| Gold hits new high over $900
Gold hit a record high above $900 an ounce this morning as turmoil in financial markets and expectations of aggressive US rate cuts helped raise the metal's appeal. Comex gold futures touched $908.90 an ounce, surpassing Friday's record high of $900.10. The most active February contract was later quoted at $907.0, up $9.3 an ounce. Platinum hit a lifetime high, while silver touched a 27-year peak, buoyed by gold's rise. Spot gold hit an all-time high of $906.70 an ounce, higher than $895.70/896.50 in New York on Friday. Fears of further subprime mortgage-related write-downs in the US financial sector and inflation fears driven by record-high crude oil also attracted buying from investors and speculators. .
Big miners drag stocks down
On the Sydney Futures Exchange, the December share price index contract was down 72 points to 6528, on a volume of 19,549 contracts. CMC Markets dealer Matt Wacher said lower base metal prices overnight are weighing on the local bourse. "Most of the sectors seem to be pretty flat. Energy and materials sectors are off," Mr Wacher said. "I guess the materials and energy sectors are off on the back of the commodity prices overnight. Oil prices and all the base metals took a bit of a beating and similarly with the gold price which was off quite substantially." Mr Wacher said positive retail sales data in the United States helped to buoy stocks on Wall Street."The US retail sales result was pretty strong so that's probably given a bit of impetus to the market as a whole over there. "It started much lower on the day and ended up around 40 points on the close...
What Now?
It's an easy short against the dollar. You can also short sterling against the euro or the Swiss franc. Over the longer term, when the interest-rate differential between the U.S. and the U.K. in real terms has been less than 1% to the advantage of sterling, sterling always has weakened against the euro. Now it is at 70 basis points in real terms. [A basis point is one one-hundredth of a percentage point.] You can sell sterling short against the dollar in the futures market. Faber: It may be easier to short a British-pound ETF, CurrencyShares British Pound Sterling Trust [FXB]. Zulauf: On the long side, Fred already talked about gold [in last week's Roundtable installment]. I have recommended it several times over the years. Now it's $850 per ounce. The most important thing driving the price of gold is low real interest rates.
Thomson Financial Europe AM at a glance share guide: Shares mixed, oil ...
Oil futures ended an erratic session higher Tuesday as investors focused on expectations that the Federal Reserve will cut interest rates and OPEC will hold production steady, and shrugged off estimates that domestic crude inventories rose last week. METALS: Gold prices fell as the dollar was mixed against major European currencies. EVENTS: FOMC meeting (interest rate decision due 1915 GMT) US weekly API, Department of Energy oil inventory data (0330 GMT) Jan ADP national employment report (1315 GMT) Q4 GDP (advance) (1330 GMT) Kraft Foods Inc Q4 results. EPS forecast 44 cents vs 51 (before market opens) Merck & Co Inc Q4 results. EPS forecast 73 cents vs 50 (before market opens) Allergan Inc Q4 results. EPS forecast 58 cents vs 51 (1700 GMT) Amazon Com Inc Q4 results. EPS forecast 48 cents vs 23 (1700 GMT) Boeing Co Q4 results.
The Ex Ante Factor: Bizarro World
The week of January 21-25, 2008 will go down in the history books of financial markets and potentially society at large. We witnessed the largest financial debacle in history where SocGen lost $7b in index futures pushing stock markets to the brink of collapse (are we trying to one-up each other's debacles?), we received an historic 75bps inter-meeting ease from the Federal Reserve (to fix a bad trade in Europe?), the US government agreed to pass a stimulus package to head off a recession (borrowing $150 billion to save a multi-trillion $ credit bubble?) and to top it off 10YR treasury yields traded down to 3.30% just 30bps from the 2003 lows while the inflation sensitive gold contract traded at an all time high above $920/oz (is this bizarro world?). With all the debate regarding whether or not the US will enter a recession we took a look at the conflicting messages coming from the commodity and bond markets to see if we could come up with a conclusion and trading strategy.
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