Tuesday, July 3, 2007

Gold Market #9 – Components of This Rally

When interest rates started on their way up the price of gold started on its way down. Now the price of the dollar is on its way down and the price of gold is going back up. Just another component of what controls the price of gold. From Market Watch:

. . . . "The dollar is falling fast now, the oil price is sitting on $70 and looks like staying there or rising. Gold had to run up, despite any efforts to hold it down," he said in e-mailed comments.

"Bolstered by a significant erosion in the dollar ... and geopolitical tremors prompted by the London and Glasgow terror attacks, the decision to go long gold in the short-term was made much easier for market participants," said Jon Nadler, an analyst at Kitco Bullion Dealers, in a note to clients.

. . . . "However, of more importance is the Bear Stearns shambles and the increasing possibility of forced liquidation of more than $1 trillion of collateralized debt obligations (CDOs), which may lead to huge losses in large banks, insurance companies, and pension managers and systemic issues," . . . .

Bear Stearns is having difficulty calculating the exact amount of losses at two hedge funds it runs, and investors will have to wait as long as two weeks for a current accounting of their value, according to a report in The Wall Street Journal Monday. The illiquid nature of many of the exotic mortgage-backed securities the funds held is making it difficult to value the holdings, the Journal reported.

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