Tag Archive: U.S. economy

Feb 17

The Great American Dream Death Spiral

61719 10151736895504966 175545658 n The Great American Dream Death Spiral

So, what do you think a $10-per-hour minimum wage law will do to the below welfare map which shows the 11 states with more on welfare than employed?

In FY 2011, government gave $168 per day in assistance to each impoverished U.S. household. US median household income: $137 a day. Hourly pay for a 40-hour work week: Welfare – $30; job – $25.

Jan 26

Gold Climbing Back to $2,000 on News that Federal Reserve Vows to Keep Rates Low & Home Sales Fall

Oil rose to near $100 a barrel Thursday in Asia after the U.S. Federal Reserve said it would keep interest rates at record lows at least until 2014 to help jump-start the world’s biggest economy.

As we suspected yesterday, crude oil prices edged higher after an overtly dovish FOMC announcement sank the US Dollar. The move higher was muted by a pickup in inventories however, where the weekly build more than doubled expectations. Looking ahead, a mixed set of US economic data is ahead, with expectations calling for a slowdown in Durable Goods Orders but improvements on the composite Leading Indicators index and New Home Sales. However, the earnings calendar may prove most market-moving as a hefty dollop of industrials report results, with traders particularly interested in guidance from the likes of Caterpillar Inc as a proxy gauge of the global business cycle (and thereby oil demand prospects).

The U.S. central bank, which has kept its benchmark interest rate near zero for three years, said Wednesday that it doesn’t plan to raise the rate before late 2014.

That caused the dollar to turn lower against major currencies, which makes dollar-priced oil less expensive for holders of other currencies.

“That would mean the U.S. dollar would continue to be cheap versus other currencies, and there is typically an inverse correlation between the value of the dollar and commodity pricing,” said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.

The median sales price for a new home fell 2.5 percent to $210,300 last month, the biggest drop in four months. Compared to December last year, the median price was down 12.8 percent.

There were a record low 157,000 new homes on the market last month and at December’s sales pace, it would take 6.1 months to clear them, up from 6.0 months in November.

Spot Gold (NY Close): $1710.57 // +44.90 // +2.70% 

Not surprisingly, gold soared after the Federal Reserve extended its pledge to keep interest rates at “exceptionally low” levels to the end of 2014 from the previously promised mid-2013. With the central bank determined to keep borrowing costs near-zero for the foreseeable future and recent US economic data pointing to a pickup in activity, inflation expectations are understandably climbing and boosting demand for the yellow metal as a store-of-value hedge. Indeed, the 2-year breakeven rate – a measure of inflation expectations derived from bond yields – soared to the highest in nearly 7 months after the FOMC outcome crossed the wires.

Spot Silver (NY Close): $33.16 // +1.12 // +3.49%

As with gold, silver prices soared higher after the dovish FOMC outcome stoked future inflation bets, with more of the same seemingly likely ahead. Likewise in line with its more expensive counterpart, the spotlight now turns to US economic data to see if positive momentum resumes or falters, with the latter scenario likely to defuse what will otherwise almost certainly amount to another major advance for precious metals. Prices are testing resistance in the 38.78-33.30 region, with break higher exposing 35.30. Near-term support lines up at 31.04.

Aug 25

India is World’s Biggest Consumers of Gold Say Imports of Gold May Reach Record 1,000 Tons

Gold imports by India, the world’s biggest consumer, may reach a record this year as investors seek a haven against inflation and volatility in stock markets, a traders’ group said.

Imports may be between 950 metric tons and 1,000 tons this year, Prithviraj Kothari, president of the Bombay Bullion Association, told reporters at a gold conference in Kovalam in south India. Consumption in India rose to a record 963.1 tons last year, driving bullion imports to the highest ever at 958 tons, according to the World Gold Council.

Rising Indian imports may help extend a 30 percent rally in gold prices to a record that’s made the precious metal the second-best performer on the Thomson Reuters/Jefferies CRB Index of 19 raw materials this year. Bullion is heading for its 11th annual gain as Europe’s sovereign-debt crisis and concern that the U.S. economy may be slowing spur demand for a haven.

“The equity market is volatile and property prices are too high, driving people toward gold as an investment,” Kothari said. “The rains have been good so far, so we can expect good demand for festival season this year.”

Purchases by India, the world’s biggest user, surged 60 percent to 267 tons in the three months ended June 30, from 167 tons a year earlier, the producer-funded council said on Aug. 18. Investment demand jumped 78 percent to 108.5 tons, the second-highest quarter on record, it said.

Central Banks

Gold may top $2,000 an ounce by the end of this year as central banks’ purchases and a stalling economy boosts the appeal of the precious metal as a haven, Kothari said.

“Gold may rise to $2,000 or more by 2011 end if the global economy remains the same,” he said. “Central banks are also buying gold, which is positive.”

Holdings in exchange-traded products touched a record on Aug. 8, and central banks are adding to their reserves for the first time in a generation. George Soros, the billionaire investor, cut his holdings in the SPDR Gold Trust in the second quarter as prices rallied, while billionaire John Paulson maintained the largest stake, according to regulatory filings this week.

Global holdings of gold by governments and official institutions such as the International Monetary Fund stood at 30,684 tons last month, according to the World Gold Council. Central banks added 155 tons valued at about $8.18 billion to reserves in the first five months of the year and will be net buyers next year, according to the council.

The precious metal prices may be headed for a drop to $1,725 an ounce as early as next month, according to Jeffrey Rhodes, chief executive officer at INTL Commodities LLC.

beprepared 600x150 India is World’s Biggest Consumers of Gold Say Imports of Gold May Reach Record 1,000 Tons

Aug 18

Gold Hit Record Highs $1,827 on News of Fall in Existing Home Sales, Freddie-Mac lowering rates, 10-Year US Bonds Droppes Under 2%

Gold rallied to its second record high in a week on Thursday, driven by growing investor unease over the outlook for the U.S. economy after data showed an unwelcome pickup in inflation, and over the lack of resolution to the European debt crisis.

Asset such as stocks, corporate bonds, industrial commodities and higher-yielding currencies slid after investors lost more appetite for risk, to the benefit of gold, government bonds and the dollar itself, which many resort to in times of extreme market nervousness.

Although gold remains off its inflation-adjusted peak above $2,000 struck in 1980, it is one of the top performing assets this year, up by over 25 percent versus a 15-percent loss in U.S. blue-chip stocks <.SPX> or a 7.7-percent decline in the price of copper.

So far in August, the price has risen by more than 11 percent, putting it on track for its biggest monthly gain since November 2009.

Growth in the United States, which last week lost its top-notch credit rating, has been patchy, while European leaders struggle to contain the spread of the debt crisis that has forced Greece, Portugal and Ireland to seek emergency funding and now threatens to swamp Italy and Spain.

Spot gold was up 1.6 percent on the day at $1,816.09 ounce by 2:00 p.m. BST, having hit a record $1,817.90 and was on course for a 9 percent gain over the last two weeks, its best two-weekly performance since mid-February 2009.

GOLD IN DEMAND

Demand for gold has been fairly evident through increases in holdings of the metal in exchange-traded funds and rising open interest in U.S. gold futures, building on a decline in the second quarter of the year.

The World Gold Council said in a report on Thursday overall gold demand fell 17 percent in the second quarter to 919.8 tonnes, as growing interest in jewellery, coins and bars failed to offset a sharp decline in ETF buying.

Investment in ETFs fell by more than 80 percent on the same quarter last year, although inflows this year are up by a net 6 percent, with most of that investment materialising in the last month, according to ETF data monitored by Reuters.

In Europe, plans from France and Germany to move towards fiscal union in 2012 got a chilly response from other euro-zone countries and failed to reassure investors worried about the region’s debt crisis and weakened economies.

The U.S. Federal Reserve Bank is taking a closer look at the U.S. units of Europe’s biggest banks, concerned that a euro zone debt crisis could spill into the U.S. banking system, the Wall Street Journal reported.

The $2.5 trillion (1.51 trillion pounds) U.S. money market funds industry — which supplies short-term dollar funding to banks — has retreated from the euro zone in recent months, concerned that the continent’s debt crisis is spiralling out of control.

In other fundamental news, Venezuelan President Hugo Chavez said the country will nationalize its gold industry and is moving its international reserves out of Western countries.

Existing home sales fell 3.5 percent

Existing home sales unexpectedly dropped in July as cancellations of pending contracts continued to depress buying activity.

The National Association of Realtors said on Thursday sales fell 3.5 percent month over month to an annual rate of 4.67 million units. June’s sales were upwardly revised at a 4.84 million-unit rate.

Economists polled by Reuters had expected sales to rise 3.8 percent to a 4.90 million-unit pace. Compared to July 2010, sales were 21 percent higher.

Major stock benchmark indexes fell more than 4 percent on a morning of downbeat economic data that also included mid-Atlantic factory activity. Investors snapped up U.S. Treasuries on fears over a global economic slowdown.

NAR Chief economist Lawrence Yun said the fallout rate of contract sales for properties on the market continued to average 16 percent for a second straight month, higher than the 10 percent average seen during the same period in 2010. The uptick was a result of difficulties with mortgage financing and home appraisals, he said.