Further losses were seen in gold prices overnight as the overseas trade continued Monday's selling and brought the metal to a one-month low of $813 per ounce. All but $15 of December's gains in bullion's value have now been given up, and two-thirds of that drop were recorded in yesterday's session alone. A modicum of bargain hunting averted additional price dips, however the yellow metal appears to be aiming for a retest of support under $800 in the near-term. One week ago, UBS issued profit-taking advice for gold longs as well as forecasts regarding the possibility of $800 gold in one, as well as three months.
Global economic pain remains the main feature of the flow of business news. Massive losses at Japan's Sony, Canon, and Toshiba contributed to the Nikkei's 422-point overnight wipeout. Formerly gadget-hungry consumers are focusing on the absolute necessities and are shunning new/improved versions of...everything. This includes cars, as trends reveal that drivers are hanging on to their buggies longer. Alcoa lost $1.2 billion last quarter, following a 56% drop in aluminium prices last year.
China's imports and exports fell sharply in December and threatened additional job losses in the manufacturing and export-oriented coastal areas of the country. The government is trying very hard to avoid a deepening of the slump, but may miss this year's objective of 8% growth anyway. Citi shuttered its private banking offices in China as perhaps it expects a lot fewer millionaires to be freshly minted in the country anytime soon. Germany unveiled a second, $66 billion stimulus package intended to do the same but at the end of the day it showed only that eurozone governments remain behind the curve in assessing the severity of the local and global contraction and remain woefully behind the curve in stimulus rollouts.
New York spot gold prices opened without a concrete initial direction as prices oscillated on either side of the unchanged mark, but only by about a dollar or two. This, of course, could well change as we get further into the trading day, but for the moment the metal started the day at $817.70 per ounce, marking a $2.20 loss. Participants are keeping alert as the dollar added another 0.50 to rise to 83.75 on the index, and as crude oil prices fell another 75 cents to $36.88 per barrel.
Risk aversion keeps flourishing and may receive a new impetus following Mr. Bernanke's take that the recovery in the US economy remains difficult to time. He also said that further stimuli and coordinated government responses to the crisis will be necessary, while stressing that the Fed has plenty of other ammo which could be rolled out if conditions warrant. There, don't you feel better already?
Forecasts of $30 oil have made their way into the news once again this morning. Silver lost a nickel, opening at $10.57 while platinum sank another $16 to start at $936 per ounce. Palladium dropped $3 to the $182.00 level. Automaker woes and poor commodity price prospects offered by South Africa's Investec Securities contributed to fund selling in the metals complex at a time when the rebalancing of weightings was underway already. At the Detroit auto show, Saab and Volvo continued to showcase their metal even as their US owners (GM and Ford) are likely to jettison the brands in their survival quest.
Meanwhile, investors are rowing hard against these swift currents, trying to keep their asset rafts from capsizing and hoping to make it through what is shaping up to be another very difficult year. Perennial Marketwatch curmudgeon Paul Farrell offers the following twelve tips for financial survival this year, courtesy of Forbes columnist Gary Schilling - who, by-the-way is said to have been right on target with his 2008 calls:
1. Sell home-builder stocks and bonds.
2. If you plan to sell your house, second home or investment houses anytime soon, do so yesterday. (Yes, another 20% drop is coming.)
3. Sell some housing-related stocks.
4. Sell some consumer discretionary spending companies.
5. Sell most commercial real estate.
6. Sell some commodities. (But proceed carefully: Selling some securities, or buying, or actively trading in today's volatile markets demands a level of skill sets, savvy and sophistication most investors lack.)
7. Sell emerging-market equities.
8. Sell emerging-market debt.
9. Sell stocks in general. (Shilling's forecast of a severe recession suggests that corporate profits, as defined by the Commerce Department, will fall 48% from their peak in the third quarter 2007 to the fourth quarter 2009, and drop 32% from 2008 to 2009. This forecast implies much weaker S&P 500 earnings than projected by Wall Street analysts and strategies whom he says tend to be overly optimistic, especially in recessions when analysts don't want to offend managements of the companies they follow with low numbers.)
10. Sell consumer lenders' equities.
11. Buy the dollar.
12. Buy, carefully, high-grade bonds.
Adding our own number thirteen, Please ensure that your 10% gold insurance policy remains in place. Trading the metals for profit may be a daunting task and unless you chew coffee beans for snacks, is not highly advisable.