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Tuesday, January 8, 2008

Technology, Intel and a Bounce

Gold Climbs to Record on Higher Oil Prices, Weakening Dollar: “Gold rose to a record as higher crude oil and a weaker dollar spurred demand for the metal as a hedge against inflation.

Gold is off to its best start to the year since 1980. Oil rose to a record $100 last week, U.S. warships were confronted by Iranian boats over the weekend, and the dollar today fell against 15 of 16 major currencies.

"The U.S. dollar is weakening and oil has picked back up,'' said David Thurtell, a metals analyst at BNP Paribas SA in London. ``There are a lot of supportive reasons to buy and not many reasons to sell.''

Gold for immediate delivery rose as much as $17.84, or 2.1 percent, to $876 an ounce in London, exceeding the previous record of $868.89 set Jan. 3. The metal traded at $874.90 as of 12 p.m. in London. Gold for February delivery rose as much as $16.80, or 2 percent, to $878.80 an ounce on the Comex division of the New York Mercantile Exchange.

The metal last reached an all-time high in New York in 1980, when the dollar was weakening, oil prices were rising and the U.S. and Iran were at loggerheads. U.S. Navy warships were approached by Iranian ``fast boats'' in the Straits of Hormuz on Jan. 6, the U.S. Defense Department said yesterday. The straits are the sea route for about a quarter of the world's oil.”

Aaaah, those silly Iranians: “I am coming at you; you will explode in a couple of minutes.”

That is one of the geopolitical catalysts that, should it snowball, would light a fire under crude. However, this kind of saber rattling is nothing new and as long as it doesn’t evolve it can generate trading opportunities.

U.K. Retail Sales Gains Slow, HBOS House Prices Fall (Update3): “U.K. retail sales rose at the slowest pace since March 2006 and house prices declined for the first quarter in seven years, adding to the case for the Bank of England to cut interest rates again.

Revenue at stores open at least 12 months increased 0.3 percent from a year earlier in December, the British Retail Consortium said in London today. Home values fell 0.8 percent in the fourth quarter, the first drop since 2000, according the HBOS Plc, the country's biggest mortgage lender.

Signs of slower economic growth prompted the Bank of England to reduce the benchmark interest rate from a six-year high last month after borrowing costs rose because of the collapse of the U.S. subprime-mortgage market. Retailer Next Plc says business is already slowing, and HBOS said today the Bank of England will need to cut rates twice more this year.”

Nothing unexpected there.

Citigroup May Take $16 Billion Subprime Writedown, Merrill Says: “Citigroup Inc. may post a larger loss than previously estimated because the biggest U.S. bank may have to take a $16 billion writedown in the fourth quarter, Merrill Lynch & Co. analyst Guy Moszkowski said.

New York-based Citigroup may post a loss of $1.43 a share in the fourth quarter, almost twice the previous estimate of 73 cents, Moszkowski wrote in a note to clients today.

Writedowns at Bear Stearns Cos. and Lehman Brothers Holdings Inc., whose fiscal year ends a month earlier than Citigroup in November, suggest ``substantial deterioration in the value of the underlying securities as well as some hedge breakage,'' Moszkowski wrote.

``Further, overall fixed-income trading results were abysmal at all most November year-end firms and likely worsened in December,'' he wrote.”

The first quarter of 2008 is going to be pretty nasty.


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