Gold News

Credit crisis snares Freddie Mac, growth forecasts bleak

The effects of the US credit crisis look ever deeper as another leading mortgage lender has been snared by bad debt and home loans that may never be repaid.

America's second-largest mortgage finance company, Freddie Mac, has announced third quarter losses well in excess of analyst expectations, raising new concerns as the impact of credit problems.

The group reported net quarterly losses of $2 billion, amounting to $3.29 per share, confounding expectations that its relatively low exposure to the sub-prime sector would spare Freddie Mac from the ravages of other lenders.

Meanwhile the Fed was once again the bearer of bad news, releasing economic data yesterday suggesting that the consecutive rate cuts aimed at easing troubled mortgage repayments might not be enough.

Fed forecasts for 2008 showed that predicted growth had fallen to between a 1.8 to 2.5 per cent range, with unemployment figures set to rise in accordance.

Growth-related skepticism, combined with Freddie Mac's predicament, have made this week a prime time to buy gold, with the commodity's safe-haven investment value gaining as other stocks look vulnerable to a potential further rate cut and ensuing inflation.


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