December 21st, 2009
- Regulators on Friday shut down two big California banks, as well as banks in Alabama, Florida, Georgia, Michigan and Illinois, bringing to 140 the number of U.S. banks brought down this year by the weak economy and mounting loan defaults. The 140 bank failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the government-backed deposit insurance fund — which has fallen into the red — more than $30 billion so far this year. The failures compare with 25 last year and three in 2007.
- The gap between yields on Treasuries and so-called TIPS due in 10 years, a measure of the outlook for consumer prices, closed above 2.25 percentage points four days last week, the longest stretch since August 2008. That’s the low end of the range in the five years before Lehman Brothers Holdings Inc. collapsed, and shows traders expect inflation, not deflation in coming months, said Jay Moskowitz, head of TIPS trading at CRT Capital Group LLC in Stamford, Connecticut.
- The economy is still flat at best. The Commerce Department reported seasonally adjusted November retail sales up 1.3% from October. However, if you apply the average seasonal adjustments that were used during the years 2006 and 2007, which account for a normal spike in November sales due to the holiday shopping season, retail sales were actually down 1.3% in November.
- Former Federal Reserve Chairman Alan Greenspan said in prepared testimony the threat to U.S. fiscal stability is larger than ever. Averting a situation where the U.S. struggles to finance unprecedented budget deficits “is more urgent than at any time in our history,” he said in testimony Thursday before the Senate Committee on Homeland Security and Governmental Affairs.
- Zhu Min, Deputy Governor of the Chinese Central Bank, issued comments at an economic forum in Beijing yesterday in which he stated that the U.S. dollar is set up to go lower and that foreign buyers will become a lot more reluctant to buy more U.S. Treasury bonds: “When the U.S. has to fund its deficit through the combination of issuing more Treasuries and printing more dollars, it is inevitable that the dollar will continue to weaken.”
Tags: Economic News, economic recovery, global economic recovery
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September 14th, 2009
US Global Investors
By Frank Holmes
CEO and Chief Investment Officer
Gold has cracked the $1,000-an-ounce barrier for a second time. The first time, in March 2008, the price fell back to three digits within a couple of days. What about this time?
No one knows the answer to that question, but there are some plausible reasons why the gold price could stay higher longer this time around.
The first reason is one that we’ve discussed before–we are now in what has historically been gold’s strongest season of the year. September is gold’s best month of the year in terms of month-over-month price appreciation, the key driver being jewelry makers stocking up for holiday buying in Asia, the Middle East and North America.
A second reason relates to the weak dollar due to prolonged rock-bottom interest rates and massive deficits being piled up in the U.S. Gold and the dollar typically move in opposite directions, so a weak dollar tends to be good for gold. That inverse relationship is intact so far in September–the DXY dollar index has lost 2 percent of its value so far this month September and on Friday hit a 12-month low, and over the same period spot gold has risen about 6 percent.
A third reason is rebounding interest in commodities overall. Prices for copper, zinc and other metals have seen strength recently. This isn’t surprising, given the growing signs of economic recovery and the dollar weakness.
In addition to these factors, Barrick Gold has reportedly purchased more than 2 million ounces of gold and is expected to buy another 3 million ounces to cut its hedge position by more than half.
Many are afraid that a global economic recovery will unleash inflation. Stimulus spending by the Federal Reserve and central banks around the world have added several trillion dollars to the global money supply. This will eventually erode the value of the dollar and other currencies.
There is an opposing fear that all of the stimulus spending won’t be enough to get the global economy out of its sickbed. What happens then? The Fed and others have made it clear that their medicine will be more stimulus spending, which will further devalue paper currencies.
Either way, gold has appeal.
Tags: global economic recovery, golbal economy, Gold price, inflation, stimulus spending, weak dollar
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