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Gold hits fresh peaks near $850, Oil hits $98 a barrel

Gold hits fresh peaks near $850, Oil hits $98 a barrel

Forbes
November 7, 2007

LONDON (Thomson Financial) – Gold raced to a series of fresh 28-year highs and is currently just 1 pct below its historic peak as the dollar sank against major currencies and record oil prices stoked inflation jitters.

The precious metal moves in the opposite direction to the dollar as gold is seen as an alternative asset and moves in line with high oil prices as investors hedge against energy-led inflation.

The weak dollar, which hit yet another low against the euro this morning, spurred buying as it made commodities denominated in the greenback cheaper for those trading in other currencies.

At 10.16 am, spot gold was trading at 839.38 usd an ounce, against 821.30 usd in late New York trade yesterday, having earlier hit 845.58 usd, its fresh peak in almost 30 years.

Analysts are now calling for the metal to hit and even surpass 850 usd, the all time high set in January 1980.

‘With this weaker dollar we will see it (gold) push through 850 usd and even 860 usd today,’ said Ben Coleman, commodities trader at Trade Index. ‘Currency is having a big call on what’s going on with gold, oil and metals,’ he said.

Meanwhile, risk aversion in the equity markets, as fears the US subprime debacle will mean slower growth going ahead, sparked a rush towards safer assets like gold.

‘As long as the financial markets remain fragile and investors risk averse, gold prices will be a beneficiary in our view,’ said HSBC (nyse: HBC news people ) analyst James Steel.

Looking ahead, oil is expected to top 100 usd a barrel in the very near future. Today, markets will see if US crude stocks are shown to have fallen last week, as expected, in a weekly report due out at 3.30 pm London time.

New York’s WTI benchmark hit a record of 98.43 usd a barrel this morning, sparking already intense fears inflation is going to impact markets.

‘The flood of speculative cash pouring into oil has resulted in a breach of 100 usd a barrel very much on the cards for today,’ said Bank of Ireland (nyse: IRE news people ) analyst, Paul Harris (nyse: HRS news people ).

Gold has gained over 30 pct since January, oil’s price has almost doubled and the dollar has lost over 10 pct of its value against the euro since the start of this year.

With the yellow metal near its all time record, not many participants are calling a price top.

‘If we see a sell-off it will be aggressive,’ said Coleman at Trade Index. ‘(But) levels here mean it’s hard to pick a top.’

Elsewhere, other precious metals surged, following in gold’s footsteps and as they garnered strength from the dollar’s weakness.

Silver is now comfortably over 15 usd, previously seen as key resistance level, platinum hit a record high and palladium hit its highest price since April.

Silver was trading at 15.86 usd an ounce against 15.32 usd in New York yesterday, having hit 16.18 usd — its highest price since April last year.

Platinum was steady at 1,471 usd an ounce from 1,472 usd, having earlier set a historic peak at 1489.50 usd. Palladium rose to 376 usd from 375 usd, after striking its highest price of the year of 384.50 usd.

 

Dollar Slumps to Record on China’s Plans to Diversify Reserves

Bloomberg
November 7, 2007

Nov. 7 (Bloomberg) — The dollar fell the most since September against the currencies of its six biggest trading partners after Chinese officials signaled plans to diversify the nation’s $1.43 trillion of foreign exchange reserves.

The dollar fell against all 16 of the most-active currencies, declining to the weakest versus the Canadian dollar since the end of a fixed exchange rate in 1950, a 26-year low against the pound and a 23-year low versus the Australian dollar. The New York Board of Trade’s dollar index dropped to 75.21 today, the lowest since the gauge started in March 1973.

“Further weakening of the dollar is very likely,” said Teis Knuthsen, the Copenhagen-based head of foreign-exchange, fixed-income and derivative research at Danske Bank A/S, the Nordic region’s second-biggest lender. China may “diversify out of dollar holdings.”

The U.S. currency slumped to $1.4704 per euro, the lowest since the 13-nation currency debuted in January 1999, before trading at $1.4671 as of 7:15 a.m. in New York, from $1.4557 late yesterday. The dollar dropped the most in two months against the yen, trading as low as 112.87 yen. The euro fell against the yen to 165.84, from 166.99 yesterday.

The U.S. dollar index may be due for a reversal, according to a technical indicator. Its 14-day relative-strength measure fell to 21.38 today, below the 30 mark, which may signal the currency’s decline has bottomed out.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

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Relative of Merrill Lynch Founder Predicts Stock Market Crash


Relative of Merrill Lynch Founder Predicts Stock Market Crash


Kerri Panchuk
DSNews
October 30, 2007

In a market where fears over the subprime shakedown are spreading pessimism nationwide, Charles Merrill, the cousin of the man who founded Merrill Lynch & Co., is predicting a stock market crash that will put the 1929 crash to shame.

Merrill, in an exclusive interview with a financial author, said, “There is going to be a major stock market crash, so protect your assets. Buy physical gold and hide it.”

Merrill also discussed all the changes at Merrill Lynch that indicate a potential market crises—even alluding to the company’s chief executive officer, who stepped down this week.

“Merrill Lynch is crashing, due to the ineptness of the CEO,” Merrill said. “No matter who is running Merrill Lynch & Co., it’s going to need a regimen of restraint and recuperation after getting badly bruised by the global credit market shakedown. I predict a house of dominos, and the whole stock market is going to crash.”

Lynch’s less-than-encouraging remarks were part of an interview with writer Michael Grace, who is writing a book called, “The Final Great Depression.”

During the interview, Merrill concluded, “There is so much wealth in Palm Springs … from inherited to funny money, and I’m advising my friends to buy gold. Grace’s book on the ‘final depression’ sounds like a novel or fantasy but unfortunately it is a picture of our horrible future here in America. My cousin Charlie must be turning over in his grave.”

 

Oil Crisis in Summer ’09: War in Iran. Gasoline rationing. A military draft. A Chinese takeover of Taiwan. Double-digit inflation and unemployment

Herald Tribune
November 2, 2007

WASHINGTON: War in Iran. Gasoline rationing. A military draft. A Chinese takeover of Taiwan. Double-digit inflation and unemployment. The draining of the strategic petroleum reserve.

This is where current energy policy is going in the United States, according to a nightmare scenario played out as a policy-making exercise on Thursday by a group of former top government officials.

Two bipartisan business-supported groups sponsored an elaborately staged role-playing game called Oil ShockWave that tried to dramatize the effect of American dependence on oil imported from unstable and unfriendly parts of the world.

The organizers have an agenda: They hope to prompt Congress to act on energy legislation and to push the issue into the presidential campaign.

Read Full Article Here

 

CDS traders warn of ‘blood on streets’

BBC
October 27, 2007

The mood in credit derivatives markets turned ugly on Thursday, with the cost of insuring corporate debt hitting multi-week highs on both sides of the Atlantic.

Speculation was rife that leading major investment banks were facing additional losses linked to complex mortgage-backed securities, while worries mounted over the health of major financial guarantors.

“It’s scary out there — there’s blood on the streets,” a trader at a US brokerage said. “It’s a real mess.”

In the US, the perceived risk of owning corporate debt jumped to a seven-week high, with the cost to insure a $10m portfolio of investment-grade debt reaching $67,000, data from Phoenix Partners Group showed.

Confidence in Citigroup and Merrill Lynch, as measured by their credit default swaps, slumped to lows not seen since the height of the credit squeeze in August.

Five-year credit default swaps tied to Citigroup widened to 60 basis points, meaning it cost $60,000 annually to insure Citigroup’s debt against default for five years. A couple of weeks ago, that figure stood at $27,000.

Contracts on Merrill Lynch, which last week posted the largest quarterly loss in its 93-year history, rose $18,000 to $103,000. CDS on UBS rose 10bp to 51bp, Deutsche Bank said. The contracts stood at about 6bp in May. Contracts on Credit Suisse rose 4bp to 52bp from 10bp in June.

Bond insurers, or monolines, were also hit hard.

“[These triple-A rated companies are] exposed to the crumbling housing market,” said Gavan Nolan, an analyst at derivatives data provider Markit. “Investors in monolines will be waiting for the coming months of housing data with trepidation,” Mr Nolan said.

CDS on MBIA Insurance rocketed to a four-year high, of 345bp, CMA Datavision said.

Last week the insurer posted $36.6m net loss and halted its share buy-back programme.

Contracts on the bond insurance unit of Ambac Financial climbed to a five-year high of 310bp.

Gimme Credit, an independent research term, downgraded both MBIA and Ambac this week.

In Europe, the iTraxx Crossover index of 50 mostly high-yield companies widened by 18 bp to 338bp, the biggest rise since August, according to Deutsche Bank data.

The iTraxx Europe index, which tracks 125 investment-grade companies, rose 3.75bp to 41bp. It was the biggest one-day jump since early September.

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Oil strikes record near $94

Oil strikes record near $94

Matthew Robinson
Reuters
October 29, 2007

Oil jumped to a record high near $94 a barrel on Monday as stormy weather disrupted supplies from giant exporter Mexico and the dollar wallowed near record lows.

Mexican state oil company Pemex has shut a fifth of the nation’s crude production and halted the bulk of exports as storms kept ships bottled at ports across the country, a top U.S. supplier.

U.S. crude settled up $1.67 at $93.53 a barrel after striking a record $93.80 earlier. London Brent settled $1.63 higher at $90.32 a barrel.

Oil prices have soared by more than a third since mid-August as a stand-off between Turkey and Kurdish rebels, dollar weakness, easing interest rates and winter supply fears have lured a fresh wave of investment capital.

“Every new bullish factor pushes U.S. crude irrationally closer to $100 barrel,” said SGCIB, adding: “Prices will fall if the FOMC does nothing.”

The U.S. Federal Reserve’s Federal Open Market Committee meets on October 30-31, and Wall Street is betting on another rate cut as the U.S. housing downturn deepens.

Expectations of a cut have helped push the dollar to record lows against a basket of currencies and boosted the price of dollar-denominated commodities.

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Canadian Dollar Hits 47-Year High

AFP
October 29, 2007

The Canadian dollar reached on Monday a 47-year high versus the US greenback, gaining on the US currency’s recent weakness, as well as soaring demand for oil and other natural resources.

At 1500 GMT, the American dollar was worth only 95.47 Canadian dollars, while the loonie, a sobriquet given to the Canadian dollar, was being traded for 1.0474 US dollars.

According to the Bank of Canada, the loonie had last seen such heights in March 1960.

Analysts noted that all major currencies were increasing in value against the US dollar in anticipation of an interest rate cut by the US Federal Reserve on Wednesday.

Most observers expect the Fed to cut its key lending rate by 25 percentage points, bringing it in line with Canada’s rate of 4.50 percent.

As well, demand for oil, gold and other natural resources, of which Canada is a major exporter, has given the Canadian dollar a big boost of late.

Since the beginning of this year, the Canadian dollar has increased 20 percent, and jumped 69 percent since 2002, when it was trading at a historic low of 61.70 US cents.

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Strong loonie may lead Canadian economy to collapse

Strong loonie may lead Canadian economy to collapse

Pravda Russia
October 29, 2007

Cross-border shoppers will rob the Canadian economy of billions of dollars in economic growth, an economic think-tank is warning.

The surge in cross-border shopping due to the strong dollar, not to mention the slump in exports, could knock nearly three-quarters of a percentage point off growth in the Canadian economy, says Action Economics, an online economic research firm.

However, the U.S. economy could get a much needed boost from the rise in cross-border shopping, as well as an increase in exports and drop in imports resulting from the relative weakness of its currency against the loonie, the report adds.

“Overall, the rapid rise in the Canadian dollar should resonate through both the Canadian and U.S. economies well into next year,” it said, as the loonie traded near a 33-year high of more than $1.03 US.

“Canadian dollar strength adds to the downside risk for Canada’s domestic economy via deflection of consumer spending, and will likely exacerbate an already difficult environment for some Canadian exporters,” it said. “In contrast, the U.S. economy stands to benefit via increased retail sales and export demand, which would provide a timely offset to what is shaping up to be a sizable drag from residential investment.”

Read Full Article Here