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.

Capital Gold Group, dollar decline, gold safe haven, precious metals, silver, U.S. growth, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold, The Capital Gold Group

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

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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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."

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%

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.

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


 

Thursday July 24 2008 15:32 IST

MUMBAI: India's gold prices eased further on Thursday as weak crude oil eroded the value of the metal as an inflation hedge, and local buyers reacted with heavy purchases, dealers said.

"There is a huge demand... in the last couple of days alone 10 tonnes may have been sold all over India," said Prithviraj Kothari, director of Riddisiddhi Bullions Ltd.

Foreign gold, that guides the local market, rebounded from a two-week low on bargain hunting as crude oil stabilized after steep drops from its all-time highs this month.

Gold generally tracks crude oil as the latter signals inflation, while the metal negates it.

Investors, women and jewellers were thronging Zaveri Bazaar to buy gold, said Jitendra Kantilal of Jugraj Kantilal & Co, a prominent trader in Mumbai's Zaveri Bazaar.

"They are buying coins and bars... mostly 100 gram bars for investment," said Kantilal.

But consumers haven't given up hopes of more dips, said D.P. Naresh, a wholesaler in Bangalore.

"There is a lot of appetite for prices at lower levels," said Naresh. "At $915 an ounce, there would be huge interest."

India's lean season for gold purchases is set to end in another month after which festivals and weddings are expected to spur demand for the yellow metal.

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Commentary:  ETF's add to global gold demand and allow investors to participate in the commodities market, but do not provide the safety and preservation of physical gold assets, nor do they add the additional portfolio diversification of a hard asset allocation in physical gold.

The Hong Kong Securities and Futures Commission has approved the city`s first gold ETF

The Hong Kong Securities and Futures Commission has approved the city`s first gold exchange-traded fund to meet investors` demand after bullion prices climbed.

State Street Global Advisors, the money-management unit of the world`s second-largest manager of exchange-traded funds, and the World Gold Council will give details on July 24, according to a media invitation sent by Hill & Knowlton Asia Ltd.

Hong Kong wants to bolster its position as an Asian financial center as rivals Tokyo and Singapore offer commodities trading. Gold for immediate delivery has jumped 39% in the past 12 months as investors seek an inflation hedge and alternative assets as global equities declined.

"Gold-related investment products are expected to be well received when inflation remains high as investors are seeking ways to preserve their wealth," Kenny Tang, associate director at Tung Tai Securities, said in Hong Kong. "An ETF makes investment in gold easier and more accessible for public investors. What they need is only a stock-trading account."

The listing in Hong Kong comes after a similar fund started trading in Japan this year and in Singapore in 2006. Hong Kong is also planning to start a commodities exchange in the first quarter of 2009 and will offer dollar-denominated fuel oil contracts for delivery into China.

"We have seen growing investor interest in the commodities market and have been working with industry participants to enable the introduction of different commodities products," the regulator said on July 24 in a statement on its Web site.

The SPDR Gold Trust was approved on July 21, the regulator said. It didn`t say when the fund will start trading.

Hong Kong Exchanges & Clearing Ltd., the operator of Asia`s third-largest stock market, is trying to reduce its reliance on stocks by venturing into commodities. The bourse will start trading gold futures in October.

Capital Gold Group, commodities, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold demand, gold ETF, gold IRA, IRA gold

July 22 2008 3:01PM

The first thing people usually consider when buying gold is its price, but unfortunately, they are grabbing the wrong end of the stick. Price is of secondary importance. To explain why, one has to examine the reasons for buying and holding gold.

The motivation to buy gold is usually driven by the pursuit of some defensive financial strategy. For example, gold is a proven and time-tested inflation hedge, so people acquire gold if they believe inflation is likely to worsen. This defensive strategy aims to protect your purchasing power because with gold you hold sound money instead of some inflating national currency.

Another defensive motivation to acquire gold is its unique attribute of being money with no counterparty risk. This significance of this risk was highlighted by the bank-run at Northern Rock in the UK last year and more recently, Bear Stearns in the US. People withdrew their money from those banks because they recognized that their ‘money’ was only as good as the financial capability of those banks to make good on their promise. In contrast, gold is not dependent upon a promise because it is the only money that is a tangible asset, and not an I.O.U. of some financial institution.

Another reason people focus on the price of gold is because they consider it to be an investment, but it’s not. Investments generate rates of return because you put money at risk, for example, by lending it or buying equity in a company. If the investment is successful, you will generate a return, increasing your wealth. But gold doesn’t do this. Gold preserves wealth; it doesn’t increase it.

For example, one ounce of gold purchases approximately the same amount of crude oil today as it has at anytime over the past 60 years. Who would want an investment like that? Gold hasn’t generated any rate of return. It hasn’t given its holders the opportunity to buy more crude oil. But because you can still buy essentially the same amount of crude oil, an ounce of gold has done exceptionally well at protecting wealth by preserving purchasing power, which is what money is supposed to do.

Money is a temporary store of value where we place a portion of our wealth while we decide whether to spend, invest or save (hoard) it. So when we hoard gold, we are in fact saving money until that moment in time when we decide to spend or invest it, which brings me back to my basic point.

Does one question the price (i.e., purchasing power) of dollars before choosing to open a savings account? No, of course not. Savings represent the portion of one’s accumulated wealth held as liquidity (i.e., money) either for a rainy day, to accumulate before spending or investing it, or just to safeguard this portion of your wealth safely and securely. But an inflating dollar doesn’t achieve these aims. The dollar – and indeed every other national currency – has severe problems that undermine their usefulness. In contrast, protecting wealth is what gold does exceptionally well by preserving the purchasing power of one’s liquidity, not necessarily from day-to-day or week-to-week, but consistently and reliably over longer periods of time.

So instead of focusing on gold’s price when buying it, focus on what gold is, what it offers, and what it accomplishes for you. Gold is a form of savings that securely preserves that portion of your wealth that you choose to hold as sound money.

I recognize that it is difficult to view gold in this way and to give little regard to its price, particularly because we are so used to looking at prices of goods and services in terms of dollars and not gold. Also, we have been trained to think of gold as an investment instead of what it really is – money. But we can overcome these biases and incorrect conventional wisdoms.

One way to do that is to consider accumulating gold on a regularly monthly basis. In other words, save some money every month, but don’t save dollars, the purchasing power of which is being inflated away. Save sound money instead. Save gold.

When gold is viewed in this way, it is clear that even with the four-fold increase in the gold price since 2001, no one has ‘missed the boat’. Building savings by accumulating gold is always a good thing.

Putting the Gold Price in Perspective – follow-up

The above article generated some interesting questions from readers of “Information Line”. Here is one of those questions and my response.

Q. – "I read this with interest, but if I buy gold in 2008 at $1000 per ounce and now it’s 2010 and gold is $500 per ounce, why do I not feel good??? Of course, if you buy gold in 2000 at $280 per ounce and sell in 2008 at $1000 I know you feel good, but life does not always work that way!"

A. – You are looking at gold from the perspective of a trader. In other words, you assume that the only advantage to owning gold is to profit from its price swings. Gold is money, and there are also other important benefits that come from owning physical gold. These include:

1. No counterparty risk – When you own physical bullion, you own a tangible asset. Physical gold is money not dependent upon anyone’s promise, which is an attribute becoming increasingly important as the present financial crisis deepens. Ask anyone who had money in Northern Rock in the UK or Bear Stearns about their experience when those banks failed. Better yet, ask anyone who lived through the Great Depression to learn about the fear that arises when your wealth is reliant upon counterparty risk in a financial crisis.
   
   
2. Consistency in commodity purchasing power – If gold were to drop to $500 in 2010, the price of crude oil, wheat and other commodities will have also dropped. You would be able to buy gasoline at $2 per gallon again, and a loaf of bread at much less than today’s price. There is a close correlation between the price of basic commodities and gold. So the loss of purchasing power from a drop in gold’s price may be less than it seems at first glance.
   
   
3. Not reliant upon government decisions – The value of the dollar is dependent upon government politicians and bureaucrats. Therefore, the dollar has become a political tool, rather than what money is supposed to be, namely, a neutral tool useful in commerce available to one and all and unfettered by government interference. Government actions can undermine the usefulness of currency. Moreover, when you own dollars you are speculating that the government will not take any actions harmful to the currency. That’s not a good bet because experience has shown that governments eventually and inevitably totally destroy the currency under their management.
   
   
4. Assets outside the banking system – Gold provides diversification by enabling you to place a portion of your money outside of banks, and indeed, the entire monetary system of fiat currencies. Therefore, this portion of your wealth is removed from the threat of capital controls and other government imposed restrictions. This safety you receive from gold can be enhanced further when you store gold in countries outside of where you live and where there is no history of asset confiscation by government.

The above points explain why gold has value. Namely, it is useful in many different ways. But there is one last point worth mentioning.

While the future is unknowable and unpredictable, the probability of gold falling to $500 in 2010 is “slim to none”. The only way for gold to fall to that level would be for the purchasing power of the dollar to be significantly enhanced. In other words, instead of inflating the dollar, the US government would need to embark on a new monetary policy aimed at deflating the dollar, the result of which would be to enhance the dollar’s purchasing power, repeating the experience of the Great Depression. Monetary policy is aimed specifically at avoiding another deflationary Great Depression, so it is reasonable to expect that the dollar will continue to be inflated, meaning the price of gold will continue to rise.

by James Turk

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

By Marianne Stigset

July 15 (Bloomberg) -- Gold rose to the highest in almost four months in London as political tension in the Middle East and financial concerns in the U.S. increased investor demand for the metal as a haven.

Gold gained for a fifth day after U.S. financial shares fell to the lowest in a decade yesterday on speculation a shortage of capital will cause some banks to collapse. Iran, OPEC's second- biggest producer, is defying United Nations efforts to halt its nuclear program.

``Heightened tensions towards Iran and fears of a meltdown in U.S. financial markets triggered further flight-to-safety demand,'' James Moore, an analyst at TheBullionDesk.com in London, wrote in a report today. Gold is ``on course to challenge resistance around $982-90 an ounce,'' Moore wrote, without giving a timeframe.

Gold for immediate delivery rose $10.68, or 1.1 percent, to $983.28 an ounce as of 12:46 p.m. in London. It earlier reached $985.16, the highest since March 17. Futures for August delivery rose $11.40, or 1.2 percent, to $985.10 on the Comex division of the New York Mercantile Exchange.

The dollar fell to a record low against the euro, bolstering gold's appeal as a hedge against further declines in the U.S. currency. Crude oil rose above $146 a barrel, increasing demand for gold as a hedge against inflation. Global stock markets fell.

``With the downturn in equity markets a lot of people are diversifying into gold,'' said Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin. Gold may reach $1,000 an ounce this week, he said.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by gold, advanced to a record 705.9 metric tons on July 10. Holdings in the fund rose from 659.91 tons, according to data posted on the company's Web site July 11.

Morning Fixing

Gold rose to $981.75 an ounce in the morning ``fixing'' in London, used by some mining companies to sell production, from $968.00 at the previous afternoon fixing.

Among other metals for immediate delivery, platinum dropped $3.50, or 0.2 percent, to $2,018.50 an ounce. Palladium rose 50 cents, or 0.1 percent, to $452.25 an ounce and silver gained 31.49 cents, or 1.7 percent, to $19.4049 an ounce.

Platinum fell to $2,015 an ounce in the morning ``fixing'' in London from $2,017 at the previous afternoon fixing. Palladium declined to $450.00 an ounce, from $451.00.

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

By John Poirier and Rachelle Younglai

WASHINGTON (Reuters) - U.S. banking regulators swooped in to seize mortgage lender IndyMac Bancorp Inc on Friday after withdrawals by panicked depositors led to the third-largest banking failure in U.S. history.

California-based IndyMac, which specialized in a type of mortgage that often required minimal documents from borrowers, became the fifth U.S. bank to fail this year as a housing bust and credit crunch strain financial institutions.

The federal takeover of IndyMac capped a tumultuous day for U.S. markets that saw stocks slide on a surging oil price and renewed fears about the stability of the top two home financing providers, Fannie Mae and Freddie Mac.

IndyMac will reopen fully on Monday as IndyMac Federal Bank under Federal Deposit Insurance Corp supervision, but tensions ran high as customers at a branch at its Los Angeles-area headquarters read a notice in the window saying it was closed.

At another branch down the road, a man who said he had more than $200,000 (100,000 pounds) in an account -- twice what is normally FDIC guaranteed -- argued with a security guard who was closing up.

The FDIC, which will seek a buyer for IndyMac, estimated the cost of the bank's failure to its $53 billion insurance fund at between $4 billion and $8 billion.

"IndyMac is a company that was pretty much 100 percent invested in mortgage assets, and we're in a bad mortgage market, and it had no capital. It's not complicated," said Adam Compton, co-head of global financial stock research at RCM in San Francisco, which manages about $150 billion.

IndyMac joins top bank failures headed by the 1984 collapse of Continental Illinois National Bank & Trust Co.

The Office of Thrift Supervision (OTS) insisted IndyMac's failure was the second-largest bank failure based on FDIC figures. But the FDIC said its data showed it was third behind the collapse of First RepublicBank Corp in 1988.

RUN ON THE BANK

The OTS, IndyMac's primary regulator, blamed comments by New York Democratic Sen. Charles Schumer for causing a run on deposits at the largest independent publicly traded U.S. mortgage lender.

Schumer responded quickly on Friday, blaming the OTS for not doing its job and allowing IndyMac's loose lending practices. "OTS should start doing its job to prevent future IndyMacs," he said in a statement.

Schumer questioned IndyMac's ability to survive the housing crisis in late June, and over the next 11 business days, depositors withdrew more than $1.3 billion, the OTS said.

"This institution failed today due to a liquidity crisis," OTS Director John Reich said. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."

IndyMac was founded in 1985 by David Loeb and Angelo Mozilo, who also founded Countrywide, another big mortgage lender whose loans helped fuel the housing boom. Countrywide was taken over last week by Bank of America Corp.

FDIC spokesman David Barr said agency officials arrived at IndyMac's headquarters in Pasadena at 3 p.m. (2200 GMT).

The successor FDIC-run bank opens for business on Monday. Over the weekend, depositors will have access to their funds by ATM, other debit card transactions, or by writing checks, but no access via online banking and phone services until Monday.

Yet many customers were in the dark as branches shut on Friday. "I'm pissed. They should have let me know," said Elizabeth Ortega, a 29-year-old hairdresser who has a checking account with IndyMac.

IndyMac had said earlier in the week it was unable to raise new capital, would slash staff by 60 percent and had stopped making home loans. Its stock then tumbled, last trading at 28 cents on the New York Stock Exchange, down 95 percent in 2008.

The FDIC insures up to $100,000 per deposit and up to $250,000 per retirement account at insured banks.

At the time of closing, IndyMac had about $1 billion of potentially uninsured deposits held by about 10,000 depositors. The FDIC said it would pay those depositors an advance dividend equal to 50 percent of the uninsured amount.

The OTS told a conference call with reporters that it did not expect significant market impact from IndyMac's closure as the firm is not a systemic institution and does not have numerous counterparties. Reich also said he did not expect a larger thrift to fail.

MORE FAILURES SEEN

Four small banks have already been closed this year and the FDIC is hiring more staff in preparation for more failures. The agency has boosted its list of troubled banks to 90 and has said an increasing number of banks face high exposure to deteriorating conditions in commercial real estate and construction lending. Last year, just three banks failed.

"IndyMac's takeover by the FDIC is one of many to come," predicted Daniel Alpert, an investment banker at Westwood Capital in New York.

Former FDIC official Ann Graham said it was not unprecedented for the FDIC to start running a bank after it fails. "It happens when they need to move more swiftly with the closing than they can move with a potential sale," said Graham, a law professor at Texas Tech University.

"They don't have to sell the institution over the weekend," she said. "They have the time to shop around."

Graham said the FDIC has the authority to operate an institution for two years but expected the agency would dispose of it much sooner than that.

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

***Commentary:  Investors holding their long term savings in gold preserve their wealth and insure themselves against loss.

Feds take over mortgage lender IndyMac. FDIC will seek buyer. May become most expensive bank collapse ever.

 

July 11, 2008

NEW YORK (CNNMoney.com) -- In what could turn out to be the most expensive bank failure ever, troubled mortgage lender IndyMac Bank was taken over by federal regulators on Friday.

The operations of the Pasadena, Calif.-based bank - once one of the nation's largest home lenders - were shut down at 3 p.m. by the Office of Thrift Supervision and transferred to the Federal Deposit Insurance Corp.

According to the FDIC, 10,000 IndyMac customers could lose as much as $500 million in uninsured deposits. The agency says the failure will cost the Deposit Insurance Fund between $4 billion and $8 billion, based on preliminary estimates.

"It's possible this will be the most costly bank failure in history, but it's too soon to say," FDIC Chairman Sheila Bair said in a conference call late Friday night. The failure could also affect premiums paid by all banks for deposit insurance, she added.

IndyMac, with assets of $32.01 billion and deposits of $19.06 billion, is the fifth bank to fail this year. Between 2005 and 2007, only three banks failed. And in the past 15 years, the FDIC has taken over 127 banks with combined assets of $22 billion, according to FDIC records.

"There will be increased failures, but it will be within range of what we can handle," Bair said. "People should not worry."

IndyMac marks the largest bank collapse since 1984, when Continental Illinois, which had $40 billion in assets, failed, according to FDIC records. The two most expensive failures were in 1988: American Savings and Loan Association in California ($5.4 billion) and involved First Republic Bank in Texas ($4 billion).

What now for IndyMac customers?

Bair said that the FDIC will try to sell IndyMac as a complete entity within 90 days.

When a bank shuts down, traditional bank accounts are insured to at least $100,000. Some accounts such as annuities and mutual funds are not insured at all. Individual Retirement Account funds are insured to $250,000.

Customers with uninsured deposits will get at least half that money back, and they could get more back, depending on what the FDIC gets when it sells the bank, said Bair.

IndyMac customers will have their funds transferred to a new entity - IndyMac Federal FSB - controlled by the FDIC. They will have uninterrupted customer service and access to their funds by ATM, debit cards and checks.

However, customers will have no access to online and phone banking services this weekend, according to the FDIC. Service will resume on Monday. Loan customers were advised to continue making loan payments as usual.

For additional information, the FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3:00 p.m. to 9:00 p.m. (PDT), and then daily from 8:00 a.m. to 8:00 p.m. thereafter, except Sunday, July 13, when the hours will be 8:00 a.m. to 6:00 p.m. Customers also may visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.

How it got to this point

IndyMac specialized in loans it had long argued were of minimal risk: low documentation loans to residential mortgage borrowers.

On Tuesday, IndyMac - which had 33 branches - announced that it was firing 53% of its workforce and exiting its retail and wholesale lending units. Last year, the lender was ranked 11th in residential mortgage origination, according to trade publication Inside Mortgage Finance.

More importantly, IndyMac also disclosed that regulators no longer considered it "well capitalized." As a result, since Tuesday, the bank wasn't able to accept brokered deposits, or short-term investments in large dollar amounts from brokers seeking the highest return on certificates of deposit.

Over the past two years, IndyMac dropped over 95% in stock price, or about $3.5 billion in market capitalization. Shares traded down nearly 10% on Friday to close at 28 cents.

IndyMac lost $184.2 million in the first quarter and announced on Monday that it was expecting a wider loss for the second quarter. It lost $614 million last year stemming from its focus on the Alt-A mortgage sector, where it originates loans to borrowers who fall between prime (or conforming) and sub-prime on the credit spectrum. The lender's chief executive, Michael Perry, had long argued that it was being unfairly punished given its relatively paltry exposure to sub-prime mortgages.

Rising Alt-A and prime mortgage delinquencies likely were enough indication for investors that the housing crisis had moved beyond the weakest borrowers. Even worse, with the securitization markets in collapse, IndyMac had no way to get new loans off its books. As it turned out, IndyMac was a leader in loans requiring little income and asset documentation, a category that has had disastrous levels of delinquencies at other troubled lenders. What loans the bank had made recently were to borrowers with well-documented assets and income, but those are sharply less profitable with respect to fees and interest income.

IndyMac, in its filing on Monday, said it would focus on its reverse mortgage business, retail branch network and mortgage servicing operations. But the growth restrictions placed on IndyMac by regulators and the banks and brokerages it did business with, as well as the sharply higher borrowing costs, placed the profitability of even its non-mortgage-related banking efforts in doubt.

Even efforts to prop up the bank hurt it. Last month, Sen. Charles Schumer, D-N.Y., wrote a series of letters to regulators in Washington and California asking them to take steps to prevent the bank's "likely collapse." In response, about $100 million in customer deposits has been withdrawn from the bank, according to one of its filings.

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Gold Soars To Multi-Month High

(RTTNews) - The price of gold surged again on Friday and hit a 3 1/2-month high. Gold for August delivery moved to $961.10, up $19.10 on the session. Prices hit as high as $963.30 in the early going, pushed by record crude oil prices.

The dollar extended this week's losses versus the euro Friday morning, but was stable against most other majors. Renewed concerns about the health of the US financial sectors have weighed on the dollar for the past few sessions. Gold usually moves opposite the dollar because of its hedge attraction.

Gold closed higher for the second straight day as it continued to rebound from a slump from earlier this month. August gold moved to $942, up $13.40 on the day. Prices touched as high as $946.00 in the early-going.

Prices turned higher on Wednesday after a three-day dive. August gold closed at $928.60, up $5.30 for the session. The precious metal closed lower by $5.50 on the session. The metal touched as low as $913.00, its lowest mark since June 26. The metal recouped some of its losses but still lower by $4.80 on Monday as traders returned to work after a three-day holiday weekend.

The dollar has seen mild weakness over the last two days and returned some of its gains against other major currencies, which help boost the price of gold. The greenback had seen strength recently, reducing gold's hedge appeal.

Traders considered Labor Department data showing import prices in the U.S. climbed 2.6 percent in the month of June. This is higher than the expectations of analysts, who were looking for a rise of about 2 percent. Meanwhile, the Commerce Department reported that the U.S. trade deficit dropped to a seasonally-adjusted $59.8 billion.

Oil soared on Thursday amid turmoil in the Middle East and moved above $141 a barrel again. Light sweet crude for August delivery ended the session at $141.65, up $5.60 on the session. Prices climbed as high as $142.08 and erased most of its sharp drop from earlier in the week.

On Thursday, Iran test-fired more missiles, a day after testing Shahab-3, a long- range missile capable of reaching Israel. Iran has said it will close the Strait of Hormuz, which is vital to crude oil distribution, if its nuclear facility is attacked. Meanwhile, a militant group in Nigeria has threatened to end a ceasefire.

Traders also considered data from Wednesday showing inventories dropped more than expected in the recent week. Inventories decreased by 5.9 million barrels in the week ended July 4, according to the latest EIA report. However, gasoline and distillate stockpiles increased in the recent week.

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CNBC HEADLINES:

CREDIT CONCERNS MOUNTING
SELLOFFS INTENSIFY THROUGHOUT DAY
TECH JOINS SELLOFFS

FREDDIE MAC DOWN 24%
FANNIE MAE DOWN 13% TODAY

WORST DAY FOR THE BANKS GOING BACK TO JULY, 2002
FANNIE AND FREDDIE AT LOWEST LEVELS SINCE 1992

S&P FALLS 2.3% TODAY; DOWN 20.5% SINCE OCTOBER; IN BEAR TERRITORY

DOW FALLS 2.1% TODAY - 236 POINTS - NOW AT 11,147.44

NASDAQ DOWN 2.6% TODAY
NASDAQ'S LOWEST CLOSE SINCE MARCH

DOW & NASDAQ IN BEAR MARKET
STOCKS DROP INTO OFFICIAL BEAR MARKET

POOR FANNIE BOND OFFERING SPARKS MARKET SELLOFF
MERRILL,FANNIE MAE PUSH S&P 500 INDEX TO WORST DAY SINCE JULY 2002

"ECONOMIC DECLINE ACCELERATING IN PAST SIX WEEKS" - WARREN BUFFETT

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Comment:  In a typical response to political turmoil, gold prices edged up after Iran test-fired 9 long and medium range missiles early today in what its officials say is a response to threats from the U.S. and Israel.  The tests "demonstrate our resolve and might against enemies who in recent weeks have threatened Iran with a harsh language," one military official said. 

A similar flight to the safety of gold was seen after the December assassination of Benazir Bhutto. 

Gold Prices edge up after Iran Test-fires Missiles

July platinum rose 20 cents to $1,950.60 an ounce and September palladium added $5.75 to $448.20 an ounce, but September copper dropped 3 cents to stand at $3.67 a pound.

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Bloomberg Television
7/8/07

In his address to the FDIC conference in Arlington, Virginia today, J.P. Morgan CEO Jamie Dimon stated that the correction in the banking industry is still taking place and that the problem is going to get far worse.

He stated that "the next shoe to drop" will be commercial banks and regional banks, specifically loans to builders.

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By Jesse Westbrook

July 8 (Bloomberg) -- A U.S. Securities and Exchange Commission investigation into credit-rating companies found the firms improperly managed conflicts of interest and violated internal procedures in granting top rankings to mortgage bonds.

A 10-month review of Moody's Investors Service, Standard & Poor's and Fitch Ratings found instances in which analysts contributed to fee discussions and weighed the likelihood they would lose clients if they issued certain ratings, the Washington-based SEC said in a report released today. Employees also cast doubt on the quality of some ratings, the SEC said.

``We uncovered serious shortcomings at these firms,'' SEC Chairman Christopher Cox said today at a news conference. ``When there were not enough staff to do the job right, the firms sometimes cut corners.''

Pension and money-market funds bought AAA-rated securities backed by mortgages made to the riskiest borrowers because they offered higher returns than government bonds with the same ratings. In many cases, credit raters were paid by investment banks selling the bonds, prompting regulators and lawmakers to question their independence.

The SEC report details an e-mail in which an analyst at an unidentified credit-rating company refers to the market for collateralized debt obligations as a ``monster.''

``Let's hope we are all wealthy and retired by the time this house of cards falters,'' said the e-mail, which was sent Dec. 15, 2006, to another analyst at the same firm.

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2008/7/3 2:46:07

Gold is likely to regain $1,000 per ounce by the end of 2008 and to work higher through 2009-2010, Citigroup has forecast.

In its recent Gold Commodity Update, Citigroup metals analysts, John H. Hill and Graham Wark also predicted that “gold is capable of doubling or tripling from current levels.”

The analysts said “secular and seasonal factors favor gold” during the second half of this year.

“We remain positive on gold, based on macro and supply/demand factors. The forces that have propelled gold for 5 years are firmly in place,” they stated.

During the second quarter of this year, gold has averaged $896 per ounce, up 34 percent from the same quarter of 2007 and down 3 percent from the first quarter of this year.

“Following a series of downside fundamental tests gold appears to have found a floor, and quietly climbed back to $917per ounce. We believe the drivers of the gold bull market remain intact, heading into a favorable period,” analysts added.

As at yesterday, the price of gold stood at $940.900 per ounce. Gold prices increased by more than 30 percent in 2007. Gold has generated positive returns of 43 percent over the last year and 11 percent year to date in 2008.

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