Earlier today some others criticized the Paulson bail-out plan for assuming that the investment banking model on Wall Street could survive the current crisis, provided it was cleansed of its bad assets. It turns out the model didn’t even make it to Monday’s New York Open.

In a move that marks the end (for now) of the high-leverage, no oversight, risk-taking investment bank model, the Federal Reserve announced that its board had approved, “Pending a statutory five-day antitrust waiting period, the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.”

It’s too early to reach conclusions, but here are some initial observations on why the move was made and what it means going forward:

• The ban on short selling hits leveraged players the hardest. You don’t get more leveraged than Goldman and Morgan Stanley. The banks have to de-lever in an orderly fashion without being driven into the arms of a commercial bank partner with deposits. Goldman and Morgan have accepted the oversight that comes with commercial banking in exchange for maintaining their existence.
• Goldman and Morgan move from being prey to predators. As bank holding companies, they can now take deposits. But it’s much more likely they’ll simply acquire deposits. They can acquire the deposits of firms like Washington Mutual or Wachovia. Or, even better from their perspective, the deposits of regional banks hit hard by the collapse in Fannie and Freddie bonds.
• Goldman and Morgan gain enhanced access to Fed lending facilities now that they are bank holding companies. Even though the Fed had already set up a Primary Dealer Credit Facility, as deposit-taking institutions the new Goldman and Morgan have even greater access to more Fed loans (should they need them. What’s more, the new versions of the old investment banks would presumably be covered by the FDIC as deposit taking institutions.

The Fed must hope this moves Morgan and Goldman out of the “problem” category and into the “solution” category. Given a big enough line of credit by the Fed, these new bank holding companies can become new non-government homes of “good assets” while the Fed and Treasury deal with the bad assets. It also keeps the unthinkable from happening: Wall Street losing all its investment banks and two big counter-parties in the derivatives market.

***Treasury includes all asset-backed securities in new plan

Even though it is just a few days old, the scale of the proposed US$700 billion bailout of troubled mortgage-related assets has already gotten bigger. Bloomberg reports today that the Treasury Department has suggested the new program include a much wider variety of asset-backed securities than previously suggested.

“The change suggests the inclusion of instruments such as car and student loans, credit-card debt and any other troubled asset. That may force an eventual increase in the size of the package as Democrats and Republicans in Congress negotiate the final legislation with the Bush administration, analysts said.

“How much are we talking about here? At least another US$500 billion. According to a September third article by Bloomberg’s Sarah Holland, “More than $358 billion of credit card asset-backed securities were outstanding as of March 31, according to the Securities Industry and Financial Markets Association. Another $196.6 billion in securities were backed by auto loans.”

Click to Enlarge

However the SIFMA’s latest data from 2007 (above) shows that once you include home equity lines of credit (HELOC) and student loans, the number quickly jumps to over US$2 trillion. It is almost certain that student loans would be eligible for purchase under the Treasury plan. But HELOCS?

If Paulson and company are doing a true “Control-Alt-Delete” systemic re-boot of the financial sector, then all securitised assets that will be affected by consumer non-payment (nor or in the future) must be transferred from private balance sheets to the public.

That means that though he’s only asked for $700 billion up-front to deal with the bad assets, the Paulson plan could eventually require as much as $2 to $3 trillion in new Treasury money to buy asset-backed securities. Of course Wall Street will only want to get rid of the worst paper and keep the best for itself.

But you are still looking at a number that’s likely to be much bigger than what Congress has been told. That number is even more bearish for the dollar than the current one, which is already bad enough.

***Forget the short-covering rally, a Futures Freeze?

One point we failed to make clear earlier today is that by eliminating shorting from the market today, regulators make it harder for the market to find a bottom, even though they are trying to help the market find a floor. Why?

Shorts help begin a new bull market by covering their positions. They do this, naturally, by being the first buyers of shares. To cover your short you buy back the shares you previously lent. Without the shorts in the market, who’s going to step in and buy at the lows?

In any event, there are still a few tricks up the regulatory sleeve if the prohibition on short-covering fails. First, there is the futures market, where one can still go short an index or security. Activity in the futures market could be shut down if the regulators think it would help. We’re not saying it would help. But now that we’ve gone through the looking glass, anything is possible.

A light lunch could be the order of the day for tomorrow readers, as the Reserve Bank of Australia (RBA) prepares to announce its interest rate decision at 2.30pm on Tuesday afternoon.

But before that has even happened there was unadulterated delight from politicians and commentators alike as Wizard Home Loans announced that it would be reducing its mortgage interest rates regardless of what the RBA does.

Wizard chairman Mark Bouris told the media that “It’s a risk, but we are cutting rates now because the cost of funding our mortgages has fallen, irrespective of the cash rate, and it is only fair that we pass that saving on to our customers.”

Where is the Risk?
Does that really sound like a positive statement? Who is it a “risk” for? Well, Mr. Bouris is clearly talking about it being a risk for Wizard, but potentially in the medium term we could be looking at a risk for the whole economy. We don’t mean that Wizard’s actions will create a domino effect on the economy, but that the actions of the RBA have the potential to induce the very problems that it is supposed to be trying to prevent.

Let’s take a step back to the past. What were some of the things that created the recent collapse in credit markets? Put simply it was cheap credit with easy lending practices followed by a period of more expensive credit with easy lending practices, ending with the inability of corporates and individuals to service the debt and the inability of banks to find investors willing to give it money to lend.

However, the full extent of the problems with the credit markets hasn’t yet had the time to play itself out in the market. Given the time it would, but not yet.

Interestingly there seems to be an undercurrent of opinion that Australian finance markets have come through this unscathed. Even though this is plainly not the case: ANZ, NAB, Opes Prime, Tricom, ABC Learning, Babcock & Brown, Centro, Rams Home Loans, etc., are all evidence that Australia has not been let off lightly.

The Risk is to You!
So what does this have to do with you, and why should you be concerned? Well, right at this moment, the Australian economy appears to be nearing a standstill, with very minimal or no growth in the economy expected. Whether it will fall into a recession with negative growth is uncertain.

While this is happening, inflation continues to rise. In fact, based on recent statistics, the annual inflation rate is now running at over 5% with the RBA not expecting it to return to the 2-3% target band until 2010 at the earliest.

In other words the RBA is choosing to ignore one of its core responsibilities at the expense of another. Unfortunately, they are not mutually exclusive. Inflation cannot be ignored.

Pressing the Inflationary Pause Button
The likely impact of a reduction in interest rates may very well have a short-term desired effect of giving a boost to the economy by easing debt obligations for consumers and business. In reality, all it is likely to do is delay the negative impact.

What the RBA should be doing is encouraging consumers and business to pay down debt levels which paradoxically they tend to do when interest rates are higher, because it becomes a greater burden. Yet when interest rates fall – the optimum time to be paying down debt – the reverse tends to happen, in that they tend to pay off less of the debt (largely because minimum repayment amounts are less) and in fact tend to expose themselves to a greater amount of debt as money becomes cheap again.

The effect is that although it may improve consumer and business spending and therefore assist with ‘growing’ the economy, it will have the consequence of applying further inflationary pressures, for example, by encouraging businesses to raise prices and therefore lead to a need to increase interest rates again. Only this time, the debt burden will be even greater with a potentially greater impact on credit markets.

All Roads Lead to Beijing

Section One:
We all know the China story. We see the consequences of it on our stock market five days each week, BHP and Rio Tinto rise and fall as commodity prices rise and fall. Even when the US market is rising and falling there is the tendency to draw everything back to China and its economic prospects.

All roads lead to Beijing.

The question which everyone wants answered is ‘Will China continue to grow?’ The Chinese government enforced the closure of many industries leading up to the Olympic Games as it attempted to improve the air quality for athletes. Now the Olympics are over it is game on again for China and for its industry.

The amount of construction in China cannot be overstated. It only took watching the Olympic road cycling races or the marathon on TV to see the sheer number of uncompleted building projects in Beijing.

Today in Shanghai, China’s tallest building will be officially opened. The 492 metre, 101 storey Shanghai World Financial Center is the worlds third largest building after the Dubai Tower and Taipei 101. According to the owner of the building, Minoru Mori “total office space in Shanghai is not so large, there is not enough taking into account the business potential of the city. If you supply a good space, then the demand will follow.”

We admit that a statement like that sounds like a property bust waiting to happen. But not yet. And possibly not for a long time yet.

One thing that is often overlooked is that China still has an enormous rural economy. A rural economy where the average annual income is little more than $600. Even in the urban areas the average wage is only about $2,000 per year.

China isn’t standing still. The wages growth for Chinese farmers was 10% for the first six months of this year. Rural wages will need to grow too.

The last thing that the Chinese government would want is for the countryside to be emptied. Now, that’s the extreme and in reality it isn’t going to happen, but the point is that rural wages cannot afford to be left behind. Rural Chinese citizens will need an ever greater incentive to stay rural as the cities become bigger and richer.

That among others is one of the next big challenges for China.

The Most Important Story This Week:
The gold price has rebounded recently following a brief period under USD$800. It wasn’t that long ago that it was trading above USD$1,000, so which way is the gold price going to go next? Money Morning technical analyst Gabriel Andre gave his view on that during the week. Gold to Test Support

Monday: Rule 1. When taking over as CEO of a company make sure that you shift the blame for all the bad stuff on the previous mob. ANZ in Denial

Tuesday: With net profit totaling just $556 million, down from just over $1 billion the previous year, Suncorp has maintained its dividend payment at $1.07, which means that it has a dividend payout ratio of 183%. Financials, Is It Safe?

Wednesday: just like the BHP Billiton results, much of the earnings increase has come as a result of commodity price increases. While that is fine, and it deserves it having suffered through periods of low commodity prices, there is little in the results that would convince BHP that it needed to pay any more than is already on the table. Rio Tinto Releases Results

Thursday: Macquarie may not have the same exposure to leveraged funds that Babcock & Brown [ASX:BNB] has, but it is still being dragged down nonetheless. It is going to take a complete cleanout of this sector before investors can start to have any confidence in companies that have any association with leveraged infrastructure funds again. Not So Big Macq

Inflation Story that Nobody Is Telling You

The vast majority of consumers see “inflation” as what we’re paying for groceries, gas, a Starbucks coffee, and electricity.

Yes, it’s true that rising prices for these necessities has been the poster child for inflation lately. But there’s much more to inflation than just forking over more at the gas station or coffeehouse.

When it comes to Europe, wage push inflation plays a crucial role.

Producers Pass the Inflation Buck

the Consumer

Producer prices are simply the costs required to produce goods and services. Naturally, when producers have to pay higher costs to produce goods, they’ll demand higher prices for the goods they’re selling. In other words, they pass their higher costs to you, the buyer.

Rising commodity prices tend to be a big reason why producers’ costs rise. More money spent in production means smaller profit margins at current prices. If a producer wants to make up for shrinking profit margins but can’t control his input costs, then he must pass on these costs in the form of higher prices. Excess money creation is what drives this type of inflation, affording higher prices.

No doubt, this is exactly why rising energy costs have been such a huge driver of the inflationary environment we’ve trudged through over the last several months.

The debate is heating up among whether this global inflationary period is coming to an end. I tend to believe it is. But, more importantly, economic growth and available credit across the globe is rolling over at the same time surging commodities have left inflation concerns on everyone’s mind.

For this reason central bank policy makers are struggling.

The cost of energy has buoyed the cost for producers, consumers, and everyone in between. But what happens when this pressure eases for a considerable stretch of time?

Inflation Is a Little Bit Different on the Other Side of the Pond

They don’t serve ice cubes in their drinks. They can drive on the left-hand side of the road. And inflation is also a little bit different in Europe. Despite this fact, inflation analysis in these respective regions often focuses on generalities and overlooks one particular difference. Let me explain…

Let’s focus only on two countries and two central banks: The Federal Reserve and the European Central Bank. If you haven’t been hiding under a rock for the last year, then you probably have some kind of idea how their respective policies vary.

The Federal Reserve has knocked off more than 3% from its benchmark interest rate in the last year. In that same time, the European Central Bank has mostly stood its ground, mixing in one rate hike of 25 basis points that brought its benchmark up to 4.25%.

And if you’ve been following my currency articles lately, you also probably know that this monetary policy discrepancy has been a boon to the euro, and a detriment to the buck. For many months, even years now, the relative performance of each currency has been primarily based upon expectations for this rate differential to change.

As you might imagine, inflation expectations play an enormous role in monetary policy expectations. Even though inflation has received plenty of attention over the last several months, many analysts have neglected an important difference between European inflation and U.S. inflation.

Now’s the time to pay closer attention.

What All the Analysts Have Missed Over the Last Few Months

In the last few weeks, commodity prices (particularly crude oil) have cracked. With that abrupt downturn also came a reprieve in inflation expectations. And that’s got many accepting the potential for a lasting shift towards even lower prices and less inflation pressure.

With that in mind, the dollar has managed to rally on two simple facts:

1. The U.S. Federal Reserve has already lopped off a considerable portion of its benchmark interest rate. So they’re now ahead of the rate-cut curve, which has helped maintain some growth in the U.S. relative to Europe.

2. The European Central Bank will be forced to bailout their deteriorating economy by cutting their benchmark interest rate.

Up until this point, the European Central Bank had a good reason to keep fighting inflation. But with commodity prices easing up, now may be the time for ECB policy makers to take action. Here’s why they’ve struggled…

Why Hasn’t the ECB Joined the Worldwide Rate Cutting Party Yet?

With many threats to global growth and concerns over several Eurozone member countries, many have been surprised the ECB has gone so long without letting up on the interest rate front. After all…

• The Federal Reserve has made several moves to lower rates
• The Bank of Canada has followed suit
• The Bank of England has gotten the ball rolling
• So has the Reserve Bank of New Zealand
• The Reserve Bank of Australia is likely next

If you’re wondering why the ECB hasn’t budged, look no further than labor unions. Simply put: Wage contracts put in place via labor unions have employees’ wages moving higher in lock-step with inflation.

There’s really no thought to profitability (the point when workers typically consider demanding higher wages). In other words, rising headline inflation fuels this wage-spiral. And this wage-spiral spurs greater headline inflation. And it continues on like this. That’s something Ben Bernanke hasn’t had to deal with.

You see, the Fed has been able to react to weakening growth by cutting interest rates. The plan: As growth moderates, or rolls over, inflation is likely to follow. But that assumption is more difficult to make when you’ve got rising wages keeping prices unnaturally high. The ECB hasn’t yet been able to make that assumption. Its interest rates remain high.
But here’s what you should expect…

When the ECB finally decides to cut rates, they will do so substantially and they will do so quickly. It will be their way of reloading. Because we know, with the labor unions continually eroding profit margins and forcing prices higher, the ECB will need some fire power for their next inflation shoot-out.

If they cut back rates now, they’ll be able to hike rates and combat inflation when the time comes again. All you need to do is be prepared to act accordingly.

NEW YORK - US stocks closed higher on Friday amid market speculation that struggling investment bank Lehman Brothers could be taken over or win a sizeable cash infusion, and as world oil prices fell sharply.
Speculation about Lehman’s fortunes has mounted as the company’s investment losses linger and as its share price has fallen dramatically in the past year.
The Dow Jones Industrial Average surged 197.85 points, or 1.73 per cent to a close of 11,628.06, while the tech-heavy Nasdaq composite gained 34.33 points, or 1.44 per cent to 2,414.71.
The broad-market Standard & Poor’s 500 index advanced 14.48 points, or 1.13 per cent to finish at 1,292.20.

LONDON - European stock markets closed sharply higher on Friday, ending a volatile week on a strong note as speculation about a bid for troubled US investment house Lehman Brothers gave financials a boost.
In London, the FTSE 100 index of top companies gained 2.52 per cent, or 135.4 points to 5,505.6.

FRANKFURT - The DAX gained 1.69 per cent, or 105.48 points, to 6,342.42.

PARIS - The CAC 40 rose 95.84 points, or 2.23 per cent, to 4,400.45.

TOKYO - The Tokyo Stock Exchange’s benchmark Nikkei-225 index lost 86.17 points , or 0.68 per cent, to end at 12,666.04.

HONG KONG - Hong Kong markets were closed due to a typhoon on Friday.
On Thursday, the benchmark Hang Seng Index fell 539.20 points to 20,392.06.

WELLINGTON - The New Zealand share market finished down, the benchmark NZSX-50 index falling 20.45 points to 3,311.61.

SYDNEY - The Australian stock market is expected to open higher after US stocks rose on Friday as financial stocks gained and a plunge in oil prices soothed worries about inflation and consumer spending.
At 0750 AEST on the Sydney Futures Exchange, the September share price index futures contract was up 73 points at 4,969.
Annual results are due today from Goodman Fielder, Transfield Services, Ramsay Health Care, Austereo and IBA Health Group.
The Australian share market closed firmly in the black on Friday, driven by a resurgent resources sector after the commodities index posted its biggest weekly gain in 33 years.
The benchmark S&P/ASX200 was up 56.2 points, or 1.15 per cent, to 4,931.4, while the broader All Ordinaries gained 60.6 points, or 1.22 per cent, to 5,010.2.

NYMEX
Oil prices shed more than six dollars a barrel on Friday after the dollar firmed and as the world’s second-largest pipeline appeared set to reopen.
New York’s main contract, light sweet crude for October, fell $US6.59 to close at $US114.59 a barrel.
On Friday, oil prices that had surged more than five dollars the prior day fell when the dollar lost steam against the euro.
The euro, which rose above $US1.49 on Thursday, was trading around $US1.47 on Friday.
The greenback’s newfound vigour inspired profit taking in dollar-denominated oil ahead of the weekend.
Another factor hitting crude prices was an expectation that the Baku-Tbilisi-Ceyhan oil pipeline (BTC) would reopen next week.
BP, which operates the pipeline, said this week it expects to start loading oil to the ships at the port of Ceyhan on Turkey’s Mediterranean coast “early next week”.
The BTC line was shut on August 5 after a blast in a pump at a section in eastern Turkey sparked a fire. The blaze was put out six days later.
The world’s second-longest pipeline at 1,774 kilometres, the BTC pipeline, inaugurated in 2006, carries Azeri oil from the Caspian Sea fields to Ceyhan, and is capable of transporting 1.2 million barrels of crude per day.
Despite recent gains, crude oil prices have tumbled sharply from record highs above $US147 set in July as weak economic growth dents global demand for energy.
In London, Brent North Sea crude for October dropped $US6.24 to settle at $US113.92.

COMEX
Gold futures for December delivery fell $US9.50 to $US829.90 an ounce on the Comex division of the New York Mercantile Exchange.
Silver for September delivery lost 0.288 US cents to settle at $US13.555 on the Nymex while September copper decreased 0.0735 US cents to settle at $US3.4725 a pound.

NEW YORK - Wall Street ended mixed on Thursday after investors largely shrugged off a jump in oil prices and focused instead on a bullish analyst call on Lehman Brothers Holdings Inc that eased worries about the financial sector.
The Dow Jones industrial average rose 12.78, or 0.11 per cent, to 11,430.21.
The Standard & Poor’s 500 index rose 3.18, or 0.25 per cent, to 1,277.72, and the Nasdaq composite index fell 8.70, or 0.36 per cent, to 2,380.38.

LONDON - European stock markets closed lower on Thursday as higher oil prices back above $US120 added to gloom over the economic outlook and the health of the banks.
The FTSE 100 index held up better than its peers to show a loss of just 1.6 points or, 0.03 per cent, to 5,370.20 points.

FRANKFURT - The DAX was down 80.84 points, or 1.28 per cent at 6,236.96 points.

PARIS - The CAC 40 fell 61.26 points, or 1.40 per cent, to 4,304.61 points.

TOKYO - The Tokyo Stock Exchange’s benchmark Nikkei-225 index lost 99.48 points to end at 12,752.21.

HONG KONG - Hong Kong shares closed 2.58 per cent down on Thursday, taking the benchmark index to a 15-month low, after Beijing failed to confirm reports of new measures to stimulate the economy.
The benchmark Hang Seng Index fell 539.20 points to 20,392.06.

WELLINGTON - The New Zealand sharemarket nudged into positive territory on Thursday to outperform weak Asian markets as the annual reporting season wound up.
The benchmark NZSX-50 index closed up 0.04 points at 3332.06.

SYDNEY - The Australian stock market is expected to open flat today after a mixed lead from the US, although the futures index in Sydney was higher.
At 0745 AEST, the Sydney Futures Exchange’s September share price index futures contract was up 31 points at 4,875.
Annual results are due from Goodman Group, Worldwide Exploration, Insurance Australia Group, Transfield Services Infrastructure Fund and Billabong International.
Interim results are due from Caltex Australia Ltd.
The market awaits a statement from ABC Learning, which yesterday requested a trading halt on its shares pending an announcement.
Yesterday, the Australian share market closed lower after falls in the financial sector.
The benchmark S&P/ASX200 index was down 54.3 points, or 1.1 per cent, to 4875.2, while the broader All Ordinaries lost 47.9 points, or 0.96 per cent to 4949.6.

NYMEX
Oil prices rocketed on Thursday as traders tracked geopolitical tensions between the United States and Russia, a weak dollar and a large drop in US motor fuel reserves.
New York’s main oil futures contract, light, sweet crude for delivery in October, soared more than $6, to settle eventually up $US5.62 at $US121.18 per barrel.
Brent crude settled $US5.80 higher at $US120.16.
October briefly rallied a similar amount to a two-week high of $US120.93.

COMEX
Gold futures for December delivery gained $US22.70 to $US839.00 an ounce on the Comex division of the New York Mercantile Exchange.
Silver for September delivery added 68.7 US cents to settle at $US13.84 on the Nymex while September copper increased 14.9 US cents to settle at $US3.546 a pound.

NEW YORK - Wall Street scored a moderate gain after a volatile session on Wednesday that saw the major indices ratchet up and down on the price of oil and mixed feelings about the financial sector.
The Dow Jones industrial average rose 68.88 points, or 0.61 per cent, to 11,417.43.
The Standard & Poor’s 500 index rose 7.85, or 0.62 per cent, to 1,274.54, while the Nasdaq composite index rose 4.72, or 0.20 per cent, to 2,389.08.

LONDON - European markets closed mostly higher on Wednesday, while cautious over trends on Wall Street.
The FTSE 100 index was up 51.4 points, or 0.97 per cent, to 5,371.80 points.

FRANKFURT - The DAX put on 35.37 points, or 0.56 per cent, at 6,317.80 points.

PARIS - The CAC 40 added 33.08 points, or 0.76 per cent, to 4,365.87 points.

TOKYO - The benchmark Nikkei-225 index dropped 13.36 points to end at 12,851.69.

HONG KONG - Hong Kong shares closed 2.18 per cent up Wednesday, tracking a surge in mainland Chinese stocks ignited by reports that Beijing will soon unveil measures to shore up its economy, dealers said.
The benchmark Hang Seng Index rose 446.89 points, or 2.18 per cent, to 20,931.26. Turnover was 62.33 billion Hong Kong dollars ($A9.17 billion).

WELLINGTON - Telecom shares slipped to a 15-year low today, but along with the market as a whole the company managed to claw back early losses to end ahead.
The benchmark NZSX-50 closed up 12.91 points at 3332.02.

SYDNEY - The Australian stock market is expected to open higher today after US stocks had a moderate gain overnight.
At 0659 AEST, the Sydney Futures Exchange’s September share price index futures contract was up 37 points at 4,919.
In news today, the Reserve bank of Australia (RBA) will release its monthly bulletin and Australian Bureau of Statistics will issue new motor vehicles sales data from July.
Annual results are due from Amcor, Qantas, Fairfax Media, Healthscope, Sonic Healthcare, Downer EDI, OZ Minerals, Wesfarmers, Lend Lease, Challenger Infrastructure Fund, Wridgways, PaperlinX, Clough Resources, Auckland International Airport, Cabcharge, and Macquarie Office Trust.
Interim results are due from QBE Insurance, Babcock and Brown, Santos, Iluka Resources, Thakral Holdings, and Adelaide Brighton Ltd.
AWB Ltd will hold a shareholders meeting for A Class shareholders.
Yesterday, the Australian share market closed firmly in the black after a stronger commodity prices drove resources sector higher, helping to overcome a negative lead from Wall Street.
The benchmark S&P/ASX200 was up 63.1 points, or 1.3 per cent at 4,929.5, while the broader All Ordinaries gained 67.1 points, or 1.36 per cent, to 4,997.5.

NYMEX
Oil prices rose on Wednesday after a sharp spike the previous day as traders nervously mulled a larger-than-expected decline in US gasoline stocks.
Prices closed higher in edgy trade, wiping out declines experienced earlier in the day, as traders assessed a weekly US inventory report for clues on energy demand.
Crude oil for September delivery rose $US0.45, or 0.4 per cent, to settle at $US114.98 a barrel. Futures are down 22 per cent from a record $US147.27 on July 11.
Prices are up 62 per cent from a year ago.
The price action occured after the US Department of Energy said reported that US crude oil stockpiles climbed 9.4 million barrels in the week ending August 15.
Analysts had forecast a much smaller gain of 800,000 barrels.
In London, Brent North Sea crude for October delivery climbed $US0.45 to settle up at $US114.36.

COMEX
Gold futures for December delivery lost $US0.50 to $816.30 an ounce on the Comex division of the New York Mercantile Exchange.
Silver for September delivery fell 0.065 of a cent to settle at $13.04 on the Nymex while September copper shed 3.15 cents to settle at $3.397 a pound.

NEW YORK - Wall Street fell sharply for a second straight session on Tuesday after a hefty jump in wholesale inflation and a drop in new home construction gave investors more reason to believe an economic recovery is far off.
The Dow Jones industrial average dropped 130.84 points, or 1.14 per cent, to close at 11,348.55.
The Standard & Poor’s 500 index fell 11.91, or 0.93 per cent, to 1,266.69, and the Nasdaq composite index fell 32.62, or 1.35 per cent, to 2,384.36.

LONDON - European stock markets closed sharply lower on Tuesday, following heavy losses on Wall Street.
In London, the FTSE 100 index lost 129.8 points, or 2.38 per cent, to 5,320.40 points.

FRANKFURT - The DAX shed 150.45 points, or 2.34 per cent, to 6,282.43 points.

PARIS - The CAC 40 tumbled 116.05 points, or 2.61 per cent, to close at 4,332.79 points

TOKYO - The Tokyo Stock Exchange’s benchmark Nikkei-225 index dropped 300.40 points, or 2.28 per cent, to end at 12,865.05.

HONG KONG - The benchmark Hang Seng index closed down 446.3 points, or 2.13 per cent, at 20,484.37, its lowest closing level since August 17, 2007.

WELLINGTON - New Zealand shares sank nearly 0.5 per cent.
The benchmark NZSX-50 index closed down 15.03 points at 3319.12.

SYDNEY - The Australian stock market is expected to open lower today after US stocks fell overnight following a hefty jump in wholesale inflation.
At 0734 AEST, the Sydney Futures Exchange’s September share price index futures contract was down 35 points at 4,827.
In news today, the Westpac/Melbourne Institute leading index of economic activity for June will be released, and the Department of Education, Employment and Workplace Relations (DEEWR) will release its killed vacancies survey for August.
In company news today, Brambles, Perpetual, Mortgage Choice, Macmahon, Centennial Coal, AGL Energy, Crown, Pacific Brands, Domino’s Pizza, Noni B and Macquarie Leisure Trust Group will release annual results.
Coca-Cola Amatil and Macquarie Airports release interim results.
James Hardie Industries issues first quarter results and Fox Resources Ltd holds a general meeting.
Yesterday, the Australian share market closed more than two per cent lower, dragged down by the resource and financial sectors and a weak lead from Wall Street.
The benchmark S&P/ASX200 was down 118.6 points, or 2.38 per cent, to 4866.4, while the broader All Ordinaries dropped 113.1 points, or 2.24 per cent, to 4930.4.

NYMEX
Oil prices rebounded Tuesday, jumping back above $114 barrel after the dollar weakened against the euro and a rally in heating oil pulled new buyers into energy markets.
Light, sweet crude for September delivery rose $US1.66 to settle at $US114.53 on the New York Mercantile Exchange, after alternating between positive and negative territory earlier in the day.
The September contract expires Wednesday, adding to the volatility.
In London, October Brent crude rose $US1.31 to settle at $US113.25 a barrel.
Crude began the day lower after Tropical Storm Fay missed oil and gas installation in the Gulf of Mexico, easing concerns about a disruption in supplies.
But prices later spiked more than $3 a barrel, apparently driven higher by a surge in heating oil futures that triggered technical buy orders in energy markets, analysts said.

COMEX
Gold rose as the dollar dropped on speculation that a slumping US economy will prevent the Federal Reserve from raising borrowing costs. Silver was little changed.
Gold futures for December delivery rose $11.10, or 1.4 per cent, to $816.80 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $787.50 as the dollar climbed as much as 0.4 per cent.
Silver for September delivery added 0.005 of a cent to settle at $13.105 on the Nymex while September copper gained 11.35 cents to settle at $3.4285 a pound.

NEW YORK - Wall Street stocks plunged on Monday as jitters re-emerged over the financial health of mortgage-finance giants Fannie Mae and Freddie Mac, triggering fresh fears about the US credit crunch.
The Dow Jones industrial average fell 180.51, or 1.55 per cent, to settle at 11,479.39.
The Standard & Poor’s 500 index fell 19.60, or 1.51 per cent, to 1,278.60, and the Nasdaq composite index fell 35.54, or 1.45 per cent, to 2,416.98.

LONDON - European stock markets closed narrowly mixed in volatile trade. In London, investors set record results for the world’s biggest miner, BHP Billiton, against deep-seated concerns on the economic outlook.
The FTSE 100 index slipped, 4.6 points, or 0.08 per cent, to 5,450.20 points.

FRANKFURT - The DAX was off 13.14 points, or 0.20 per cent, to 6,432.88 points.

PARIS - The CAC 40 edged down 4.78 points, or 0.11 per cent, to 4,448.84 points.

TOKYO - The Tokyo Stock Exchange’s benchmark Nikkei-225 index rose 146.04 points, or 1.12 per cent, to end at 13,165.45.

HONG KONG - The benchmark Hang Seng index closed down 229.91 points, or 1.09 per cent, at 20,930.67.

WELLINGTON - Fisher & Paykel Appliances shares plunged 11.5 per cent, or by 24 cents to 185, after the short term cost of the move of much of the company’s manufacturing offshore was revealed.
Fisher & Paykel helped take the benchmark NZSX-50 index down 16.99 points to 3334.15.

SYDNEY - The Australian stock market is expected to open lower today after Wall Street fell overnight.
At 0743 AEST, the Sydney Futures Exchange’s September share price index futures contract was down 85 points at 4,920.
In news today, Australian Chamber of Commerce and Industry (ACCI) small business survey will be released, the Housing Industry Association of Australia issues its state and national outlook for the June quarter, and the Reserve Bank of Australia will release the minutes of its August 5 board meeting.
The Australian Bureau of Statistics releases data on merchandise imports for July, and the Melbourne Institute issues its quarterly wages report.
In company news today, OneSteel, Consolidated Media, Boral, Hutchison Telecommunications, Melbourne IT, JB Hi Fi, GWA International, Virgin Blue Holdings, Monadelphous Group, Thomas & Coffey, Oil Search and Newcrest will release annual results.
Lihir Gold releases interim results.
Origin Energy releases its target’s statement in response to a takeover bid by the UK’s BG Group.
The Australian share market nudged a little higher yesterday as investors anticipated a good profit result from BHP Billiton, which released its results after the close of the market.
The benchmark S&P/ASX200 index was up 3.3 points to 4,985, while the broader All Ordinaries index gained 4.6 points to 5,043.5.

NYMEX

Crude oil prices fell on Monday as Tropical Storm Fay looked set to spare energy facilities in the Gulf of Mexico and as the Baku-Tbilisi-Ceyhan pipeline appeared ready to reopen.
New York’s main contract, light sweet crude for September delivery, dropped 90 cents to close at $US112.87 a barrel.
Earlier, oil prices had climbed as investors worried that Tropical Storm Fay would strike the Gulf of Mexico, where nearly a quarter of US oil installations are located.
The New York futures contract had bounced above $US115 before losing steam when it became clear that Fay, which had battered the Dominican Republic, Haiti and Cuba, was on track to hit Florida.
Royal Dutch Shell said it had evacuated 425 staff from the Gulf of Mexico but said that no more workers would leave as Fay appeared likely to miss its energy installations.
According to the Miami-based National Hurricane Center, Fay could reach hurricane strength before making landfall in Florida late on Monday (overnight Monday to Tuesday morning AEST).

COMEX

Gold for December delivery closed at $US805.70 per troy ounce on the New York Mercantile Exchange, up from $792.10 on Friday.
Silver for September delivery added 28.5 cents to settle at $13.10 on the Nymex while September copper fell 0.75 cent to settle at $3.315 a pound.

NEW YORK - Wall Street ended a volatile week with a mixed showing on Friday as worries about credit markets and the economy tempered investors’ upbeat sentiments about falling oil prices.
Investors were encouraged early in the Friday session as oil’s pullback lifted the outlook for consumer companies and eased concerns that record-high energy prices would force Americans to curb spending.
The Dow Jones Industrial Average advanced 43.97 points, or 0.38 per cent, to close at 11,659.90, while the tech-rich Nasdaq composite fell 1.15 points, or 0.05 per cent to 2,452.52.
The broad-market Standard & Poor’s 500 index gained 5.27 points to finish at 1,298.20.

LONDON - Europe’s main stock markets mainly rose on Friday, boosted by Wall Street gains and weak oil futures, but London fell as the mining sector was hit by falling metals prices, analysts said.
The FTSE 100 lost 42.6 points, or 0.77 per cent, to close at 5,454.80 points.

FRANKFURT - The DAX 30 ended 3.81 points, or 0.06 per cent, higher at 6,446.02.

PARIS - The CAC climbed, or 32.71 points, 0.74 per cent, to finish at 4,453.62 points, with trading subdued because of a public holiday in France.

TOKYO - The Tokyo Stock Exchange’s benchmark Nikkei-225 index rose 62.61 points, or 0.48 per cent, to end at 13,019.41.

HONG KONG - The benchmark Hang Seng Index fell 232.13 points, or 1.09 per cent, at 21,160.58.

WELLINGTON - The New Zealand sharemarket rose on Friday as Fletcher Building continued to strengthen following Wednesday’s annual profit result.
The benchmark NZSX-50 index rose 17.23 points to 3351.13.

SYDNEY - The Australian stock market has had a flat lead with New York indices closing mixed on Friday as worries about credit markets and the economy tempered investors’ upbeat sentiments about falling oil prices.
At 0738 AEST, the Sydney Futures Exchange’s September share price index futures contract was down eight points at 4,930.
In news today, miner BHP Billiton Ltd and steelmaker BlueScope Steel are to release their annual results, as are rubber products manufacturer Ansell, online job agency Seek Ltd and online service provider iiNet Ltd.
The Australian share market closed flat on Friday as a rally in banks and property trusts, triggered by a positive US lead, offset falls in mining and energy stocks.
The benchmark S&P/ASX200 index was up 0.6 of a point to 4,981.7, while the broader All Ordinaries index lost 0.1 of a point to 5,038.9.

NYMEX
Oil fell to its lowest price in three months on Friday, briefly touching the $111 level after the dollar muscled higher and OPEC predicted the world’s thirst for fuel next year will fall to its lowest point since 2002.
Light, sweet crude for September delivery fell $1.24 to settle at $113.77 a barrel on the New York Mercantile Exchange after falling to $111.34, its lowest price since May 2 and more than $35 - or 24 per cent - below its July 11 trading record above $147.
As high energy costs force countries around the globe to cut back on consumption, crude prices have plummeted and are now within striking distance of $100 a barrel, a level first reached on February 19.
At the pump, retail gas prices also continued falling, with a gallon of regular shedding about half a penny overnight to a new national average of $3.771, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas peaked at $4.114 on July 17.
Crude fell after the dollar gained strength against the euro on US data showing that industrial output rose more than expected in July.
The 15-nation euro has lost some of its lustre compared to its American rival amid growing evidence that European economies are slowing.
The euro bought $1.4675 in trading Friday, down from $1.4811 late Thursday.

COMEX
Gold for December delivery dropped $22.40 to settle at $792.10 an ounce on the New York Mercantile Exchange, after earlier falling to $777.70, its lowest level since October.
Other precious metals traded mixed Friday. Silver for December delivery shed $1.43 to settle at $12.93 on the Nymex, its lowest close since almost a year ago, while September copper rose 1.65 cents to settle at $3.2925 a pound.

15 2008 - Australasian Investment Review – (AIR)

Suddenly the spectre of inflation no longer hangs over the world: it’s gone, banished by the reversal in sentiment in commodity and financial markets. Banished by fears of recession, which were confirmed overnight with Europe contracting in the second quarter, with Germany and France following Italy into a slump. Oil, copper and gold down, and wheat, corn and soybeans as well it’s been a sea change in sentiment in the past month. Slowing Europe and Japan suddenly mean the US is not alone, so it’s off into the greenback because you’ll be more protected there. Europe moved into a real slowdown in the June quarter,with growth contracting by 0.2%, Germany’s economy contracted by 0.5%. France slowed as well, with the economy falling a surprising 0.3% in the quarter. Growth is still up for the first half after the March quarter saw growth of 0.7%, but the size and speed of the slump was surprising, and emphasised why commodity prices are weakening, along with the euro. Inflation is supposed to have peaked, or is close to peaking; growth is slowing, and so will price pressures as recession bites. That’s why the surge in consumer inflation last month in the US came as a complete shock to the markets. Despite the slump in oil and petrol prices from mid-month onwards, and the rise in the value of the US dollar, the CPI surged by a rather large 5.6%, the highest rate since January, 1991 when the first Gulf War was raging. That compares to an annual 5.1% in the year to June. The CPI rose 0.8% in July, compared to June when it jumped 1.1%, so there was a small slowing. But the surprising news had no impact on interest rates, shares or sentiment. Oil was still easier, gold fell sharply, losing the gains of the day before and copper was lower. Higher food, petrol and energy costs were responsible, despite the drop in oil and petrol prices. Those falls are continuing, that’s why economists believe the CPI will drop sharply this month. Now the older and wiser of those in the market wonder if there’s something more dangerous approaching, along with the slumping global economy: deflation. More of that shortly. All year long, the debate has raged over whether the world faces a greater risk from resurgent inflation or from a deflation, caused by the credit crunch, to match Japan in the 1990s. The fall in commodity prices has, for now, convinced the market that we need not worry about inflation. In the US, the market for government inflation protected bonds (called TIPS) now implies that inflation will average 2.16% over the next decade. That’s the lowest in five years, but is it just as much an overshoot as the upward drive in commodity prices when they peaked midway through last month? What is still clear is that inflation is still with us: from the United States, through Europe and Asia, prices are still rising. Wholesale price inflation is double digit in China (but consumer prices are easing); in the US, Europe and the UK wholesale and consumer price inflation are at levels not seen for more than a decade in some cases.  In Japan this week’s report of a 7.1% jump in wholesale inflation was the steepest rise in 27 years In the eurozone, the consumer inflation hit 4.0% in July; more than double the European Central Bank’s inflation target of 1%-2%. Inflation stands at 3.6% in France, at 4.4% in Britain (its highest level for 16 years) and at its highest level for 12 years in Italy at 4.1% and 11 years in Spain where its running at 5.3%. In Germany inflation hit 3.3%, the highest rate since 1993 and enough to get the old anti-inflationist Bundesbank rolling in its grave. Inflation hit 4.3% in Norway, Eastern Europe it’s 6.7%, while in India it’s running at nearly 12% and in Japan at 1.9%, the highest for more than a decade. In some countries such as Argentina there’s doubt about the declared rate (9.3% there) because of changes to the way the government accounts for and reports inflation. In Thailand it’s running at 27% and higher in Egypt This week China reported a slowing in consumer inflation to 6.3% from 7.1% in June. But core measures which discount food and energy have risen past 2%. Now the point of this international roll call is to make a point: normally it would be enough to see interest rates rising everywhere: in India, the central bank is tightening policy, but apart from the increase at the start of July by the European Central Bank, central banks are holding back, transfixed in the case of the Fed and with the Bank of England by fears of a downturn and fears about inflation. So why then are financial markets (even bond markets) suddenly more relaxed about price pressures and galloping into equities and out of oil and commodities? Relative growth differences between the US, Asia and Europe is the one reason already stated, but the Merrill Lynch’s August fund managers survey provides a second reason. Big international investors no longer fear inflation.They worry more about recession, which they believe will take care of cost pressures.So does that indeed signal a deflationary period of rapidly falling growth and prices?

Here’s what Merrill Lynch concluded this week:

Fund managers’ fears of inflation have all but evaporated to reach their lowest level since the downturn of late 2001, according to Merrill Lynch’s Survey of Fund Managers for August.

Merrills said a total of 193 fund managers participated in the global survey from 1 August to 7 August, managing a total of $US611 billion. A total of 161 managers participated in the regional surveys, managing $US432 billion.

The survey captures an extraordinary reversal in investors’ attitude towards inflation. A net 18% of the 193 respondents expect global core inflation to fall in the coming 12 months.

In June’s survey, a net 33% thought inflation would rise.

A falling oil price and growing evidence of recession have prompted this rethink.

More investors believe that the global economy has already entered recession - 24% of the panel take that view this month compared with 20% in July and 16% in June. During the credit boom, investors urged companies to borrow more, but with the credit crunch biting, they are now concerned about leverage.

The net percentage of investors who believe corporates are under leveraged has tumbled to 9%, down from nearly 40% at the end of 2007.

“The message from investors to corporates is that if we are headed for a recession, they should clean up their balance sheets and prepare a financial buffer,” said Karen Olney, chief European equities strategist at Merrill Lynch.

“As banks de-lever, non-financial corporates will have to wake up to far less flexible world of credit.”

Merrill Lynch found that US assets are indeed back in favour (as it seemed in the Mat survey).

“With the economic downturn spreading to the eurozone and certain emerging markets, investors are starting to view U.S. assets as attractive.

“The net balance of asset allocators overweight U.S. equities stands at 12 percent, its highest level in more than six years.

“Supporting this view is the widely-held belief that the U.S. dollar is undervalued.

“A record net 58 percent say this month that the dollar is undervalued, while a net 71 percent say the euro is overvalued. Investors believe that the U.S. has a better corporate profit outlook and higher quality earnings than the eurozone.”

In Europe, investors are moving from oil to consumer stocks.

“European investors have responded to the fall in the oil price by selling oil producers and buying into discretionary consumer stocks.

“The percentage of European investors overweight oil & gas stocks collapsed to 11 percent in August from 52 percent in July.

“Investors have also significantly scaled back large underweight positions in travel & leisure, personal & household goods and retail companies.

“Technology and media sectors, both with significant exposure to consumer demand, also swung back in favour.

“At the same time, inflation fears among the European panel have fallen to levels even lower than in the Global Survey.

“A net 45 percent of European fund managers expect the region’s core inflation to fall over the next 12 months. In June, 32 percent of the European panel were predicting rising inflation.

“The market appears to have overreacted to a fall in the oil price, and investors have turned a blind eye to second round effects of inflation, such as rising wages,” said Karen Olney. “It will take several months of slowing global growth to be sure that the inflationary dragon has been slain.”

But the Merrill Lynch survey contains a cautionary note.

“One consequence of the recent fall in the oil price has been a rapid unwinding of what the survey has highlighted as a highly-crowded trade: Investors have reduced ‘long’ or overweight positions in energy and started closing underweight positions in financials.

“But have they lost sight of the fundamentals in unwinding this position?”

Merrill Lynch says it believes that the energy sector will continue to be supported by a strong oil price.

The firm forecasts oil at $US119 in the fourth quarter, underpinned by low, real global interest rates.

Francisco Blanch, Merrill’s head of global commodities research, said in a statement with the survey results: 

“While we have started to see some demand for oil curtailed in OECD economies, the economic fundamentals in China and other emerging markets support oil at more than $US$100 a barrel into 2009.”

“Investors have moved to close underweight positions in European financials after second quarter results suggested banks are on the road to improvement.”

But, according to ML’s Stuart Graham, head of European bank equity research, toxic write-downs are coming to an end and banks have completed more than half of their capital raising.

However, although earnings downgrades for banks are well under way, doubts remain about the sector’s ability to bounce back quickly.

“Banks are highly unlikely to see a V-shaped recovery in their share price given the uncertainties in the market,” said Stuart Graham. “Apart from the economic outlook, a key question is how stringent regulators will be in setting new rules to govern banks’ capital ratios. No one yet knows what the appropriate capital structure of the future is.”

NEW YORK - Wall Street was lower on Tuesday as downbeat news from the financial sector raised more concerns about the ongoing impact of the credit crisis on the economy.
Another drop in the price of oil helped placate some investors. Goldman Sachs Group fell after several analysts lowered recommendations and earnings estimates for the investment bank.
The day’s trading illustrated the ongoing push-and-pull caused by oil prices and any news about financials.
The major US bourses were volatile and ceased to track one-another.
The Dow Jones industrial average lost 139.88, or 1.19 per cent to 11,642.47 after a multi-day run. The broader Standard & Poor’s 500 index fell 15.73, or 1.21 per cent to 1,289.59, while the NASDAQ shed 9.34, or 0.38 per cent to 2,430.61.

LONDON - Europe’s major stock markets fell on Tuesday as the European single currency slid to a near six-month low against the US dollar and oil prices extended their losses.
In London, the FTSE 100 index lost 7.3 points, or 0.13 per cent, to close at 5,534.50.

FRANKFURT - The Dax ended 23.76 points, or 0.36 per cent, lower at 6,585.87.

PARIS - The CAC 40 shed 20.01 points, or 0.44 per cent, to 4,518.48.

TOKYO - Japan share prices fell 0.95 per cent on Tuesday as worries about the health of the economy triggered profit-taking as the market priced-in positives including sliding oil prices and a weaker yen.
The Tokyo Stock Exchange’s benchmark Nikkei 225 index lost 127.31 points to end at 13,303.60.

HONG KONG - Hong Kong share prices closed down one per cent on Tuesday following sluggish trade in mainland Chinese markets.
The benchmark Hang Seng Index dropped 218.45 points to 21,640.89.

WELLINGTON - New Zealand shares closed down 0.5 per cent Tuesday with the major blue-chips leading the broader marker lower.
The benchmark NZX 50 index fell 16.56 points to 3,353.63.

SYDNEY - The Australian stock market is expected to slide today after Wall Street finished lower after a volatile day’s trade.
At 0743 AEST, the Sydney Futures Exchange’s September share price index futures contract was 33 points down to 4,995.
Releases today include the Westpac/Melbourne Institute index of consumer sentiment, the Australian Bureau of Statistics labour price index for the June quarter, and Reserve Bank of Australia Assistant Governor Philip Lowe will speak in Sydney at the Retail Financial Services Forum, day one of the three-day forum.
Annual results are released today by the Commonwealth Bank of Australia Ltd, Telstra Corporation Ltd, Computershare Ltd, Aevum Ltd and Specialty Fashion Group Ltd.
Hillgrove Resources is holding an extraordinary general meeting.
In Brisbane, it’s the Royal Queensland Show Day public holiday.
The Australian share market closed higher on Tuesday.
The benchmark S&P/ASX200 index rose 27.5 points to 5,053.6, while the broader All Ordinaries rose 21 points to 5,090.3.

NYMEX

Crude oil prices slid to a four-month low on Tuesday after Russia announced the end of military operations in Georgia and the International Energy Agency forecast a steep drop in demand.
New York’s main contract, light sweet crude for September delivery, sank $US1.44 to $US113.01 a barrel, the lowest level since April 15.
In London, Brent North Sea crude for September delivery lost $US1.52 to settle at $US111.15 a barrel.
Trading was volatile as investors reacted to developments in Georgia, where fighting between Russian and Georgian troops raised concerns because the country is a key transit point for crude oil and gas exports from Azerbaijan to Western markets.
British energy giant BP announced on Tuesday that it had closed the Baku-Supsa oil pipeline in Georgia as a precaution because of the fighting, but said oil and gas supplies continued to flow from the Caspian Sea to the West by other routes.
The decline in oil prices was supported as the US dollar hit a near six-month peak against the euro, pressuring demand for the dollar-priced commodity.
The market was also dampened after the International Energy Agency (IEA) forecast a steep drop in demand in advanced countries because of high prices and cooling economies.
The IEA said in its monthly report that oil demand was slowing in advanced economies as people ease up on driving, supplies are rising and the market is set to cool well into next year.
Signs of slowing global demand were further confirmed by a report from the US Energy Information Administration.
The EIA, for the first time since February, lowered its price forecasts for crude oil in 2008 and 2009, citing a decline in global consumption and increased production capacity in Organisation of the Petroleum Exporting Countries, the cartel that supplies some 40 per cent of the world’s oil.
The agency said that the benchmark New York futures contract, which averaged $US72 a barrel in 2007, is expected to average $US119 in 2008 and $US124 in 2009.

COMEX

Gold fell for an eighth straight session, the longest slide since 2001, on speculation that the dollar’s strength will reduce demand for the precious metal as an alternative investment. Silver fell, too.
The dollar was little changed against a basket of six major currencies after rising 4 per cent in the past seven sessions. Gold has erased all of this year’s gains, plunging 12 per cent since July 31.
Gold, which generally moves in tandem with the euro as an alternative to the dollar, reached a record $1,033.90 an ounce in March. It has dropped 21 per cent into a bear market.
Gold futures for December delivery fell $13.70, or 1.7 percent, to $814.60 an ounce on the Comex division of the New York Mercantile Exchange.
The last time the metal declined for eight straight sessions was in May 2001, when the price dropped 7.3 percent.
Silver futures for September delivery fell 13.5 cents, or 0.9 per cent, to $14.485 an ounce on the Comex. Silver had gained 14 per cent in the past year while gold advanced 22 per cent.