Gold rises towards record high, unease deepens
One kilogram gold bars are seen in this picture illustration taken at the Korea Gold Exchange in Seoul August 9, 2011.
Credit: Reuters/Jo Yong-Hak
LONDON |
LONDON (Reuters) - Gold rallied back toward record highs above $1,800 an ounce on Thursday, driven by unease over the lack of a solution to the European debt crisis and sluggish growth in the developed world which has shaken investor confidence in stocks, bonds and hard currencies.
Prices have climbed to within $5 of last week's record high of $1,813.79 an ounce.Although it remains off the inflation-adjusted peak above $2,000 struck in 1980, it is one of the top performing assets this year, up by over 25 percent versus a 15-percent loss in U.S. blue-chip stocks .SPX or a 7.7-percent decline in the price of copper.
Growth in the United States, which last week lost its top-notch credit rating, has been patchy, while European leaders struggle to contain the spread of the debt crisis that has forced Greece, Portugal and Ireland to seek emergency funding and now threatens to swamp Italy and Spain.
Spot gold was up 1.1 percent on the day at $1,808.20 an ounce by 6:48 a.m. EDT, set for a 3.6 percent gain this week and a nearly 9 percent gain over the last two weeks, its best two-weekly performance since mid-February 2009.
"There is a genuine feeling that all of these issues are playing indirectly into gold, and the impact these factors have on the currencies mean people are getting out of those and into gold," said ANZ head of metal sales Peter Hillyard.
"I'm one of those people who think gold is going to $2,000 and it's getting there. The underlying reasons don't change, there is a lack of confidence in everything else," he said.Plans from France and Germany to move toward fiscal union in 2012 got a chilly response from other euro-zone countries and failed to reassure investors worried about the region's debt crisis and weakened economies.
Austria, Finland and Ireland all questioned bold proposals from French President Nicolas Sarkozy and German Chancellor Angela Merkel to give up sovereignty over budgetary policies as a means to shore up their 17-nation currency union.
"Investors were still digesting comments from Merkel and Sarkozy late on Tuesday night where the leaders pledged to defend the euro at all costs," wrote VTB Capital analyst Andrey Kryuchenkov in a daily note. "However, what the markets really need is a concrete action plan."
Demand for gold has been fairly evident through increases in holdings of the metal in exchange-traded funds and rising open interest in U.S. gold futures, building on a decline in the second quarter of the year.
The World Gold Council said in a report on Thursday overall gold demand fell 17 percent in the second quarter to 919.8 tonnes, as growing interest in jewelry, coins and bars failed to offset a sharp decline in ETF buying.
Investment in ETFs fell by more than 80 percent on the same quarter last year, although inflows this year are up by a net 6 percent, with most of that investment materializing in the last month, according to ETF data monitored by Reuters.
DEMAND PICKS UP"Although profit-taking, margin requirement hikes and seasonally soft physical demand could temper the rally intermittently, the external environment has turned increasingly fertile for gold," said Barclays Capital in a research note.
Gold's fortunes could be altered in the case of rising real interest rates, controlled inflation and a stable macro-environment, it added.
Later in the day investors will comb through weekly data on first-time unemployment benefit claims for a read on the health of the U.S. jobs market, as well as U.S. consumer prices.
Data on Wednesday showed the sharpest pick-up in producer prices excluding food and energy in six months in July, although weak consumer demand was expected to keep inflation at the farm and factory gate in check.
In other fundamental news, Venezuelan President Hugo Chavez said the country will nationalize its gold industry and is moving its international reserves out of Western countries.In other precious metals, silver rose 0.5 percent to trade at $40.38 an ounce.
Platinum was flat at $1,835.74, while palladium was down 0.1 percent at $769.47 an ounce.
(Editing by Alison Birrane)
Gold Stays Strong - Pretty Much
Supported by the weakening dollar, gold remains a generally strong bid.
PRLog (Press Release) - Aug 18, 2011 - After warnings from a Chinese foreign exchange official of the risks of holding too many dollars, gold remains generally well bid, supported by dollar weakness. Gold and silver ETFs notched another win Monday, starting out a new week near record territory. Gold prices hit a near-one-month high of $1548 per ounce in Asian trading on Monday – a 1.8% gain on last week's low – before dropping back when London opened, while stocks and commodities continued to fall after Friday's disappointing US jobs data. The US economy added just 54,000 jobs in May, according to non-farm payroll data published Friday by the Bureau of Labour statistics, compared to analysts' forecasts that ranged from 150,000 to 190,000. Speculations of a generous third quantitative easing (QE3) package will probably continue to grow if the negative tone of US economic news continues.
The U.S. currency has already struggled this year against expectations the Federal Reserve will keep rates low for a protracted period to safeguard economic growth. Gold tends to have an inverse relationship to the dollar, because it becomes cheaper for holders of other currencies when the U.S. unit weakens, and it is sometimes bought as an alternative asset. The showdown in Greece over its failure to achieve budget metrics attracted safe haven buying of the metal throughout the past two to three weeks, taking the Euro from the high of 1.49 in May to approximately 1.41 against the dollar as well as providing ammunition for firming gold prices above $1,520. Gold has been “persistently negatively correlated” with the euro since the start of the Greek crisis last year, and stabilization in the euro could be “a catalyst for it to decline. A weaker dollar provided some support for metals. Investors are also waiting to hear from Ben Bernanke. The Federal Reserve chairman is scheduled to speak about the economic outlook in Atlanta later on Tuesday.
However, short-term prospects for gold are still favourable. The metal has spent most of electronic trading in Asian hours in the black but fell as floor trading approached. Physical gold demand is also holding up strongly despite near-record prices, analysts say, particularly in the Asian markets, where appetite for gold has typically been sharpest.
There is another interesting market dynamic recently involving gold ETFs. Gold prices have “sharply diverged from equities and many commodities in the past two weeks. One explanation for this recent relationship could be low volatility in the stock market since gold-based ETFs would take enough of a hit in a margin-call driven sell-off to push it lower. Gold has rallied while most other financial assets have declined, pointing out a disconnect between stocks and the falling dollar, causing the unusual situation where the dollar is weakening and equities are in full-on retreat.
There is another interesting market dynamic recently involving gold ETFs. Gold prices have “sharply diverged from equities and many commodities in the past two weeks. One explanation for this recent relationship could be low volatility in the stock market since gold-based ETFs would take enough of a hit in a margin-call driven sell-off to push it lower. Gold has rallied while most other financial assets have declined, pointing out a disconnect between stocks and the falling dollar, causing the unusual situation where the dollar is weakening and equities are in full-on retreat.
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Bank of America Sued for $10 Billion
Posted by Wealth Wire - Monday, August 8th, 2011
http://www.wealthwire.com/news/finance/1633
American International Group has filed suit against Bank of America, citing "massive fraud" in the quality of mortgages placed in securities and sold to investors.
The mostly taxpayer-owned insurance group is suing BoA for $10 billion to recoup losses suffered during the subprime meltdown.
BoA rejected the lawsuit outright. A spokesman told Reuters:
"AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets," said the spokesman, Lawrence Di Rita.
"It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors. We reject its assertions and allegations."
AIG is not the only one suing BoA. Before this lawsuit, they were already attempting to head their other lawsuits off at the pass. They are currently in discussions with federal officials to cut a deal, where the bank would help struggling homeowners pay down their mortgages in exchange for protection against such lawsuits. But how do you strike a balance between protecting investors and protecting homeowners, when their interests are diametrically opposed?
From the Washington Post:If it reduced the principal on mortgage loans, the investors might have to take a hit. But if it doesn’t, homeowners might not be able to continue to make their monthly payments. It can also be difficult to know which homeowners should get this aid.
“You get situations where investors say, ‘Hey, wait a second, you’re using my money to solve your problems.’ The concern is, investors want to make sure that’s not what’s happening,” said Robert J. Madden, a partner at the Texas law firm Gibbs & Bruns, which is representing 22 large institutional investors who bought mortgage securities from Bank of America.
“You get situations where investors say, ‘Hey, wait a second, you’re using my money to solve your problems.’ The concern is, investors want to make sure that’s not what’s happening,” said Robert J. Madden, a partner at the Texas law firm Gibbs & Bruns, which is representing 22 large institutional investors who bought mortgage securities from Bank of America.
When Bank of America settled to pay $8.5 billion to those and other investors in late June, the agreement allowed the bank to reduce loan amounts, but only in situations in which the reduction benefited homeowners as well as investors, Madden said.
As BoA scrambles to fight off these lawsuits, they're also fighting the issue of foreclosures. And their approach to those empty homes? They are bulldozing them.
I'm betting they wish they could get rid of all their problems that way...
Bank of America to Start Demolishing Foreclosures
Posted by Brittany Stepniak - Wednesday, July 27th, 2011
http://www.wealthwire.com/news/headlines/1549
The housing industry is in a seemingly never-ending rut, facing a glut of foreclosure as unwanted houses are sitting and wasting away. The abandoned, decrepit homes that can't sell will soon see a new fate: demolition.
Bank of America Corp. is trying to trim the fat, planning to use bulldozers to destroy thousands of empty homes.
The project is intended to ease a lot of problems for lenders in the United States, where disposing repossesed homes proves to be a huge hassle that's becoming all too commonplace.
In this country 1,679,125 - one out of 77 - were in various stages of foreclosure as of June 2011. Unfortunately, those properties only aid in depressing house prices and scaring off potential buyers, worried that home values will only continue to fall...
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