Posted on 11/27/2009 5:41:16 AM PST by danielmryan
FRANKFURT (MarketWatch) -- Gold futures fell on Friday but traded off their lows, as Dubai World's debt woes fueled a sell-off in commodities and stocks, while the U.S. dollar gained against its rivals.
Gold for December delivery tumbled from a high of $1,195 an ounce to an intraday low of $1,130.10 an ounce in electronic trading on Globex. That is a decline of nearly $65, or more than 5%.
In recent trading, gold fell $26.80, or 2.3%, to $1,160.20 an ounce.
(Excerpt) Read more at marketwatch.com ...
It’s interesting to me that a risk reduction trade like the one this morning would be dollar-positive. There really must be some truth to the idea of the carry trade where people are short dollar funding to buy high-risk, speculative assets like gold and foreign stocks.
Foreign stocks and gold are supposed to be high risk assets?
In comparison to what ?
Could the implosion of Dubai be the joker that brings the whole house of cards down??
And are Geithner and Bernanke frantically discussing ‘too-big-to-fail’ measures to try to plug this hole in the dam??
(And did I just use up my ‘mixed metaphors’ quota for the day??)
‘would be dollar-positive’
I still think it’s the idea of the tallest pygmy. The dollar is still the ace in the whole when the world is in doubt.
Anything is high-risk if there is a speculative bubble driving the price action.
Is Dubai big enough to prevent from failing?
Maybe we should borrow some money from China and bail them out?
I think people have borrowed in dollars to buy all sorts of assets all over the world, and when those assets look like they may decline they sell the assets and buy back the dollar to repay their dollar loan.
--Willaim Safire (attributed), amended by Sid Sodnagel
The dollar is still a bigger safe haven than gold.
Good is extremely vulnerable. When you have profits: TAKE THEM!!!!!!!!!!!!!!
Hopefully this spike in dollar strength will cause the massive dollar-carry trade to snap-back, returning us to more sensible P/E ratios and an S&P of about 850.
ahh.. GOLD is extremely vulnerable. When you have profits: TAKE THEM!!!!!!!!!!!!!!
The “hole in the dam” comment was the straw that broke the camel’s back. Stop beating the dead horse, you’ve played your hand.
As we saw in 2008, when traders are really in a lather, they will dump whatever they have that isn’t US Treasury bills and buy T-bills. And as we saw, they’ll keep buying T-bills even when they have pushed the yield into negative territory, ie, they’re effectively paying Uncle Sugar to take their money.
During market events like this (debt defaults with unknown couplings), return OF capital becomes much more important in traders’ minds than return on capital.
Foreign stocks involve an element of currency risk, plus they currently have higher P/E ratios than the US market. Gold is a purely speculative asset - it throws off no interest or dividends. People pile on if they think it's moving up, but they also pile off if they think the momentum is reversing. In the late 70's, gold hit a high of $800. It then went on a two decade slide that saw it hit $250. It is now at $1200. This is the kind of roller coaster move that leads gold to be characterized as high risk. While the value will never go to zero, you can lose a great deal of money if you buy at the high, and end up having to sell at a loss a short time later, or holding the asset for decades while other assets skyrocket.
60 billion in debts spread around the world. i believe they offered like 80 cents on the dollar making a 12 billion loss,again,spread around the world.
Also,important on debt restructuring,say you accept 80 cents in new debt for your old debt. A coupon of 5% over 5 years on the new paper gets you back to 100%. (5% x 80=4) You may have made nothing,but you’re whole again. There have been plenty of trades where being made whole is better than the alternative.
DJIA down big at open.
Let’s see,...... Dubai needs money, gold drops, oil drops, dollar gains, and they turn ON the oil spigots to 110% to raise the money. Dollar is stronger, oils is cheaper,( big time cheaper), what’s not to like?
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