Weekly Commentary

Today the Commerce Department reported that the U.S. current account deficit narrowed by 1.0% to $195.8 billion in the 3rd quarter, as companies collected payments from foreign insurance companies for hurricane-related damage. Economists did not expect this. This is the 2nd straight quarter of a narrowing deficit after the current account reached a record $198.7 billion in the 1st quarter. Still the deficit amounts to 6.2% of gross domestic product and remains to be a cause for alarm for the future of our economy.

Gold futures are on the rise once more, last trading up $1.50 at $508.10 an ounce. On Monday, the contract touched a 25-year high of $543 an ounce (a 27.2% gain from May 11 when we advised our readers to accumulate gold), rallying on strong physical demand and inflation fears.

The dollar weakened against the euro which was quoted up 0.2% at $1.1988. The dollar, which has endured a decline this week due to strong signals from the Federal Reserve that its program of rate increases is nearing an end, last was down 0.2% at 116.16 yen.

The 30-year fixed-rate mortgage averaged 6.3% for the week ending Thursday, down from last week's 6.32%. Last year at this time, the 30-year rate averaged 5.68%. This is the 3rd consecutive week of decline for this mortgage rate. The average for a 15-year fixed-rate mortgage this week was 5.85%, down from last week's average of 5.87% but higher than last year's 5.11%. Adjustable-rate mortgages (ARMs) edged lower as well this week. The 5-year Treasury-indexed hybrid ARM averaged 5.77% this week, down from 5.78%. One-year Treasury-indexed ARMs averaged 5.15% this week, down slightly from last week when it averaged 5.16%. At this time last year, the one-year ARM averaged 4.18%.
[Source of mortgage data: Freddie Mac's weekly mortgage report]