October Blog Archives 2014

Gold prices slip after Fed announcement. U.S. stocks end lower after Fed announced end to QE. Gold last traded at $1,224 an ounce. Silver at $17.26 an ounce.

The Federal Reserve is widely expected to announce today the end of its open market bond-buying program, known as quantitative easing, or Q.E.

While the Fed and Wall Street are downplaying the impact of this end, there is great disagreement about it in other circles and some analysts are skeptical that the Fed can even abandon its bond-buying activity permanently.

Fed officials say the purchases served to strengthen job growth and the economic recovery no longer needs quite so much of the central bank's support. We would suggest that the details of the employment statistics released by the Labor Department show anything BUT a strong job market and a variety of other economic reports, including those in real estate, reveal an uneven economic recovery at best.

While the Fed and Wall Street maintain that the end of Q.E. will be a seamless transition, former Fed Chairman Alan Greenspan disagrees.

He says the Federal Reserve won’t be able to exit from its loose monetary policy without turmoil in financial markets. Greenspan says the Fed’s Q.E. program has failed in one of its goals to spur demand. He also says there is a very high level of uncertainty holding back the U.S. economy.

One long-time analyst says that the end of Q.E. is just a mirage. According to Marc Faber, editor and publisher of the Gloom, Boom & Doom report, "The Fed will never end QE for good".

In Faber's view, within a few years, the asset purchases will be substantially higher than they were before.

Faber has long maintained that at some stage the economy will weaken again and at that point the Fed will argue, "Well, we haven't done enough, we have to do more."

In addition to Chinese and Indian demand, there is another growing source of gold demand to report: the Russian government.

Russia has boosted its gold reserves to the highest level since defaulting on local debt in 1998, driving its bullion holdings to the largest in at least two decades.

The country expanded its stockpile, the world’s fifth-biggest, by 37.2 metric tons in September to 1,149.8 tons, according to data on the International Monetary Fund’s website. The increase, valued at about $1.5 billion, was the biggest since November 1998. Russian reserves overtook those of Switzerland and China this year.

Finally, it was reported yesterday that fears over hackers was one of Americans' most serious crime concerns. Today, a new victim of hackers was reported: the White House.

Hackers have broken into an unclassified computer network used by President Obama's top advisers.

The Obama administration is saying little about the intrusion, only that hackers slipped into the network and their tools are "not being used to enable a destructive cyberattack," according to one official.

In the hacking world, attackers often use spying tools to steal files or monitor computer sessions.

The White House would not confirm the nature of the attack or even when it happened.

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Gold prices end slightly higher on a weaker-than-expected U.S. economic report. U.S. stocks rally, Dow closes above 17,000 as investors focus on FOMC meeting. Gold last traded at $1,229 an ounce. Silver at $17.23 an ounce.

There is a rule of thumb among economists that no economic recovery can maintain steam absent a healthy real estate market.

Recent data show that the US real estate market is on a slowing trend and, to make matters worse, the American people are losing confidence in the Obama administration and his Federal Reserve.

The annual growth in home sales prices across the nation slowed for the eighth consecutive month in August, according to a report released by S&P/Case-Shiller this morning.

The slowdown holds true for 19 of the 20 cities Case-Shiller tracks, with Cleveland the only city where annual price gains did not slow down.

Investors, while not selling their homes, are not buying nearly as many. That has taken much of the air out of home prices. In addition, the number of homes for sale is rising. Homes are sitting on the market far longer than they did just six months ago. It is no longer a seller's market.

Real estate prices soared between 2011 and 2013 due to the Federal Reserve's artificial intervention; it bought billions of dollars worth of mortgage-backed bonds in its Quantitative Easing program and pushed the average rate on the 30-year fixed rate mortgage to a record low. That created artificial demand, providing investors with cheap cash to buy foreclosures. As that demand goes away, housing will pay a price again. We are just now starting to see it.

The slowdown in housing coincides with disenchantment with the Obama administration, largely due to its fiscal and economic policies.

53 percent of Americans think Obama is doing a bad job with the economy. The reason? Quality of life is poor. Starting at the very bottom, poverty levels point to stagnation. In January 2009 the poverty rate stood at 14.3 percent. It rose to around 15 percent and then fell back down in 2013 to 14.5 percent (but the actual number of those in poverty remained the same from 2012). Meanwhile, the share of federal income tax paid by the middle class has, according to the IRS, risen.

Even the much praised unemployment rates can be misleading. While the number seeking work might be falling, that doesn’t necessarily mean they’ve found jobs. In January 2009, the labor force participation rate was 65.7 percent; today it is 62.7 percent--the lowest since 1978. In other words, a lot of Americans have simply withdrawn from the labor market.

On Wall Street, confidence in the "almighty" Federal Reserve is finally eroding and deservedly so. The problems that are emerging - a topped out stock market, a teetering real estate market, a mixed economy - are creations of the Fed's own machinations.

As long as those machinations were feeding the stock market bubble, no one on Wall Street complained. Now that the machinations have inevitably played out their effectiveness, Wall Street is griping.

As the Federal Reserve prepares to exit its monthly money-printing program, it faces a thorny dilemma with a market not buying what the central bank is selling.

In some respects, this is the Fed's worst scenario, in which its dithering over rate policy and mixed public signals cause it to lose credibility; a situation that could create substantial market dislocations considering soaring prices of risky assets over the past five and a half years.

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Gold prices end slightly lower as traders await important economic data due out later this week. U.S. stocks mostly unchanged on Monday as the energy and materials sectors suffer big losses. Gold last traded at $1,229 an ounce. Silver at $17.16 an ounce.

Gold is continuing its transformation from the gloom of bearishness in 2013 to outright bullishness at present.

Nowhere has gold's surge been more apparent than in China. Last week we reported India's demand for gold was surging. As we begin this week the same news is coming out of China.

China's gold imports from Hong Kong (the key trading center for gold into China) in September rose to the highest in five months as retailers and fabricators have boosted purchases.

China’s jewelry sales jumped 11.4 percent in September from a year earlier, according to the National Bureau of Statistics. Higher gold jewelry sales are pointing to robust consumer demand. Anticipation of strong gold sales during the festival season in October prompted some heavy restocking in September.

China imported 91.8 tons last month, including scrap, compared with 38 tons in August.

Rising demand for gold is no doubt playing a role in the resurgent bullish sentiment for the yellow metal--along with concerns about the stock market, weakening global economic growth and lingering geopolitical issues.

Large traders and futures market speculators sharply increased their overall gold bullish bets last week as gold positions rose for a fourth consecutive week to the best level since August, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC).

Today there were two new reports released in the US that reinforced the concerns mentioned above about economic growth.

U.S. services sector activity dipped to a six-month low in October.

Financial data firm Markit said its preliminary or "flash" services sector Purchasing Managers Index slipped to 57.3 last month, the lowest reading since April, from 58.9 in September.

The index, was dragged down by a decline in the new business sub-index, which touched its lowest level in three months.

Another report showed contracts to buy previously owned homes rebounded less than expected in September, an indication that the housing recovery remains anemic. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in September, rose 0.3 percent. The gain was below Wall Street's consensus forecast of a 0.5 percent rise.

Lingering questions about the health of the economy have been on the minds of some stock market analysts, adding to the growing sentiment that the market is vulnerable to a decline.

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Gold prices end higher on safe-haven demand. U.S. stocks end week strong as investors digest positive economic data and upbeat earnings reports. Gold last traded at $1,231 an ounce. Silver at $17.18 an ounce.

The official capital of the United States of America is Washington, DC, but the financial capital of America is New York City.

Yesterday, New York became the focus of the news media due to two unrelated incidents. Neither of these incidents is directly related to the financial markets, but both incidents have potential economic implications that could impact the financial markets.

The first incident was news that a doctor living in New York has contracted the Ebola virus.

So far, just one American has died from the deadly virus that has killed more than 4,800 in West Africa.

The fact that some stocks were down due to the Ebola scare, at least temporarily, speaks to the fragility of this bull market.

The greater concern may be less about Ebola itself, and more about how equipped and competent the government bureaucracy and Obama administration are in response to Ebola scares.

The government’s confidence that this can be contained is reminiscent of former Fed Chairman Ben Bernanke’s comments in early 2007 that the fallout from problems in the subprime market was likely contained.

The other event was an attack on a group of NYPD officers by an axe-wielding Jihadi. Two officers were injured, one seriously, and the attacker was shot dead by the police.

The attack was no where near New York's financial district, but coming in the wake of two very similar attacks in Canada earlier this week, it served as an alarming reminder that the threat of Jihadist terrorism is still very much with us.

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Gold prices fell on upbeat economic data as investors embrace risk. U.S. stocks ended sharply higher on upbeat eurozone data and better-than-expected earnings. Gold last traded at $1,229 an ounce. Silver at $17.23 an ounce.

Governments and the financial establishment, such as Wall Street, tend to not like gold. But citizens and individual investors have a different view.

Two countries in the news today demonstrate this phenomenon: India and Switzerland.

In India, demand for gold is soaring. Renewed optimism in India's economy has encouraged more buyers there to buy gold during Diwali, a five-day festival of lights whose celebration peaks tonight.

It was a different story last year; when slowing growth, high inflation and a weaker rupee resulted in fewer Indians buying gold during Diwali, a festival that kicks off the nation's wedding season and typically leads to a surge in gold buying, as it's considered an auspicious time to buy the shiny metal.

Gold is getting a boost not only from rising confidence in the Indian economy, but also massive promotions by Indian merchants who are working hard to ensure they don't see a repeat of last year.

In Switzerland, there is an upcoming referendum about whether the country should increase its gold reserves.

A new poll shows a majority of Swiss citizens would vote yes to force the Swiss National Bank to increase and hold on to their gold reserves.

Government bureaucrats in Switzerland are opposed, largely because they don't like being told what to do. The vote is about a month away.

One of the factors that could send gold prices higher down the road is European Central Bank (ECB) monetary policy. The ECB is set to start purchases of corporate bonds in order to inject cash into the economy, similar to the US Quantitative Easing program. The purchases are forecast to exceed $1 billion.

One probable outcome of this will be a drop in the value of the euro, which would push the price of gold in euros higher.

Speaking of the ECB, Europe's biggest banks are facing a day of judgment as the ECB prepares to unveil the results of a yearlong search through the dark corners of their finances.

The ECB review, to be unveiled Sunday, seeks to identify banks too weak to lend to businesses, or make it through another recession, and force them to strengthen their finances. It includes a detailed look at 130 banks' loans, holdings and investments, as well as a so-called stress test that simulates how banks would fare in a deep economic downturn.

Those that fall short in the tests will have to raise more money - and could have to restructure or be sold to stronger partners. Previous tests by a different EU agency in 2010 and 2011 lost credibility after banks that passed needed to be bailed out months later.

The test results could cause some market turbulence for banks in the following days and weeks as lenders that do poorly scramble for money.

Another country that may have to resort to "stimulus" programs is China. The latest manufacturing report from China, the PMI, showed that factory output fell to a five month low. This caused stocks in Asia to retreat as economic weakness in China is seen as a serious problem for the entire world.

Domestically, there are new signs that the real estate market in the US may be headed for trouble once again. Investors are not only no longer selling their own homes but they are not buying other homes for investment either. That has taken much of the air out of home prices. The number of homes for sale is rising. Homes are sitting on the market far longer than they did just six months ago. It is no longer a seller's market.

Real estate weakness aside, one famous observer has another threat in mind when it comes to the US economy. TV personality Suze Orman says the biggest threat to the US economy is student loan debt--and she makes a convincing case.

The US has more than $1.2 trillion of student loan debt. And while 6.7 million borrowers in repayment mode are delinquent, the sad fact is that many lenders aren't exactly incentivized to work with borrowers. Unlike all other forms of debt, student loans can't be discharged in bankruptcy. Moreover, lenders can garnish wages and even Social Security benefits to get repaid.

Total student loan debt has grown more than 150 percent since 2005. Inflation to blame? No. Overall prices rose just 22 percent or so between 2005-2014. The culprit here is more loans being taken out, and more borrowers getting hit with fees and penalties.

According to TransUnion, in 2005 student loans accounted for less than 13 percent of the total debt load for adults age 20-29. Today, student loans account for nearly 37 percent of that group's outstanding debt.

The situation is so bad that the Treasury Department recently acknowledged that the student loan market could "significantly depress demand for mortgage credit and dampen consumption."

Speaking of the Treasury Department, we are all somewhat dependent on government statistics for economic forecasts and decisionmaking.

We have often asked on these pages whether those government statistics can be trusted.

Unfortunately, a fresh report calls that into question, to say the least.

A whistleblower at the Census Bureau told the New York Post that workers in the Los Angeles region have been manipulating economic used by other government agencies to put together economic reports.

Finally, fresh on the heels of yesterday's terror attack in Ottawa, Canada, America's financial center also got a stark reminder of the overarching threat of terrorism.

New York City's Office of Emergency Management ran a training exercise Wednesday that simulated a response to a 10-kiloton nuclear device exploding at 42nd Street and Seventh Avenue in Times Square.

According to the exercise, 100,000 people were instantly killed, a wave of overpressure took down buildings for a half-mile radius and did damage for up to two miles and a radiation cloud swept over the region.

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Gold prices end lower on profit taking and a stronger U.S. dollar. U.S. stocks snap 4-day winning streak as investors consolidated sharp gains from previous sessions. Gold last traded at $1,245 an ounce. Silver at $17.24 an ounce.

The investment markets have been largely distracted by the unfolding drama in Ottawa, Canada where an unknown number of gunmen have carried out attacks in multiple locations in what appears to be a coordinated terrorist attack.

The potential economic and financial implications of this incident will no doubt unfold as details become available in the aftermath of the attack.

In strictly economic news, the US Consumer Price Index Inflation numbers came in today from the Labor Department and they show restrained inflation. This likely means the Federal Reserve can continue to keep interest rates near zero territory, a bullish factor for gold.

Renowned investment manager Richard Russell, editor in chief of the Dow Theory Letters, released a statement today that Fed monetary policy, as well as European Central Bank (ECB) policy, amount to an "avalanche of fiat money creation," which will undermine man-made currencies such as the dollar and the euro over the long-term. Today's news on the CPI from the Labor Department will do nothing to change this outlook.

Fed Chair Janet Yellen has expressed more concern about "income inequality" than about the US dollar and US economy lately. MarketWatch correctly pointed out in an opinion column today that it is Fed policy itself that has created that situation:

"...when the Fed buys financial assets with printed money and — by definition — drives up the price of those assets, it cannot then act mystified why the main owners of financial assets have grown wealthier. Doing so simply insults our intelligence."

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Gold prices hit six-week high on concerns over a global economic slowdown. U.S. stocks jump higher in hopes of more ECB stimulus. Gold last traded at $1,251 an ounce. Silver at $17.54 an ounce.

The price of gold has hit a new 6-week high today thanks in part to disappointing news on China's economic front and continued weakness in the US dollar.

China's economy has clocked its worst quarter in more than five years, raising concerns over Beijing's ability to meet its own annual growth target.

GDP expanded by 7.3% in the third quarter versus the same period last year, the weakest performance since the global financial crisis.

With the Chinese economy showing slower growth, experts are now sounding the alarm over ballooning Chinese corporate debt. A few Chinese companies have defaulted on their debt in recent months, a previously unheard of phenomenon, and no government bailouts are in sight.

Worries have also escalated over the use of unconventional financing. Some firms, for example, have been using copper as collateral to secure loans. Experts are concerned that some companies are even using the same copper stockpiles to take out multiple loans, borrowing far more than they can repay. This amounts to a Ponzi scheme; a ticking time bomb in the Chinese economy that would result in aftershocks around the globe.

In Europe, the European Central Bank is reportedly planning to buy corporate bonds in an effort to battle against a slowing economy. Not surprisingly, the euro fell on this news, meaning gold is rising in both dollar and euro terms.

Gold was also bolstered by buying interest in the physical markets from Asia - the top-consuming region.

India, the second-biggest gold buyer, celebrates the festivals of Dhanteras on Tuesday and Diwali later in the week. Both are considered auspicious for buying gold, which could provide a boost to retail sales and imports.

News that India's central bank will not tighten gold import rules further could also lend some support.

Finally, we have yet another sign of a top in the US stock market: merger and acquisition deals are currently failing at their highest rate since 2008, the onset of the financial crisis.

The value of deals that fail to complete has reached its highest level in six years. A total of $573B worth of deals have been withdrawn, setting this year up to surpass the $640B in deals that went uncompleted in 2008.

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Gold ends lower, but closed week higher on global growth concerns. U.S. stocks finish higher, snapping six-day losing streak. Gold last traded at $1,239 an ounce. Silver at $17.33 an ounce.

Gold is poised for a second straight week of gains as persistent fears over the health of the world economy have taken a toll on global equities and the US dollar, prompting safe haven seekers to flock to precious metals.

Weak economic data from China and Europe have, in particular, spooked world markets.

Dollar weakness has also supported gold prices as the sluggish economic data prompted speculation that the U.S. Federal Reserve could postpone any increase in interest rates.

The US Dow Jones Industrial Average is now in its longest losing streak in 14 months. Tokyo's Nikkei is now at a new four-and-a-half-month low — posting its worst week in 6 months.

The financial world--at least in the US--is back in its Fed watching mode, a strategy that has proven fruitless in recent weeks and months.

Many on Wall Street are looking for another handout from the Fed, analyzing every word that Fed Chair Janet Yellen utters in hopes the Fed will step in and revisit its quantitative easing program if markets fall too far, too fast.

St. Louis Fed President James Bullard gave Wall Street some of what they wanted, when he said the Fed should consider continuing to buy bonds beyond the scheduled end of quantitative easing later this month, due to market turmoil.

Bullard's comments come two days after those of San Francisco Fed President John Williams (who, like Bullard, is a non-voting member of the Fed Open Market Committee). Williams told Reuters "If we get a sustained, disinflationary forecast… then I think moving back to additional asset purchases in a situation like that should be something we seriously consider."

Yellen speaks on economic opportunity at the Boston Fed's 58th Economic Conference today.

Boston Fed President Eric Rosengren seemed to dampen hopes for immediate Fed stimulus when he said the Fed needs to fully process the causes of financial markets turmoil before making a judgement on quantitative easing. The Fed next meets October 28.

It's amazing that Wall Street is so dependent on unprecedented, loose monetary policies to pump up stocks when those policies have undermined the value of the dollar and led to the current turmoil.

Clearly, Wall Street has run out of answers.

That's why so many investors around the world are once again turning to gold. Gold is an asset in its own right. It has stood solid as a store of value and trusted medium of exchange for 5,000 years. And it's never dependent on anyone's promises.

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Gold prices end slightly lower, but hold near 5-week high on upbeat economic reports. U.S. stocks end mostly flat after dovish remarks from James Bullard, president of the Federal Reserve Bank of St. Louis. Gold last traded at $1,241 an ounce. Silver at $17.44 an ounce.

World stock markets have been reeling for a week prompting many observers to predict that the downward momentum will accelerate, soon bringing the major indices into bear market territory.

A bear market is defined as a drop of 20% or more. A "correction" is defined as a drop of 10% or more. The Dow, S&P 500 and NASDAQ are all nearing the correction level and on pace to keep going. No bull market lasts forever. The last bear market in stocks saw the Dow drop 53%.

In recent times, major sell-offs have been about seven years apart. There was a major sell-off in stocks in 2001 and again in 2008. Under this timing scenario, the next one is due around 2015, which is less than a quarter away.

There are fears over the spread of Ebola, deflation, a slowdown in Europe, a fall in oil prices, and weak volumes which all contributed to the negative sentiment in stocks with investors shunning riskier assets. In Europe, fears over Greece's economy have also resurfaced on reports that Athens may want to drop out of its bailout program.

Up until now, stocks in Japan and China had escaped the carnage, but overnight they joined in.

Mounting anxiety over global growth and the spread of Ebola dragged Asian bourses lower.

Japan's Nikkei index closed at a fresh four-and-a-half-month low. Shanghai closed down 0.7%. Hong Kong stocks remained downbeat overnight, tanking 0.6 percent as the city's pro-democracy protests continued into the third week amid renewed clashes between police forces and protesters.

Here in the US, weaker retail sales, a decline in producer prices and a surprising drop in the Empire State index all added to the wave of worry pushing stocks lower.

New York manufacturers are growing at the slowest pace in six months as new orders shrink and shipments barely rise: The Federal Reserve Bank of New York said yesterday that its Empire State Manufacturing index dropped to 6.2 in October, down sharply from September. October's reading is the lowest since April.

Influential investor Dennis Gartman told CNBC that the bear market has begun and warned there was going to be "more than a mere 7 to 10 percent correction" in the stock markets. " I don't like to think about it – but this might be the very beginnings of a bear market that could last some period of time," he warned.

Traders will be watching today's economic reports for clues about the future strength of the US economy. Today's reports include weekly jobless claims, industrial production, the Philadelphia Federal Reserve survey and the National Association of Home Builders sentiment survey.

In addition, there will be a full slate of earnings reports turned in over the course of the day.

Hedge funds are on course for their worst year since 2011, as several of their biggest and most popular trades turned sour and some managers were forced to cut their losses.

Wednesday's new and sudden fall in US Treasury yields numerous wrong-footed funds that had positioned themselves for rising interest rates and an improving global economy.

Gold has retained sharp gains over the past week with investors seeking safety amid increasing concerns over a slump in the global economy and the numerous other factors negatively impacting stocks.

In other words, gold is shining now, demonstrating its vital role as a safe haven during times of turmoil and its ability to perform as a key portfolio diversifier. While world stock markets are falling precipitously, gold is more than holding its own--it's rising.

That's why gold belongs in every portfolio.

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Gold prices settle higher on weak economic reports and safe-haven demand. U.S. stocks tumble on continued concerns over the health of the global economy. Gold last traded at $1,242 an ounce. Silver at $17.43 an ounce.

Gold is once again proving its worth as a safe haven and portfolio diversifier today as its price is sharply higher while the Dow Jones Industrial Average has plunged 450 points--the worst trading day for the Dow in three years.

The Dow is by no means alone; the S&P 500 has fallen even further in terms of percentages and the NASDAQ is in the same ballpark. Moreover, the US stock market isn't alone. Stock markets in Germany, France and the UK all fell just as sharply overnight. All of these stock indices are now approaching "correction" (10% drop) territory.

Europe started the downfall due to fears of crumbling global growth, weak economic data and new concerns about the political situation in Greece.

"A major shift has happened in the last couple of days, Greece, who everyone thought was on the mend, saw its bond yield cross an important line," Kathleen Brooks, a research director at FOREX.com, said in a research note.

"Right now, there is no sovereign crisis, but the fact that Greek yields have crossed the 7 percent threshold is a warning sign that all is not well."

Since then, a variety of factors have added to the wall of worry in the US.

Transportation stocks led the decliners in the US on reports that a new Ebola patient flew the day before falling ill.

"Ebola is in the background," said Peter Boockvar, chief market analyst at The Lindsey Group. "It feeds generally into global growth concerns."

The recent bad news in the stock market has resulted in a paradigm shift in sentiment.

"I think this heightened volatility has shaken confidence among investors," Jack Ablin, chief investment officer at BMO Private Bank, said. "This downturn is feeding on itself."

Economic reports also touched off a renewed decline in the US dollar. This, combined with the turmoil in the stock market, has fed the accelerating gold rally.

The dollar hit session lows after data for September showed U.S. retail sales eased and U.S. producer prices fell for the first time in over a year, a potentially worrisome sign for the economy.

Retail sales, which account for about one-third of consumer spending, dropped 0.3 percent last month, the first decrease since January.

The weakness in retail sales was broad-based. A gauge of so-called core sales, which strips out automobiles, gasoline, building materials and food services - and corresponds most closely with the consumer spending component of gross domestic product - fell 0.2 percent. Economists had expected it to rise.

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Gold prices end higher on safe haven demand, short covering and bargain hunting. U.S. stocks close higher amid upbeat earnings results. Gold last traded at $1,234 an ounce. Silver at $17.40 an ounce.

The price of gold has continued its rally today in the wake of the worst 3-day stretch in stocks since 2011.

The combination of worries on the global economic front along with the sell-off in stocks has prompted investors to rediscover the safety of gold, pushing its price to fresh 4-week highs.

There are a variety of issues worrying investors right now, prompting them to seek safe havens.

First and foremost are worries about the global economy and when firms that are usually cheerleaders for Wall Street and Fed policymakers start issuing warnings, one must admit, things are bad.

Goldman Sachs cut its forecast for Europe in the 3rd Quarter to a triple-dip recessionary decline of -0.15% GDP. This is dramatically below what Goldman called an "over-optimistic" consensus forecast of +0.35% as incoming data they are seeing is notably weaker than expected.

Meanwhile, here in the US, with the holiday shopping season on the horizon, forecasters warn that businesses could ultimately struggle to persuade households to spend more in this year's season. Stagnant wage growth coupled with the rising costs of health care, child care, housing and other essentials, means many Americans simply have less money left at the end of the year for presents.

PriceWaterhouseCoopers projects that average holiday season spending per household will fall to $684 this year, from $735 in 2013, primarily because of sluggish salaries and rising costs of living.

This is what is known as "stagflation," a combination of a stagnating economy and a rising cost of living and it partially explains the move toward gold since, historically, stagflationary conditions produce rising gold prices and declining stock prices.

In a survey to be published this week by the personal finance website Bankrate.com, two-thirds of respondents said they would limit how much they spend each month. That, Bankrate said, could be an ominous sign for the holiday shopping season.

Retailers are competing against the many other rising costs middle class Americans are facing. Apartment rents have risen across the country for 23 straight quarters and last year the cost of child care rose by up to eight times the rate of increases in family income from the previous year.

The weaker spending is giving retailers thinner margins, prompting them to cut wages and benefits for workers, which contributes to stagnating wages.

The worries over economic growth around the world are having an affect on money managers.

Investors are showing less faith in the global economy, sending the appetite for riskier assets, such as emerging-markets and European equities, lower; according to a survey of fund managers released by Bank of America Merrill Lynch today. The survey found only a net 32% of the fund managers polled expect the global economy to strengthen over the next 12 months, marking the lowest reading in two years and a fall of more than 20 percentage points from the previous survey. Additionally, profit expectations slumped to an 18-month low.

At least one market analyst is watching a key indicator, the S&P 500 200-day moving average, and an exogenous factor: the ebola outbreak.

Steve Grasso, institutional sales director at Stuart Frankel & Co., believes there's one key level to watch over the next few days: that 200-day moving average of 1,905. Stocks could signal an extended downward trajectory, depending on how they close over the next few days.

"Right now the market is too skittish," Grasso said. "If we keep closing below that 1,905 level, we go dramatically lower."

Grasso tied the exit from stocks to Ebola. "What is the exodus at the end of the day? It was the Ebola headlines."

Finally, a brand new exogenous event has emerged in the headlines that is also making traders worried. There are multiple credible reports that ISIS, the Jihadist terrorist organization, has obtained and used chemical weapons against Kurdish civilians in Iraq and Syria. If this turns out to be true, it could signal a serious, dangerous escalation in the conflict with ISIS.

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Gold prices end higher, hitting a 4-week high, on safe haven demand and bargain hunting. U.S. stocks end sharply lower on global growth concerns. Gold last traded at $1,236 an ounce. Silver at $17.50 an ounce.

Gold has started this week just as it ended last week: on the upswing.

Gold's continuing rally can be attributed to uncertainty about how soon and whether the Federal Reserve will raise interest rates along with worries about the global economy reducing investor appetite for risk.

The metal is now trading at a 4-week high after hitting a 15-month low just last week.

Gold's gains were helped by a lower dollar after Fed officials warned over the weekend that if the global recovery stumbled, it could delay an increase in U.S. interest rates.

"The expectations for a rate hike have been pushed back by at least a quarter so now we are not looking at the first half but the second half of 2015 and that is potentially going to limit the aggressiveness of the dollar's upward move,'' Saxo Bank senior manager Ole Hansen said.

A delay in raising interest rates would be seen as positive for gold, a non-interest-bearing asset, and negative for the dollar.

Meanwhile, global stock markets remain under pressure both from weak economic data and after credit rating agency Standard & Poor's lowered its outlook on France from to 'stable' to 'negative'.

Financial author Michael Sincere today joined the chorus of experts warning about an extended fall in stocks when he wrote that "this is the most dangerous stock market since 2008."

Sincere went on to say: "When fear does hit the market, there will be a mad rush out the door that will remind investors of 2008."

That process has already started in the Russell 2000 small cap index, with many stocks--including some household names--down 40% or more for the year. Zynga, Groupon, Rite Aid, Pandora, SeaWorld Entertainment, Herbalife, Kate Spade and AMD are among 27 stocks down sharply and steeply, anywhere from 40% to 73%.

Silicon Valley venture capitalist Peter Thiel, who has already sounded the alarm about the stock market, is now making a convincing case that the bubble has been created by our government, calling current conditions a "government bubble of massive size."

Thiel also has another ominous warning for investors. While many realize that the stock market is in jeopardy, Thiel points out that the bond market is the most distorted of all the markets.

This means investors looking for safety and security need to look to gold, since it has historically moved independently of stocks and bonds.

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Gold prices end slightly lower on a stronger U.S. dollar and profit taking. U.S. stocks trading lower and suffer weekly losses after a volatile week of trading. Gold last traded at $1,221 an ounce. Silver at $17.30 an ounce.

This week has seen a dramatic reversal in the fortunes of various asset sectors.

The price of gold is now headed to its largest weekly increase in over 4 months and stocks have been blasted by concerns over everything from slow growth in Europe to the spread of the Ebola virus. The NASDAQ is set to have its worst week since April.

The faltering world economy has most observers believing that world central banks will be pulling out the stops with continued "stimulus" programs in an attempt to jump start respective national economies. The minutes from the recent Federal Reserve Open Market Committee meeting released yesterday would seem to confirm that.

Those minutes revealed members of the committee were concerned that the global economic slowdown could negatively impact the US economy, so they expressed the overall intention to hold US interest rates near zero for a “considerable time.”

The US central bank was not alone. European Central Bank President Mario Draghi pledged yesterday to expand stimulus measures if needed, while Governor Haruhiko Kuroda said the Bank of Japan has many options for additional easing as well.

Lindsey Group's chief market analyst, Peter Boockvar says that the Federal Reserve meeting minutes released this week point to a reversal for gold, mainly because of unease that Federal Open Market Committee officials voiced about the dollar's strength against foreign currencies.

When policymakers express concerns that the dollar might get too strong, the smart money moves to gold for two reasons:

1. Gold is priced in dollars, so when the dollar declines, which seems to be what the Fed wants, the price of gold in dollars naturally increases.

2. Because the dollar is still currently the world's reserve currency of choice, gold is its natural rival as a reserve asset. When confidence in the strength of the dollar declines, money gravitates to gold as a more secure asset of last resort and medium of exchange.

Some observers, notably Peter Schiff, not only see continued near-zero interest rates ahead, but also a new round of Quantitative Easing, despite the Fed's program to unwind that program currently in progress. Schiff says conditions will essentially force the Fed to ramp up Quantitative Easing anew sometime in the months ahead. This is another bullish sign for gold and negative sign for the US dollar.

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Gold prices end sharply higher, hitting a 3-week high, as investors show reservations about the strength of the U.S. dollar. U.S. stocks end lower on profit taking after the main benchmarks recorded their biggest one-day gains of the year in the previous session. Gold last traded at $1,225 an ounce. Silver at $17.42 an ounce.

Yesterday the financial markets paused, as they customarily do, while awaiting the minutes from the most recent Federal Reserve Open Market Committee meeting.

The results are in and the conditions in the gold market have shifted to a decidedly bullish posture.

That's because the minutes from the meeting showed that members of the committee are concerned that the recently strengthening US dollar could pose a threat to the earnings of US corporations.

This is seen as a signal that the Fed won't raise interest rates any time soon, despite speculation from some quarters.

Not surprisingly, the US dollar is weakening and gold is strengthening.

Gold had been trading at a low for 2014 just 3 days ago, a sensational buying opportunity. But the buying opportunity in gold is still terrific given the price is still relatively low and sentiment has shifted.

One additional factor that will impact the value of the dollar over the longer-term is the challenge being posed by China to have its yuan supplant and, perhaps, replace the US dollar as a medium of exchange and reserve asset.

Yesterday something happened that will doubtlessly boost that process: China just overtook the US to become the world's largest economy, according to the International Monetary Fund.

The method used by the IMF to measure national economies adjusts for purchasing power parity. The simple logic behind this method is that prices aren't the same in each country.

So the IMF measures both GDP in market-exchange terms and in terms of purchasing power. On the purchasing-power basis, China is overtaking the US right now and becoming the world's biggest economy.

According to the IMF, by the end of 2014, China will make up 16.48% of the world's purchasing-power adjusted GDP (or $17.632 trillion), and the US will make up just 16.28% (or $17.416 trillion)

This will continue to boost China's clout economically and in the financial world, which will aid its efforts in promoting the yuan at the expense of the US dollar. This will push up the price of gold in dollars.

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Gold ended the day lower, but strengthened in electronic trading after Fed minutes. U.S. stocks recover losses, closing up nearly 2% after Fed minutes showed that the Federal Reserve cut their growth outlook. Gold last traded at $1,206 an ounce. Silver at $17.06 an ounce.

The financial world - in fact, the whole world - has a serious worry on its collective mind: Ebola, the deadly virus that seems to be spreading out from West Africa.

In addition to the obvious humanitarian impact of Ebola, there will no doubt also be an economic and financial cost. That already became apparent overnight when European stock markets tumbled across the board, largely due to concerns of an Ebola outbreak in Spain.

Airlines and other travel shares are being especially hard hit due to Ebola fears. Should this situation accelerate, it could literally touch off a depression in the travel and hospitality industry.

Ebola aside, other factors of course continue to influence the financial markets.

As of press time, Wall Street is paused, awaiting the release of the Federal Reserve Open Market Committee (FOMC) minutes later today for additional clues as to upcoming Federal Reserve monetary policy. Essentially, everyone on Wall Street is still trying to guess when the Fed may start to raise interest rates.

Another worry is the faltering European economy. In today's interconnected world, when a major region suffers economically, the rest of the world cannot escape the effects.

Sentiment in the US is certainly not positive. According to a CNBC survey, Americans' approval of President Obama's handling of the economy stands at the lowest level of his presidency. 44 percent of the public says they have no confidence at all in the president on the economy.

This is showing up in declining confidence in the stock market, with more and more investors coming to the realization that the market is vulnerable.

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Gold prices extend gains on weak stocks and softer U.S. dollar. U.S. stocks end sharply lower, suffering worst drop in more than two months. Gold last traded at $1,212 an ounce. Silver at $17.24 an ounce.

There is no doubt China is making moves to establish world supremacy economically and financially through a number of methods.

One chief method is something we've written about frequently: China seeks to have the yuan supplant and eventually replace the US dollar as the world's reserve currency of choice and become a major international medium of exchange.

China has been cooperating primarily with Russia in this regard - the Russians' motives are likely political - but also Iran, some European nations and some Asia-Pacific nations as well.

As the world's No. 2 economy after the US, China believes it is close to earning the status of a reserve money, the first time an emerging market currency would attain this position.

Former Federal Reserve Chairman Alan Greenspan wrote in Foreign Affairs magazine that he believes China will increase its gold holdings in a "big way," with an eye toward making the yuan convertible to gold.

China has been accumulating big gold positions for many years now for one paramount reason: it has also accumulated trillions in United States government debt. The value of the dollar and the price of gold move in opposite directions. It’s essentially an inverse relationship. Thus the Chinese ensure their dearly-bought reserves stay at par value.

Greenspan believes, should China one day announce the convertibility of its currency to gold, it could transform the country into a world monetary leader by prompting other nations to follow suit with their currencies.

Greenspan says this explains why so many world central banks maintain large gold reserves even though many of the central bankers themselves talk down the role of gold.

Watch what people DO, don't just listen to what they SAY!

In the here and now, US stocks have been slammed once again in trading today, but this time due to concerns about an economic slowdown emanating from Europe.

Investors are fretting over increased signals of slowing growth in Europe and pondered the impact on quarterly earnings from U.S. corporations that operate in the European market.

German industrial output fell by 4 percent in August, with the worse-than-expected drop coming a day after the country's industrial orders had their largest monthly decline since the global financial crisis in 2009.

Adding to these worries was the International Monetary Fund (IMF) cutting its global growth forecast for the remainder of 2014 and all of 2015.

This development comes less than a month after the Organization for Economic Cooperation and Development (OECD) slashed its expectations for the global economy over concerns about a stuttering recovery in the U.S. and the continued fragility of the euro zone.

Speaking of the IMF, its World Economic Outlook was released today. Its Research Director, Olivier Blanchard, said the world's economic recovery was "weak and uneven and remains susceptible to many downside risks." This is far different from the rhetoric coming from the Obama administration.

Among the risks facing global economies, the IMF reports, are rising interest rates, geopolitical risks and the euro zone's stalling recovery.

Finally, the US Bureau of Labor Statistics' Job Openings and Labor Turnover Survey was released today and it included a little-noticed but not insignificant statistic that hiring last month hit its lowest level since the very cold January of this year; and represented the biggest month to month decline since June of 2010. This could very well signal weakness in the US economy on the horizon.

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Gold prices end lower on upbeat jobs data. U.S. stocks end sharply higher following a stronger-than-expected monthly jobs report. Gold last traded at $1,192 an ounce. Silver at $17.48 an ounce.

Once again the Labor Department has released a rosy employment report. And once again, a deeper analysis of the details shows the report is quite misleading when it comes to the actual health of the US economy.

The report indicates that jobs growth accelerated in September and hiring during the summer was stronger than initially reported. The U.S. added 248,000 jobs in September, more than consensus forecasts from economists. Unemployment also fell to 5.9% from 6.1%.

Now the details, which aren't so pleasing.

More Americans also stopped looking for jobs, reducing the percentage of people in the labor force to a 36-year low. The participation rate in September fell a tenth to 62.7%, marking the lowest level since February 1978. The government unemployment report also masks another negative factor — a large and growing number of Americans who want to work more hours but are unable to do so. Those people are no longer considered unemployed but are in no way whole as compared to where they were less than a decade ago.

A number of economists look past the "main" unemployment rate to a different figure that the Bureau of Labor Statistics calls "U-6," which it defines as "total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers." In other words, the unemployed, the underemployed and the discouraged—a rate that still remains high. The U-6 rate is 11.8 percent.

In other news, there was an event reported overnight that has serious implications for Americans concerned about their financial privacy. J.P. Morgan Chase, one of America's largest, most sophisticated financial conglomerates, suffered a security penetration resulting in a data breach that affected 76 million households and 7 million small businesses.

Customer names, addresses, phone numbers and e-mail addresses were taken. Hackers also obtained internal data identifying customers by category, such as whether they are clients of the private-bank, mortgage, auto or credit-card divisions. At this point the bank claims no account information was accessed and the bank also says it has not detected any fraud associated with the breach. Nevertheless, this incident illustrates all too vividly how vulnerable our financial privacy is in the cyber age.

Finally, it is no secret that China seeks to promote its currency, the yuan, as a reserve currency and an international medium of exchange, at the expense of the dollar. The recent establishment of the Shanghai Gold Exchange is a sign the Chinese will use gold as a tool in that quest by seizing control over gold pricing mechanisms from the COMEX in the USA. This would result in a global currency reset and move the yuan to the fore and overshadow the US dollar.

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Gold prices remained flat ahead of key unemployment report due out Friday morning. U.S. stocks swung between gains and losses on Ebola fears and mixed economic data. Gold last traded at $1,215 an ounce. Silver at $17.48 an ounce.

For months, if not years, the Federal Reserve and the Obama administration have been touting America's economic "recovery."

Now it appears that independent authorities are contradicting those dubious assertions and the stock market is reacting.

U.S. stocks are declining for a fourth straight session today, extending their worst start to October in three years, as the International Monetary Fund (IMF) called the global economy softer than thought.

According to the managing director of the IMF, Christine Lagarde, the global economy could be stuck in a weak growth rut for a long time as countries struggle to pull free from a past of high debt and unemployment.

Lagarde chronicled a series of "clouds on the horizon" that could hurt the global economy, including central banks' differing plans to raise interest rates.

"The longer easy money policies continue, the greater the risk of fueling financial excess," she said.

In other words, the IMF is worried about a bubble.

Lagarde warned that financial risks could emerge as asset valuations in advanced economies have shot up while volatility stays low; and riskier transactions start to migrate to the shadow banking sector.

Geopolitical risks could also derail the recovery, she said, pointing to turmoil in Ukraine, the Middle East and some parts of Asia, as well as the outbreak of the deadly Ebola virus in West Africa.

The European Central Bank seems determined to fuel the bubble that Lagarde fears. Just yesterday the European Central Bank (ECB) announced it was purchasing 1 trillion euros worth of debt instruments to inject liquidity into the European economy.

Loans and mortgages worth as much as one trillion euros ($1.3 trillion) -- including some junk-rated assets from Greece and Cyprus -- qualify as assets that will be purchased by the ECB over two years.

European monetary policy has created a whole new set of problems for money market funds there. In fact, it may just destroy them. The ECB has imposed a negative deposit rate of -0.2% on reserves held at the bank, making it exceedingly difficult for cash equivalents traditionally held in money market funds to be viable. About 500 billion euros is invested in European money market funds and officials are worried about the possibility of mass withdrawals, cratering the industry as people resort to keeping money "in the mattress" rather than risk it in money market funds that have always previously been considered "safe."

Back here in the US, there are fresh signs (yes, again) that the US economy is less than healthy.

Orders to U.S. factories fell in August by the largest amount on record (10.1%). Wall Street is trying to make excuses for the drop and explain it away as an anomaly, but this is increasingly difficult as these anomalies become more and more common.

When the New York Times is doubting the health of the US economy, you know that the Obama administration is losing the propaganda war. The Times published an article today pointing out--as many of us have been doing for months--that the US unemployment rate masks serious economic problems. An excerpt:

"There are at least two special factors that are distorting the unemployment rate’s signal. First, there are over seven million involuntary part-time workers, almost 5 percent of the labor force, who want, but can’t find, full-time jobs. That’s still up two percentage points from its pre-recession trough. Importantly, the unemployment rate doesn’t capture this dimension of slack at all — as far as it’s concerned, you’re either working or not. Hours of work don’t come into it.

The second special factor masking the extent of slack as measured by unemployment has to do with participation in the labor force. Once you give up looking for work, you’re no longer counted in the unemployment rate, so if a bunch of people exit the labor force because of the very slack we’re trying to measure, it artificially lowers unemployment, making a weak labor market look better.

That’s certainly happened over the recession and throughout the recovery, but it’s been mixed in with a more benign source of labor force exits: the retirement of aging baby boomers. So economists have scurried about trying to figure out how much of the three-percentage-point decline in the labor force participation rate, from about 66 to 63 percent, to attribute to slack and how much to so-called structural (vs. cyclical) factors."

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Gold prices end higher as investors dumped riskier assets for the safety of gold. U.S. stocks plunge as investors worry that the Fed may raise interest rates sooner than later. Gold last traded at $1,215 an ounce. Silver at $17.48 an ounce.

Today is the first day of the new fiscal year for the federal government and thus an opportune time to point out the fiscal mess the government has our country in.

The U.S. federal government alone is borrowing some $8 trillion per year. When discussing the national debt, most people tend to only focus on the amount that it increases each 12 month period. The U.S. national debt has increased by more than $1 trillion during fiscal year 2014.

But that does not count the huge amounts of U.S. Treasury securities the federal government must redeem each year. When these debt instruments hit their maturity date, the U.S. government must pay them off. This is done by borrowing more money to pay off the previous debts. In fiscal year 2013, redemptions of U.S. Treasury securities totaled more than $7 trillion and new debt totaling more than $8 trillion was issued. The final numbers for fiscal year 2014 are likely to be significantly higher than that.

So what happens when the rest of the world decides it does not want to loan us $8 trillion a year at ultra-low interest rates?

Well, the game of musical chairs will be over and America will be in a massive amount of trouble.

In investment news, evidently many are making the mistake of switching from stocks to bonds right now. This is literally a case of jumping out of the frying pan into the fire because when interest rates inevitably climb higher, the prices of existing bonds will automatically decline. Unfortunately, many investors still don't understand this phenomenon.

A much wiser move in the current environment is to diversify out of stocks and bonds into gold, which is still trading at bargain levels, in fact at 9-month lows. And that appears to be happening.

Sales of US Mint American Eagle gold coins more than doubled during September from August's levels, with sales coming in at 58,000 ounces, the highest sales levels since January.

Finally, overseas, in Japan, an event occurred that showed just how vulnerable markets and investors are in today's highly automated, computerized world. Share orders worth several billions of dollars were cancelled in Japan due to a "fat finger" trading error.

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