Spot gold was bid at $925.20 by 1520 GMT after hitting an intra-day low of $922.60, the lowest since June 24. Earlier it hit a high of $944.70.

The precious metal reversed earlier gains when the dollar, which has been under pressure, gained against a basket of currencies after U.S. consumer confidence data.

“Obviously, in these days where everything is linked together, from crude prices to the price of gold, any change to people’s view of the economy and inflation expectations will cause a reaction,” said Ole Hansen, an analyst at Standard Bank.

Adding to the bearish signals for gold prices, crude oil dropped nearly 3 percent.

While investing in gold is usually seen as a hedge against risk, a strengthening dollar makes it relatively more expensive for holders of foreign currencies, weakening its appeal.

“Gold is following the dollar,” said senior trader Michael Kempinski at Commerzbank. “Euro/dollar falling below $1.41 triggered some profit-taking in gold,” he said.

Earlier in the London session, gold slipped after the European Central Bank said gold and gold receivables held by euro zone central banks fell by 96 million euros ($136 million) in the week ending June 26.

INFLATION IN FOCUS?

Matthew Turner, an analyst at VM Group, said gold investors seemed to be focusing more intently on long-term inflation expectations than recession fears, which would strengthen the link between crude and bullion prices.

“But there are no immediate signs of inflation anywhere for now, so investors are looking to the long term, and of course when inflation does start to go up, the price of gold will be rising well ahead of it,” he said.

U.S. gold futures for August delivery dropped by 1.5 percent to $926.90 per ounce on the day.

On the investment front, the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings remained at 1,125.74 tonnes as of June 29, unchanged since June 25.

In other precious metals, spot silver was lower at $13.52 against $13.84 on Monday, platinum was unchanged at $247.00.

LONDON, June 30 (Reuters)

Fear is one thing, but new economic ties to perhaps the fastest growing economy in the world surly stands for something when evaluating the prospects of ^TWII – especially since the index is down over the past 52 weeks from 9,437.43 to a tempting 4,110.09.

The trade agreement between China and Taiwan has been in the works for the past six months, following the election of Taiwan’s new president, Ma Ying-jeou.
With missile threats and naval exercises by China perhaps a thing of the past, Beijing and Taipei buried the political hatchet to work on strengthening economic ties.

The timing does indicate a sense of desperation by both nations to cooperate in this devastating global cash crunch.

Under the new accord, China and Taiwan will expand shipping, air travel, food safety and mail service – underscoring Taiwan’s role as a major transportation hub in the region. It also means that Taiwan’s high-tech industry will get a boost with unfettered access to the mainland’s growing middle class.

The news, however, lacked the fuel to send up ^TWII. The index has been see-sawing since mid-October – closing at 4,995.06 on Nov. 3, down from a monthly October 1 high of 5,764.01.

Rather than looking to Beijing, it seemed that all eyes were on Taiwan’s central bank, as it cut interest rates on Thursday for the third time in about a month.
The central bank cut its benchmark discount rate by 25 basis points to 3.0%.

It’s the central bank’s third reduction since late September and follows cuts on Wednesday by the U.S. Federal Reserve and the central banks of China and others.

In a way, ^TWII represents a trading mentality of hope against hope.

As fear grips the world’s markets, ^TWII could make a rational choice for investors who tend to see that the numbers underlying this new agreement favor Taiwan.

“The growing reality is that this is not just a slowdown, but a true recession,” Joel Naroff, president and chief economist of Naroff Economic Advisors told Money Morning Friday. “Europe and Asia can no longer deny U.S. problems are also hitting there.”

Friday was the 79th anniversary of 1929’s “Black Thursday,” when U.S. stocks were decimated at the start of the Great Depression. And while U.S. markets weren’t quite as hard hit on that date in 2008 as they were in 1929, the overall global effect was chilling.

This October is on track to be the worst since the crash of 1987.

The MSCI World Index has been decimated as each of the 48 developed nations tracked by MSCI Inc. (MXB) have marked a decline so far this year, with 22 of those nations down more than 50%, Bloomberg News reported.

Emerging markets, the global superstars of growth in 2007, are also slowing. Of the “BRIC” nations of Brazil, Russia, India and China, Russia has been hit the hardest. Russia’s Micex Index is down more than 73% year-to-date. China’s stock market is down more than 60% from its peak.

All three major U.S. indices have racked up steep losses for the month of October and are deep in bear market territory for the year.

• The blue-chip Dow Jones Industrial Average Index is down 22.8% for the month and 36.8% year-to-date.
• The tech-laden Nasdaq Composite Index is down 25.8% for the month and 41.5% for the year.
• And the broader Standard & Poor’s 500 Index has dropped 24.7% in October and is down 40.3% so far this year.

The month has seen unprecedented government intervention into the private markets, including coordinated interest rate cuts and widespread bank recapitalization measures, but global stock indices continue to fall. The U.S. Federal Reserve is slated to begin a two-day meeting tomorrow (Tuesday).

“The outlook for the market really depends upon what type of action the Fed may take,” Doug Roberts, chief investment strategist for Channel Capital Research in Shrewsbury, New Jersey, told Reuters. “I wouldn’t rule out the possibility of something on a coordinated basis globally as well.”

Widening Swath of Recessions

Friday’s steep sell-off was sparked in part by the British Office for National Statistics’ announcement that, after a flat second quarter, U.K. gross domestic product (GDP) contracted 0.5% in the three months ended Sept. 30. It was a sharper decline than expected, as median economists’ estimates projected a 0.2% decline, according to Reuters.

Howard Archer, economist at Global Insight Inc., said the reading indicates that the United Kingdom is in a recession.

“The depth of the decline means that we are there to all intents and purposes. Indeed, there can be no doubt that further marked GDP contraction will occur in the fourth quarter as consumers retrench in the face of major headwinds and investment is pared back sharply,” Archer told The Financial Times.

Other European nations have already succumbed to recession, while still more are teetering on the brink of economic contraction. Germany, the EU’s largest economy, is expected to see a 0.2% contraction in gross domestic product (GDP) for the third quarter after a 0.5% contraction in the second quarter. And the nation of Iceland is dangerously close to bankruptcy.

In Asia, Japan – the world’s second largest economy – is also dangerously close to recession. Japan’s GDP contracted 2.4% in the three months ended June 30 after expanding 3.2% in the first quarter.

Worse, the United States could be next.

U.S. Economic Peril

U.S. GDP for the second quarter clocked in at a surprisingly strong 2.8%. But the advance estimate for third quarter U.S. GDP is slated for release this coming Thursday, and according to Naroff, the world markets could very well be in for another shock.

“U.S. GDP contracted significantly in the third quarter,” Naroff said. He predicts GDP may have fallen as much as 2.5% – 3.0%. “Such a sharp slowdown is not expected.”

Global investors might not expect such a sharp decline, but a dire stream of economic indicators has been flooding in for months and they haven’t painted a pretty picture.

“We expect our number next week not to be a good one, and the next quarter could probably be tough as well,” White House Press Secretary Dana Perino said at a White House briefing on Thursday, referring to the upcoming GDP announcement, Bloomberg News reported.

“The president knows that we’re in for a rough ride,” Perino said.

According to Bloomberg data, median economist expectations predict a 0.5% contraction in U.S. GDP for the third quarter.

U.S. unemployment continues to rise and a slowdown in consumer spending, which is responsible for two-thirds of GDP, is bound to slowdown.

“I don’t see how the consumer can do anything but retrench,” Robert McTeer, former president of the Fed Bank of Dallas, said in an Oct. 24 Bloomberg Television interview. “If they all do it at the same time, it will really tank the economy.”

Analysts from Citigroup Inc. (C) predict the United States could see an entire year of contraction before the economy gets back on track, shrinking throughout the first half of 2009.

“We are now expecting one of the sharpest recessions in the post-war period,” Citigroup’s Geoffrey Dennis and Jason Press wrote in a report to clients on Oct. 21.

Dennis and Press also predicted that U.S. unemployment could reach as high as 8.5%.

Source: Recession Fears Hit Home as World Markets Plummet and U.S. Economy Contracts

Turned out to be a good bet for a while, until our credit crisis became a global disease… and even stellar markets had their corrections.

But now, on the slightest bump up in the dollar, some analysts are now questioning whether emerging markets is the best place for your cash. Some say that U.S. stocks are a better bet than foreign stocks.

What’s really going on is that other major currencies, like the euro and the British pound, are being hit by recession fears and the possibility of more bank write-downs.

The dollar hasn’t really risen that much on its own yet. We’re still seeing poor housing numbers and sky-high inflation. There have been bright spots in the U.S. economy, and I won’t deny that things are starting to look better, but a major shift back to holding only U.S. assets in your portfolio is a big mistake.

There are still some great choices out there in foreign markets, and the number of ways to access them as investors grows every day. Just look at the number of ADRs available for Latin American countries.

And get this: 2008 GDP growth for Latin American countries as a unit has been revised up 0.1% since the first quarter of 2008. Look at these projections for the year:

Argentina: 6.7
Bolivia: 4.5
Brazil: 4.6
Chile: 4
Colombia: 5.1
Costa Rica: 4
Cuba: 6.4
Dominican Republic: 4.9
Ecuador: 2.6
El Salvador: 3.1
Guatemala: 4.4
Honduras: 4.4
Jamaica: 2.3
Mexico: 2.4
Nicaragua: 3.5
Panama: 7.9
Paraguay: 4.2
Peru: 7.5
Uruguay: 5.3
Venezuela: 5

Investors would be fools to ignore some of these growth numbers.

Is it time for U.S. investors to come home to U.S. markets? It’s not for me to say for sure… I’m at least a little wary about this recent uptick in the dollar, and I’d like to see it rise of its own accord before I advocate for more U.S. stocks.

That said, there are deals to be had in U.S. markets, and in global markets for that matter. Without the euphoria of a bull market (or a bubble?) it boils down to fundamentals and value. And that goes for all investments worldwide.

Source: Dollar Turn-around Has Analysts Questioning Emerging Markets