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November 3, 2008
Gold Rose Last Week:
Gold Rose Last Week until Friday, a fitting crazy Halloween conclusion to a roller-coaster month: October 2008 was gold's worst month since February, 1983, and the stock market's worst month since October, 1987. Copper fell 35% in October, while silver fell 20% for the month. Gold lost 18%, but most of that was due to the 11% gain the U.S. dollar last month. But today:
Gold opened higher:
This Morning, Gold opened up nearly 3% to $740 (for the December futures contract), before consolidating to a 1% gain. A new month has started, and October is best forgotten, for investors in nearly every market - from commodities to stocks. Part of gold's rise this morning is due to the dollar's recent decline, after three months of strong recovery. The euro bottomed out at $1.24 to the dollar last Monday and rose to $1.29 over the weekend, giving gold a boost in dollar terms.
Gold 52 weeks ago (November 2, 2007): $796.50 Gold's low for 2008: $692.50 on October 24
Gold's average price for 2008 so far: $887.38 Gold's high for 2008: $1023.50 on March 17
Deficits Growing Larger:
Record U.S. Deficits Growing Larger: The dollar is finally starting to fall again, due to the specter of huge, runaway federal deficits this year. The U.S. federal deficit for the fiscal year just ended (on September 30) reached a nominal record of $455 billion. This is a shocking 180% rise from the previous year. The annual deficit had consistently shrunk the three previous years, from $413 billion in 2004 to $162 billion (barely 1% of GDP) in 2007, mostly due to the 2003 Bush tax cuts and rising corporate profits. Now, the Congressional Budget Office forecasts the fiscal 2009 deficit will rise to $750 billion, the highest ever, representing 5% of next year's GDP.
2009 Deficit over $1 Trillion?:
New Stimulus Packages Could Push the 2009 Deficit over $1 Trillion, since the U.S. Treasury will have to issue more than $1 trillion in new U.S. Treasury securities in fiscal 2009 to cover the current federal deficit plus the recent $700 billion bailout programs. This is a staggering amount of debt, which will weaken the dollar. The recent strength of the U.S. dollar may subside soon...
Gold vs. the Dollar: 30 years ago this weekend:
On November 1, 1978, the dollar set a new record low, while the "Carter package" of monetary reforms earmarked $30 billion to support the dollar, which had sunk to about 1.3 to the Swiss franc (from 4.3 in 1971). The Carter package mandated that inflation and unemployment both fall under 3% by 1980. Alas, both rates rose to double digits by 1981, and Carter was gone...
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