Seoul: Most Asian markets fell on Monday as investors reacted to a steep decline on Wall Street on Friday after disappointing economic and corporate news reignited worries about a US recession.
Japan's benchmark index pared losses after sinking as much as 4 per cent, while markets in Hong Kong and Australia fell 3 per cent and South Korea's key index slid 2.3 per cent. Shares in mainland China, however, advanced.
Investors across the majority of the region dumped shares after a series of depressing economic and corporate reports on Friday out of the United States, a vital export market for Asia, sent the Dow Jones industrial average falling 315.79, or 2.51 per cent, to 12,266.39.
In Tokyo, the benchmark Nikkei 225 stock index was down 2.3 per cent at 13,603 in afternoon trading, recovering some ground after falling as much as 4 per cent earlier.
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Monday, March 3, 2008
Buffett says American economy is in slump and stocks are not cheap
New York: Billionaire investor Warren Buffett said on Monday the US economy is in recession and "stocks are not cheap."
Speaking on CNBC television, Buffett also said he is no longer offering to guarantee $800 billion of municipal bonds backed by MBIA, Ambac Financial Group and FGIC Corp, three large bond insurers.
Buffett said that "from a common-sense standpoint right now, we're in a recession," though the US economy has not yet recorded two straight quarters of declining gross domestic product, a traditional indicator of recession.
He said the environment is "nothing like '73 or '74 yet," referring to a deep economic downturn also marked by rising oil prices, higher inflation and falling stocks.
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Still, he said investors should not rule out a significant economic downturn, and that Federal Reserve Chairman Ben Bernanke has a "very tough balancing act" in trying to boost economic growth without kindling inflation. Buffett said there is a fair chance that inflation may ignite in a "serious way."
On Friday, Buffett's insurance and investment company Berkshire Hathaway Inc reported an 18 per cent decline in fourth-quarter profit. This stemmed in part from weakness in businesses linked to housing, including units that make bricks and carpet, and that offer real estate brokerage services.
Buffett said he is finding more buying opportunities in stocks following a 16 per cent decline in the Standard & Poor's 500 stock index from its recent high in October. "I find more things to look at now than I did six months or a year ago," Buffett said. But he acknowledged that conditions have changed "more dramatically" in the bond market.
Speaking on CNBC television, Buffett also said he is no longer offering to guarantee $800 billion of municipal bonds backed by MBIA, Ambac Financial Group and FGIC Corp, three large bond insurers.
Buffett said that "from a common-sense standpoint right now, we're in a recession," though the US economy has not yet recorded two straight quarters of declining gross domestic product, a traditional indicator of recession.
He said the environment is "nothing like '73 or '74 yet," referring to a deep economic downturn also marked by rising oil prices, higher inflation and falling stocks.
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Still, he said investors should not rule out a significant economic downturn, and that Federal Reserve Chairman Ben Bernanke has a "very tough balancing act" in trying to boost economic growth without kindling inflation. Buffett said there is a fair chance that inflation may ignite in a "serious way."
On Friday, Buffett's insurance and investment company Berkshire Hathaway Inc reported an 18 per cent decline in fourth-quarter profit. This stemmed in part from weakness in businesses linked to housing, including units that make bricks and carpet, and that offer real estate brokerage services.
Buffett said he is finding more buying opportunities in stocks following a 16 per cent decline in the Standard & Poor's 500 stock index from its recent high in October. "I find more things to look at now than I did six months or a year ago," Buffett said. But he acknowledged that conditions have changed "more dramatically" in the bond market.
Gold: Will it cross $1000 an ounce today?
Gold continued its glittering run last week, gaining 3 per cent and towards the weekend, it was almost in a galloping mood. Helping gold were factors such as the four-month high inflation witnessed by the US, fall of the dollar and fears that inflation may rise further.
Overall, the yellow metal has gained 16 per cent since the beginning of this year and along with it, silver has also had a good run. It ended near $20-an-ounce mark during the weekend.
Analysts are unanimous in their view that gold is gravitating towards $1,000 and it may happen this month.
What has happened with last week's upward momentum is that gold has now found a firm support between $953 and $961, after having closed at $974.50 for April delivery.
It has been reiterated time and again that the US economy, the interest rate cuts announced by the Fed besides pumping of currencies were all pointers to an impending crisis and therefore, gold was firmly headed towards $1,000. And going by the panic that gripped the US stock markets, there should be no surprise if that event takes place this week.
According to Anuj Goel, analyst with Kotak Commodity Services Ltd, the yellow metal is headed for $1,025-1,030 range. His view is that raging crude and the euro-dollar equation could take gold to further highs. But there is a word of caution in that the dollar-yen has broken the crucial support of 104.
Back home, the waiver of farmers' bank loans and raising of the income tax limit, which could see extra money in the hands of the households, are factors that can trigger demand for the yellow metal, besides, of course, white goods.
Gold appetite is never satiated in India, where the precious metal is valued the most. But the moot point is how many would have the courage to buy at prices of over Rs 12,500 for 10 gram. Still, with the marriage season ahead and a couple of festivals coming up, there could be some purchases.
With returns from gold being much higher than those from stock markets, that should see interest in its investment also. Therein, lies a reason for some more demand, not to forget the upcoming harvest season.
The bottomline is that gold will continue to retain its sheen.
For those interested in technicals, gold will face resistance near $981 and then after $1,000. Supports for it are first at $954 and then at $939.
Silver will follow gold and it could also top $20 this week. Resistance is seen at $20.10, support at $19.33 after it closed at $19.875 during the weekend.
Crude, which has also had a run to a record $103 a barrel last week, could see some cool-off effect but March, analysts say, is always a time when it historically rises. Coal is likely to rule firm, while metals could witness profit-taking.
Overall, the yellow metal has gained 16 per cent since the beginning of this year and along with it, silver has also had a good run. It ended near $20-an-ounce mark during the weekend.
Analysts are unanimous in their view that gold is gravitating towards $1,000 and it may happen this month.
What has happened with last week's upward momentum is that gold has now found a firm support between $953 and $961, after having closed at $974.50 for April delivery.
It has been reiterated time and again that the US economy, the interest rate cuts announced by the Fed besides pumping of currencies were all pointers to an impending crisis and therefore, gold was firmly headed towards $1,000. And going by the panic that gripped the US stock markets, there should be no surprise if that event takes place this week.
According to Anuj Goel, analyst with Kotak Commodity Services Ltd, the yellow metal is headed for $1,025-1,030 range. His view is that raging crude and the euro-dollar equation could take gold to further highs. But there is a word of caution in that the dollar-yen has broken the crucial support of 104.
Back home, the waiver of farmers' bank loans and raising of the income tax limit, which could see extra money in the hands of the households, are factors that can trigger demand for the yellow metal, besides, of course, white goods.
Gold appetite is never satiated in India, where the precious metal is valued the most. But the moot point is how many would have the courage to buy at prices of over Rs 12,500 for 10 gram. Still, with the marriage season ahead and a couple of festivals coming up, there could be some purchases.
With returns from gold being much higher than those from stock markets, that should see interest in its investment also. Therein, lies a reason for some more demand, not to forget the upcoming harvest season.
The bottomline is that gold will continue to retain its sheen.
For those interested in technicals, gold will face resistance near $981 and then after $1,000. Supports for it are first at $954 and then at $939.
Silver will follow gold and it could also top $20 this week. Resistance is seen at $20.10, support at $19.33 after it closed at $19.875 during the weekend.
Crude, which has also had a run to a record $103 a barrel last week, could see some cool-off effect but March, analysts say, is always a time when it historically rises. Coal is likely to rule firm, while metals could witness profit-taking.
Marginal recovery in Dollar
Dollar finished marginally higher against the Euro on Friday due to short-covering, after heavy falls earlier in the week that saw the greenback record new all-time low versus the European currency.
Pressure due to downbeat economic data from the US and increased the concerns over the US economic outlook continued to keep the Dollar at the lower levels.
The latest data released on Friday showed US consumer sentiment dropped to 70.8 in February from 78.4 in January, according to the Reuters/University of Michigan survey. The sentiment index has fallen by almost 30% since the peak in January 2007, according to the survey.
According to the report by US Labor Department, initial claims for state unemployment benefits rose by 19,000 to 373,000 in the week ended Feb 23. However the four-week average of initial claims fell by 1,250 to 360,500. The continuing claims increased by 21,000 to 2.81 million in the week ended Feb 16, the highest level in more than two years.
The Commerce Department reported a sharp slowdown in US economic growth in the fourth quarter. The economy grew at a 0.6% annual rate, unrevised from last month's estimate. The yearly economic growth in 2007 was an inflation-adjusted 2.2%, at the weakest pace in five years, after a 2.9% gain in 2006.
Weak US home sales data is indicating weakness in the economy has spread into the housing sector. The new U.S. single-family home sales fell in January to the lowest rate in nearly 13 years and housing inventories swelled, despite falling prices.
In the durable good sector, orders for long-lasting domestic manufactured goods recorded their biggest drop in five months in January, according to a government report also adding to pressure on dollar.
According to the release by US Labor Department, consumer prices rose at a seasonally adjusted 0.4% last month. The US core consumer price index rose 0.3 % in January, which is the strongest monthly rise since June 2006.
The US Commerce Department reported a small gain in the nation's pace of construction on new homes during January, though without any sign of recovery in building permits. Housing starts rose last month by 0.8%, to a seasonally adjusted annual rate of 1.01 million.
The Fed had lowered its 2008 growth forecast to 1.3 % - 2 %, from a forecast of 1.8 % - 2.5 % in November.
Meanwhile, the US Trade Deficit narrowed in 2007, for the first time in six years, to 711.6 billion dollars from 758.5 billion in 2006, according to the Commerce Department.
The Bank of England had cut its benchmark interest rate by 25 basis points as expected, and the European Central Bank held rates steady on Feb 7th.
In a grave effort to prevent a global market meltdown in financial markets and a possible recession in the US economy, the Fed had lowered its lending rate by 75 basis points to 3.50% - a rare move between formal meetings of the central bank's policymakers in January; and again lowered the rate to 3 percent January 30th. The 75 basis point has been the largest cut in the fed funds rate since 1990.
Pressure due to downbeat economic data from the US and increased the concerns over the US economic outlook continued to keep the Dollar at the lower levels.
The latest data released on Friday showed US consumer sentiment dropped to 70.8 in February from 78.4 in January, according to the Reuters/University of Michigan survey. The sentiment index has fallen by almost 30% since the peak in January 2007, according to the survey.
According to the report by US Labor Department, initial claims for state unemployment benefits rose by 19,000 to 373,000 in the week ended Feb 23. However the four-week average of initial claims fell by 1,250 to 360,500. The continuing claims increased by 21,000 to 2.81 million in the week ended Feb 16, the highest level in more than two years.
The Commerce Department reported a sharp slowdown in US economic growth in the fourth quarter. The economy grew at a 0.6% annual rate, unrevised from last month's estimate. The yearly economic growth in 2007 was an inflation-adjusted 2.2%, at the weakest pace in five years, after a 2.9% gain in 2006.
Weak US home sales data is indicating weakness in the economy has spread into the housing sector. The new U.S. single-family home sales fell in January to the lowest rate in nearly 13 years and housing inventories swelled, despite falling prices.
In the durable good sector, orders for long-lasting domestic manufactured goods recorded their biggest drop in five months in January, according to a government report also adding to pressure on dollar.
According to the release by US Labor Department, consumer prices rose at a seasonally adjusted 0.4% last month. The US core consumer price index rose 0.3 % in January, which is the strongest monthly rise since June 2006.
The US Commerce Department reported a small gain in the nation's pace of construction on new homes during January, though without any sign of recovery in building permits. Housing starts rose last month by 0.8%, to a seasonally adjusted annual rate of 1.01 million.
The Fed had lowered its 2008 growth forecast to 1.3 % - 2 %, from a forecast of 1.8 % - 2.5 % in November.
Meanwhile, the US Trade Deficit narrowed in 2007, for the first time in six years, to 711.6 billion dollars from 758.5 billion in 2006, according to the Commerce Department.
The Bank of England had cut its benchmark interest rate by 25 basis points as expected, and the European Central Bank held rates steady on Feb 7th.
In a grave effort to prevent a global market meltdown in financial markets and a possible recession in the US economy, the Fed had lowered its lending rate by 75 basis points to 3.50% - a rare move between formal meetings of the central bank's policymakers in January; and again lowered the rate to 3 percent January 30th. The 75 basis point has been the largest cut in the fed funds rate since 1990.
India share market crashes by 900 pts
MUMBAI: Bombay Stock market benchmark Sensex on Monday crashed by 5.12 % as it tumbled by over 900 points to 16,677.88 at close.
Weak global trend on fears of recession in the US market is thought to have triggered the latest selling pressure on the bourses.
Monday’s fall in the 30-share, Sensex, is its second biggest intra-day fall ever, pulling down the key index way below 17,000 mark, as all heavy-weight stocks lost substantial ground in today’s trade.
Similarly, the National Stock Exchange index Nifty declined 270 points to 4953.00 with the selling pressure spread over a wide-front, placing all the sectoral indices, excluding FMCG and auto on a downward spiral.
Incidentally, earlier in the day Finance Minister P Chidambaram had indicated that markets’ falling is a trend that has no correlation to the health of Indian economy and were purely owing to the global gloom fearing US recession.
Hong Kong share prices opened down 3.5% today over worries of inflation and slowing down of domestic growth as well as concerns about the recession in the US economy.
Weak global trend on fears of recession in the US market is thought to have triggered the latest selling pressure on the bourses.
Monday’s fall in the 30-share, Sensex, is its second biggest intra-day fall ever, pulling down the key index way below 17,000 mark, as all heavy-weight stocks lost substantial ground in today’s trade.
Similarly, the National Stock Exchange index Nifty declined 270 points to 4953.00 with the selling pressure spread over a wide-front, placing all the sectoral indices, excluding FMCG and auto on a downward spiral.
Incidentally, earlier in the day Finance Minister P Chidambaram had indicated that markets’ falling is a trend that has no correlation to the health of Indian economy and were purely owing to the global gloom fearing US recession.
Hong Kong share prices opened down 3.5% today over worries of inflation and slowing down of domestic growth as well as concerns about the recession in the US economy.
What will happen when Gold touches $1,000?
LONDON (ResourceInvestor.com) -- Back in December, your correspondent speculated that gold would reach $900 before Christmas. Sure enough, gold cleared $900 an ounce, albeit a bit after Christmas. The next barrier, and a move into uncharted (four figure) territory, is $1,000 gold.
The primary driver of the gold price ever since it awoke from its torpor in the early part of this decade has been weakness in the U.S. dollar. Hence, the dollar’s fall to new lows has occurred concomitantly with the gold price closing in on $1,000 an ounce.
With the threat of a U.S. recession still potent and aggressive interest rate cuts having been proffered as a counter by the Federal Reserve, it is no wonder that the dollar has paid the price.
And the rate cutting may not be over yet, as Fed Chairman Ben Bernanke, who is now predicting bank failures to come, hinted last week. The market seems to expect another rate cut after the next meeting of the Federal Open Market Committee on March 18.
If this happens then we could see gold breach $1,000 immediately after, or perhaps even before if the Fed continues to telegraph its intentions ahead of time - leaving the formal decision itself as a bit of an anticlimax.
Gold watchers will also be paying close attention to the pronouncements of the European Central Bank (ECB), which has held Eurozone interest rates steady since June of last year, and has looked as though it will continue to do so for the time being as part of its bravely hawkish stance on inflation.
But if the ECB capitulates to recession fears and cuts rates, then more funds may be pushed into gold. The next meeting of the ECB’s Governing Council is on Thursday, and the pronouncements that follow will be interesting.
What Are the Risks?
For all this bullish talk, what are the chances of gold moving in the opposite direction?
The dollar has surprised before, and a rally by the greenback could unseat gold quite dramatically, albeit temporarily.
The trigger could be a surprise run of positive economic news suggesting that the U.S. will avert recession after all; or maybe an unexpected reversal in the policy of the Fed, meaning a move back towards focussing on inflation risks, either because the economy is looking better, or because inflation gets the point at which it cannot be ignored any longer.
This need not take the form of a rate rise – holding rates steady at the next meeting, contrary to market expectations, might be enough.
A successful IMF gold sale also has the potential to trip up the gold price, although it has to be said that this may not come to pass, particularly given the ability of the U.S. Congress to block the sale, which it has done on previous occasions.
A major factor is the price of oil. Much of the time gold and oil move in tandem, mainly because both respond to fluctuations in the parity of the dollar.
But with recession perhaps on the cards and a slowdown already in progress, oil could be seen as somewhat vulnerable. Economic pain in the U.S., at present the world’s biggest consumer of oil, will crimp demand to some, although probably fairly minor, extent.
While my feeling is that extraordinary demand growth in China and elsewhere will take up any and all slack in the oil market in the longer term, in the short term there may be scope for a temporary reduction in the oil price if recession bites in the U.S., with the fall intensified to a degree by the same kind of speculative activity that has helped to take the price higher. But then again, I wouldn’t count on it.
Perhaps, if and when gold does hit $1,000, we will see the big sell off that people have now started to talk about occur for purely psychological reasons. After all, nothing goes up in a straight line, and everybody knows that.
The primary driver of the gold price ever since it awoke from its torpor in the early part of this decade has been weakness in the U.S. dollar. Hence, the dollar’s fall to new lows has occurred concomitantly with the gold price closing in on $1,000 an ounce.
With the threat of a U.S. recession still potent and aggressive interest rate cuts having been proffered as a counter by the Federal Reserve, it is no wonder that the dollar has paid the price.
And the rate cutting may not be over yet, as Fed Chairman Ben Bernanke, who is now predicting bank failures to come, hinted last week. The market seems to expect another rate cut after the next meeting of the Federal Open Market Committee on March 18.
If this happens then we could see gold breach $1,000 immediately after, or perhaps even before if the Fed continues to telegraph its intentions ahead of time - leaving the formal decision itself as a bit of an anticlimax.
Gold watchers will also be paying close attention to the pronouncements of the European Central Bank (ECB), which has held Eurozone interest rates steady since June of last year, and has looked as though it will continue to do so for the time being as part of its bravely hawkish stance on inflation.
But if the ECB capitulates to recession fears and cuts rates, then more funds may be pushed into gold. The next meeting of the ECB’s Governing Council is on Thursday, and the pronouncements that follow will be interesting.
What Are the Risks?
For all this bullish talk, what are the chances of gold moving in the opposite direction?
The dollar has surprised before, and a rally by the greenback could unseat gold quite dramatically, albeit temporarily.
The trigger could be a surprise run of positive economic news suggesting that the U.S. will avert recession after all; or maybe an unexpected reversal in the policy of the Fed, meaning a move back towards focussing on inflation risks, either because the economy is looking better, or because inflation gets the point at which it cannot be ignored any longer.
This need not take the form of a rate rise – holding rates steady at the next meeting, contrary to market expectations, might be enough.
A successful IMF gold sale also has the potential to trip up the gold price, although it has to be said that this may not come to pass, particularly given the ability of the U.S. Congress to block the sale, which it has done on previous occasions.
A major factor is the price of oil. Much of the time gold and oil move in tandem, mainly because both respond to fluctuations in the parity of the dollar.
But with recession perhaps on the cards and a slowdown already in progress, oil could be seen as somewhat vulnerable. Economic pain in the U.S., at present the world’s biggest consumer of oil, will crimp demand to some, although probably fairly minor, extent.
While my feeling is that extraordinary demand growth in China and elsewhere will take up any and all slack in the oil market in the longer term, in the short term there may be scope for a temporary reduction in the oil price if recession bites in the U.S., with the fall intensified to a degree by the same kind of speculative activity that has helped to take the price higher. But then again, I wouldn’t count on it.
Perhaps, if and when gold does hit $1,000, we will see the big sell off that people have now started to talk about occur for purely psychological reasons. After all, nothing goes up in a straight line, and everybody knows that.
Gold hits new record at Rs 12,755
MUMBAI: Gold prices in India surged to Rs 12,755 per 10 grams in the Mumbai bullion market on Monday.
Global trend along with some investor’s decision to shift their funds from equity market to bullion as safe haven investment has influenced the golden surge.
Standard gold rose by Rs 190 per ten grams to Rs 12,755 from Rs 12,565 on Saturday and pure gold also moved up to Rs 12,810 from Rs 12,620.
Silver also opened higher at Rs 24,515 per kg in line with gold prices.
Global trend along with some investor’s decision to shift their funds from equity market to bullion as safe haven investment has influenced the golden surge.
Standard gold rose by Rs 190 per ten grams to Rs 12,755 from Rs 12,565 on Saturday and pure gold also moved up to Rs 12,810 from Rs 12,620.
Silver also opened higher at Rs 24,515 per kg in line with gold prices.
Fed created global markets at dangerous levels
By Mike Swanson
Friday was a bad day for the market to say the least. I actually sold in the middle of the afternoon and took a small profit on the positions I bought in January. I had bigger profits earlier in the week so it was a bit disappointing to sell, but in bear markets you have to take what you can get. It is very difficult to play the long side during a bear market.
More money is to be made shorting, but we still need to see the market rally and get overbought on an intermediate-term basis in order to be able to short safely. At the moment I feel like the prudent thing is to be in cash.
You have to respect bear markets and be very patient for entry points on the long and short side. Bear markets do not forgive those who refuse to cut losses or get out when things take a turn for the worse. In bull markets people who don't cut losses often get saved when the market rallies to new highs. In bear markets there is no saving. There is just carnage for the masses and only patient and prudent traders can make money in them.
You have to be totally disciplined to profit in a bear market. Otherwise you are best to stay in cash and get back in the market once the bear market is over.
I just tried going long in expectations of a market rally that would take the S&P 500 beyond the 1450 level. Friday's action makes it likely that the market will get near its January lows, and possibly even break them, before the S&P 500 will go above 1450 now despite the fact that sentiment is overly bearish and the market became extremely oversold on a historical basis back in January. The market is acting in ways that I have never seen before and no one I know has either. A retest of the lows to form a double bottom seems likely now, but there is always a risk of a crash in this market. I never said that type of thing in the 2000-2003 bear market, but this one is ten times more dangerous than that one ever was.
I pointed out to you the other week that the market has never made new lows without first having a huge rally when it became as oversold as it did in January and the Investors Intelligence survey displayed widespread bearishness. But if the market doesn't turn around and bottom Monday it will poised to go to its lows. This would be something we have never seen happen before with the oversold conditions of January. But I suppose this may end up being a bear market like none other once it is over.
During this bear market we may see a secular top in long-term bonds, a record low drop in the dollar, and gold trading in the thousands instead of the hundreds. Oh, and we are going to see real estate prices decline 20% from their highs, a few large banks go bankrupt, and the Federal Reserve take "emergency measures" to stabilize the situation. We've already seen the Fed lower interest in the past few months at a faster rate than they have ever before - faster than they did during the Great Depression - and all signs point to more interest rate cuts to come.
The Fed created this disaster by lowering rates and keeping them low for too long in response to the 2000-2003 tech bust, that was itself a direct result of a bubble created by too much easy credit and artificially low interest rates in the 1990's.
As Warren Buffett explained Friday in his annual letter to shareholders:
"You may recall a 2003 Silicon Valley bumper stick that implored, "Please, God, Just One More Bubble." Unfortunately, this wish was promptly granted as just about all Americans came to believe that house prices would forever rise. That conviction made a borrower's income and cash equity unimportant to lenders, who shoveled out money, confident that H.P.A. - house price appreciations - would cure all problems. Today, our country is experiencing widespread pain because of that erroneous belief. As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out - and what we are witnessing at some of our largest financial institutions is an ugly sight."
Now the Fed is totally trapped in a nightmare of its own creation. Or I should say the US economy is trapped. If the Fed does not continue to slash interest rates and print money like mad they risk allowing a deflationary credit implosion to throw the economy into a depression. But by acting as they do they risk the worth of the dollar and if their plan doesn't work may find them rolling the dice at the end game of hyperinflation. Like a desperate gambler they have no choice but to double down and pray to whatever God the Fed prays too. It certainly isn't the God of the bible who preached prudence, against usury, and dictated a year of jubilee every fifty years directed against money lenders to check their power and prevent inflation. Our problems exist now, because the Fed has bailed out Wall Street and banks over and over again at the expense of the real economy.
"There probably will be some bank failures" - Ben Bernanke during Friday's Senate banking hearing
As the bear market and economic unwinding continue Bernanke's answers to questions will get even more bizarre. Here he explains that he sees no inflation, because it isn't registering in the so called CPI numbers. He is so nervous and fidgety. Whenever he speaks the market drops. Same thing with Bush. But Bush never appears nervous. He seems to go out of his way to appear to be tough and macho. That's how he looked last week when he said the economy was bottoming thanks to his stimulus program that will hit it in a few months. It's as if he thinks he can will things to improve. It's same type of talk we've seen for years when he speaks about Iraq.
Back in 1999 and 2000 when I railed on Greenspan for creating that stock market disaster I used to say "no one was driving the airplane." Well now the controls on the airplane appear to be locked.
Friday was a bad day for the market to say the least. I actually sold in the middle of the afternoon and took a small profit on the positions I bought in January. I had bigger profits earlier in the week so it was a bit disappointing to sell, but in bear markets you have to take what you can get. It is very difficult to play the long side during a bear market.
More money is to be made shorting, but we still need to see the market rally and get overbought on an intermediate-term basis in order to be able to short safely. At the moment I feel like the prudent thing is to be in cash.
You have to respect bear markets and be very patient for entry points on the long and short side. Bear markets do not forgive those who refuse to cut losses or get out when things take a turn for the worse. In bull markets people who don't cut losses often get saved when the market rallies to new highs. In bear markets there is no saving. There is just carnage for the masses and only patient and prudent traders can make money in them.
You have to be totally disciplined to profit in a bear market. Otherwise you are best to stay in cash and get back in the market once the bear market is over.
I just tried going long in expectations of a market rally that would take the S&P 500 beyond the 1450 level. Friday's action makes it likely that the market will get near its January lows, and possibly even break them, before the S&P 500 will go above 1450 now despite the fact that sentiment is overly bearish and the market became extremely oversold on a historical basis back in January. The market is acting in ways that I have never seen before and no one I know has either. A retest of the lows to form a double bottom seems likely now, but there is always a risk of a crash in this market. I never said that type of thing in the 2000-2003 bear market, but this one is ten times more dangerous than that one ever was.
I pointed out to you the other week that the market has never made new lows without first having a huge rally when it became as oversold as it did in January and the Investors Intelligence survey displayed widespread bearishness. But if the market doesn't turn around and bottom Monday it will poised to go to its lows. This would be something we have never seen happen before with the oversold conditions of January. But I suppose this may end up being a bear market like none other once it is over.
During this bear market we may see a secular top in long-term bonds, a record low drop in the dollar, and gold trading in the thousands instead of the hundreds. Oh, and we are going to see real estate prices decline 20% from their highs, a few large banks go bankrupt, and the Federal Reserve take "emergency measures" to stabilize the situation. We've already seen the Fed lower interest in the past few months at a faster rate than they have ever before - faster than they did during the Great Depression - and all signs point to more interest rate cuts to come.
The Fed created this disaster by lowering rates and keeping them low for too long in response to the 2000-2003 tech bust, that was itself a direct result of a bubble created by too much easy credit and artificially low interest rates in the 1990's.
As Warren Buffett explained Friday in his annual letter to shareholders:
"You may recall a 2003 Silicon Valley bumper stick that implored, "Please, God, Just One More Bubble." Unfortunately, this wish was promptly granted as just about all Americans came to believe that house prices would forever rise. That conviction made a borrower's income and cash equity unimportant to lenders, who shoveled out money, confident that H.P.A. - house price appreciations - would cure all problems. Today, our country is experiencing widespread pain because of that erroneous belief. As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out - and what we are witnessing at some of our largest financial institutions is an ugly sight."
Now the Fed is totally trapped in a nightmare of its own creation. Or I should say the US economy is trapped. If the Fed does not continue to slash interest rates and print money like mad they risk allowing a deflationary credit implosion to throw the economy into a depression. But by acting as they do they risk the worth of the dollar and if their plan doesn't work may find them rolling the dice at the end game of hyperinflation. Like a desperate gambler they have no choice but to double down and pray to whatever God the Fed prays too. It certainly isn't the God of the bible who preached prudence, against usury, and dictated a year of jubilee every fifty years directed against money lenders to check their power and prevent inflation. Our problems exist now, because the Fed has bailed out Wall Street and banks over and over again at the expense of the real economy.
"There probably will be some bank failures" - Ben Bernanke during Friday's Senate banking hearing
As the bear market and economic unwinding continue Bernanke's answers to questions will get even more bizarre. Here he explains that he sees no inflation, because it isn't registering in the so called CPI numbers. He is so nervous and fidgety. Whenever he speaks the market drops. Same thing with Bush. But Bush never appears nervous. He seems to go out of his way to appear to be tough and macho. That's how he looked last week when he said the economy was bottoming thanks to his stimulus program that will hit it in a few months. It's as if he thinks he can will things to improve. It's same type of talk we've seen for years when he speaks about Iraq.
Back in 1999 and 2000 when I railed on Greenspan for creating that stock market disaster I used to say "no one was driving the airplane." Well now the controls on the airplane appear to be locked.
Gold rises to record on fund buying
GOLD and platinum futures hit record highs and silver a 27-year peak overnight as commodities in general remained strong and the US dollar weak, leading to more fund buying.
"A lot of people are discussing the downfall in the US dollar," said one trader. "And we're seeing a tremendous surge in commodities across the board, not just metals, but base metals and energies. The investment appeal in all of the commodities is at a premium."
Most-active April gold hit a contract high of $US992 an ounce on the Comex division of the New York Mercantile Exchange, while nearby March hit a spot-month record of $US986.90. Most-active May silver hit a contract high of $US20.74. Nearby March peaked at $US20.61, the highest level for a spot-contract month in 27 years.
Meanwhile, April platinum peaked at $US2245 an ounce, which a spot-continuation chart shows to be a Nymex record.
Bill O'Neill, one of the principals with LOGIC Advisors, cited fund buying "in just about everything." In addition to the ongoing factors supporting gold for some time, he said, momentum-based and options-related activity added to the rises.
The metals pared their gains during the latter stages of the session on profit-taking, however, especially when it became apparent the much-talked-about $US1000 level in gold would have to wait at least another day, said one trader.
Comex April gold settled $US9.20 higher at $US984.20 an ounce on the Comex division of the New York Mercantile Exchange. As pit trade was closing, the April contract at the Chicago Board of Trade was up $US8.80 to $US982.80.
Comex May silver rose US26.5 cents to $US20.18. As it was closing, CBOT May silver was up US28c to $US20.188.
As gold was closing, the Continuous Commodity Index was up 10.14 points to 575.79. April crude was up $US1.78 to $US103.62 a barrel and hit a peak of $US103.95. Grains, base metals and softs were all stronger.
"Grains were screaming, metals were screaming. Funds are buying it," said Leonard Kaplan, president of Prospector Asset Management. "Everybody is convinced that the Fed is going to drop (interest rates) by 75 basis points."
The already-embattled US dollar hit a fresh record low against the euro - which tends to support gold - on a day that the Institute for Supply Management reported that its manufacturing index fell to 48.3 in February from 50.7 in January.
This took it below the 50 level generally seen as the breaking point on whether the manufacturing sector is contracting, although it was roughly in line with expectations for a 48 reading. The euro hit a record high $US1.5272 against the US dollar before giving back gains on profit-taking.
The smaller liquidity in commodities, compared to equities or fixed-income markets, tend to mean greater moves, Mr O'Neill explained.
"Even a modest amount of asset reallocation into commodities or new buying in commodities has a very material impact," he said.
However, he said, he offered some caution about the strength.
"The only danger here is you have a frenetic-type market atmosphere," he said. "When you have that, there is always the danger you'll have some catalyst come along and change the psychology and change direction, and you can have some very, very big moves.
"These markets are certainly at very dangerous trading levels. So you need to make sure you have at least some protection against the inevitable - which is that markets don't go up forever."
Mr Kaplan also cautioned that a "bubble" could be occurring.
"But it's a bubble that could last a long, long time," he added.
Meanwhile, April platinum rose $US60.90 to $US2241.60 an ounce. June palladium gained $US9.05 to $US585.70.
Besides rising with other precious metals, platinum has "its own very dynamic fundamental structure," Mr O'Neill said. The market was already considered tight at the end of 2007, then January brought news of electrical shortages at South African mines, which was especially supportive for platinum since the country accounts for roughly four-fifths of the world's supply.
The South African power shortages, which have curtailed mining activity there, continue to support the entire precious-metals sector, said said Peter Grant, senior metals analyst with USAGOLD-Centennial Precious Metals.
"It continues to impact the supply side of the equation, obviously more severely in platinum than gold," Mr Grant said. "But as platinum rises on concerns about the increasing deficit, the rest of the precious-metals complex is going to benefit as well."
"A lot of people are discussing the downfall in the US dollar," said one trader. "And we're seeing a tremendous surge in commodities across the board, not just metals, but base metals and energies. The investment appeal in all of the commodities is at a premium."
Most-active April gold hit a contract high of $US992 an ounce on the Comex division of the New York Mercantile Exchange, while nearby March hit a spot-month record of $US986.90. Most-active May silver hit a contract high of $US20.74. Nearby March peaked at $US20.61, the highest level for a spot-contract month in 27 years.
Meanwhile, April platinum peaked at $US2245 an ounce, which a spot-continuation chart shows to be a Nymex record.
Bill O'Neill, one of the principals with LOGIC Advisors, cited fund buying "in just about everything." In addition to the ongoing factors supporting gold for some time, he said, momentum-based and options-related activity added to the rises.
The metals pared their gains during the latter stages of the session on profit-taking, however, especially when it became apparent the much-talked-about $US1000 level in gold would have to wait at least another day, said one trader.
Comex April gold settled $US9.20 higher at $US984.20 an ounce on the Comex division of the New York Mercantile Exchange. As pit trade was closing, the April contract at the Chicago Board of Trade was up $US8.80 to $US982.80.
Comex May silver rose US26.5 cents to $US20.18. As it was closing, CBOT May silver was up US28c to $US20.188.
As gold was closing, the Continuous Commodity Index was up 10.14 points to 575.79. April crude was up $US1.78 to $US103.62 a barrel and hit a peak of $US103.95. Grains, base metals and softs were all stronger.
"Grains were screaming, metals were screaming. Funds are buying it," said Leonard Kaplan, president of Prospector Asset Management. "Everybody is convinced that the Fed is going to drop (interest rates) by 75 basis points."
The already-embattled US dollar hit a fresh record low against the euro - which tends to support gold - on a day that the Institute for Supply Management reported that its manufacturing index fell to 48.3 in February from 50.7 in January.
This took it below the 50 level generally seen as the breaking point on whether the manufacturing sector is contracting, although it was roughly in line with expectations for a 48 reading. The euro hit a record high $US1.5272 against the US dollar before giving back gains on profit-taking.
The smaller liquidity in commodities, compared to equities or fixed-income markets, tend to mean greater moves, Mr O'Neill explained.
"Even a modest amount of asset reallocation into commodities or new buying in commodities has a very material impact," he said.
However, he said, he offered some caution about the strength.
"The only danger here is you have a frenetic-type market atmosphere," he said. "When you have that, there is always the danger you'll have some catalyst come along and change the psychology and change direction, and you can have some very, very big moves.
"These markets are certainly at very dangerous trading levels. So you need to make sure you have at least some protection against the inevitable - which is that markets don't go up forever."
Mr Kaplan also cautioned that a "bubble" could be occurring.
"But it's a bubble that could last a long, long time," he added.
Meanwhile, April platinum rose $US60.90 to $US2241.60 an ounce. June palladium gained $US9.05 to $US585.70.
Besides rising with other precious metals, platinum has "its own very dynamic fundamental structure," Mr O'Neill said. The market was already considered tight at the end of 2007, then January brought news of electrical shortages at South African mines, which was especially supportive for platinum since the country accounts for roughly four-fifths of the world's supply.
The South African power shortages, which have curtailed mining activity there, continue to support the entire precious-metals sector, said said Peter Grant, senior metals analyst with USAGOLD-Centennial Precious Metals.
"It continues to impact the supply side of the equation, obviously more severely in platinum than gold," Mr Grant said. "But as platinum rises on concerns about the increasing deficit, the rest of the precious-metals complex is going to benefit as well."
Can you ignore gold anymore?
Another day, another story on commodities hitting new highs. Yep, oil has done it again today, and so has that most famous metal, gold.
According to a Marketwatch piece, gold has reached a record delivery price of $992 for April delivery (as of this writing). Pretty darn amazing. Of course, the more amazing -- or, perhaps, the more sad -- thing is that I've been ignoring the gold bull run. And I don't feel good about it whatsoever. The problem is, though, that commodity prices can be quite risky, especially for individual investors. Putting money to work in gold at this point could definitely be a gamble, especially as there are other bets out there that might be more worthy in this environment (to me, at least); for example, I am bullish on certain mortgage real estate investment trusts because of the trend of the Fed; I currently own MFA (NYSE: MFA), for example. (Yes, I did end up finding an acceptable entry point.)
Looking at the one-year chart of GLD (NYSE: GLD), the tracking stock for gold value, it is nearly implausible to deny that gold is in a definitive uptrend. And gold-related stocks such as Goldcorp (NYSE: GG) are following the commodity's movement. The old adage about trends being friends rings pretty true here. But, I just don't know if I want to do any inflation-hedging right now, and I don't know if I want to chase gold at these levels. At the very least, I would wait for a pullback to the 50-day moving average before even considering allocating some of the glittery asset to my portfolio. If you are an individual investor and you do decide that you can't take it anymore, that you want in on this ride, certainly make sure that you have enough cash on hand after your first purchase to improve your cost basis if it becomes necessary.
According to a Marketwatch piece, gold has reached a record delivery price of $992 for April delivery (as of this writing). Pretty darn amazing. Of course, the more amazing -- or, perhaps, the more sad -- thing is that I've been ignoring the gold bull run. And I don't feel good about it whatsoever. The problem is, though, that commodity prices can be quite risky, especially for individual investors. Putting money to work in gold at this point could definitely be a gamble, especially as there are other bets out there that might be more worthy in this environment (to me, at least); for example, I am bullish on certain mortgage real estate investment trusts because of the trend of the Fed; I currently own MFA (NYSE: MFA), for example. (Yes, I did end up finding an acceptable entry point.)
Looking at the one-year chart of GLD (NYSE: GLD), the tracking stock for gold value, it is nearly implausible to deny that gold is in a definitive uptrend. And gold-related stocks such as Goldcorp (NYSE: GG) are following the commodity's movement. The old adage about trends being friends rings pretty true here. But, I just don't know if I want to do any inflation-hedging right now, and I don't know if I want to chase gold at these levels. At the very least, I would wait for a pullback to the 50-day moving average before even considering allocating some of the glittery asset to my portfolio. If you are an individual investor and you do decide that you can't take it anymore, that you want in on this ride, certainly make sure that you have enough cash on hand after your first purchase to improve your cost basis if it becomes necessary.
Gold hits fourth straight record, silver at 27-year high
Courtesy : Reuters
Gold edged closer to the $1 000 an ounce mark on Monday, setting a record high for the fourth straight day after the dollar tumbled and crude oil held near an all-time high.
Silver jumped to $20 an ounce for the first time since November 1980 to track gold. Platinum and palladium held near their recent highs, while a firming yen ignited selling in yen-denominated Japanese precious metals futures.
Gold jumped as high as $983,90 an ounce, partly driven by purchases from Japanese speculators who took advantage of the dollar's drop to a three-year low against the yen. Gold was last quoted at $973,30/973,75 in New York on Friday.
Gold has gained around 18 percent in 2008 as investors shift some of their money into the precious metal on expectations of more interest rate cuts in the United States, volatile stock markets and fears of rising energy costs.
"Everybody talks about $1 000. There's Japanese buying. It's cheaper for them to buy," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, adding that investors may also book profits when gold eventually hit $1 000.
"We could see some selling but I don't think it will be aggressive. I don't know what the resistance level is but we can say $970 and $965 will be the support levels," he said.
Gold's inflation-adjusted record high was $2 119 an ounce at 2007 prices, according to analysts at metals consultancy GFMS Ltd.
In the physical sector, dealers saw a surge in demand for gold bars from investors in Vietnam but holders in Indonesia and Thailand cashed in their bullion. Gold's rise scared off jewellers in Hong Kong.
The dollar extended falls on Monday and tumbled to a record low against a basket of currencies as worries about the health of US financial firms and fears of a US recession stoked expectations of aggressive rate cuts.
Lower interest rates lift gold's appeal as an alternativeinvestment.
"Sentiment is clearly bullish with weakness of the dollar prompting buying," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo.
"Gold has more room to rise considering that its pace of rise has been slower relative to other commodities."
Crude oil held steady near $102 a barrel, supported by a falling US dollar and expectations that OPEC would leave its output unchanged.
"Demand from Vietnam is very good. I guess they are buying gold bars for investment and also a hedge against inflation.
They are quite bullish on the market," said a dealer in Singapore.
A dealer in Hong Kong said: "I don't think there's physical buying here. The market is driven by funds and speculators."
Silver rose as high as $20 an ounce, up from $19,80/19,85 an ounce late in New York.
Spot platinum firmed to $2 168/2 175 from $2 163/2 170 ounce late in New York. It hit a record of $2 192 an ounce on February 22 as problems with power supply disrupted mining in main producer South Africa.
A South African minister said on Friday the country's mining industry would get priority under measures aimed at cutting electricity use to solve a power crisis.
Palladium rose to $578/583 an ounce from $563/568 an ounce late in New York -- within sight of last week's 6-1/2-year high of $582 an ounce.
The most active February 2009 contract on the Tokyo Commodity Exchange fell 30 yen per gram lower to 7 021 yen.
Gold edged closer to the $1 000 an ounce mark on Monday, setting a record high for the fourth straight day after the dollar tumbled and crude oil held near an all-time high.
Silver jumped to $20 an ounce for the first time since November 1980 to track gold. Platinum and palladium held near their recent highs, while a firming yen ignited selling in yen-denominated Japanese precious metals futures.
Gold jumped as high as $983,90 an ounce, partly driven by purchases from Japanese speculators who took advantage of the dollar's drop to a three-year low against the yen. Gold was last quoted at $973,30/973,75 in New York on Friday.
Gold has gained around 18 percent in 2008 as investors shift some of their money into the precious metal on expectations of more interest rate cuts in the United States, volatile stock markets and fears of rising energy costs.
"Everybody talks about $1 000. There's Japanese buying. It's cheaper for them to buy," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, adding that investors may also book profits when gold eventually hit $1 000.
"We could see some selling but I don't think it will be aggressive. I don't know what the resistance level is but we can say $970 and $965 will be the support levels," he said.
Gold's inflation-adjusted record high was $2 119 an ounce at 2007 prices, according to analysts at metals consultancy GFMS Ltd.
In the physical sector, dealers saw a surge in demand for gold bars from investors in Vietnam but holders in Indonesia and Thailand cashed in their bullion. Gold's rise scared off jewellers in Hong Kong.
The dollar extended falls on Monday and tumbled to a record low against a basket of currencies as worries about the health of US financial firms and fears of a US recession stoked expectations of aggressive rate cuts.
Lower interest rates lift gold's appeal as an alternativeinvestment.
"Sentiment is clearly bullish with weakness of the dollar prompting buying," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo.
"Gold has more room to rise considering that its pace of rise has been slower relative to other commodities."
Crude oil held steady near $102 a barrel, supported by a falling US dollar and expectations that OPEC would leave its output unchanged.
"Demand from Vietnam is very good. I guess they are buying gold bars for investment and also a hedge against inflation.
They are quite bullish on the market," said a dealer in Singapore.
A dealer in Hong Kong said: "I don't think there's physical buying here. The market is driven by funds and speculators."
Silver rose as high as $20 an ounce, up from $19,80/19,85 an ounce late in New York.
Spot platinum firmed to $2 168/2 175 from $2 163/2 170 ounce late in New York. It hit a record of $2 192 an ounce on February 22 as problems with power supply disrupted mining in main producer South Africa.
A South African minister said on Friday the country's mining industry would get priority under measures aimed at cutting electricity use to solve a power crisis.
Palladium rose to $578/583 an ounce from $563/568 an ounce late in New York -- within sight of last week's 6-1/2-year high of $582 an ounce.
The most active February 2009 contract on the Tokyo Commodity Exchange fell 30 yen per gram lower to 7 021 yen.
Gold powers to record on oil, eyes $1000
Gold powered to a new high around $973 an ounce on Friday after crude oil set an all-time high of above $103 a barrel, igniting another round of buying from investors and speculators.
Palladium jumped to its highest level in more than six years and silver matched a 27-year peak struck on Thursday. Platinum rebounded from its lows but given the absence of new developments in South Africa's supply problems, gains are likely to be capped.
Gold jumped as high as $974,20 an ounce, up from $968,90/969,70 late in New York on Thursday. Gold has gained more than 16 percent this year, and the next upside target pegged by dealers was $1 000.
Record high oil and expectations of more interest rate cuts in the United States add to inflation pressures, elevating gold's appeal as a hedge against rising prices, while volatile stock markets have encouraged investors to shift some of their money into gold and other precious metals.
"The target is $1 000. I personally hope it will be $1 000 within a month," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo, adding that gold was likely be driven by movements in oil in coming weeks.
Crude oil rallied to another record above $103 a barrel as Ecuador shut a key export pipeline and a fire hit a major European natural gas plant.
While oil is at a record price in inflation-adjusted as well as nominal terms, gold has lagged. According to analysts at GFMS gold's inflation-adjusted record is $2 079 an ounce.
"Most of the funds are buying inflation hedges such as gold, silver and oil. It's still a bull market, where hedge funds and banks buy precious metals," said William Kwan, a dealer at Phillip Futures in Singapore.
"I think inflation is really getting out of hand. I am looking at $955 for support and resistance at $985," said Kwan, who pegged upside target for silver at $20.
Silver matched Thursday's 27-year high at $19,83/19,88 an ounce, up from $19,74/19,79 an ounce in New York.
The dollar tumbled to a three-year low versus the yen and held near record troughs against other currencies after Federal Reserve chief Ben Bernanke warned some small US banks could fail, suggesting that interest rates may fall more.
Spot platinum rose to $2 145/2 152 an ounce from $2 135/2 140 an ounce late in New York to track a rebound in Tokyo futures. Platinum has dropped more than 2 percent since last week's record high of $2 192 an ounce.
Automakers, who had bought the metal on fears of further price hikes and mining disruptions in South Africa, were on the sidelines, waiting for a correction, said Sonoda of Daiichi Commodities.
"Car makers are waiting for the price to decrease to $2 000," he said.
Platinum, used in jewellery and auto catalysts, has jumped more than 40 percent this year after mines in South Africa, accounting for 80 percent of world output, were shut for five days at the height of last month's power crisis.
The most active February 2009 contract on the Tokyo Commodity Exchange hit a low of 6 839 yen per gram before funds bought on dips and pushed up the contract to a high of 7 069 yen. It was later quoted at 7 025 yen, up 8 yen from Thursday's close.
Palladium hit a high of $580 an ounce, its strongest in more than six years, up from $560,00/564,00 late in New York.
Palladium jumped to its highest level in more than six years and silver matched a 27-year peak struck on Thursday. Platinum rebounded from its lows but given the absence of new developments in South Africa's supply problems, gains are likely to be capped.
Gold jumped as high as $974,20 an ounce, up from $968,90/969,70 late in New York on Thursday. Gold has gained more than 16 percent this year, and the next upside target pegged by dealers was $1 000.
Record high oil and expectations of more interest rate cuts in the United States add to inflation pressures, elevating gold's appeal as a hedge against rising prices, while volatile stock markets have encouraged investors to shift some of their money into gold and other precious metals.
"The target is $1 000. I personally hope it will be $1 000 within a month," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo, adding that gold was likely be driven by movements in oil in coming weeks.
Crude oil rallied to another record above $103 a barrel as Ecuador shut a key export pipeline and a fire hit a major European natural gas plant.
While oil is at a record price in inflation-adjusted as well as nominal terms, gold has lagged. According to analysts at GFMS gold's inflation-adjusted record is $2 079 an ounce.
"Most of the funds are buying inflation hedges such as gold, silver and oil. It's still a bull market, where hedge funds and banks buy precious metals," said William Kwan, a dealer at Phillip Futures in Singapore.
"I think inflation is really getting out of hand. I am looking at $955 for support and resistance at $985," said Kwan, who pegged upside target for silver at $20.
Silver matched Thursday's 27-year high at $19,83/19,88 an ounce, up from $19,74/19,79 an ounce in New York.
The dollar tumbled to a three-year low versus the yen and held near record troughs against other currencies after Federal Reserve chief Ben Bernanke warned some small US banks could fail, suggesting that interest rates may fall more.
Spot platinum rose to $2 145/2 152 an ounce from $2 135/2 140 an ounce late in New York to track a rebound in Tokyo futures. Platinum has dropped more than 2 percent since last week's record high of $2 192 an ounce.
Automakers, who had bought the metal on fears of further price hikes and mining disruptions in South Africa, were on the sidelines, waiting for a correction, said Sonoda of Daiichi Commodities.
"Car makers are waiting for the price to decrease to $2 000," he said.
Platinum, used in jewellery and auto catalysts, has jumped more than 40 percent this year after mines in South Africa, accounting for 80 percent of world output, were shut for five days at the height of last month's power crisis.
The most active February 2009 contract on the Tokyo Commodity Exchange hit a low of 6 839 yen per gram before funds bought on dips and pushed up the contract to a high of 7 069 yen. It was later quoted at 7 025 yen, up 8 yen from Thursday's close.
Palladium hit a high of $580 an ounce, its strongest in more than six years, up from $560,00/564,00 late in New York.
Platinum deficit will likely widen in '08
The platinum market is expected to continue in a supply deficit in 2008, HSBC metals analyst Victor Flores said on Sunday, with the actual size of the shortfall likely to be determined by whether prices remain at current or higher levels, what the higher prices mean for jewellery demand, the extent to which automakers react to supply concerns in South Africa and demand from exchange-traded funds (ETFs).
Based on various scenarios and price levels, Flores forecasts the platinum market will show a deficit of between 500 000 oz and two-million ounces in 2008, although the latter figure is "at the high end" of predictions.
Recent electricity-related supply disruptions in the world's main platinum producer, South Africa, were largely to blame for the expected deficit growth.
However, a decline in jewellery demand, as a result of spiking prices, may partially offset the lower production from the South African producer, Flores said.
Platinum's primary industrial use is in emissions-reducing autocatalysts, and, while there did not appear to be significant scope for car manufacturers to increase their subsitution of platinum's cheaper sister, palladium, upside potential existed in the chance that one or more manufacturers may decide that supply concerns in South Africa justified a significant purchase of the metal to guarantee future supply.
Unlike jewellery demand for platinum, which declined as prices rose, there was less "elasticity" in industrial demand for the metal, as car companies had to meet emission control standards, which were becoming stricter.
"If, as we believe, the car companies actually have adequate stocks of platinum and palladium, then we might expect to see them not increase their demand a great deal this year, and we would see them come in at levels perhaps slightly higher than last year.
"If, on the other hand, we were to see one or more of the car companies get very worried about the availability of supply, given the situation in South Africa, they started to buy metal up, as we saw one of the auto companies do seven or eight years ago," given the already tight market, this would have a significant effect on the fundamentals for platinum in the short term, Flores said, in a presentation at the Prospectors and Developers Association of Canada's annual convention, under way this week in Toronto.
Based on various scenarios and price levels, Flores forecasts the platinum market will show a deficit of between 500 000 oz and two-million ounces in 2008, although the latter figure is "at the high end" of predictions.
Recent electricity-related supply disruptions in the world's main platinum producer, South Africa, were largely to blame for the expected deficit growth.
However, a decline in jewellery demand, as a result of spiking prices, may partially offset the lower production from the South African producer, Flores said.
Platinum's primary industrial use is in emissions-reducing autocatalysts, and, while there did not appear to be significant scope for car manufacturers to increase their subsitution of platinum's cheaper sister, palladium, upside potential existed in the chance that one or more manufacturers may decide that supply concerns in South Africa justified a significant purchase of the metal to guarantee future supply.
Unlike jewellery demand for platinum, which declined as prices rose, there was less "elasticity" in industrial demand for the metal, as car companies had to meet emission control standards, which were becoming stricter.
"If, as we believe, the car companies actually have adequate stocks of platinum and palladium, then we might expect to see them not increase their demand a great deal this year, and we would see them come in at levels perhaps slightly higher than last year.
"If, on the other hand, we were to see one or more of the car companies get very worried about the availability of supply, given the situation in South Africa, they started to buy metal up, as we saw one of the auto companies do seven or eight years ago," given the already tight market, this would have a significant effect on the fundamentals for platinum in the short term, Flores said, in a presentation at the Prospectors and Developers Association of Canada's annual convention, under way this week in Toronto.
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