Investing

Gold at $2500 per ounce looks more likely than ever
June 2, 2010 by LJ Miehe

Dan Burrow wrote a very simple and concise article laying out the case for a doubling of the price of gold from is current price that is hovering around $1,220.00 per ounce. Focusing on the driving factors like money supply growth and inflation expectations are based in solid logic for this move. Geo-political risk is another factor that was not mentioned.

With the tensions in Korean, Israel and Europe, those situations drive fear higher. When fear and uncertainty rises, people seek safer havens for their wealth and gold has been the de-facto standard for thousands of years for just that. Another point that has not been getting as much press but is still very relevant is declining mine productions around the world. Most of the large deposits are giving diminishing returns and are require you to dig deeper and deeper into the earth. Bottom-line is that it is a safe bet that gold will drive higher from here.

Daily Finance – David Rosenberg, chief economist and strategist at Canada’s Gluskin Sheff, tends to be pretty bearish, but he’s also about as dispassionate and data-driven a guy as you can find. In other words, he’s hardly some kooky gold bug. And if past relationships among data sets hold up, gold fever is just getting started, Rosenberg says.

“There is no doubt that when benchmarked against the CPI, money supply and GDP, gold can easily double from here,” Rosenberg told clients in a Tuesday report. “Demand is always difficult to forecast, especially for jewelry, but we do know that central banks have very deep pockets and bought more gold last year (425 tons) than at any other time since 1964.”

Which brings us to the issue of stagnant supply, and that too favors a sustained bull market in gold, Rosenberg says. Global mined production of the ductile metal hasn’t increased in a decade — and has actually declined outright in five of the past eight years. Furthermore, almost all the gold that’s easy to dig up — and therefore cheaper to get at — has been unearthed. Gold companies in South Africa have to drill as much as 2.3 miles to get to new deposits. Meanwhile, all Federal Reserve Chairman Ben Bernanke has to do to create currency “is press a button,” Rosenberg says.

Financial sector claws back after early losses
3:12p ET May 19, 2010 (MarketWatch)

BOSTON (MarketWatch) — U.S. financial stocks were on a wild ride Wednesday as the sector opened the session higher before following the Dow Jones Industrial Average deep into the red, only to recover in afternoon trading.

Investors remained focused on the headlines coming out of Europe, including speculation the European Central Bank may step in to stem the euro’s freefall.

The Financial Select Sector SPDR Fund was fractionally positive at last check after dropping about 3% on Tuesday as Germany’s ban on some short selling unnerved markets.

Stocks seemed to get a boost Wednesday afternoon following the release of the minutes of the latest meeting of the Federal Reserve Open Market Committee. Most Fed officials were against a plan to begin sales of mortgage-backed securities relatively soon. The Fed has purchased more than $1 trillion in mortgage-backed securities in an effort to keep mortgage rates low and stimulate a weak housing market. read more

Gross Domestic Product (GDP) May 2010

April adjustments to the first-quarter gross domestic product (GDP) came in lower than expected at 3.2%; economists forecasted an adjustment to 3.4%. This means that the economy grew slower than originally thought for the first quarter of 2010. Despite reporting a higher-than-forecasted number. However, 2009 4th quarter was at 5.6% growth, which means the U.S. economy has been able to put together back to back quarters of excellent economic growth.

FDIC proposes new rules on asset-backed securities

By MARCY GORDON and ALAN ZIBEL (AP)

WASHINGTON — Federal banking regulators on Tuesday proposed stricter rules for banks that create asset-backed securities, the bundles of loans that helped spark the market collapse in 2008 and the near-meltdown of the financial system.

The securities, which may contain mortgage, credit card or auto loans, would have to meet the Federal Deposit Insurance Corp.’s requirements so the government wouldn’t seize them if the bank failed.

Banks would be required in most cases to hold at least 5 percent of the securities on their own books to qualify for a guarantee against seizure. The idea is that banks with such exposure to risk would be more careful about properly screening borrowers.

The board of the FDIC voted 3-2 on Tuesday to propose the requirements. The rules will be open for public comment for 45 days after which the FDIC could formally adopt them, possibly with changes. read more