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    Daily Digest 12/12 – China Rates Worries on Gold, Senate Bill Extends IRA Donations, OPEC Dismisses $90 Oil as ‘Blip’

    by DailyDigest

    Sunday, December 12, 2010, 4:00 PM

  • China Rates Worries Weigh On Gold
  • Failed Us Bank Count In 2010 Nears 150-Mark
  • Euro Will Not Fail, Say Wolfgang Schaeuble and John Major
  • Senate Bill Extends IRA Donations, Other Provisions
  • Bond Market Signals No End to Deflation for Eight More Years: Japan Credit
  • A Secretive Banking Elite Rules Trading in Derivatives
  • Swan Takes on Australia’s Four Big Banks With Plan for Greater Competition
  • OPEC Dismisses $90 Oil Price as ‘Blip,’ Maintains Production Targets Again

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China Rates Worries Weigh On Gold

The most actively traded contract, for February delivery, settled down $7.90, or 0.6%, at $1,384.90 per troy ounce on the Comex division of the New York Mercantile Exchange. Gold prices slipped as China ramped up its battle against inflation Friday. The People’s Bank of China raised bank reserve requirements by 50 basis points, the sixth increase this year. The decision aims to curb rising inflation by limiting the amount of credit available to businesses and consumers. The move weighed on gold futures, as the yellow metal is considered a hedge against inflation and loses investor appeal when inflation rates slow. China, the world’s largest gold producer, is also the precious metals second-largest consumer.

Failed Us Bank Count In 2010 Nears 150-Mark

The count of collapses, which has already surpassed last year’s total of 140, is expected to rise till the US labour market situation stabilises. As per the latest official data, two banks were shut down on December 10, pushing this year’s failures to 149. According to the Federal Deposit Insurance Corporation (FDIC), Paramount Bank and Earthstar Bank were closed down last Friday. The federal agency, which insures deposits at over 8,000 US banks, expects these collapses to cost over USD 113 million.

Euro Will Not Fail, Say Wolfgang Schaeuble And John Major

The single currency won’t fail, and the region’s nations are determined to defend it, Mr Schaeuble told German newspaper the Bild am Sonntag in an interview published on Sunday. “All those responsible in Europe agree: the euro is to all our advantage. And that’s why we will successfully defend it,” Mr Schaeuble was cited as saying. “Those who bet their money against the euro will have no success,” he added. “The euro won’t fail.”

Senate Bill Extends IRA Donations, Other Provisions

Since the announcement of the deal by the White House and top Republicans to extend Bush-era tax cuts for two years and cut payroll taxes for one, taxpayers have been anxious to learn the fate of other tax breaks that have expired or are set to. Now there is news: The Senate bill released Thursday night reveals which “extenders,” as they are known, would be renewed and for how long. The Senate plans a vote on Monday, but it’s unclear when and what House members will do. “Even tax professionals are on the edge of their seats about the outcome of these provisions,” says Melissa Labant, a tax expert with the American Institute of CPAs.

Bond Market Signals No End to Deflation for Eight More Years: Japan Credit

Bonds designed to protect investors against inflation show that money managers in Japan anticipate prices will decline at an average 0.6 percent pace over the next five years and 0.4 percent annually through 2018. Japan is the only country where bonds linked to price changes show entrenched deflation expectations, according to data compiled by Bloomberg. “Japan is not going for any aggressive reflationary policy mix and therefore is likely to prolong Japan’s deflation,” said Tomoya Masanao, who oversees funds in Japan for Newport Beach, California-based Pacific Investment Management Co., which runs the world’s biggest bond fund. The BOJ plan was “rather cosmetic,” Masanao said in an e-mailed reply to questions.

A Secretive Banking Elite Rules Trading in Derivatives

Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk. In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks. The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available.

Swan Takes on Australia’s Four Big Banks With Plan for Greater Competition

The government will bolster credit unions and building societies that have lost market share since the financial crisis and ban “exit” fees home owners face in switching mortgage providers for new loans starting in July, Swan said. It also plans to give customers more flexibility to change lenders and expand the powers of the nation’s competition regulator. Commonwealth Bank of Australia, Westpac Banking Corp., National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. control more than 80 percent of the home-loan market. Swan, whose government has no outright majority in parliament, is seeking to soothe a public angered by mortgage-rate increases by banks last month that went beyond the central bank’s benchmark increase, even after they reported record profits.


OPEC Dismisses $90 Oil Price as ‘Blip,’ Maintains Production Targets Again

Supply and demand are “in balance,” and $70 to $80 is “a good price” for oil, Saudi Arabian Oil Minister Ali al-Naimi said at the group’s meeting in Quito, Ecuador. OPEC forecasts demand growth will slow as the economy struggles to recover, amid ample supplies, according to a group statement. “The issue they looked at was whether $90 is a blip or a trend,” said Bill Farren-Price, founder of consultant Petroleum Policy Intelligence, based in Winchester, U.K. “They’ve taken the view that there are one-off factors such as the cold snap, a weak dollar, that won’t be sustained in the new year.”

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