Gold hits record near $1,150/oz as dollar slips

November 18, 2009

Wed Nov 18, 2009 5:13am EST

By Jan Harvey

LONDON (Reuters) – Gold hit a fresh record high near $1,150 an ounce on Wednesday, boosting precious metals across the board, as a dip in the dollar index added to momentum buying as prices broke through key technical resistance levels.

In non-U.S. dollar terms, gold also climbed, hitting multi-month highs when priced in the euro, sterling and the Australian dollar.

Spot gold hit a high of $1,147.45 and was at $1,146.05 an ounce at 0948 GMT, against $1,141.50 late in New York on Tuesday.

U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange also hit a record $1,148.10 and were later up $7.10 at $1,146.40 an ounce.

“Yesterday the market took a breather and tested below $1,130 very quickly, (but) a few physical related bargain hunters were lined up to grab the dip,” said Afshin Nabavi, head of trading at MKS Finance in Geneva.

The market is being underpinned by fresh interest in gold from the official sector, he said, after a recent major bullion acquisition from India and smaller buys by the central banks of Mauritius and Sri Lanka.

The acquisitions underlined gold’s appeal as a portfolio diversifier, especially in an environment where further dollar weakness was expected, analysts said.

The dollar eased back on Wednesday from its biggest rise in three weeks in the previous session, as traders awaited U.S. inflation data due at 1330 GMT.

The dollar index, which measures the U.S. currency’s performance against a basket of six others, was down 0.37 percent, while the euro/dollar exchange rate firmed.

Other commodities also climbed, with oil rising back toward $80 a barrel and copper to 13-1/3 month highs near $7,000 a tonne. Both are being lifted by the weak dollar.

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Megabubble waiting for new president in 2009

May 22, 2008

‘Numbers racket’ exposes potential disaster for economy, markets

By Paul B. Farrell, MarketWatch
Last update: 10:13 a.m. EDT May 20, 2008

ARROYO GRANDE, Calif. (MarketWatch) — Remember that big ah-ha moment in the 1939 classic “The Wizard of Oz?” Dorothy wants to see the Wizard. His voice booms: “Do not arouse the wrath of the Great and Powerful Oz! Come back tomorrow!” Afraid, Lion, Tin Man, Scarecrow shake. Dorothy’s dog runs up, tugs on a curtain. She chases Toto, pulls curtain open:

“Who are you?” Dr. Marvel stutters: “Well, I – I – I am the Great and Powerful, Wizard of Oz.” Dorothy: “You are? I don’t believe you!” He replies: “No, it’s true. There’s no other Wizard except me.” Dorothy’s miffed: “Oh, you’re a very bad man!” Wizard: “Oh, no, my dear. I’m a very good man. I’m just a very bad Wizard.”

2009 Sequel: Script exposes diabolical cover-up conspiracy

Flash forward: Real life, Washington, new leaders, a new Congress, old wizardry. Be forewarned: No matter who’s elected president, America will soon see a massive statistical curtain pulled back, exposing a con game of historic proportions. And when that happens, you and I will suffer another ear-splitting global meltdown, bigger than today’s housing-credit crisis, dragging us deep into a recession and bear market for years.

Cast: New ‘leading man’ from old Nixon political machine

Yes, the lead character pulling back the curtain is none other than Kevin Phillips, a former Republican strategist for Nixon, and today America’s leading political historian. Phillips just published “Bad Money: Reckless Finance, Failed Politics & the Crisis of American Capitalism,” everything you need to know about today’s credit meltdown.

Scene 1: Numbers racket hiding behind Washington curtain

Opening shot: Phillips pulling back the curtain, exposing charlatan Wizards in a brilliant Harper’s Magazine article: “Numbers Racket: Why the economy is worse than we know.” Far worse. Buy it, read it — this is essential reading if you really want to understand the depth of today’s political as well as economic impending meltdown, and the harsh realities facing Washington, Wall Street, Corporate America, and Main Street in 2009 and beyond … harsh because we cannot cover up the truth much longer.

Scene 2: Statistics, Washington’s new WMDs, a time bomb

“If Washington’s harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it really is. The corruption has tainted the very measures that most shape public perception of the economy,” especially three key numbers, CPI, GDP and monthly unemployment statistics.

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The degradation of accounting

April 14, 2008

April 14, 2008

Martin Hutchinson is the author of “Great Conservatives” (Academica Press, 2005) — details can be found on the Web site http://www.greatconservatives.com

Fair value accounting, by which debt and equity securities on a company’s balance sheet are “marked to market” — written up or down to their market price — has been hyped by accountants and regulators as the epitome of modern financial reporting, enabling investors to gain a completely true picture of their investment’s financial position. Indeed, Gerald White of the Chartered Financial Analyst Institute, speaking at an American Enterprise Institute conference Tuesday, believes it should be applied to all items on the balance sheet, not just financial instruments. There is just one problem: in the turbulence of the last nine months it has completely failed to work, and has indeed shown itself to be pro-cyclical, encouraging economically foolish behavior in both up and down cycles.

As someone who only thinks about accounting once a decade or so, I wasn’t really aware that much had changed from my business school days in the early 1970s. At that time, the values of assets on the balance sheet didn’t move much. Everything the company owned was dumped on the balance sheet at cost price and stayed there for decades while the world turned. The only exception was when the company held bonds or shares that had declined catastrophically in value (the occasional wobble was ignored) in which case they were declared “impaired” and their value written down. The fun for analysts was in finding companies whose downtown real estate was still held on the books at its value of 1926, when it had been bought, since there just could be a little teensy-weensy asset profit that might be unlocked from the company if one could figure out how.

This attitude to values was maintained through the inflation-accounting period of the late 1970s and early 1980s. Assets were assumed to be held for the long term, so buildings were written up by the movement in the consumer price index between the asset’s purchase date and the balance sheet date. US and British accounts differed in their approach to inflation accounting, which may have been one reason why it was abandoned fairly quickly once inflation returned to single digits, but neither system attempted to “mark to market.”

The “mark to market” approach had been used since 1940 by US investment banks, holders of large numbers of tradable securities, who needed to convince their regulators that their capital was adequate. It was not however used by British merchant banks, equally holders of substantial amounts of tradable securities. Only a small portion of merchant bank assets was held in a “trading account.” The remainder was held on a “back book” investment account and valued at cost. In this way, merchant banks were able to manage earnings very effectively; generally they built up large “hidden reserves” in good years which were amortized into earnings in years of unexpected dearth, so that the overall picture was smoothened. The result was to increase the confidence of the market in each merchant bank; people assumed that 200-year-old institutions had accumulated enough “hidden reserves” and undervalued real estate to smooth out any problems that might arise.

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Inflation Fears To Support Gold Once Stocks Stabilize

January 24, 2008

Gold may be poised for further gains due to growing inflation fears, especially once equity markets stabilize and with the U.S. Federal Reserve speeding the pace of easing its monetary policy, traders and analysts said.

One observer compared the Fed’s recent rate cuts to a doctor administering medicine in an attempt to save the life of a patient – in this case the economy – before worrying about possible side effects, such as inflation.

As it is, the gold was already drawing some buying even when it was hit earlier in the week by long-liquidation pressure from investors needing to raise cash as stocks sold off.

“Silver and gold have done a good job of holding together as the stock indices fell apart,” said Ira Epstein, chief executive with Ira Epstein & Co. Futures. “They’ll do a phenomenal job to the upside once they believe the economy is on better footing. The rational for that is all these rate cuts will lead to inflation.”

Precious metals are likely to draw safe-haven buying due to some of the uncertainties in the financial and credit markets, said Gijsbert Groenewegen, managing partner with Gold Arrow Capital Management.

“On the other hand, precious metals have also been an inflation hedge,” he continued. “If you look at food and energy prices, there is inflation. Wheat is at all-time highs. Look at corn. You’re having an acceleration of the world population having access to ‘better foods.'” With oil at historically high prices, demand for biofuels has added to rallies in food commodities such as corn and sugar, he added.

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