By Jon Nadler
Asian equity markets finished
significantly lower following yesterday's rout
in the Dow. Financials led the parade of
decliners once again, as fears of a second wave
in the global credit crisis tsunami enveloped
market after market. Other sectors in various
locations showed weakness as well, however.
France set aside $14 billion for some of its
troubled banks, while its auto industry was seen
as teetering lest it also receives some cash.
Australia's BHP Billiton announced job cuts of
6% of its workforce in the wake of slumping
commodity prices (in this case, nickel and
metallurgical coal). Circuit City will close
every last store, Ericsson will cut 5,000 jobs,
and the Bank of England will buy assets (some
$50 billion's worth at that) and likely
nationalize some banks. Contenders for the
N-list are as yet uncertain, but RBS and
Barclays are apparently ahead in the running.
The quote of the day comes from BoE Governor
Mervyn King, and it encapsulates the latest
trend in central bank-think - and not only in
his country. Talking about the emerging signs
that interest rate cuts are not cutting the
frozen credit mustard, Mr. King alluded to other
measures his institution might take with the
following tongue (and brain) twister: "In
addition to these conventional unconventional
measures there are also unconventional
unconventional measures." Way to say it, Guv'nor.
Or, not. The pound extended its losses falling
to new historic lows against a host of rival
After maintaining gains overnight and reaching
towards the $865 level, gold prices opened the
mid-week session in New York on the downside.
Bullion started at $850.10, off by nearly $6 per
ounce, as the US dollar pared losses and was
seen as steady around the 86.25 level. Oil rose
63 cents to near $41.47 and was seen as
providing a second day of assistance to metals.
Question is, will it be effective, especially if
stock market-related margin calls start hitting
players once again.
For the moment, the $845 pivot point remains in
play and is the focus of speculative activity.
Silver also pared gains, but was still ahead by
8 cents at the open, quoted at $11.25 per ounce.
Platinum shed $9 to $924 and palladium was
unchanged at $183 per ounce. The sector is
awaiting better news from the automotive world
than it has been receiving, and is also nervous
following mass demonstrations at AngloPlat
related to the disappearance of two of its
Team Obama prepared to unveil a two-pronged
attack against the credit Hydra with its $825
billion stimulus package, and a bank-rescue plan
nearing $50 billion according to some estimates.
Spring cleaning of toxic assets might well be
underway in the dead of winter. The new
President and his team got down to business at
7:45 this morning and showed every intention of
hitting the ground in full stride. The embattled
head of the SEC, Mr. Cox, handed in his
resignation papers. Finally. Some still question
why it took a Madoff-sized event to get the man
Today's food for thought comes from the world of
precious metals. It is still the middle of
crystal ball-gazing season, and the numbers keep
rolling in. A change of (price forecasting) tune
has been reported by Bloomberg, over at Morgan
Stanley. The house (reportedly, one of the
sinister forces "suppressing" the gold price in
the minds of some) sees gold prices averaging
higher for the next three years, as well as new
records being put into place. The usual suspects
are named as the catalysts for such bold moves.
The X-factors that could derail the predictions
remains the dollar and deflation taking hold in
lieu of the opposite phenomenon. Happy
Gold may average higher for each of the next
three years and climb to a record driven by
increased demand and a declining dollar as
governments ramp up spending to battle the
global recession, according to Morgan Stanley.
The metal may average $900 an ounce this year,
up 20 percent from an earlier target of $750,
the bank said today in a report. It may average
$1,000 in 2010, $1,050 in 2011 and $1,075 in
2012, up as much as 34 percent from previous
estimates, the report said. The commodity peaked
at $1,032.70 on March 17.
Morgan Stanley joins Standard Chartered Plc in
raising its target for gold prices amid concern
that the dollar may drop as the supply of the
currency is increased. President Barack Obama,
sworn in yesterday, plans an $850 billion
stimulus on top of a $700 billion bank-bailout
package enacted under his predecessor.
?Devalued currencies, growing global incomes and
a renewed appreciation for gold should keep
prices higher,? Morgan Stanley?s New York-based
analyst Hussein Allidina wrote. ?A globally
synchronous and aggressive fiscal and monetary
stimulus may be needed to re-inflate the global
economy, and we think this continues to present
significant upside to gold prices.?
The International Monetary Fund has forecast
that advanced economies including the U.S. will
contract simultaneously this year for the first
time since World War II, spurring stimulus plans
backed by more state debt. Gold, regarded by
some investors as a safe-haven asset, can rise
when the dollar falls.
?Gold will remain relatively stable in the first
half of the year, then later, a weaker dollar,
pickup in inflation and flight to safety will
help gold test its record high again,? said Chen
Yonglin, an analyst at Citic Securities Co.
Gold climbed for an eighth year in 2008, gaining
5.8 percent ?in a year when most other asset
classes saw double- digit losses,? Morgan
Stanley?s Allidina wrote. ?The U.S. dollar
should weaken as the global economy recovers.?
The metal for immediate delivery traded at
$851.35 an ounce at 2:37 p.m. in Singapore, and
has averaged $846.18 an ounce this year.
Standard Chartered said in a report e-mailed
Jan. 15 that gold may average $971 an ounce in
2009, up 11 percent from the bank?s previous
forecast. A weaker dollar, lower supply of the
metal and safe-haven buying by investors should
drive gold to more than $1,000 an ounce in the
second half of this year, according to StanChart
analysts led by Helen Henton.
Jim Rogers, the chairman of Rogers Holdings who
correctly predicted in April 2006 that gold
would reach $1,000 an ounce, said last month
that he planned to buy more of the metal, adding
that the price ?will go much higher.?
Platinum may average $875 in 2009, $1,000 in
2010, $1,050 in 2011, and $1,150 in 2012, down
as much as 42 percent from previous estimates,
according to Morgan Stanley. Palladium may
average $180 in 2009, $200 in 2010, $220 in 2011
and $240 in 2012, down as much as 39 percent
from earlier calls, it said."