Gold is trading down $19 today, and pulling several major gold stocks down to new 52 week lows in reaction to the drop in the precious metal.
If you follow gold prices, you know that the past month has not been kind on the commodity, with prices falling from above $900 an ounce a few weeks ago down to its current price of $716.30. Earlier in today's session we actually saw prices trading much lower, breaking through the psychological $700 barrier, and falling all the way down to $695.20 an ounce. This is the first time in 13 months that gold has been under $700, and marks a huge drop from the highs it set back on March 14, when it was at historic highs above $1000 an ounce.
Typically, you would think that recessionary times in America would lead to a rise in gold, but this time around things are a bit different. Not only is America in hard times, but countries all around the world are dealing with their own economic slowdowns, which in turn is pushing currencies around the world lower. As this happens, the dollar, despite the current state of the American economy, has been strengthening against its foreign counterparts. As we all know, gold trades inversely proportionate to the dollar, so any strength in the American currency will result in gold prices dropping, and that is part of what we are seeing right now.
Minutes ago the Federal Reserve Board cut the overnight discount rate to 2.25%. At first, this did not meet with the expectations of Wall Street traders, or perhaps their imaginations. The Dow, which was up about 300 points during morning trading as reported earlier, moved a bit lower. However, it soon recovered and is moving up again.
Where we will end up is strictly guess work but this market is not one of conviction, so I expect the retreat to continue at least to a level such that the fearful will not want to be over-weighted overnight. Nobody wants to fall victim to news headlines and many will want to lock in whatever profits they can for the day.
Lower rates mean a lower dollar, and most likely more upward pressure on gold prices, which topped $1,010 an ounce today. I am not a gold expert but I would not be surprised to see the precious metal higher going forward, given the Fed's abandonment of inflation concerns -- at least for now.
UPDATE:Dow FINAL up 420.41 points to 12,392.66 (3.51%)
Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture and planning firm. He writes Chasing Value and Serious Money columns.
Among companies reporting quarterly earnings on Thursday were Safeway Stores Inc. (NYSE: SWY), the largest food retailer in North America, and Newmont Mining Corp. (NYSE: NEM), one of the world's largest gold producers.
Despite ongoing efforts to upgrade the image of its stores, Safeway, which reported that fourth-quarter earnings in-line with the consensus estimates of analysts surveyed by Thomson Financial, also reported that same-store sales slowed.
The quarterly earnings came to $301.1 million, or 68 cents per share, for the period that ended December 29, down 2% from $307.9 million, or 69 cents per share, in the same quarter of 2006, when tax benefits lifted results. Excluding that gain, earnings per share would have climbed by more than 11%. Fourth-quarter revenue rose 7% to $13.36 billion, which beat the analysts' average estimates.
Despite signs of a slowdown, the fourth quarter capped Safeway's most profitable year since 2001. The company earned $888.4 million, or $1.99 per share, on sales of $42.3 billion, compared to earnings of $870.6 million, or $1.94 per share, on revenue of $40.2 billion in 2006. For 2008, Safeway forecast earnings of $2.25 to $2.35 per share, in-line with analysts' expectations.
Safeway shares fell more than $3 in morning trading, reaching a new 52-week low of $28.80.
It seems investors the world over are rediscovering the precious metal after years of neglect. How could you expect anything else with social unrest, war and recession fears on the front pages of every newspaper, with China and India growing rapidly, placing high demand on all commodities, and with a head-in-the-sand administration just now lifting itself up to take a gander at the last few months of its dubious leadership.
Despite recession fears, there is also the serious possibility of dramatic inflation in the next few years based on deficit spending, the ever expanding federal government and lack of concern for the value (buying power) of the currency. It's pitiful. Gold has been an historic hedge against inflation, so why should now be any different?This has ignited one of my 2008 picks Chasing Value: Anglo American (AAUK) is down...but!, which has moved up sharply in the last week.
I do not know where the ceiling is on gold prices, but it does not seem historically high, and I still think AAUK and FCX belong on everyone's watch list.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of AAUK.
In case you hadn't noticed yet, we are definitely in the midst of a modern day gold rush. Gold prices have been rising strongly again today, with February gold futures moving up as high as $871.20.
There are two main reasons why people are quickly moving into the precious metal. One is the fear a possible recession on the horizon. Any time you enter into a period of economic uncertainty gold becomes a favorable avenue for people's money. The more obvious and in your face explanation for the recent gold rush is the weak U.S. dollar. The weaker the dollar gets, the more favorable gold will be to investors.
Will gold continue to move higher? I think so. Right now America is facing a pretty discouraging mortgage situation. How bad things are going to get is anyone's guess, but you can be sure of one thing: the Fed will do anything it can to keep the economy in "good shape".
Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.
His new favorite for the rest of 2007 is -- like Virginia -- a "gold company with a difference." His new pick is Vista Gold Corp. (ASE: VGZ). He explains, "During the early 2000s, when the price of gold was weak, Vista acquired known gold resources, but ones that were uneconomic at the time.
"This enabled it to build reserves inexpensively, and rather than mining them when the price was low, it held on to the gold in the ground, building value as the price of bullion appreciated.
"Now Vista has 12 properties around the world in various stages of development, some economic at today's higher price. Together, it has over 13 million ounces of resource (proven, probable, and indicated), valued at just over $20 per ounce in the ground -- very cheap.
"In addition to the considerable exploration potential at many of its properties, it also has $20 million in cash. With strong leverage to rising gold prices, we would buy Vista as an option on gold, but one without an expiration date."
Gold is trading down $19 today, and pulling several major gold stocks down to new 52 week lows in reaction to the drop in the precious metal.
Minutes ago the Federal Reserve Board cut the overnight discount rate to 2.25%. At first, this did not meet with the expectations of Wall Street traders, or perhaps their imaginations. The Dow, which was up about 300 points during morning trading 
Adrian Day, editor of the 
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