Thursday February 21, 2008 
Thursday February 21, 2008
Gold rises to record $949.20 as oil sparks demand for inflation hedge
Gold futures rose to a record $949.20 an ounce after energy costs jumped to the highest ever, boosting the appeal of the precious metal as a hedge against inflation. Crude oil rose to a record for a second straight day, reaching $101.32 a barrel and extending the rally in the past year to 73%. Gold has touched a record 11 times this year, after jumping 31% in 2007 as U.S. inflation accelerated at the fastest pace since 1990.
The precious metal has more than tripled in price during a seven-year rally. Last year's gain was fueled by Federal Reserve interest-rate cuts that helped send the dollar down 9.5% against the euro. The federal funds rate is at 3%, down from 5.25% in mid-September.
- It looks like $950 is the resistance level to watch out for. A breakout above $950 will set the stage for $1000 gold and beyond.
See also :
1. Gold soars above US$920 as power crisis closes South African mines
2. Gold reaches record, breaching $900, on US interest rates
3. Crude oil hits $101.32 on increased demand, rate cuts
4. Fed slashes rates another half a point to blunt economic slowdown
(2008-02-21 21:37:15 SGT)
[Biz]
Permalink
Crude oil hits $101.32 on increased demand, rate cuts
Crude oil advanced to a record $101.32 barrel in New York on speculation U.S. interest rate cuts will bolster fuel consumption. Federal Reserve Chairman Ben S. Bernanke has indicated the central bank will reduce U.S. interest rates if financial conditions and the availability of credit deteriorate. Rising world demand for raw materials helped send oil and commodities including soybeans and platinum to records this week.
Crude oil for March delivery rose 73 cents to $100.74 a barrel at 2:50 pm, a second consecutive record close above $100 on the New York Mercantile Exchange. Prices are up 74% from a year ago. The price of $101.32 reached today [20 Feb 2008] was the highest since oil futures began trading in 1983. The March contract expired today. "We should be looking at oil in the $120-to-$150 area by the end of the year without any major changes," said Peter Schiff, chief executive officer of Darien, Connecticut-based brokerage Euro Pacific Capital, which has $1 billion in customer accounts.
- This is a clear upward breakout of the consolidation range that we have been having between $85 and $100. For a short while, crude oil on the NYMEX hit $100.10 which was just 1 cent above the previous record high of $100.09 - it looked a bit shaky at that point but apparently it was enough to push it above $101.
In time to come we will be looking at $100 oil as a support level instead of resistance. I think it would be more than mildly interesting.
See also :
1. $100 oil : Straits Times front Page
2. Crude oil hits $100.00 [2 Jan 2008]
3. Crude oil hits $99.29 (20 Nov 2007)
4. Crude oil hits $98.03 (7 Nov 2007)
5. "It's going crazy" ($93.80) (29 Oct 2007)
(2008-02-21 09:55:13 SGT)
[Energy]
Permalink
Lockheed aims to sell 500 F-35's in Asia Pacific
Lockheed Martin aims to sell about 500 F-35 [Lightning II] aircraft to governments in the Asia-Pacific region during the life of the stealth fighter's production program, an executive said Tuesday [19 Feb 2008]. "I think 500 is about right, plus or minus 50," Vice President for F-35 Business Development George Standridge told Dow Jones Newswires at Singapore Airshow 2008.
He said Lockheed Martin is in talks with four likely buyers, including Japan, South Korea, Australia, and Singapore. The sales target suggests revenue from the Asia-Pacific region exceeding $20 billion, as initial orders from the U.S. government were priced at $45 million per plane in 2002. The potential sales come in addition to over 2,000 aircraft due for delivery by 2025 to the U.S. military and eight other countries participating in the F-35 program. The US Air Force is expected to take delivery of the first F-25 in 2010, with the UK, another program partner, receiving the first international order in 2011. Countries outside of the F-35 program may receive aircraft as early as 2014. Lockheed will focus on countries that are positioned to upgrade to the "fifth generation" aircraft from models such as the F-16, F-18, or the Harrier.
- The revenue from the 500 Joint Strike Fighter (JSF) units should be much higher than $20 billion. The stated price tag of $45 million per plane is clearly an outdated figure - Wikipedia has a price figure of $50-60 million for the F-35, so the tally would probably be more like $30 billion.
Not to forget that inflation often hits defence spending too, through a combination of various factors, so the final figure remains to be seen.
See also :
1. Lockheed to sell F-16's to India (and also to Pakistan)
2. Twice the jet fighters
(2008-02-21 09:44:02 SGT)
[Biz]
Permalink
China CPI inflation rate hits 7.1% in January 2008
China's inflation rate hit 7.1% in January, the National Bureau of Statistics said Tuesday [19 Feb 2008], the highest figure in over 11 years. The consumer price index was pushed up by an 18.2% rise in food prices, with the cost of pork jumping 58.8% compared with a year ago, the bureau said. The inflation rate is the highest since September 1996, when the index rose 7.4%.
Inflation in China has continued to rise sharply despite a wide range of government measures to keep a lid on prices and rein in the nation's economy, which expanded at a 13-year high of 11.4% in 2007. As part of those efforts, China last year raised interest rates 6 times and increased the amount of money commercial banks needed to set aside in reserves 10 times. But taming inflation became far tougher in China in January when large swathes of the country endured their coldest winter weather in more than 50 years. In south and southwestern China, snow and ice destroyed crucial winter crops such as wheat, rapeseed and fruit.
And as China struggles to control rising prices, there are increasing concerns that it is exporting its inflation problem. With the cost of raw materials, food and energy rising in China, its vast array of exports are in danger of becoming far more expensive, although the massive source of cheap labour helps to absorb some of those pressures.
- That massive source of cheap labour is demanding higher wages in order to cope with increasing prices. The root cause remains the same in China as it is anywhere else : the money supply growing at a faster rate than the economy. Despite China's GDP growth rate of over 11%, their M3 money supply's growth rate is over 20%, so there you have it.
See also :
1. China CPI inflation surges to 11-year high of 6.9% on food, fuel [11 Dec 2007]
2. China in grip of inflation
3. China : 2 billion holiday trips during Chinese New Year threatened by snowstorms
4. China inflation hits American price tags (aka : China's latest export is inflation)
(2008-02-21 09:17:43 SGT)
[Biz]
Permalink
Toshiba scraps HD-DVD, gives in to Sony Blu-Ray in format war
Toshiba abandoned its HD DVD technology, surrendering to Sony's Blu-ray in the entertainment industry's biggest format war since VHS beat Betamax in the 1980s. Toshiba, the leading promoter of HD DVD, will reduce shipments of players and recorders, aiming to close the business by March, the Tokyo-based company said in a statement today [19 Feb 2008].
Sony's victory may stoke sales of high-definition discs after shoppers held back purchases because of uncertainty over which technology would prevail. US retailers plan to stop selling HD-DVD's after Warner Bros. Entertainment, the largest DVD publisher, said last month [Jan 2008] it would release its films only on Blu-ray. An HD DVD can store up to 30 gigabytes of data, or six times more than conventional DVDs, less than the 50 gigabytes for Blu-ray discs.
- Hooray for Blu-Ray! It's about time Sony won a format war (RIP Betamax, Minidisc, SACD).
See also :
1. TDK hard at work on 8-layer 200GB Blu-ray Disc
(2008-02-21 09:04:13 SGT)
[Tech]
Permalink
Iran starts oil exchange in Tehran
Iran, holder of the world's second-largest oil and gas reserves, opened an exchange for crude and petrochemicals as the government encourages private investment in the energy sector. Trading began today [17 Feb 2008] in petroleum products such as light polyethylene, a plastic used for packaging. The Tehran-based Iran Mercantile Exchange is using "spot" rather than futures trading, requiring immediate payment and delivery of the physical product.
Crude oil contracts will be added after a review, Iran's Oil Minister Gholamhossein Nozari said. Iran had been expected to start its own oil-trading market in 2005. Since then, Dubai has launched the Persian Gulf's first bourse to trade sour crude oil futures, which best reflects the type of oil produced in most of the region.
The Iranian rial will be used for all transactions in the first phase and "can be converted in real time into any currency," Nozari said. Traders are based in the Kish Island free-zone, offering investors easy transfer of money and tax exemptions. The exchange may also use the Russian ruble "to free the world of dollar slavery," Iran's ambassador to Moscow, Gholamreza Ansari, said Feb. 15 [2008].
- Iran's much-talked about "nuclear weapon" against the US Dollar looks to be no more than an unguided Scud missile. They are starting small, and under certain restrictions which seem more political than technical. I'm pretty sure that they are quite capable of conducting transactions in all forms of oil and petrochemical products versus just polyethylene, in Euros instead of Iranian Rial, and supporting both futures and spot instead of just spot trading. But that would then be a real threat to the NYMEX and the USD and might provoke an immediate armed response from the US. So the Iranians are at least smart enough to start slowly instead of taking the big bang approach.
See also :
1. The Proposed Iranian Oil Bourse
2. About 70% of Iran oil income in non-U.S. dollar
3. The Peak Oil Crisis : Iran
(2008-02-21 08:45:38 SGT)
[Energy]
Permalink
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