Gold, silver rocket as recession fears deepen

Gold and silver zoomed again Friday, ignoring strength in the dollar, as the dismal U.S. jobs report for August drove some investors back into haven-seeking mode.

Near-term gold futures in New York closed with a gain of $47.70, or 2.6%, to $1,873.70 an ounce. It was the metal’s biggest one-day advance since early August, and left it just 0.8% below the record closing high of $1,888.70 set on Aug. 22.

Silver also rocketed, rising $1.54, or 3.7%, to $43.02 an ounce. Silver remains below its 30-year high of $48.58 reached on April 29.

The government’s report that the economy created no net new jobs last month stoked fears that recession is becoming a self-fulfilling prophecy, after the global market turmoil in August. With stocks crumbling worldwide Friday, gold and silver attracted frightened money, just as they did for much of last month.

“This economy is in real trouble,” said Matt Zeman, a market strategist at Kingsview Financial in Chicago. What’s more, even though the Federal Reserve is expected to try another rescue by aiming to pull long-term interest rates lower, falling rates could help the case for gold by making bond yields less attractive as an alternative investment.

Gold and silver also got a boost as Europe’s never-ending debt crisis took another bad turn, as Greece fell behind on austerity measures it must meet to qualify for more euro-zone aid.

While the Dow Jones industrial average slumped 253.51 points, or 2.2%, to 11,240.26 on Friday, the average blue-chip stock in Europe fared much worse, tumbling 3.7%.

Europe’s latest mess helped bolster the dollar. The euro fell 0.4% to $1.419, its lowest level since Aug. 10. The dollar also gained against a number of other currencies.

Historically, what’s good for the dollar usually is bad for gold, its archrival. But gold has been in its own bullish world for much of the summer, paying little attention to the dollar’s moves.

The metal now looks primed to try another run for $2,000 an ounce. Gold reached $1,917 intraday on Aug. 22, then was slammed by profit-taking that took the price as low as $1,707 on Aug. 25.

With the economic backdrop worsening, “I think we’re going to see $2,000 gold here very, very shortly,” Zeman said.

The bigger question may be this one: If gold does top $2,000, does that spark another round of profit-taking -- or a panic rush in by investors who've so far missed gold's 11-year bull market?

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Photo: Gold bars at gold and silver separating plant in Vienna. Credit: Lisi Niesner / Reuters

Gold halts two-day slump, awaiting Bernanke's speech

Gold slumped almost to the $1,700 level early Thursday, then clawed its way back to close higher -- halting a vicious two-day sell-off that followed seven straight weekly gains.

The next test for the metal’s bull market comes at 7 a.m. PDT Friday morning, when Federal Reserve Chairman Ben S. Bernanke gives a speech on policy at a bankers’ gathering in Jackson Hole, Wyo. Gold buyers could swarm again if Bernanke strongly hints at more economic stimulus.

Near-term futures in New York ended regular trading Thursday up $5.70 to $1,759.80 an ounce, after losing nearly $135, or 7.1%, in the previous two sessions.

Money moved back into gold after the stock market was unable to sustain its three-day advance, said Adam Klopfenstein, senior market strategist at commodities trader MF Global in Chicago.

Gold futures fell as low as $1,707 early in the day, then rebounded as stocks slumped. The Dow Jones industrials closed off 170.89 points, or 1.5%, to 11,149.82, giving back one-third of the 504-point rally from Monday through Wednesday.

Silver, the "poor man's gold," gained $1.58 to $40.74 an ounce.

Gold, the classic haven, had been on a hot streak since late July as stocks plunged worldwide amid wild volatility. The price surged from $1,587 on July 21 to a record $1,888.70 on Monday. In intraday trading Monday gold briefly crossed $1,917.

But the latest wild rush into the metal also triggered warnings that profit-taking was overdue, with the price up 33% year to date through Monday.

“This was a necessary flush because everyone wanted to own gold,” Klopfenstein said of this week’s selling wave.

Bernanke may hold the key to gold’s short-term trend.

With the U.S. economy again struggling, Bernanke is expected to say Friday that the Fed stands ready to provide more help if necessary. That could mean another round of pumping cash into the financial system (a.k.a. money printing) -- which could be bullish for gold by raising the specter of further devaluation of the dollar.

Still, most economists say Bernanke won’t do more than lay out some possibilities. Whether that's enough to excite gold’s fans remains to be seen.

Carl Riccadonna, senior economist at Deutsche Bank Securities in New York, noted that the Fed chief in July said that two preconditions were necessary for the central bank to launch another big stimulus program. “One, economic weakness must prove more persistent than expected,” Riccadonna said in a report Thursday. “And two, deflationary risks must reemerge.

“The first condition is arguably already being met," he said, "but it is hard to make the case the latter is occurring in the present environment given that recent data have shown substantial residual inflation pressures.”

The consumer price index was up 3.6% in July from a year earlier, more than three times the annualized inflation pace of July 2010. Blame energy and food prices.

But then, rising inflation also has been good for gold. In fact, nearly everything has been good for gold over the last decade: The metal is on track to post its 11th straight annual gain, after ending 2000 at $274 an ounce.

-- Tom Petruno

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Gold slides from record high as profit-takers cash in

Not so fast on those "Gold $2,000" T-shirts.

Some investors and traders finally decided to cash in their recent huge gains in the yellow metal, driving the price down Tuesday after a six-day rally to record highs.

Near-term futures in New York fell $30.40, or 1.6%, to $1,858.30 an ounce in the regular trading session, then slid to $1,835 in electronic trading.

The price had reached a record $1,917.90 in electronic trading late Monday.

Silver, which had been up for seven straight sessions through Monday, fell $1.04, or 2.4%, to $42.28 an ounce Tuesday. Silver had closed at $43.32 on Monday, its highest price since May 2, when the metal was beginning a steep plunge after hitting a 30-year high.

Precious metals have streaked higher this summer on fears of another global recession and as Europe’s government-debt crisis has worsened. The dive in stock prices since late July also has fed demand for gold as a haven.

Through Monday, gold had risen nearly $400 just since June 30.

But just as some analysts began to talk about a “parabolic” rise in prices, it probably was inevitable that profit-taking would hit.

Next up: Gold’s fans are counting on Federal Reserve Chairman Ben S. Bernanke hinting at another economic-stimulus program when he speaks at a banking conference on Friday in Jackson Hole, Wyo.

Any new money-printing campaign by the Fed could further devalue the dollar and keep gold’s bull market raging.

But note: Bernanke is merely expected to say the Fed stands ready to help, if needed. And if the stock market keeps rallying, Bernanke may have less reason to sound concerned about the economy.

The Dow Jones industrials were up 247 points, or 2.3%, to 11,101 at about noon Tuesday, with an hour of trading to go.

-- Tom Petruno

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Photo: Australian gold coins at the Perth Mint. Credit: Ron D'Raine / Bloomberg News

Bad weather raises concern over future food prices

 
Corn futures rose Monday amid speculation that the recent rains in the Midwest won't be enough to ease drought conditions and boost farmers' yields.

Indeed, it has been a brutal year weather-wise for much of the country, particularly for the Midwest and Texas. In the spring there were floods, which made it difficult for farmers to get their crops planted in the ground.

This summer, heat waves have damaged crop fields, and intense droughts in Texas and Oklahoma have resulted in cattle dying and ranchers rushing to sell their animals, even if they took a loss. The extreme weather has raised concerns that a smaller-than-expected supply of corn, soybeans and other core commodity crops might ripple out and keep consumer food prices high in the coming months.

Last month, the U.S. Department of Agriculture cut its forecast for this year’s harvest and predicted that grain inventories, though still hitting record highs, would come in lower than previously expected. Among its estimates: Corn was forecast to hit 12.9 billion bushels, down from previous forecasts of 13.5 billion bushels.

Corn futures in Chicago rose 9 cents on Monday, closing at $7.20 a bushel for a September delivery. The price has jumped 21% from $5.96 a bushel on July 1, and is nearing the three-year high of $7.85 reached on June 9.

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Photo: A corn crop failed to mature in a Texas field this July. A severe drought has caused most non-irrigated crops in the area to fail and forced farmers to abandon some fields to conserve their limited resources. Credit: Scott Olson / Getty Images

Gold tops $1,900 as buyers pile on

Gold topped another century mark Monday in its summer price surge, rising above $1,900 an ounce for the first time.

The metal traded as high as $1,917.90 in afternoon electronic futures trading. In the regular futures session the near-term contract closed up $39.80, or 2.1%, to a record $1,888.70.

The price has risen for six straight sessions and seven straight weeks. Gold topped $1,800 for the first time last week. The $1,600 mark was crossed in mid-July.

Year to date the metal is up a stunning 33%, from $1,421 at the end of last year.

Another milestone: The SPDR Gold Trust exchange-traded fund (ticker symbol: GLD) has become the largest ETF by market value, exceeding the SPDR S&P 500 ETF (SPY), which tracks the Standard & Poor’s 500 stock index.

The gold fund’s market value reached $76.7 billion on Friday, compared with $74.4 billion for the S&P 500 fund, according to Bloomberg News data.

By now, everyone knows what’s driving gold: pretty much everything.

Take your pick: diving stock prices worldwide, fear of recession, fear of a European banking-system meltdown, distrust of central banks and paper currencies, nervousness over Standard & Poor’s downgrade of U.S. government’s debt rating, disgust with rock-bottom short-term interest rates, or . . .  add your own reason.

And as last week demonstrated, “Gold seems to go up whether the S&P 500 goes up or down, and whether the dollar goes up or down,” said Jeffrey Friedman, a market strategist at MF Global in Chicago.

Momentum in the price of any asset can create more momentum as short-term traders pile on. And gold has the Big Mo now.

“Gold is strong in any and all currency terms and it is now entering that stage when prices go ‘parabolic,’ ” commodities analyst Dennis Gartman wrote in his Gartman Letter on Monday.

But when the price of anything goes parabolic, many investors know to stay away. “When we have a correction it could be violent,” Friedman said.

Remember silver’s spring streak? The “poor man’s gold” shot from $37.70 an ounce on April 1 to nearly $49 on April 29 -- then crashed to $33.50 by mid-May. Silver has been clawing its way back since then, and rose 89 cents to $43.32 on Monday, its highest since May 2.

Gold’s next big test may come on Friday, when Federal Reserve Chairman Ben S. Bernanke is scheduled to speak at the annual gathering of central bankers and economists at Jackson Hole, Wyo.

With the U.S. economy on the ropes, the widespread expectation is that Bernanke will signal the Fed’s willingness, if necessary, to launch another program to pump money into the financial system via purchases of Treasury bonds.

That could further fuel inflation fears and zap the dollar, giving gold’s fans another reason to keep buying.

But if Bernanke sounds reluctant to act, he could give gold owners an excuse to take some of their massive 2011 profits.

-- Tom Petruno

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Photo: Gold bars at the Istanbul Gold Refinery in Istanbul, Turkey. Credit: Kerem Uzel / Bloomberg News

Gold price surge leads to wave of crime [Video]

 

The surging price of gold has made the precious metal attractive not only to investors but also to thieves. In Los Angeles, police have reported an increase of smash-and-grab robberies at jewelry stores and street muggings in which thieves have snatched gold chains from victims and run away.

The Times reported Friday that police have warned the public not to wear gold jewelry in public to avoid becoming a victim.

Last month, police released a video, below, which captured a robbery at 21st Century Jewelry on South Broadway.

In an interview, the victim of that robbery said he was worried about the valuable, uninsured jewelry that thieves were stealing that day. But mostly he was thinking about his wife and 6-year-old daughter.

“Always I think about them,” he said, requesting that he not be identified out of fear for his safety. “I’m always thinking about my daughter. ... That moment was really scary.”

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Photo: Security guards outside jewelry stores on South Broadway in L.A. Credit: Jay L. Clendenin/Los Angeles Times

Spot gold tops $1,800 an ounce

Gold had barely cooled its heels after sprinting to record highs last week when roiling markets sent it back on the run.

Spot gold in New York swept up to $1,818.60 an ounce -- another peak -- in late-session trading Thursday as investors recoiled from a raft of bad economic news. The price broke records earlier this week, closing Wednesday at $1,791.20.

Wilting equity markets in Europe stoked fears. Economists from Morgan Stanley, who downsized their forecast for global economic growth, declared the U.S. “dangerously close” to a recession.

Government reports found that consumer inflation and claims for unemployment benefits were both on the rise. Meanwhile, home sales plunged as high food and energy prices push up the cost of living.

Such instability has long been a powerful lure into gold’s haven. The precious metal has trended up for more than a decade and has more than doubled since the recession first hit.

The World Gold Council said it expected gold to stay hot in the second half of the year. Stoking the fire: lingering worries linked to the downgraded U.S. debt, a fragile economic outlook in the West and a strong demand for gold from India and China despite the high price.

Venezuelan President Hugo Chavez sees it as a good time to grab hold of gold. He announced plans Wednesday to nationalize Venezuela’s gold sector.

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Photo: Thousand-gram gold bars. Credit: Kerem Uzel / Bloomberg

Gasoline prices still falling but remain far ahead of 2010 levels

Gasoline price drops were accelerating Wednesday during the last days of the summer driving season, which is usually a time when they are on the rise.

The average cost of a gallon of regular gasoline in the U.S. fell to $3.584, down an additional 5.3 cents since last week.

In California, the average fell an additional 5.4 cents to $3.72 a gallon. Analysts said that refinery output in the state was running high and that there had been no equipment problems in the state.

"Gasoline supplies continue to grow in California even as it drops in other parts of the country. That is resulting in a seldom-seen situation in which some parts of California are very close to the national average. That is almost unheard of," said Patrick DeHaan, senior petroleum analyst for GasBuddy.com.

DeHaan said that prices should continue to drop well into the fall, during the period when demand for gasoline usually falls following the end of the summer driving season, especially if oil prices fail to rebound to levels seen earlier in the year.

"When oil prices were last around $85 a barrel, retail gasoline prices were much lower, so they should continue to fall," DeHaan said.

A year ago, regular gasoline was averaging just $2.742 a gallon nationally. In California, the average last year was $3.169 a gallon.

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Consumer Confidential: Netflix for kids, credit cards, coffee prices

Here's your take-me-home-country-road Tuesday roundup of consumer news from around the Web:

-- Netflix is opening a store on Sesame Street. The company is giving kids and their parents a new reason to embrace its Internet video subscription service by adding a "Just For Kids" tab to subscribers' accounts. Clicking on the feature will pull up a list of kid-friendly recommendations drawn from about 1,000 movies and TV shows in Netflix's Internet video streaming library. It won't suggest titles that are only available as DVD rentals delivered through the mail. That's an option that Netflix is trying to make less enticing to subscribers so it can spend more money expanding its selection of videos available for streaming. The company says about half its subscribers have watched at least two movies or TV shows made for kids in the last 90 days.

-- We're getting smarter with our plastic. Credit card users have been so focused on keeping their accounts in good standing that they've driven the rate of late payments to its lowest level in 17 years. The national credit card delinquency rate, or rate of payments 90 days or more past due, fell to 0.60% in the second quarter, down from 0.92% a year ago. That's the lowest rate since 1994, according to credit reporting agency TransUnion. And the improved payment habits came despite increased use of credit cards, based on quarterly data on Visa, Mastercard, American Express and Discover cards. The average combined debt on all major credit cards increased to $4,699 per borrower, up $20 from the first three months of the year.

-- Here's some more happy news: J.M. Smucker, the top seller of packaged coffee, has cut prices by 6% for most of its brands, including its flagship, Folgers, as well as the Dunkin' Donuts branded coffee sold in grocery stores. Smucker is the first major roaster to trim prices in more than a year, putting pressure on its rivals to follow suit. The company raised its prices four times between May 2010 and May 2011, increasing them by a total of 38%.

-- David Lazarus

Photo: Netflix is striving to be more kid-friendly. Credit: Richard Termine/PBS

 

Gasoline prices still dropping; oil prices rebound

Retail gasoline prices were falling again on Monday as oil rebounded a bit from sharp losses last week. Oil's small gain was based on hopes that European leaders would solve that region's debt crisis, analysts said.

The European benchmark, Brent North Sea crude, rose 93 cents to $108.96 after dipping as low as $107.40 on the ICE Futures Exchange in Europe. Brent crude is off sharply from its high of the year of $127 a barrel set in May. The U.S. benchmark, West Texas Intermediate crude, regained $1.41 to $86.79 a barrel during trading on the New York Mercantile Exchange.

West Texas Intermediate is also down considerably from its high of just under $114 a barrel set in May.

The news for motorists was expected to be fairly good, barring any major, unexpected disruptions in supply.

Gasoline prices could rise a bit near the approaching Labor Day weekend as families plan their last summer driving excursions. But on Sept. 15, California refineries begin the nation's earliest switchover from their more expensive summer blends to a cheaper winter formulation, which should keep the downward pressure on prices, said fuel price analyst Bob van der Valk.

In California, the average price of a gallon of regular gasoline fell another six cents over the past week to $3.73 a gallon, according to the AAA Fuel Gauge Report. That's a drop of 54.5 cents a gallon from the high so far for the year of $4.275 a gallon set on May 6. But prices remain substantially higher than one year ago, when an average gallon cost $3.175.

Nationally, the average dropped 6.9 cents a gallon over the past week to $3.594. A year ago, the average price for a gallon of gasoline nationally was just $2.755.

The graphic is the AAA's 12-month rolling average for regular gasoline prices.

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-- Ronald D. White

Oil takes a tumble as Fed declines to offer new stimulus

Crude oil declined below $79 a barrel to its lowest levels since September on the New York Mercantile Exchange, extending the drop after the Federal Reserve pledged to keep interest rates at a record low through mid-2013.

U.S. benchmark crude for September delivery, West Texas Intermediate, dropped $2.01 to $79.30 on the New York Mercantile Exchange. That was the commodity's lowest settlement since Sept. 29, 2010. Futures have fallen 17% so far this month and are now down 13% for the year.

European benchmark Brent North Sea oil for September delivery dropped $2.35, or 2.3%, to $101.39 a barrel on the ICE Futures exchange in London. Earlier, it had fallen as much as $5, to $98.74, briefly drifting below $100 for the first time since Feb. 8.

Phil Flynn, an analyst at PFGBest Research, said "the market was hoping it would see some more Fed stimulus."

Flynn added, "The Fed didn't need to tell us they were keeping rates low. We already know that. There is a little bit of disappointment about that. Add to that the numerous reports from sources like the Energy Department on lower oil demand and we have another decline. Oil can be a safe haven, but only if you believe the global economy is going to move up reasonably and steadily."

Retail gasoline prices continued to decline, falling to a national average of $3.652 for a gallon of regular from $3.703 a week ago, according to the AAA Fuel Gauge Report. In California, the average price of a gallon of regular gasoline was $3.783, down from $3.816 a week ago.

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Chart: The 12-month rolling average for the price of regular unleaded gasoline in California and in the U.S. Credit: AAA Fuel Gauge Report