Tuesday, October 21, 2008

Gold lower, but steady as Credit starts to flow.

This is for Tuesday (10/21)

LBMA- $781.00 am/ $772.00 pm
goldprice.org $760.27 (15 after midnight)

For Tuesday, several items seemed to push gold lower. First, the Overnight Dollar Libor Rate declines to 1.28 Percent the largest move in five (5) weeks. Second, the Fed announced is will provide up to $540 Billion to aid Money Market Funds. Third, the Lehman Credit-Swap Auction set the payout to 91.38 cents. It was later reports at $5.6B in payouts. The late in the day there were reports that the dollar was gaining strength.

Friday, October 17, 2008

Gold Below $800

LBMA - $784.50
goldprice.org - $786.58

10:30 am Pacific Time


Unused Cash Piles Up

Yesterday NPR's Market Place reported a large pile of cash being unused at the Federal Reserves . Known as "reserve balances", this is cash parked in the Reserve by US banks. Last week they hit historic highs. After 9/11(2001) the unused cash amounted to $67 B. In the last few weeks, it has gone from $175 B. to $265 B. That B. for billioin.


Down she goes

Gold slid down across all markets to close at $804.50 an ounce on the New York Mercantile Exchange after earlier falling to $786.70

LBMA - $802.50
goldprice.org - $811.66 and going up
The mixed news helped keep gold volatile. Unemployment up. Spending down. Libor still high, but is inching down. Oil prices are plumeting as well as gasoline.

And add UBS and Credit Suisse to the bail out list.


Wednesday, October 15, 2008

Gold holds steady

Openings are:
LBMA - $848.50
goldprice.org - $837

EUBOR and LIBOR (Interbank Offer Rates) both fell for the second day in a row, but slowly.

Paulson spoke on a morning talk show which seemed to push gold lower, but now recovering. The DOW is plunging lower, but it is still early.


Monday, October 13, 2008

Markets settling on a partial day.

The London Bullion Market Association set the Gold Fix at $831.50, down $33.50 (about 4%) from the AM call. Because of the American Holiday (Columbus Day), there was mixed financial action. The stock markets were open (The Dow up $936), as well as the futures, but the bond markets were closed.

Add to this the furry of "rescue" work over the weekend, including The Euro Group, The G7, The World Monetary Fund, and, of course, The Federal Reserve. The plans varied and it is difficult to say which are having an affect on the markets. I stated this because, on Tuesday the Bond market may take back all the gains of the day, and add more volatility to the Gold contracts.

Aside from this, the first of the auctions for defunct Mortage Default Swaps happens Tuesday, or perhaps the mortages themselves (its diffcult to tell with all the noise and activity). Add also that in the morning President Bush will make some type of speech about the so-called rescue plan.

Tuesday should be quite volatile.


Saturday, October 11, 2008

Gold's volatile status

Reports from AP and MarketWatch indicate a price spread between Gold Futures($859) and the Spot Price ($900). They both state that fund managers are liquidating their positions to cover margin calls, and other needs for cash. Even so, GoldPrice.org has been marking the volatility all days, and continues to do so.

In addition, they both report the rising strenght of the dollar is having an inpact.

I should also note, as is widely reported, the Dow Jones Industrial was down $128, to $8,451.19. slipping below $8000 in interday trading.

NOTE: GE faired well appearing to be on track with earnings, but reports that its consumer finance may take as much as $6.6B in loses this year.


Thursday, October 9, 2008

The markets finally break. GOLD UP - DJI DOWN

Finally, after weeks of gold following the stock market up and down, there is a break. Finally gold goes higher as the stock market plunges. Gold today closes about $900 per ounce, and the stock market breaks below $9000 (The Dow Jones Industrial).

The break signals the true panic in the markets. As the financial markets hit bottom, they will rebound, but not before taking a few more big names with them. This bottom will mark the actual return to confidence. Expect 6-8 weeks of more down movement.

Also, it appears the late-in-the-day-jump in the price of gold is related to Citibank walking away from negociations with Wells Fargo over Wachovia.

NOTE: if GE tanks tommorrow (2008/10/10), we will see another groundhog day. This means gold will be up and the market down. If GE hits the mark, there will be buying. GE reports before the market opens.

Wednesday, October 8, 2008

Gold bouncing up

Yesterday gold bounced up $30. Today it is swing up again. At one point up $50.

Monday, October 6, 2008

Bernanke's Gold (or Folly?)

In the year 2000, Mr. Ben S(halom) Bernanke published his Essays on the Great Depression (ISBN 0-691-11820-5). In this book, he and others discuss "The Great Depression" in macroeconomic terms. One of the premises layed out is that "the earliness with which a country left the gold standard reliably predicted its economic recovery". In fact my reason for writing this blog, and now reading the aforementioned book, is that last month (September, 2008) Mr. Bernanke (Chairman of the Federal Reserve System) and Mr. Henry M. Paulson (Secretary of the Treasury) both informed Congress in a closed sesssion (essentiall a meeting without record) that a $700 Billion bailout was needed of the financial sector. After much consternation, Congress approved a bill as such.

I have then been wonder what they said to Congress. The political noise was such that we should expect the end of the American Financial System as we know it. It appears this will be the case either way.

In any case, what is Mr. Burnanke thinking. It appears from reading the preface of book that they consider a reliance on gold as major factor in slowing the "aggregate growth". In other words, gold is a slow lubricator of economic transfer. (Duh.) Gold is heavy, difficult to move, difficult to replicate and is easily tested. At this point in time, gold has two primary uses - jewlery and electronics.

Put another way, if people have more confidence in gold, which happens during a panic, then the U. S. Dollar and any assoicated credit instruments have less confidence - and in the worst case scenario they are worth nothing. Therefore Bernanke's job is to assure the stability of the financial market and make paper worth something. In essence, paper is Bernanke's Gold.