-- Posted Friday, 17 August 2007 | Digg This Article
| Close | Gain/Loss | On Week |
Gold | $656.30 | +$8.30 | -2.10% |
Silver | $11.73 | +$0.33 | -8.29% |
XAU | 129.36 | +2.96% | -10.37% |
HUI | 306.19 | +2.02% | -11.51% |
GDM | 955.92 | +2.47% | -11.25% |
JSE Gold | 2203.16 | -0.68% | -3.12% |
USD | 81.40 | -0.35 | +0.87% |
Euro | 134.87 | +0.86 | -1.53% |
Yen | 87.77 | -0.73 | +3.82% |
Oil | $71.78 | +$0.78 | +0.43% |
10-Year | 4.673% | +0.073 | -2.16% |
Bond | 109.84375 | -0.75 | +0.49% |
Dow | 13079.08 | +1.82% | -1.21% |
Nasdaq | 2505.03 | +2.20% | -1.57% |
S&P | 1445.94 | +2.46% | -0.53% |
Before the markets opened in the U.S. this morning the fed took action. They cut the discount rate, not the fed funds rate. The discount rate is the rate at which backs can borrow from the fed, rather than from each other, and it was cut from 6.25% to 5.75%, or from 1% above the fed funds rate of 5.25%, to 0.5% above the fed funds rate. Institutions can also now borrow longer at 30 days instead of just overnight.
Indiscriminate irrational illiquidity is how Rick Santelli put it on CNBC today to describe recent market actions, and the fed’s action today certainly seemed to help put an end to that as assets like gold and other commodities that were irrationally sold on days like yesterday rebounded today.
Overall people were happy to see that Bernanke and the fed are watching the markets and are willing to act if necessary. There were however some very unhappy people who were short the market with it being options expiration day and they were obviously hurt as the fed’s action inspired the Dow to shoot over 300 points higher at the open.
The Metals:
CoT Reports: Gold | Silver
Gold rose about $4 in after hours trade yesterday before it dropped and traded near unchanged in Asia, but it then rose back to about $652 in London and added over $10 more to those gains in New York after the fed’s announcement. Gains pared a bit into the close, but gold still closed higher by 1.28%. Silver followed a similar pattern and gained 2.89%.
Euro gold roes above €486, platinum lost $2 to $1,225, palladium lost $4 to $327, and copper gained nearly 2 cents to about $3.19.
Gold and silver equities rose over 4% at the open before they halved their gains by about an hour into trade, but they then held near that level for the rest of trade and closed with over 2% gains.
The Economy:
Report | For | Reading | Expected | Previous |
Michigan Sentiment | Aug | 83.3 | 88.5 | 90.4 |
The fed’s statement today in addition to cutting the discount rate by 50 basis points to improve liquidity:
“Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.”
All of this week’s economic reports:
Next week’s economic highlights include Leading Economic Indicators on Monday, Initial Jobless Claims on Thursday, and Durable Goods Orders and New Home Sales on Friday.
The Markets:
Charts Courtesy of http://finance.yahoo.com/
Oil rose as the fed cut the discount rate and eased economic worries, a fire at a refinery raised production concerns, and Hurricane Dean strengthened while a new forecast called for it to go through the Yucatan peninsula and head to the Western Gulf where refinery operations and energy infrastructure is present and could be damaged.
The U.S. dollar index fell as the fed stepped in and cut the discount rate which is a step towards cutting the fed funds rate and that would certainly reduce the appeal of the dollar as an investment relative to other world currencies and other assets in general.
Treasuries fell as the fed took action and calmed the markets. This also caused a steeper yield curve, meaning that long term rates rose more than short term rates.
The Dow, Nasdaq, and S&P rocketed higher at the open on short covering after the fed stepped in, but impressive opening gains were roughly cut in half not long into trade and the three indices held at about that level with over 1% gains until the last hour of trade when they rose back near their early highs and closed with roughly 2% gains.
Among the big names making news in the market Friday were Dell, Bear Stearns, and Borse Dubai and OMX.
The Commentary:
“The bullion price fell, not because of the investment, but problems with the investors. The gold price then recovered because the Indian market loves a bargain.
Looking around at all the wounded in so many markets across the globe, with more financial tsunamis to come for sure before the end of the year, one has to be impressed by the resilience of gold this week.
We realize that the credit squeeze is not short-term and believe that today’s short-term move of dropping rates could easily become longer-term, as the unfortunate consumer, the mainstay of the growth of the last few years, staggers with all this weight on him.
For sure high levels of volatility are here to stay, with gold seemingly experiencing low volatility now.”- Julian D.W. Phillips, www.goldforecaster.com
“December Gold finished up 8.8 at 666.8, 7.5 off the high and 5.8 up from the low.
September Silver closed up 0.305 at 11.8. This was 0.09 up from the low and 0.21 off the high.
The gold market might have disappointed the bull camp with the inability to hold all of the rather impressive early gains. However, with the US Fed providing some confidence and in some minds adding into the inflation potential at least a portion of the extremely negative macro economic focus was forgotten. One would also think that the gold market was lifted by the reversal in the Dollar, especially since that force was a conclusive bear item throughout the first four trading sessions of the week. With oil prices also showing strength and a number of physical commodities regaining there footing a number of Press and trade sources were suggesting that some of the buying in gold was fresh buying and not simply technical short covering.
With the stock market higher, copper strong and oil prices rising the outside market forces were certainly helping silver rally instead of heaping on the pressure. With the financial crisis at least temporarily downplayed and the silver market coming off a significant pounding this week, it is probably a safe bet to suggest that a good portion of the buying on Friday was short covering. Some players have suggested that in order to see fresh value hunting buying in silver might require several days of calm and positive action in the stock market.”- The Hightower Report, Futures Analysis and Forecasting
GATA Posts:
Fall dinner meeting of CMRE to be held in New York on Oct. 25
GATA supporters hold lunch in Canberra on Sept. 3
Fed cuts loan rate to banks by half percent
Fed takes junk collateral, slashes 1-month loan rate to 4%
Fears for commercial paper grow
The Statistics:
As of close of business: 8/16/2007
Gold Warehouse Stocks: | 7,095,222 | +10,139 |
Silver Warehouse Stocks: | 134,256,622 | - |
Global Gold ETF Holdings
[WGC Sponsored ETF’s]
| Product name | Total Tonnes | Total Ounces | Total Value |
New York Stock Exchange (NYSE) AND Singapore Exchange (SGX) | Streettracks Gold Shares | 507.14 | 16,304,928 | US$ 10,796m |
London Stock Exchange (LSE) AND Euronext Paris AND Borsa Italiana AND Frankfurter Wertpapierbörse (Deutsche Börse ) | Gold Bullion Securities | 88.49 | 2,844,950 | US$ 1,872m |
Australian Stock Exchange (ASX) | Gold Bullion Securities | 12.71 | 408,380 | US$ 269m |
Johannesburg Securities Exchange (JSE) | New Gold Debentures | 14.28 | 459,201 | US$ 304m |
Note: Change in Total Tonnes from yesterday’s data: The NYSE/SGX subtracted 3.07 tonnes.
COMEX Gold Trust (IAU)
Profile as of 8/16/2007 | |
Total Net Assets | $985,043,368 | Ounces of Gold
in Trust | 1,519,696.371 |
Shares Outstanding | 15,350,000 | Tonnes of Gold
in Trust | 47.27 |
Note: No change in Total Tonnes from yesterday’s data.
Silver Trust (SLV)
Profile as of 8/16/2007 | |
Total Net Assets | $1,750,634,770 | Ounces of Silver
in Trust | 141,612,134.500 |
Shares Outstanding | 14,250,000 | Tonnes of Silver
in Trust | 4,404.63 |
Note: No change in Total Tonnes from yesterday’s data.
The Stocks:
Goldcorp’s (GG) reported minimal investment in Canadian Asset Backed Securities, Ivanhoe’s (IVN) corporate update, Barrick’s (ABX) completed acquisition of an additional 20 per cent interest in the Porgera mine, and Pan American’s (PAAS) largely unaffected Peruvian operations were among the big stories in the gold and silver mining industry making headlines Friday.
WINNERS
Gold Seeker Weekly Wrap-Up: Gold and Silver Gain Friday, but Lose Over 2% and 8% on the Week