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Perfect Storm
April 16, 2008
- The perfect storm scenario is coming alive again. The dollar is down, the economy is weakening and inflation is rising. Gold is the perfect asset for individual investors due to the fact that the asset helps protect and build wealth during times like this. Gold's recent performance has been sluggish after its rally above $1,000 when many investors lock in profits, forcing a correction in the price. While gold has gained back ground since dipping slightly below $860, the metal still has a long way to go in the upwards direction.
- The dollar has given up about two cents this morning against the euro and is now trading at a record low of $1.5968. "We're seeing a lot of pressure on the dollar right now, with traders wanting to see the $1.60 level," said Commerzbank precious metals analyst Rory McVeigh. The dollar has fallen to a record lows against the euro due to increasing inflation in Europe, ultimately reducing chances that the European Central Bank will follow the Federal Reserve in cutting interest rates.
- JP Morgan, the third- biggest U.S. bank, said profit fell 50% compared to 1st quarter 2007, after $5.1 billion worth of writedowns and provisions linked to home-equity loans, financing for leveraged buyouts and subprime mortgages. "Our expectation is for the economic environment to continue to be weak and for the capital markets to remain under stress," Chief Executive Officer Jamie Dimon, said in the statement.
- Housing starts in the U.S. dropped more than twice as much as forecasted in March. The decline drops it to a 17-year low, signaling that reduction in construction will keep eroding economic growth for the remainder of the year.
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