Capital Gold Group Report: BREAKING NEWS: DOW PLUNGES MORE THAN 450 POINTS; GOLD RISES 8.8% ON COMEX; MOST SINCE SEPT. ’99

Gold Soars Most Since 1999 as Investors Seek Haven From Turmoil

By Pham-Duy Nguyen

Sept. 17 (Bloomberg) — Gold surged the most in nine years as investors sought the safety of precious metals on concern that the credit crisis will deepen, leading more financial institutions to fail. Silver soared the most since 1995.

Equities tumbled even after the Federal Reserve took over the biggest U.S. insurer. The cost of borrowing dollars for three months jumped the most since 1999 as banks hoarded cash. Central banks in the Phillipines and Venezuela said they may buy gold. In March, the metal reached a record as the government steered JPMorgan Chase & Co. to buy Bear Stearns Cos.

“With paper assets in question, gold represents the textbook storehouse of value,” said Ron Goodis, the futures trading director at Equidex Brokerage Inc. in Closter, New Jersey.

Gold futures for December delivery gained $66.10, or 8.5 percent, to $846.60 an ounce at 1:17 p.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage gain for a most-active contract since Sept. 28, 1999. Gold reached a record $1,033.90 on March 17.

Silver futures for December delivery rose 96.3 cents, or 9.2 percent, to $11.48 an ounce. A close at that price would mark the biggest gain since March 30, 1995.

Before today, gold fell 6.9 percent this year, while silver tumbled 30 percent.

About $2.8 trillion of market value was erased from global stocks this week as Lehman Brothers Holdings Inc. filed for bankruptcy, Bank of America Corp. purchased Merrill Lynch & Co. for $50 billion, and the U.S. government took control of American International Group Inc. in an $85 billion takeover to prevent the biggest financial collapse ever.

Russian Banks

Russia halted stock trading for a second day and poured $44 billion into its three biggest banks in a bid to halt the worst financial crisis in a decade.

“You’re sorting out, by process of elimination, that gold is the asset you’d rather own,” said Greg Orrell, who manages the OCM Mutual Fund at Orrell Capital Management Inc. in Livermore, California. “It’s the currency you’d prefer.”

U.S. Treasury three-month bill rates dropped to the lowest since at least 1954. Investors pushed the rate as low as 0.0304 percent.

“It’s not even worth it to keep money in the bank,” said John Licata, the chief investment strategist at Blue Phoenix Inc. in New York. “Gold is going to be the beneficiary of a global move toward a safe haven.”

Reserve Primary Fund, the oldest U.S. money-market fund, yesterday became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman.

`Systemically Scary’

“That’s systemically scary,” said Frank McGhee, the head dealer of Integrated Brokerage Services LLC in Chicago. “Unless you put gold in your backyard, you have to trust your money to an institution.”

Gold’s gains accelerated after prices topped $800, analysts said.

“There are going to be more banks that will fail,” said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. “This is the time when people want to buy gold.”

London-based researcher GFMS Ltd. said gold may rise to $950 by the end of the year as central banks and mining companies hold back sales and investors buy the metal as a haven against falling equities.

Since the second quarter of 2007, banks worldwide have posted $515.5 billion in losses and writedowns related to investments in subprime mortgages. The Fed has also engineered $200 billion in takeovers for Fannie Mae and Freddie Mac, the biggest providers of financing for U.S. homes.

Central Bank Buyers

The world’s central banks, already the biggest holders of gold, may look to the metal as an alternative reserve asset to the dollar, said Dennis Gartman, an economist and the editor of the Gartman Letter in Suffolk, Virginia. Until today, Gartman had been bearish in his outlook for gold.

Venezuela said today it may buy 15 metric tons of gold a year to develop investment products, including coins. At a conference in London, Maria Ramona Gertrudes Santiago, the managing director of the treasury at the Phillipines Central Bank, called gold a “perfect hedge.”

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Capital Gold Group Report: U.S. Stocks Drop as Lending Freezes Up Following AIG Takeover

By Elizabeth Stanton and Lynn Thomasson

Sept. 17 (Bloomberg) — U.S. stocks tumbled as bank lending seized up in the wake of the government’s takeover of American International Group Inc., raising concern that more of the nation’s biggest financial companies will fail.

Goldman Sachs Group Inc. and Morgan Stanley, the two remaining independent U.S. securities firms after Lehman Brothers Holdings Inc. collapsed and Merrill Lynch & Co. was taken over, plunged the most ever. General Electric Co., the world’s third- biggest company, fell 7.7 percent and U.S. Steel Corp. slid 11 percent. Yields on three-month Treasury bills sank to a 54-year low as investors sought the relative safety of government debt, and a measure of corporate borrowing costs surged to the highest since the crash of 1987.

“It’s ugly,” said Michael Mullaney, a Boston-based money manager for Fiduciary Trust Co., which oversees $10 billion in stocks and bonds. “It’s about the worst I’ve seen it in 25 years. You have to have free-flowing credit to lubricate the system. That’s not happening right now.”

The S&P 500 lost 48.01, or 4 percent, to 1,165.58 at 12:30 p.m. in New York, its lowest level in almost three years as all 10 of the main industry groups declined. The Dow Jones Industrial Average decreased 355.56, or 3.2 percent, to 10,703.46 with three of its 30 companies gaining. The Nasdaq Composite Index sank 78.11, or 3.5 percent, to 2,129.79, falling below its previous low for the year on March 10. More than 10 stocks retreated for each that rose on the New York Stock Exchange.

Value Erased

About $2.8 trillion of market value has been erased from global stocks this week, triggered by the largest-ever bankruptcy filing by Lehman Brothers, once the fourth-largest U.S. securities firm. Russia halted stock trading for a second day and poured $44 billion into its three biggest banks in a bid to halt the worst financial crisis in a decade.

Gold and silver surged as investors turned to precious metals as a store of value. Newmont Mining Co., the largest U.S. gold producer, rose 7.3 percent to $42.43 for the second- biggest gain in the S&P 500.

Investors paid up for protection from further losses. The Chicago Board Options Exchange Volatility Index jumped 13 percent to 34.27, which would be the highest closing level since February 2003. The VIX measures the cost of using options as insurance against declines in the S&P 500.

`Protracted’ Battle

Morgan Stanley slid $9.61, or 33 percent, to $19.09 after Oppenheimer & Co. analyst Meredith Whitney and Merrill Lynch & Co.’s Guy Moszkowski reduced their fourth-quarter profit estimates, citing higher funding costs. The lowered forecasts come a day after Morgan Stanley’s profit beat estimates.

“We believe Morgan Stanley, along with its peers, will battle a protracted period of negative operating leverage,” Whitney wrote in a note to clients.

Goldman slid $28.59, or 21 percent, to $104.42. Oppenheimer cut its fourth-quarter earnings estimate to $2.60 a share from $3.45.

The three-month London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers’ Association said.

U.S. Treasury three-month bill rates dropped to as low as 0.15 percent and the so-called TED spread, the difference between what the Treasury pays to borrow for three months and the amount banks charge each other for loans, widened by 0.73 percentage point to 2.91.

AIG Takeover

AIG, the largest U.S. insurer by assets, lost $1.69, or 45 percent, to $2.06 and extended its decline over the past year to 97 percent, after the government said it will receive a 79.9 percent stake in return for an $85 billion loan that analysts said will be repaid by liquidating the company.

“A disorderly failure of AIG could add to already significant levels of financial market fragility,” according to a central bank statement yesterday.

The S&P Financials Index slumped 8.7 percent as 85 of its 86 companies retreated.

Banks and brokerages also fell after the Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman. Investor redemptions will be delayed as long as seven days, the fund said.

“There’s just a massive retrenchment in risk appetite,” said Robert Stimpson, a money manager at Oak Associates Ltd. in Akron, Ohio, which oversees $1.1 billion. “We’ve seen three cornerstones of Wall Street fall by the wayside in the last six months. Is anyone safe? It’s a legitimate question.”

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Capital Gold Group Report: WHY SHOULD I CARE ABOUT AIG? Maybe this will help you understand.

Customers are wondering if the insurer’s woes will affect them. Here’s why you should care – even if you aren’t a customer.

By Chris Isidore, CNNMoney.com senior writer

Last Updated: September 16, 2008: 2:46 PM EDT

NEW YORK (CNNMoney.com) — American International Group is the world’s largest insurer and at the moment, Wall Street’s biggest worry.

The insurer is struggling to raise cash while economists and investors debate whether or not it should get a government bailout. Despite the company’s importance, the average American is probably not sure how, or why, its problems will affect them.

Here are five key questions and answers about AIG’s current woes and what they mean to you.

I have insurance through AIG. How worried should I be about the problems at the company?

At least in the short term, you probably don’t need to be worried at all. The problems are with the AIG holding company, not the individual insurance company subsidiaries that you do business with, according to a source with New York State’s insurance regulator.

Even if AIG’s holding company is forced to file for bankruptcy court protection, there’s a good chance that the subsidiaries will continue to operate normally with no disruption in claims payments. That has happened in the case of other insurance holding companies bankruptcies in the past, such as Conseco.

What guarantees are there that my claims will be paid?

Typically, if an insurance company falls into financial distress and is at risk of having claims that exceed the assets it holds to make those payments, the insurance regulator in its home state will take control of the firm and make payments.

The state regulator will not only use the firm’s own assets to make those payments but if necessary can also make payments out of a state fund into which all insurers in the state are required to pay.

This guarantee applies not just to traditional insurance policies but also to retirement products that have a promised payout, such as annuities.

But there are limits to the payments that will be made to customers that vary depending on which state a particular AIG subsidiary is based, according to Joseph Belth, professor emeritus of insurance at Indiana University and editor of The Insurance Forum, a newsletter often critical of the industry.

Should I be thinking about changing my policy away from AIG to another insurer?

While credit rating agencies downgraded debt held by AIG on Monday, AIG’s ratings are still considered investment grade and the company’s insurance subsidiaries are considered to be secure, at least for now.

Belth said changing insurers is not a simple decision.

“A lot depends on what kind of insurance you talk about,” he said. “If you’re talking about life insurance, you have to think about whether you can qualify with a new insurer, if your health has changed. But it’s something you have to consider if the ratings decline into the vulnerable range.”

Why should I care about problems at AIG if I’m not a customer?

AIG is by far the world’s largest insurer and its stock is found in many mutual funds, including any S&P 500 index fund. It is also a component of the Dow Jones industrial average. All by itself, it’s been responsible for dragging the Dow down more than 400 points so far this year.

AIG is also active in the business of credit default swaps, complicated financial instruments used by investors to protect themselves from bond defaults. Lehman Brothers was another major player in that field. If both go away, it would create a tighter credit market for consumers and businesses trying to get loans.

For this reason, there is a debate about whether the Federal Reserve will agree to lend the company the tens of billions of dollars it needs to cover its short-term funding needs or if the Fed will try and get private firms to assist AIG instead.

AIG is an insurer, not a lender. Why do I keep hearing about its problems with subprime mortgages?

All insurers take money they collect in premiums and invest them in different forms of assets. The idea is to make money on those investments so that the insurer can keep their premiums low and attract more clients.

But AIG made a bigger investment into securities that were backed by subprime mortgages than most other insurers. As defaults and foreclosures of those loans rose, the value of those securities fell, creating big problems for the firm.

In the past nine months, AIG has reported net losses of more than $18 billion, largely due to its exposure to bad mortgages.
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Capital Gold Group Report: AIG’s Clients Seeking Liquidation Get “Voicemail”

Capital Gold Group clients seeking to liquidate annuities in attempts to preserve long term savings and retirements for conversion into physical gold got “voicemail” today in attempting to initiation liquidations. No calls were being returned, leaving investors chained to this potentially sinking ship.

Breaking News: 2:55 EDT
The Fed is currently reconsidering helping AIG, and AIG may get a loan package from the Federal Reserve.

AIG Plunges as Downgrades Threaten Quest for Capital

By Hugh Son

Sept. 16 (Bloomberg) — American International Group Inc. fell 34 percent in New York trading after the insurer’s credit ratings were cut, threatening efforts to raise funds to keep the company afloat and roiling global financial markets.

S&P lowered AIG’s long-term counterparty rating three grades to A- because of losses tied to home loans and concerns whether the insurer can raise enough money to meet obligations to investors who purchased credit-default swaps from the company.

The downgrade of AIG is the latest tremor to shake the global financial industry, less than a day after Lehman Brothers Holdings Inc. filed for Chapter 11 bankruptcy protection and Merrill Lynch & Co. sold itself to Bank of America Corp. for about $50 billion. Stock markets from Tokyo to London tumbled as investors weighed the impact of a potential collapse of the largest U.S. insurer by assets.

“There’s a systemic risk if AIG isn’t saved,” Benoit de Broissia, an equity analyst at Richelieu Finance in Paris, said in a Bloomberg Television interview. Richelieu has about $6.2 billion under management.

Investors led by former Chief Executive Officer Maurice “Hank” Greenberg are considering taking control of the insurer through a proxy fight or buyout, they said today in a regulatory filing. The group is reviewing options “in light of current circumstances” at the insurer, the filing said.

Collateral Damage

AIG may be overwhelmed by protection it sold investors on $441 billion of fixed-income investments, including $57.8 billion in securities tied to subprime mortgages. The swaps already forced $25 billion in writedowns over nine months.

The rating cuts may trigger more than $13 billion in collateral calls from debt investors who bought swaps, according to an Aug. 6 filing from New York-based AIG, intensifying pressure on CEO Robert Willumstad to raise cash.

The swaps provided profits when the housing market prospered “for what has now turned out to be a much greater amount of risk than anybody anticipated,” Willumstad, 63, said during an Aug. 7 conference call.

AIG fell $1.62 to $3.14 at 1:23 p.m. in New York Stock Exchange composite trading, paring losses from earlier in the day when the shares declined 74 percent. AIG’s market value has shrunk more than 90 percent since peaking at almost $190 billion at the end of 2006, when it ranked among the world’s five biggest financial companies.

`Much Bigger Problem’

Wall Street’s largest firms were to meet at the New York Federal Reserve for a fifth day today, discussing AIG, said a spokesman for the New York Fed.

“I don’t know of a major bank that doesn’t have some significant exposure to AIG,” said Kenneth Lewis, chief executive officer of Bank of America, in a CNBC interview. An AIG collapse would “be a much bigger problem than most that we’ve looked at,” he said.

S&P also lowered AIG’s short-term counterparty credit rating by two grades to A-2 from the top A-1+ rating, and cut its counterparty credit and financial strength ratings on most of AIG’s insurance operating subsidiaries by three grades to A+ from AA+. The ratings remain on watch for a possible further downgrade, S&P said.

Moody’s cut AIG’s senior unsecured debt two grades to A2. Fitch Ratings lowered its assessment to A from AA-.

`Continuing Deterioration’

Moody’s said in a statement that its decision was made “in light of the continuing deterioration in the U.S. housing market and the consequent impact on the group’s liquidity and capital position due to its related investment and derivative exposures.” Moody’s placed AIG’s long-term and Prime-1 short- term ratings on review for possible downgrades.

AIG piled up net losses totaling $18.5 billion in the past three quarters on writedowns tied to the collapse of the U.S. subprime mortgage market. The insurer has units that originate, guarantee and invest in home loans.

“AIG poses a systemic risk because it’s a large counterparty in the financial system,” said Prasad Patkar, who helps manage the equivalent of $1.8 billion at Platypus Asset Management in Sydney. “It’s too big to be allowed to fail.”

In the Aug. 6 filing, AIG outlined the implications of credit rating downgrades. A cut in its long-term senior debt ratings to A1 by Moody’s and A+ by S&P would permit counterparties to make additional calls for as much as $13.3 billion of collateral, while a downgrade to A2 by Moody’s, and to A by S&P would permit counterparties to call for approximately $1.2 billion of additional collateral, the company said in the filing.

`Immediate Need’

AIG has already posted $16.5 billion in collateral through July 31. A downgrade could also set off early termination of swaps with $4.6 billion in payments, AIG had said.

The round of credit-rating cuts “further accentuates the immediate need for AIG to secure short-term funding and quickly execute sales of several of its subsidiaries,” said Morgan Stanley analyst Nigel Dally in a note to investors today. “Whether this is possible in a short time frame remains questionable.”

The Fed yesterday urged AIG to seek private capital, according to two people with knowledge of the discussions. Goldman Sachs Group Inc. and JPMorgan Chase & Co. were working with AIG to determine how much the New York-based insurer needs, said two more people, all of whom declined to be identified because negotiations are private.

Bridge Loan

The loan would involve temporary financing, a so-called bridge loan, through a syndicate of banks, and there’s no assurance a deal will be worked out, one of the people said.

The insurer has issued no official statements on its capital-raising plans this week, frustrating investors.

“We expected the company to make a statement yesterday and they didn’t,” said Cliff Gallant, an insurance analyst at KBW Inc., in an interview with Bloomberg Television. “They are waiting to have something concrete to say.” Willumstad had previously said he’d present a turnaround plan Sept. 25.

AIG spokesman Nicholas Ashooh had no comment today on the credit downgrades.

“We’re still working on a number of alternatives,” Ashooh said yesterday. JPMorgan’s Brian Marchiony and Goldman’s Lucas van Praag declined to comment.

AIG was given special permission to access $20 billion of capital in its subsidiaries to free liquidity, New York Governor David Paterson said yesterday. The insurer has one day to raise $75 billion to $80 billion, Paterson told CNBC today. The insurer may file bankruptcy tomorrow, the network said, citing unnamed people close to the company.

State Regulation

When an insurance company stumbles or fails, its operations including obligations to policyholders are handled by state regulators. The holding company that owes money to stockholders and lenders may go through bankruptcy court procedures. That was the route followed by the units of Conseco Inc. after it filed for bankruptcy in 2002.

AIG hadn’t gotten access to the New York lifeline as of about 10:30 a.m., said David Neustadt, a spokesman for state Insurance Superintendent Eric Dinallo.

“It would be part of a broader deal,” Neustadt said. “If there’s no broader deal, then it doesn’t happen.” The regulators didn’t say yesterday that access to the cash would require such conditions.

“We have seen some of the companies that serve as the bedrock of our financial system unraveling before our eyes,” Paterson said in a news conference yesterday.

Hedge Funds

The $1 trillion-asset company has about $48.7 billion in hard-to-value holdings, and had 116,000 employees as of Dec. 31, compared with 97,000 two years earlier. In addition to selling life insurance and protecting property, AIG owns or manages about $25.7 billion of real estate including residential, industrial and retail properties. The company had private equity and hedge fund holdings of about $30 billion as of June 30.

AIG’s $2.5 billion of 5.85 percent notes due in 2018 plunged 14.5 cents to 38 cents on the dollar as of 1:22 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The debt yields 21.5 percent, or about 18 percentage points more than similar-maturity Treasuries, Trace data show.

The Fed has hired Morgan Stanley to examine alternatives for AIG, a person familiar with the situation said. Morgan Stanley will review what role, if any, the government should play in helping the insurer, said the person, who declined to be identified because the talks are confidential.

`The Bigger Problem’

“The bigger problem here is that AIG is a bigger balance sheet, the tentacles go further and we don’t have the same relationship between the Fed and an insurance company as we do with some of the others,” said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. in a Bloomberg Television interview.

AIG may report writedowns of $30 billion for the period ending Sept. 30, resulting in its “worst quarter yet,” if Lehman’s bankruptcy leads to distressed sales of mortgage assets, Citigroup Inc. analyst Joshua Shanker said yesterday in a note. He downgraded AIG to “hold” from “buy.”

The company may consider selling assets, including American General Finance, AIG’s consumer lender, which could fetch more than $6 billion if the unit sold for twice its book value. AIG Investments could sell for more than $3 billion if it sold for 2.5 percent of clients’ assets under management. The company’s stake in reinsurer Transatlantic Holdings Inc. is worth about $2.25 billion, based on yesterday’s share price.

Aircraft Leasing

Bank of America analyst Alain Karaoglan said Willumstad, 63, should reconsider the decision to keep its aircraft-leasing unit, International Lease Finance Corp., which could sell for $7 billion to $14 billion. The unit was downgraded today by S&P, which may increase its cost of borrowing.

AIG rejected investments from buyout firms KKR & Co., TPG Inc. and J.C. Flowers & Co., people familiar with the talks said. Billionaire Warren Buffett‘s Berkshire Hathaway Inc. is no longer talking with AIG about an investment in the insurer, CNBC reported, citing people familiar with the situation it didn’t identify.

The insurer raised $20.3 billion in May by selling debt and equity, diluting the holdings of long-time investors. It’s “very hard to predict” if AIG will need more capital, Willumstad said on Aug. 7. “We’re obviously dependant on the condition of the U.S. housing market.”

Last week, the U.S. Treasury seized Fannie Mae and Freddie Mac, the biggest sources of funding for U.S. mortgages, and nearly wiped out the value of their shares. AIG had $550 million to $600 million of preferred shares in the companies, said a person who declined to be identified because the insurer hadn’t made a formal announcement.

`Moral Hazard’

Republican presidential nominee John McCain told CNBC today that there is a “moral hazard” in forcing taxpayers to be responsible for the poor performance of companies.

Asked whether regulators should allow AIG to fail, McCain said, “I think you have to.”

AIG former CEO and Chairman Maurice “Hank” Greenberg, who controls the largest stake in the insurer, has “repeatedly offered” to assist the firm, his spokesman Glen Rochkind said.

Greenberg, 83, saw his holdings decline by $3.1 billion last week. He controls 11 percent of AIG shares through two investment firms and personal holdings.

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Capital Gold Group Report: BREAKING NEWS – FED VOTE TO LEAVE RATES UNCHANGED IS UNANIMOUS

Sept. 16, 2008

The Federal Reserve held interest rates steady, and in a disappointment to Wall Street, didn’t appear to signal that rate cuts are forthcoming anytime soon. Though officials continued to warn about inflation risks, they also signaled that economic concerns have intensified.

In its statement, the Fed said: “Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters.”

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Capital Gold Group Report: BREAKING NEWS. . . 2nd MOST HISTORIC DAY ON WALL STREET. . . DOW DROPS 505 POINTS; WORST ONE-DAY DROP SINCE 9/11/01

Bloomberg Television reported today as the 2nd most historic day on Wall Street.

In the biggest reshaping of the financial industry since the Great Depression, two of Wall Street’s most storied firms, Merrill Lynch & Co. and Lehman Brothers Holdings Inc., headed toward extinction.

Lehman Brothers filed bankruptcy this morning in Manhattan, and is the largest bankrutpcy in history, their stock now trading at $.19 a share.

Bank of America agreed to buy Merrill Lynch.

The Dow Jones Industrial Average has plunged 505 points to well below 11,000. This is the worst point loss since the September 2001 terrorist attacks in New York City.

AIG plunged 60% to its lowest since May 1988, extending its year to date collapse to 91%, and surrounded it with pessimism.

U.S. dollar falls the most against the Japanese yen since 1999.

S&P 500 suffers worst one-day slide in 6 years – 4.6%; lowest since Stepember 2001 attacks

S&P Financials suffer worse one-day drop EVER.

Wachovia plunged 23%, most since 1980.

“WE ARE IN A FINANCIAL CRISIS”, SAYS JACK BOGLE, FOUNDER OF VANGUARD GROUP.

GOLD RISES $45 to $790 IN 2 SESSIONS

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Capital Gold Group Report: INVESTORS FLOCK TO GOLD – QUALITY ASSET IN DEEPENING FINANCIAL CRISIS

GOLD RISES 3% TO $787; JUMPING $23

NEW YORK (MarketWatch) — Gold futures rose Monday, rallying to near $780 an ounce at one point, as the deepening crisis on Wall Street raised demand for the safe-haven investment.

Gold for December delivery rose $15.50, or 2%, to $780 an ounce in Monday morning trade on the Comex division of the New York Mercantile Exchange. It surged $25 in overnight electronic trading to $789.50.

Crisis on Wall Street

• Lehman’s record-setting bankruptcy • Bank of America’s rush to buy Merrill

• AIG seeks $40 billion loan from Fed • Regulators move to reassure investors • Presidential candidates press for reform• Fed expands lending programs • Central banks inject market liquidity • European markets log broad losses • Dollar falls; yen and euro gain • Debt destruction necessary evil(Minyanville)

Wall Street witnessed a tumultuous weekend as Lehman Brothers Holdings was forced into bankruptcy, Merrill Lynch & Co. sold itself to Bank of America for $50 billion, and American International Group reportedly asked the Federal Reserve for a $40 billion capital boost.

“Gold’s safe haven credentials are set to come into their own again as the global financial and capitalist system itself is creaking at the seams,” said Mark O’Byrne, executive director at Gold and Silver Investments.

The U.S. stock market tanked after Lehman filed for Chapter 11 bankruptcy protection, ending the 158-year-old Wall Street firm’s run and rattling the foundation of the global financial system.

Also rocking investors’ confidence, Merrill Lynch agreed to be bought by Bank of America Corp. in an all-stock deal the companies valued at $50 billion. See full story.

Investors turned to the relative safety of gold in the face of the unprecedented financial turmoil, lifting the precious metal’s prices.
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Capital Gold Group Report: Gold Rebounds as Dollar Weakens Against Euro; Silver Advances

By Pham-Duy Nguyen

Sept. 12 (Bloomberg) — Gold rose, snapping a nine-day losing streak, as the dollar fell against the euro, reviving demand for the precious metal as an alternative investment.

The euro rose as much as 0.9 percent against the dollar. The 15-nation currency is still down 1.1 percent this week and gold has fallen 5.5 percent. Gold reached a record in March as the euro headed to an all-time high against the dollar in July.

“Gold is definitely oversold and it’s certainly due for a bounce,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “This is about capital flow. We’re seeing some profit taking on the long-dollar positions and a little bit of buying coming into gold.”

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BLOOMBERG BREAKING NEWS HEADLINES – U.S. GOVT. TO ARRANGE SALE OF LEHMAN BROS

WASHINGTON POST REPORTS U.S. GOVERNMENT TO ARRANGE SALE OF LEHMAN BROTHERS

LEHMAN DROPS 41% – PLUNGES 75% THIS WEEK

BANK OF AMERICA UP 2.1%

MORGAN STANLEY REMOVES ITS LEHMAN’S RATING CITING TOO MUCH UNCERTAINTY

Capital Gold Group Report: NOT ALL GOLD IS CREATED EQUAL – PRE-1933 GOLD LESS VOLATILE THAN BULLION

Most would agree that the daily spot price of gold is impacted by several factors, not the least of which is the U.S. Dollar Index and global market conditions. Since 2001, these have been the driving forces in gold’s climb from $265/oz. to over $1,000/oz.

Recently the dollar has rallied and oil prices have dropped sharply, resulting in the pull-back of gold prices. Yet most analysts remain bullish on gold long-term. In the words of world-reknowned economist Jean-Marie Eveillard, “Value investors must be willing to suffer short-term pain for long-tern gain.”

Holders of Mint State Pre-1933 U.S. gold coins do benefit from rising spot gold prices, however, the volatility of corrections reflected in the spot price are tempered by limited availability of pre-1933 investment grade gold, making it the perfect form of gold to own for long-term capital appreciate and wealth preservation.

The “privacy factor” adds to the appeal of certified pre-1933 gold coins, creating more demand that the supply can accommodate, which can result in an appreciation in the value of these coins even when gold bullion prices depreciate.

Ultimately, a new breed of financial advisors and investors see the diversification, risk management, and hedge offered by mint state pre-1933 gold coins as a necessity in every portfolio, regardless of the short term movement of the spot price of gold.

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