Economy Watch keeps a close eye on world events that directly influence your pocket book, for history has proven that gold and rare coins preserve wealth during inflationary times. To view Economy Watch Archives, click here.

November 20: A reality check for investors mulling the sale of gold

Source: Myra P. Saefong, Marketwatch

Tokyo -- It's an age-old question among investors, but one that's more pertinent than ever for traders facing never-before-seen levels in gold prices: How will you know when it's the right time to sell? It's a fair question given gold's shocking $100-an-ounce climb over the last four weeks to a futures price above the $1,150 mark. The December gold contract had started out this year at only $885. "Investors will not know when to sell as they will be so euphoric, all calls for selling will be ignored," said Ned Schmidt, editor of the Value View Gold Report. "Euphoric" is the operative word, with trading in gold in the past month easily described as a feeding frenzy. The precious metal has hit fresh record highs regularly since early October.

Analysts have also been saying that much higher prices are far more likely than a drop back below the $1,000 level. "We may reach levels previously thought of as crazy -- $5,000 an ounce or even $10,000, with plenty of volatility along the way, including pullbacks," said Patrick Kerr, managing director at Amerifutures Commodities & Options. He also predicts that those incredible prices are a possibility as early as the end of 2010. "If not, then soon after." Myra P. Saefong, See full story.

November 19: Delinquencies, foreclosures break record

Source: Marketwatch

Chicago -- Job losses caused more Americans to fall behind on their mortgage payments in the third quarter, leading to a record 14.41% of loans either in foreclosure or with at least one payment past due, the Mortgage Bankers Association's chief economist said Thursday. "Despite the recession ending in mid-summer, the decline in mortgage performance continues. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP," said Jay Brinkmann, chief economist of the MBA, in a news release. "Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07% to 1.42%."

Delinquency and foreclosure rates are expected to continue worsening before improving, he said. The employment picture is unlikely to improve until sometime next year, and even then jobs will grow at a slow pace. "Perhaps more importantly, there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates," he said. About 4 million mortgage loans are 90 days or more past due or in foreclosure, Brinkmann said. That compares with 3.9 million new and previously occupied homes now for sale, he said, adding that there is likely overlap between the numbers. See full story.

November 18: Commodities are en vogue with fund managers

Source: Marketwatch

Madrid -- Global fund managers are hedging their bets against future inflation and pouring more money into commodities and emerging markets, according to a monthly survey released Wednesday. The Bank of America Merrill Lynch survey for November revealed that commodity investing is at its most popular among investors since 2005, when the question first showed up on surveys.

A net 25% of managers have overweight positions in commodities, up from 11% in October, while 53% are overweight emerging markets, against 46% in the prior month. Assets that protect against deflation, such as fixed income and utilities, are proving less popular. "Investors see inflation as a greater risk than deflation and are hedging that risk with overweight positions in emerging markets and commodities, and an underweight position in the U.S. dollar," said Michael Hartnett, chief global equity strategist at B. of A. Merrill Lynch Global Research, said in the research report. See full story.

November 17: Bernanke signals ‘extended’ period may become longer

Source: Marketwatch

Washington -- Federal Reserve Chairman Ben S. Bernanke’s diagnosis of a weak U.S. economy and labor market signaled that the central bank’s extended period of low borrowing costs may get even longer. Bernanke said “significant economic challenges remain,” with lending constrained and the jobless rate above 10 percent. Speaking in New York yesterday, he said U.S. asset prices aren’t out of line with underlying values, and central bank policy will ensure that the “dollar is strong.”

Treasury two-year notes rose and the dollar weakened as investors reduced bets the Fed will raise interest rates by August. In his most extensive comments on the economy since July, Bernanke repeated the Fed’s Nov. 4 pledge to keep rates low for an “extended period,” and he said forecasters anticipate “moderate” growth this quarter after the 3.5 percent pace of expansion in the prior three months. The Fed chief wants to “keep the liquidity spigot wide open for some time to come,” said Stephen Stanley, chief economist at RBS Capital Markets in Stamford, Connecticut. “Bernanke just locked the Fed into an easy monetary policy, at least in the short term, so any implicit threat of response to dollar declines simply has zero credibility.” See full story.

November 16: Dollar stays lower; Bernanke-inspired recovery's short-lived

Source: Marketwatch

Washington -- The dollar briefly recovered some of the session's losses against the euro Monday after Federal Reserve Chairman Ben Bernanke said the central bank is committed to a strong greenback. Gains were limited, however, as the top U.S. central banker also repeated that the Fed anticipates that "exceptionally low" interest rates are likely to persist for "an extended period" and that considerable challenges remain for the economy.

Though remarks from central bankers about the currency are rare, "Bernanke's comments do not present a significant obstacle to dollar bears," strategists at Brown Brothers Harriman said. The dollar index, which tracks the U.S. unit against a basket of foreign currencies, fell about 0.5% to 74.963 in recent trading, after briefly erasing the day's decline, and compared to 75.298 in late New York trading on Friday. The euro briefly turned negative after Bernanke's dollar remarks but then resumed gains to buy $1.4963, up from $1.4903 late Friday. See full story.

November 13: Trade gap widens sharply in September

Source: Marketwatch

Washington -- The U.S. trade deficit widened sharply in September as global activity returned to levels not seen since the financial crisis hit hard in the fall of 2008. The nation's trade deficit expanded 18.2% in September to $36.5 billion from $30.8 billion in August, the Commerce Department said. The one-month worsening in the deficit is the biggest since February 1999. This is the largest trade gap since January.

Imports rose 5.8% to $168.4 billion, the largest percentage increase in imports since February 1993. Exports rose 2.9% to $132 billion in September. This is the fifth consecutive monthly gain in exports. In real terms, which exclude price changes, imports rose 6.2% in September. Exports rose 4.4%. In real terms, the deficit widened by 10.2%. See full story.

November 12: Foreclosure filings surpass 300,000 for 8th straight month

Source: Marketwatch

Washington -- U.S. foreclosure filings surpassed 300,000 for an eighth straight month as unemployment made it tougher for homeowners to pay their bills, RealtyTrac Inc. said. A total of 332,292 properties received a default or auction notice or were seized by banks in October, up 19 percent from a year earlier, Irvine, California-based RealtyTrac said today. One in every 385 households received a filing. The tally fell 3 percent from September, the third consecutive monthly decline.

“The foreclosure problem is still with us and will keep prices down,” Stephen Miller, chairman of the economics department at the University of Nevada at Las Vegas, said in an interview. “The real issue is we don’t know what inventory banks are holding that they have yet to put on the market.” Distressed real estate transactions accounted for 30 percent of all home sales in the third quarter as the median price fell 11 percent from a year earlier to $177,900, according to the National Association of Realtors. U.S. unemployment surged to a 26-year high of 10.2 percent in October as payrolls fell by 190,000 workers, the Labor Department said last week. See full story.

November 11: Global confidence dips as policy makers begin exit strategies

Source: Bloomberg

Singapore -- Confidence in the world economy dipped in November as central banks’ actions to withdraw some emergency measures sparked concern about the strength of the recovery, a Bloomberg survey of users on six continents showed. The Bloomberg Professional Global Confidence Index fell to 60.3 from 61.7 in October, the highest level in the series that began two years ago. The index exceeded 50 for a fourth month, which means there were more optimists than pessimists.

The survey follows steps by central banks including the Federal Reserve to start unwinding stimulus, seeking to avoid market distortions that may spur bubbles in assets from stocks and commodities to real estate. The shift comes at a time when job losses are still rising in the U.S. and Europe, threatening a nascent recovery as consumers limit spending. “Confidence hinges almost entirely on the level of stability produced by extraordinary monetary support,” said Lena Komileva, an economist at Tullett Prebon Plc in London who participated in the survey. “As the effect of fiscal stimulus peaks, the future path of growth figures will become more volatile and that will affect confidence.” See full story.

November 10: U.S. job woes behind need for low rates, Fed officials say

Source: Marketwatch

Washington -- The Federal Reserve's historic zero-interest-rate policies remain necessary because the outlook for the U.S. labor market remains grim, two senior Fed officials said on Tuesday. The News Hub panel discusses new legislation that would set limits on the size of financial companies. They were 1,800 miles apart as they delivered their speeches, but the remarks of Federal Reserve Bank of San Francisco chief Janet Yellen and her Atlanta Fed counterpart Dennis Lockhart bore some similarities -- namely, as near as they could tell, the nation's economic recovery was likely to be subdued.

These comments are important because they are the first by Fed officials after their closed-door policy meeting on monetary policy and rates last week. At their meeting, they voted to keep rates at historic lows and said in the policy statement that these "exceptionally low" rates would be needed for an "extended period." This wording has been in place in the Fed's policy statements since March. However, Fed officials who are more concerned with inflation than growth have been agitating for changes in this language. On Tuesday, Yellen and Lockhart both said that interest rates would have to rise at some point in the future. But they stressed that the economy remains too fragile for the Fed to "normalize" monetary policy. See full story.

November 9: Dollar reached 15-month low in wake of G20 meeting

Source: Marketwatch

New York -- The dollar weakened Monday, pushing an index of the greenback to the lowest in 15 months, after a weekend meeting of Group of 20 policy makers offered no support for the U.S. unit. Traders also took heed of an International Monetary Fund report issued at the G20 meeting that said the dollar has moved closer to "medium-term equilibrium" but "still remains on the strong side." The dollar index, a measure of the greenback against a trade-weighted basket of rival currencies, fell as low as 74.930, a level last seen since August 2008. It recently traded at 75.080, down from 75.760 in North American trading late Friday.

The euro pressed back above the psychologically important $1.50 level for the first time since Oct. 26. It struggled to push much higher and recently traded up about 1% at $1.4991, up from $1.4840 on Friday. The single currency extended its gain after data showed German industrial production rose 2.7% in September. Earlier, the British pound jumped as much as 1.3% and recently bought $1.6717. The dollar stood at 90.01 Japanese yen, from 89.88 yen on Friday. "Risk is bid, the dollar is on its way down," said strategist at RBC Capital Markets. "Like a broken record, the theme once again is U.S. dollar weakness across the board." See full story.

Source: Marketwatch

Washington -- The U.S. unemployment rate climbed to 10.2% in October, topping the 10% mark for the first time in 26 years, the Labor Department reported Friday. Nonfarm payrolls dropped by a seasonally adjusted 190,000 in October, bringing to total number of jobs lost in the recession to 7.3 million. It was the 22nd straight decline in payrolls. Large losses were seen in manufacturing, construction and retail. Health care and temporary-help agencies added jobs. The October jobs report shows a growing disconnect between a recovery in economic output and continued job losses. The economy grew at a 3.2% annual rate in the third quarter, with productivity rising at a 9.5% rate.

"The grinding pace of progress in labor markets likely flags a tepid economic recovery," wrote Sal Guatieri, an economist for BMO Capital Markets. The report was worse than expected. Economists surveyed by MarketWatch were forecasting a rise in the unemployment rate to 10%, with 150,000 lost payroll jobs. An upward revision to August and September payrolls cushioned some of the disappointment, however. See full story.

November 5: Jobless claims fall 20,000 to 512,000

Source: Marketwatch

Washington -- The number of people filing initial claims for state unemployment benefits fell by 20,000 to a seasonally adjusted 512,000 in the week ending Oct. 31, the Labor Department reported Thursday. It was the first decline in two weeks. It's the fewest initial claims since early January. Initial jobless claims have been above 500,000 for 51 straight weeks. The news was mixed, said Jennifer Lee, an economist for BMO Capital Markets. The decline in initial claims was "clearly good news," but her enthusiasm was tempered by a rise in recipients of extended federal benefits.

The figures come one day before the Labor Department reports on the October employment rate. Economists surveyed by MarketWatch expect nonfarm payrolls to fall by 150,000 in October, and for the unemployment rate to rise to 9.9%. "If the pace of decline from the peak is maintained, we are still some five months away from claims reaching the level that will signal net job growth," wrote economists for RDQ Economics. Economists surveyed by MarketWatch expected initial claims to fall to about 520,000. The level of initial claims in the week ending Oct. 24 was revised up by 2,000 to 532,000. See full story.

November 4: Fed to keep rates low for ‘extended period’

Source: Bloomberg

Washington -- The Federal Reserve restated its intention to keep interest rates “exceptionally low” for “an extended period” as long as inflation expectations are stable and unemployment fails to decline. “Businesses are still cutting back on fixed investment and staffing, though at a slower pace,” the Federal Open Market Committee said in a statement today. “Household spending appears to be expanding, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit,” the FOMC said after meeting in Washington.

Chairman Ben S. Bernanke is trying to determine when the recovery is strong enough to withdraw the $1 trillion the Fed injected to avert a depression. While gross domestic product rose for the first time in a year during the third quarter, figures this week are forecast to show payrolls fell further in October. Johnson & Johnson, the world’s largest health-products company, said yesterday it will fire more than 7,000 people. Officials kept their benchmark overnight lending rate at between zero and 0.25 percent, where it has been since December. The conditions they cited to keep it there are “low rates of resource utilization, subdued inflation trends, and stable inflation expectations,” the Fed said. See full story.

November 3: No hints, winks, nods from Fed about rate hikes

Source: Marketwatch

Washington -- The Federal Reserve will not give the market any hints, winks or nods about its battle plan for pushing interest rates higher after their meeting concludes on Wednesday, economists said. The overwhelming consensus is that the Fed will hold the federal funds rate steady at near-zero, where the Fed's target has been since last December. The Federal Open Market Committee begins its two-day meeting on Tuesday. An announcement is expected Wednesday at about 2:15 p.m. Eastern. "The facts on the ground -- high unemployment, low inflation, no net private-sector job creation -- suggest to us that it is inconceivable that policy will actually change on Nov. 4," said the economic team at Credit Suisse in a report to clients.

A report in the Financial Times on Oct. 23 set off a firestorm when it suggested that the Fed was considering scrapping its promise to keep rates "exceptionally low" for "an extended period." The 'extended period' phrase has been in place since March. As the dust has settled, most Fed watchers have concluded that Wednesday is too early for the central bank to edit the language. "We don't expect them to move away from the extended-period language," said Dean Maki, chief U.S. economist at Barclays Capital Inc., in New York. See full story.

November 2: Factory sector strengthens in October

Source: Marketwatch

Washington -- The nation's manufacturing firms grew at the fastest pace in more than three years in October, according to a closely followed survey of top executives released Monday. The Institute for Supply Management index rose to 55.7% from 52.6% in September, well above the 53.0% expected by economists surveyed by MarketWatch. It's the highest reading since April 2006. The production gauge also rose to a five-year high.

Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting. The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better this month than last. The nation's economy, as measured by gross domestic product, grew at a 3.5% pace in the third quarter. The big question remains whether the economy can stand on its own as the stimulus wanes. See full story.

October 30: Consumer spending, confidence fall on job worries

Source: Bloomberg

Washington -- Americans cut spending for the first time in five months and a gauge of confidence weakened, signaling consumers will make a limited contribution to the recovery without government incentives. Consumer spending fell 0.5 percent in September after a 1.4 percent jump in August, Commerce Department figures showed today in Washington. The Reuters/University of Michigan final index of consumer sentiment decreased to 70.6 in October from 73.5 the month before.

Mounting jobs losses, stagnant incomes and the expiration of programs such as the cash-for-clunkers auto rebates threaten to hold back household spending as the nation emerges from a recession. An unexpected improvement in an index of business activity reported separately today supports forecasts that manufacturing may help fill the void and propel the expansion that started last quarter. “Manufacturing growth is going to be robust and broad- based,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Consumers are waiting to see whether the job market will improve before confidence takes another big leg up. That’s coming, but it’ll be a gradual process.” See full story.

October 29: Dollar weakens after U.S. economy grows, boosting stocks

Source: Marketwatch

New York -- The dollar declined versus major counterparts Thursday, stemming a string of gains in recent sessions, after a report showed the U.S. economy returned to growth in the third quarter, boosting stocks and reducing the appeal of the relative safety of the greenback. A separate report showed first-time jobless claims dropped in the latest week. "The better-than-expected report caused risk appetite to surge across the board," said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, fell for the first day in six. It traded at 75.891 recently, down from 76.456 in North American trading on Wednesday.

The euro rose for the first time in four days to $1.4847, compared to $1.4713 late Wednesday. The British pound jumped 1.1% versus the dollar to buy $1.6567. The Japanese yen, however, has been the most sensitive to risk aversion trading, falling when investors are more interested in riskier assets such as equities. Against the yen, the dollar rose to buy 91.42 yen, from 90.80 yen on Wednesday. Both the yen and dollar have declined as traders borrow in the low-yielding currencies to buy higher-yielding assets, putting on so-called carry trades. See full story.

October 28: Gold to rise to $2,000 amid 'massive' inflation, Superfund says

Source: Bloomberg

Singapore -- Gold may rise to a record $2,000 an ounce in the next three years as investors hedge against “massive” inflation sparked by governments printing money, according to Superfund Financial Singapore Pte’s Aaron Smith. “In the next few years, after the deflation cycle, we’ll see massive inflation,” Managing Director Smith, 30, said in an interview. “Soon, when you go to buy a cup of coffee, you’ll pay $20 or $30 because the dollar won’t be worth anything.”

The company’s Superfund Green Gold A Fund, which has more than doubled since its inception in 2005, has lost 15.6 percent this year because of higher volatility, said Smith, who joined in 2002. Gold rose to an all-time high this month as governments including the U.S. boosted debt to combat the global recession. “When the U.S. dollar crashes, all the paper currencies have to crash, otherwise if their currencies are too strong, their economies will be weak,” said Smith, who issued similar gold forecasts in May and earlier this month. “Another excellent buying opportunity for investors is silver.” Gold for immediate delivery, which touched a high of $1,070.80 an ounce on Oct. 14, traded at $1,039.32 at midday in Singapore. The metal has strengthened 18 percent this year, while the Dollar Index, a six-currency gauge of the dollar’s strength, fell 6.4 percent. See full story.

October 27: Confidence drops for second straight month in Oct.

Source: Marketwatch

Washington -- U.S. consumers doubt that the much-touted economic recovery is under way, according to the latest report on consumer confidence released by the Conference Board on Tuesday. The consumer confidence index was much weaker than expected, falling for the second straight month as the assessment of present-day conditions fell to its lowest level in 26 years.

"This indicator, and its component detail, appears to be pointing to a longer and more difficult journey to recovery than most would like to believe at the moment," said Josh Shapiro, chief economist at MFR Inc., in a note to clients. The Conference Board's consumer confidence index fell to 47.7 in October from an upwardly revised 53.4 in September, according to the survey of 5,000 households. Economists surveyed by MarketWatch expected the index to stay steady at around 53.2. See full story.

October 26: National index climbs above recession level

Source: Marketwatch

Washington -- A broad gauge of U.S. economic activity rose above the level that typifies recessions, the Federal Reserve Bank of Chicago reported Monday. For the three months through September, the average national activity index -- composed of fully 85 separate indicators -- increased to a reading of negative 0.63, up from negative 0.96 for the three-month interval ended in August. It's the first time since January 2008 that the three-month average has been above negative 0.70, the level that typically marks a recession.

In the past four recessions, the end of the downturn has come about the same time that the three-month average of the national index rose above negative 0.70, the Chicago Fed said. The index is designed so that a reading of zero indicates the economy's long-term growth trend. The index measures deviations from the trend. The September data take on greater importance as the government prepares to release results on gross domestic product for the third quarter on Oct. 29. See full story.

October 23: Bank failures hit 100 for year

Source: Marketwatch

New York -- A Naples, Fla., bank failed Friday, marking the first year since 1992 that at least 100 have gone under. Experts suggest we could be no more than 10% of the way through this cycle of bank collapses, which is sure to be the worst run of closures since the Great Depression. The parade of bank failures continued on Friday as the FDIC took control of Partners Bank of Naples after it was closed by the Office of Thrift Supervision. So far 100 banks have failed in 2009. See FDIC timeline of 2009's failed banks.

CreditSights, which tracks the dismal data, predicts that in the current cycle, from 2008 through 2011, as many as 1,100 banks will fail. That would wipe out 13.4% of all U.S. banks, representing 7% of U.S. banking assets. The last year in which the FDIC had that many banks to deal with was in 1992, at the tail end of the last real estate crisis. The FDIC rescued 122 in 1992, according to Keefe, Bruyette & Woods researchers. The increasing stream of bank failures is likely to run through 2011 according to some industry experts, as the fallout from the credit crisis continues. See full story.

October 22: Fed’s Rosengren sees 'risk' of relapse into recession

Source: Bloomberg

Washington -- Federal Reserve Bank of Boston President Eric Rosengren said the U.S. economy is at risk of relapsing into recession after expanding in the second half of 2009. “It’s certainly a risk,” Rosengren said today in an interview with CNBC, when asked about the danger of a relapse. “That’s why we don’t want to take the stimulus away too quickly.”

A report from the Fed’s 12 district banks yesterday portrayed an economy on the mend with little danger of inflation. District banks saw “stabilization or modest improvements” in many areas of the economy, with “little or no” price pressures, according to the Beige Book report. At their meeting last month, policy makers repeated their promise to keep interest rates exceptionally low for “an extended period” and pushed back the end-date of their program to purchase $1.45 trillion of mortgage-backed securities and housing agency bonds by three months. The jobless rate and inflation, excluding food and energy costs, are both “pretty far away from where we’d like to end up,” Rosengren told CNBC. “We need to wait until we make a little bit more progress on the economy before it’s appropriate to take some of the stimulus away.” See full story.