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Gold market suffering 'very real damage,' Dennis Gartman warns

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Gold market suffers 'damage' The gold market is suffering "very real damage," warns economist Dennis Gartman, who fears that the rally from September's lows is "now under assault."

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"The rally was always disconcertingly tepid; that is, after a vicious decline such as that seen in late August until late September, the bounce, if the market is truly healthy, should have been even more vigorous. It was not, and indeed if anything it was tepid, quiet and placid," the publisher of the Gartman letter said today.

"Tepid placidity all too often gives way to vigorous selling sooner rather than later."

Mr. Gartman cited several possible reasons - margin call selling, for example, or central bank sales - and said that "caution and some liquidation are in order before others beat us to the punch."

Gold is well down from its peak of more than $1,900 (U.S.) and ounce before September's dip, and several factors are playing into global markets overall, whether they be the troubles of the euro zone, worries over the U.S. economy, or fears of China's economic growth slowing down.

"The problem with all this is it's getting tricky to work out what gold's reaction will be if there was a rescue plan [for Europe]or there isn't a rescue plan or there is a downgrade and so on," Mitsubishi analyst Matthew Turner told Reuters.

"The only rational conclusion I can draw is internal factors in the gold market are moving around and establishing a new level for gold. And while that goes on, the price won't move in line with other assets in a normal way."

RIM announces BBX Research In Motion Ltd. today unveiled a new, unified operating system for its BlackBerry smart phones and tablet computers - called BBX - at its annual developer conference in San Francisco, The Globe and Mail's Iain Marlow reports.

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This annual developer conference, known as DevCon, is the company's biggest and most important event, and this year it is being seen as a crucial juncture for RIM.

The company also unveiled new developer tools to help the mobile software programmers create new apps for the BBX platform.

China's growth slows China's economy appears to be slowing just as Beijing wanted, though you've got to put that in perspective.

The economy expanded by 9.1 per cent in the third quarter, according to official numbers released today, a growth pace to die for in the industrialized countries but the slowest for China since 2009. This adds to fears that the engine of the world's economy will slow to the point of eating into demand for exporting countries.

Beijing has tried to manage a slowdown in its ongoing fight against inflation, and while there are some troubles and some unknowns, such as the impact from the euro zone crisis, observers believe China is headed for a soft landing.

"This slowdown in China primarily reflects the impact of domestic policy tightening measures put in place over the last 12 to 18 months as part of Beijing's efforts to curb price pressures," said Brian Jackson of the RBC emerging markets research group.

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"So far, there remains little sign that China is about to experience a hard landing as severe as that seen three years ago, and we continue to forecast a further gradual moderation in the months ahead," he said in a research note.

"Clearly, though, risks to the outlook are skewed to the downside ... Policy makers will be watching incoming data closely to assess whether they have struck the right balance between getting inflation under control and keeping growth at acceptable levels."

Mark Williams, the chief China economist at Capital Economics in London, warned, however, that both exports and construction will probably slow down, pointing to "a more difficult period" ahead.

"The outlook is for continued volatility as China's failure to transition rapidly to domestic consumer-driven growth leaves it susceptible to bouts of investment-fuelled overcapacity and downturns in the global economy," Mr. Williams said.

Euro zone hit again France scrambled today to assure the markets it would protect its triple-A credit market, though it indicated its economic growth will be shy of expectations.

The comments from Finance Minister Francois Baroin came after Moody's said it would take a long look at France, and could put the country on a negative outlook. This is a new front, given that France has so far largely not be a focus of the debt crisis in the 17-member monetary union.

France had targeted growth of 1.75 per cent, but the finance minister said today it will probably be less than that.

"Moody's is on to the child's shell game that appropriately characterizes the response to Europe's debt crisis thus far," said Derek Holt and Karen Cordes Woods of Scotia Capital.

"Swapping one nation's debt for another via contingent guarantees entails no free lunch. They've moved it around so much underneath different shells that no one seems to know how much of it sits underneath which shell, and that's reminiscent of the CDO/SIV leveraging leading up to the crisis," they said in a research report.

"In stating that it would assess France's stable outlook over the next three months, Moody's noted that 'the deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the government's triple-A debt rating. The French government now has less room for manoeuvre in terms if stretching its balance sheet than it had in 2008.' This matters greatly because recall that any efforts to use the [bailout fund]in order to bridge over peripheral funding concerns is entirely premised upon it being able to maintain a triple-A rating, such that if the backing of its major guarantors including France is no longer triple-A, then the whole pyramid scheme is in jeopardy."

In Greece, meanwhile, as a new reading put the jobless rate at 16.5 per cent, the country was gripped again by strikes against the government's austerity measures. Garbage collectors, tax authorities, lawyers, railway workers and - yes, even journalists - were protesting today.

Goldman sinks to loss Goldman Sachs Group Inc. has chalked up its second quarterly loss since it went public in 1999.

The Wall Street giant said today it lost $393-million (U.S.) or 84 cents a share in the third quarter, compared to a profit of $1.9-billion or $2.98 a year earlier, hurt by losses on investments and trading revenue.

"CEO and investor confidence as well as asset prices across markets were lower in the third quarter given the uncertain macroeconomic and market conditions," said chief executive officer Lloyd Blankfein.

"Our results were significantly impacted by the environment and we were disappointed to record a loss in the quarter. However, we believe the strength of both our client franchise and our balance sheet positions us well for when economies and markets improve."

Bank of America rebounds While Goldman sank to a loss, Bank of America Corp. rebounded to a quarterly profit. The better results reflected gains from asset sales and accounting.

The bank earned $6.23-billion (U.S.) or 56 cents a share, compared to last year's loss of $7.3-billion or 77 cents.

Today's results also showed that JPMorgan Chase & Co. has ousted Bank of America as the nation's biggest by assets.

"This quarter's results reflect several actions we took that highlight our ongoing transformation toward becoming a leaner, more focused company," said chief executive officer Brian Moynihan. "The diversity and depth in our customer and client offerings provided some resiliency in a very challenging environment."

D'Alessandro's millions It's looking more and more likely that some $10-million in restricted shares earmarked for the former CEO of Manulife Financial Corp. will be going back to shareholders.

Those shares have been in limbo, Streetwise columnist Tara Perkins writes today, since Dominic D'Alessandro retired just after the insurer's shares plunged as the financial crisis took hold. He told the board at that time that he would forgo the restricted shares unless Manulife stock hit $36 by the end of this year. That's not likely now.

Mr. D'Alessandro made the voluntary gesture after the board's decision to grant him a $12.5-million (U.S.) pay package for his final 18 weeks of work stirred up controversy.

In Economy Lab The fourth year into the crisis, and all G20 meetings have evolved into predictable verbal ping-pong, Constantin Gurdgiev writes.

In International Business A peculiarly Chinese response to the "Occupy Wall Street" movement: Occupy Wal-Mart. The Financial Times reports.

In Globe Careers Under the surface of the current anti-capitalist protests, from Wall Street to London, is a decade-old sore that never healed, Andrew Hill of The Financial Times writes.

From today's Report on Business

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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