-- Weekly Market Summary --
Gold
$903.10 Close Feb 15, 2008
-$4.20 Gain/Loss
-1.64% On Week
Silver
$17.105 Close Feb 15, 2008
-$0.095 Gain/Loss
-0.03% On Week
XAU
177.32 Close Feb 15, 2008
+0.25% Gain/Loss
-2.17% On Week
HUI
435.06 Close Feb 15, 2008
+0.18% Gain/Loss
-1.94% On Week
GDM
1305.33 Close Feb 15, 2008
-0.04% Gain/Loss
-2.55% On Week
JSE Gold
2267.66 Close Feb 15, 2008
-12.51 Gain/Loss
-5.26% On Week
USD
76.04 Close Feb 15, 2008
-0.11 Gain/Loss
-0.76% On Week
Euro
146.68 Close Feb 15, 2008
+0.27 Gain/Loss
+1.07% On Week
Yen
92.90 Close Feb 15, 2008
+0.30 Gain/Loss
-0.25% On Week
Oil
$96.50 Close Feb 15, 2008
+$0.04 Gain/Loss
+5.15% On Week
10-Year
3.780% Close Feb 15, 2008
-0.038 Gain/Loss
+3.45% On Week
Bond
117.00 Close Feb 15, 2008
+0.59375 Gain/Loss
-1.45% On Week
Dow
12348.21 Close Feb 15, 2008
-0.23% Gain/Loss
+1.36% On Week
Nasdaq
2321.80 Close Feb 15, 2008
-0.46% Gain/Loss
+0.74% On Week
S&P
1349.99 Close Feb 15, 2008
+0.08% Gain/Loss
+1.40% On Week
Feature Article: Are the Rate Cuts and the Economic Stimulus Packages Enough to Save the US economy from a Recession?
So far, 2008 has been full of disappointing news and commentary on the state of the U.S. economy. Economic news is pointing to a recession, there is a national mortgage crisis and there are many pessimistic views about the economy’s short term future. This week has been a busy week aimed at stimulating the U.S. economy, with a $170 billion economic stimulus package signed by President Bush, a mortgage aid package and an economic hearing before the Senate Banking Committee. The events follow the two recent U.S. Federal interest rate cuts last month of three-quarters percentage points, followed by another half a point 8 days later. Current reports suggest that the Fed is ready to cut rates again.
These economic stimulus attempts by the US government, coupled with the economic discussions from the current campaigns for President, have stirred up a lot of attention focused on the state of the U.S. economy. The question still remains; will this be enough to keep the U.S. economy out of a recession?
According to the Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson who convened Thursday before the Senate Banking Committee; the nation will avoid failing into a recession. Both men did acknowledge that there are problems in the U.S. economy, but they feel that the recent steps taken by the government are enough to keep the economy moving forward.
While onlookers hoped that the stock market would respond favorably to responses in the Senate Banking Committee, the markets did not respond. The DOW closed Thursday (-175.26), down -1.4% and the NASDAQ closed (-41.39), down 1.74% from the previous day. While the S&P closed on a down note, the gold market closed on a positive note at 913.40, up 0.29% from the previous day.
There has been a lot of debate about whether the $170 billion economic stimulus package will make a big enough impact on the economy to avoid a recession. The main premise for the stimulus package is to stimulate consumer spending across the nation. Most individuals will receive a $600 tax relief check and couples will receive a $1200 check. Bush signed the bill this Wednesday, so estimates are suggesting that Americans will receive their checks sometime this summer.
There is some debate as to whether this stimulus package will actually stimulate the economy past the short term. The thought is that short term cuts will equal short term impacts. Some economic commentators also believe that consumers won’t change their spending habits for a one time, short term relief package. There is also some debate about whether the stimulus package will help to create new jobs, as many believe that employers will not add new retail jobs in anticipation of sales that are only going to be $600 per person.
The Fed is currently predicting a 1.8% growth for this year, a more conservative investment than the Council of Economic Advisors estimated growth of 2.7% for 2008. While the U.S. economy has been growing over the past 6 years, the 4th quarter of 2007 experienced minimal growth across most sectors, stimulating a great amount of concern across the entire country.
Another large concern for the U.S. economy is the widespread mortgage crisis. Foreclosures are on the rise and the real estate market has slowed across most of the country. Many economists believe that a primary reason for the recent U.S. stock market’s decline is due to the bad investments and troubles within the sub prime mortgage sector. The recent mortgage aid package is designed to freeze mortgage rates for families who are in trouble. “Project Lifeline”, which is backed by the U.S. government would pause foreclosure proceedings for home owners who are 90 days in arrears in their mortgage payments. The program’s intention is to help determine whether an alternative payment arrangement can be made with the Borrowers to help them keep their homes. The 6 mortgage lenders who are participating in this program are Bank of America, JPMorgan Chase & Co, Citigroup, Countrywide Financial, Washington Mutual and Wells Fargo.
This week has been eventful in attempt to stimulate the U.S. economy and to evade a looming recession this year. People around the world are wondering whether it will be enough.
Friday, February 15, 2008
Sunday, February 10, 2008
Weekly Market Summary Feb 8/08 & Will a US Recession Lower Oil Prices?
Gold
$918.20 close Feb 8/08
+$11.80 Gain/Loss
+1.13% On the week
Silver
$17.11 close Feb 8/08
+$0.37 Gain/Loss
+1.91% On the week
XAU
181.25 close Feb 8/08
+3.64% Gain/Loss
-1.82% On the week
HUI
443.66 close Feb 8/08
+3.55% Gain/Loss
-1.75% On the week
GDM
1339.50 close Feb 8/08
+3.52% Gain/Loss
-1.64% On the week
JSE Gold
2393.65 close Feb 8/08
-58.23 Gain/Loss
-4.19% On the week
USD
76.62 close Feb 8/08
-0.16 Gain/Loss
+1.51% On the week
Euro
145.12 close Feb 8/08
+0.49 Gain/Loss
-2.05% On the week
Yen
93.13 close Feb 8/08
+0.16 Gain/Loss
-0.90% On the week
Oil
$91.77 close Feb 8/08
+$3.66 Gain/Loss
+3.10% On the week
10-Year
3.654% close Feb 8/08
-0.082 Gain/Loss
+1.50% On the week
Bond
118.71875 close Feb 8/08
+0.90625 Gain/Loss
-0.89% On the week
Dow
12182.13 close Feb 8/08
-0.53% Gain/Loss
-4.40% On the week
Nasdaq
2304.85 close Feb 8/08
+0.52% Gain/Loss
-4.50% On the week
S&P
1331.29 close Feb 8/08
-0.42% Gain/Loss
-4.60% On the week
Will a US Recession Lower Oil Prices?:
The U.S. currently comprises only 5% of the total world population, yet consumes over 25% of the total fossil fuel based energy. The country imports the majority of its needed resources, creating a dependency on other world suppliers. This dependency on oil and foreign suppliers creates an economy that is greatly affected by either an increase in price or a decrease in supply. With the current political debates focusing in on the failing U.S. economy, the current mortgage crisis, the widespread debt crisis and the weakening of the U.S. dollar, what is in store for the overall economy in the upcoming months and how will this affect the price of oil?
The value of oil is measured over several different indexes and is based on multiple factors. Crude Oil prices measure the spot prices of oil barrels, typically from the West Texas area. The Brent Blend is a combination of oil from 15 different oil fields from the North Sea. The OPEC basket price is an average of oil prices from Algeria, Indonesia, Nigeria, Saudi Arabia, Dubai, Venezuela and Mexico. OPEC prices are most commonly considered when evaluating the health of the world’s oil economy.
Recent crude oil prices have tumbled about 12% from an all time high in January 2008, with the fear that the U.S. economy is slipping into a recession. NYMEX petroleum prices closed February 7th at 88.66 and Crude futures closed February 7th at 89.250. While oil prices have taken a temporary decline in value from their $100 per barrel price at the first of the year, U.S. citizens are more concerned about a potential repeat spike in oil prices would affect them at home. With many American families struggling financially, specifically the middle class, changes in oil prices have become a large concern for many.
Consumers feel the spike in oil prices mostly in the prices of their gasoline, and since U.S. consumers are largely dependent on their personal vehicles, a sharp rise in oil prices is often devastating to their disposable income. While natural gas and other heating sources utilize oil to provide homes with heat throughout the winter, the rising prices don’t have nearly the effect on the consumer pocketbooks as that of gasoline.
The Fed has made 2 recent attempts to cut interest rates in hopes to stimulate the U.S economy, and there is current legislation being discussed within Congress about passing a short term economic stimulus package. Americans are hoping that this trend will last until they receive assistance from the government’s potential financial relief later this spring or early this summer.
While consumers are hoping that oil prices remain steady or even decrease, oil companies are hoping for a different scenario. The other factor for the economy to take into consideration is how the value of the USD will affect oil prices and the overall economy. The U.S. dollar has been experiencing sharp declines over the past year and most economists are not predicting a rise in the near future. There is often much speculation and debate about how the dollar value and the price of oil affect one another. One economic question to ask is whether the weakening dollar will drive oil prices up or whether rising oil prices create the weakening of the dollar?
Economists are wondering about whether these recent oil price dips are temporary or an indication of the expected recession. In a recession, there is the possibility of a decrease in the demand for oil. Consumers would potentially cut back on their gasoline consumption and businesses could cut down on all un-necessary air travel. While these could lead to a short term decrease in the demand for oil, many economists are arguing that it may not cause a decrease in overall energy prices for consumers. Energy prices are expected to hold steady and even increase throughout the end of the year. It is expected that oil prices will average $80 a barrel for the year which would be $8 ahead of last year, and nearly double the value from 2004.
$918.20 close Feb 8/08
+$11.80 Gain/Loss
+1.13% On the week
Silver
$17.11 close Feb 8/08
+$0.37 Gain/Loss
+1.91% On the week
XAU
181.25 close Feb 8/08
+3.64% Gain/Loss
-1.82% On the week
HUI
443.66 close Feb 8/08
+3.55% Gain/Loss
-1.75% On the week
GDM
1339.50 close Feb 8/08
+3.52% Gain/Loss
-1.64% On the week
JSE Gold
2393.65 close Feb 8/08
-58.23 Gain/Loss
-4.19% On the week
USD
76.62 close Feb 8/08
-0.16 Gain/Loss
+1.51% On the week
Euro
145.12 close Feb 8/08
+0.49 Gain/Loss
-2.05% On the week
Yen
93.13 close Feb 8/08
+0.16 Gain/Loss
-0.90% On the week
Oil
$91.77 close Feb 8/08
+$3.66 Gain/Loss
+3.10% On the week
10-Year
3.654% close Feb 8/08
-0.082 Gain/Loss
+1.50% On the week
Bond
118.71875 close Feb 8/08
+0.90625 Gain/Loss
-0.89% On the week
Dow
12182.13 close Feb 8/08
-0.53% Gain/Loss
-4.40% On the week
Nasdaq
2304.85 close Feb 8/08
+0.52% Gain/Loss
-4.50% On the week
S&P
1331.29 close Feb 8/08
-0.42% Gain/Loss
-4.60% On the week
Will a US Recession Lower Oil Prices?:
The U.S. currently comprises only 5% of the total world population, yet consumes over 25% of the total fossil fuel based energy. The country imports the majority of its needed resources, creating a dependency on other world suppliers. This dependency on oil and foreign suppliers creates an economy that is greatly affected by either an increase in price or a decrease in supply. With the current political debates focusing in on the failing U.S. economy, the current mortgage crisis, the widespread debt crisis and the weakening of the U.S. dollar, what is in store for the overall economy in the upcoming months and how will this affect the price of oil?
The value of oil is measured over several different indexes and is based on multiple factors. Crude Oil prices measure the spot prices of oil barrels, typically from the West Texas area. The Brent Blend is a combination of oil from 15 different oil fields from the North Sea. The OPEC basket price is an average of oil prices from Algeria, Indonesia, Nigeria, Saudi Arabia, Dubai, Venezuela and Mexico. OPEC prices are most commonly considered when evaluating the health of the world’s oil economy.
Recent crude oil prices have tumbled about 12% from an all time high in January 2008, with the fear that the U.S. economy is slipping into a recession. NYMEX petroleum prices closed February 7th at 88.66 and Crude futures closed February 7th at 89.250. While oil prices have taken a temporary decline in value from their $100 per barrel price at the first of the year, U.S. citizens are more concerned about a potential repeat spike in oil prices would affect them at home. With many American families struggling financially, specifically the middle class, changes in oil prices have become a large concern for many.
Consumers feel the spike in oil prices mostly in the prices of their gasoline, and since U.S. consumers are largely dependent on their personal vehicles, a sharp rise in oil prices is often devastating to their disposable income. While natural gas and other heating sources utilize oil to provide homes with heat throughout the winter, the rising prices don’t have nearly the effect on the consumer pocketbooks as that of gasoline.
The Fed has made 2 recent attempts to cut interest rates in hopes to stimulate the U.S economy, and there is current legislation being discussed within Congress about passing a short term economic stimulus package. Americans are hoping that this trend will last until they receive assistance from the government’s potential financial relief later this spring or early this summer.
While consumers are hoping that oil prices remain steady or even decrease, oil companies are hoping for a different scenario. The other factor for the economy to take into consideration is how the value of the USD will affect oil prices and the overall economy. The U.S. dollar has been experiencing sharp declines over the past year and most economists are not predicting a rise in the near future. There is often much speculation and debate about how the dollar value and the price of oil affect one another. One economic question to ask is whether the weakening dollar will drive oil prices up or whether rising oil prices create the weakening of the dollar?
Economists are wondering about whether these recent oil price dips are temporary or an indication of the expected recession. In a recession, there is the possibility of a decrease in the demand for oil. Consumers would potentially cut back on their gasoline consumption and businesses could cut down on all un-necessary air travel. While these could lead to a short term decrease in the demand for oil, many economists are arguing that it may not cause a decrease in overall energy prices for consumers. Energy prices are expected to hold steady and even increase throughout the end of the year. It is expected that oil prices will average $80 a barrel for the year which would be $8 ahead of last year, and nearly double the value from 2004.
Wednesday, February 06, 2008
Commodities in a Volatile Market
1) Instability and Resistance in Commodities
Instability in the US Dollar and fear of a continued slump in the US market has investors still on the worry track. The treadmill continues as investors keep looking for stability of hard assets such as gold, copper, platinum and silver during these volatile times. It is debatable whether the Fed’s will be able to rescue the economy by cutting interest rates another half percentage point which keeps investors on the worry treadmill.
Gold has enjoyed a 10% price surge in the first part of 2008 compared to a 32% gain in all of 2007 and 23% in 2006. As gold is continuing its climb to record and near record highs of around $940 other commodities are rallying as well. Before the Fed’s announcement last week gold and platinum both rose quickly in anticipation of the expected Federal Reserve rate cut. After the Wednesday January 30th half percentage point rate cut by the Federal Reserve gold, platinum, copper and silver all rose to near resistance.
Resistance seems to be more of a psychological glass ceiling rather than an overall market resistance. Gold and silver are both still in the not-over bought category according to the relative strength index. With silver showing some resistance even if only psychological at around the $16.70 mark.
This remains to be uncharted territory for gold investors as gold’s rise continues on the shirt tails of oil’s sudden surge in price. At the same time silver is enjoying a continued up swing, with only slight downward movement when oil prices tumbled then had a nice rebound when oil prices bounced up.
2) Commodities Supply Shortages
China and India as growing markets are continuing to see supply shortages in the metals market. Over the next two decades gold and other precious metal prices are likely to see a prices climb to un-heard of levels.
In recent months the rolling blackouts in South Africa due to a short power supply have caused mine production to suffer a steep decline. At the same time as the decline the demand for gold and other metals commodities are continuing to see a rise. Officials in South Africa have called the rolling black outs a national emergency.
The major mines Harmony Gold Mining, AngloGold Ashanti and Gold Fields are all in need of steady power. The mines need power to ventilate the shafts and to pump water out of mine shafts that can reach up to four kilometers deep. The recent shut down of mines has caused lost revenue to be estimated between $12 million per day to $250 million per day. Government officials in South Africa have been able to ration enough power to get the mines operational again and up to almost 90% efficiency.
3) Rising Demand for Metals Commodities
Rising income levels in India and Asia as these areas begin to industrialize and wealth grows is causing a foreseeable demand in gold. The tight supplies for mines and the build up of metal Exchange Trade Funds as well as increased operational costs to the mining industry are bringing the line of support for gold and other commodities to higher levels.
Holidays during the seven months ranging from August to February have coupled with interest rate cuts to bring the seasonal demand for gold up. Jewelry sales which equate to approximately 70% of the gold demand see an increase each year as Ramadan which occurs sometime between August and November kicks off the holiday season. The Jewish New Year in September, Diwali celebrated in India in November, Christmas during December in the west, and the Chinese New Year in February all combine to see an increase in gold demand and prices.
Instability in the US Dollar and fear of a continued slump in the US market has investors still on the worry track. The treadmill continues as investors keep looking for stability of hard assets such as gold, copper, platinum and silver during these volatile times. It is debatable whether the Fed’s will be able to rescue the economy by cutting interest rates another half percentage point which keeps investors on the worry treadmill.
Gold has enjoyed a 10% price surge in the first part of 2008 compared to a 32% gain in all of 2007 and 23% in 2006. As gold is continuing its climb to record and near record highs of around $940 other commodities are rallying as well. Before the Fed’s announcement last week gold and platinum both rose quickly in anticipation of the expected Federal Reserve rate cut. After the Wednesday January 30th half percentage point rate cut by the Federal Reserve gold, platinum, copper and silver all rose to near resistance.
Resistance seems to be more of a psychological glass ceiling rather than an overall market resistance. Gold and silver are both still in the not-over bought category according to the relative strength index. With silver showing some resistance even if only psychological at around the $16.70 mark.
This remains to be uncharted territory for gold investors as gold’s rise continues on the shirt tails of oil’s sudden surge in price. At the same time silver is enjoying a continued up swing, with only slight downward movement when oil prices tumbled then had a nice rebound when oil prices bounced up.
2) Commodities Supply Shortages
China and India as growing markets are continuing to see supply shortages in the metals market. Over the next two decades gold and other precious metal prices are likely to see a prices climb to un-heard of levels.
In recent months the rolling blackouts in South Africa due to a short power supply have caused mine production to suffer a steep decline. At the same time as the decline the demand for gold and other metals commodities are continuing to see a rise. Officials in South Africa have called the rolling black outs a national emergency.
The major mines Harmony Gold Mining, AngloGold Ashanti and Gold Fields are all in need of steady power. The mines need power to ventilate the shafts and to pump water out of mine shafts that can reach up to four kilometers deep. The recent shut down of mines has caused lost revenue to be estimated between $12 million per day to $250 million per day. Government officials in South Africa have been able to ration enough power to get the mines operational again and up to almost 90% efficiency.
3) Rising Demand for Metals Commodities
Rising income levels in India and Asia as these areas begin to industrialize and wealth grows is causing a foreseeable demand in gold. The tight supplies for mines and the build up of metal Exchange Trade Funds as well as increased operational costs to the mining industry are bringing the line of support for gold and other commodities to higher levels.
Holidays during the seven months ranging from August to February have coupled with interest rate cuts to bring the seasonal demand for gold up. Jewelry sales which equate to approximately 70% of the gold demand see an increase each year as Ramadan which occurs sometime between August and November kicks off the holiday season. The Jewish New Year in September, Diwali celebrated in India in November, Christmas during December in the west, and the Chinese New Year in February all combine to see an increase in gold demand and prices.
Friday, February 01, 2008
How is the 2nd U.S. Fed rate cut in 9 days going to affect the metals markets?
The upcoming U.S. Presidential election in November has sparked international interest into the state of the U.S. economy. Leading economic commentators are pointing to a looming recession, and some are even suggesting that we are already there. The price of gold has been a leading economic indicator for the international economy for decades. The prices of gold are known to reflect the monetary, political and economic stability within its respective countries. In particular, the rising cost of gold per ounce within the U.S., points to a troubling economy and the potential lack of confidence in the U.S. dollar among the American citizens. When investors lose faith in the currency of the country or if they are just unsure, they often turn to gold or other metals as solid investment alternatives.
In a 9-1 decision today, the U.S. Fed made their 2nd interest rate cut within 9 days. This half point rate deduction lowered interest rates to 3%. Although the Dow jumped temporarily following the rate cut announcement by over 200 points, it ended the day down 37.47. While the rate cut was encouraging to some investors, the Fed’s commentary about the overall health of the economy was dismal. More rate cuts can be expected at the next scheduled meeting of the Fed in March.
The Fed’s decision lowered the U.S. dollar against every major currency that it is benchmarked against. In fact, over the past 5 months, the U.S. rates have gone from the 4th highest among developing countries, to the 4th lowest demonstrating the dramatically weakening state of the economy.
While the weakening U.S. dollar and failing economy are damaging for some, the inverse relationship to the price of gold is a great sign for gold investors and gold miners. Decreasing interest rates and the weakening of the U.S. dollar in global economies creates bullish signs for the gold economy.
Following the decrease in rates, the gold futures market hit a new all time high during trading, of 942.20 on Wednesday. Spot gold prices closed today at 921 per ounce, down 4.50 from the day before. Gold trading remained mostly negative throughout the day in anticipation of the Fed decision regarding rate cuts. Gold markets were up across the world as well, creating the need for a boost in gold production to meet the demand. With the increased confidence in the precious metals sector, we can expect to see a surge of investment dollars and possibly new investors into this market over the next few months. The rate cuts and the weakening dollar are positive signs for all the precious metal markets worldwide.
While gold has made most of the headlines this year so far, silver has been holding its own ground. Silver’s use within the economy has deviated from the once popular photography uses into areas such as: superconductor components, water purification agents, plasma televisions and into the medical field as a bacterial reduction agent. These recent additions of silver use within the global marketplace have made this metal more attractive to international investors. Silver generally trades in line with gold, at 50-60x the dollar value amount per ounce. With the Fed rate cut announcement today, silver had a volatile day, but holding at 16.750. With the markets still open, it is possible to see it rise even higher. Most experts are bullish on the silver market for the rest of the year, and some are suggesting that it may even become more attractive to investors than gold.
Investors who are active in the metals markets are anticipating a surge in prices in the months to come. They are watching with anticipation in particular to the U.S. economy and its overall health to gauge where the prices are likely to head in all metal markets.
In a 9-1 decision today, the U.S. Fed made their 2nd interest rate cut within 9 days. This half point rate deduction lowered interest rates to 3%. Although the Dow jumped temporarily following the rate cut announcement by over 200 points, it ended the day down 37.47. While the rate cut was encouraging to some investors, the Fed’s commentary about the overall health of the economy was dismal. More rate cuts can be expected at the next scheduled meeting of the Fed in March.
The Fed’s decision lowered the U.S. dollar against every major currency that it is benchmarked against. In fact, over the past 5 months, the U.S. rates have gone from the 4th highest among developing countries, to the 4th lowest demonstrating the dramatically weakening state of the economy.
While the weakening U.S. dollar and failing economy are damaging for some, the inverse relationship to the price of gold is a great sign for gold investors and gold miners. Decreasing interest rates and the weakening of the U.S. dollar in global economies creates bullish signs for the gold economy.
Following the decrease in rates, the gold futures market hit a new all time high during trading, of 942.20 on Wednesday. Spot gold prices closed today at 921 per ounce, down 4.50 from the day before. Gold trading remained mostly negative throughout the day in anticipation of the Fed decision regarding rate cuts. Gold markets were up across the world as well, creating the need for a boost in gold production to meet the demand. With the increased confidence in the precious metals sector, we can expect to see a surge of investment dollars and possibly new investors into this market over the next few months. The rate cuts and the weakening dollar are positive signs for all the precious metal markets worldwide.
While gold has made most of the headlines this year so far, silver has been holding its own ground. Silver’s use within the economy has deviated from the once popular photography uses into areas such as: superconductor components, water purification agents, plasma televisions and into the medical field as a bacterial reduction agent. These recent additions of silver use within the global marketplace have made this metal more attractive to international investors. Silver generally trades in line with gold, at 50-60x the dollar value amount per ounce. With the Fed rate cut announcement today, silver had a volatile day, but holding at 16.750. With the markets still open, it is possible to see it rise even higher. Most experts are bullish on the silver market for the rest of the year, and some are suggesting that it may even become more attractive to investors than gold.
Investors who are active in the metals markets are anticipating a surge in prices in the months to come. They are watching with anticipation in particular to the U.S. economy and its overall health to gauge where the prices are likely to head in all metal markets.
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