Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Dividend Aristocrat Is Leading the 5G Revolution - 22nd July 19
What the World Doesn’t Need Now is Lower Interest Rates - 22nd July 19
My Biggest 'Fear' For Silver - 22nd July 19
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Credit Crisis to Deteriorate on Credit Derivative Debacle

Interest-Rates / Credit Crisis 2008 Jun 24, 2008 - 06:17 AM GMT

By: Mark_OByrne

Interest-Rates Best Financial Markets Analysis ArticleGold closed at $984.40 in New York  yesterday and was down 17.30 cents and silver closed at $16.76, down 57 cents. 

Gold rallied in Asia and in early European trading to recover some of yesterday's sharp losses. Oil has risen to near record highs, above $138 a barrel again this morning and the dollar has given up much of yesterday's gains (1.557 to the Euro) and this is likely leading to gold buying.


All eyes are on the Federal Reserve's interest rate decision tomorrow and this could lead to traders being reluctant to take large positions -long or short. Markets are expecting no change as the Federal Reserve grapples with its most challenging environment since the stagflation of the 1970's. Thus, the Fed is widely expected to hold rates at 2% (leaving real interest rates negative) with market participants hoping the accompanying statement will provide clues on future interest rate policy.

Credit Crisis to Escalate on Credit Derivative Debacle
Further confirmation that we are in the early to middle stages on the credit crisis and that a new more severe phase may soon begin was seen in the latest downgrading of the bond insurers, Ambac and MBIA, and the attempts by these bond insurers to try and ‘wipe out' $125 billion of insurance of risky debt securities in order to try and protect them from possible collapse.

The FT reports that “discussions about "commuting" these insurance contracts, which were sold by the bond insurers to banks in the form of credit default swaps (CDS), have taken on a renewed sense of urgency amid a rash of rating downgrades in the bond insurance sector.   . . .  The talks centre on CDS contracts issued by bond insurers to guarantee payments on collateralized debt obligations (CDOs), complex debt securities often backed by mortgages that have plunged in value amid a wave of foreclosures .”

Overnight, Moody's became the last of the three major rating agencies to downgrade Ambac and MBIA , the embattled bond insurers, citing their limited ability to raise new capital and write new business.

Bond insurers guarantee a range of complex debt products held by many financial institutions with the result that changes to their ratings have broad and negative consequences for the wider market.

Another very real systemic risk being ignored in the latest bout of wishful thinking is the huge threat posed by what is being termed the ‘shadow banking system'.

Marketwatch reports that “a network of lenders, brokers and opaque financing vehicles outside traditional banking that ballooned during the bull market now is under siege as regulators threaten a crackdown on the so-called shadow banking system.

Big brokerage firms like Goldman Sachs and Merrill Lynch are the biggest players in this non-bank financial network, may have the most to lose from stricter regulation. The shadow banking system grew rapidly during the past decade, accumulating more than $10 trillion in assets by early 2007. That made it roughly the same size as the traditional banking system, according to the Federal Reserve.

Unless radical changes are made to bring this shadow network under an updated regulatory umbrella, the current crisis may be just a gust compared to the storm that would follow a collapse of the global financial system, experts warn.”

Credit derivatives and the now quadrillion dollars worth ( yes a new number to contend with – a quadrillion is a thousand trillion ! )  of derivatives as evaluated by the Bank of International Settlements (BIS) and the shadow banking system will soon lead to the next stage in the credit and systemic crisis. As usual much of the media will largely ignore these risks until they become glaringly obvious and be wise again in hindsight.

With the U.S. banking and financial system the epicenter of the current systemic crisis, the dollar is likely to come under further serious pressure in the coming months and with stagflation becoming entrenched in economies internationally, gold is set to continue to outperform all other asset classes and investors should remain overweight gold.


Today's Data and Influences
US data due this afternoon are expected to show consumer confidence slipping below last month's 16 year low.

The Conference Board's confidence index fell to 56, the lowest level since October 1992, from 57.2 in May, according to the median estimate in a Bloomberg News survey. A separate report may show home prices dropped at a faster pace.

Falling property values, rising unemployment and higher food and fuel bills have shaken consumers and may cause purchases to slump once the rebate money is gone. This raises the risk that Americans will retrench after spending their tax rebates.

Silver
Silver is trading at $16.86/16.88 per ounce (1200 GMT).

PGMs

Platinum is trading at $2033/2053 per ounce (1200 GMT).
Palladium is trading at $466/472 per ounce (1200 GMT). 

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold Investments
Tower 42, Level 7
25 Old Broad Street
London
EC2N 1HN
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules