Stocks jump up & down on .25% Fed cut ... dollar falls, $114 oil, $875 gold
By David Bradshaw ~ links ~ wisdom
Editor, Real Money Perspectives ~ Daily email
Apr 30, 2008 ~ *news* ~ features ~ ((Podcast))
* Wednesday gold prices rose above $875/oz. after the Fed cut rates .25% to help stimulate the economy. Gold closed in NY up $5.90 to $876.60/oz., silver rose $.32 to $16.84/oz.
* For the month gold prices gave back 4.5%, slipping from $915/oz. to $876/oz. while silver retreated 6%, falling from $17.88/oz. to $16.84/oz.
* John Reade at UBS noted substantial selling from ETFs over the past week has driven the gold downturn. The analyst has cut his one-month forecast to $850/oz from $900/oz," reports Platts.
* "The Federal Reserve cut Fed Fund rates by .25% to 2.00% as the downside market risks outweighed their inflation concerns. The Fed appears to be concerned about housing and further sub-prime problems so I think they will keep rates low until those markets improve," said Swiss America CEO Craig R. Smith.
* "The Fed opened up the old playbook and cut rates aggressively when subprime loans blew up. This cemented higher inflation into place, crushed the dollar, pushed commodity prices up sharply. The answer is for the Fed to lift rates somewhere north of 5%. Tax-rate reductions and interest-rate hikes cured the world of its ills in the early 1980s. They can do so again," reports WSJ.
* "The bruised economy limped through the first quarter of this year at only 0.6 percent as housing and credit problems forced people and businesses alike to hunker down," reports AP.
* Conflict Securities Advisory Group and Overlap Inc. today officially launched terrorfreecalculator.com, a new website dedicated to equipping investors to determine whether their mutual funds invest in companies that do business in countries that sponsor terror, reports WND.
* "Oil prices turned lower Wednesday after the government said supplies of crude increased more than expected. Crude fell $1.57 to $114.06 a barrel," reports CNN.
* "U.S. stock indexes pulled strongly higher Wednesday on first-quarter economic growth numbers and good results from Proctor & Gamble Co. and General Motors Corp.," reports MW.
"The Consumer Confidence Index, which had declined sharply in March, fell to a 5-year low in April. The Index now stands at 62.3 (1985=100), down from 65.9 in March. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households," reports CBC.
"Oil prices hit an all-time high near $120 a barrel Monday after a weekend refinery strike closed a pipeline system that delivers a third of Britain's North Sea oil to refineries in the U.K.," reports AP.
The U.S. dollar firmed on Tuesday as traders mulled over buck's prospects following the FOMC meeting and statement on Wednesday.
Ben Bernanke has a rare opportunity to remind speculators that the fight against inflation hasn't been abandoned. "The Fed has a chance to surprise the markets," said James Hamilton, an economics professor, adding that doing so would be "important for the Fed's credibility," reports Fortune.
US households will start receiving more than $110 billion in emergency tax rebates, approved by Congress in an attempt to revive consumer spending.
Swiss America CEO Craig Smith told FOX's Neil Cavuto, "This is election year feel-good legislation. A recent survey stated only 17% of the public is planning to spend their rebate, while 29% plan to save it and 54% plan to pay down debt." Watch it
High prices for food and fuel, weak income growth and falling home values pulled down consumer sentiment in April, according to a government report released Friday.
In the short term, "gold remains vulnerable to a test back towards the April 1 low of $872 as speculators continue to take profit in order to increase their cash liquidity," wrote James Moore, an analyst at TheBullionDesk.com.
"This pullback in gold will produce the same result as the previous five major corrections since 2001; a great buying opportunity. If you haven't participated in the greatest gold bull ever, it is not too late," said Swiss America CEO Craig R. Smith.
"Demand for precious metals in self-directed U.S. Individual Retirement Accounts is growing for many of the reasons other investors have been drawn to the metal - a hedge against inflation, dollar weakness and credit-market worries," reports DowJones.
"Sales of new homes plunged in March to the lowest level in 16 1/2 years as housing slumped at the start of the spring sales season. The median price of a new home in March, fell by 8.5%, the largest amount in nearly four decades," reports AP.
$200 oil, $2,000 gold ahead
"Surging crude prices, which could surpass $200 a barrel in four years on tight supplies, could push gasoline prices to as high as $7 a gallon, CIBC World Markets analysts said Thursday," reports MW.
"Crude-oil prices rose to a new high of $119.86 a barrel this week as lingering worries over oil-supply disruptions and the dollar's new low against the euro provided support for prices," reports MW.
* U.S. gasoline prices topped out at $3.58 per gallon for self-serve regular on Friday, according to AAA -- "the highest average price the national auto club has ever recorded. A year ago it was $2.85," reports CNN.
Gas prices are actually cheaper today than they were forty years ago in relation to silver prices. A gallon of gas cost three 90% silver dimes back in 1964, today it costs just two 90% silver dimes, which equates to about $3.40 a gallon with silver prices near $17/oz.
"By owning gold instead of US dollars, you can today purchase basically the same amount of crude oil as at any other time since 1945," reports James Turk.
Recently many analysts have jumped onto the $1,000/oz. plus gold bandwagon -- most of whom were not considered "gold bugs" in the past, like Citibank and JP Morgan & Co. We've collected over fifty prominent analysts, authors and gold expert statements about why their combined gold price expectation is $2,200/oz.
"The price of gold is up 35% in the past 12 months. The question is whether they will keep rising. Odds are, if inflation moves higher, they will too. Is it too late to get in? "I think we're in a long-term bull market for commodities," says Matthew Tuttle, a financial planner in Stamford, Conn to WSJ.
"Don’t sell your investments in commodities yet. Billionaire George Soros says the boom in commodities is still in a 'growth phase.' In fact, prices for commodities like oil, wheat and gold continue to rise to new records, defying the paradigm that commodity prices should fall as the U.S. economy slows," reports MoneyNews.
* "Scholars speculate that the Wizard of Oz was at once a children’s fantasy and a timely political allegory, and that the silver slippers, yellow brick road, and Emerald City were intended as symbols for the gold and silver standards and paper money," reports Columbia. [Ed. Note: Watch: Hugo Salinas Price explain "Dorothy's Silver Slippers" from recent GATA conference].
"Farmers and food executives appealed fruitlessly to federal officials yesterday for regulatory steps to limit speculative buying that is helping to drive food prices higher. Meanwhile, some Americans are stocking up on staples in anticipation of high prices and shortages spreading from overseas," reports W.Times.
"The euro roared to another record high Tuesday, briefly crossing $1.60 in late afternoon trading in Europe after a pair of European Central Bank governors said high inflation may cause the bank to raise interest rates," reports AP.
"While the dollar continues to weaken, lately gold has stopped responding to this weakness. If the April 30th FED statement suggests that this cut is the last one for a while the markets may see it as dollar supportive," reports FXStreet.
"Global warming is not really about atonement for mankind's sins against Mother Earth. ...it's about money and power. It's just the latest and most sophisticated effort by elitists to empower themselves at the expense of the people and the rule of law by redistributing wealth as they see fit," reports WND.
"A $35 price drop in gold last Friday coupled with the secretive launch of a brand new, super fast, global trading platform for gold; Globex. What a coincidence! I remember when JP Morgan closed its trading desk in NY and opened in London so it could exercise its 'gold control' on both sides of the Atlantic. The “Globex” appears to be an extension of the same strategy," reports MarketOracle.
"The fight over gold and silver as media of exchange is about more than mere money...it is a fight with only two possible outcomes: either control of their own lives by the people themselves, or control of the people and their lives by political and economic elitists," said Edwin Vieira Jr. at the recent 'GATA Goes to Washington' conference.
"With gold now trading closer to $900, this is a great time to load up on more exposure to bullion, which is only taking a breather before heading to $1,500 an ounce and higher," reports MSN.
"I see the greatest value in the gold market today in early American $20 gold coins and U.S. Gold Commemorative coins. This area of the gold market has incredible strength and is overdue for a big increase," reports Craig R. Smith, Swiss America CEO.
"World authorities may take action to halt the collapse of the dollar and undercut commodity speculation by hedge funds. Last week's accord by the G7 powers described "sharp fluctuations in major currencies" as a threat to economic and financial stability," reports London Telegraph.
"Any additional interest rate cuts by the Federal Reserve would be counterproductive, spurring commodity price inflation without helping the economy, according to Martin Feldstein, former chairman of President Reagan’s Council of Economic Advisors," reports Moneynews.
"Higher costs for food and energy pushed the U.S. producer price index to surge 1.1% in March, the Labor Department reported last Tuesday, in a result that far exceeded analysts' expectations," reports MW.
"The overall environment remains very positive for gold because the dollar is so weak, oil prices buoyant and there is concern about financial markets," said Suki Cooper, analyst at Barclays Capital reports Reuters.
"U.S. food prices rose 4% in 2007, compared with an average 2.5% annual rise for the last 15 years, according to the U.S. Department of Agriculture. And the agency says 2008 could be worse, with a rise of as much as 4.5 percent," reports AP.
"After nearly two decades of low food inflation, prices for staples such as bread, milk, eggs, and flour are rising sharply, surging in the past year at double-digit rates, according to the Labor Department. Milk prices, for example, increased 26 percent over the year. Egg prices jumped 40 percent," reports TheGlobe.
U.S. consumer confidence fell to its lowest in more than a quarter century in April on heightened worries about the economy, jobs and rising inflation.
"The IMF has thrown a measure of uncertainty back into the gold market. Faced with a budget shortfall of about $140 million for the fiscal year ending this month, the IMF plans to sell 12% of its gold reserves, or about 403 tons, to fill in its budget deficit and reform its bloated structure," reports Moneynews.
"The price of gold can very well reach $1,100 an ounce this year or early 2009, the London-based consultancy group GFMS Ltd. said Wednesday in its latest survey of the gold market," reports MW.
"Wall Street analysts are "going to lead you off the cliff," said Richard Weiss, 47, who oversees $60 billion as CEO at City National Bank in Beverly Hills, California. First-quarter earnings will be "a big wake-up call for some analysts who are sitting on big double-digit numbers," reports Bloomberg.
"Iranian President Ahmadinejad is urging OPEC members to form a joint bank and stop pricing oil trades in U.S. dollars," reports AP.
"The dollar is taking a pounding. With the US sinking deeper into recession, the greenback recently hit an all-time low against the euro and a 12-year low against the yen. If the G7's upcoming dollar dialogue is conducted in whispered tones, another much bigger question won't be discussed at all - the dollar's status as the world's reserve currency," reports London Telegraph.
"Yes, we bailed out the economy in general," said Fed Chairman Ben Bernanke in Senate testimony last Thursday, referring the the Fed's role in responding to the Bear Sterns collapse.
"Sadly, no one bothered to ask Bernanke if what he did was legal, how many votes were required, who did vote, and why the Fed could not see this coming even though many predicted this would happen," reports gea.
"The Fed has taken onto its balance sheet some $30 billion in smelly collateral from Bear Stearns and billions more from other financial institutions. That is just the beginning. Somehow, the whole shebang of mistakes, misjudgments, greed-stoked miscalculations will end on the shoulders of the US Treasury, on the backs of US citizens and dollar holders all over the world," reports Daily Reckoning.
Swiss America CEO Craig R. Smith discussed getting rid of the Federal Reserve on the Fox News Channel's "Your World" with Neil Cavuto on Wednesday. Watch it.
"The Federal Reserve has proven over and over that they are against free markets. Now that the Treasury wants to give more power to the Fed I think it's time to reexamine whether the Fed is a benefit to the economy or not. We shouldn't have 'Big Daddy Fed' wiping Wall Street's nose if mistakes are made," said Mr. Smith.
"Federal Reserve Chairman Ben Bernanke warned the economy may shrink over the first half of this year and that "a recession is possible." Yet, he didn't offer any assurances of further interest rate cuts," reports AP.
Congressman Ron Paul grilled Ben Bernanke on Capital Hill on Wednesday regarding the impact interest rate cuts have in stoking inflation and weakening the buck. Watch it.
"Technically gold is in very, very oversold territory now, the weekly moving averages show support in the $880.00 area. For those wanting to buy low it should be bought this week," said Jim Carrillo, a Broker at Swiss America.
"During the last major gold price correction in June 2006 gold stepped back 22% from its May peak of $725/oz. down to $550/oz., then prices proceeded to nearly double in less than two years. My advice remains the same as it was in 2006, R e l a x!" said Swiss America CEO Craig R. Smith.
"There is still considerable upside left to gold, although not without a short-term correction. Gold may someday reach a peak of $2,000 an ounce. For most investors, gold should represent a 5 to 10 percent asset allocation," said Thomas Winmill, manager of the Midas Fund to MW.
Cut 2008 taxes with a Gold IRA
Gold prices ended the first quarter of 2008 with a 9% gain as investors sought safe havens from a declining dollar, rising inflation, the housing slump and credit crisis.
"The Treasury Department proposed on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system," reports NYTimes.
"Treasury Secretary Henry Paulson defended his blueprint to overhaul the nation's financial regulatory structure Monday, saying that initial reviews that the plan amounted to less oversight of Wall Street were wrong," reports MW.
"Central banks will resort to full-throttle reflation, setting off a fresh boom in shares and gold, said Bernard Connolly at Banque AIG, who foresaw this crisis with uncanny accuracy. In the end, the whole industrial world will stoke a fresh credit bubble to put off the day of reckoning, for another cycle," reports London Tepegraph.
"In the past two weeks, the Federal Reserve has redefined its role to also become protector and overseer of Wall Street, eliminating a key form of self-regulation for investment banks," reports WashPost.
"The economy nearly sputtered out at the end of the year and is probably faring even worse now amid continuing housing, credit and financial crises. U.S. gross domestic product increased at a feeble 0.6 percent annual rate in the fourth quarter," reports AP.
"Sales of new homes fell in February for the fourth straight month, pushing activity down to a 13-year low. While the rate of decline has slowed, the worst slump in more than two decades has not run its course, analysts told AP.
"U.S. consumer confidence dropped to the lowest level since Richard Nixon was in the White House last month. The index fell to 64.5, a five-year low, from a revised 76.4 in February," reports Bloomberg.
"Gold will likely resume its upward march sooner than expected and we will likely see gold back near (nominal) record highs above $1,030 before the end of April," reports MarketOracle.
"This was a healthy correction and a rare opportunity for wise investors to add gold to their portfolio. Value investors are buying gold to protect against future equity losses amid the ever-widening credit crisis on Wall Street," said Swiss America CEO Craig R. Smith
"The current environment for gold couldn't be better. You have the Federal Reserve slashing rates aggressively and leaning on depression era loopholes in order to stave off a financial crisis, which it caused by slashing rates and expanding credit too aggressively in the first place," reports DailyReckoning.
"The 200-year commodity cycle, in which bull market upmoves have averaged between 17-22 years, is currently only seven years old. This bull market coincides with the fundamentals, reinforcing that commodities prices still have years to run," reports AdenForecast
"In the coming weeks and months, negative dollar sentiment will remain a key driving force behind gold's bull trend, as further rate cuts by the Fed will drive investors to stronger yielding assets," said James Moore, analyst at TheBullionDesk.com to Reuters.
"For ethically minded gold investors: Buy gold coins minted perhaps 50 or more years ago. The metal is just as valuable as any gold mined today, he says, and the premium paid for an aged coin can be recouped (at least in large measure) from another buyer down the line," Peter Schiff, CEO of Euro Pacific Capital told CSM.
"Experts also think that the recent gold price dip could have been triggered by buyer exhaustion. Many say they will not sell their gold holdings and will look into buying again, since the fundamental underpinnings for gold remain unchanged. They're urging investors to take the time to understand the gold market, before plunging in," reports CCTV.
"Financial pain is now unacceptable. Those in trouble demand to be rescued, and the government seems to agree that the "creative destruction" component of capitalism must not be allowed to do its work," reports MSN.
"After gold hit $1,000 for the first time ever, some analysts began warning of a correction. Still, gold watchers predict the metal will continue its upward climb amid fears that the U.S. is sliding toward or already in a recession, record-high crude prices and a weak dollar," reports AP.
"The U.S. Dollar Index, down 5.9 percent this year, rose 0.8 percent, the biggest gain in almost six weeks last week. Inflation concerns had boosted demand for commodities, sending the UBS Bloomberg index up 17% this year before today," reports Bloomberg.
"It is unsettling to watch the world's reserve currency disintegrate. Commodities from gold to oil and wheat are taking on the role of safe-haven 'currencies'. The monetary order is becoming unhinged," reports London Telegraph.
"The severity of the moves in a range of markets suggested that funds were closing their most profitable trades in a scramble to raise liquidity," reports London Telegraph.
"It looks like investors are taking some money out after this great rally. The dollar didn't get crushed here. People were short dollars and long gold heading into this Fed meeting," reports Bloomberg
"We remain bullish towards gold and anticipate the metal could test as high as $1,150 this quarter given the likelihood of further rate cuts this weeks as investors seek to offset rising safe-haven and inflationary concerns," said TheBullionDesk.Com analyst James Moore to CNN.
"Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed to be sold to J.P. Morgan Chase & Co. for the fire-sale price of $2 a share in stock, or about $236 million after prodding by the federal government," reports WSJ.
"Value investors are buying gold to offset equity losses amid a bottomless confidence and credit crisis on Wall Street," said Swiss America CEO Craig R. Smith.
"A world addicted to easy credit must go cold turkey. Debt junkies, like heroin addicts, demand ever bigger fixes.The collapse of once-mighty Bear Stearns is another reminder that the unwinding of the Great Debt Delusion still has a long way to go and many more victims to claim," reports London Telegraph.
"Gold needs no 'ratings agency' to clarify its value. Gold enforces discipline in financial markets. By attracting increasing sums of investment from other asset classes, such as asset-backed securities and other credit- supported issues, it transmits the absence of trust and the decline of those markets to its membership, causing a reordering of that universe to reflect an improved allocation of risk to such entities," reports SeekingAlpha.
"The reality is that Bear Stearns was carrying more than $28 billion in ‘level 3’ assets on its books at the end of fiscal 2007, versus a net equity position of only $11.7 billion. The company’s balance sheet was highly leveraged to many untradable and potentially worthless assets. When investor and lender confidence finally evaporated, it was this balance sheet that forced Bear to call the New York Fed," reports Fallstreet.com.
"With gold breaking the barrier of $1,000 an ounce and surging over 40% over the last year, a growing number of investors that joined the fray are finally acknowledging that gold bugs' plans for apocalypse weren't so kooky after all," reports MW.
"Gold remains far below levels that are adjusted for inflation, with several analysts in recent months saying this figure would be closer to $2,400 an ounce. 'The thinking is that the Fed is going to jettison both the dollar and its concern about keeping inflation contained," said Edward Meir, an analyst at MF Global reports WSJ.
"Commodities may have 'explosive rallies' in the next couple of years, with crude oil rising to $175 a barrel, according to Goldman Sachs Group Inc.," reports Bloomberg.
"Trying to calm jitters about the economy, President Bush conceded that the country 'obviously is going through a tough time... these are uncertain times' but expressed confidence about a rebound in his speech on Friday," reports AP.
"People have realized that the central banks are going to have to ignore the inflationary risks to rescue the banking system," said Sean Corrigan, chief investment strategist at Diapason Commodities to Reuters.
"Gold is the only commodity over history that has served as a reliable store of wealth. I expect the Fed's monetary policy to send the U.S economy from a inflationary-recession to a hyper-inflationary depression over the next few years," said John Williams of Shadowstats.com to CNN(video).
"Turmoil in global credit markets may lead to the collapse of a North American bank, pushing bullion prices up to $2,000 an ounce as investors seek a haven in gold," said Eric Sprott, founder and chairman of Sprott Asset Management, which manages about $7 billion to Bloomberg.
"U.S. housing prices have further to fall, housing prices have fallen a third as far as they're going to go," said Richard Syron, chief executive of mortgage-finance giant Freddie Mac, reports MW.
"Americans' percentage of equity in their homes fell below 50 percent for the first time on record since 1945, the Federal Reserve said Thursday. 13.8 million households, or 15.9 percent, will be "upside down" if prices fall 20 percent from their peak," reports FOX.
"The Federal Reserve is ramping up efforts to provide more relief to cash-strapped financial institutions, a coordinated action with other central banks aimed at easing a global credit crises that threatens to push the U.S. economy into its first recession since 2001," reports AP.
"What is occurring is THE MONETIZATION OF BANKRUPTCY. The predictable result of monetizing bankruptcy is a significant increase in inflation and a sharply lower dollar. The result of a sharply lower dollar is sharply higher gold regardless of the dress up process being applied to the US dollar and gold today," reports JSMineset.
"The Fed is desperately pulling on levers. Each day brings more evidence of a system-wide credit breakdown. The Fed intends to stop the meltdown in the only way it can – by pulling on the lever of inflation; that is, by introducing more ‘liquidity’ into the marketplace," reports Daily Reckoning.
"Oil prices hit a record above $109 per barrel as dollar weakness triggered buying, extending a rally which has seen the price of crude surge around 15 pct in just one month," reports Forbes.
Goldman Sachs says $200 a barrel could be a reality in the not-too-distant future. "As the lack of supply growth and price-insulated non-OECD demand suggest a future rebound in U.S. gross domestic product growth or a major oil supply disruption could lead to $150-$200 oil prices," reports MW.
"As markets are now even more convinced that the US economy is in a recession and tensions in the financial system prevail, as hedge funds failed on margin calls, position liquidation might not only weigh on stock markets but also on gold," said Peter Fertig, research analyst at Dresdner Kleinwort to TF.
"Rebalancing your portfolio with hard assets can help insure the return OF your money and help you stop worrying about the return ON your money," reports Craig R. Smith.
"If history is a reliable guide, the recession of 2008 is now unavoidable. And if the good times really have ended, they were never that good to begin with. Most American households are still not earning as much annually as they did in 1999, once inflation is taken into account," reports NY Times.
"In a bull market, strength begets strength and that seems to the driving force behind gold's repeated attempt to breach the $1,000 level. With all fundamentals intact and bullish momentum ticking consistently, gold should continue to gain in the coming days," said Pradeep Unni, analyst at Vision Commodities to Reuters.
"The great gold bull has broken free of its chains. A strange and unprecedented union of forces has emerged. The US public is unaware of the great phenomenon that is playing out before their eyes. Somewhere ahead, the US public will enter the bull market," reports Richard Russell of DowTheoryLetters.
"If the reality of a collapsing dollar and foreign exchange turmoil starts to bite consumers where they keep their pocketbooks... the affects of currency misalignment could quickly move from the realm of dry treatises to the hyperactive world of live, televised political debate. It's time the candidates devote less time on the minutiae of configuring the next economic stimulus package... They should be thinking about how they will confront the imminent global currency crisis. It's the dollar, stupid." reports WSJ.
"Long-term dollar weakness is putting U.S. security at risk," Swiss America CEO told national radio talk show host Jerry Doyle on Wednesday. "Yes, military warfare leads to economic warfare," said Doyle. With regard to the trillions of dollars being held by China and Mideast UAE funds, "We are paying for the rope we may hang on," said Mr. Smith. Both agreed owning gold today is an important hedge against further dollar declines and offers excellent growth potential.
"While the debate continues regarding the so-called decoupling of the rest of the world's economy from the U.S., commodity prices appear to have left the argument behind. Base metals, precious metals, grains, oil and even orange juice prices are soaring to record highs, despite a steady drumroll of grim economic news emanating from the U.S.," reports FinPost.
"Crude oil may rise to $120 a barrel within six months due to the dollar weakness and global political tensions, the chief executive officer of Abu Dhabi National Energy Co. said to Bloomberg.
"I think the rare coin market could outperform the bullion market in the years to come and I tried to make an argument for this in my book. I prefer physical gold over ETFs and my three favorite coins are Buffalo one-ounce gold coins, pre-1933 Liberty gold coins, and Morgan silver dollars," says Shayne McGuire, author of Buy Gold Now.