15-Feb (The Economic Times) — World gold prices could “easily poke through $2,000″ an ounce this year, AngloGold Ashanti chief executive Mark Cutifani said on Wednesday.

In a conference call with reporters after the release of fourth quarter earnings, which fell far below expectations, Cutifani said he saw the price of bullion averaging $1,700-$1,850 throughout 2012.

[source]

15-Feb (USAGOLD) — Gold pushed to a new high for the week, despite the Greek bailout deal seemingly unraveling yet again. Today’s Eurogroup meeting was cancelled amid concerns about the Greek government’s commitment to reforms being required to free-up the second bailout funds. There are reports that the Eurogroup may try and kick the can until after Greece’s snap election in April in the hopes of securing those reform commitments from a government that might be around for a while. The problem is, Greece runs out of money in March.

Gold of late has been trading like a risk asset, rising along with the euro and stocks on hopes that the Greece mess is moving toward resolution, and falling along with the euro as the dollar rises when such hopes ultimately erode. Today is different though: The euro tumbled as one might expect on the latest deterioration of the Greek situation, but gold rallied this time in tandem with the dollar. Perhaps this is an early indication that the yellow metal is reverting to its traditional role as a safe-haven asset.

We saw Greece’s Q4 GDP numbers yesterday, a whopping 7% contraction y/y. Today, we saw Q4 GDP data from the eurozone as a whole (-0.3% q/q), Germany (-0.2% q/q), France (+0.2% q/q) and Italy (-0.7%). Europe is slipping back into recession — if their not there already — with Greece as a millstone around their neck. It is that reality that likely explains the rise in calls for Greece to be ejected or leave the EMU.

Perhaps the only thing that prevented a rout of the euro today were renewed pledges from China to help resolve the debt crisis. PBoC Governor Zhou Xiaochan echoed the comments of Premier Wen Jiabao, saying that China stands ready to be more involved through the EFSF and ESM. Understandably, China does not want to see its largest trading partner implode. Certainly China has ample FX reserves to dedicate to periphery bond purchases, but in reality, China seems to have a growing aversion toward foreign bonds. And particularly bonds whose yields don’t accurately reflect risk.

The PRC’s State Administration of Foreign Exchange might have a hard time justifying a move out the still relative safety of US Treasuries in favor of Greek and Portuguese bonds for example. Oh they will likely dabble, in the hopes of giving the sovereign bond market some sense of stability, while quietly continuing their reserve diversification plans. Plans that very much revolve around the further accumulation of gold.

• US NAHB housing market index jumped to 29 in Feb, above market expectations of 26, vs 25 Jan.
• US industrial production flat in Jan, below market expectations of +0.7%; capacity use 78.5%.
• US TIC net inflows +$17.9 bln in Dec (ex-swaps), vs $61.3 bln in Nov.
• NY Empire State index surged to 19.5 in Feb, above market expectations of 14.7, vs 13.5 in Jan.
• Eurozone Q4 GDP -0.3% q/q, vs negative revised +0.1% in Q3. Germany -0.2% q/q, France surprises with +0.2% q/q.
• UK claimant count jumps 6.9k in Jan, more than double expectations of 3.0k, vs upward revised 1.9k in Dec; unemployment steady at 8.4%.
• Malaysia Q4 GDP softens to 5.2% y/y, vs 5.8% y/y in Q3.
• Singapore retail sales (nominal) slow to 4.2% y/y in Dec, vs negative revised 6.2% y/y in Nov.
• South Korea unemployment rate (sa) ticks higher to 3.2% in Jan.
• New Zealanl Q4 retail trade +2.2%, vs positive revised 2.4% in Q3.

14-Feb (Financial Times) — Rioters burn the German flag in street protests. A demonstrator defaces the façade of the Bank of Greece, the central bank, so that it reads “Bank of Berlin”.

Most shockingly, a rightwing Greek newspaper depicts Angela Merkel, Germany’s chancellor, in a Nazi uniform above the headline “Memorandum macht frei” – an allusion to the memorandum in which Greece’s foreign creditors demand more austerity measures and to the Auschwitz slogan.

In these anxious times anti-German sentiments are not unusual in Greece. Locked in a struggle to avoid economic ruin and exit from the eurozone, Greece is confronting the potential collapse of its self-image as a country with a secure place in Europe’s family of nations.

To blame Germany draws on deep wells of national suffering endured during the 1941-1944 Nazi occupation of Greece. It is not the only response: Greek economic mismanagement, public sector corruption and dysfunctional politics inspire much self-criticism. Animosity towards Germany is not sweeping through all levels of Greek society.

…Today’s Greek outbursts against Germany are a cry of anger from a country that knows it committed so many mistakes that its fate lies to a great extent in the hands of outsiders.

[source]

15-Feb (Bloomberg) — Greece said that Europe’s wealthier countries are “playing with fire” by toying with the idea of expelling it from the 17-nation euro area as talks over a second aid program ran into new obstacles.

Finance Minister Evangelos Venizelos leveled the accusation after a decision slated for tonight on aid totalling 130 billion euros ($171 billion) was postponed until Feb. 20 at the earliest.

“We are continually faced with new terms,” Venizelos told reporters in Athens today. “In the euro area, there are plenty who don’t want us anymore. There are some playing with fire, domestically and abroad. Some are playing with torches and some are playing with matches. But the risk is equally great.”

[source]

15-Feb (Reuters) — Euro zone finance officials are examining ways of delaying parts or even all of the second bailout programme for Greece while still avoiding a disorderly default, several EU sources said on Wednesday.

Delays could possibly last until after the country holds elections expected in April, they said

While most of the elements of the package, which will total 130 billion euros, are in place, euro zone finance ministers are not satisfied that Greece’s political leaders are sufficiently committed to the deal, which requires Athens to make further spending cuts and introduce deeply unpopular labour reforms.

[source]

PG View: The Eurogroup is understandably reluctant to cut loose with €130 bln for Greece based on promises made by a government that may well be ousted in April. But in waiting to get promises from a new government at that time, Greece runs out of money in the interim. Interesting conundrum.

14-Feb (The Wall Street Journal) — Twelve European Union member nations, including Italy, Spain, the U.K. and France, are suffering from significant economic imbalances that leave them vulnerable to further shocks, the European Commission said Tuesday.

In a press conference in Strasbourg, European Economics Commissioner Olli Rehn said that the EU’s executive arm will conduct an in-depth analysis into nearly half of the EU’s 27 members, which could eventually lead to demands for policy changes and potentially to sanctions for euro-zone countries.

[source]

14-Feb (USAGOLD) — Gold remains narrowly confined within the recent range as it remains unclear whether Greece is inching toward its second bailout, or the progress has stalled completely and policymakers are simply stalling for additional time in the hope of controlling an inevitable default and prevent contagion. The EU’s Olli Rehn said today that a decision on Greece was coming “soon.” Yawn…whatever.

And speaking of ‘yawns’: Moody’s downgraded a number of European countries, including Italy, Spain and Portugal and warned that France, the UK and Austria where in jeopardy of losing their AAA ratings. This latest bunch of downgrades was largely ignored by the market, because like the obligatory daily rumor of an impending Greek deal, investors have become disturbingly accepting of downgrades.

Meanwhile, data were released today that confirms what was widely acknowledged; that Greece’s recession (at what point can we call it a depression?) worsened at the end of the year. The Greek economy contracted by 7% y/y in Q4, versus -5% in Q3. The FT pointed out in an article this morning that, “Greece’s economy has now shrunk in every quarter but one since mid-2008.” Given the dismal absence of growth — and the reality that the additional austerity being demanded is only going to make things worse — it is becoming increasingly clear that the €130 bln second bailout that Greece is seeking is simply not going to be enough…if it ever was…

Here in the US, headline January retail sales disappointed. The ex-auto number was better, but with negative Q4 revisions and softness in Dec business inventories, expectations that Q4 GDP would beat the advance 2.8% figure have evaporated.

Across the other ocean, the BoJ held its overnight call rates steady at 0-0.1%, but surprised the market by offering additional accommodations. The BoJ is now targeting near-term inflation at 1.0%. They also pledged an additional ¥10 trillion in asset purchases. So, the BoE increased asset purchases last week and the BoJ today…Fed, you’re up next! Of course many would like to see the ECB buying more bonds as well, but for the timing being they remain relegated to skulking around the secondary market.

• US business inventories +0.4% in Dec, in-line with expectations, vs 0.3% in Nov.
• US retail sales +0.4% in Jan, below market expectations of +0.7%; +0.7% ex-autos.
• US import prices +0.3% in Jan, above market expectations of +0.2%; exports +0.2%.
• Eurozone industrial production (sa) -1.1% m/m in Dec, in-line with expectations, vs upward revised unch in Nov; -2.0% y/y (wda).
• Germany ZEW Economic Sentiment improved to 5.4 in Feb, above market expectations of -12.2, vs -21.6 in Jan; Current Situation 40.3, vs 28.4.
• UK core CPI moderated to 2.6% y/y in Jan, vs 3.0% in Dec.
• Japan industrial production (sa) – Revised +3.8% m/m in Dec, vs -2.7% in Nov.
• BoJ holds rates steady at 0-0.1%, targets inflation at 1%, announces additional asset purchases.

14-Feb (CNBC) — Despite its recent slip, inflation will remain above the Bank of England’s 2 percent target in the UK for a long time, as the Bank is taking no action to bring price rises down, Andrew Sentance, a former member of the Monetary Policy Committee, told CNBC on Tuesday.

Figures released on Tuesday showed inflation fell to 3.6 percent in January from 4.2 percent in December as the effect of a rise in value-added tax faded, but Sentance said that since the middle of the years 2000, inflation has been at a “sustained high level” above target.

“I think it’s a sign of the times that when inflation falls below 4 percent it seems a good thing,” Sentance said.

The Bank of England decided last week to boost its asset-purchasing program, also known as quantitative easing, by 50 billion pounds ($79.3 billion), to kick-start the economy.

[source]

14-Feb (MoneyNews) — Gasoline prices are headed for $5 a gallon in many locations in the United States this year, says John Hofmeister, founder of Citizens for Affordable Energy and the former CEO of Shell Oil’s U.S. operations.

Global demand will rise and pressure supply, while U.S. politicians aren’t doing anything to ease prices at home such as allowing for significantly more drilling.

“What’s really unprecedented is developing countries, particularly China and India, have this insatiable need for more oil and that has not been taken into account when we think of public policy in this country,” Hofmeister tells CNBC.

[source]

PG View: Good thing the Fed doesn’t count something as trivial as gasoline prices toward its inflation target…

14-Feb (ZeroHedge) — European (like US) stocks remain in a narrow range just above the cliff of the unbelievably good NFP print of 2/3. US and European credit markets have lost significant ground since then and it seems equity investors just want to ignore this ‘uglier’ reality for now. The BE500 (Bloomberg’s broad European equity index) is unchanged from immediately after the NFP ‘jump’, investment grade credit is +10bps from its post-NFP tights, crossover (or high yield) credit is around 50bps wider, Subordinated financial credit is +50bps off its post-NFP wides at 382bps, and senior financial credit is an incredible 36bps wider at 225bps (by far the largest on a beta adjusted basis). The divergence is very large, increasing, and a week old now and perhaps most importantly as we look forward to LTRO Part Deux, LTRO-ridden banks have underperformed dramatically (40bps wider since 2/7 as opposed to non-LTRO banks which are only 10bps wider) – how’s that for a Stigma? Some ‘banks’ have suggested the underperformance of credit is due to ‘technicals’ from profit-taking in the CDS market – perhaps they should reflect on why there is profit-taking as opposed to relying on recency bias to maintain their bullish and self-interest positioning as the clear message across all of the credit asset class is – all is not well.

[source]

14-Feb (Financial Times) — Greece’s recession worsened at the end of last year, new figures showed on Tuesday, adding to the pressure on a government caught between riots at home and pressure from eurozone leaders to force through deep spending cuts in exchange for a fresh €130bn bail-out.

The economy contracted by 7 per cent in three months to December compared with the same period in the previous year, a steeper decline than the 5 per cent recorded in the third quarter, according to preliminary data published by Elstat, the national statistics body. Greece’s economy has now shrunk in every quarter but one since mid-2008.

[source]

PG View: And I repeat, €130 bln is no longer enough. If it ever truly was…

14-Feb (Reuters) — The Bank of Japan boosted its asset buying programme by $130 billion (82.5 billion pounds) on Tuesday and in the face of political pressure set an inflation goal of 1 percent, signalling a more aggressive monetary policy to pull an ailing economy out of deflation.

Bond futures jumped and the yen fell as the decision pointed to much faster asset buying in the central bank’s most determined effort to date to reinflate an economy that shrank last year and which has struggled with deflation for most of the last two decades.

The central bank kept its policy rate in a range of zero to 0.1 percent and pledged not just to maintain zero rates but to continue buying assets until 1 percent inflation is foreseen.

[source]

The Cradle of Western Civilization Burns

13-Feb (USAGOLD) — The Greek Parliament passed the latest austerity measure on Sunday, but dissent within the parties has resulted in a call for a snap-election in April. Not surprisingly, the Greek people are not too pleased with having more austerity heaped upon the existing austerity and more than 100,000 of them expressed their displeasure in Athens, some violently. More than 45 buildings were set on fire as protesters battled with riot police. With the cradle of Western Civilization ablaze, one has to wonder if this is an ominous harbinger of things to come elsewhere in the western-world, where austerity is long past due.

Nonetheless, the markets initially viewed the Parliament’s agreement as good news, increasing the likelihood that Greece will eventually get its next round of bailout funds. However, the politicians in Greece are obviously under a great deal of pressure; the hoops they are having to jump through to secure that €130 bln are weighing heavily on the Greek economy and therefore the Greek people. Even if the additional €130 bln is green-lighted pretty rapidly, the requirements agreed to yesterday may all be in question if a new government comes to power in April. This may well give the keepers of the purse-string pause, but whether the money is forthcoming or not, it does nothing to resolve the underlying fundamental problems facing Greece.

Today, the Obama administration released their whopping $3.8 trillion fiscal year 2012 budget proposal, $1.33 trillion of which will be deficit spending. This is the fourth consecutive budget proposal that will result in a deficit in excess of a trillion dollars. While the budget projects a $4 trillion decline in the deficit over the next 10-years, this less-than rosy forecast is largely dependent on Congress agreeing to a $1.4 trillion tax hike primarily on households with income in excess of $250,000. In an election year, and given the rather adamant objections already expressed by the GOP controlled House, there is essentially no chance this budget will make it through Congress.

In fact, Senate majority leader Harry Reid has already said that, like the previous two-budgets, the Senate will not even bring this one up for a vote. A budget hasn’t cleared the Senate since April 2009. Basically, nobody wanted to vote for such massive deficit spending ahead of the 2010 midterms and the same is true for this year. So, we’ll operate without a budget once again.

I imagine that those in Washington — even those inclined to impose austerity here in the US — must be looking at events in Greece with some degree of dread. As both the weather and political rhetoric heats-up into the Spring and Summer, hibernating occupiers will undoubtedly be taking back to the streets of America. One has to wonder what the appetite for austerity might really be. And if there is no political will to foist austerity on the American people and no political will to meaningfully raise taxes, that will leave perpetuation of the American consumer machine in the hands of the Fed.

The Fed has already pledged to keep interest rates near 0% into late-2014, but trillion dollar deficits for years to come will likely obligate the central bank to maintain a zero interest rate policy far beyond 2014. In the absence if meaningful fiscal reform — that arguably must include some level of austerity — the Fed will likely turn to additional quantitative measures to pump additional liquidity in the market.

This will have a negative impact on the dollar, further eroding purchasing power and decimating savers. As we said in our latest Video Roundtable, saving in gold as an alternative to dollars, is a strategy that everyone should at least be considering.

13-Feb (Politico) — The White House rolled out its new $3.8 trillion budget Monday, promising major investments to spur a manufacturing revival in the U.S. while walking a fine line between the August debt accords and President Barack Obama’s fear that too much austerity now will spell trouble for the economy—and his own reelection chances in November.

From Justice to Defense and Homeland Security, as many as six cabinet level departments or agencies will see their budget shrink in compliance with the new appropriations caps. But Obama would also go outside the box by creating new mandatory spending initiatives costing tens of billions of dollars and for the first time, openly tap war savings to fund his domestic agenda.

…In the case of taxes, the budget never spells out Obama’s much-talked-about “Buffett rule”—-that all of the most wealthy must pay an effective tax rate of at least 30 percent. But his long-term deficit reduction plan rests very much on achieving $1.43 trillion in 10-year revenue increases at the households with income over $250,000.

[source]

12-Feb (Reuters) — The Greek parliament approved a deeply unpopular austerity bill to secure a second EU/IMF bailout and avoid national bankruptcy, as buildings burned across central Athens and violence spread around the country.

Cinemas, cafes, shops and banks were set ablaze in central Athens as black-masked protesters fought riot police outside parliament.

State television reported the violence spread to the tourist islands of Corfu and Crete, the northern city of Thessaloniki and towns in central Greece. Shops were looted in the capital where police said 34 buildings were ablaze.

[source]

10-Feb (NumberSlueth) — We here at NumberSleuth are all about exploring the world of numbers, and with this infographic we decided to take a look at the numbers behind the entire amount of gold in the world. Below are a series of questions that we began with and the answers we discovered in our research. We believe that this is the most thorough and in-depth resource about the world’s gold on the Internet and we hope you have as much fun reading through the information as we did in putting it all together.

From: Number Sleuth

10-Feb (The Wall Street Journal) — President Barack Obama’s budget request to Congress on Monday will forecast a deficit of $1.33 trillion in fiscal year 2012 and includes hundreds of billions of dollars of proposed spending on the nation’s infrastructure, according to draft documents viewed by Dow Jones Newswires and The Wall Street Journal.

[source]

10-Feb (Bloomberg) — UniCredit SpA (UCG), Intesa Sanpaolo SpA and Banca Monte dei Paschi di Siena SpA (BMPS) were among 34 Italian financial firms downgraded by Standard & Poor’s, after the credit-ratings firm reduced the nation’s grade last month.

UniCredit, Italy’s biggest bank, and No. 2 Intesa had their long-term ratings lowered to BBB+ from A, S&P said today in a statement. Monte dei Paschi, the No. 3 bank, was reduced to BBB from BBB+. All three have a negative outlook, S&P said.

…“Italy’s vulnerability to external financing risks has increased, given its high external public debt, resulting in Italian banks’ significantly diminished ability to roll over their wholesale debt,” S&P said in a separate statement on the country’s financial industry. “We anticipate persistently weak profitability for Italian banks in the next few years.”

[source]

10-Feb (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said the central bank’s efforts to spur economic growth are being blunted by impediments to mortgage lending, and he called for further steps to heal the housing market.

“We have helped lower mortgage rates to the lowest point in many, many decades,” Bernanke told homebuilders today in Orlando, Florida. “Yet we are not seeing as much activity as we would like to see.”

Bernanke, who repeated that the pace of the recovery has been “frustratingly slow,” didn’t discuss the outlook for monetary policy. He devoted part of his speech to recommendations from a Fed study on housing that was sent to Congress last month and which prompted criticism from some lawmakers, who said the Fed has overstepped its authority.

[source]

PG View: Mightn’t Mr. Bernanke be greasing the skids for some more MBS purchases?