Gold keeps shining
Big Picture
New taxes hurt retail; jobs rebound
Retail sales took a pounding in July as three provinces increased their sales tax. Statistics Canada reported that retail sales fell 0.1%, while economists expected a 0.6% gain, as Canadians spent less on furniture, home furnishings, electronics and appliances in Ontario, British Columbia and Nova Scotia. Jobless claims dropped 4.5% in July versus June, and are down 20% since peaking a year ago. Employment gains have now offset nearly half of the jobs lost during the recession.
The U.S. economy is stuck in a “painfully slow recovery,” according to the National Bureau of Economic Research. The panel of prominent U.S. economists reported the recession officially ended in June 2009 after shaving 4.1% off U.S. economic activity, but warned that despite $1-trillion in economic stimulus, expansion could take years to reach pre-recession levels. Ireland posted a surprise decline in second-quarter gross domestic product, fuelling concerns over its ability to repay its debts and cut the budget deficit to 3% of GDP by 2014.
Markets
Rally steams, then stalls
The September rally picked up steam on Monday, sending North American indexes to four-month highs, amid hopes the Federal Reserve would announce measures to stimulate the economy. But the rally stalled as the Fed deferred any new steps and left key interest rates unchanged. Microsoft announced it will raise its quarterly dividend by 23%. With $37-billion of cash on its balance sheet, Microsoft will share the wealth with shareholders frustrated by stagnant share prices – prices are at the same level as eight years ago. Adobe shares plunged 19% as several Wall Street analysts cut their ratings on the stock after a disappointing forecast for its fourth fiscal quarter.
Netflix went live in Canada, offering unlimited access to 7,000 movies and television shows over the Internet for $7.99 per month. At the same time, Blockbuster in the U.S. filed for bankruptcy, hoping to stage a turnaround after slashing US$900-million of debt. General Mills profit rose 12% despite steep discounting and higher costs for raw materials such as wheat. Cotton prices reached a 15-year high as flooding in Pakistan devastated crops. The supply shock triggered panic buying by clothing manufacturers, especially in China, the world’s largest consumer of cotton. CP Rail reported shipments were up 14% so far in 2010 thanks to a recovery in potash exports and an unexpected leap in shipments on Canada’s west coast.
Sector Plays
Gold Shines again
Last time I wrote about gold was in May and the price had reached an all time high of $1248.95. Last week gold shone through $1300, another all time high. IShares Comex Gold Trust (IGT) seeks to correspond with the day-to-day movement of the price of gold bullion. From a technical perspective gold prices have momentum behind them. The current price has been trading above the 50 and 100 day moving average for over a month now and relative strength and MACD (moving average convergence divergence) both appear positive as the trend goes upward. According to research done by Brooke Thackray, Gold tends to do well in September prior to the fall festival and wedding season in India. He also points out that its shine can dull as we enter into October. “In the past this has largely been the result of the European Central Banks, at this time of year, allocating the amount of gold each country can sell throughout the year. Historically, this has caused the gold price to fall as the banks were eager to sell.” With the sovereign debt crisis and the slow economic recovery one has to question whether that will be the case this year. Frank Holmes, CEO and CIO US Global Investors argues, another factor that could be driving the price of gold is “competitive currency devaluation”. The US, Japan and the European Union are all dealing with little or no economic growth at home….Keeping their currencies down is an important part of turning hope into reality.” The basic view is that devaluations make gold more attractive as a safe haven investment.
New taxes hurt retail; jobs rebound
Retail sales took a pounding in July as three provinces increased their sales tax. Statistics Canada reported that retail sales fell 0.1%, while economists expected a 0.6% gain, as Canadians spent less on furniture, home furnishings, electronics and appliances in Ontario, British Columbia and Nova Scotia. Jobless claims dropped 4.5% in July versus June, and are down 20% since peaking a year ago. Employment gains have now offset nearly half of the jobs lost during the recession.
The U.S. economy is stuck in a “painfully slow recovery,” according to the National Bureau of Economic Research. The panel of prominent U.S. economists reported the recession officially ended in June 2009 after shaving 4.1% off U.S. economic activity, but warned that despite $1-trillion in economic stimulus, expansion could take years to reach pre-recession levels. Ireland posted a surprise decline in second-quarter gross domestic product, fuelling concerns over its ability to repay its debts and cut the budget deficit to 3% of GDP by 2014.
Markets
Rally steams, then stalls
The September rally picked up steam on Monday, sending North American indexes to four-month highs, amid hopes the Federal Reserve would announce measures to stimulate the economy. But the rally stalled as the Fed deferred any new steps and left key interest rates unchanged. Microsoft announced it will raise its quarterly dividend by 23%. With $37-billion of cash on its balance sheet, Microsoft will share the wealth with shareholders frustrated by stagnant share prices – prices are at the same level as eight years ago. Adobe shares plunged 19% as several Wall Street analysts cut their ratings on the stock after a disappointing forecast for its fourth fiscal quarter.
Netflix went live in Canada, offering unlimited access to 7,000 movies and television shows over the Internet for $7.99 per month. At the same time, Blockbuster in the U.S. filed for bankruptcy, hoping to stage a turnaround after slashing US$900-million of debt. General Mills profit rose 12% despite steep discounting and higher costs for raw materials such as wheat. Cotton prices reached a 15-year high as flooding in Pakistan devastated crops. The supply shock triggered panic buying by clothing manufacturers, especially in China, the world’s largest consumer of cotton. CP Rail reported shipments were up 14% so far in 2010 thanks to a recovery in potash exports and an unexpected leap in shipments on Canada’s west coast.
Sector Plays
Gold Shines again
Last time I wrote about gold was in May and the price had reached an all time high of $1248.95. Last week gold shone through $1300, another all time high. IShares Comex Gold Trust (IGT) seeks to correspond with the day-to-day movement of the price of gold bullion. From a technical perspective gold prices have momentum behind them. The current price has been trading above the 50 and 100 day moving average for over a month now and relative strength and MACD (moving average convergence divergence) both appear positive as the trend goes upward. According to research done by Brooke Thackray, Gold tends to do well in September prior to the fall festival and wedding season in India. He also points out that its shine can dull as we enter into October. “In the past this has largely been the result of the European Central Banks, at this time of year, allocating the amount of gold each country can sell throughout the year. Historically, this has caused the gold price to fall as the banks were eager to sell.” With the sovereign debt crisis and the slow economic recovery one has to question whether that will be the case this year. Frank Holmes, CEO and CIO US Global Investors argues, another factor that could be driving the price of gold is “competitive currency devaluation”. The US, Japan and the European Union are all dealing with little or no economic growth at home….Keeping their currencies down is an important part of turning hope into reality.” The basic view is that devaluations make gold more attractive as a safe haven investment.
posted by David Allard at
12:10 PM
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