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 currencies.
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 mineworkers.
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 out.
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 pondering:
Jan. 21 (Bloomberg) -- 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.