Dubai: Interest rate cuts expected imminently by the US Federal Reserve in the range of 0.75 per cent to 1.25 per cent are putting additional pressure on GCC central banks to reform their monetary policies, anchored on the dollar peg, according to economists and analysts.
The Fed's key rate has already fallen from 5.25 per cent in September to 3 per cent. The pace picked up in January when the Fed slashed the rate by 1.25 percentage points.
Amidst expectations of further cuts, the Fed announced on Sunday that it was cutting by a quarter-point to 3.25 per cent its discount rate, the primary credit rate offered at the Fed's discount window for loans to institutions.
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"US interest rate cuts will definitely increase the pressure on GCC central banks. Although it might intensify the call for revaluation of some currencies such as the UAE dirham and Qatari riyal, the solution lies in anchoring the exchange rates against a basket of currencies," said Simon Williams, chief economist at HSBC Middle East.
In the context of expectation that the Fed will cut rates by another 1.25 per cent today, speculation is rising on many regional currencies. Reuters reported yesterday that one-year UAE dirham forwards slid to a record deep discount, reflecting speculation of a revaluation against the plummeting dollar, while Kuwait's currency rose to a record high.
Bankers confirmed yesterday that there has been an increase in speculation on the dirham. "The trend will continue until the central bank makes its position clear. Last week there were reports that it has launched a study into revaluation. This has heightened the expectations," said the head of treasury at a local bank.
Although the Gulf countries are facing a highly inflationary situation, econ-omists said the regional central banks would be forced to follow the US rate cuts. "The most likely scenario would be that most GCC central banks would cut deposit rates while keeping the lending rates unchanged," said Monica Malik, director of economics with EFG Hermes, an investment bank.
Economists said the Gulf states have reached a stage where they will have to delink their currencies from the dollar sooner rather than later. "The negative real interest rates, combined with rising inflation, will continue to exert pressure on the dollar pegs and further raise currency reform on the agenda of policymakers. Inflation levels will remain high. We continue to maintain our stand that there is a 60 per cent chance of revaluation in the first half of this year," said Malik.
Monday, March 17, 2008
Can Fed further boost rising Gold price trend
Remember the old Wall Street maxim, "Don't fight the trend"? asks Ed Bugos for The Daily Reckoning.
And do you remember the other? "Don't fight the Fed."
So what happens when the Fed fights the trend, as it has been trying to do recently? Which axiom to believe?
The historical odds favor the trend over the Fed when these two maxims collide. Which is why the stock market looks weak right now, despite the new $200bn Injection of Fed Help.
But let's consider what the Federal Reserve is doing for the trend in Gold Prices – a trend, I am loathe to inform you, which it is not fighting.
Let me sum it up: the trajectory of this bull trend shifted north when Bernanke took the helm of the Federal Reserve system. The policies pursued by the Bernanke Fed have confirmed the investment thesis driving the bull market in Gold ever since.
As one pundit recently noted during a Bloomberg interview, "You gotta go with the inflation theme...it's the only thing still working."
After upping the size of its new Term Auction Facility from $60 to $100 billion this weekend, the Fed revealed another innovative tool that might help it manage liquidity in the banking system.
The new facility, the Term Securities Lending Facility (TSLF), will offer up to $200 billion in Treasury Securities to primary dealers in exchange for a wide variety of collateral the Fed has never before accepted, including private label mortgage securities. It also eased swaps with other central banks.
The controversy is that although the Fed has been allowed to accept mortgage backed securities as collateral since 1980, it has never outright bought them, and only recently enacted legislation that allows it to actually monetize them – which means to buy them without having to sell other assets.
Gold bugs have followed the Fed's legislative changes with interest. This move should not surprise any of them, but it does hold a special significance in its long-term implications, and for Gold Prices.
And even though the Fed hasn't expanded bank reserves or the monetary base much since August, it is helping the banking system postpone an increase in reserve demands triggered by criteria built into the Basel II framework, a generally accepted model for capital adequacy standards.
By boosting the quality of bank reserves, even if temporarily, the Fed hopefully won't need to increase the quantity of bank reserves, which have been sufficient to fuel an $800 billion expansion in the broad US credit aggregate, MZM, since August.
That is 11% money supply growth since the summer, or 15% year over year – the highest rate since 2002.
That is a bullish recipe for the precious metals. There is nothing more bullish for Gold than a situation where the central bank refuses to acknowledge that it is pouring gasoline on a raging fire.
Forget the Dollar, and oil. Those were just interim preoccupations. The real bull market is about to stand up. If Gold Prices are going to continue to drive through $1000, they are going to do it because the central banks are all inflating madly at the worst time. This means that a good old-fashioned bear market on Wall Street is sufficient to keep central bankers' collective pedal to the metal, and sustain the gold bull.
So far, the precious metals stocks have bucked the general stock market trend since August. This is as it should be, and it is impressive – because by most counts, gold stocks are quite expensive relative to today's Gold Price.
But investors are complaining about the underperformance of those stocks relative to gold, and also about the lackluster performance of their junior mining assets, which haven't participated in the precious sector rally at all since August – when the current leg started.
There are a few explanations for this.
Perhaps John Embry said it best, at a gold conference in Vancouver recently, when he remarked that gold shares sometimes act like a bet on gold, but sometimes they just act like plain old shares.
We should leave it at that. However, that is not like us.
Historically, I have found that gold shares are susceptible to market declines, except occasionally during a major bull market advance in gold, when they tend toward counter-cyclicality – the more so as the bull market progresses. They will still fall during stock market panics, as all shares do, but they are likely to come back harder and hold their trends better. Still, since 2004, I've held the position that, as an asset class, gold shares would not outperform gold prices for the remainder of the primary leg.
I continue to think that, with the qualification that we are talking about the average gold stock.
Junior markets are wired differently. They do not correlate that well with the underlying commodity trend in the first place. In my experience, they correlate better with market attitudes toward risk.
Junior and small cap markets have never fared well in a general market meltdown because they are typically risky assets, and in a selling panic the crowd is averting risk.
The larger capitalization precious metal producers are different. The reasons for this are sound. But as a rule, speculative assets do well when the gambling environment is friendly.
However, within the small cap resource sector there will invariably be exceptions. It remains to be seen if the junior gold miners will be able to buck the general market trend, but there is a good chance they will. Many of them are cheap now, and the supply fundamentals for gold are tightening.
Production from many gold producing regions of the world is currently constrained by power shortages; and rapidly inflating development costs are causing the postponement of several otherwise promising development projects around the world. Meanwhile, gold producers need reserves!
The large cap producers are on the hunt for sound mining assets. And they aren't going to be discouraged by a 20-30% drop in gold, nor in stock prices.
And do you remember the other? "Don't fight the Fed."
So what happens when the Fed fights the trend, as it has been trying to do recently? Which axiom to believe?
The historical odds favor the trend over the Fed when these two maxims collide. Which is why the stock market looks weak right now, despite the new $200bn Injection of Fed Help.
But let's consider what the Federal Reserve is doing for the trend in Gold Prices – a trend, I am loathe to inform you, which it is not fighting.
Let me sum it up: the trajectory of this bull trend shifted north when Bernanke took the helm of the Federal Reserve system. The policies pursued by the Bernanke Fed have confirmed the investment thesis driving the bull market in Gold ever since.
As one pundit recently noted during a Bloomberg interview, "You gotta go with the inflation theme...it's the only thing still working."
After upping the size of its new Term Auction Facility from $60 to $100 billion this weekend, the Fed revealed another innovative tool that might help it manage liquidity in the banking system.
The new facility, the Term Securities Lending Facility (TSLF), will offer up to $200 billion in Treasury Securities to primary dealers in exchange for a wide variety of collateral the Fed has never before accepted, including private label mortgage securities. It also eased swaps with other central banks.
The controversy is that although the Fed has been allowed to accept mortgage backed securities as collateral since 1980, it has never outright bought them, and only recently enacted legislation that allows it to actually monetize them – which means to buy them without having to sell other assets.
Gold bugs have followed the Fed's legislative changes with interest. This move should not surprise any of them, but it does hold a special significance in its long-term implications, and for Gold Prices.
And even though the Fed hasn't expanded bank reserves or the monetary base much since August, it is helping the banking system postpone an increase in reserve demands triggered by criteria built into the Basel II framework, a generally accepted model for capital adequacy standards.
By boosting the quality of bank reserves, even if temporarily, the Fed hopefully won't need to increase the quantity of bank reserves, which have been sufficient to fuel an $800 billion expansion in the broad US credit aggregate, MZM, since August.
That is 11% money supply growth since the summer, or 15% year over year – the highest rate since 2002.
That is a bullish recipe for the precious metals. There is nothing more bullish for Gold than a situation where the central bank refuses to acknowledge that it is pouring gasoline on a raging fire.
Forget the Dollar, and oil. Those were just interim preoccupations. The real bull market is about to stand up. If Gold Prices are going to continue to drive through $1000, they are going to do it because the central banks are all inflating madly at the worst time. This means that a good old-fashioned bear market on Wall Street is sufficient to keep central bankers' collective pedal to the metal, and sustain the gold bull.
So far, the precious metals stocks have bucked the general stock market trend since August. This is as it should be, and it is impressive – because by most counts, gold stocks are quite expensive relative to today's Gold Price.
But investors are complaining about the underperformance of those stocks relative to gold, and also about the lackluster performance of their junior mining assets, which haven't participated in the precious sector rally at all since August – when the current leg started.
There are a few explanations for this.
Perhaps John Embry said it best, at a gold conference in Vancouver recently, when he remarked that gold shares sometimes act like a bet on gold, but sometimes they just act like plain old shares.
We should leave it at that. However, that is not like us.
Historically, I have found that gold shares are susceptible to market declines, except occasionally during a major bull market advance in gold, when they tend toward counter-cyclicality – the more so as the bull market progresses. They will still fall during stock market panics, as all shares do, but they are likely to come back harder and hold their trends better. Still, since 2004, I've held the position that, as an asset class, gold shares would not outperform gold prices for the remainder of the primary leg.
I continue to think that, with the qualification that we are talking about the average gold stock.
Junior markets are wired differently. They do not correlate that well with the underlying commodity trend in the first place. In my experience, they correlate better with market attitudes toward risk.
Junior and small cap markets have never fared well in a general market meltdown because they are typically risky assets, and in a selling panic the crowd is averting risk.
The larger capitalization precious metal producers are different. The reasons for this are sound. But as a rule, speculative assets do well when the gambling environment is friendly.
However, within the small cap resource sector there will invariably be exceptions. It remains to be seen if the junior gold miners will be able to buck the general market trend, but there is a good chance they will. Many of them are cheap now, and the supply fundamentals for gold are tightening.
Production from many gold producing regions of the world is currently constrained by power shortages; and rapidly inflating development costs are causing the postponement of several otherwise promising development projects around the world. Meanwhile, gold producers need reserves!
The large cap producers are on the hunt for sound mining assets. And they aren't going to be discouraged by a 20-30% drop in gold, nor in stock prices.
What time is best to make money
"The time to make money in the stock market," reckons Stephen Gandel – yet another senior writer at Money Magazine – is not when things are going gangbusters...”
(Don’t they have any juniors? Just wondering.)
"[The time to make money is] when things look as if they're going bust," he advises. "Just ask anyone who invested in beaten-down US stocks after the market sank in the immediate aftermath of 9/11."
Okay, let's ask him. Because things really do look like they're "going bust" right now, starting at Bear Stearns and winding up there again 10 months later...but not before feeding into the global finance system and finally the very credibility of official currency itself.
Say, value-loving investor, how did things pan out after you bought beaten-down stocks post-9/11...?
"Oh gee, what a move!" says our beaten-down buyer.
"I bought both the S&P and the Nasdaq when the markets re-opened on Sept. 17th, and I made 30% on tech stocks and 12% on broader stocks in less than three months.
"Trouble is, I didn't know a good thing when I got it, and I was underwater again by July the next year. And thanks to the deeper trend – which was downhill all the way from March of 2000 – I was actually fast on my way to losing one-fifth of my money by the real bottom of mid-Oct. 2002.
"It took me another seven months on the QQQQ to get back to break-even from there. The S&P didn't get back to its post-9/11 low until August 2003."
What? Your plucky beaten-down bargains took nearly two years to get straight?
"Hmm, yeah. Kinda got screwed by the trend – which was, like I said, clearly down. Even though the bounce looked a shoo-in. Which it was."
Take heart, investors everywhere! "Step out of the stock market, even temporarily, and you may miss the whole point of owning stocks," says Janice Revell, another senior writer at CNN's Money Magazine.
The whole point being, of course, that bear markets in stocks – sparked by mal-investments in credit-fuelled bubbles – take a good deal longer to work out than anyone ever dares guess.
(Don’t they have any juniors? Just wondering.)
"[The time to make money is] when things look as if they're going bust," he advises. "Just ask anyone who invested in beaten-down US stocks after the market sank in the immediate aftermath of 9/11."
Okay, let's ask him. Because things really do look like they're "going bust" right now, starting at Bear Stearns and winding up there again 10 months later...but not before feeding into the global finance system and finally the very credibility of official currency itself.
Say, value-loving investor, how did things pan out after you bought beaten-down stocks post-9/11...?
"Oh gee, what a move!" says our beaten-down buyer.
"I bought both the S&P and the Nasdaq when the markets re-opened on Sept. 17th, and I made 30% on tech stocks and 12% on broader stocks in less than three months.
"Trouble is, I didn't know a good thing when I got it, and I was underwater again by July the next year. And thanks to the deeper trend – which was downhill all the way from March of 2000 – I was actually fast on my way to losing one-fifth of my money by the real bottom of mid-Oct. 2002.
"It took me another seven months on the QQQQ to get back to break-even from there. The S&P didn't get back to its post-9/11 low until August 2003."
What? Your plucky beaten-down bargains took nearly two years to get straight?
"Hmm, yeah. Kinda got screwed by the trend – which was, like I said, clearly down. Even though the bounce looked a shoo-in. Which it was."
Take heart, investors everywhere! "Step out of the stock market, even temporarily, and you may miss the whole point of owning stocks," says Janice Revell, another senior writer at CNN's Money Magazine.
The whole point being, of course, that bear markets in stocks – sparked by mal-investments in credit-fuelled bubbles – take a good deal longer to work out than anyone ever dares guess.
India Gold prices zoom to record high
MUMBAI: Gold prices in India continue to zoom India. On Saturday, the yellow metal prices scaled to the historic high of Rs 13,200 per 10 grams in the Mumbai the bullion market.
Bullion traders and dealers said buying activity picked up after reports of the preci ous metal in the US markets surged to an all-time high of $1,005 an ounce. Stockists indulged in enlarging their positions as melting stocks, falling dollar and crude rising to record high levels left no other option to invest.
The steep fall in dollar against other leading currencies and crude oil rising to $111 an ounce mainly raised concerns of inflation all over the world and made the gold more dear among stockists and other actual consumers like jewellery fabricators.
Standard gold and ornaments traded at last levels of Rs 13,200 and Rs.13,050 per 10 gram respectively. Sovereign was higher by Rs.50 to set new record high levels of Rs.10, 150 per piece of eight gram.
Silver ready, on the other hand declined by Rs.250 at Rs 24,750 per kilo while weekly-based delivery rose by Rs.125 at Rs.26,740 per kilo as speculators extended support on expectations that the prices might go up further. Silver coins declined by Rs.100 at Rs.26,900 for buying and Rs.27,000 for selling of 100 pieces.
Bullion traders and dealers said buying activity picked up after reports of the preci ous metal in the US markets surged to an all-time high of $1,005 an ounce. Stockists indulged in enlarging their positions as melting stocks, falling dollar and crude rising to record high levels left no other option to invest.
The steep fall in dollar against other leading currencies and crude oil rising to $111 an ounce mainly raised concerns of inflation all over the world and made the gold more dear among stockists and other actual consumers like jewellery fabricators.
Standard gold and ornaments traded at last levels of Rs 13,200 and Rs.13,050 per 10 gram respectively. Sovereign was higher by Rs.50 to set new record high levels of Rs.10, 150 per piece of eight gram.
Silver ready, on the other hand declined by Rs.250 at Rs 24,750 per kilo while weekly-based delivery rose by Rs.125 at Rs.26,740 per kilo as speculators extended support on expectations that the prices might go up further. Silver coins declined by Rs.100 at Rs.26,900 for buying and Rs.27,000 for selling of 100 pieces.
Gold Boom: Yellow fever grips global markets
Gold for April delivery soared to a record high of $1,001.50 an ounce on the New York Mercantile Exchange, before closing up $13.30 at $993.80 an ounce.
MarketWatch reports: Gold futures broke above the psychologically key level of $1,000 an ounce Thursday, propelled by ongoing dollar weakness and bleak news from the financial sector.
"This is just the start of things, and if the government continues to give away money and torpedo the dollar, gold will do nothing but move higher," said Zachary Oxman, Wisdom Financial
Gold at $1,000 "will one day, and likely not too far off in the future, be looked at as a foreshadowing milestone," said Peter Spina, an analyst at GoldSeek.com. "The gravity of the unfolding situation is starting to sink in with investors and that leads many more of them to move capital into real money - into gold and silver.”
Reuters reports: U.S. gold futures surged as a record-low dollar and inflation fears due to crude oil rising to all-time highs prompted investors to enter the bullion market.
"It's psychological and I view this by no means as a significant barrier to gold. And I think the market is going to continue to work its way higher," said Bill O'Neill, managing partner of LOGIC Advisors. "I don't think the mentality relative to the credit crisis will be changing for a while. I can't predict the end of it, but we're not finished here, it's going to drive gold to $1,100 in my view."
"The Federal Reserve is going to cut and inflate our way out of this credit mess and the implications are going to be higher and sustained inflation, and that's been signaled by not just gold but by virtually every commodity and the dollar," said Michael Darda, chief economist of MKM Partners LLC.
Dow Jones reports: Gold extended its contract high to $1,001 an ounce as the dollar weakens, equities are lower and crude oil, while near steady, is still quite strong near $110 a barrel.
“The yellow metal is seeing safe-haven buying on economic worries, including more subprime and bank concerns,” said John Person, president of NationalFutures.com, adding that other precious metals are also moving higher.
Bloomberg reports: Gold rose above $1,000 an ounce for the first time as mounting credit-market losses spurred demand for bullion as a haven from the sagging dollar and equities.
“There is more monetary reflation in the pipes, more interest rate cuts and more flushing of money at the system,” said Martin Murenbeeld, chief economist at DundeeWealth Inc. “The easiest thing to say about gold at the moment is to stay long.”
“The situation in the U.S. could easily spread further, which means other central banks will try to takes steps to support their economy,” Murenbeeld said.
“The dollar weakness is systemic and interest rates are headed lower,” said Robert Gottlieb, managing director and global head of precious metals at Bear Stearns Cos. “As long as there's a great deal of financial uncertainty, gold can go higher.”
Forbes reports: The precious metal hit its all-time high of $1000 per troy ounce Thursday and many speculate that this price is far from the ceiling for the metal.
"I believe gold is going to go higher," said JPMorgan Chase analyst John Bridges. "[Now that we have gotten] above $1,000, we are going to get a whole lot of momentum driven investors who are going to drive the price higher."
May silver rose 42 cents to $20.42 an ounce; April platinum gained $27.50 to end at $2,097.50 an ounce; June palladium rose $5 to $515.90 an ounce; May copper ended down 1 cent at $3.83 a pound. Light sweet crude for April delivery rose 41 cents to settle at a record $110.33 a barrel after earlier surging to a new trading record of $111.
courtesy: resourceinvestor.com
MarketWatch reports: Gold futures broke above the psychologically key level of $1,000 an ounce Thursday, propelled by ongoing dollar weakness and bleak news from the financial sector.
"This is just the start of things, and if the government continues to give away money and torpedo the dollar, gold will do nothing but move higher," said Zachary Oxman, Wisdom Financial
Gold at $1,000 "will one day, and likely not too far off in the future, be looked at as a foreshadowing milestone," said Peter Spina, an analyst at GoldSeek.com. "The gravity of the unfolding situation is starting to sink in with investors and that leads many more of them to move capital into real money - into gold and silver.”
Reuters reports: U.S. gold futures surged as a record-low dollar and inflation fears due to crude oil rising to all-time highs prompted investors to enter the bullion market.
"It's psychological and I view this by no means as a significant barrier to gold. And I think the market is going to continue to work its way higher," said Bill O'Neill, managing partner of LOGIC Advisors. "I don't think the mentality relative to the credit crisis will be changing for a while. I can't predict the end of it, but we're not finished here, it's going to drive gold to $1,100 in my view."
"The Federal Reserve is going to cut and inflate our way out of this credit mess and the implications are going to be higher and sustained inflation, and that's been signaled by not just gold but by virtually every commodity and the dollar," said Michael Darda, chief economist of MKM Partners LLC.
Dow Jones reports: Gold extended its contract high to $1,001 an ounce as the dollar weakens, equities are lower and crude oil, while near steady, is still quite strong near $110 a barrel.
“The yellow metal is seeing safe-haven buying on economic worries, including more subprime and bank concerns,” said John Person, president of NationalFutures.com, adding that other precious metals are also moving higher.
Bloomberg reports: Gold rose above $1,000 an ounce for the first time as mounting credit-market losses spurred demand for bullion as a haven from the sagging dollar and equities.
“There is more monetary reflation in the pipes, more interest rate cuts and more flushing of money at the system,” said Martin Murenbeeld, chief economist at DundeeWealth Inc. “The easiest thing to say about gold at the moment is to stay long.”
“The situation in the U.S. could easily spread further, which means other central banks will try to takes steps to support their economy,” Murenbeeld said.
“The dollar weakness is systemic and interest rates are headed lower,” said Robert Gottlieb, managing director and global head of precious metals at Bear Stearns Cos. “As long as there's a great deal of financial uncertainty, gold can go higher.”
Forbes reports: The precious metal hit its all-time high of $1000 per troy ounce Thursday and many speculate that this price is far from the ceiling for the metal.
"I believe gold is going to go higher," said JPMorgan Chase analyst John Bridges. "[Now that we have gotten] above $1,000, we are going to get a whole lot of momentum driven investors who are going to drive the price higher."
May silver rose 42 cents to $20.42 an ounce; April platinum gained $27.50 to end at $2,097.50 an ounce; June palladium rose $5 to $515.90 an ounce; May copper ended down 1 cent at $3.83 a pound. Light sweet crude for April delivery rose 41 cents to settle at a record $110.33 a barrel after earlier surging to a new trading record of $111.
courtesy: resourceinvestor.com
Gold crosses $1000-mark
NEW YORK: The precious yellow metal surpassed the record $1000 mark on Thursday, taking advantage of a weak dollar.
After reaching the milestone, gold stood at $US997.54 an ounce on the London Bullion Market, which compared with $US975.50 late Thursday.
Investors are pooling their cash into commodities like gold as they seek refuge from volatile world stock markets, the plunging value of the dollar and growing fears about a US-led economic slowdown, traders said.
Demand for the glamorous metal, which is used in jewellery, dentistry and electronics, is spearheaded by Asian economic giants India and China.
Gold, which is priced in dollars, becomes cheaper for buyers using other currencies when the US unit falls in value. The greenback slumped against both the European single currency and the yen overnight as fresh credit jitters swept across global markets, dealers said.
On the foreign exchange market the euro jumped as high as $US1.5625 overnight amid mounting concerns over the US economy, dealers said. The dollar also plunged below the key 100 yen level for the first time in 12 years, falling as low as 99.78 yen.
Gold has risen by about 17 per cent so far this year, underscored also by supply problems in South Africa - which is the world's largest producer.
At the start of January, the metal jumped above $US850 an ounce, smashing a 28-year-old record, and has been on an upward trend ever since. The precious metal is regarded as a safe haven in times of economic uncertainty and rising inflation.
At present, there are widespread fears that the US economy is lurching into recession and record oil prices of almost $US111 a barrel have stoked those inflationary pressures.
Global demand for gold is also surging because of increased jewellery purchases in China and India, according to the World Gold Council. Demand was additionally being fuelled by higher purchases of the metal by industry and wealthy individuals, it said.
After reaching the milestone, gold stood at $US997.54 an ounce on the London Bullion Market, which compared with $US975.50 late Thursday.
Investors are pooling their cash into commodities like gold as they seek refuge from volatile world stock markets, the plunging value of the dollar and growing fears about a US-led economic slowdown, traders said.
Demand for the glamorous metal, which is used in jewellery, dentistry and electronics, is spearheaded by Asian economic giants India and China.
Gold, which is priced in dollars, becomes cheaper for buyers using other currencies when the US unit falls in value. The greenback slumped against both the European single currency and the yen overnight as fresh credit jitters swept across global markets, dealers said.
On the foreign exchange market the euro jumped as high as $US1.5625 overnight amid mounting concerns over the US economy, dealers said. The dollar also plunged below the key 100 yen level for the first time in 12 years, falling as low as 99.78 yen.
Gold has risen by about 17 per cent so far this year, underscored also by supply problems in South Africa - which is the world's largest producer.
At the start of January, the metal jumped above $US850 an ounce, smashing a 28-year-old record, and has been on an upward trend ever since. The precious metal is regarded as a safe haven in times of economic uncertainty and rising inflation.
At present, there are widespread fears that the US economy is lurching into recession and record oil prices of almost $US111 a barrel have stoked those inflationary pressures.
Global demand for gold is also surging because of increased jewellery purchases in China and India, according to the World Gold Council. Demand was additionally being fuelled by higher purchases of the metal by industry and wealthy individuals, it said.
Why South African gold production is falling
South African gold output fell 16.5% in volume terms while overall minerals production declined 10.7% in January compared with the same month the previous year, according to data from Statistics SA.
Furthermore, gold production after seasonal adjustment decreased by 5.0% for January 2008 when compared with December 2007
South Africa’s total value of mineral sales for last year was 16.6% up at R225.64 billion ($28.32 billion) while gold sales by value were 7.1% up higher at R38.99 billion ($4.89 million).
courtesy : ResourceInvestor.com
Furthermore, gold production after seasonal adjustment decreased by 5.0% for January 2008 when compared with December 2007
South Africa’s total value of mineral sales for last year was 16.6% up at R225.64 billion ($28.32 billion) while gold sales by value were 7.1% up higher at R38.99 billion ($4.89 million).
courtesy : ResourceInvestor.com
Why Gold is so precious to hold
Gold is essentially just a rock, writes the Mogambo Guru for The Daily Reckoning. So why is Gold so valuable? Why do people always turn to gold in the end?
The answer is that there is nothing else to take its place as a store of wealth that does not rot, corrode or disappear. And as Ty Andros of Traderview.com says, the "Crack Up Boom" of soaring inflation and sinking asset prices "is unfolding as predicted by Ludwig von Mises."
But on the other hand, "It's hard to predict a down stock market when they are printing money at this rate! Purchasing power is crumbling in terms of all currencies which provide a natural buoyancy as the assets re-price higher to reflect the lower purchasing power of the currencies in which they are priced.
"Can you say 'Zimbabwe here we come'?"
Zimbabwe has been printing money for so long that inflation there is now approximately 300,000% a year. This apparently prompted Junior Mogambo Ranger (JMR) Phil S. to say that with all the creation of money and credit, we seem intent on "Chasing Zimbabwe to success." Hahaha!
And the situation is just about as bad in South Africa, which has sunk so low from mismanagement, stupidity and corruption that it can't even keep the electricity flowing, and which caused a wag to comment, "What's the difference between South Africa and the Titanic? The Titanic sank with its lights still on."
All this economic misery is due to the pernicious effects of inflation, which is all due to the central banks producing too much money and credit. And in that regard, an interesting article in the Wall Street Journal that was titled "Inflation May Be Worse Than We Think" by David Ransom shows that rising input costs always "filter through" to final prices (regardless of what Ben Bernanke of the Federal Reserve perversely thinks).
"Commodity prices, far from reverting quickly back to the mean, are early-warning indicators of the future," says Ransom. Now the government's "official" figure of inflation is already a staggering 4.3%, and as bad as that is, Mr.Ransom says, "worse may be yet to come.
"While commodities like energy and food are leading indicators of the Consumer Price Index, precious metals like Gold are, in turn, leading indicators of energy and food", which is really spooky when one remembers that the Gold Price over 40% from a year ago. Yikes!
Even more interesting, his research shows that, over the last several decades, "There is a remarkable parallel between annual CPI inflation and the cumulative change in the Gold Price measured from eight years before."
Hmmm!
In fact, he says, to gauge how high inflation will get, you can simply, "Divide the percentage change in the Gold Price from eight years in the past by 80, and add three."
I groaned aloud at this, as the last thing I want in this world is look up the price of gold eight years ago, or subtract it from the Gold Price now, or divide that by 80, or add his damned three at the end. And I was just getting ready to tell him so when he surprised me by saying that he has already done the work!
Ransom says that "in the last eight years the price of gold has risen 225%. The rule therefore comes out with an answer that puts inflation a lot closer to 6% than 4%."
And it is not even necessary to look at dry statistics and analyst reports, as one can merely take the easy way out and just read the subject line in an email from Junior Mogambo Ranger Azvitt, namely that "Let them eat...well, not bread or cake." The reason for the cryptic line is the observation that "There's a store near me that sells 50 pound bags of wheat. Months ago they cost $8 on sale. Today, TWENTY SEVEN DOLLARS!!!"
Careful Mogambo Linguistic Scholars (MLS) will note the use of the triple exclamation point to indicate particular emphasis, which seems appropriate when looking at 338% inflation in just a few months.
And even then, that estimate of inflation may be too low, as John Williams at shadowstats.com – who does this kind of thing for a living – figures that inflation in prices (measured the old fashioned way of looking at actual prices) is running somewhere between 10% and 13%, right freaking now!
And what does one do when looking at inflation that is that high? Buy Gold of course!
And in that regard Shayne McGuire, of the Teacher Retirement System in Texas, reveals that he has acquired an appreciation gold, and has actually just written a book that apparently contains no subtleties or excess verbiage; it is titled Buy Gold Now.
Mr.McGuire says "any MBA holder, who has been taught to value almost any asset, hits a stone wall when faced with Gold: it pays no dividend or coupon, and without deriving a cash flow, the basis of most assets defined as being financial, there is no conventional way to determine its Dollar value. Ultimately, it's just a rock, right?"
Yes, it is! Gold is essentially a rock! So why is it so valuable? Why do people always turn to gold at the end?
The answer is that there is nothing else to take its place as a store of wealth that does not rot, corrode or disappear, is divisible, is universally accepted as money, is small enough that you can stash a lot of wealth in a small place where government tax collectors cannot assess it (unlike the equivalent amount of land or buildings), and it is entirely portable. So you can take your wealth with you to some other country where the people and the government are not so crazy with desperation, where you can start over with a new name, and new identity, a lot of money and no family to nag, nag, nag you all the time just because you are a terrible father and husband and make absolutely no effort to change.
Now, perhaps, you have a new appreciation for Gold! Although perhaps not so much for me, The Mogambo Guru.
Ugh...
The Mogambo Sez: Oh, gold! Oh, silver! Oh, oil! Thank you, thank you, thank you! A soothing haven in a world gone completely freaking bonkers!
If this little phrase means nothing to you now, rest assured that it will increasingly become more meaningful to you as time goes on, and on that one special day you will achieve Complete Mogambo Enlightenment (TME).
The only question then will be "Is it too late to finally get off my fat, dead butt and Get Gold, silver and oil so as to try and save the last little bit of my money?"
The answer is that there is nothing else to take its place as a store of wealth that does not rot, corrode or disappear. And as Ty Andros of Traderview.com says, the "Crack Up Boom" of soaring inflation and sinking asset prices "is unfolding as predicted by Ludwig von Mises."
But on the other hand, "It's hard to predict a down stock market when they are printing money at this rate! Purchasing power is crumbling in terms of all currencies which provide a natural buoyancy as the assets re-price higher to reflect the lower purchasing power of the currencies in which they are priced.
"Can you say 'Zimbabwe here we come'?"
Zimbabwe has been printing money for so long that inflation there is now approximately 300,000% a year. This apparently prompted Junior Mogambo Ranger (JMR) Phil S. to say that with all the creation of money and credit, we seem intent on "Chasing Zimbabwe to success." Hahaha!
And the situation is just about as bad in South Africa, which has sunk so low from mismanagement, stupidity and corruption that it can't even keep the electricity flowing, and which caused a wag to comment, "What's the difference between South Africa and the Titanic? The Titanic sank with its lights still on."
All this economic misery is due to the pernicious effects of inflation, which is all due to the central banks producing too much money and credit. And in that regard, an interesting article in the Wall Street Journal that was titled "Inflation May Be Worse Than We Think" by David Ransom shows that rising input costs always "filter through" to final prices (regardless of what Ben Bernanke of the Federal Reserve perversely thinks).
"Commodity prices, far from reverting quickly back to the mean, are early-warning indicators of the future," says Ransom. Now the government's "official" figure of inflation is already a staggering 4.3%, and as bad as that is, Mr.Ransom says, "worse may be yet to come.
"While commodities like energy and food are leading indicators of the Consumer Price Index, precious metals like Gold are, in turn, leading indicators of energy and food", which is really spooky when one remembers that the Gold Price over 40% from a year ago. Yikes!
Even more interesting, his research shows that, over the last several decades, "There is a remarkable parallel between annual CPI inflation and the cumulative change in the Gold Price measured from eight years before."
Hmmm!
In fact, he says, to gauge how high inflation will get, you can simply, "Divide the percentage change in the Gold Price from eight years in the past by 80, and add three."
I groaned aloud at this, as the last thing I want in this world is look up the price of gold eight years ago, or subtract it from the Gold Price now, or divide that by 80, or add his damned three at the end. And I was just getting ready to tell him so when he surprised me by saying that he has already done the work!
Ransom says that "in the last eight years the price of gold has risen 225%. The rule therefore comes out with an answer that puts inflation a lot closer to 6% than 4%."
And it is not even necessary to look at dry statistics and analyst reports, as one can merely take the easy way out and just read the subject line in an email from Junior Mogambo Ranger Azvitt, namely that "Let them eat...well, not bread or cake." The reason for the cryptic line is the observation that "There's a store near me that sells 50 pound bags of wheat. Months ago they cost $8 on sale. Today, TWENTY SEVEN DOLLARS!!!"
Careful Mogambo Linguistic Scholars (MLS) will note the use of the triple exclamation point to indicate particular emphasis, which seems appropriate when looking at 338% inflation in just a few months.
And even then, that estimate of inflation may be too low, as John Williams at shadowstats.com – who does this kind of thing for a living – figures that inflation in prices (measured the old fashioned way of looking at actual prices) is running somewhere between 10% and 13%, right freaking now!
And what does one do when looking at inflation that is that high? Buy Gold of course!
And in that regard Shayne McGuire, of the Teacher Retirement System in Texas, reveals that he has acquired an appreciation gold, and has actually just written a book that apparently contains no subtleties or excess verbiage; it is titled Buy Gold Now.
Mr.McGuire says "any MBA holder, who has been taught to value almost any asset, hits a stone wall when faced with Gold: it pays no dividend or coupon, and without deriving a cash flow, the basis of most assets defined as being financial, there is no conventional way to determine its Dollar value. Ultimately, it's just a rock, right?"
Yes, it is! Gold is essentially a rock! So why is it so valuable? Why do people always turn to gold at the end?
The answer is that there is nothing else to take its place as a store of wealth that does not rot, corrode or disappear, is divisible, is universally accepted as money, is small enough that you can stash a lot of wealth in a small place where government tax collectors cannot assess it (unlike the equivalent amount of land or buildings), and it is entirely portable. So you can take your wealth with you to some other country where the people and the government are not so crazy with desperation, where you can start over with a new name, and new identity, a lot of money and no family to nag, nag, nag you all the time just because you are a terrible father and husband and make absolutely no effort to change.
Now, perhaps, you have a new appreciation for Gold! Although perhaps not so much for me, The Mogambo Guru.
Ugh...
The Mogambo Sez: Oh, gold! Oh, silver! Oh, oil! Thank you, thank you, thank you! A soothing haven in a world gone completely freaking bonkers!
If this little phrase means nothing to you now, rest assured that it will increasingly become more meaningful to you as time goes on, and on that one special day you will achieve Complete Mogambo Enlightenment (TME).
The only question then will be "Is it too late to finally get off my fat, dead butt and Get Gold, silver and oil so as to try and save the last little bit of my money?"
Gold hits new record at Rs 12,500 in India
MUMBAI: Gold prices resumed to an all-time high of Rs 13,495 on the bullion market here Monday on persistent stockists buying in view of current marriage season coupled with global cues.
The every day weakening US dollar, rising oil prices and an un precedented fall for Asian stocks, all contributed to gold’s surge to an all-time high of $1026 an ounce in overseas markets.
Standard gold (99.5 purity) shot up by Rs 385 per ten grams to Rs 13,495 from the last weekend's level of Rs 13,110 and pure gold (99.9 purity) also firmed up to Rs. 13,555 from Rs 13,170.
Silver also shot up to an all-time peak of Rs. 25,770 per kilo in line with gold prices.
Gold prices in Hong Kong resumed sharply higher at USD 1021.60/1022.30 per ounce as against the last weekend's level of USD 990.70/991.40 per ounce.
The every day weakening US dollar, rising oil prices and an un precedented fall for Asian stocks, all contributed to gold’s surge to an all-time high of $1026 an ounce in overseas markets.
Standard gold (99.5 purity) shot up by Rs 385 per ten grams to Rs 13,495 from the last weekend's level of Rs 13,110 and pure gold (99.9 purity) also firmed up to Rs. 13,555 from Rs 13,170.
Silver also shot up to an all-time peak of Rs. 25,770 per kilo in line with gold prices.
Gold prices in Hong Kong resumed sharply higher at USD 1021.60/1022.30 per ounce as against the last weekend's level of USD 990.70/991.40 per ounce.
Bullion
Gold surged to a record $1,009 an ounce in New York as the Bear Stearns Cos. bailout and a plunging dollar increased demand for the precious metal. Silver also gained.
· Gold futures for April delivery rose $5.70, or 0.6 percent, to $999.50 an ounce on the Comex division of the New York Mercantile Exchange. The price reached the highest ever for a most-active contract at 10:45 a.m., topping yesterday's record of $1,001.50. The metal has tripled in the past five years.
· Shares of Bear Stearns, the second-largest underwriter of U.S. mortgage bonds, plunged as much as 53 percent in New York Stock Exchange composite trading. The Fed earlier this week said it would lend banks $200 billion in exchange for mortgage-backed debt.
· The StreetTracks Gold Trust, the biggest exchange-traded fund backed by bullion, began trading in November 2004 and reached a record 655 metric tons on March 10.
· Compared with government holdings, the ETF would rank eighth behind Japan, according to data from the producer-funded World Gold Council. The U.S. is the biggest holder with 8,133 metric tons, or 78 percent of its currency reserves, in gold.
· Still, high prices may discourage purchases by jewelers, the biggest buyers. Jewelry demand dropped 17 percent in the fourth quarter following a 15 percent gain in prices in the previous three months, data from the World Gold Council show. About 68 percent of gold demand last year came from jewelers.
· Imports by India, the world's biggest gold buyer, plunged 81 percent to 10.2 metric tons in February from a year earlier, according to the Bombay Bullion Association Ltd.
MCX Gold Apr
Technical Outlook:
Momentum studies are bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.
Recommendations:
MCX Gold April: Buy at 12960 Target 13100 and 13160 Stop loss at 12915
MCX Silver May
Technical Outlook:
Momentum studies are bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.
Recommendations:
MCX Silver May: Buy at 26640 Target 26950 and 27200 Stop loss 26410
US Economy Update
· The stock market got hit with news on Friday morning that Wall Street's biggest buyer of mortgage securities, Bear Stearns, needed emergency funding today to keep from going under. The June S&P 500 closed down 21.40 at 1,293.90.
· The Federal Reserve helped to provide today's funding for Bear Stearns and issued a statement saying that it "will continue to provide liquidity as necessary to promote the orderly functioning of the financial system." The June U.S. T-bonds closed up 1.22/64ths at 119.34/64ths, the highest close in seven weeks.
· The U.S. Labor Department said that consumer prices were unchanged in February and up 4.0% from a year ago, not as much as expected. Excluding food and energy costs, prices were unchanged in February and up 2.3% from a year ago. The December eurodollars closed up .21 at a new contract high of 97.995.
· The University of Michigan's consumer sentiment index slipped from 70.8 to 70.5 in early-March, but was better than expected.
Currency Update
· Consumer prices in the Euro area 15 were up 3.3% in February from a year ago, up from a 3.2% gain in January and slightly more than expected. The June euro finished up .0074 at a new contract high of $1.5590 in spite of concerns that central banks may try to intervene to support the U.S. dollar.
· Statistics Canada reported that productivity was down .8% in the fourth quarter, the biggest decline in twelve years, blamed on the loss of manufacturing jobs. The June Canadian dollar ended down .0002 at $1.0121.
· The Bank of France reduced its estimate of real GDP growth from .5% to .4% for the first quarter of 2008.
· Gold futures for April delivery rose $5.70, or 0.6 percent, to $999.50 an ounce on the Comex division of the New York Mercantile Exchange. The price reached the highest ever for a most-active contract at 10:45 a.m., topping yesterday's record of $1,001.50. The metal has tripled in the past five years.
· Shares of Bear Stearns, the second-largest underwriter of U.S. mortgage bonds, plunged as much as 53 percent in New York Stock Exchange composite trading. The Fed earlier this week said it would lend banks $200 billion in exchange for mortgage-backed debt.
· The StreetTracks Gold Trust, the biggest exchange-traded fund backed by bullion, began trading in November 2004 and reached a record 655 metric tons on March 10.
· Compared with government holdings, the ETF would rank eighth behind Japan, according to data from the producer-funded World Gold Council. The U.S. is the biggest holder with 8,133 metric tons, or 78 percent of its currency reserves, in gold.
· Still, high prices may discourage purchases by jewelers, the biggest buyers. Jewelry demand dropped 17 percent in the fourth quarter following a 15 percent gain in prices in the previous three months, data from the World Gold Council show. About 68 percent of gold demand last year came from jewelers.
· Imports by India, the world's biggest gold buyer, plunged 81 percent to 10.2 metric tons in February from a year earlier, according to the Bombay Bullion Association Ltd.
MCX Gold Apr
Technical Outlook:
Momentum studies are bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.
Recommendations:
MCX Gold April: Buy at 12960 Target 13100 and 13160 Stop loss at 12915
MCX Silver May
Technical Outlook:
Momentum studies are bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.
Recommendations:
MCX Silver May: Buy at 26640 Target 26950 and 27200 Stop loss 26410
US Economy Update
· The stock market got hit with news on Friday morning that Wall Street's biggest buyer of mortgage securities, Bear Stearns, needed emergency funding today to keep from going under. The June S&P 500 closed down 21.40 at 1,293.90.
· The Federal Reserve helped to provide today's funding for Bear Stearns and issued a statement saying that it "will continue to provide liquidity as necessary to promote the orderly functioning of the financial system." The June U.S. T-bonds closed up 1.22/64ths at 119.34/64ths, the highest close in seven weeks.
· The U.S. Labor Department said that consumer prices were unchanged in February and up 4.0% from a year ago, not as much as expected. Excluding food and energy costs, prices were unchanged in February and up 2.3% from a year ago. The December eurodollars closed up .21 at a new contract high of 97.995.
· The University of Michigan's consumer sentiment index slipped from 70.8 to 70.5 in early-March, but was better than expected.
Currency Update
· Consumer prices in the Euro area 15 were up 3.3% in February from a year ago, up from a 3.2% gain in January and slightly more than expected. The June euro finished up .0074 at a new contract high of $1.5590 in spite of concerns that central banks may try to intervene to support the U.S. dollar.
· Statistics Canada reported that productivity was down .8% in the fourth quarter, the biggest decline in twelve years, blamed on the loss of manufacturing jobs. The June Canadian dollar ended down .0002 at $1.0121.
· The Bank of France reduced its estimate of real GDP growth from .5% to .4% for the first quarter of 2008.
Dollar at new low; remains vulnerable
The dollar remained vulnerable, and recorded fresh all-time low against the euro for the fourth day in a row.
Adding to the pressure on the greenback, the consumer confidence in US recorded a drop. The University of Michigan/Reuters index tracking consumer sentiment dipped to 70.5 in March from 70.8 in February.
In a separate report, the US Labor Department said the consumer price index was flat in February against the expectations of a 0.2 % increase.
On Thursday, US Commerce department reported a worse-than-expected 0.6 percent fall in the Retail Sales in February.
Another release by the US Labor Department showed the initial claims for state unemployment benefits remained unchanged at 353,000 in the week ended March 8. The four-week average of initial claims fell slightly in the latest week, down by 1,250 to 358,500.
The doubts about the effectiveness of the Federal Reserve's efforts also added pressure in to the greenback. Last day, the Federal Reserve had announced new steps to boost liquidity in the banking system.
Stronger-than-expected economic data from the Euro-zone, according to which industrial production posted a 0.9% rise in January and 3.8% rise annually, propped up the European currency to new highs against the Dollar.
In a surprise move, the Fed said it would increase the size of its emergency auctions by $40 billion, which means providing $100 billion to primary dealers in US Treasury debt. It also would start a series of term repurchase transactions with the primary dealers that trade securities directly with the Fed, expected to be worth a total of $100 billion.
The Beige Book survey of the Fed reported softening or weakening in the pace of business activity in 8 of the 12 Fed regional districts; and subdued, slow or modest growth in others, confirming the slowdown in US economy since the start of the year.
Federal Reserve Chairman Ben Bernanke had given a grim assessment of the U.S. housing sector, adding to mounting fears of recession.
The Fed had lowered its 2008 growth forecast to 1.3 % - 2 %, from a forecast of 1.8 % - 2.5 % in November.
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.
Adding to the pressure on the greenback, the consumer confidence in US recorded a drop. The University of Michigan/Reuters index tracking consumer sentiment dipped to 70.5 in March from 70.8 in February.
In a separate report, the US Labor Department said the consumer price index was flat in February against the expectations of a 0.2 % increase.
On Thursday, US Commerce department reported a worse-than-expected 0.6 percent fall in the Retail Sales in February.
Another release by the US Labor Department showed the initial claims for state unemployment benefits remained unchanged at 353,000 in the week ended March 8. The four-week average of initial claims fell slightly in the latest week, down by 1,250 to 358,500.
The doubts about the effectiveness of the Federal Reserve's efforts also added pressure in to the greenback. Last day, the Federal Reserve had announced new steps to boost liquidity in the banking system.
Stronger-than-expected economic data from the Euro-zone, according to which industrial production posted a 0.9% rise in January and 3.8% rise annually, propped up the European currency to new highs against the Dollar.
In a surprise move, the Fed said it would increase the size of its emergency auctions by $40 billion, which means providing $100 billion to primary dealers in US Treasury debt. It also would start a series of term repurchase transactions with the primary dealers that trade securities directly with the Fed, expected to be worth a total of $100 billion.
The Beige Book survey of the Fed reported softening or weakening in the pace of business activity in 8 of the 12 Fed regional districts; and subdued, slow or modest growth in others, confirming the slowdown in US economy since the start of the year.
Federal Reserve Chairman Ben Bernanke had given a grim assessment of the U.S. housing sector, adding to mounting fears of recession.
The Fed had lowered its 2008 growth forecast to 1.3 % - 2 %, from a forecast of 1.8 % - 2.5 % in November.
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.
Gold Outlook
Gold prices skyrocketed in early trade today, to record a fresh high of $1030.80 a Troy ounce, as the dollar tumbled after the Federal Reserve in a an unexpected move on Sunday night cut its discount rate for direct loans to banks by 0.25 percent point to 3.25 percent, and launched a new discount window facility for primary dealers, in desperate moves to stabilize financial markets.
The emergency moves deepened investors’ worries about the state of US economy, and boosted speculations regarding the possibilities for more casualties in the widening US financial crisis.
On Friday, international spot gold traded in the range $990.50 - $1007.10 and last quoted at $992.80.
Dollar was pulled down to a new all-time low versus the Euro. Adding to the pressure on the greenback, the consumer confidence in US recorded a drop. The University of Michigan/Reuters index tracking consumer sentiment dipped to 70.5 in March from 70.8 in February.
In a separate report, the US Labor Department said on Friday the consumer price index was flat in February against the expectations of a 0.2 % increase.
The US Commerce department reported a worse-than-expected 0.6 percent fall in the Retail Sales in February.
Another release by the US Labor Department showed the initial claims for state unemployment benefits remained unchanged at 353,000 in the week ended March 8. The four-week average of initial claims fell slightly in the latest week, down by 1,250 to 358,500.
Positive economic data from the Euro-zone, according to which industrial production posted a 0.9% rise in January and 3.8% rise annually, added to the strength of the European currency.
The Federal Reserve had announced new steps to boost liquidity in the banking system.
The Fed said it would increase the size of its emergency auctions by $40 billion, which means providing $100 billion to primary dealers in US Treasury debt. It also would start a series of term repurchase transactions with the primary dealers that trade securities directly with the Fed, expected to be worth a total of $100 billion.
Meanwhile, the US Commerce Department reported on Tuesday that the US trade deficit widened slightly in January, up 0.6% to $58.2 billion.
The emergency moves deepened investors’ worries about the state of US economy, and boosted speculations regarding the possibilities for more casualties in the widening US financial crisis.
On Friday, international spot gold traded in the range $990.50 - $1007.10 and last quoted at $992.80.
Dollar was pulled down to a new all-time low versus the Euro. Adding to the pressure on the greenback, the consumer confidence in US recorded a drop. The University of Michigan/Reuters index tracking consumer sentiment dipped to 70.5 in March from 70.8 in February.
In a separate report, the US Labor Department said on Friday the consumer price index was flat in February against the expectations of a 0.2 % increase.
The US Commerce department reported a worse-than-expected 0.6 percent fall in the Retail Sales in February.
Another release by the US Labor Department showed the initial claims for state unemployment benefits remained unchanged at 353,000 in the week ended March 8. The four-week average of initial claims fell slightly in the latest week, down by 1,250 to 358,500.
Positive economic data from the Euro-zone, according to which industrial production posted a 0.9% rise in January and 3.8% rise annually, added to the strength of the European currency.
The Federal Reserve had announced new steps to boost liquidity in the banking system.
The Fed said it would increase the size of its emergency auctions by $40 billion, which means providing $100 billion to primary dealers in US Treasury debt. It also would start a series of term repurchase transactions with the primary dealers that trade securities directly with the Fed, expected to be worth a total of $100 billion.
Meanwhile, the US Commerce Department reported on Tuesday that the US trade deficit widened slightly in January, up 0.6% to $58.2 billion.
CME to acquire Nymex group for $9.4 bn
NEW YORK: Chicago Mercantile (CME )Group, the world’s largest futures market is all set to acquire Nymex Holdings for $9.4 billion.
CME will give shareholders of Nymex (Newyork Mercantile Exchange), the biggest energy market, 0.1323 of its stock plus $36 in cash for each Nymex share they own.
The offer values Nymex at $100.30 a share, or 5.2% above Nymex’s March 14 closing price of $95.34.
Now CME will be able to add benchmark oil and natural gas futures to the contracts it offers.
The acquisition builds on a two-year partnership between the companies, in which Nymex’s contracts have traded on CME’s Globex electronic trading platform.
CME Group gains a stronghold in trading contracts that set prices on everything from oil and natural gas to US Treasuries. It will also acquire Nymex’s over-the-counter business, an area CME has struggled to penetrate in financial futures such as interest rates.
Analysts said there are good synergies between these two exchanges and that increase in volumes will boost profits for CME.
Exchanges have announced at least $41 billion of mergers and acquisitions since the start of last year, according to analysts.
NYSE Euronext, under the new leadership of Duncan Niederauer, agreed to buy the American Stock Exchange for $260 million in January.
Electronic trading at Nymex soared after it listed its contracts on Globex in 2006 in response to rival Intercontinental Exchange Inc’s introduction of a competing US crude oil futures contract that trades via computer. About 76% of Nymex’s contracts traded via computer last month, compared with 16% in February 2006.
Nymex shareholders can elect to take cash or stock for their shares in the deal, up to a maximum of $3.4 billion in cash.
CME will give shareholders of Nymex (Newyork Mercantile Exchange), the biggest energy market, 0.1323 of its stock plus $36 in cash for each Nymex share they own.
The offer values Nymex at $100.30 a share, or 5.2% above Nymex’s March 14 closing price of $95.34.
Now CME will be able to add benchmark oil and natural gas futures to the contracts it offers.
The acquisition builds on a two-year partnership between the companies, in which Nymex’s contracts have traded on CME’s Globex electronic trading platform.
CME Group gains a stronghold in trading contracts that set prices on everything from oil and natural gas to US Treasuries. It will also acquire Nymex’s over-the-counter business, an area CME has struggled to penetrate in financial futures such as interest rates.
Analysts said there are good synergies between these two exchanges and that increase in volumes will boost profits for CME.
Exchanges have announced at least $41 billion of mergers and acquisitions since the start of last year, according to analysts.
NYSE Euronext, under the new leadership of Duncan Niederauer, agreed to buy the American Stock Exchange for $260 million in January.
Electronic trading at Nymex soared after it listed its contracts on Globex in 2006 in response to rival Intercontinental Exchange Inc’s introduction of a competing US crude oil futures contract that trades via computer. About 76% of Nymex’s contracts traded via computer last month, compared with 16% in February 2006.
Nymex shareholders can elect to take cash or stock for their shares in the deal, up to a maximum of $3.4 billion in cash.
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