar vis-a-vis rupee -- it is taking half the time to double investments made in the greenback compared to that in the domestic currency.
An analysis of historic movements in the total invested wealth on domestic bourses show that its rupee value has taken 14 months to double, against less than eight months in case of the dollar value.
The total investors' wealth, measured in terms of total market capitalisation of all the listed companies, currently stands at Rs 63,85,475 crore or about $1,611 billion.
According to the market capitalisation data available with the bourses, it was near the half-way mark of the current rupee value at the end of September 2006, at Rs 31,85,680 crore -- taking 14 months to double.
In contrast, the market capitalisation's dollar value was at the half-way mark of the current level less than eight months ago in early April this year.
The differential growth period in dollar and rupee value is due to a sharp appreciation of close to 15 per cent in Indian currency compared to the US greenback over past one year.
Since the beginning of this year, the rupee value of total investors' wealth has grown about 78 per cent, while the surge in its dollar value is close to 98 per cent. Between January and November, investors have become richer by about Rs 27,61,000 crore in rupee terms.
In dollar terms, the gain is close to $800 billion, which includes only $620 billion because of the stock market surge. The rest is due to the rupee appreciation and had the local currency stayed at its 2006-end level, the dollar market cap would have been lower by $180 billion
Monday, December 3, 2007
Gold prices may fall further on unwinding funds
Gold prices are expected to decline in line with crude oil, which fell below $ 91, and a correction in dollar prices, a top industry official said.
"Gold prices will see a correction following unwinding of position by funds internationally in futures and OTC (over the counter) market," said, B N Vaidya Associates' Chief Bhargav Vaidya..
"Wholesale gold prices will fall below Rs 10,000 and retail buying will pick up only after January 14 (Sankranti), considered the beginning of the auspicious period," Vaidya said.
Standard gold (99.50 purity) per 10 grams was quoted at Rs 10,095 and pure gold (99.50 purity) per 10 grams quoted at Rs 10,145 in the Mumbai bullion market on Saturday.
Gold climbed to the highest level in 27 years earlier this month, driven mainly by oil's ascent towards the USD 100 level and steep declines in the US dollar. But with these trends stalling or in reverse, at least temporarily, investors have shifted funds out of the safe-haven metals in the international market.
"The falling crude oil prices and a strengthening dollar is causing pressure on gold prices," Kotak Commodity Services' Analyst Raghavan Sundararajan said in the company's research report.
Though de-hedging has fallen to its lowest level since 1992, the pace of further de-hedging is expected to be slow, thus also indicating lower prices in gold.
In the Indian markets, however, a weakening rupee could limit the downside in prices, Sundararajan said.
Despite the recent correction in gold prices, physical buying of the yellow metal is not picking up, local bullion dealer Amit Zaveri said.
"Gold prices will see a correction following unwinding of position by funds internationally in futures and OTC (over the counter) market," said, B N Vaidya Associates' Chief Bhargav Vaidya..
"Wholesale gold prices will fall below Rs 10,000 and retail buying will pick up only after January 14 (Sankranti), considered the beginning of the auspicious period," Vaidya said.
Standard gold (99.50 purity) per 10 grams was quoted at Rs 10,095 and pure gold (99.50 purity) per 10 grams quoted at Rs 10,145 in the Mumbai bullion market on Saturday.
Gold climbed to the highest level in 27 years earlier this month, driven mainly by oil's ascent towards the USD 100 level and steep declines in the US dollar. But with these trends stalling or in reverse, at least temporarily, investors have shifted funds out of the safe-haven metals in the international market.
"The falling crude oil prices and a strengthening dollar is causing pressure on gold prices," Kotak Commodity Services' Analyst Raghavan Sundararajan said in the company's research report.
Though de-hedging has fallen to its lowest level since 1992, the pace of further de-hedging is expected to be slow, thus also indicating lower prices in gold.
In the Indian markets, however, a weakening rupee could limit the downside in prices, Sundararajan said.
Despite the recent correction in gold prices, physical buying of the yellow metal is not picking up, local bullion dealer Amit Zaveri said.
Stockists, traders recharge as gold consolidates
MUMBAI: Fresh buying in physical gold has started with prices consolidating last week. This is unusual as this is not considered the time for stockists to purchase physical gold.
However, because prices have been high this year, they are buying ahead of an anticipated price rise next year.The price in the international market consolidated, closing lower by close to $8 per ounce, and in the Indian market the prices lost between Rs 200-500 per 10 gm.
This fuelled the buying. "The sales have picked up considerably from last month," said Chennai-based India Bullion’s Krishna Nathani. However, he said because of the high prevailing prices, the volumes of sales are low compared with the same time last year. Since the festival season sales were very poor, any dip in prices proves a good time to stock up on gold.
Fresh markets like Indonesia, Thailand and Singapore are also reported to be witnessing physical buying, as prices dropped globally. According to analysts, prices are well supported at these levels and there are fewer chances of prices correcting from here.
"Next trend might emerge depending on whether crude oil takes an upturn or a downturn after the Opec meeting on December 5," MAPE Admisi Commodity Research stated. Gold price saw a marginal hike on Monday with the dollar dipping and oil prices firming up ahead of key data on manufacturing in the United States. The prices were lower last week, mainly because of European Central Bank's sale of 42 tonnes of gold.
The current pull back in gold is seen only a temporary stopgap before it climbs again. A poorly performing US dollar is ensuring that interest in gold is kept alive.
However, because prices have been high this year, they are buying ahead of an anticipated price rise next year.The price in the international market consolidated, closing lower by close to $8 per ounce, and in the Indian market the prices lost between Rs 200-500 per 10 gm.
This fuelled the buying. "The sales have picked up considerably from last month," said Chennai-based India Bullion’s Krishna Nathani. However, he said because of the high prevailing prices, the volumes of sales are low compared with the same time last year. Since the festival season sales were very poor, any dip in prices proves a good time to stock up on gold.
Fresh markets like Indonesia, Thailand and Singapore are also reported to be witnessing physical buying, as prices dropped globally. According to analysts, prices are well supported at these levels and there are fewer chances of prices correcting from here.
"Next trend might emerge depending on whether crude oil takes an upturn or a downturn after the Opec meeting on December 5," MAPE Admisi Commodity Research stated. Gold price saw a marginal hike on Monday with the dollar dipping and oil prices firming up ahead of key data on manufacturing in the United States. The prices were lower last week, mainly because of European Central Bank's sale of 42 tonnes of gold.
The current pull back in gold is seen only a temporary stopgap before it climbs again. A poorly performing US dollar is ensuring that interest in gold is kept alive.
Forex market begins to feel the dollar squeeze
MUMBAI: The days of dollar deluge may be soon over. The greenback is becoming a scarce commodity in the local foreign exchange market. In the past two weeks, the Reserve Bank of India (RBI) purchased only about $2.2 billion from the market, compared with around $7 billion in the first two weeks of November. The dollar liquidity in the market is also tightening, according to forex dealers.
Standard Chartered Bank managing director and head of corporate sales (global markets) Hemant Mishr said, “The difference between the Fed fund rates and the one-month inter-bank deposit rates continues to be high at 73 basis points. This indicates the extent of illiquidity.” Even in the forward market, all indicators are towards dollar tightness. For example, on one hand, the premium on one-month forward contract is tightening on account of importers buying dollars and covering their near-term exposures, resulting in tight dollar conditions.
On the other hand, exporters are selling dollars in the long-term forward market, which is causing long-term premium to crash sharply. This condition also results in dollar tightness for the present, as dollar sales under one-year forward contract are actually fructified only at the end of the term of the contract.
The current strategy is to buy dollars in for a near-term and sell them on the forward market through a contract having a six-month tenure, according to a forex dealer.
The slowdown in dollar inflows could be due to a number of factors. For one, FIIs are going slow on the India story, thanks largely to the Sebi regulations on participatory notes, requiring FII sub-accounts to register with the market regulator in late October. FIIs took out $1.5 billion in November against inflows of $5 billion in October.
Also, the measures to clamp down on the external commercial borrowing (ECB) inflows by imposing end-use restrictions seem to have had some impact. Though inflows in August and September are somewhat higher than the inflows at around $3 billion, a year ago, sequentially inflows have substantially slowed down over the June and July levels of the ECB inflows during which close to $6 billion came in through the overseas borrowing route.
Typically, most FIIs follow a calendar-year pattern for maintaining their balance sheets. Also, the beginning of December gives rise to several FIIs ploughing back profits to their home countries. Thus, they end up making dollar purchases from the local market through multinational banks with a presence in India. Incidentally, banks such as large American banks in the country are reported to be purchasing dollars from the local market over the past few days, which could be on behalf of their FII clients since they are custodians for many FIIs, said a forex trader with a private sector bank.
Some dealers also say that dollar-fund outflows could also be on account of FIIs having oversubscribed at the initial public offering of Mundra Port. At the other end, even the central bank has been buying dollars, in a bid to prevent the rupee from growing too strong, which, in turn, could hurt exporters. Foreign banks are not confident about the creditworthiness of borrower-banks, and to an extent, this has also affected their lending to nationalised banks here. Also, for multinational banks having presence here, it has become increasingly difficult to get funds from their parent banks, too.
Standard Chartered Bank managing director and head of corporate sales (global markets) Hemant Mishr said, “The difference between the Fed fund rates and the one-month inter-bank deposit rates continues to be high at 73 basis points. This indicates the extent of illiquidity.” Even in the forward market, all indicators are towards dollar tightness. For example, on one hand, the premium on one-month forward contract is tightening on account of importers buying dollars and covering their near-term exposures, resulting in tight dollar conditions.
On the other hand, exporters are selling dollars in the long-term forward market, which is causing long-term premium to crash sharply. This condition also results in dollar tightness for the present, as dollar sales under one-year forward contract are actually fructified only at the end of the term of the contract.
The current strategy is to buy dollars in for a near-term and sell them on the forward market through a contract having a six-month tenure, according to a forex dealer.
The slowdown in dollar inflows could be due to a number of factors. For one, FIIs are going slow on the India story, thanks largely to the Sebi regulations on participatory notes, requiring FII sub-accounts to register with the market regulator in late October. FIIs took out $1.5 billion in November against inflows of $5 billion in October.
Also, the measures to clamp down on the external commercial borrowing (ECB) inflows by imposing end-use restrictions seem to have had some impact. Though inflows in August and September are somewhat higher than the inflows at around $3 billion, a year ago, sequentially inflows have substantially slowed down over the June and July levels of the ECB inflows during which close to $6 billion came in through the overseas borrowing route.
Typically, most FIIs follow a calendar-year pattern for maintaining their balance sheets. Also, the beginning of December gives rise to several FIIs ploughing back profits to their home countries. Thus, they end up making dollar purchases from the local market through multinational banks with a presence in India. Incidentally, banks such as large American banks in the country are reported to be purchasing dollars from the local market over the past few days, which could be on behalf of their FII clients since they are custodians for many FIIs, said a forex trader with a private sector bank.
Some dealers also say that dollar-fund outflows could also be on account of FIIs having oversubscribed at the initial public offering of Mundra Port. At the other end, even the central bank has been buying dollars, in a bid to prevent the rupee from growing too strong, which, in turn, could hurt exporters. Foreign banks are not confident about the creditworthiness of borrower-banks, and to an extent, this has also affected their lending to nationalised banks here. Also, for multinational banks having presence here, it has become increasingly difficult to get funds from their parent banks, too.
Canada's Lofty Dollar, Source of Pride, Cuts Profits
(Bloomberg) -- Canada's soaring dollar, a symbol of the energy-rich nation's emerging global clout and a source of national pride, is turning into a bust for many businesses.
Only about two months ago, Canada hit parity with the U.S. dollar for the first time in 31 years. Now many Canadians have had their fill: Companies ranging from jetmaker Bombardier Inc. to lumber producer Canfor Corp. say their currency's strength is cutting into profits and jobs.
``There is not much pride in declining business,'' said Ken Lewenza, a Canadian Auto Workers union leader in Windsor, Ontario, where parts suppliers are closing operations and the casino just cut another 200 jobs. ``The squeeze is on, and our lives are miserable.''
Economists have slashed growth forecasts for 2008, and the Bank of Canada may cut interest rates as early as its next policy meeting tomorrow. Governor David Dodge said Nov. 17 that ``downside risks'' to the global economy have increased and might start to affect rates, as the strong currency and slower worldwide growth curb exports.
Canada's dollar has gained 17 percent against the U.S. dollar this year, the second-best performer among the 16 actively traded currencies Bloomberg tracks. The currency traded for $1 at 4:03 p.m. today in Toronto. A stronger currency reduces the value of sales in the U.S., which buys about 80 percent of Canada's exports.
Falling Exports
Canada's trade surplus narrowed to a nine-year low of C$2.7 billion ($2.7 billion) in September, as exports fell to the lowest level in 11 months and imports rose 2.2 percent, Statistics Canada said Nov. 9.
David Wolf, Merrill Lynch Canada's chief strategist, forecasts that Canada's economic growth will slip to 1.7 percent next year. That would be the slowest pace since 1996 and is down from 2.8 percent last year, according to Statistics Canada.
In a note to clients, Wolf said the strength of Canada's dollar, along with weaker U.S. demand, may help reduce profits for Toronto Stock Exchange-listed companies by 3.1 percent next year.
Toronto-based buyout firm Onex Corp. reported its largest quarterly loss in three years last month, and Montreal's Canadian National Railway Co. said the currency contributed to a third-quarter profit decline.
Vancouver-based Canfor, the country's biggest lumber firm, reported its third straight quarterly loss Nov. 1, as the U.S. homebuilding slump sapped demand, and Canada's strong dollar cut the value of U.S. sales.
`Liquidation, Bankruptcy'
If the dollar stays near parity, ``the entire forest- products industry practically is going to be in liquidation, bankruptcy, and there is going to be an enormous loss of employment,'' said Stephen Jarislowsky, a former Canfor director who is chief executive officer of Montreal-based Jarislowsky Fraser Ltd., which manages about $63 billion in investments.
``It's very hard to compete,'' Laurent Beaudoin, CEO of Montreal-based Bombardier, told Industry Minister Jim Prentice Nov. 21 during a question-and-answer session after a speech the minister gave in Toronto. Without the government or the Bank of Canada taking steps to mitigate the currency's advance, Beaudoin said, ``the manufacturing sector in Canada can't survive.''
Labor and business leaders have come together on the issue. In a rare joint statement today, the Canadian Labour Congress and Canadian Manufacturers & Exporters -- a lobby group for factory owners -- called on Dodge to cut interest rates tomorrow.
Retail Sales
Retail sales also fell in September, the third drop in four months, which Toronto-based Scotia Capital Inc. economist Karen Cordes called ``a strong indication that cross-border shopping is affecting domestic sales.''
Mail volume from the U.S. rose 15 percent in October from a year earlier, according to Canada Post spokeswoman Catherine Lortie. Same-day trips to the U.S. by car hit a six-year high of 2.1 million in September, 7.8 percent more than a year earlier.
Jay Sullivan, an Oakville, Ontario, resident, said his wife sent him to a Buffalo, New York, shopping mall for a pair of shoes, which he found for half the C$120 Canadian price.
``We are getting ripped off,'' said Sullivan, 37, who plans another trip to take advantage of cheaper car prices.
Car imports from the U.S. rose 68 percent in October from the previous month to almost 25,000 vehicles, according to the North American Automobile Trade Association.
Reason to Stay
Some retailers are giving consumers reason to stay in Canada. Wal-Mart Stores Inc., the world's largest retailer, announced price reductions in a Nov. 22 statement, saying, ``It's true! A strong dollar means lower prices for you at Wal- Mart Canada.''
Canada's currency started rising after hitting a record low in 2002. Since reaching an all-time high of 90.58 Canadian cents per U.S. dollar on Nov. 7, it has weakened 10 percent, as government reports show an economy struggling to cope.
Lewenza, the 53-year-old auto worker, said Canada's dollar must fall further to help the car industry in Ontario, which makes more vehicles than Michigan.
He was on the factory floor of the Benteler Automotive plant in Windsor last month to tell workers that efforts to keep the facility open had failed and they might be laid off. Benteler Automotive, a unit of Paderborn, Germany's Benteler AG, builds suspension parts at the plant for Chrysler LLC's Pacifica sport-utility vehicle, which the automaker is discontinuing.
Job losses have already shrunk Local 444 by about 3,000 union members -- or 23 percent -- since 2002, Lewenza said. The dollar ``is one more storm cloud we did not need.''
Only about two months ago, Canada hit parity with the U.S. dollar for the first time in 31 years. Now many Canadians have had their fill: Companies ranging from jetmaker Bombardier Inc. to lumber producer Canfor Corp. say their currency's strength is cutting into profits and jobs.
``There is not much pride in declining business,'' said Ken Lewenza, a Canadian Auto Workers union leader in Windsor, Ontario, where parts suppliers are closing operations and the casino just cut another 200 jobs. ``The squeeze is on, and our lives are miserable.''
Economists have slashed growth forecasts for 2008, and the Bank of Canada may cut interest rates as early as its next policy meeting tomorrow. Governor David Dodge said Nov. 17 that ``downside risks'' to the global economy have increased and might start to affect rates, as the strong currency and slower worldwide growth curb exports.
Canada's dollar has gained 17 percent against the U.S. dollar this year, the second-best performer among the 16 actively traded currencies Bloomberg tracks. The currency traded for $1 at 4:03 p.m. today in Toronto. A stronger currency reduces the value of sales in the U.S., which buys about 80 percent of Canada's exports.
Falling Exports
Canada's trade surplus narrowed to a nine-year low of C$2.7 billion ($2.7 billion) in September, as exports fell to the lowest level in 11 months and imports rose 2.2 percent, Statistics Canada said Nov. 9.
David Wolf, Merrill Lynch Canada's chief strategist, forecasts that Canada's economic growth will slip to 1.7 percent next year. That would be the slowest pace since 1996 and is down from 2.8 percent last year, according to Statistics Canada.
In a note to clients, Wolf said the strength of Canada's dollar, along with weaker U.S. demand, may help reduce profits for Toronto Stock Exchange-listed companies by 3.1 percent next year.
Toronto-based buyout firm Onex Corp. reported its largest quarterly loss in three years last month, and Montreal's Canadian National Railway Co. said the currency contributed to a third-quarter profit decline.
Vancouver-based Canfor, the country's biggest lumber firm, reported its third straight quarterly loss Nov. 1, as the U.S. homebuilding slump sapped demand, and Canada's strong dollar cut the value of U.S. sales.
`Liquidation, Bankruptcy'
If the dollar stays near parity, ``the entire forest- products industry practically is going to be in liquidation, bankruptcy, and there is going to be an enormous loss of employment,'' said Stephen Jarislowsky, a former Canfor director who is chief executive officer of Montreal-based Jarislowsky Fraser Ltd., which manages about $63 billion in investments.
``It's very hard to compete,'' Laurent Beaudoin, CEO of Montreal-based Bombardier, told Industry Minister Jim Prentice Nov. 21 during a question-and-answer session after a speech the minister gave in Toronto. Without the government or the Bank of Canada taking steps to mitigate the currency's advance, Beaudoin said, ``the manufacturing sector in Canada can't survive.''
Labor and business leaders have come together on the issue. In a rare joint statement today, the Canadian Labour Congress and Canadian Manufacturers & Exporters -- a lobby group for factory owners -- called on Dodge to cut interest rates tomorrow.
Retail Sales
Retail sales also fell in September, the third drop in four months, which Toronto-based Scotia Capital Inc. economist Karen Cordes called ``a strong indication that cross-border shopping is affecting domestic sales.''
Mail volume from the U.S. rose 15 percent in October from a year earlier, according to Canada Post spokeswoman Catherine Lortie. Same-day trips to the U.S. by car hit a six-year high of 2.1 million in September, 7.8 percent more than a year earlier.
Jay Sullivan, an Oakville, Ontario, resident, said his wife sent him to a Buffalo, New York, shopping mall for a pair of shoes, which he found for half the C$120 Canadian price.
``We are getting ripped off,'' said Sullivan, 37, who plans another trip to take advantage of cheaper car prices.
Car imports from the U.S. rose 68 percent in October from the previous month to almost 25,000 vehicles, according to the North American Automobile Trade Association.
Reason to Stay
Some retailers are giving consumers reason to stay in Canada. Wal-Mart Stores Inc., the world's largest retailer, announced price reductions in a Nov. 22 statement, saying, ``It's true! A strong dollar means lower prices for you at Wal- Mart Canada.''
Canada's currency started rising after hitting a record low in 2002. Since reaching an all-time high of 90.58 Canadian cents per U.S. dollar on Nov. 7, it has weakened 10 percent, as government reports show an economy struggling to cope.
Lewenza, the 53-year-old auto worker, said Canada's dollar must fall further to help the car industry in Ontario, which makes more vehicles than Michigan.
He was on the factory floor of the Benteler Automotive plant in Windsor last month to tell workers that efforts to keep the facility open had failed and they might be laid off. Benteler Automotive, a unit of Paderborn, Germany's Benteler AG, builds suspension parts at the plant for Chrysler LLC's Pacifica sport-utility vehicle, which the automaker is discontinuing.
Job losses have already shrunk Local 444 by about 3,000 union members -- or 23 percent -- since 2002, Lewenza said. The dollar ``is one more storm cloud we did not need.''
PRECIOUS METALS: NY Gold, Silver Rise Slightly On Currencies
NEW YORK (Dow Jones)--Gold and silver futures rose slightly Monday as the U.S. dollar dipped a smidge and the euro firmed modestly, analysts said.
February gold rose $5.60 to $794.70 an ounce on the Comex division of the New York Mercantile Exchange. As pit trade was closing, the February contract at the Chicago Board of Trade was up $5.80 to $795.30.
Gold rose along with the euro, said Jim Steel, senior vice president and metals analyst with HSBC.
"I think it is simply a modest recovery from the selling last week," he said.
The slipping dollar supported gold, which remained within key support and resistance, said Patrick Fearon, analyst with A.G. Edwards.
"I'm really watching the area around $782 or so (as support)," said Fearon. "If we break below that level, I think that's a decidedly bearish sign for the bulls."
Resistance lies up around $821, he added.
"The dollar is not doing much," said Leonard Kaplan, president of Prospector Asset Management. "But the euro is a little up, so gold is a little bit up."
As gold was closing, the dollar index was down more than 0.2% while the euro was up to $1.4662.
Meanwhile, Comex March silver rose 4.5 cents to $14.21 an ounce as the euro was slightly higher, said HSBC's Steel.
Silver also got a boost from Friday news that Mexican mining production fell 2.6% in September from the year-ago month, due to lower output of metals including silver, he said.
January platinum, the biggest winner among U.S. precious metals, rose $17.30, or nearly 1.2% to $1,461.40 an ounce, while March palladium declined $1.70 to $351.65 an ounce.
Platinum futures seemed to be "overachieving" ahead of a planned strike in South Africa, a trader said. They were also "seeing a little bit of a bump" on word of a closed mine shaft, he said.
Palladium is down on supply-demand fundamentals, the trader said.
"The surplus is really just tremendous this year," he said.
The metal "doesn't want to go higher than this," the trader said. "Some say it doesn't deserve to be at $350."
Settlements (includes open-outcry and electronic trading):
London PM Gold Fix: $784.25 versus previous $783.50
Spot gold at 1:31 p.m. EST: $789.05, up $5.65; Range:
$777.20-$791.70
February gold (GCG08) $794.70, up $5.60; Range $783.00-
$798.00
March silver (SIH08) $14.210, up 4.5 cents; Range $13.960-
$14.395
January platinum (PLF08) $1,461.40, up $17.30; Range
$1,436.10-$1,462.00
March palladium (PAH08) $351.65, down $1.70; Range $348.75-
$354.05
February gold rose $5.60 to $794.70 an ounce on the Comex division of the New York Mercantile Exchange. As pit trade was closing, the February contract at the Chicago Board of Trade was up $5.80 to $795.30.
Gold rose along with the euro, said Jim Steel, senior vice president and metals analyst with HSBC.
"I think it is simply a modest recovery from the selling last week," he said.
The slipping dollar supported gold, which remained within key support and resistance, said Patrick Fearon, analyst with A.G. Edwards.
"I'm really watching the area around $782 or so (as support)," said Fearon. "If we break below that level, I think that's a decidedly bearish sign for the bulls."
Resistance lies up around $821, he added.
"The dollar is not doing much," said Leonard Kaplan, president of Prospector Asset Management. "But the euro is a little up, so gold is a little bit up."
As gold was closing, the dollar index was down more than 0.2% while the euro was up to $1.4662.
Meanwhile, Comex March silver rose 4.5 cents to $14.21 an ounce as the euro was slightly higher, said HSBC's Steel.
Silver also got a boost from Friday news that Mexican mining production fell 2.6% in September from the year-ago month, due to lower output of metals including silver, he said.
January platinum, the biggest winner among U.S. precious metals, rose $17.30, or nearly 1.2% to $1,461.40 an ounce, while March palladium declined $1.70 to $351.65 an ounce.
Platinum futures seemed to be "overachieving" ahead of a planned strike in South Africa, a trader said. They were also "seeing a little bit of a bump" on word of a closed mine shaft, he said.
Palladium is down on supply-demand fundamentals, the trader said.
"The surplus is really just tremendous this year," he said.
The metal "doesn't want to go higher than this," the trader said. "Some say it doesn't deserve to be at $350."
Settlements (includes open-outcry and electronic trading):
London PM Gold Fix: $784.25 versus previous $783.50
Spot gold at 1:31 p.m. EST: $789.05, up $5.65; Range:
$777.20-$791.70
February gold (GCG08) $794.70, up $5.60; Range $783.00-
$798.00
March silver (SIH08) $14.210, up 4.5 cents; Range $13.960-
$14.395
January platinum (PLF08) $1,461.40, up $17.30; Range
$1,436.10-$1,462.00
March palladium (PAH08) $351.65, down $1.70; Range $348.75-
$354.05
This is Gonna Hurt…
A darker mood sweeps the world, as financial bombs continue to go off…none of our milestones were hit last week - but all is not lost…
*** Observing a car accident of titanic proportions…dreaming of a golden Christmas…
*** Another rate cut is inevitable - but will it matter?…college essay difficulties…and more!
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"I'd wait for him to get home. Then, I'd listen for the car in the garage…and stand by the door until he came out."
Elizabeth's grandmother was explaining what it was like during the Great Depression. Her husband, a stockbroker, had lost almost all his clients…and maybe all his money. Some men couldn't take it. They sat in their cars with the motor running until the stock market disappeared forever.
It is hard for us to imagine what it was like. Hardly anyone alive today remembers. Instead, what we remember is a long period in which nothing went wrong. Credit default swaps - insurance against non-payment - grew like mushrooms, up nine times in the last three years…to more than $45 trillion.
And why shouldn't they grow? It cost almost nothing to insure against default…because nothing ever defaulted. Even if you wanted to default - whether on a commercial loan or a mortgage - it was hard to do; there was always someone waiting to lend you more money.
But now…things have changed:
"Suddenly the mood has darkened," reports the London Times. "Just when bankers and investors were hoping the worst was over, a second devastating wave of writedowns from major banks has rocked confidence. In recent weeks, Citi announced it would write down a further $6.4 billion in losses related to the sub-prime mortgage crisis. Merrill has also revealed more losses, while HSBC last week said it would take $45 billion back onto its balance sheet by rescuing two structured-investment vehicles. Last month Barclays wrote off $1.3 billion.
"More pain looks inevitable. Analysts expect Citi to be hit with a further $15 billion of writedowns. Investors will be nervously scrutinising a Royal Bank of Scotland trading statement this Thursday when the bank is expected to reveal sub-prime-related losses of more than £1 billion. Goldman Sachs analysts have estimated that the total sub-prime-linked losses could reach a whopping $500 billion - far higher than Federal Reserve chairman Ben Bernanke's initial estimate of $50 billion, later revised to $150 billion.
"To add to the gloom there are mounting fears that the problems could engulf other types of American debt - credit cards, car finance and unsecured loans.
"'What has happened is that the risk has been spread so far and wide that no-one really knows where the pain is being taken. The financial bombs just keep going off,' said one senior investment banker."
Last week, none of our milestones were hit.
Gold didn't rise above $850. The euro (EUR) didn't go above $1.50. Oil didn't hit $100.
Well, there's always next week!
You will recall, dear reader, that we are watching a titanic traffic accident. The unstoppable force of inflation is running smack dab into the immoveable object of falling prices.
We don't yet know how it is going to turn out…but we're sure of one thing: sparks will fly when these two collide.
Last week, the European Central Bank announced that it "fears inflation more than a slowdown," according to the Financial Times. But most of the news points to an increasing danger from falling prices, not rising ones.
Commodities were down on Friday. Gold fell $13. It could go as low as $700 in this correction. Buy the dips, dear reader. Take advantage of a correction in the yellow metal - and it could turn out to be a golden Christmas for you.
"Foreclosures are piling up," says the Associated Press. And now comes this shocker from the Commerce Department: the median house price in the United States fell 13% over the 12 months ending in October. The median house now sells for $217,800. Hmmm….that's about $2.6 trillion in disappeared value from the national balance sheet.
But we have a long way to go. Wives are not listening to their husband's automobiles; not yet.
*** As anticipated, here comes the Bush Administration with a plan to make the subprime situation worse.
It's called the 'teaser freezer' program and it could be announced as early as today. What's the idea? Well, it's quite simple - just pass a law! Actually, we're exaggerating. The discussion so far, as we understand it, is to ask for voluntary cooperation from the mortgage lenders. They are supposed to let the teaser rates ride…for people who can't afford an increase.
"Deal in the Works to Freeze Rates on Subprime Loans," says the Washington Post. Of course, if such a deal made sense, lenders and borrowers could work it out on their own. And if it were possible to eliminate the problem - or even ease it - by government decree, it would be a very different world than the one we live in. When people owe money and can't pay it back, someone is going to take a loss. You can diddle with the details all you want…all you're going to do is to shift the loss from someone who deserves it onto someone else.
The great innovation of the recent credit boom was to create a stick that was long in the middle and short on both ends. On one end, the borrowers are now losing their houses. On the other, the investors are losing their money. The financial intermediaries - notably Goldman Sachs (NYSE:GS) - are sitting pretty. They made their money by putting the two dumbbells together. And now, the Bush Administration is taking the time-honored tradition of pushing more of the losses away from the borrowers…and towards the other end of the stick, that is, towards the lenders. Why? Hey…where have you been, dear reader? We live in a democracy. One man, one vote. How many subprime borrowers are there? How many subprime investors are there? You do the math. And expect more meddling as the crisis continues.
*** Among the many investors in subprime debt were state and local governments. Now, the press reports that Florida schools are "flat broke" as a consequence. And they're not the only ones. We're read about a couple French banks that have taken huge hits. And in last week's news was a report from north of the Arctic Circle, where towns in Norway had - you guessed it - invested in subprime debt. Citibank sold them the toxic stuff. Now, the poor Norwegians are not going to be able to retire in the style to which they had hoped to become accustomed.
So you see how it works? What goes around comes around. A fellow buys a home he can't afford. Wall Street sells the debt to a pension fund. The guy defaults on his mortgage. He loses his house…and his pension! The Wall Street financier, in the meantime, puts a new wing on his palace in Greenwich.
*** But don't worry. Another rate cut is coming - in less than two weeks. Let's see how this works again…people get into trouble because they've borrowed too much money. Then, the feds come to the rescue - by offering to lend them more at lower rates!
But what's this? The banks aren't cooperating. While the feds lower…the banks raise. They ask for higher rates to protect themselves from the growing losses.
Part of the problem is that there is so much credit around…of such dubious quality…that the banks (and investors generally) don't know what to make of it. Double-A mortgage-backed credits are now trading at half their prices three months ago. It may be true that investors are overreacting. But after such a long period of not reacting at all…what would you expect?
"Lower rates usually boost stock prices. But there's another side to this story. There's a side few financial forums care to consistently report," Free Market Investor's Christopher Hancock tells us.
"Lower rates mean more money. More M3 means more inflation. Most haven't noticed the effect yet, because Chinese imports have delayed the hangover. But the days of importing Chinese deflation are coming to an end, as well.
"Every imaginable rescue mission for the overly indebted American consumer, not to mention the overly indebted American government, leads to increasing quantities of dollars and credit, which can only mean one thing:
"Dollar-holders beware."
Christopher tells us that at Free Market Investor, they're committed to businesses with little debt, tangible assets and earning power from consumers with cash to burn. Not a subscriber? Find out how to become one here.
And isn't is possible that the Fed, like the Bank of Japan before it, is now in the unenviable position of no longer pulling on the string of credit…but pushing on it? Isn't it possible, that the market no longer welcomes cheaper credit, but fears it? And isn't it possible, as we guessed last week, that the Fed is no longer driving the price of credit - by lowering rates - but following along behind what the market is already doing? U.S. Treasuries are dear; yields are low. The 10-year note is already below the yield of the Fed Funds rate. People are happy to lend to the government, because they know they will get their money back. But woe to the borrower without the U.S. government behind him.
Will a lower Fed rate encourage the mortgage lender to finance another house in the Detroit area? Will it encourage a builder to put up more condos in Miami or Las Vegas? Will it entice the marginal homebuyer to enter into another ARM contract?
Maybe not. That's the trouble with the immoveable object of deflation. It can be stubborn. Sometimes, it won't budge.
*** Poor Henry. The 17-year-old has to write his college essay. He's applying to various American universities…and to Cambridge in the United Kingdom. But he's also going to one of the toughest schools in France…where he is doing math that bears no resemblance to anything tackled by the Class of '66 at Southern High in Anne Arundel County, Maryland.
The problem for Henry is that he has to try to keep up with his work in school…while also figuring out where to go to college and getting together his applications.
"Sorry, Henry, I have no idea what any of this stuff means," we had to tell him…after trying to figure out one of his math problems. "But maybe I can help with your essay."
"Well, I'm supposed to write something that tells a bit about who I am…about something that influenced me…or a book that made a big impression on me. I was thinking of writing about To Kill a Mockingbird."
"Don't do that," was our advice. "They must get thousands of kids writing about To Kill a Mockingbird. And what are you going to say that hasn't already been said a thousand times? Instead, I would choose something that is specific to you. Original. Don't try to talk about big themes…don't try to sound smart…or wrestle with global warming or ethical issues. Just tell a story. Write with your eyes and your ears. Tell it as it happened. Tell what you heard. What you saw. What happened. Let them see who you are…by seeing the world that you see…through your eyes. Don't try to explain who you are or what you think. Don't come to a conclusion; let the reader do that. Don't use big words…and no Latinate words; stick to Anglo-Saxon words."
"Hmmm….then maybe I should tell about that time I helped Damien. That was an experience. We were working with power tools in the rain. It was shocking. Heh heh. And Damien practically cut his finger off."
Until tomorrow,
Bill Bonner
The Daily Reckoning
--- Special Offer ---
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It doesn't matter if you've never bought a stock before…
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The Daily Reckoning PRESENTS: You might argue that the Mogambo was a little crazy to begin with; but one this is certain - inflation is massaging that craziness on a daily basis. Poor, poor Mogambo… Good thing he's got his old friend tequila to help keep his mind right. Read on…
TRAUMATIZED BY INFLATIONARY GUNFIRE
by The Mogambo Guru
As usual, it is inflation in prices that makes me crazy, and it's tequila that lets me do something fun with my natural insanity to take my mind off the horror of it, as it is inflation in prices that is the precursor to social upheaval and economic collapse, which is why I figure that the Second Amendment was invented in the first place, and if you don't think so, then just manage to stay alive for the next couple of years to learn a real expensive lesson that you will never forget.
In the meantime, my dire prognostications continue apace, as the CRB index increased 1.4% for the week, which is a lot, and which is about a 15% increase year-to-date. The Goldman Sachs Commodities Index (GSCI) went up by a heart-stopping 3% last week, which means that this index is up a terrifying 42% y-t-d!
And speaking of inflation, the new Producer Price Index came out, and it looks like the price of finished goods, on a non-adjusted basis was up 6.1% year-over-year.
But for businesses, the prices they are paying keep going up, as the annual All-Items PPI inflation for October spiked to a 6.1% jump over this time last year. Food increased 7.1%, and Energy was up16.1%. Yikes!
For All-Items Intermediate Goods, prices were up 5.6%. Yikes yikes!!
For All-Items Finished Goods, prices were a blistering 25.7%. Yikes yikes yikes!!!
And even more ominous, The Economist magazine reports that "The Baltic Dry Index, which tracks the costs of shipping 'dry' goods such as iron ore, coal and grain around the world, dipped this week after hitting an all-time high on November 13th. But it is still up 154% from a year earlier." In fact, "The cost of shipping iron ore from Brazil to China is now more than the cost of digging up the ore itself."
The reason is the same old one, "As with so much to do with commodities, the extraordinary rise in freight rates is partly because of China's appetite for raw materials."
And this means that the transportation pipeline is already too small to accommodate such a large movement of goods, as "A dearth of new ships, and flotillas waiting to berth in overcrowded ports (especially in Australia), are also driving rates higher", meaning that even if enough stuff could be grown or mined, very little of this surplus could be delivered, as the transportation system is maxed out already! Hahaha!
And that is why OPEC saying that they are going to pump more oil is a load of hooey. In fact, The Daily Reckoning's Desidooru Saloon reports an online.wsj.com article that read, "Sadad I. Al-Husseini, an oil consultant and former executive at Aramco, Saudi Arabia's national oil company, gave a particularly chilling assessment of the world's oil outlook. The major oil-producing nations, he said, are inflating their oil reserves by as much as 300 billion barrels. These amount to hypothetical reserves that are 'not delineated, not accessible and not available for production.'"
The worse news, for those expecting an open oil spigot to save our nasty economic butts, is that, "A lot of production in the Middle East is from mature reservoirs, and the giant fields of the Persian Gulf region are 41% depleted."
But we were not talking about how oil exporters are liars and cheats, but about inflation, and that inflation in prices is everywhere, and everywhere the official response is the same; "Paper that sucker over!", even in oil-exporting nations.
For example, according to the Financial Times, inflation in consumer prices in the United Arab Emirates is "rampant" at "around 10%", which has prompted the federation of seven emirates to think about "revaluing or de-linking the dirham from its long-standing US dollar peg in a bid to tame" the inflation.
There are many ways for a government to paper over this mess. In this case, the UAE plans to, I kid you not, "raise federal government salaries by 70%"! Hahaha! Too rich!
The article even says that there are many of us out here in the real world of economics who are scared out of our freaking minds about such irresponsible government behavior, and indeed there are other "economists" who said that this "could fuel inflation in the Gulf state", although there is no word on how many of these other "economists" are also scared enough to carry so much heavy firepower, so much so, in fact, that they are so burdened that they need a motorized wheelchair just to get around the office, and so much body armor and bullet-proof plating that you need an intern just to help you remove enough of that heavy stuff to take a crap, which you have to do a lot during the day because there is just so much economic bad news scaring the crap out of me, so you can see my problem.
And without the least bit of irony, the very next sentence was, unbelievably, that "A cabinet meeting yesterday raised the 2008 budget by 47%." Yow!
In other sites around the region, Saudi Arabia, according to the Financial Times, "Inflation, which crept up to 4.9 per cent in September after averaging 2.2 per cent last year, is raising anxiety among the authorities." What I think is really worrying authorities is that "Food prices have increased 18.8 per cent", which makes you wonder how in the hell the overall inflation stayed at 4.9 percent?
King Abdullah, proving that being a king doesn't take a lot of smarts about money, especially if you have a lot of oil to pump that is making you lots and lots of money without lifting a finger, is apparently unaware of the basics of economics, which says that all this excessive flood of money inflating the money supply will cause inflation in prices, which is exactly what is happening. Being a stupid king, and thus at a loss, he "felt compelled to summon officials last month [to] explain the phenomenon."
I don't know what they did or said, but I assume that they did some uniquely Arab thing, like looking into the eye of some camels and eating figs or something, I dunno, since the idea of actual economics doesn't seem to appeal to them.
Well, to be fair, the fact is that the supply of oil can't apparently be increased, and in fact it is going down as part of the Peak Oil phenomenon, and with demand rising, oil exporters are going to be making scads of money, tons of money, mountains of money for their oil, no matter how little they pump.
And speaking of oil, in Martin Wolf's column in the Financial Times, he quotes the International Energy Agency as reporting the astonishing factoid that "The increase in China's energy demand between 2002 and 2005 was equivalent to Japan's current annual energy use." Yow! This is just the increase!
Suddenly, I feel compelled to remind you to buy gold and silver, as much as you can, and take physical possession of them, and put them somewhere safe and sound, someplace where you can get a good shot at anyone who even goes near to that locked closet, and when you demonstrate your resolve with a couple of warning shots to one of the kids who "accidentally" wandered over to the closet while chasing a stupid rubber ball that had rolled in there, leave the bullet holes in the wall as a reminder to the others. Trust me; it's worked like a charm around here!
But we were not talking about me or my Mogambo Closet Of Bullion (MCOB), or even how some snotty "mental health professionals" think that the stupid kids are now "scarred for life" because of a little gunfire, some random screaming and vague death threats for trespassing in the Mogambo Forbidden Zone (MFZ). Instead, we were talking about inflation and oil, and combining both of them brings us to the further news that in other "Gulf countries", inflation is running at double-digit rates! Ten percent and more! Much more! My God! This is horrific news!
But explaining to stupid social workers the relative degree of the two situations, namely a traumatized bunch of stupid kids or a traumatized stupid economy, is a waste of time, as they just "don't get it."
*** Observing a car accident of titanic proportions…dreaming of a golden Christmas…
*** Another rate cut is inevitable - but will it matter?…college essay difficulties…and more!
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"I'd wait for him to get home. Then, I'd listen for the car in the garage…and stand by the door until he came out."
Elizabeth's grandmother was explaining what it was like during the Great Depression. Her husband, a stockbroker, had lost almost all his clients…and maybe all his money. Some men couldn't take it. They sat in their cars with the motor running until the stock market disappeared forever.
It is hard for us to imagine what it was like. Hardly anyone alive today remembers. Instead, what we remember is a long period in which nothing went wrong. Credit default swaps - insurance against non-payment - grew like mushrooms, up nine times in the last three years…to more than $45 trillion.
And why shouldn't they grow? It cost almost nothing to insure against default…because nothing ever defaulted. Even if you wanted to default - whether on a commercial loan or a mortgage - it was hard to do; there was always someone waiting to lend you more money.
But now…things have changed:
"Suddenly the mood has darkened," reports the London Times. "Just when bankers and investors were hoping the worst was over, a second devastating wave of writedowns from major banks has rocked confidence. In recent weeks, Citi announced it would write down a further $6.4 billion in losses related to the sub-prime mortgage crisis. Merrill has also revealed more losses, while HSBC last week said it would take $45 billion back onto its balance sheet by rescuing two structured-investment vehicles. Last month Barclays wrote off $1.3 billion.
"More pain looks inevitable. Analysts expect Citi to be hit with a further $15 billion of writedowns. Investors will be nervously scrutinising a Royal Bank of Scotland trading statement this Thursday when the bank is expected to reveal sub-prime-related losses of more than £1 billion. Goldman Sachs analysts have estimated that the total sub-prime-linked losses could reach a whopping $500 billion - far higher than Federal Reserve chairman Ben Bernanke's initial estimate of $50 billion, later revised to $150 billion.
"To add to the gloom there are mounting fears that the problems could engulf other types of American debt - credit cards, car finance and unsecured loans.
"'What has happened is that the risk has been spread so far and wide that no-one really knows where the pain is being taken. The financial bombs just keep going off,' said one senior investment banker."
Last week, none of our milestones were hit.
Gold didn't rise above $850. The euro (EUR) didn't go above $1.50. Oil didn't hit $100.
Well, there's always next week!
You will recall, dear reader, that we are watching a titanic traffic accident. The unstoppable force of inflation is running smack dab into the immoveable object of falling prices.
We don't yet know how it is going to turn out…but we're sure of one thing: sparks will fly when these two collide.
Last week, the European Central Bank announced that it "fears inflation more than a slowdown," according to the Financial Times. But most of the news points to an increasing danger from falling prices, not rising ones.
Commodities were down on Friday. Gold fell $13. It could go as low as $700 in this correction. Buy the dips, dear reader. Take advantage of a correction in the yellow metal - and it could turn out to be a golden Christmas for you.
"Foreclosures are piling up," says the Associated Press. And now comes this shocker from the Commerce Department: the median house price in the United States fell 13% over the 12 months ending in October. The median house now sells for $217,800. Hmmm….that's about $2.6 trillion in disappeared value from the national balance sheet.
But we have a long way to go. Wives are not listening to their husband's automobiles; not yet.
*** As anticipated, here comes the Bush Administration with a plan to make the subprime situation worse.
It's called the 'teaser freezer' program and it could be announced as early as today. What's the idea? Well, it's quite simple - just pass a law! Actually, we're exaggerating. The discussion so far, as we understand it, is to ask for voluntary cooperation from the mortgage lenders. They are supposed to let the teaser rates ride…for people who can't afford an increase.
"Deal in the Works to Freeze Rates on Subprime Loans," says the Washington Post. Of course, if such a deal made sense, lenders and borrowers could work it out on their own. And if it were possible to eliminate the problem - or even ease it - by government decree, it would be a very different world than the one we live in. When people owe money and can't pay it back, someone is going to take a loss. You can diddle with the details all you want…all you're going to do is to shift the loss from someone who deserves it onto someone else.
The great innovation of the recent credit boom was to create a stick that was long in the middle and short on both ends. On one end, the borrowers are now losing their houses. On the other, the investors are losing their money. The financial intermediaries - notably Goldman Sachs (NYSE:GS) - are sitting pretty. They made their money by putting the two dumbbells together. And now, the Bush Administration is taking the time-honored tradition of pushing more of the losses away from the borrowers…and towards the other end of the stick, that is, towards the lenders. Why? Hey…where have you been, dear reader? We live in a democracy. One man, one vote. How many subprime borrowers are there? How many subprime investors are there? You do the math. And expect more meddling as the crisis continues.
*** Among the many investors in subprime debt were state and local governments. Now, the press reports that Florida schools are "flat broke" as a consequence. And they're not the only ones. We're read about a couple French banks that have taken huge hits. And in last week's news was a report from north of the Arctic Circle, where towns in Norway had - you guessed it - invested in subprime debt. Citibank sold them the toxic stuff. Now, the poor Norwegians are not going to be able to retire in the style to which they had hoped to become accustomed.
So you see how it works? What goes around comes around. A fellow buys a home he can't afford. Wall Street sells the debt to a pension fund. The guy defaults on his mortgage. He loses his house…and his pension! The Wall Street financier, in the meantime, puts a new wing on his palace in Greenwich.
*** But don't worry. Another rate cut is coming - in less than two weeks. Let's see how this works again…people get into trouble because they've borrowed too much money. Then, the feds come to the rescue - by offering to lend them more at lower rates!
But what's this? The banks aren't cooperating. While the feds lower…the banks raise. They ask for higher rates to protect themselves from the growing losses.
Part of the problem is that there is so much credit around…of such dubious quality…that the banks (and investors generally) don't know what to make of it. Double-A mortgage-backed credits are now trading at half their prices three months ago. It may be true that investors are overreacting. But after such a long period of not reacting at all…what would you expect?
"Lower rates usually boost stock prices. But there's another side to this story. There's a side few financial forums care to consistently report," Free Market Investor's Christopher Hancock tells us.
"Lower rates mean more money. More M3 means more inflation. Most haven't noticed the effect yet, because Chinese imports have delayed the hangover. But the days of importing Chinese deflation are coming to an end, as well.
"Every imaginable rescue mission for the overly indebted American consumer, not to mention the overly indebted American government, leads to increasing quantities of dollars and credit, which can only mean one thing:
"Dollar-holders beware."
Christopher tells us that at Free Market Investor, they're committed to businesses with little debt, tangible assets and earning power from consumers with cash to burn. Not a subscriber? Find out how to become one here.
And isn't is possible that the Fed, like the Bank of Japan before it, is now in the unenviable position of no longer pulling on the string of credit…but pushing on it? Isn't it possible, that the market no longer welcomes cheaper credit, but fears it? And isn't it possible, as we guessed last week, that the Fed is no longer driving the price of credit - by lowering rates - but following along behind what the market is already doing? U.S. Treasuries are dear; yields are low. The 10-year note is already below the yield of the Fed Funds rate. People are happy to lend to the government, because they know they will get their money back. But woe to the borrower without the U.S. government behind him.
Will a lower Fed rate encourage the mortgage lender to finance another house in the Detroit area? Will it encourage a builder to put up more condos in Miami or Las Vegas? Will it entice the marginal homebuyer to enter into another ARM contract?
Maybe not. That's the trouble with the immoveable object of deflation. It can be stubborn. Sometimes, it won't budge.
*** Poor Henry. The 17-year-old has to write his college essay. He's applying to various American universities…and to Cambridge in the United Kingdom. But he's also going to one of the toughest schools in France…where he is doing math that bears no resemblance to anything tackled by the Class of '66 at Southern High in Anne Arundel County, Maryland.
The problem for Henry is that he has to try to keep up with his work in school…while also figuring out where to go to college and getting together his applications.
"Sorry, Henry, I have no idea what any of this stuff means," we had to tell him…after trying to figure out one of his math problems. "But maybe I can help with your essay."
"Well, I'm supposed to write something that tells a bit about who I am…about something that influenced me…or a book that made a big impression on me. I was thinking of writing about To Kill a Mockingbird."
"Don't do that," was our advice. "They must get thousands of kids writing about To Kill a Mockingbird. And what are you going to say that hasn't already been said a thousand times? Instead, I would choose something that is specific to you. Original. Don't try to talk about big themes…don't try to sound smart…or wrestle with global warming or ethical issues. Just tell a story. Write with your eyes and your ears. Tell it as it happened. Tell what you heard. What you saw. What happened. Let them see who you are…by seeing the world that you see…through your eyes. Don't try to explain who you are or what you think. Don't come to a conclusion; let the reader do that. Don't use big words…and no Latinate words; stick to Anglo-Saxon words."
"Hmmm….then maybe I should tell about that time I helped Damien. That was an experience. We were working with power tools in the rain. It was shocking. Heh heh. And Damien practically cut his finger off."
Until tomorrow,
Bill Bonner
The Daily Reckoning
--- Special Offer ---
How the Ordinary Investor Cashes in on Huge Profits
It doesn't matter if you've never bought a stock before…
The CXS Money-Multiplier System tells you what to buy and sell. And you could $200 into $1 with 7 steps. See how here.
---------------------
The Daily Reckoning PRESENTS: You might argue that the Mogambo was a little crazy to begin with; but one this is certain - inflation is massaging that craziness on a daily basis. Poor, poor Mogambo… Good thing he's got his old friend tequila to help keep his mind right. Read on…
TRAUMATIZED BY INFLATIONARY GUNFIRE
by The Mogambo Guru
As usual, it is inflation in prices that makes me crazy, and it's tequila that lets me do something fun with my natural insanity to take my mind off the horror of it, as it is inflation in prices that is the precursor to social upheaval and economic collapse, which is why I figure that the Second Amendment was invented in the first place, and if you don't think so, then just manage to stay alive for the next couple of years to learn a real expensive lesson that you will never forget.
In the meantime, my dire prognostications continue apace, as the CRB index increased 1.4% for the week, which is a lot, and which is about a 15% increase year-to-date. The Goldman Sachs Commodities Index (GSCI) went up by a heart-stopping 3% last week, which means that this index is up a terrifying 42% y-t-d!
And speaking of inflation, the new Producer Price Index came out, and it looks like the price of finished goods, on a non-adjusted basis was up 6.1% year-over-year.
But for businesses, the prices they are paying keep going up, as the annual All-Items PPI inflation for October spiked to a 6.1% jump over this time last year. Food increased 7.1%, and Energy was up16.1%. Yikes!
For All-Items Intermediate Goods, prices were up 5.6%. Yikes yikes!!
For All-Items Finished Goods, prices were a blistering 25.7%. Yikes yikes yikes!!!
And even more ominous, The Economist magazine reports that "The Baltic Dry Index, which tracks the costs of shipping 'dry' goods such as iron ore, coal and grain around the world, dipped this week after hitting an all-time high on November 13th. But it is still up 154% from a year earlier." In fact, "The cost of shipping iron ore from Brazil to China is now more than the cost of digging up the ore itself."
The reason is the same old one, "As with so much to do with commodities, the extraordinary rise in freight rates is partly because of China's appetite for raw materials."
And this means that the transportation pipeline is already too small to accommodate such a large movement of goods, as "A dearth of new ships, and flotillas waiting to berth in overcrowded ports (especially in Australia), are also driving rates higher", meaning that even if enough stuff could be grown or mined, very little of this surplus could be delivered, as the transportation system is maxed out already! Hahaha!
And that is why OPEC saying that they are going to pump more oil is a load of hooey. In fact, The Daily Reckoning's Desidooru Saloon reports an online.wsj.com article that read, "Sadad I. Al-Husseini, an oil consultant and former executive at Aramco, Saudi Arabia's national oil company, gave a particularly chilling assessment of the world's oil outlook. The major oil-producing nations, he said, are inflating their oil reserves by as much as 300 billion barrels. These amount to hypothetical reserves that are 'not delineated, not accessible and not available for production.'"
The worse news, for those expecting an open oil spigot to save our nasty economic butts, is that, "A lot of production in the Middle East is from mature reservoirs, and the giant fields of the Persian Gulf region are 41% depleted."
But we were not talking about how oil exporters are liars and cheats, but about inflation, and that inflation in prices is everywhere, and everywhere the official response is the same; "Paper that sucker over!", even in oil-exporting nations.
For example, according to the Financial Times, inflation in consumer prices in the United Arab Emirates is "rampant" at "around 10%", which has prompted the federation of seven emirates to think about "revaluing or de-linking the dirham from its long-standing US dollar peg in a bid to tame" the inflation.
There are many ways for a government to paper over this mess. In this case, the UAE plans to, I kid you not, "raise federal government salaries by 70%"! Hahaha! Too rich!
The article even says that there are many of us out here in the real world of economics who are scared out of our freaking minds about such irresponsible government behavior, and indeed there are other "economists" who said that this "could fuel inflation in the Gulf state", although there is no word on how many of these other "economists" are also scared enough to carry so much heavy firepower, so much so, in fact, that they are so burdened that they need a motorized wheelchair just to get around the office, and so much body armor and bullet-proof plating that you need an intern just to help you remove enough of that heavy stuff to take a crap, which you have to do a lot during the day because there is just so much economic bad news scaring the crap out of me, so you can see my problem.
And without the least bit of irony, the very next sentence was, unbelievably, that "A cabinet meeting yesterday raised the 2008 budget by 47%." Yow!
In other sites around the region, Saudi Arabia, according to the Financial Times, "Inflation, which crept up to 4.9 per cent in September after averaging 2.2 per cent last year, is raising anxiety among the authorities." What I think is really worrying authorities is that "Food prices have increased 18.8 per cent", which makes you wonder how in the hell the overall inflation stayed at 4.9 percent?
King Abdullah, proving that being a king doesn't take a lot of smarts about money, especially if you have a lot of oil to pump that is making you lots and lots of money without lifting a finger, is apparently unaware of the basics of economics, which says that all this excessive flood of money inflating the money supply will cause inflation in prices, which is exactly what is happening. Being a stupid king, and thus at a loss, he "felt compelled to summon officials last month [to] explain the phenomenon."
I don't know what they did or said, but I assume that they did some uniquely Arab thing, like looking into the eye of some camels and eating figs or something, I dunno, since the idea of actual economics doesn't seem to appeal to them.
Well, to be fair, the fact is that the supply of oil can't apparently be increased, and in fact it is going down as part of the Peak Oil phenomenon, and with demand rising, oil exporters are going to be making scads of money, tons of money, mountains of money for their oil, no matter how little they pump.
And speaking of oil, in Martin Wolf's column in the Financial Times, he quotes the International Energy Agency as reporting the astonishing factoid that "The increase in China's energy demand between 2002 and 2005 was equivalent to Japan's current annual energy use." Yow! This is just the increase!
Suddenly, I feel compelled to remind you to buy gold and silver, as much as you can, and take physical possession of them, and put them somewhere safe and sound, someplace where you can get a good shot at anyone who even goes near to that locked closet, and when you demonstrate your resolve with a couple of warning shots to one of the kids who "accidentally" wandered over to the closet while chasing a stupid rubber ball that had rolled in there, leave the bullet holes in the wall as a reminder to the others. Trust me; it's worked like a charm around here!
But we were not talking about me or my Mogambo Closet Of Bullion (MCOB), or even how some snotty "mental health professionals" think that the stupid kids are now "scarred for life" because of a little gunfire, some random screaming and vague death threats for trespassing in the Mogambo Forbidden Zone (MFZ). Instead, we were talking about inflation and oil, and combining both of them brings us to the further news that in other "Gulf countries", inflation is running at double-digit rates! Ten percent and more! Much more! My God! This is horrific news!
But explaining to stupid social workers the relative degree of the two situations, namely a traumatized bunch of stupid kids or a traumatized stupid economy, is a waste of time, as they just "don't get it."
Gold ends higher after last week's steep fall
(MarketWatch) -- Gold futures closed with gains on Monday, rebounding from their steep decline last week, as weakness in the dollar boosted demand for the precious metal. Gold for February delivery rose $5.60 to end at $794.70 an ounce on the New York Mercantile Exchange. Earlier, the contract hit an intraday low of $788.80.
"The metal is likely to remain in a more mixed mood over the next few weeks as pockets of investment demand are offset by long liquidation in the run-up to year-end," said James Moore, an analyst at TheBullionDesk.com, in a research note.
On Friday, gold fell $13.20 to end at $789.10 an ounce, posting a weekly loss of $42.70.
"Gold was down some 5.5% last week on options expiry, year-end profit-taking and tentative dollar strength and oil weakness," said Mark O'Byrne, director at Gold and Silver Investments Ltd.
"While there may be some follow-through selling this week and further short-term weakness and consolidation, the medium and long-term outlook remains extremely bullish with very strong fundamentals underpinning the gold market," O'Byrne said in a research note.
On the currency markets, the dollar fell back against other major currencies, after comments by a Federal Reserve official cemented expectations that the central bank will cut interest rates next week.
In a speech Monday, Boston Fed president Eric Rosengren suggested that the foreclosure crisis in subprime mortgages will get worse before it gets better. Just how much worse depends on the outlook for the economy and housing, he said.
The dollar index, which tracks the performance of the greenback against a basket of key currencies, fell 0.3% at 75.940. See Currencies.
Crude-oil futures declined amid ongoing speculation about whether the Organization of Petroleum Exporting Countries will raise production quotas at its meeting later this week. See Futures Movers.
Other metals prices were mixed on Monday. Copper for December delivery dropped 9.60 cents, or 3%, to $3.0610 a pound.
Silver for March delivery gained 4.50 cents at $14.210 an ounce and January platinum rose $17.30 at $1,461.40 an ounce. December palladium edged down $1.70 to $346.95 an ounce.
"The metal is likely to remain in a more mixed mood over the next few weeks as pockets of investment demand are offset by long liquidation in the run-up to year-end," said James Moore, an analyst at TheBullionDesk.com, in a research note.
On Friday, gold fell $13.20 to end at $789.10 an ounce, posting a weekly loss of $42.70.
"Gold was down some 5.5% last week on options expiry, year-end profit-taking and tentative dollar strength and oil weakness," said Mark O'Byrne, director at Gold and Silver Investments Ltd.
"While there may be some follow-through selling this week and further short-term weakness and consolidation, the medium and long-term outlook remains extremely bullish with very strong fundamentals underpinning the gold market," O'Byrne said in a research note.
On the currency markets, the dollar fell back against other major currencies, after comments by a Federal Reserve official cemented expectations that the central bank will cut interest rates next week.
In a speech Monday, Boston Fed president Eric Rosengren suggested that the foreclosure crisis in subprime mortgages will get worse before it gets better. Just how much worse depends on the outlook for the economy and housing, he said.
The dollar index, which tracks the performance of the greenback against a basket of key currencies, fell 0.3% at 75.940. See Currencies.
Crude-oil futures declined amid ongoing speculation about whether the Organization of Petroleum Exporting Countries will raise production quotas at its meeting later this week. See Futures Movers.
Other metals prices were mixed on Monday. Copper for December delivery dropped 9.60 cents, or 3%, to $3.0610 a pound.
Silver for March delivery gained 4.50 cents at $14.210 an ounce and January platinum rose $17.30 at $1,461.40 an ounce. December palladium edged down $1.70 to $346.95 an ounce.
China closes in on SA as world's top gold producer
Emerging global superpower China may snatch South Africa's crown as the world's top gold producer this year.
South Africa has thus far managed to hold on to the crown, but China, which has established itself as the world's second-largest gold producer after seven years of continued growth, now looks set to overtake South Africa in the production stakes.
In the nine months to end September, China's output of gold reached 191,5 tons, which is just fractionally behind South Africa's output of 192,8 tons.
"It will be very interesting to see how the world's largest gold-producing countries rank at the end of this year," said Australian mining consultants Surbiton Associates.
"It looks like China could overtake South Africa to become the world's number one producer for 2007 ... Australia will probably take third place, followed by the United States," it said.
This echoes the view of precious metals consultancy GFMS, which in September predicted that Chinese gold production may outpace that of South Africa.
It said production announcements at three notable operations in China were expected to add to China's full-year production profile, while South Africa's gold production profile was not expected to grow because the majority of its producing mines were reaching maturity.
South Africa, whose output comprised about 66% of world production in the 1970s, produced 275 tonnes of gold in 2006.
South Africa has thus far managed to hold on to the crown, but China, which has established itself as the world's second-largest gold producer after seven years of continued growth, now looks set to overtake South Africa in the production stakes.
In the nine months to end September, China's output of gold reached 191,5 tons, which is just fractionally behind South Africa's output of 192,8 tons.
"It will be very interesting to see how the world's largest gold-producing countries rank at the end of this year," said Australian mining consultants Surbiton Associates.
"It looks like China could overtake South Africa to become the world's number one producer for 2007 ... Australia will probably take third place, followed by the United States," it said.
This echoes the view of precious metals consultancy GFMS, which in September predicted that Chinese gold production may outpace that of South Africa.
It said production announcements at three notable operations in China were expected to add to China's full-year production profile, while South Africa's gold production profile was not expected to grow because the majority of its producing mines were reaching maturity.
South Africa, whose output comprised about 66% of world production in the 1970s, produced 275 tonnes of gold in 2006.
U.S. platinum rises ahead of S. African strike
(Reuters) - Platinum futures in New York rose early
Monday on the back of robust physical and trade buying ahead of a national
mining strike in the world's top platinum producer South Africa. Meanwhile, U.S. gold contracts were higher and dealers said bullion
could find technical support after its sharp losses last week. "I think the imminent strike with the safety issue boosted platinum. We
are also hearing in TOCOM (Tokyo Commodities Exchange) that there are some
very good physical buying in the last couple of days in platinum, despite
gold being very weak and silver being very weak," said Ralph D'Esposito, a
NYMEX floor trader in New York. At 10:26 a.m. EST (1526 GMT), most-active New York Mercantile Exchange
January platinum PLF8 was up $7.90 at $1,452.00 an ounce, trading between
$1,436.10 and $1,454.50. Spot platinum was quoted at $1,448/1,453. Mines in South Africa will fall silent at midnight on Monday due to a
national protest against mine deaths, with warnings of further action if
fatalities continue. South Africa accounts for nearly 80 percent of the
world's total platinum output. [ID:nL03280899] Almost a quarter of a million members of the country's biggest mining
union will down tools in the one-day action, the first-ever national and
industry-wide strike on safety, as the death toll in the mines, some of
which are the world's deepest, rose over the weekend to near the 199 killed
in 2006. D'Esposito also cited heavy commercial activity on the buy-side and
robust investment demand. "I am still maintaining that $1,500 is just
around the corner here," he said. NYMEX January platinum hit a contract high of $1,498.80 on Nov 7. GOLD HITS BOTTOM? Gold futures rebounded on a slightly weaker dollar in spite of lower
crude oil prices. February gold GCG8 on the COMEX division of the NYMEX was up $3.70 at
$792.80 an ounce, trading between $783 -- which marked a near two-week low
-- and $798. "We've seen a good pullback in gold from the highs and we are starting
to bump along technical support around $775. We will see if people in the
next 48 hours will view this as a opportunity to buy or is this going to be
further liquidation," said one precious metals dealer in New York. Gold futures finished at a 10-day low last Friday after posting heavy
losses last week. The February contract hit a three-week high of $844.20
last Monday, but it had dropped $55 from its Monday peak last week. The dealer said that the South African strike should have a bigger
impact on platinum compared to gold. "Overall, it will continue the trend of diminishing supply from South
Africa in gold," he said. The U.S. Commodity Futures Trading Commission said in its latest
Commitment of Traders report that noncommercial net gold position rose to
175,081 lots in the week up to Nov 27 compared with 172,390 lots in the
week earlier. [ID:nN30326378] In the government sector, the European Central Bank (ECB) said it
completed gold sales amounting to 42 tonnes of gold on Nov. 30, which were
in conformity with the Central Banks' Gold Agreement of 2004. Meanwhile, the Bank of Spain held its gold reserves at 9.1 million troy
ounces in November, data on the central bank's Web page showed on Monday.
Spain held 13.4 million ounces of gold at the end of last year.
[ID:nL03315429] Spot gold was quoted at $786.60/786.80 an ounce, compared with
$783.50/784.20 in New York Friday afternoon. London bullion dealers fixed
the afternoon spot reference price at $784.25. COMEX March silver SIH8 was up 5.50 cents at $14.22 an ounce, trading
between $13.96 and $14.26. Spot silver was quoted at $14.03/14.08 an ounce, compared with
$13.96/14.01 late Friday in New York. London silver was fixed at $13.860. March palladium PAH8 dropped $3.15 to $350.20 an ounce. Spot
palladium fetched $346/349.
Monday on the back of robust physical and trade buying ahead of a national
mining strike in the world's top platinum producer South Africa. Meanwhile, U.S. gold contracts were higher and dealers said bullion
could find technical support after its sharp losses last week. "I think the imminent strike with the safety issue boosted platinum. We
are also hearing in TOCOM (Tokyo Commodities Exchange) that there are some
very good physical buying in the last couple of days in platinum, despite
gold being very weak and silver being very weak," said Ralph D'Esposito, a
NYMEX floor trader in New York. At 10:26 a.m. EST (1526 GMT), most-active New York Mercantile Exchange
January platinum PLF8 was up $7.90 at $1,452.00 an ounce, trading between
$1,436.10 and $1,454.50. Spot platinum
national protest against mine deaths, with warnings of further action if
fatalities continue. South Africa accounts for nearly 80 percent of the
world's total platinum output. [ID:nL03280899] Almost a quarter of a million members of the country's biggest mining
union will down tools in the one-day action, the first-ever national and
industry-wide strike on safety, as the death toll in the mines, some of
which are the world's deepest, rose over the weekend to near the 199 killed
in 2006. D'Esposito also cited heavy commercial activity on the buy-side and
robust investment demand. "I am still maintaining that $1,500 is just
around the corner here," he said. NYMEX January platinum hit a contract high of $1,498.80 on Nov 7. GOLD HITS BOTTOM? Gold futures rebounded on a slightly weaker dollar in spite of lower
crude oil prices. February gold GCG8 on the COMEX division of the NYMEX was up $3.70 at
$792.80 an ounce, trading between $783 -- which marked a near two-week low
-- and $798. "We've seen a good pullback in gold from the highs and we are starting
to bump along technical support around $775. We will see if people in the
next 48 hours will view this as a opportunity to buy or is this going to be
further liquidation," said one precious metals dealer in New York. Gold futures finished at a 10-day low last Friday after posting heavy
losses last week. The February contract hit a three-week high of $844.20
last Monday, but it had dropped $55 from its Monday peak last week. The dealer said that the South African strike should have a bigger
impact on platinum compared to gold. "Overall, it will continue the trend of diminishing supply from South
Africa in gold," he said. The U.S. Commodity Futures Trading Commission said in its latest
Commitment of Traders report that noncommercial net gold position rose to
175,081 lots in the week up to Nov 27 compared with 172,390 lots in the
week earlier. [ID:nN30326378] In the government sector, the European Central Bank (ECB) said it
completed gold sales amounting to 42 tonnes of gold on Nov. 30, which were
in conformity with the Central Banks' Gold Agreement of 2004. Meanwhile, the Bank of Spain held its gold reserves at 9.1 million troy
ounces in November, data on the central bank's Web page showed on Monday.
Spain held 13.4 million ounces of gold at the end of last year.
[ID:nL03315429] Spot gold
$783.50/784.20 in New York Friday afternoon. London bullion dealers fixed
the afternoon spot reference price at $784.25. COMEX March silver SIH8 was up 5.50 cents at $14.22 an ounce, trading
between $13.96 and $14.26. Spot silver
$13.96/14.01 late Friday in New York. London silver was fixed at $13.860. March palladium PAH8 dropped $3.15 to $350.20 an ounce. Spot
palladium
Fidelity, Goldman May Retain Indian Commodity Stakes
(Bloomberg) -- Fidelity International Ltd. and Goldman Sachs Group Inc. may get approval from India's government this week to retain their entire stakes in commodity exchanges, allowing them to profit from a surge in trading.
The cabinet will consider raising overseas investment caps in sectors including the exchanges and oil refining, Trade Minister Kamal Nath said in an interview yesterday. The limit for each foreign investor may be raised to 10 percent, three people familiar with the proposals said. Goldman and Fidelity each own more than 5 percent stakes.
``We are going to ease caps in some sectors,'' Nath said in New Delhi, where he's attending the World Economic Forum.
The rule change would allow Goldman to profit from a surge in trading in India, the world's largest consumer of gold and the second-biggest producer of wheat, sugar and rice. Foreign investors are barred from buying and selling commodity futures to shield India's 234 million farmers from global price swings.
``Commodities trading is going to be the next hot thing in India,'' said D. H. Pai Panandiker, president of the RPG Foundation, an economic policy group based in New Delhi. ``With volumes expected to surge substantially, foreign investors clearly see a huge opportunity in that area.''
Overseas funds need regulatory approval to take stakes in the Indian commodity exchanges, which offer a wide array of contracts ranging from spices to sugar and soybeans. Turnover surged 68 percent to 36 trillion rupees ($908 billion) in the year ended March 31.
Buying Stakes
New York-based Goldman, the world's most profitable securities firm, acquired a 7 percent holding in the National Commodity & Derivatives Exchange Ltd. last year and Fidelity bought 9 percent of Multi Commodity Exchange of India Ltd.
The Reserve Bank of India had proposed that investment limits in commodities markets mirror the rules for stock exchanges. Overseas investors are each allowed to hold a maximum 5 percent of India's stock markets, with total foreign ownership capped at 49 percent.
Citigroup Inc. and Merrill Lynch & Co., based in New York, in September bought 5 percent stakes in the Multi Commodity Exchange, known as MCX, to tap the tripling in growth in trade last year on the world's third-largest gold bourse. The exchange sold smaller stakes to Passport Capital and GLG Partners LP.
Foreign Investment
Prime Minister Manmohan Singh is seeking to attract more foreign investment to sustain economic growth of more than 9 percent in the next five years, cut the budget deficit and spend more on reducing poverty.
Companies such as Vodafone Group Plc, the world's largest cellular-phone company, and General Motors Corp. are investing more to take advantage of the second-fastest pace of growth in the world after China. The South Asian nation, Asia's third- largest economy, has grown an average 8.6 percent since 2004, the fastest pace since independence in 1947.
``We have the most liberal foreign investment regime in the world,'' Nath said. ``Foreign investment is flowing in because India is looked upon as an incredible country.''
For investment in state-run oil refineries, the government is considering raising the current 26 percent foreign ownership limit to 49 percent to spur investment. Billionaire Lakshmi Mittal and Chevron Corp. have invested in Indian refineries as economic growth boosts demand for fuels.
Mittal was granted a waiver to buy 49 percent in a plant being built by Hindustan Petroleum Corp. in northern India. Chevron, which bought a 5 percent stake in Reliance Petroleum Ltd. last year, has an option to raise its holding to 29 percent.
Record Inflows
India last year received record foreign direct investment of $19.5 billion. This year the government aims to attract $30 billion from abroad, according to Nath.
Prime Minister Singh started allowing overseas companies to set up operations locally, introduced free-market measures and removed state-enforced capacity limits in 1991 when he was the finance minister.
The cabinet will consider raising overseas investment caps in sectors including the exchanges and oil refining, Trade Minister Kamal Nath said in an interview yesterday. The limit for each foreign investor may be raised to 10 percent, three people familiar with the proposals said. Goldman and Fidelity each own more than 5 percent stakes.
``We are going to ease caps in some sectors,'' Nath said in New Delhi, where he's attending the World Economic Forum.
The rule change would allow Goldman to profit from a surge in trading in India, the world's largest consumer of gold and the second-biggest producer of wheat, sugar and rice. Foreign investors are barred from buying and selling commodity futures to shield India's 234 million farmers from global price swings.
``Commodities trading is going to be the next hot thing in India,'' said D. H. Pai Panandiker, president of the RPG Foundation, an economic policy group based in New Delhi. ``With volumes expected to surge substantially, foreign investors clearly see a huge opportunity in that area.''
Overseas funds need regulatory approval to take stakes in the Indian commodity exchanges, which offer a wide array of contracts ranging from spices to sugar and soybeans. Turnover surged 68 percent to 36 trillion rupees ($908 billion) in the year ended March 31.
Buying Stakes
New York-based Goldman, the world's most profitable securities firm, acquired a 7 percent holding in the National Commodity & Derivatives Exchange Ltd. last year and Fidelity bought 9 percent of Multi Commodity Exchange of India Ltd.
The Reserve Bank of India had proposed that investment limits in commodities markets mirror the rules for stock exchanges. Overseas investors are each allowed to hold a maximum 5 percent of India's stock markets, with total foreign ownership capped at 49 percent.
Citigroup Inc. and Merrill Lynch & Co., based in New York, in September bought 5 percent stakes in the Multi Commodity Exchange, known as MCX, to tap the tripling in growth in trade last year on the world's third-largest gold bourse. The exchange sold smaller stakes to Passport Capital and GLG Partners LP.
Foreign Investment
Prime Minister Manmohan Singh is seeking to attract more foreign investment to sustain economic growth of more than 9 percent in the next five years, cut the budget deficit and spend more on reducing poverty.
Companies such as Vodafone Group Plc, the world's largest cellular-phone company, and General Motors Corp. are investing more to take advantage of the second-fastest pace of growth in the world after China. The South Asian nation, Asia's third- largest economy, has grown an average 8.6 percent since 2004, the fastest pace since independence in 1947.
``We have the most liberal foreign investment regime in the world,'' Nath said. ``Foreign investment is flowing in because India is looked upon as an incredible country.''
For investment in state-run oil refineries, the government is considering raising the current 26 percent foreign ownership limit to 49 percent to spur investment. Billionaire Lakshmi Mittal and Chevron Corp. have invested in Indian refineries as economic growth boosts demand for fuels.
Mittal was granted a waiver to buy 49 percent in a plant being built by Hindustan Petroleum Corp. in northern India. Chevron, which bought a 5 percent stake in Reliance Petroleum Ltd. last year, has an option to raise its holding to 29 percent.
Record Inflows
India last year received record foreign direct investment of $19.5 billion. This year the government aims to attract $30 billion from abroad, according to Nath.
Prime Minister Singh started allowing overseas companies to set up operations locally, introduced free-market measures and removed state-enforced capacity limits in 1991 when he was the finance minister.
Gold Advances on Demand for Dollar Alternative; Silver Declines
(Bloomberg) -- Gold advanced in London, ending a four-day selloff, on speculation declines in the value of the dollar will spur investor demand. Silver fell.
Assets in the StreetTracks Gold Trust, the biggest fund backed by gold, are at a record 609.33 metric tons, figures from the World Gold Council show. Gold has climbed 23 percent this year as the dollar declined to a record against the euro and higher crude-oil prices spurred demand for an inflation hedge.
``The dollar and the path of oil prices will continue to support gold prices going forward,'' said Suki Cooper, an analyst at Barclays Capital in London who forecasts higher average gold prices through the first half of next year.
Gold for immediate delivery climbed 59 cents to $784.34 an ounce as of 2:23 p.m. in London. New York gold futures were up 90 cents at $790 an ounce. The UBS Bloomberg Constant Maturity Commodity Index of 18 commodities is up 17 percent this year.
Gains may be limited by increased sales from central banks. The European Central Bank today said it completed the sale of 42 metric tons of gold on Nov. 30. That's almost half the 103 tons disposed by central banks in the past two months, estimates from the World Gold Council show.
``The central bank is a key factor here because there's a lack of demand,'' said Emanuel Georgouras, a precious metals trader at Marex Financial Ltd. in London. ``Everyone is pretty happy to sell the market.''
Gold's 20-day moving average is about $806 and the 100-day is $729. Moving averages point to changes in price trends. If the 20-day moving average breaks below the 100-day moving average, for example, the move suggests prices may fall, and vice versa.
Silver Fixing
The 14-day relative strength index for gold is 46. Readings above 70 indicate a price may be poised to fall, and readings below 30 indicate it may be about to rise.
The 10:30 a.m. gold ``fixing'' price used by some mining companies to sell their production fell $11 to $783.75 an ounce. The midday silver fixing dropped 37 cents to $13.86.
European central banks voluntarily agreed to cap their sales at 500 tons a year from 2004 through Sept. 26, 2009. The ECB sale is part of that agreement, the Frankfurt-based European Central Bank said.
``From our perspective, if gold absorbed this much selling from the ECB and has not broken even more, we are much impressed,'' U.S. economist and trader Dennis Gartman said in the Gartman Letter today. ``But for now, this is bearish news.''
France has sold 20.2 tons in the fourth year of the agreement, followed by disposals from the Netherlands and Sweden, said Jill Leyland, economist at the World Gold Council in London.
Gold Futures
Speculators who trade gold futures in the U.S. need to reduce their holdings to the equivalent of about 10 million ounces, from about 16.5 million ounces now, before gold will be a ``table-banging buy,'' said John Reade, an analyst at UBS AG in London. There is also ``no jewelry demand,'' the biggest use of the metal, he said.
The cost of borrowing gold for 12 months is 0.448 percent, compared with an average of 0.235 percent in the past year, according to data compiled by Bloomberg. Rates reflect expectations about the amount of metal available for borrowing.
Silver for immediate delivery dropped 5 cents, or 0.4 percent, to $13.955.
Assets in the StreetTracks Gold Trust, the biggest fund backed by gold, are at a record 609.33 metric tons, figures from the World Gold Council show. Gold has climbed 23 percent this year as the dollar declined to a record against the euro and higher crude-oil prices spurred demand for an inflation hedge.
``The dollar and the path of oil prices will continue to support gold prices going forward,'' said Suki Cooper, an analyst at Barclays Capital in London who forecasts higher average gold prices through the first half of next year.
Gold for immediate delivery climbed 59 cents to $784.34 an ounce as of 2:23 p.m. in London. New York gold futures were up 90 cents at $790 an ounce. The UBS Bloomberg Constant Maturity Commodity Index of 18 commodities is up 17 percent this year.
Gains may be limited by increased sales from central banks. The European Central Bank today said it completed the sale of 42 metric tons of gold on Nov. 30. That's almost half the 103 tons disposed by central banks in the past two months, estimates from the World Gold Council show.
``The central bank is a key factor here because there's a lack of demand,'' said Emanuel Georgouras, a precious metals trader at Marex Financial Ltd. in London. ``Everyone is pretty happy to sell the market.''
Gold's 20-day moving average is about $806 and the 100-day is $729. Moving averages point to changes in price trends. If the 20-day moving average breaks below the 100-day moving average, for example, the move suggests prices may fall, and vice versa.
Silver Fixing
The 14-day relative strength index for gold is 46. Readings above 70 indicate a price may be poised to fall, and readings below 30 indicate it may be about to rise.
The 10:30 a.m. gold ``fixing'' price used by some mining companies to sell their production fell $11 to $783.75 an ounce. The midday silver fixing dropped 37 cents to $13.86.
European central banks voluntarily agreed to cap their sales at 500 tons a year from 2004 through Sept. 26, 2009. The ECB sale is part of that agreement, the Frankfurt-based European Central Bank said.
``From our perspective, if gold absorbed this much selling from the ECB and has not broken even more, we are much impressed,'' U.S. economist and trader Dennis Gartman said in the Gartman Letter today. ``But for now, this is bearish news.''
France has sold 20.2 tons in the fourth year of the agreement, followed by disposals from the Netherlands and Sweden, said Jill Leyland, economist at the World Gold Council in London.
Gold Futures
Speculators who trade gold futures in the U.S. need to reduce their holdings to the equivalent of about 10 million ounces, from about 16.5 million ounces now, before gold will be a ``table-banging buy,'' said John Reade, an analyst at UBS AG in London. There is also ``no jewelry demand,'' the biggest use of the metal, he said.
The cost of borrowing gold for 12 months is 0.448 percent, compared with an average of 0.235 percent in the past year, according to data compiled by Bloomberg. Rates reflect expectations about the amount of metal available for borrowing.
Silver for immediate delivery dropped 5 cents, or 0.4 percent, to $13.955.
U.S. Economy: Manufacturing Grows at Slower Pace
(Bloomberg) -- Manufacturing in the U.S. grew in November at the slowest pace in 10 months as the housing slump pushes the economy toward recession.
The Institute for Supply Management's factory index fell to 50.8, matching economists' forecasts, from 50.9 the previous month, the Tempe, Arizona-based group said today. Fifty is the dividing line between contraction and expansion.
The figures bear out warnings by Federal Reserve officials that the economy is cooling after a third-quarter surge. While manufacturers eliminated jobs last month, companies also reported increases in exports, production and orders.
``It's softer, but it's not a dire picture,'' said Julia Coronado, a senior economist at Barclays Capital Inc. in New York. ``Orders are holding up, and one of the things that's helping is overseas demand.''
Treasury notes remained higher after the report. The yield on the benchmark 10-year note fell 4 basis points to 3.90 percent at 12:11 p.m. A basis point is 0.01 percentage point.
President George W. Bush's administration is trying to hammer out a plan to help mitigate the housing slump.
Treasury Secretary Henry Paulson today said the government and banks will ``soon'' announce a plan to minimize foreclosures by getting agreement among banks, mortgage companies and securities-industry lobbyists to fix some subprime rates before they reset higher.
Easing Risks
While no ``silver bullet,'' a deal to rewrite a set of subprime loans would ``clearly'' ease the risks from the housing slump, Paulson said in an interview later.
The decline in the manufacturing reflected decreases in employment and inventories. The inventory index fell to 46.9 from 47.2. Figures less than 50 mean manufacturers are reducing stockpiles. The ISM's employment measure fell to 47.8, the lowest since September 2003, from 52 in October.
Increases in exports, production and orders prevented the decline from being even bigger. A gauge of export orders rose to 58.5, the highest since May, from 57.
The new orders index increased to 52.6 from 52.5, and the production index rose to 51.9 from 49.6.
Overseas demand helped Deere & Co., the world's largest maker of tractors and harvesters, boost profit in the fourth quarter. Demand in Brazil and Eastern Europe lifted overseas sales 32 percent, Deere said Nov. 21. That softened the blow from reduced revenue in the construction and forestry unit that reflected the housing slump.
Regional Surveys
Today's ISM report runs counter to regional surveys that showed manufacturing gained strength. Measures released previously by the National Association of Purchasing Management- Chicago and the Federal Reserve Bank of Philadelphia rose, while the New York Fed's gauge held near a three-year high.
Economists lowered fourth-quarter growth forecasts after reports last month showed inventories grew more last quarter than previously estimated, while consumer spending slowed in October and orders for durable good dropped.
Lehman Brothers Holdings Inc. projects the economy will expand at a 0.8 percent annual rate from October through December, down from a 4.9 percent pace in the previous three months. The data currently available suggest growth may be as weak as 0.2 percent, Morgan Stanley said.
``The closer they are tied to exports the better life is going to be right now,'' Norbert J. Ore, chairman of the Institute's manufacturing survey, said on a conference call. ``There are industries that are doing very, very well in this environment while others aren't doing so well.''
The Institute for Supply Management's factory index fell to 50.8, matching economists' forecasts, from 50.9 the previous month, the Tempe, Arizona-based group said today. Fifty is the dividing line between contraction and expansion.
The figures bear out warnings by Federal Reserve officials that the economy is cooling after a third-quarter surge. While manufacturers eliminated jobs last month, companies also reported increases in exports, production and orders.
``It's softer, but it's not a dire picture,'' said Julia Coronado, a senior economist at Barclays Capital Inc. in New York. ``Orders are holding up, and one of the things that's helping is overseas demand.''
Treasury notes remained higher after the report. The yield on the benchmark 10-year note fell 4 basis points to 3.90 percent at 12:11 p.m. A basis point is 0.01 percentage point.
President George W. Bush's administration is trying to hammer out a plan to help mitigate the housing slump.
Treasury Secretary Henry Paulson today said the government and banks will ``soon'' announce a plan to minimize foreclosures by getting agreement among banks, mortgage companies and securities-industry lobbyists to fix some subprime rates before they reset higher.
Easing Risks
While no ``silver bullet,'' a deal to rewrite a set of subprime loans would ``clearly'' ease the risks from the housing slump, Paulson said in an interview later.
The decline in the manufacturing reflected decreases in employment and inventories. The inventory index fell to 46.9 from 47.2. Figures less than 50 mean manufacturers are reducing stockpiles. The ISM's employment measure fell to 47.8, the lowest since September 2003, from 52 in October.
Increases in exports, production and orders prevented the decline from being even bigger. A gauge of export orders rose to 58.5, the highest since May, from 57.
The new orders index increased to 52.6 from 52.5, and the production index rose to 51.9 from 49.6.
Overseas demand helped Deere & Co., the world's largest maker of tractors and harvesters, boost profit in the fourth quarter. Demand in Brazil and Eastern Europe lifted overseas sales 32 percent, Deere said Nov. 21. That softened the blow from reduced revenue in the construction and forestry unit that reflected the housing slump.
Regional Surveys
Today's ISM report runs counter to regional surveys that showed manufacturing gained strength. Measures released previously by the National Association of Purchasing Management- Chicago and the Federal Reserve Bank of Philadelphia rose, while the New York Fed's gauge held near a three-year high.
Economists lowered fourth-quarter growth forecasts after reports last month showed inventories grew more last quarter than previously estimated, while consumer spending slowed in October and orders for durable good dropped.
Lehman Brothers Holdings Inc. projects the economy will expand at a 0.8 percent annual rate from October through December, down from a 4.9 percent pace in the previous three months. The data currently available suggest growth may be as weak as 0.2 percent, Morgan Stanley said.
``The closer they are tied to exports the better life is going to be right now,'' Norbert J. Ore, chairman of the Institute's manufacturing survey, said on a conference call. ``There are industries that are doing very, very well in this environment while others aren't doing so well.''
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