Concerns about sovereign debt, weak employment and a deflating housing market all helped push the price of gold up today. The yellow metal rose by $12.80 to $1,247.60 per troy ounce, off of its earlier record highs but its strongest performance this week.
Traders and economists fretting about Greece's continuing instability commanded the headlines today, with stocks plummeting after an indecisive day yesterday. Credit-default swaps (CDS) on Greek debt rose to a record high of 970 basis points, reported Bloomberg. CDS rates rose on Spanish and Portuguese bonds as well, which many experts believe could be the next dominoes to fall in Europe's debt game.
Stocks began pricing in these fears yesterday after the Federal reserve took a steady, predictable course and kept interest rates near zero. In their statement, the Federal Open Market Committee (FOMC) cited the continuing weakness and precarious situation of European sovereign debt as the chief problem going forward.
One piece of good news was word from the Department of Commerce that orders for durable goods were up almost one percent, possibly reflecting some long-term optimism about manufacturing or the economy as a whole.
However, the real news was in the housing market.
New home sales and existing home sales both collapsed last month, as a federal tax credit designed to support the real estate and construction industry expired. It seems likely that the market will remain depressed for a relatively long time, as the tax credit probably pushed many buyers into closing in the first half of the year.
The day's trading left gold and silver, along with copper and coffee futures, as the best-performing assets of the day. Once again, sustained economic weakness is good news for hard assets and commodities like gold, backed by inherent value rather than questionable loans or mortgages.
With gold having fallen back from the $1,260 per ounce level, it might be time to consider an investment in dealer gold and silver to hedge or even replace the increasingly volatile motion of stocks and equities. As the debt crisis seems to spread rather being contained, it's hard to say which country will be next to place its head on the block.
If the U.S. keeps issuing debt - and the Treasury will auction off another $30 billion of 7-year debt today alone - it could find itself on the wrong end of the CDS business, with investors paying a massive premium to insure their US debt and driving up the country's cost of borrowing.
Monday, June 28, 2010
Saturday, June 19, 2010
Gold101.com - China gives in, finally makes yuan more flexible
China’s central bank said on Saturday that it would make its yuan exchange rate more flexible, in what analysts said was an indication that Beijing was ready to scrap the dollar peg and allow its currency to rise.
However, the People’s Bank of China said there were no grounds for “large swings” in the currency, suggesting that policymakers would maintain a tight grip on the value of the yuan.
The announcement was welcomed by US Treasury Secretary Timothy Geithner, who said the move would make a “positive contribution” to global growth once implemented.
IMF chief Dominique Strauss-Kahn said it was a “very welcome” announcement that would help Chinese households and consumers.
The statement by the central bank was released amid pressure on Beijing to strengthen its currency and comes ahead of next week’s G20 nations’ meeting in Toronto, where the controversial policy is expected to be on the agenda.
“China’s central bank has decided to further promote the reform of the RMB (yuan) exchange rate mechanism, and strengthen the flexibility of the RMB exchange rate,” the central bank said on its website.
However, it stressed that it would continue to manage the floating exchange rate “within the band already announced”. Central bank adviser Li Daokui said he had no idea when the trading band would be widened.
However, the People’s Bank of China said there were no grounds for “large swings” in the currency, suggesting that policymakers would maintain a tight grip on the value of the yuan.
The announcement was welcomed by US Treasury Secretary Timothy Geithner, who said the move would make a “positive contribution” to global growth once implemented.
IMF chief Dominique Strauss-Kahn said it was a “very welcome” announcement that would help Chinese households and consumers.
The statement by the central bank was released amid pressure on Beijing to strengthen its currency and comes ahead of next week’s G20 nations’ meeting in Toronto, where the controversial policy is expected to be on the agenda.
“China’s central bank has decided to further promote the reform of the RMB (yuan) exchange rate mechanism, and strengthen the flexibility of the RMB exchange rate,” the central bank said on its website.
However, it stressed that it would continue to manage the floating exchange rate “within the band already announced”. Central bank adviser Li Daokui said he had no idea when the trading band would be widened.
Wednesday, June 16, 2010
Superior Gold Group - Greek debt downgraded to junk status
Moody's Investors Service downgraded Greece's debt from A3 to Ba1, officially classifying the worst-hit member of the euro-zone as a "junk" bond risk.
The Dow immediately plunged almost a hundred points after the news, undermining its strong performance early in the morning. However, the downgrade was far from unexpected - despite austerity measures and a massive if belated bailout by the EU, Greece's financial situation remains dire and it threatens to bring other countries, like Spain and Italy, down with it.
The downgrade will make it harder then ever for Greece to maintain the unsustainable cycle of borrowing to pay the debts coming due, possibly accelerating some kind of general default and contagion throughout euro-zone and global markets.
The euro crisis pushed gold to record levels last week, and further debt scares might light another fire under the price this week. Dealer gold and silver, along with other precious metals like platinum and palladium, represent an attractive and stable alternative to the debt-ridden paper currencies like the euro and the dollar. Irrational exuberance in the stock markets may depress the price of gold for a little while, but one way or another, Greece's debts will have to be paid. The ensuing chaos in the markets could well push dealer gold to fresh highs.
The Dow immediately plunged almost a hundred points after the news, undermining its strong performance early in the morning. However, the downgrade was far from unexpected - despite austerity measures and a massive if belated bailout by the EU, Greece's financial situation remains dire and it threatens to bring other countries, like Spain and Italy, down with it.
The downgrade will make it harder then ever for Greece to maintain the unsustainable cycle of borrowing to pay the debts coming due, possibly accelerating some kind of general default and contagion throughout euro-zone and global markets.
The euro crisis pushed gold to record levels last week, and further debt scares might light another fire under the price this week. Dealer gold and silver, along with other precious metals like platinum and palladium, represent an attractive and stable alternative to the debt-ridden paper currencies like the euro and the dollar. Irrational exuberance in the stock markets may depress the price of gold for a little while, but one way or another, Greece's debts will have to be paid. The ensuing chaos in the markets could well push dealer gold to fresh highs.
Monday, June 14, 2010
Superior Gold Group - National debt exceeds 90 percent of GDP
As the U.S. economy continues to be drained by an unsustainable national debt, job creation is likely to be one of the many areas that will take a hit in the coming years.
A recent Treasury Department report estimated that the total national debt for fiscal year 2010 will stand at $13.6 trillion, which is 93 percent of the gross domestic product.
With that in mind, Representative Dave Camp, a Michigan Republican who serves as ranking member of the Ways and Means Committee, recently pointed out that a national debt load above 90 percent of the GDP will start eroding the nation's economic growth.
"The debt is preventing us from creating the jobs America needs," said Camp. "This report is yet another warning that Congress cannot continue to pass unpaid-for spending without further hurting our recovery."
As the U.S. national debt continues to soar with little relief in sight, now may be the time for concerned investors to consult with silver and gold dealers about traditional safe harbor options.
A recent Treasury Department report estimated that the total national debt for fiscal year 2010 will stand at $13.6 trillion, which is 93 percent of the gross domestic product.
With that in mind, Representative Dave Camp, a Michigan Republican who serves as ranking member of the Ways and Means Committee, recently pointed out that a national debt load above 90 percent of the GDP will start eroding the nation's economic growth.
"The debt is preventing us from creating the jobs America needs," said Camp. "This report is yet another warning that Congress cannot continue to pass unpaid-for spending without further hurting our recovery."
As the U.S. national debt continues to soar with little relief in sight, now may be the time for concerned investors to consult with silver and gold dealers about traditional safe harbor options.
Friday, June 11, 2010
Superior Gold Group - Euro crisis pushes gold to yet another record
Long-term investors in dealer gold had their foresight rewarded yet again this week as the precious metal soared to another record high due to concern about the European debt crisis.
A Tuesday Reuters report noted that gold's new record price now stands at above $1,250 per ounce, while gold futures for August delivery stood at another record of $1,254.50. The wire service also noted that the gold prices have risen about 12 percent during the current quarter alone.
Elsewhere, a report from Bloomberg News quoted Paul Walker, CEO of GFMS, Ltd., as saying that gold prices could trade between $1,050 and $1,300 for the rest of this year, with the potential to soar as high as $2,000 per ounce if the current European debt crisis extends to other regions of the world.
The current sovereign debt crisis focuses on fears that Greece, followed by Spain and Portugal, will eventually default on its bond obligations, which would result in billions of dollars in fresh losses for European banks.
However, the United States and other countries, including Mexico and Great Britain, have been receiving their own levels of investor concern about heavy budget deficits and long-term fiscal problems.
A Tuesday Reuters report noted that gold's new record price now stands at above $1,250 per ounce, while gold futures for August delivery stood at another record of $1,254.50. The wire service also noted that the gold prices have risen about 12 percent during the current quarter alone.
Elsewhere, a report from Bloomberg News quoted Paul Walker, CEO of GFMS, Ltd., as saying that gold prices could trade between $1,050 and $1,300 for the rest of this year, with the potential to soar as high as $2,000 per ounce if the current European debt crisis extends to other regions of the world.
The current sovereign debt crisis focuses on fears that Greece, followed by Spain and Portugal, will eventually default on its bond obligations, which would result in billions of dollars in fresh losses for European banks.
However, the United States and other countries, including Mexico and Great Britain, have been receiving their own levels of investor concern about heavy budget deficits and long-term fiscal problems.
Monday, June 7, 2010
Superior Gold Group - Eurozone nations set up $1 trillion bailout fund
Eurozone nations have begun setting up a massive bailout fund that could rescue any member of Europe's currency union from default, aiming to soothe market jitters that have sent the euro to a new four-month low against the dollar.
The ``shock and awe'' financial rescue package from the European Union and the International Monetary Fund will total euro750 billion ($1 trillion) — money that can be lent to any indebted eurozone nation risking default, and intended to counter investor fears that Spain, Portugal or others could follow Greece in requiring a bailout to meet debt repayments.
The special purpose vehicle to borrow up to euro440 billion ($526 billion) will be ready this month, when countries formalize debt guarantees for some 90 percent of the package, said Luxembourg Prime Minister Jean-Claude Juncker, who led Monday's talks between eurozone finance ministers.
Another 60 billion euro managed by the EU's executive commission ``is available to cover urgent financial needs were it to arise'' in the meantime, he said, while the International Monetary Fund will provide another euro250 billion.
Germany, which will provide the largest chunk of the EU fund, has pressed other eurozone countries to make big budget cuts to reduce the chances of them needing a bailout.
Markets ``want to see not only actions but deeds'' to shore up the currency, German Finance Minister Wolfgang Schaeuble told reporters.
German Chancellor Angela Merkel vowed to ``set an example'' Monday by laying out plans to save euro80 billion through 2014 by reducing handouts to parents, cutting 15,000 government jobs and delaying projects such as construction of a replica of a Prussian palace in Berlin.
Juncker said eurozone finance ministers wanted Spain and Portugal to build on current ``significant and courageous'' spending cuts with further efforts ``needed beyond 2011 together with further progress'' on structural reforms, such as changes to pensions, welfare or labor systems.
EU Economy Commissioner Olli Rehn warned that they and others may need to prepare more budget reductions. He did not name which other countries should take action.
Eurozone nations said in a joint statement that they would draft bigger cuts and tax increases if they have to and would pursue ``structural reforms'' to slim state running costs — such as raising retirement ages to curb pension costs.
The International Monetary Fund called in a Monday report for eurozone countries facing market pressure to shun ``delayed or half-hearted'' budget cuts and draft more in case they can't make current targets to reduce budget deficits — the gap between government spending and income.
Juncker dismissed market volatility in recent days triggered by concern that Hungary — which does not use the euro — could be the next European government to follow Greece by risking a default.
Hungarian officials last week warned that the country's deficit is growing and the country is close to default, two years after it received a bailout from the EU and the IMF.
Hungary's government has downplayed those comments, which nevertheless kept the euro trading near the four-year lows it hit Friday, when it went below $1.19 for the first time since March 2006.
There is intense pressure on all eurozone countries to make cuts. However, trade unions warn that budget cuts could be going too far and could choke a fragile recovery that so far relies more on exports than domestic demand in European countries where people are still slow to spend and companies are reluctant to hire new workers.
Unemployment in the eurozone reached a 10-year high of 10.1 percent in April — adding extra welfare costs to governments struggling with higher outgoings, lower tax revenue and debt that has soared since they paid out hundreds of billions to shore up the region's banking system.
Monday's talks between eurozone finance ministers will be followed by a meeting of most EU finance ministers and EU officials who will thrash out plans for long-term ways to avoid a new economic crisis, including a proposal for more EU oversight of national budgets.
The ``shock and awe'' financial rescue package from the European Union and the International Monetary Fund will total euro750 billion ($1 trillion) — money that can be lent to any indebted eurozone nation risking default, and intended to counter investor fears that Spain, Portugal or others could follow Greece in requiring a bailout to meet debt repayments.
The special purpose vehicle to borrow up to euro440 billion ($526 billion) will be ready this month, when countries formalize debt guarantees for some 90 percent of the package, said Luxembourg Prime Minister Jean-Claude Juncker, who led Monday's talks between eurozone finance ministers.
Another 60 billion euro managed by the EU's executive commission ``is available to cover urgent financial needs were it to arise'' in the meantime, he said, while the International Monetary Fund will provide another euro250 billion.
Germany, which will provide the largest chunk of the EU fund, has pressed other eurozone countries to make big budget cuts to reduce the chances of them needing a bailout.
Markets ``want to see not only actions but deeds'' to shore up the currency, German Finance Minister Wolfgang Schaeuble told reporters.
German Chancellor Angela Merkel vowed to ``set an example'' Monday by laying out plans to save euro80 billion through 2014 by reducing handouts to parents, cutting 15,000 government jobs and delaying projects such as construction of a replica of a Prussian palace in Berlin.
Juncker said eurozone finance ministers wanted Spain and Portugal to build on current ``significant and courageous'' spending cuts with further efforts ``needed beyond 2011 together with further progress'' on structural reforms, such as changes to pensions, welfare or labor systems.
EU Economy Commissioner Olli Rehn warned that they and others may need to prepare more budget reductions. He did not name which other countries should take action.
Eurozone nations said in a joint statement that they would draft bigger cuts and tax increases if they have to and would pursue ``structural reforms'' to slim state running costs — such as raising retirement ages to curb pension costs.
The International Monetary Fund called in a Monday report for eurozone countries facing market pressure to shun ``delayed or half-hearted'' budget cuts and draft more in case they can't make current targets to reduce budget deficits — the gap between government spending and income.
Juncker dismissed market volatility in recent days triggered by concern that Hungary — which does not use the euro — could be the next European government to follow Greece by risking a default.
Hungarian officials last week warned that the country's deficit is growing and the country is close to default, two years after it received a bailout from the EU and the IMF.
Hungary's government has downplayed those comments, which nevertheless kept the euro trading near the four-year lows it hit Friday, when it went below $1.19 for the first time since March 2006.
There is intense pressure on all eurozone countries to make cuts. However, trade unions warn that budget cuts could be going too far and could choke a fragile recovery that so far relies more on exports than domestic demand in European countries where people are still slow to spend and companies are reluctant to hire new workers.
Unemployment in the eurozone reached a 10-year high of 10.1 percent in April — adding extra welfare costs to governments struggling with higher outgoings, lower tax revenue and debt that has soared since they paid out hundreds of billions to shore up the region's banking system.
Monday's talks between eurozone finance ministers will be followed by a meeting of most EU finance ministers and EU officials who will thrash out plans for long-term ways to avoid a new economic crisis, including a proposal for more EU oversight of national budgets.
Friday, June 4, 2010
Superior Gold Group - Spain hit by credit rating downgrade
Gold and silver dealers around the world are continuing to hear from anxious investors in light of a euro zone debt problem that seems to show no sign of ending.
Last month, the European Union and the International Monetary Fund unveiled a nearly $1 trillion financial bailout package for Greece aimed at calming the markets and putting the sovereign debt crisis to rest.
However, any easing of market concerns appears to have been only temporary, with the euro having hit recent lows this week as a result of the latest negative credit news from the region.
On Friday, an announcement from Fitch Ratings indicated that Spain's Instituto de Credito Oficial had been subjected to a downgrade in its credit rating from AAA to AA+, with an outlook of stable. The entity is a state financial entity run by the Spanish government.
The move in its own right was relatively minor, but combined with other recent downgrades for euro zone economies, it came as the latest red flag for investors. As these red flags continue to pile up in the euro zone, those who invest in dealer gold may find themselves well-positioned to ride out any remaining economic difficulties.
Last month, the European Union and the International Monetary Fund unveiled a nearly $1 trillion financial bailout package for Greece aimed at calming the markets and putting the sovereign debt crisis to rest.
However, any easing of market concerns appears to have been only temporary, with the euro having hit recent lows this week as a result of the latest negative credit news from the region.
On Friday, an announcement from Fitch Ratings indicated that Spain's Instituto de Credito Oficial had been subjected to a downgrade in its credit rating from AAA to AA+, with an outlook of stable. The entity is a state financial entity run by the Spanish government.
The move in its own right was relatively minor, but combined with other recent downgrades for euro zone economies, it came as the latest red flag for investors. As these red flags continue to pile up in the euro zone, those who invest in dealer gold may find themselves well-positioned to ride out any remaining economic difficulties.
Tuesday, June 1, 2010
Superior Gold Group - BP shares plunge as US opens criminal probe on Gulf oil spill
Faced a grim future on Tuesday as its failure to stop a Gulf of Mexico oil spill prompted a plunge in the energy giant's shares and the Obama administration opened a criminal investigation.
President Barack Obama, struggling to get on top of the worst oil spill in US history, vowed an overhaul of US laws and regulations needed to prevent a repeat of the April 20 rig explosion that killed 11 people and triggered the spill.
And after meeting co-chairs of a commission that will investigate the accident, Obama raised the prospect of criminal prosecutions and BP began a new strategy to end the six-week-old drama.
"If our laws were broken leading to this death and destruction, my solemn pledge is that we will bring those responsible to justice on behalf of the victims of this catastrophe and the people of the Gulf region," Obama said.
US Attorney General Eric Holder, on a visit to the region, said in New Orleans that the US government has launched a criminal probe and that federal agencies, including the FBI, are participating.
"If we find evidence of illegal behavior, we will be forceful in our response," Holder told reporters.
The oil giant's shares fell by as much as 17 percent in London on Tuesday before ending down 13 percent, at 430 pence. Later in New York, the American Depositary Receipts lost nearly 15 percent to close at 36.52.
The shares were hit hard by weekend news that its latest attempt to plug its blown-out seabed well had not worked, sparking fears oil could leak into the Gulf until August.
The shares have lost more than a third of their value, or about 46 billion pounds ($67 billion), since the leak started. The cost of dealing with the crisis now totals $990 million, and is rising.
Shares of other companies with stakes in the well were also down between 10 and 17 percent, including Anadarko, Transocean, Cameron and Halliburton.
In its next attempt to stop the mile-deep gusher, BP's next plan will use a dome to funnel oil to a tanker on the surface. Robotic equipment will use giant shears and a diamond saw to cut a pipe 35 feet (11 meters) above the wellhead that will allow BP to sit the dome on top of it.
President Barack Obama, struggling to get on top of the worst oil spill in US history, vowed an overhaul of US laws and regulations needed to prevent a repeat of the April 20 rig explosion that killed 11 people and triggered the spill.
And after meeting co-chairs of a commission that will investigate the accident, Obama raised the prospect of criminal prosecutions and BP began a new strategy to end the six-week-old drama.
"If our laws were broken leading to this death and destruction, my solemn pledge is that we will bring those responsible to justice on behalf of the victims of this catastrophe and the people of the Gulf region," Obama said.
US Attorney General Eric Holder, on a visit to the region, said in New Orleans that the US government has launched a criminal probe and that federal agencies, including the FBI, are participating.
"If we find evidence of illegal behavior, we will be forceful in our response," Holder told reporters.
The oil giant's shares fell by as much as 17 percent in London on Tuesday before ending down 13 percent, at 430 pence. Later in New York, the American Depositary Receipts lost nearly 15 percent to close at 36.52.
The shares were hit hard by weekend news that its latest attempt to plug its blown-out seabed well had not worked, sparking fears oil could leak into the Gulf until August.
The shares have lost more than a third of their value, or about 46 billion pounds ($67 billion), since the leak started. The cost of dealing with the crisis now totals $990 million, and is rising.
Shares of other companies with stakes in the well were also down between 10 and 17 percent, including Anadarko, Transocean, Cameron and Halliburton.
In its next attempt to stop the mile-deep gusher, BP's next plan will use a dome to funnel oil to a tanker on the surface. Robotic equipment will use giant shears and a diamond saw to cut a pipe 35 feet (11 meters) above the wellhead that will allow BP to sit the dome on top of it.
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