Finance & Business World

New Zealand’s manufacturing industry contracted at a faster pace in August as new orders and production slowed, adding to signs of a weaker recovery from the nation’s worst recession in three decades.

The manufacturing index was 48.7 from 49.6 in July, Bank of New Zealand Ltd. and Business New Zealand, a Wellington-based employer group, said on the group’s web site. An index below 50 indicates that manufacturing is contracting.

Companies have reined in production since April last year amid a global recession that curbed export demand and consumer spending. The Reserve Bank last week said the economy may grow just 0.1 percent in the third quarter, the first expansion in seven quarters.

“We don’t believe it spoils the recovery theme,” said Craig Ebert, senior economist at Bank of New Zealand in Wellington absolutely free credit report. “The PMI does sound a cautionary note not to get overly excited about a strong or sustained recovery just yet.”

The index is based on gauges of production, employment, new orders, finished stocks and deliveries.

The recovery in July’s index to a 16-month high had stoked expectations manufacturing was close to expanding again. Instead, the index for new orders fell to 50.3 in August from 55.4 and the production gauge dropped below 50.

Ebert said the slump in demand was exacerbated by a drop in aluminum production from Rio Tinto Group’s Tiwai smelter. Dairy and meat processing increased in the second quarter, suggesting other areas of manufacturing remain weak, he said.

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A third of companies are in crisis one year on from Lehman Brothers Holdings Inc.’s collapse and most are still cutting costs, a McKinsey & Co. survey found.

“A year after the global economic system nearly collapsed, many companies are finally finding ways to increase profits, but almost as many expect profits to continue falling,” the consulting firm said in an e-mailed report. “Executives also indicate that their broader economic hopes remain fragile.”

Federal Reserve Chairman Ben S. Bernanke said in a speech yesterday that the worst U.S. recession since the 1930s has probably ended, while warning growth may not be strong enough to quickly reduce the jobless rate. Stock markets have rallied and bond spreads have contracted this year amid hopes the global economy is rebounding.

Bonds have returned investors 13 percent this year, according to the Merrill Lynch Global Broad Market corporate bond index. The MSCI World stock index is up 22 percent.

Less than 10 percent of survey respondents expect sales to fall because consumers or businesses can’t get credit, McKinsey found. Just under 50 percent expect higher borrowing costs over the next five years.

China executives are no more likely than those in other countries to predict the start of a global rebound, though are particularly bullish on China’s economic prospects, with 82 percent expecting higher growth this year, McKinsey said.

Concern over trade restrictions has eased in the past six months, the survey said.

The firm said it received responses from 1,677 executives from all regions, industries, and company sizes.

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Singapore employers fired fewer workers last quarter and increased job openings as the economy emerged from its worst recession since independence in 1965.

Employers cut 5,980 jobs in the three months ended June, compared with 12,760 in the first quarter, the Ministry of Manpower said today. That is higher than the ministry’s July estimate of 5,500. The seasonally adjusted unemployment rate was 3.3 percent, unchanged from the previous quarter.

“Job losses, initially feared to reach hundreds of thousands, have surprised by being resilient to the worsening economy,” said Chow Penn Nee, an economist at United Overseas Bank Ltd. in Singapore.

Prime Minister Lee Hsien Loong has handed out cash to companies to help them reduce wage costs and prevent job losses amid the deepest global slowdown since the 1930s. Singapore’s economy expanded for the first time in a year last quarter as manufacturing and services began to recover from the slump.

There were 24,500 job vacancies last quarter, an 8 percent seasonally adjusted increase from the prior three months. That was the first gain after four quarters of declines, according to today’s report.

The number of layoffs this year will likely be lower than the 30,000 peak of the 1998 Asian financial crisis, the Straits Times reported last month, citing Lim Swee Say, secretary- general of the National Trades Unions Congress. The jobless rate is also unlikely to match the peak of 4.3 percent during the 2003 SARS epidemic, Lim was cited as saying.

Seagate Closure

Employers retrenched 5,170 workers, and another 810 were released from their contracts early between April and June. The jobless rate is the highest in four years.

United Overseas Bank predicts about 36,000 jobs will be lost this year, pushing the unemployment rate to 3.7 percent. Singapore’s jobless rate may reach 3.8 percent at the end of 2009, compared with a June estimate of 4.2 percent, a central bank survey of economists published this month showed.

Seagate Technology, the world’s largest maker of hard-disk drives, said last month it will close one of its factories in Singapore by the end of 2010, affecting as many as 2,000 employees.

Total employment in the Southeast Asian economy shrank 7,700 in the second quarter as manufacturing payrolls fell, the manpower ministry said today.

Average wages before adjusting for inflation fell 2.2 percent in the second quarter from a year earlier, the ministry said, after declining 3.7 percent in the previous three months.

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U.S. stocks are poised to repeat their advance this week as investors bet that the economic recovery is gaining strength and company outlooks are turning rosier.

Despite the anniversary this week of Lehman Brothers Holdings’ collapse and the tumult that subsequently rocked Wall Street, the mood in the market is likely to be more optimistic than gloomy.

A year ago, it seemed as if the financial world was coming to an end when Lehman, a 158-year-old trading company and parent of what had been the fourth-largest U.S. investment bank, filed for bankruptcy on September 15, setting off a scramble by authorities to avert global financial meltdown.

But fast forward to September 2009, U.S. stocks are at new 11-month highs, and if this week’s economic reports show that the recession continues to abate, U.S. stocks should extend their run-up.

“The market is still in the process of pricing in an economic recovery,” said Sean Clark, chief investment officer at Philadelphia-based Clark Capital Management.

“We think we’re going to see 3.0 percent economic growth in the second half of this year. As we look out into the future, I think third-quarter earnings are going to be better than expected and, based on improving economic conditions, we’ll start seeing top-line growth.”

OUTLOOKS, DATA

Indeed, in recent days there have been increasing signs that corporate profits are improving after FedEx Corp and Procter & Gamble joined other bellwethers in giving upbeat financial outlooks last week.

There could yet be more companies this week that offer welcome news in their outlooks cheap credit report.

“The earnings pre-announcements are going to be important because to sustain any move beyond where we are, we have to have pretty decent earnings growth in 2010,” said Gail Dudack, chief investment strategist at Dudack Research Group in New York.

On the economic front, August retail sales, due on Tuesday, along with the Producer Price Index and a reading on July business inventories, will command attention. Data on New York state manufacturing is also due on Tuesday.

A Reuters poll of economists expects retail sales to show a gain of 2.0 percent after a slide of 0.1 percent in July. Excluding autos, the sales are projected to be up 0.4 percent, compared with a dip of 0.6 percent the prior month.

“You will get a boost to retail sales from the autos side, but we will be looking at the underlying trend of sales without autos,” said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey. “If there’s any improvement, that should give a gauge of recovery in consumer spending.”

Data on the Consumer Price Index and industrial production in August are due on Wednesday.

Releases on August housing starts, a weekly report on initial jobless claims and a survey of factory activity in the U.S. mid-Atlantic region are scheduled on Thursday. 

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The parent company of American Airlines is in talks to set up a broad venture with Japan Airlines Corp in a deal that could see the U.S. carrier investing hundreds of millions of dollars in JAL, The Wall Street Journal cited sources as saying on Saturday.

AMR Corp has been in intensive negotiations for over a month to form a “far-reaching” joint venture with the Asian carrier and is willing to invest to secure an agreement, the Journal cited people familiar with the discussions as saying.

Any investment deal would give loss-making JAL, which posted 99 billion yen ($1.1 billion) of net losses in the April-June quarter, a much-needed capital infusion.

JAL is in talks with several carriers about a cash infusion, according to separate media reports.

Sources have told Reuters that Delta Air Lines, the world’s largest carrier, is engaged in closed-door discussions to take a minority stake in the Asian carrier, to expand its global footprint.

On Saturday, Japan’s national broadcaster, NHK, reported that JAL was also seeking a capital injection of several billion yen from Air France-KLM.

The Nikkei business daily reported on Saturday that Delta had proposed in late August a capital injection of 30 billion to 50 billion yen into JAL. But it cited an unnamed senior official at JAL as saying a tie-up with Delta would be difficult because the Japanese carrier has a partnership with American through the Oneworld alliance.

Delta and Air France-KLM are in the rival SkyTeam alliance.

JAL is headed for its second-straight annual loss this business year to March, hit by a downturn in travel and as it struggles to rein in costs.

It secured a 100 billion yen government-backed loan in June and is expected to ask for more financial assistance to help it restructure.

JAL is due to submit a restructuring plan by the end of the month.

(Reporting by Edwin Chan; Editing by Peter Cooney)

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Inventories at U.S. wholesalers fell for a record 11th month in July as higher sales helped distributors move out more of their excess supply.

The 1.4 percent decline in stockpiles was greater than forecast and followed a revised 2.1 percent drop in June, the Commerce Department said today in Washington. Wholesale inventories have had the longest series of declines since records began in 1987. Sales rose 0.5 percent, the third straight gain.

After a record drawdown of inventories in the second quarter, by $159.2 billion at an annual pace, economic growth is forecast to return over the last half of this year amid stabilizing demand. Low inventory levels will allow producers to boost output to meet new orders as businesses down the supply chain replenish their own stockpiles.

“It’s more indication that the recovery is starting,” said Jonathan Basile, an economist at Credit Suisse Holdings USA Inc. in New York. Leaner inventories and rising sales are “setting you up for a bounceback in output.”

Inventories at wholesalers were forecast to drop 1 percent after a previously reported 1.7 percent drop the prior month, according to the median estimate of 34 economists surveyed by Bloomberg News. Projections ranged from declines of 1.6 percent to 0.4 percent.

At the current sales pace, it would take 1.23 months for distributors to deplete the amount of goods on hand, the lowest since October 2008, compared with 1.25 months in June. The reading was as low as 1.1 months in June 2008. A reduction in months supply leaves more room for companies to buy more goods, helping to support production.

Consumer Confidence

Confidence among U.S. consumers rose more than forecast in September as the pace of job losses slowed and the economy showed signs of pulling out of the recession, a separate report showed today.

The Reuters/University of Michigan preliminary index of consumer sentiment increased to 70.2 this month from 65.7 in August. The index was forecast to rise to 67.5, according to a Bloomberg survey of economists.

Prices of goods imported into the U.S. rose in August for the fifth time in six months, led by an increase in petroleum costs, a Labor Department report showed earlier today.

The 2 percent gain in the import price index followed a 0.7 percent decrease the prior month. Prices excluding fuels rose 0.4 percent, as the cost of industrial supplies and materials rose.

Durable Goods

Today’s inventories report showed stockpiles of durable goods, or those meant to last at least three years, fell 1.5 percent in July after a 1.8 percent decline the prior month. Durable sales increased 1 percent.

Auto inventories declined 2 percent and sales increased 1 credit scores for free.1 percent, today’s report showed. That pushed the industry’s inventory-to-sales ratio for July to 1.74 months, the lowest since June 2008, from 1.8 months.

The reduction in inventories over the first half of the year sets the stage for production to rebound, economists said. Companies including General Motors Co. and Chrysler Group LLC, both automakers that have emerged from bankruptcy, benefited in late July and the month of August from higher sales and demand linked to the government’s “cash-for-clunkers” program.

Car Sales

Last month GM called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosted second-half production in part because of the trade-in program. The administration’s plan, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles.

Cars and light trucks sold at a 14.1 million annual pace last month, up 25 percent from July, industry figures last week showed. It was the biggest gain since October 2001, when automakers including GM introduced zero-percent financing to boost sales following the terrorist attacks on New York and Washington.

Target Corp., the second-largest U.S. discount retailer, is among companies trimming costs to make up for slower sales. “We continue to conservatively manage our inventories to help us navigate the challenging sales environment,” Kathryn Tesija, Target’s vice president for merchandising, said in an Aug. 18 conference call.

Professional Equipment

Stockpiles of professional equipment, such as computers, fell 1.2 percent as sales increased 1.3 percent.

Stockpiles of non-durable goods such as fuels and grains dropped 1 percent after falling 2.5 percent in June. Sales of such items increased 0.1 percent.

A drop in crude oil costs may have pushed down the value of petroleum inventories, which fell 1.6 percent. The average closing price of a barrel of crude oil traded on the New York Mercantile Exchange was $64.29 in July after $69.70 in June.

Wholesalers make up about 25 percent of all business stockpiles. Factory inventories, which account for about a third of the total, fell 0.7 percent in July, Commerce reported on Sept. 2. Retail stockpiles, which make up the rest, will be included in the Sept. 15 business inventories report.

Earlier today, the Labor Department said prices of goods imported into the U.S. rose 2 percent in August, led by energy costs.

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OPEC said it will keep oil production quotas unchanged, banking on a recovery in the world economy to maintain prices near today’s $72 a barrel as the International Energy Agency raised its global demand forecast.

The Organization of Petroleum Exporting Countries agreed to maintain total production quotas at 24.845 million barrels a day and will urge members to adhere to targets, OPEC Secretary General Abdalla El-Badri said. The IEA raised its global oil demand estimate for next year for a second month, citing growth in Chinese consumption and stronger-than-expected U.S. oil use.

“Holding production was the prudent thing to do,” Jason Schenker, president of Texas-based consultants Prestige Economics LLC, said in an interview in Vienna.

The producer group, which accounts for about 40 percent of global crude supply, had been expected by analysts and most ministers to keep output unchanged after prices rallied. Oil has gained 62 percent this year, last month reaching the $75 level identified by Saudi King Abdullah as satisfactory for consumers and producers. It’s the third time in 2009 the group has met without changing output.

Crude oil advanced for a fourth day. The contract for October delivery climbed as much as $1.13, or 1.6 percent, to $72.44 a barrel on the New York Mercantile Exchange.

“This $65-to-$75 range seems amenable to both producers and consumers,” Schenker said. “If they’d cut when production is above quotas, and prices are amenable, it may not have been received well.”

IEA Forecast

World oil consumption is likely to rise 1.3 percent next year to 85.7 million barrels a day next year, helped by Chinese demand and stronger-than-expected oil use in the U.S., the IEA said in a report today. That’s 450,000 barrels more than the energy adviser to 28 industrial nations forecast last month.

Algerian Oil Minister Chakib Khelil and Qatari Energy Minister Abdullah bin Hamad al-Attiyah confirmed the decision as they left OPEC’s headquarters at about 1 a.m. Vienna time today, after closed door talks lasting three hours.

“OPEC has played its cards very well,” considering that there has been a significant economic slowdown in some of the major consuming nations and regions, said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “They were probably correct in not cutting output further at the beginning of this year. They have to be relatively happy with where prices are.”

OPEC agreed late last year to cut production targets by 4.2 million barrels a day after prices crashed more than $100 a barrel from a record set in July 2008. Oil dipped to $32.40 in December before recovering this year. In the past five months, production has risen from the 11 OPEC members bound by quotas.

OPEC Compliance

The 11 members bound by quotas pumped 26.055 million barrels a day in August, according to estimates in a Bloomberg survey, which indicates quota compliance of about 71 percent.

Supplies rose by 80,000 barrels a day in August, to 26.25 million barrels a day, signifying compliance of about 66 percent, from 68 percent in July, the IEA said today.

Compliance with existing production quotas is improving and prices may rise further by the end of the year, Algeria’s Khelil said. Late yesterday, Ali al-Naimi, the oil minister for Saudi Arabia, OPEC’s biggest producer, told reporters “we are enjoying a good, fair price” for oil, so any slippage in compliance with production quotas is not a concern while prices are “perfect.”

Ministers from several OPEC member states including Kuwait and Venezuela had said this week they didn’t expect any change in allowed production volumes. Quotas were last changed in December. All 26 analysts surveyed by Bloomberg News last week also forecast no change in quotas.

Quota Busters

Only Saudi Arabia, Kuwait and Qatar pumped less than their target last month, according to Bloomberg estimates. Iran, Angola and Venezuela were the biggest quota busters. Iraq is the only OPEC member which does not have production limits.

“Everybody should adhere to his production allocation,” OPEC’s el-Badri said. There are “positive signs” oil demand will pick up in 2010, he added.

World oil demand is expected to increase by 490,000 barrels to 84.4 million barrels a day this year, according to the Paris- based IEA.

The IEA left its estimates for non-OPEC production unchanged for 2009 and 2010, and therefore raised its “call on OPEC crude” by 500,000 barrels a day for 2009 and by 400,000 barrels for next year.

OPEC members will make $559 billion in net sales from crude exports this year, down 42 percent from 2008, the U.S. Energy Department reported. The figure was little changed from last month’s forecast of $555 billion. OPEC made $971 billion last year and is forecast to make $675 billion in 2010.

OPEC will meet next in Luanda, Angola, on Dec. 22, and again in Vienna on March 17 next year, the group said.

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The Organization of Petroleum Exporting Countries should maintain existing output quotas and improve compliance when the 12-member group meets today, the group’s production-monitoring committee recommended.

“We need more compliance” with existing production targets, Kuwaiti Oil Minister Sheikh Ahmed al-Abdullah al-Sabah told reporters in Vienna. “I don’t foresee any cut,” he said, when asked at what price level the group might consider a further supply reduction.

Saudi Arabian Oil Minister Ali al-Naimi, who represents OPEC’s biggest and most influential producer, said current oil prices are “good for everybody, consumers, producers,” adding to comments from other members of the group pointing to no change in output. All 26 analysts surveyed by Bloomberg News forecast OPEC will leave production quotas unchanged for a third time at today’s meeting.

Oil rallied from a low of $32.70 in January to peak this year at $75 a barrel on Aug. 25. Crude for October delivery was trading at $71.07 on the New York Mercantile Exchange at 10:49 a.m. in Singapore. Al-Sabah said current prices are “OK” and said a supply cutback is unlikely in the near future even though the market is “oversupplied.”

OPEC’s Ministerial Monitoring Committee met for an hour yesterday evening at the group’s Vienna headquarters to review data on OPEC oil supply and demand. The MMC, comprising officials from Iran, Nigeria and Kuwait, often recommends a course of action for the full meeting of OPEC ministers, which convenes at 9:30 p.m. local time, after dark because the summit falls in the Muslim holy month of Ramadan.

Compliance Percentage

The MMC also recommended no change in quotas when it met before OPEC’s May meeting. OPEC Secretary General Abdalla El- Badri and Iran’s incoming Oil Minister Masoud Mir-Kazemi both left the meeting without commenting.

The group agreed late last year to cut production targets by 4.2 million barrels a day after prices crashed more than $100 a barrel from a record of $147.27 in July 2008.

The 11 OPEC members bound by quotas are currently complying with about 68 percent of their promised cutbacks, Al-Sabah said, adding that “75 percent would be fine free credit scores.”

Those members, all except Iraq, pumped 26.055 million barrels a day in August, according to estimates in a Bloomberg survey, which indicates quota compliance of about 71 percent. Only Saudi Arabia, Kuwait and Qatar pumped less than their target. Iran, Angola and Venezuela are the biggest quota busters.

Non-OPEC Criticized

Qatari Energy Minister Abdullah bin Hamad al-Attiyah, while backing no change to OPEC’s targets, criticized the lack of support from non-member producers such as Russia.

“We heard a lot of oral support, we would like to see physical support,” from non-OPEC suppliers, Al-Attiyah said as he arrived in Vienna yesterday.

Russia’s oil exports are surpassing those of Saudi Arabia for the first time since the Soviet Union’s collapse as Prime Minister Vladimer Putin exploits OPEC cuts to gain market share.

Exports of crude and refined products from Russia rose to about 7.4 million barrels a day in the second quarter, according to Energy Ministry data. Saudi shipments fell to about 7 million barrels a day, International Energy Agency estimates of output and domestic demand showed.

Investors had expected Russian supplies to decline this year after Putin’s deputy, Igor Sechin, told the Organization of Petroleum Exporting Countries in December that his government was ready to limit production to support prices. Instead, the country is providing tax breaks for new fields in Siberia. OAO Rosneft, OAO Lukoil and BP Plc’s Russian venture TNK-BP pumped more to take advantage of a 59 percent gain in prices so far this year.

The extra barrels may undermine OPEC efforts to reduce inventories and keep members from exceeding their quotas after the group meets in Vienna tomorrow. Oil will fall 4.7 percent from the average so far this quarter to $64.50 a barrel in the third, according to the median of 34 analyst estimates compiled by Bloomberg.

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Gold rose to the highest price since March 2008, topping $1,000 an ounce, while silver climbed to a 13-month high as a weaker dollar and concern that inflation may accelerate boosted the appeal of precious metals.

Bullion surged as high as $1,009.70 in New York, within 3 percent of the record of $1,033.90 set in March 2008. The metal is headed for a ninth annual gain. Crude oil and all six industrial metals on the London Metal Exchange rallied as the U.S. Dollar Index fell as much as 1.2 percent to an 11-month low. Raw materials typically rise when the greenback falls. Equity indexes climbed from Tokyo to London and New York.

“The market thinks inflation is coming,” Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois, said by telephone. He has been trading gold for more than 30 years and believes gold won’t stay above $1,000 for long. “With interest rates so low, money is chasing money and the dollar is getting murdered.”

Governments have cut interest rates and boosted spending to fight the worst recession since World War II, spurring investors to buy bullion as a hedge against the prospect of accelerating inflation and currency debasement. Gold, silver and palladium holdings in exchange-traded funds have reached records.

Gold previously traded at more than $1,000 on Feb. 20, the first time the metal had surpassed that price since March 2008. Futures dropped as low as $865 on April 6. The metal advanced $3.10, or 0.3 percent, to $999.80 an ounce on the New York Mercantile Exchange’s Comex division. In London, bullion for immediate delivery surged as high as $1,007.70 and traded at $995.75 at 8:25 p.m. local time.

Selling May Ensue

“We are at levels similar to February and June this year, which triggered profit-taking, sending gold prices lower,” Anne-Laure Tremblay, a BNP Paribas SA analyst in London, said by e-mail. She cited “little in the way of inflationary pressures” as well as an appetite for riskier assets.

“This week I will be looking for consistent and steady trade above $1,000 before considering a long position in gold,” Ralph Preston, a Heritage West Futures Inc. analyst in San Diego, said by e-mail. “I’m looking for $1,200 gold before year’s end. I believe the Iranian deadline to negotiate with the West will have an impact on gold and oil moving into the final quarter of this year.”

Iran may offer to resume talks over the Persian Gulf country’s nuclear program, Agence France-Presse reported, citing comments by Foreign Minister Manouchehr Mottaki on the state-run ISNA news service. World powers have set an informal end-of- September deadline for Iran to respond on its atomic-power work.

$1,200 ‘Possible’

Gold may set a record within five sessions and “it’s possible” that it will touch $1,200 within weeks, Prospector’s Kaplan said. “And if a new record doesn’t come soon, it doesn’t come in the near future,” Kaplan said. “Markets think that the Fed isn’t going to withdraw stimulus money fast enough and that would cause inflation.”

Gold may be cementing its haven-investment status as governments flood the financial system with cash to haul the global economy out of a recession. The dollar index has dropped for three straight sessions, touching 77.047, the lowest since Sept. 29. The gauge has slipped 4.9 percent this year.

“We don’t see any immediate recovery in the dollar and gold is one of the better alternatives,” said Bernard Sin, the head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “From here, the next technical level is $1,040, and at the rate it’s going, it might not be difficult. There’s a lot of new money coming into gold quick payday loan.”

Decline by Year-End

Gold prices may reach a short-term peak of $1,050 and retreat to the “mid-$700s” by year-end, said Miguel Perez- Santalla, a Heraeus Precious Metals Management sales vice president in New York. “I am a bear” on gold, he said.

““Even though the U.S. dollar continues to be weak against the euro, gold is considered overall by the market to be overdone at the higher price level,” Perez-Santalla said. “I won’t put my money into gold, and I know many traders and their families that are rummaging their jewelry looking for scrap to sell to take advantage of these high prices.”

The metal’s advance boosted producers. Newcrest Mining Ltd., Australia’s largest gold-mining company, gained 3.7 percent to A$33.75 in Sydney. Zijin Mining Group Co., China’s biggest supplier, rose as much as 10 percent in Hong Kong.

“Gold can push much higher, especially if confidence in the dollar continues to recede,” Edward Meir, an MF Global Ltd. analyst in Darien, Connecticut, said today by e-mail. “In fact, adjusted for inflation going back to 1980, values should be around $2,500 an ounce.”

In London, lead, which has more than doubled this year to pace gains in metals, jumped 4.5 percent. Copper, which has doubled this year, rose 2.4 percent to a one-week high.

Other Precious Metals

Other precious metals have outperformed gold this year.

Silver futures for December delivery advanced 22.5 cents, or 1.4 percent, to $16.51 an ounce on the Comex, after touching $16.86, the highest for a most-active contract since Aug. 5, 2008. The metal has climbed 46 percent this year.

Palladium futures for December delivery rose $2.60, or 0.9 percent, to $298.60 an ounce and touched $301 earlier, a one-year high. The best-performing precious metal this year has gained 58 percent in 2009. Platinum futures for October delivery jumped $30.50, or 2.4 percent, to $1,289.60 an ounce in New York, increasing its gain for the year to 37 percent.

Investing in gold “is a hedge against policy makers losing control of fiscal and quantitative monetary policies,” said Greg Gibbs, a Royal Bank of Scotland Group Plc strategist in Sydney.

U.S. President Barack Obama has increased the nation’s marketable debt to an unprecedented $6.78 trillion as he borrows to spur the world’s largest economy. Goldman Sachs Group Inc. predicts that the U.S. will sell about $2.9 trillion of debt in the two years ending September 2010.

Oil Climbs

Crude-oil futures, used by some investors to forecast inflation, surged as much as 5.5 percent today and have soared 59 percent this year in New York. Consumer prices will rise 0.9 percent in advanced economies in 2010 compared with 0.1 percent gain this year, the International Monetary Fund said in July.

Gold’s eight-year advance, the longest in six decades, may attract more investors. Assets in some of the industry’s largest exchange-traded funds have set records in the past few months.

The SPDR Gold Trust, the biggest ETF backed by the metal, reached an all-time high of 1,134.03 metric tons on June 1. The fund, which held 1,077.63 tons as of Sept. 4, has overtaken Switzerland as the world’s sixth-largest gold holding. Bullion held in ETF Securities Ltd.’s exchange-traded products gained 6,640 ounces to a record 8 million ounces (248.8 tons) yesterday, its Web site showed.

The company’s silver holdings increased 0.9 percent to an all-time high of 20.516 million ounces, while palladium assets rose 1 percent to a record 456,953 ounces.

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Seniors battered by the tough economy are selling their life insurance policies to replenish their retirement nest eggs.

Unlike younger investors, older adults may not have time to wait for the market to recover their losses, so they’re turning to this previously overlooked asset to see whether they should sell it and use the money to pay medical bills or other expenses.

Seniors sold life insurance policies with a face value of $11.8 billion last year, almost double the value of policies sold just two years earlier, according to the U.S. Senate’s committee on aging, which recently held a hearing on such transactions.

A "life settlement," as a sale is called, may be an attractive option for seniors who determine they no longer need their life insurance policy, said Doug Head, executive director of the Life Insurance Settlement Association, an industry group.

Policyholders typically sell their insurance through life settlement brokers to investment companies for lump sums that are usually several times greater than they would receive if they surrendered the policies to the insurance companies, he said.

The new owners pay the remaining premiums and become the beneficiaries when the original policyholders die.

But a life settlement doesn’t always make sense, experts caution, and seniors considering such a sale should consult with an independent financial adviser to figure out whether it’s the best move.

"If you’re thinking about selling your life insurance mostly because you’re strapped for cash, there may be other ways to tap the value of your policy without losing your coverage," said lawyer and insurance expert David McDowell.

"You may be able to take out a loan against your policy or receive a partial payout through an accelerated death benefit," he said. "It’s worth visiting with your life insurance agent and exploring the option."

"The best candidates for a life settlement are now people in their 70s or older who have a life insurance policy valued at $500,000 or more that they no longer need, perhaps because their spouses have passed away," said Scott Gibson of Lewis and Ellis, an actuarial consulting firm cash advance.

Though the amount that seniors receive for their life insurance will vary depending on their age, gender and health, the average payout today is slightly less than 20 percent of the policy’s death benefit, said Russel Dorsett, co-managing director of the Select Life Settlement Corp. in Houston.

"That’s still three or four times more than they’d get if they simply surrendered their policies to the insurer," he said.

Still, selling a life insurance policy is often a complex transaction involving time and paperwork, so consumers should turn to financial advisers who know the risks, said Ana Smith-Daley, a deputy insurance commissioner for Texas.

"An independent adviser can help you decide whether selling your policy is in your best interest," she said. "If it is, the adviser will probably call on a broker to shop around your policy to determine what kind of price it will fetch."

Seniors also need to understand that their medical records will be examined as part of the sales and that the buyers of their policies will occasionally check on them to determine when to collect the death benefits, she said.

Smith-Daley said sellers may also pay taxes on the proceeds from a life settlement and lose their eligibility for Medicaid or other government benefits, so anyone contemplating a sale should consult a tax adviser or lawyer.

But even with those considerations, industry officials expect life settlements to exceed $100 billion over the next couple of decades as boomers convert unwanted or unneeded life insurance to cash to bolster their lagging savings.

"Under the right circumstances, it’s a viable and valuable option that will only become more popular," Gibson said.

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