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10.21.14 - Gold At Fresh One-Month High; China GDP Comes Up Short

Gold prices hit six-week high on concerns over a global economic slowdown. U.S. stocks jump higher in hopes of more ECB stimulus. Gold last traded at $1,251 an ounce. Silver at $17.54 an ounce.

The price of gold has hit a new 6-week high today thanks in part to disappointing news on China's economic front and continued weakness in the US dollar.

China's economy has clocked its worst quarter in more than five years, raising concerns over Beijing's ability to meet its own annual growth target.

GDP expanded by 7.3% in the third quarter versus the same period last year, the weakest performance since the global financial crisis.

With the Chinese economy showing slower growth, experts are now sounding the alarm over ballooning Chinese corporate debt. A few Chinese companies have defaulted on their debt in recent months, a previously unheard of phenomenon, and no government bailouts are in sight.

Worries have also escalated over the use of unconventional financing. Some firms, for example, have been using copper as collateral to secure loans. Experts are concerned that some companies are even using the same copper stockpiles to take out multiple loans, borrowing far more than they can repay. This amounts to a Ponzi scheme; a ticking time bomb in the Chinese economy that would result in aftershocks around the globe.

In Europe, the European Central Bank is reportedly planning to buy corporate bonds in an effort to battle against a slowing economy. Not surprisingly, the euro fell on this news, meaning gold is rising in both dollar and euro terms.

Gold was also bolstered by buying interest in the physical markets from Asia - the top-consuming region.

India, the second-biggest gold buyer, celebrates the festivals of Dhanteras on Tuesday and Diwali later in the week. Both are considered auspicious for buying gold, which could provide a boost to retail sales and imports.

News that India's central bank will not tighten gold import rules further could also lend some support.

Finally, we have yet another sign of a top in the US stock market: merger and acquisition deals are currently failing at their highest rate since 2008, the onset of the financial crisis.

The value of deals that fail to complete has reached its highest level in six years. A total of $573B worth of deals have been withdrawn, setting this year up to surpass the $640B in deals that went uncompleted in 2008.

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10.20.14 - Underlying Economic Problems Persist

Gold prices end higher, boosted by safe-have demand and bargain hunting. U.S. stocks higher, led by gains in energy and materials sectors. Gold last traded at $1,244 an ounce. Silver at $17.35 an ounce.

The price of gold has resumed its recent rally today largely due to renewed weakness in European stocks overnight.

That weakness may be due to a variety of persistent factors simmering below the surface around the world.

No region is immune.

In Europe itself, worries of slow economic growth persist with continued poor performance in the German economy and fresh concerns about the Greek economy teetering once again despite massive bailouts.

But traders in Europe and America may be even more worried about China soon.

China may ignite panic over the state of the global economy when it reports its third quarter gross domestic product (GDP) on Tuesday, which could confirm a marked slowdown in the world's main growth engine.

Meanwhile, here in the US, despite the declining unemployment rate, more and more evidence points to a weak, overall jobs market in the US. The unemployment rate is simply masking overall economic weakness.

US policy makers are missing a key question as they assess the health of the labor market: if those who are employed are either overqualified for their job or would like to work more hours.

A report earlier this year from the Federal Reserve Bank of New York found that 44 percent of working recent college graduates were underemployed, defined as holding a job that doesn't usually require a bachelor's degree. That was up from 34 percent in 2001 and approaching levels last seen during the 1990-91 recession, when concern about underemployment heightened, the central bank said. Meanwhile, the share of people unemployed for 27 weeks or more remains higher than at any point prior to the recession that began in December 2007.

In her latest policy speech, on Friday, Fed Chair Janet Yellen touched on a theme we've been hearing from the Obama administration for some time now: income inequality. Yellen said this problem is of great concern to her. Yellen avoided talking about current economic conditions or monetary policy in her speech, but the theme of income inequality is one the political Left claim is a threat to American prosperity. Yellen indicated that the problem has grown progressively worse over the past few decades.

Of course, she offered no solutions to this problem.

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10.17.14 - Gold Set for Another Positive Week

Gold ends lower, but closed week higher on global growth concerns. U.S. stocks finish higher, snapping six-day losing streak. Gold last traded at $1,239 an ounce. Silver at $17.33 an ounce.

Gold is poised for a second straight week of gains as persistent fears over the health of the world economy have taken a toll on global equities and the US dollar, prompting safe haven seekers to flock to precious metals.

Weak economic data from China and Europe have, in particular, spooked world markets.

Dollar weakness has also supported gold prices as the sluggish economic data prompted speculation that the U.S. Federal Reserve could postpone any increase in interest rates.

The US Dow Jones Industrial Average is now in its longest losing streak in 14 months. Tokyo's Nikkei is now at a new four-and-a-half-month low — posting its worst week in 6 months.

The financial world--at least in the US--is back in its Fed watching mode, a strategy that has proven fruitless in recent weeks and months.

Many on Wall Street are looking for another handout from the Fed, analyzing every word that Fed Chair Janet Yellen utters in hopes the Fed will step in and revisit its quantitative easing program if markets fall too far, too fast.

St. Louis Fed President James Bullard gave Wall Street some of what they wanted, when he said the Fed should consider continuing to buy bonds beyond the scheduled end of quantitative easing later this month, due to market turmoil.

Bullard's comments come two days after those of San Francisco Fed President John Williams (who, like Bullard, is a non-voting member of the Fed Open Market Committee). Williams told Reuters "If we get a sustained, disinflationary forecast… then I think moving back to additional asset purchases in a situation like that should be something we seriously consider."

Yellen speaks on economic opportunity at the Boston Fed's 58th Economic Conference today.

Boston Fed President Eric Rosengren seemed to dampen hopes for immediate Fed stimulus when he said the Fed needs to fully process the causes of financial markets turmoil before making a judgement on quantitative easing. The Fed next meets October 28.

It's amazing that Wall Street is so dependent on unprecedented, loose monetary policies to pump up stocks when those policies have undermined the value of the dollar and led to the current turmoil.

Clearly, Wall Street has run out of answers.

That's why so many investors around the world are once again turning to gold. Gold is an asset in its own right. It has stood solid as a store of value and trusted medium of exchange for 5,000 years. And it's never dependent on anyone's promises.

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10.16.14 - Has The Bear Market in Stocks Begun?

Gold prices end slightly lower, but hold near 5-week high on upbeat economic reports. U.S. stocks end mostly flat after dovish remarks from James Bullard, president of the Federal Reserve Bank of St. Louis. Gold last traded at $1,241 an ounce. Silver at $17.44 an ounce.

World stock markets have been reeling for a week prompting many observers to predict that the downward momentum will accelerate, soon bringing the major indices into bear market territory.

A bear market is defined as a drop of 20% or more. A "correction" is defined as a drop of 10% or more. The Dow, S&P 500 and NASDAQ are all nearing the correction level and on pace to keep going. No bull market lasts forever. The last bear market in stocks saw the Dow drop 53%.

In recent times, major sell-offs have been about seven years apart. There was a major sell-off in stocks in 2001 and again in 2008. Under this timing scenario, the next one is due around 2015, which is less than a quarter away.

There are fears over the spread of Ebola, deflation, a slowdown in Europe, a fall in oil prices, and weak volumes which all contributed to the negative sentiment in stocks with investors shunning riskier assets. In Europe, fears over Greece's economy have also resurfaced on reports that Athens may want to drop out of its bailout program.

Up until now, stocks in Japan and China had escaped the carnage, but overnight they joined in.

Mounting anxiety over global growth and the spread of Ebola dragged Asian bourses lower.

Japan's Nikkei index closed at a fresh four-and-a-half-month low. Shanghai closed down 0.7%. Hong Kong stocks remained downbeat overnight, tanking 0.6 percent as the city's pro-democracy protests continued into the third week amid renewed clashes between police forces and protesters.

Here in the US, weaker retail sales, a decline in producer prices and a surprising drop in the Empire State index all added to the wave of worry pushing stocks lower.

New York manufacturers are growing at the slowest pace in six months as new orders shrink and shipments barely rise: The Federal Reserve Bank of New York said yesterday that its Empire State Manufacturing index dropped to 6.2 in October, down sharply from September. October's reading is the lowest since April.

Influential investor Dennis Gartman told CNBC that the bear market has begun and warned there was going to be "more than a mere 7 to 10 percent correction" in the stock markets. " I don't like to think about it – but this might be the very beginnings of a bear market that could last some period of time," he warned.

Traders will be watching today's economic reports for clues about the future strength of the US economy. Today's reports include weekly jobless claims, industrial production, the Philadelphia Federal Reserve survey and the National Association of Home Builders sentiment survey.

In addition, there will be a full slate of earnings reports turned in over the course of the day.

Hedge funds are on course for their worst year since 2011, as several of their biggest and most popular trades turned sour and some managers were forced to cut their losses.

Wednesday's new and sudden fall in US Treasury yields numerous wrong-footed funds that had positioned themselves for rising interest rates and an improving global economy.

Gold has retained sharp gains over the past week with investors seeking safety amid increasing concerns over a slump in the global economy and the numerous other factors negatively impacting stocks.

In other words, gold is shining now, demonstrating its vital role as a safe haven during times of turmoil and its ability to perform as a key portfolio diversifier. While world stock markets are falling precipitously, gold is more than holding its own--it's rising.

That's why gold belongs in every portfolio.

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