More worries at Citigroup

Hello Readers,
9 days into 2008 and so much activity in the markets and the economy. Gold once again hits the highs closing tonight at a all time high of $881.50 an ounce this equates to about £448 if you have not gotten into gold what are you waiting for it's not that far off from $1,000 an ounce. I have been writing about gold for months and would urge you to adding some to your portfolio here's why:

Gold's long-term fundamentals leave little room for interpretation:

• Production supply problems have emerged, speculative demand is surging...
• Crude oil prices show no signs of cooling off...
• The US dollar is being bombarded, along with continued fear of inflation.

I could be looking at $1,000 per ounce of gold in the very near future.

Of course, profit-taking always remains a risk for the gold market in the $800 levels. However, keep in mind that most analysts on the street expected a significant profit-taking correction at $720 and $750 and again $780.

Gold, simply put, is under-valued, under-owned and under-appreciated. And it most assuredly is not well understood by most investors.

Now to Citigroup the United States biggest bank may be forced to writedown $16 billion in the fourth quarter and post a larger loss than previously estimated, Merrill Lynch analyst Guy Moszkowski said.

Moszkowski almost doubled his estimate for Citigroup’s loss to $1.43 a share, from 73 cents, in a note to clients on Tuesday. Moszkowski, the top-rated US bank analyst according to Institutional Investor magazine, maintained his ‘neutral’ rating on the New York-based bank.

Sanford C Bernstein and Goldman Sachs Group have also cut their estimates for Citigroup on concern the bank will mark down some of its $55 billion of subprime and collateralised debt obligation holdings. The US subprime-mortgage defaults have forced financial institutions to announce about $100 billion of asset writedowns and losses on bad loans.

I expect significant writedowns from Citigroup (Jan 15th Q4 announcement) and Merrill Lynch (Jan 18th)sad to announce that Merrill Lynch has already started redunancies at the company as the losses continue and the credit crunch continues.

Tomorrow all eyes are on the Bank of England as they decide whether to cut UK interest rates or hold them. With what has been a disappointing Christmas for retail sales the economy has slowed as consumers reign in spending but spare a thought for BOE officals for the decision won't be easy.The BOE will want to show it still is concerned about rising inflation bought on by high oil prices, rising food prices and just about most items going up in price. So who are calling for the cut in interest rates? Most retailers are just take a look at the sales figures for M&S in the 13 weeks to the end of December, M&S like for like sales in the UK slipped 2.2% shares sank 89p to 414.5p wiping £1.5bn from the company's market value. I beleive the BOE will hold rates tomorrow and until February before adding to December's cut.

The sad thing about the banks they don't always pass the rate cut on to mortgage holders they are not obliged to and some of them argue that the cost of their own borrowing on the money markets remain so high that they can't afford to slash standard variable mortgage rates.

The pound has also lost ground to the dollar and Euro as the prospects of lower interest rates and a slowing UK economy worries investors add to this the credit crunch and stricter lending by banks that affect mortgage and credit card applications that will lead to a slowdown and a fall in housing prices as embattled owners take on higher energy prices and general living costs, consumer led recession a possibility? Yes.............