Mar 18th, 2011 12:43 by News

by Alix Steel
March 18, 2011 (The Street) — Goldman Sachs is bullish on gold prices, at least, for now.

The investment bank said in a research report Thursday that it expects gold to rally “towards our 3-month price target of $1,480″ an ounce. Goldman is recommending investors get long on gold by buying the December 2011 futures contract currently trading at $1,426.10 an ounce.

… “Gold at current price levels is a compelling trade, not a long term investment,” the report said. Goldman also warns gold producers to “begin scaled up hedging of forward production,” despite the fact that most major producers like AngloGold Ashanti, Barrick Gold and Kinross Gold raced to de-hedge over the past two years.

RS View: One is reminded of the Wizard of Oz who would have those four rubes, “Pay no attention to that man behind the curtain!” By paying no attention to the actual metal this article neatly reveals Goldman Sachs to be nothing more than a duplicitous paper-pusher extraordinaire. Out of one corner of their mouth they instruct gold investors go long (buying via paper contracts) while out of the other corner of their mouth they instruct gold producers to go short (selling via paper contracts).

Consider this. The price discovery is still largely driven by the preponderance of the paper gold markets. Therefore, if the paper pushers such as Goldman Sachs can jawbone the balance just right through the power of persuasion, the superficial positions of the counterparties (i.e., the investors and the producers) are thus met by each other’s paper obligations. The pricing pressure can thus be kept within a flat range, and the actual gold being produced thus remains largely available to flow to that solid core contingent of investors who are not so easily duped into settling for mere paper contracts. Thus the eternal quality and security of real gold flows to those who would not be played for a fool, meanwhile the rubes in the crowd are essentially just gaming their lives away on a poorly structured gamble that they neither understand nor can afford to lose.

Mar 18th, 2011 11:44 by News

by Alix Steel
03/18/11 (TheStreet ) — Gold prices were popping Friday as the metal shrugged off China’s latest attempt to curb inflation and focused on the G7′s decision to intervene in the currency markets.

Gold for April delivery was adding $14.70 to $1,418.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has rallied 1.4% Friday to $1,424.10 an ounce and as low as $1,402.20.

… Investors were rushing into gold Friday as protection against a volatile currency market after the G7 said it would step in the help Japan put a lid on its rising yen. On Wednesday evening after 5 p.m EDT, the currency rallied 4.6% against the dollar in minutes to just below the 82 level. This is the first group effort to “help” a currency in 11 years. The last time was in 2000 when the group helped stem a euro plummet.

… Japan has offered up almost $800 billion to shore up its economy in the past week and expanded its bond buying program to 10 trillion yen. The efforts should have dragged on the yen, but it didn’t. Speculators who had been betting the yen would fall had to buy it back to cover their bets, and companies and individuals are rumored to have been selling other assets for yen as well.

Any sort of whisper of currency intervention typically gives gold a boost as it reminds investors that paper currencies are at the mercy of central banks and highlights gold’s appeal as a safer place to store wealth. The currency market can also be very volatile which also makes gold, a hard asset, more appealing.

… Gold didn’t even flinch at China’s latest attempt to control inflation by increasing the amount banks must hold in their reserves…. Gold’s rally in spite of China’s move suggests that investors don’t expect the country to be able to tame its growth and reverse its negative interest rate environment, which makes gold worth more than money kept in the bank.

RS

Mar 18th, 2011 09:12 by News

March 18, 2011 (The Associated Press) — Inflation spooked the nation in the early 1980s. It surged and kept rising until it topped 13 percent.

These days, inflation is much lower. Yet to many Americans, it feels worse now. And for a good reason: Their income has been even flatter than inflation.

Back in the ’80′s, the money people made typically more than made up for high inflation. In 1981, banks would pay nearly 16 percent on a six-month CD. And workers typically got pay raises to match their higher living costs.

… The median U.S. inflation-adjusted household income – wages and investment income – fell to $49,777 in 2009, the most recent year for which figures are available, the Census Bureau says. That was 0.7 percent less than in 2008.

Incomes probably dipped last year to $49,650, estimates Lynn Reaser, chief economist at Point Loma Nazarene University in San Diego and a board member of the National Association for Business Economics. That would mark a 0.3 percent drop from 2009. And incomes are likely to fall again this year – to $49,300, she says.

Significant pay raises are rare during periods of high unemployment because workers have little bargaining power to demand them.

They surely aren’t making it up at the bank. Last year, the average nationwide rate on a six-month CD was 0.44 percent. The rate on a money market account was even lower: 0.21 percent.

RS View: Yet another reason (in addition to the prior currency intervention article) to choose gold as your prime vehicle of savings. For a full decade now, it’s growth in real value against all else has outpaced all national currencies AND their interest rates to boot.

Mar 18th, 2011 08:44 by News

By Kenji Hall and Tom Petruno
(Los Angeles Times) — The Group of 7 industrialized nations have agreed to act together to try to stop the Japanese yen from strengthening further by intervening in currency markets, an extraordinary step to avert more damage to the country’s battered economy.

… each tick higher in the yen threatens the country’s exporters by making Japanese products more expensive for foreign buyers. That would be another body blow to Japan, whose exports such as vehicles and electronics are a cornerstone of its economy.

… A joint intervention is highly unusual and shows that Japan and its allies are serious about restraining the yen. The last such joint agreement to intervene in currency markets was in 2000, when the G-7 sought to bolster the sinking euro.

… The intervention meant the G-7, which includes finance ministers from Canada, France, Germany, Italy, Japan, Britain and the United States, would probably sell yen and buy dollars, though how much was not made public to keep speculators guessing.

… The decision, announced by Japanese Finance Minister Yoshihiko Noda in Tokyo, came after the yen’s value had surged to a record 76.25 per dollar in Asian trading Thursday in the U.S. from 79.39 on Wednesday and about 83 a week earlier.

“The Japanese market is not in chaos and will continue to be healthy,” Noda said in a televised morning press conference. “Japan is in a difficult situation at the moment. The G-7 intervening together to stabilize the market will have great meaning.”

RS View: The “great meaning” is that individual national currencies are geopolitically forever doomed to mediocrity at best — leaving gold as the sole earthly agent primed to serve as the vehicle of long-term savings no matter who or where you are in the world.

Mar 18th, 2011 08:31 by News

by Zheng Lifei & Sophie Leung
Mar 18, 2011 (Bloomberg) — China raised banks’ reserve requirements for the third time this year, judging that inflation remains a bigger threat to the world’s second-largest economy than Japan’s earthquake and nuclear crisis.

The proportion of lenders’ deposits that must be parked with the central bank will increase half a percentage point from March 25, the People’s Bank of China said on its website today. The requirement will rise to 20 percent for the nation’s biggest banks, excluding any extra limits for individual lenders.

… An interest-rate increase for China is “a couple of weeks away,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. He said the reserve-ratio increase was to soak up money as central-bank bills matured. Shen estimated that annual inflation may accelerate to 6 percent this month, the fastest pace since July 2008.

… People’s Bank of China Governor Zhou Xiaochuan said this month that rates will be used to curb inflation, and played down the role of currency gains, which U.S. officials have encouraged China to use as a tool.

Mar 18th, 2011 08:20 by News

by Kerri Shannon
March 18, 2011 (MoneyMorning) — The U.S. consumer price index rose 0.5% in February from the month before, pushed higher by food and energy costs. The price index for all items climbed 2.1% over the past year.

But many think government-reported inflation numbers don’t present an accurate price picture. Some economists estimate the true rate of inflation is closer to 8% or 9%. And those numbers could rise higher as the U.S. Federal Reserve continues to pump billions of dollars into the financial system.

Inflation, coupled with political turmoil in the Middle East, has pushed many investors out of stocks and into commodities. Gold rose to a record $1,445.70 an ounce on March 7. … A dramatic increase in inflation this year could push gold prices even higher than predicted as more investors seek safe haven investments. Many predict gold will continue to climb and reach $2,000 an ounce, or higher.

“I’m still looking for gold to reach $2,500 an ounce – but after a brief pullback,” Money Morning Chief Investment Strategist Keith Fitz-Gerald said last month. “Not only are many people beginning to seriously accumulate the yellow metal, but so are many countries, as one of the truly viable alternatives to traditional currencies and a means of diversifying their sovereign debt risk.”