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Dow holds ground, gold hits another record

Gold hit another record with December delivery jumping 1.8% to $1,885.90 after hitting a record $1,898.60. This is the 11th year of the metal’s bull run, longer than the 1970s to 1980 bubble. There is now talk of gold prices rising at an “arithmetic” rate to a stage of “parabolic” increase.


Stocks are holding their ground despite drops in financial stocks. Most indices are slightly off morning highs amid a lack of major economic news. The Dow has dropped 15.6% from its 52 week high, 15% of that in just the last four weeks of trading.

As of late afternoon on Monday, the Dow was up 72 to 10,890, the Nasdaq rose 11 to 2,353, and the S&P 500 rallied 5 to 1,129.

Gold hit another record with December delivery jumping 1.8% to $1,885.90 after hitting a record $1,898.60. This is the 11th year of the metal’s bull run, longer than the 1970s to 1980 bubble. There is now talk of gold prices rising at an “arithmetic” rate to a stage of “parabolic” increase. Others indicate it may be over-bought.

GLD, the SPDR gold Trust ETF, is now bigger in assets than SPY, the SPDR S&P 500 ETF, with $77 billion in assets compared to $75 billion for the latter.

Libyan rebels have seized control of Tripoli after meeting with little resistance from Col. Moammar Gadhafi’s forces Sunday. Rebel forces have taken over 95% of the capital, although Gadhafi has gone into hiding. The National Transitional Council formed by the rebel group is ready to set up a transitional government to rule the country, hoping to prevent a power vacuum. Seif al-Islam, son of Col. Gadhafi, has been captured and will face charges of crimes against humanity at the International Criminal Court in the Netherlands.

News of Gadhafi’s fall sent Brent Crude prices tumbling $1.25 to $107.25 a barrel Monday, though well above lows of about $100 in February when concerns over lost Libyan oil production initially surfaced. With Gadhafi overthrown, many now wonder if the rebel groups’ many factions can hold together without a unifying cause. At any rate, returning the country to full oil production will likely take some 36 months.

Corporate News

Royal Dutch Shell PLC (NYSE:RDS) together with joint venture PetroChina Co. (NYSE:PTR) are considering to acquire Australian coal seam producer Bow Energy Ltd. in a bid worth $540 million. The offer would come from Arrow Energy, co-owned by Shell and PetroChina. The oil majors have been investing heavily in coal seam gas plays, spending over $20 billion on such deals in 2008 in Australia alone. Shell and PetroChina have contracts for a facility in Queensland with initial capacity of eight million metric tons of LNG a year. The companies aim to ramp production to 16 million tons annually.

Ford Motor Co. (NYSE:F) and Toyota Motor Corp. (NYSE:TM) are teaming up to develop a new, gas-electric hybrid system for rear-wheel-drive light trucks and SUVs. The formal collaborative agreement is expected to be signed next year, coming as the government enacts legislation forcing the auto industry to markedly improve fleet gas mileage by 2025. Both companies have a wide array of front-wheel drive hybrids including Toyota’s Prius, but lack rear-wheel drive hybrid technology.

Shenzhen-based BYD Co. first half profit cratered due to competition and an end to government subsidies for car buyers. Net profit fell 89% to 275.4 yuan from 2.42 billion yuan, as revenue dropped 11% to 22.54 billion yuan from the previous year. The number of cars sold plummeted 23% to 220,131. Established in 1995 selling rechargeable lithium-ion and nickel bacteries, BYD quickly moved into cellphone parts and alternative fuel cars. A unit of Warren Buffett’s Berksire Hathway owns 10% of the company.

Citic Securities Co., China’s largest brokerage firm by assets, saw profit increase 13% for the first half of the year ending June 30 to 2.97 billion yuan from 2.63 billion yuan a year earlier. Revenue, though, dropped 5% to 7.51 billion yuan from 7.91 billion yuan, due in large part to a 35% fall in its securities brokerage business.

Roche AG (OTC:RHHBY.PK) reported encouraging news on the development of a new class of drugs called CETP inhibitors, designed to raise “good” cholesterol. The company announced preliminary data from its mid-stage 130 patient trial. Full results from this and a larger 470 patient Phase II trial will be announced at a conference in August. Investors eagerly await final results of an ongoing Phase III trial due 2012. If successful, this could be a blockbuster drug; Merck & Co. (NYSE:MRK) has a similar product in the clinic. An earlier effort, and much touted by Pfizer (NYSE:PFE), was a bust when its drug actually increased the risk of patients dying.

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