Capital Gold Group Report: U.S. Growth Weaker Than Expected — Dollar Decline Boosts Investor Demand for Gold

Gold Rallies as Dollar Decline Boosts Investor Demand for Metal

By Millie Munshi

July 31 (Bloomberg) — Gold gained the most in three weeks after a report showed weaker-than-expected U.S. growth during the second quarter, sending the dollar tumbling and boosting the appeal of the metal as an alternative investment. Silver rose.

The economy grew at a 1.9 percent annualized rate, the Commerce Department said today, sending the dollar down as much as 0.8 percent against the euro. Gold, sometimes used as a safe- haven investment, rose to a record in March as the U.S. currency headed for record lows and the economic outlook dimmed.

The rise in the precious metal is “certainly coming off the dollar after the GDP report,” said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. “Gold looks very strong right now.”

Gold futures for December delivery rose $13.70, or 1.5 percent, to $926 an ounce at 10:48 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest gain for a most-active contract since July 11.

Economists were expecting the U.S. to grow at a 2.3 percent rate, according to the median of 79 estimates in a Bloomberg News survey. The dollar dropped to as low as $1.5688 per euro.

Gold, priced in dollars, generally moves in the opposite direction of the U.S. currency. The metal reached a record $1,033.90 an ounce in March as the dollar headed to an all-time low of $1.6038 per euro on July 15.

Haven Asset

The precious metal may be insulated from a slowing global economy as investors turn to gold as an alternative to the dollar and as a haven asset, Evan Smith, who helps manage $1.5 billion at U.S. Global Investors Inc. in San Antonio, said yesterday.

Prices may rally later this year, according to Barrick Gold Corp., the world’s largest gold producer.

“Inflationary pressures” will continue to drive gold higher, Barrick Chief Financial Officer Jamie Sokalsky said today on a conference call with investors. “The outlook for gold continues to be very positive.”

Prices will be boosted by rising geopolitical tensions, continued concerns about the financial and credit crisis, and constraints on gold supply, Barrick said.

The surging cost of gold, which has more than doubled since 2003, has boosted profit for mining companies. Barrick said today second-quarter profit increased 22 percent amid soaring prices for bullion.

Silver Gains

Silver also advanced after China said it will remove an export rebate on the precious metal.

“It is likely that the abolition of the rebate will depress exports” from the Asian country, analysts at Barclays said in a report today.

Silver futures for September delivery added 29.5 cents, or 1.7 percent, to $17.76 an ounce on the Comex. Silver has gained 17 percent this year before today.

China is the worlds’ third-largest silver producer, according to Barclays. The country also removed an export rebate on zinc. The move comes as China steps up efforts to cut a record trade surplus.

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Capital Gold Group Report: Have Markets Hit Rock Bottom Yet? — WSJ

Markets Still Helter Skelter, Seek Bottom

July 30, 2008

Was that the capitulation?

Many analysts believe the stock market won’t shed its bear costume until it has one big cathartic selloff during which despair is at its fullest. Such moments have flagged bottoms in the past and set the stage for new bull markets.

Monday’s stock selloff, followed by Merrill Lynch’s Band-Aid-ripping CDO fire sale and Tuesday’s rally, had that aroma. Then again, so did the Société Générale capitulation in January, when the market panicked due to a rogue French trader’s mishap, the Bear Stearns capitulation in March and the Fannie Mae/Freddie Mac capitulation of mid-July.

A closely watched fear gauge, the Chicago Board Options Exchange’s Volatility Index, jumped at each of those moments, hinting at capitulations. But it never hit levels associated with past market bottoms. At the end of previous bear markets, the VIX spiked to more than 35. It is now at 22. Maybe the market is still complacent about the risks that lie ahead. Or maybe it won’t see the kind of capitulation analysts are counting on.

The VIX’s history is too short to offer much confidence that every market bottom must be accompanied by a VIX above 35.

There are reasons to hope the end of this mess may be nearing. But banks are still faced with deteriorating credit quality, and the knock-on economic effects of tighter credit have only begun. The future path of the economy may trace something more like an L-shape than a V, meaning an easily spotted capitulation may never come.

“Will we see catharsis when everyone is waiting for it? It’s doubtful the market will play along,” said Wayne Kaufman, chief market analyst at John Thomas Financial.

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Capital Gold Group Report: “Financial System is in ‘the worst crisis since the Great Depression'” – NYU Econ Professor

Roubini: Bear Market Only Half Over, But It’s Not Armageddon

Posted Jul 22, 2008 11:40am EDT by Aaron Task in Investing, Newsmakers, Recession, Banking

One of the most noted skeptics on Wall Street, NYU Professor Nouriel Roubini says the financial system is in “the worst crisis since the Great Depression,” and that the bear market in stocks is only half over.

Subprime mortgages are only the tip of the bad-loan iceberg, says Roubini, who expects the “subprime financial system” to ultimately suffer credit-related losses of between $1 trillion and $2 trillion vs. the approximately $330 billion thus far.

Roubini believes the economy slid into recession in the first quarter of 2008 and will remain there until the second quarter of 2009, with “subpar growth” likely to characterize the recovery.

That’s the (very) bad news.

The good news is Roubini, who also chairs research firm RGE Monitor, is “not in the Armageddon camp.”

The economist sees a “severe recession” that will last 12-to-18 months, but does not foresee the U.S. sliding into a prolonged Japan-like economic malaise. Similarly, while further 20% declines for major averages isn’t pretty, it won’t be as bad as the bursting of the tech bubble or the Great Depression for stocks, which Roubini sees starting to recover later this year/early next year.

Watch the interview at:

http://finance.yahoo.com/tech-ticker/article/41229/Roubini-Bear-Market-Only-Half-Over-But-It

Commentary: How many more reasons do you need to own gold?

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Capital Gold Group Report: U.S. Deficit to Reach Record $490 BILLION in 2009

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By Roger Runningen

July 28 (Bloomberg) — The U.S. budget deficit will widen to a record of about $490 billion next year, an administration official said, leaving a deep budget hole for the next president.

The projected deficit for the fiscal year that begins Oct. 1 is far higher than the $407 billion forecast by President George W. Bush in February. The official also confirmed a report in USA Today that the deficit this year will be less than the $410 billion estimated in February.

The bigger shortfall for fiscal 2009 may reflect dwindling tax receipts because of the U.S. economic slowdown, the cost of payments distributed under the $168 billion economic stimulus package and the cost of the wars in Iraq and Afghanistan.

“We’ve already seen a pretty sharp cooling in tax receipts, and it’s just going to continue into next fiscal year,” Stephen Stanley, chief economist at RBS Capital Markets, said in a telephone interview.

The deficit projection injects another element into the fight over future U.S. economic policy between Republican John McCain and Democrat Barack Obama, the presumptive presidential nominees of the major political parties. Both may find their economic proposals constricted by red ink when the next president is sworn in on Jan. 20, 2009.

Plans and Proposals

McCain will have a tougher case to make for extending all of Bush’s tax cuts, which are projected to cost $4.2 trillion over 10 years, while Obama will confront the risk that his proposals for government programs will widen the budget gap.

White House press secretary Dana Perino refused to comment on the numbers, while adding that the administration said when the economic stimulus package passed in February that it might increase the deficit.

“That’s the price we would pay” for boosting the economy, she said at a briefing this morning. Asked if the administration still believes it’s on a path to a balanced budget by 2012, she said, “I believe so, yes.”

The White House budget office will release its mid-session review of the government’s balance sheets at 1:30 p.m. today.

The shortfall reflects a deterioration of the budget over the past seven years. Bush inherited a budget surplus of $128 billion when he took office in 2001. The budget worsened almost immediately, because of recession, the Sept. 11 attacks, the beginning of the war in Afghanistan and, later, the war in Iraq that began in March 2003.

Deficit Record

Bush recorded his first deficit a year after being sworn in, and it widened to the current record of $413 billion in 2004.

Five months ago, the administration projected a shortfall of more than $400 billion this year and next, reflecting a struggling economy, and forecast a recovery to a $160 billion deficit in 2010, declining to $96 billion in 2011 and finally a $48 billion surplus in 2012.

The current projections may understate the deficit next year because the administration hasn’t requested money to prosecute the wars for the full year, leaving that to the next president. Military operations in Iraq and Afghanistan now are costing about $10 billion to $12 billion a month.

The Bush administration and Congress also haven’t dealt with the largest long-term fiscal problems: the growing costs of Medicare, Medicaid, and Social Security. Those three programs consumed an estimated 41 percent of the federal budget in 2007.

Economy Discussions

Obama was scheduled to confer today with his top economic advisers “on America’s pressing economic challenges,” his campaign said. The Illinois senator was to meet with business and labor officials on oil, food and other commodities, topped with discussions with investor Warren Buffett, former Chairman of the Federal Reserve Paul Volcker, and former Treasury Secretary Robert Rubin, among others.

McCain, an Arizona senator, was scheduled to talk about the economy at town-hall meetings with voters in Nevada and Wisconsin.

Record gasoline prices, plunging home values and shrinking credit access have thrust the economy to center stage. The Labor Department this week may report a seventh straight month of job losses.

House Budget Committee Chairman John Spratt, Democrat of South Carolina, took the administration to task for a record deficit, citing news accounts.

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Capital Gold Group Report: Two more banks fail; FDIC sells deposits

Mutual of Omaha Bank takes over accounts of California, Nevada lenders

By MarketWatch

Last update: 3:24 p.m. EDT July 26, 2008

SAN FRANCISCO (MarketWatch) — Two more banks were shut down by federal regulators late Friday, who sold the banks’ deposits to Mutual of Omaha Bank. It brings to seven the number of bank failures so far this year.

The Federal Deposit Insurance Corp. said it was appointed receiver of First National Bank of Nevada, based in Reno, Nev., and First Heritage Bank of Newport Beach, Calif. – both units of First National Bank Holding Co., of Scottsdale, Ariz.

Mutual of Omaha Bank’s acquisition of all deposits was the “least costly” resolution for the Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the banks’ franchises, the FDIC said in a statement.

All depositors, including those with deposits in excess of the FDIC’s insurance limits, will automatically become depositors of Mutual of Omaha Bank for the full amount of their deposits, the FDIC said.

Over the weekend, customers of the banks can access their money by writing checks or using ATM or debit cards. Checks drawn on the banks will be processed normally. Loan customers should continue to make loan payments as usual.

As of June 30, 2008, First National of Nevada had total assets of $3.4 billion and total deposits of $3.0 billion. First Heritage Bank had total assets of $254 million and total deposits of $233 million, the FDIC said.

In addition to assuming all of the deposits of the banks, Mutual of Omaha Bank will purchase approximately $200 million of assets from the receiverships.

Mutual of Omaha Bank will pay the FDIC a premium of 4.41% to assume all the deposits. The FDIC will retain the remaining assets for later disposition, the FDIC said.

FDIC will retain most of First National’s loan portfolio, Mutual of Omaha Bank said in a statement on its Web site.

The FDIC said the failures would likely cost the FDIC’s deposit insurance fund roughly $862 million. The failed banks had combined assets of $3.6 billion, .03% of the $13.4 trillion in assets held by the 8,494 institutions insured by the FDIC.

Overwhelmed by Problem Loans

The Office of the Comptroller of the Currency, a division of the Treasury Department, said First National Bank of Nevada “was undercapitalized and had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices,” according to a report in the online edition of The Wall Street Journal.

First National Bank of Nevada had 25 branches, 15 in Arizona and 10 in Nevada, some of which came from its June 30 merger with the First National Bank of Arizona.

The Journal also reported that according to regulatory filings, the Arizona-based bank that was folded into First National Bank of Nevada had a net loss of $131.3 million in the first quarter. The bank had $95.9 million in loan-loss provisions, a sign that it was being overwhelmed by problem loans, the Journal report noted. First National Bank of Nevada had a first-quarter net loss of $7.3 million, hurt by a loan-loss provision of $18 million.

First Heritage Bank, which specializes in commercial banking, operated three locations in the Los Angeles area. It had a first-quarter net loss of $1.9 million, according to a regulatory filing.

Mutual of Omaha Bank has more than $750 million in assets and operates 14 retail branches in Nebraska and Colorado with commercial lending offices in Dallas and Des Moines, Iowa. It is a subsidiary of insurance and financial services company Mutual of Omaha.

“We would first like to reassure all customers of First National Bank of Nevada and First Heritage Bank that all their deposits are safe and accessible,” Jeffrey R. Schmid, Mutual of Omaha Bank’s chairman and chief executive, said in a statement. “Their deposits will automatically transition to Mutual of Omaha Bank and we will be open for business on Monday morning.”

Earlier this month, IndyMac Bancorp Inc. became the biggest casualty of the subprime mortgage crisis over the weekend, as federal regulators shut down the troubled Pasadena, Calif.-based savings bank in one of the largest U.S. bank failures ever. See related story.

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Capital Gold Group Report: Reuters Poll Shows Gold Prices Will Rise

07.24.08, 10:31 PM ET

SINGAPORE (Reuters)

“A Reuters poll showed average gold prices will rise more than 30 percent this year and hold onto gains in 2009, as safe-haven buying fueled by ongoing financial risks will boost investor interest.”

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Capital Gold Group Report: Worst Performing Stocks of the Last Decade

WORST PERFORMING STOCKS OF THE LAST DECADE
6/30/98 – 6/30/08
Name				Symbol		10 Year Return
Fannie Mae				FNM		-68%
KeyCorp				KEY		-69%
Gannett Co.				GCI		-70%
Interpublic Group				IPG		-72%
Dillard’s, Inc.				DDS		-72%
Goodyear Tire & Rubber				GY		-72%
Tenet Healthcare				THC		-73%
Xerox Corporation				XRX		-73%
Wachovia Corporation				WB		-73%
Fifth Third Bancorp				FITB		-76%
First Horizon (Bank)				FHN		-76%
Huntington Bancshares Inc.				HBAN		-77%
Qwest Communications, Int’l.				Q		-77%
General Motors				GM		-79%
Eastman Kodak				EK		-80%
JDS Uniphase				JDSU		-82%
Washington Mutual				WM		-83%
Ford Motor Company				F		-85%
Unisys Corporation				UIS		-86%
National City Corporation				NCC		-87%
Tellabs, Inc.				TLAB		-87%
MGIC Investment Corp.				MGIC		-89%
Ciena Corporation				CIEN		-90%
MBIA Inc.				MBIA		-91%
Ambac Financial				ABK		-97%

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Capital Gold Group Report: Gold Prices Predicted to Continue to Rise

July 25, 2008

Although gold prices have seen some consolidation in recent days, investment in the precious metal will continue in the long term.

This is according to David Holmes, director of precious metals sales at Dresdner Kleinwort – the commercial and investment banking division of Dresdner Bank AG – who said that the lower prices could tempt people back into investment.

“We’ve had a significant correction off our highs and people are now tip-toeing back into the market,” he commented to Reuters.

Meanwhile, Ralph Preston, a commodity analyst at commodity brokerage services Heritage West Futures in San Diego, said that he believes gold prices will continue to rise.

“The fundamentals haven’t changed for oil and gold. The washout in the metals has, for the most part, run its course. I’m comfortable wading back in,” he told Bloomberg.

Earlier this month, Tom Kendall, an analyst at Mitsibushi International, predicted that gold prices will be back up to the record-breaking levels last seen in March by the end of 2008.

He said gold is gaining support from investors looking for decreased risk.

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Bloomberg Breaking News Headlines – JULY 24, 2008 4:09 pm ET

S & P FINANCIALS INDEX FALLING THE MOST SINCE APRIL 14, 2000

Capital Gold Group Report: Last Chance to Buy Gold in a Consolidation before Typical Autumn Rally?

NEW YORK (MarketWatch) — Gold futures lost more ground Thursday after tumbling more than $40 in the past two sessions, as the U.S. dollar continued to gain against other major currencies.

Gold for August delivery edged down $1.80 to $921 an ounce on the New York Mercantile Exchange.

“This week’s slide in oil and the improved dollar tone could see risk on the downside for gold, with inflation concerns tempering along with the safe-haven bid,” according to analysts at Action Economics. Over the past two sessions, gold has shed $40.90, tracking a sharp fall in crude prices. Ongoing dollar strength is putting some pressure on dollar-denominated gold.

The dollar index, a measure of the greenback against a trade-weighted basket of currencies, rose 0.6% to 72.93.

“The general tone of the dollar has improved in recent sessions, with the decline in oil prices, hawkish Fed comments, greater confidence that U.S. officials will not permit the demise of Fannie Mae or Freddie Mac and getting past another round of bank earnings all helping,” wrote currency strategists at Brown Brothers Harriman.

Crude futures regained some ground early Thursday, following their sharp decline over the past two sessions.

“While gold has suffered strong selling in recent sessions, it is only working off an overbought position, and a correction and consolidation is healthy and normal,” Mark O’Byrne, executive director at Gold and Silver Investments Ltd., wrote in a research note.

“This looks likely to be the last such sell-off prior to a strong rally into the autumn, as is typical,” he said.

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