By Jordan Roy Byrne
Mar 29, 2011 (MarketOracle) — In this missive we reply to the supposed reasons against investing in Gold.

Point: “Gold is a crowded trade and a bubble.”

First of all, ignore anyone who calls Gold a trade. It’s a bull market not a trade. A trade makes it sound like it is a fad and aberration. Yes, there will be wild swings both ways but the global allocation to Gold and gold shares is 1%. Its estimated that the allocation to Gold and gold shares in pension funds is 0.3%. Does that sound like a bubble? Not even close. Good God, can you imagine if that figure went to 5%?

Point: “You can’t eat Gold.”

I didn’t know the US Dollar had any nutritional value.

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By Claudia Assis and Virginia Harrison
March 29, 2011 (MarketWatch) — Gold futures on Tuesday slipped to their lowest point in nearly two weeks, extending their losing streak to four sessions as investors locked in some of their recent profits.

Gold for June delivery, the most active contract, fell $3.80, or 0.3%, to $1,417.50 an ounce on the Comex division of the New York Mercantile Exchange. That was gold’s lowest settlement since March 18. It had traded as low as $1,412.10 an ounce earlier, but prices came off lows as a key gauge of consumer confidence fell sharply in March. A report from the nonprofit Conference Board pointed to rising prices of food and energy as the main source of worries for U.S. consumers.

… “Investors are clearly still taking profits after the price of gold marked a new record high last week,” Commerzbank analysts said in a note. “The fall in price yesterday was accompanied by outflows from gold [exchange-traded funds],” they said.

… Japan struggled to contain radiation leaks at its crippled Fukushima Daiichi power plant, with plutonium found in soil near the plant. Prime Minister Naoto Kan said the government was on “maximum alert” and called the situation at the plant “unpredictable.”

… Fears of currency debasement and loose monetary policy are top reasons for gold’s decades-long bull market.

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by Neil Charnock
Mar 29, 2011 (MarketOracle) — Capital waves control the direction of markets; they are flows of money, the liquidity that dictates direction. There is nothing like a good gold rally because it is driven by fear. As I will explain, this coming rally is shaping up with considerable force, the capital wave to hit this market sector will be a monumental event.

… Gold is looking ready to break out and run strongly yet again as debt markets gear up for another round of trouble. A banking crisis could breakout at any time which is why I am keeping at least one foot in this market at all times. One needs a core position in case we wake up one morning and gold has jumped $40 over night at the launch point of a mega run. Massive amounts of debt have to be rolled over in the next three months; Portugal and Spain have come back into the limelight for all the wrong reasons lately.

… The central banks are still buying back gold because this essential reserve asset adds stability to the monetary system. The authorities continue to search for a solution to workable regulation that might stop a repeat of the GFC. They are up against a chronic structural imbalance due to the largest debt bubble in history.

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by Brett Arends
Tuesday, March 29, 2011 (MarketWatch) — Who are the three gullible hedge fund managers in New York and San Francisco who just dropped $15 million in an alleged Ponzi scheme out in Utah? The Securities and Exchange Commission won’t say, but it’s going to be embarrassing if John “Scott” Clark, the man behind the alleged swindle, ever goes to trial. We’ll find out then.

… The alleged Ponzi scheme was a doozy. The SEC says that from 2006 through last year, Clark raised $47 million from investors for his firm, Impact Cash, an online payday lender making loans to the poor at Chili Palmer rates.

He promised his backers annual returns of up to 80% a year.

You heard me. Eighty percent a year.

One hundred and twenty investors took the bait.

… It pretty much tells you all you need to know about a lot of hedge fund managers. It’s a term that covers a multitude of sins. Five years after Wall Street got suckered by subprime, they really haven’t learned.

Even your grandma knows that anyone promising you 80% a year, or even 55%, is offering you a suckers’ bet.

Melton referred to them as “low-level hedge funds,” but he noted they have enough money to hire top counsel in Salt Lake City.

Would you want them managing one penny of your money?

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by Jan Harvey
March 29, 2011 (Reuters) — Gold steadied near $1420 an ounce on Tuesday as violence in the Middle East boosted the metal’s safe-haven appeal, but investors remain cautious towards the metal amid expectations monetary policy is set to tighten.

… St Louis Federal Reserve Bank president James Bullard said on Tuesday the US economy was strong enough to curtail the Fed’s $600 billion bond-buying program, while ECB chief Jean-Claude Trichet said on Monday the inflation rate in the euro zone was “durably” above the bank’s target. Growing expectations US and euro zone monetary policy may tighten have weighed on gold prices after unrest across the Middle East and North Africa pushed gold to a record $1447,40 an ounce last week.

Violence is continuing to rage in Libya after months of unrest in North Africa. Muammar Gaddafi’s better armed and organised troops reversed the westward charge of Libyan rebels as world powers met in London to plot the country’s future without the “brother leader”.

US Ambassador to the United Nations Susan Rice said on Tuesday that the Obama administration has not ruled out arming Libya’s rebels as an option for trying to end Muammar Gaddafi’s 41-year rule.

Among other commodities, oil prices turned positive on Tuesday as Gaddafi’s troops halted a rebel advance, raising doubts among investors over how quickly the conflict in OPEC member Libya could be resolved.

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by Alix Steel
March 29, 2011 (TheStreet ) — Gold prices were modestly lower Tuesday as they fell in tandem with oil prices and as rumors circulated that China may raise interest rates. Gold for April delivery was down $1.50 to $1,418.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded in a tight range from $1,422.90 to $1,411

Silver prices were down 8 cents to $37 an ounce. Both metals were stemming steeper losses from Monday’s session.

Gold and silver make juicy investments when inflation is high as paper currencies lose value and hard assets are worth more. That inflation thesis is seeing some headwinds Tuesday as China Securities Journal reported that China’s central bank could raise rates to tame inflation, which is up 4.9% in February and could rise to more than 5% in March. Main consumer product companies are raising prices from 5% to 15% in April, according to the article.

… In the U.S., although the Federal Reserve won’t be raising rates anytime soon, recent hawkish comments from Fed members have indicated that quantitative easing won’t be re-upped in June when the current program expires. Some more aggressive Fed presidents, like James Bullard, are calling for a $100 billion cut from the $600 bond buying program.

The Fed, and gold prices, will take direction from Friday’s jobs number. Expectations are for the unemployment rate to stay at 8.9% and for the private sector to add between 190,000 and 200,000 jobs.

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by David Levenstein
Tuesday, 29 Mar 2011 (Mineweb) — … When this bull market in gold began in 2000, the price was $250 an ounce. At the time, practically every main stream analyst saw no value in gold and advised clients to stay well away from this metal. It was referred to as a barbaric relic that no one wanted and besides who on earth would want to invest in something that did not pay a dividend?

… we should not forget that since 2001 while the gold price has increased by almost six times, the same can’t be said regarding equities and bonds. And, while the price of gold has increased, we have seen global currencies fall, property fall, equities fall and rise, and bond prices fall.

… The analysts, who over the last ten years or so have remained negative on gold, have not only missed an amazing opportunity for their clients but, they have also failed to understand the fundamentals driving the gold price higher.

… Without money life can be extremely difficult and miserable. Can you imagine what it must be like to wake up one day and find that all the money you have saved after working most of your life has just become worthless?
This is exactly what happened in Zimbabwe where Mugabe and his bankers, totally destroyed not only the country’s monetary system but the wealth of many individuals who had spent their entire life saving for their retirement. In Zimbabwe the state does not offer social security or pensions for the old aged. Now, those people cannot find work and have to rely on financial assistance from friends and family while Mugabe and his group of bandits continue live in the lap of luxury. However, those people who owned hard assets such as gold escaped this devastation.

While no logical thinking individual can compare Zimbabwe to the US or the Eurozone, the effect of currency debasement is the same. It ultimately, lowers the value of the currency, and causes higher inflation. It also lowers the standard of living of many citizens and eventually erodes their wealth. But, precious metals such as gold and silver protect against this.

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By Joanne Hart
29 September, 2010 (TheBanker) –

… [T]he dollar and dollar-denominated liquid assets still account for the majority of central bank reserves. According to the International Monetary Fund (IMF), central banks have invested about 60% of their reserves in dollars for the past 25 years, with remarkable consistency.

While the breadth of the US market makes this understandable, it has prompted increased unease among economists, foreign exchange strategists and central bankers themselves. “China is dissatisfied with a system in which it feels forced to invest in dollars and dollar-denominated instruments,” says Mr Magnus.

Other emerging economies feel the same…. But change has to be handled with great delicacy if it is not to have unintended consequences…. Moving into other currencies or asset classes is even more of a challenge for giants such as the Chinese.

“It might be a good idea for the Chinese to move into gold as part of a diversification programme but the mere speculation that they might increase their allocation would push up the price to such an extent as to make the investment a lot more questionable,” says Mr Magnus.

Some central banks have deliberately gone for a high-profile approach, sending out signals to policy-makers and markets. The quantitative easing programmes undertaken by the Federal Reserve and the Bank of England are explicitly designed to ease volatility, although they are frowned on by many other central banks.

“Emerging economies do not approve of quantitative easing as they say it is debasing their assets. Some even threaten to initiate a buyers’ strike. The debate is quite polite but there will be more and more dissatisfaction, particularly if the US economy does not start to recover,” says Mr Juckes.

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29 March 2011 (Reuters) — Gold eased in Europe on Tuesday as expectations that interest rates may rise in key countries undermined confidence in the metal, with investors remaining cautious after its failure to build on last week’s record high. Violence in the Middle East and euro zone debt fears were still lending support to prices, however.

Spot gold was bid at $1,414.15 an ounce at 1136 GMT, against $1,419.50 late in New York on Monday. U.S. gold futures for April delivery fell $5.10 an ounce to $1,414.80. Last week it pushed to a record high at $1,447.40 an ounce on the back of spreading violence in the Middle East and resurgent fears over euro zone sovereign debt, but the impact of those issues is now priced in.

“It does seem to be getting trickier to push convincingly beyond previous highs,” said Macquarie analyst Hayden Atkins…. “There seem to be too many things going on for a lot of people, and positioning in that type of environment is quite difficult.”

… “We expect that the strengthening U.S. economy combined with the end of quantitative easing by the U.S. Federal Reserve will lead to gradually rising U.S. real interest rates in 2011,” said Goldman Sachs in a report on Tuesday. “Should real rates return to their February levels of 1.3 percent, we would expect a slightly slower gold rally than currently embedded in our forecasts for the second half of 2011, which currently stand at $1,565 and $1,690 in six and 12 months, respectively.”

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By Claudia Assis and Virginia Harrison
March 28, 2011 (MarketWatch) — Gold futures dipped below $1,420 an ounce Monday, as investors lacked a fresh reason on the geopolitical front to turn their attention to the metal.

Gold for April delivery settled $6.30 lower, or down 0.4%, at $1,419.90 an ounce on the Comex division of the New York Mercantile Exchange. That was gold’s lowest close in a little more than a week.

Gold for June delivery, with the most contracts still outstanding, also retreated $6.30 to close at $1,421.30 an ounce.

… A “lack of significant fresh developments from current geopolitical issues has resulted in some anxiety draining out of markets like gold,” analysts at MS Futures said in a note to clients Monday. Modest gains for the dollar have also given gold bears the upper hand, the analysts added.

… Geopolitical tensions are not going away any time soon, however, and continue “to suggest a rise in the price of gold, which should therefore resume its uptrend soon,” analysts at Commerzbank said in a note to clients. Investors’ anxieties center mainly on Japan’s nuclear crisis, the conflict in Libya, unrest in the Middle East and the debt crisis in euro-zone peripheral countries, they said.

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by Peter Brimelow
March 28, 2011 (MarketWatch) — Gold had a week for the history books but ended with a whimper. However, gold bugs remain confident.

Although the CME April gold contract (currently the benchmark “nearby” contract) had a record-high close on Wednesday of $1,438, and the London PM fix achieved a record level on Thursday of $1,447, both Thursday and Friday saw steep declines in the New York afternoon (after European markets had closed). So, for the week, April gold closed quietly with a gain only $10.10 (0.7%).

Naturally, the faction I call the “Radical Gold Bugs” — who believe that gold is constantly subject to covert, malign influence by the U.S. authorities and their chosen instruments — were neither whimpering nor quiet.

… The specter of a determined official-sector effort to cap the gold price is alarming for the gold bulls — especially as a credible rumor of it is likely to attract opportunistic profit-motivated sellers and be self-fulfilling.

But this time the fear may be overblown…. the assessment posted Friday on the Jesse’s Café Americain website deserves attention: “I do not know what it is going to take to move gold over that neckline in the big inverse head and shoulders formation, or how long it might take. But I suspect strongly that when it does break out, we will see another fast move higher, because so many in the markets are not positioned for it. After at least one serious ‘gut check’ on the longs, gold will most likely move fairly quickly to $1,590.”

“Depending on what happens, I will not be surprised to see gold hitting $2,000 by year end.”

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By Ben Bland
March 28 2011 (FT) — Vietnamese gold traders have sent billions of dollars worth of high-grade gold jewellery to be smelted in Switzerland over the past two years to circumvent government restrictions on bullion exports.

… Cameron Alexander, a senior analyst at GFMS precious metals consultancy, said: “In Vietnam, banks haven’t been able to export bullion freely, so they have made jewellery out of it so they can export it. There’s a loophole and people who need the dollars have taken advantage of it.”

… Many analysts say that government attempts to control Vietnam’s gold market have been counter-productive. “When there are restrictions, people will always smuggle it…”

… Benedict Bingham, the IMF’s senior representative in Vietnam: “It’s basically residents shifting from dong into dollars and gold and keeping it out of the banking system.”

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Monday, March 28, 2011 (Atlanta Business Chronicle) — Federal Reserve Bank of Atlanta President and CEO Dennis P. Lockhart has a “net positive” outlook on the nation’s economy for the rest of 2011 and into 2012, he told the Rotary Club of Atlanta Monday afternoon.

Lockhart said the Atlanta Fed’s economic forecast calls for continued moderate growth, gradually declining unemployment, and the settling of price movements around an inflation rate that is consistent with the Federal Reserve’s price stability objective. He said that for the time being, the risk of deflation has receded.

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RS View: It’s seemingly ‘A Tale of Two Cities’ — this one versus the preceding article. (And, yes, I do realize that is SecTreas Geithner gesturing above on behalf of Atl. FedPres Lockart’s commentary — merely providing a visual counterpoint to Trichet’s earlier gesture.)

by Leigh Thomas and Jean-Baptiste Vey
March 28, 2011 (Reuters) — The inflation rate in the euro zone is “durably” above the European Central Bank’s target, the bank’s president Jean-Claude Trichet said on Monday in comments which offered support to the euro.

Inflation in the 17-country euro zone accelerated to 2.4 percent in February…. Concerns about inflation led the ECB earlier this month to say it may raise interest rates in April — a scenario its policymakers have since flagged repeatedly despite the economic impact of Japan’s earthquake, tsunami and nuclear disasters.

One major issue for the bank — and the scale and pace at which it chooses to raise interest rates — is the extent to which expectations for price growth in the euro zone are becoming entrenched at high levels due to oil and food prices.

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Note: Additions to the Gilded Opinion Library (GOL) are made on the basis of enduring value to gold owners. We invite you to visit the GOL (linked at the bottom). This page generates significant web traffic. As testimony to that longevity, as well as the page’s popularity, an article by Tocqueville Gold Fund’s John Hathaway posted at the GOL in 1999 recently received significant readership when posted at the Casey Research web site in Ed Steer’s column. That is a lifespan of almost 12 years and counting!

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The Floating Dollar as a Threat to Property Rights

Reprinted by permission from Imprimis, a publication of Hillsdale College

The following article is an interesting spin on how the floating fiat currency known as the dollar impacts our “right to the property that comes to us in the form of a salary or is held by us in the form of savings.” The concern of course is that since the United States went off the gold standard, the float in the dollar has been, for the most part, unidirectional…down.

A prudent saver might then consider protecting that ‘property’ by choosing to save in gold, rather than dollar.

The emphasis added to the article is mine.

Link

Elaine Kurtenbach and Sharon Silke Carty
TOKYO (The Associated Press) — The auto industry disruptions triggered by Japan’s earthquake and tsunami are about to get worse.

In the weeks ahead, car buyers will have difficulty finding the model they want in certain colors, thousands of auto plant workers will likely be told to stay home, and companies such as Toyota, Honda and others will lose billions of dollars in revenue. More than two weeks since the natural disaster, inventories of crucial car supplies — from computer chips to paint pigments — are dwindling fast as Japanese factories that make them struggle to restart.

Because parts and supplies are shipped by slow-moving boats, the real drop-off has yet to be felt by factories in the U.S., Europe and Asia. That will come by the middle of April.

… Much of Japan’s auto industry — the second largest supplier of cars in the world — remains idle. Few plants were seriously damaged by the quake, but with supplies of water and electricity fleeting, no one can say when factories will crank up. Some auto analysts say it could be as late as this summer.

… The uncertainly has suppliers, automakers and dealers scrambling. And it exposes the vulnerability of the world’s most complex supply chain, where 3,000 parts go into single car or truck. Each one of those parts is made up of hundreds of other pieces supplied by multiple companies. All it takes is one part to go missing or arrive late, and a vehicle can’t be built.

… Car buyers will soon see higher prices and fewer choices.

… After the earthquake hit, car companies began the long process of figuring out which parts are in danger of running out. That means figuring out where every piece in every part comes from. “Everyone is putting on the brakes a little bit and taking a look to see where they are affected,” says Paul Newton, an analyst with IHS Automotive.

Companies will shut down plants as soon as some parts start running out, which could start happening in the next four to six weeks, he says. “You will see it happen almost daily.”

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Shino Yuasa
Monday March 28, 2011 (Associated Press) — Workers discovered new pools of radioactive water leaking from Japan’s crippled nuclear complex, officials said Monday, as emergency crews struggled to pump out hundreds of tons of contaminated water and bring the plant back under control.

… three of the complex’s six units are believed to have partially melted down, and emergency crews have struggled with everything from malfunctioning pumps to dangerous spikes in radiation that have forced temporary evacuations.

Confusion at the plant has intensified fears that the nuclear crisis will last weeks, months or years amid alarms over radiation making its way into produce, raw milk and even tap water as far away as Tokyo.

The troubles at the Fukushima complex have eclipsed Pennsylvania’s 1979 crisis at Three Mile Island, when a partial meltdown raised fears of widespread radiation release, but is still well short of the 1986 Chernobyl disaster….

TEPCO officials said Sunday that radiation in leaking water in Unit 2 was 10 million times above normal — a report that sent employees fleeing. But the day ended with officials saying that figure had been miscalculated and the level was actually 100,000 times above normal, still very high but far better than the earlier results.

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by Sergei Balashov
March 28, 2011 (ProactiveInvestors) — Gold prices declined rapidly today as safe haven demand eroded amid new developments in the Libyan civil war. The rebels, boosted by the support of the NATO led coalition, seem to have gained a decisive advantage and are rapidly gaining ground in the west of the country. The opposition has now retaken the key oil towns of Brega and Ras Lanuf, weakening forces loyal to the country’s ruler Muammar Gaddafi.

In addition to that, gold and other dollar-denominated commodities were hit by a stronger US dollar, which is seen as an alternative investment to gold and has an inverse relationship with the yellow metal. Gold last traded at US$1,414/oz.

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by Tatyana Shumsky
March 28, 2011 (Wall Street Journal) — Gold futures slumped on stronger-than-expected U.S. consumer-spending data.

The most actively traded contract, for April delivery, was recently down 0.9%, or $12.90, at $1,413.30 per troy ounce on the Comex division of the New York Mercantile Exchange. The thinly traded March contract was down 0.9%, or $12.90, at $1,413.20 per troy ounce. Tuesday is the last day of trade for the contract.

Gold prices headed for their third consecutive day of declines, after a report showed U.S. consumers had a greater willingness to spend in February. Consumer spending rose by 0.7% in February from the prior month, the eighth straight increase and the largest since October, in the latest indication that Americans are feeling more upbeat about the economic recovery.

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ALSO…

US consumer spending up, inflation accelerates
Mar 28, 2011 (Reuters) — US consumer spending rose for an eighth straight month in February as households tapped savings to cover higher food and energy prices.

Spending rose 0.7 percent in February after a 0.3 percent increase in January, and inflation accelerated at its fastest pace since June 2009, the Commerce Department said on Monday.

Adjusted for inflation, spending was up a far smaller 0.3 percent last month after being flat the prior month.

“The data provide yet more evidence that higher prices are denting economic growth,” said Paul Dales, a senior US economist at Capital Economics in Toronto.

Economists polled by Reuters had expected spending, which accounts for about 70 percent of US economic activity, to advance 0.6 percent.

US government debt prices extended losses after the data, while stock index futures were little changed.

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by Shivom Seth
Monday, 28 Mar 2011 (Mineweb) MUMBAI — Europe’s debt crisis has spurred demand for an alternative investment. And gold is turning out be a investment of choice for most Indians, especially those based in Ahmedabad.

Imports of the yellow metal scaled a six-year high in this Gujarat town, despite the high price. According to figures available, Ahmedabad imported 248.41 metric tonnes of gold till February 2011, as compared to 215.52 metric tonnes that it had imported in the previous financial year.

… Gold traders revealed that the highest demand for gold this year has come in from the rural areas, particularly from the farming community.

“Over the past one year, farmers have minted money by selling out large tracts of land to real estate developers. The money has then been diverted to buying gold,” said an official of Sonawala Jewellers, a retail outlet in Mumbai, who has had operations in Gujarat for over 3 decades.

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By Paul Carrel, Mark Felsenthal, Pedro da Costa, David Milliken and Alan Wheatley
FRANKFURT/WASHINGTON (Reuters) –

… Since the early days of the financial crisis in 2008, the European Central Bank, the U.S. Federal Reserve and the Bank of England have all been forced to adopt policies that just a few years ago they would have dismissed as preposterous. And the Bank of Japan responded to the Sendai earthquake and tsunami by doubling its own asset-purchase programme, to keep the banking system of the world’s third-largest economy on an even keel.

For a generation, the accepted orthodoxy has been to focus on taming inflation. Financial stability has taken something of a back seat. Now, whether mandated to do so or not, western central banks have bought up sovereign debt to sustain the financial system, printed money by the truckload to stimulate their economies, sacrificed some of their independence to coordinate monetary policy more closely with fiscal decisions, and contemplated new ways of preventing asset bubbles. Some — such as Bank of England Governor Mervyn King — have joined wider political protests at commercial banks that are still behaving as if they are “too big to fail”, and as if being bailed out is just a hazard of business.

In the measured world of central banking, it amounts to nothing short of a revolution. Otmar Issing, one of the euro’s founding fathers and a career-long monetarist hawk, told Reuters that in buying government bonds the ECB had “crossed the Rubicon”. The question now for the ECB — and for its counterparts in Britain, the United States and elsewhere — is what they’ll find on the other side.

Don Kohn, a former vice-chairman of the Federal Reserve, realized central banking was changing forever at a routine meeting of his peers in Basel, Switzerland, in March 2008. The shockwaves from the U.S. subprime mortgage meltdown had begun rocking banks around the world… “It was terrible,” Kohn said. “One of the people at the meeting used the phrase, ‘It’s time to think about the unthinkable’.”

… After slashing interest rates practically to zero, central banks desperate to prevent a new global depression had no choice but to expand the volume of credit, rather than its price, by reaching for the money-printing solution known as “Quantitative Easing” (QE)…. Until that point, the Fed was a lender of last resort for deposit-taking banks. By invoking obscure legislation from the Great Depression, it also became a backstop for practically any institution whose collapse could threaten the financial system. Kohn and others at the Bear Stearns meeting had just done the unthinkable…

Buying up bonds and bailing out failing firms does indeed blur the boundaries between monetary and fiscal policy. Critically, it also suggests that supposedly autonomous central banks are doing the bidding of politicians.

… “There will have to be fundamental change … If institutions are too big to fail, they are too big to exist,” Weber said, echoing comments by King at the Bank of England. The shift is already happening. “Bond investors are not facing a future change; they are living through a change,” said Gieve, the former Bank of England deputy governor.

… In truth, central banking, by its nature, has always been an intensely political enterprise. To pretend otherwise is naive. War, revolution, depression and calamity have always subjugated central banks to political necessity, and most are still state-owned. Like a country’s highest court, a central bank cannot — no matter how vaunted its independence — be unaware of the political and social mood.

[Click here. Read the full report]

By Sarah N. Lynch and Rachelle Younglai
March 25 (Reuters) — The U.S. Treasury secretary is on the verge of dashing the hopes of some financial companies by refusing to exempt certain foreign exchange options from new regulations, sources familiar with the matter said on Friday.

Foreign exchange is a multi-trillion dollar market and derivatives, including options, are used by companies that run the gamut from financial institutions like Goldman Sachs to manufacturers like 3M to lock in prices as protection against swings in exchange rates.

The Dodd-Frank Wall Street reform law explicitly gives the Treasury secretary power to exempt the more commonly-used foreign exchange swaps and forwards from rules being written by the Commodity Futures Trading Commission. But some experts have said the law is unclear about whether Treasury Secretary Timothy Geithner has the power to also exempt options on those contracts….

The CFTC’s new rules would force some of these derivatives into clearinghouses, which stand between parties to guarantee trades, and could drive up costs for investors protecting themselves against currency fluctuations.

Geithner has not yet indicated publicly what he plans to do with foreign exchange swaps and foreign exchange forwards.

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March 25, 2011 (MarketWatch) — Gold futures settled lower Friday, hit by a stronger dollar even as ongoing conflict in Libya and the Middle East and Japan’s nuclear disaster fed some safe-haven buying.

Gold for April delivery fell $8.70 to $1,426.20 an ounce on the Comex division of the New York Mercantile Exchange. It traded as high as $1,438.10 an ounce overnight. The metal lost steam in the last stretch of floor trading after wavering between small gains and losses for most of the session. On the week, however, gold gained 0.7%.

Friday’s trading was tinted by a technical reversal on Thursday, when the metal touched an intraday record high but ended lower. The reversal left gold vulnerable on Friday.

But gold remains well supported and the technical reversal, while significant, is not expected to damage the long-term case for the metal, said Scott Meyers, a senior trading analyst with Pioneer Futures, a division of MF Global, in New York. “I don’t think the technicals are going to win out,” he said. “Pick a region, there’s something going on.”

“There’s potential for news out of Japan to get a lot worse,” said Matt Zeman, trader at Kingsview Financial in Chicago.

… Zeman said he sees gold trading at $1,500 an ounce in a matter of months on the geopolitical worries as well as fears of inflation and a low interest-rate environment in developed countries.

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by Jeff Clark
3/24/2011 (TheMarketGuardian) — What will happen to the U.S. economy and the dollar in the near term? Will inflation increase dramatically? What is the outlook for gold, and where should you put your money? Big Gold asked a world-class panel of economists, authors, and investment advisors what they expect for the future. Caution: strong opinions ahead…

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NEW YORK (Reuters) – Consumer sentiment in March fell to its lowest level in more than a year as gasoline and food prices rose, a survey released on Friday showed.

The index was slightly lower than March’s preliminary reading, while inflation expectations remained elevated. Even so, the latest consumer survey from Thomson Reuters and the University of Michigan said there was no decline in buying plans.

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PG View: While a prudent consumer might save in hard economic times, reflected in the grim sentiment print, today’s consumers are apparently inclined to go on buying because of the expectation that what they desire will be more expensive tomorrow. Fed efforts to disincentivize saving and encourage consumption may just be working, but that doesn’t mean it’s really the right choice for the average man. However, if you choose to save in gold rather than dollars, that’s a completely different story.

Gold Stabilizes After Establishing New Record High

Gold extended to a new all-time high of 1447.40 on Thursday before succumbing to profit taking. The corrective activity was initially triggered by silver’s rapid surge to a 31-year high above $38.00, but physical buying interest quickly established support in both markets. While the Thursday’s reversal day in gold (outside-day/lower-close) may give some technicians pause, the pattern was not repeated in silver, which eked out a slightly better close. While further profit taking ahead of the weekend can not be ruled out, the dominant uptrends in both gold and silver are likely to continue to garner support from broad-based risk aversion flows and ongoing dollar weakness.

Concerns about the Japanese nuclear disaster came back to the fore yesterday amid speculation that the number 3 reactor core at the stricken Fukushima nuclear plant may have been breached. Standing water in the lower level of the reactor building was reported to contain radiation levels 10,000 times higher than normal cooling system water. Two workers were hospitalized with radiation burns after wading through the standing water. The latest worries have prompted a widening of the evacuation area by nearly 60%, from a 12 to a 19 mile radius.

There continues to be a fair amount of confusion about specific roles in the UN sanctioned military action in Libya. After much squabbling, NATO has agreed to take over control of the Libyan no-fly zone. However, they remain reluctant to take control of the much more difficult and dangerous missions to protect civilians (and presumably rebels) against attack from pro-Gaddafi forces. Once the combatants are mixed together in an urban warfare environment like Misrata, differentiating the “good guys” from the “bad guys” from the air becomes all-but impossible. So far US forces are doing the lion’s share of these missions, creating political complications for the Obama administration, which promised a quick transition for US forces to support roles.

Syria is the latest country in the region to experience heightened political unrest, leading to bloodshed. Protests were seen in Deraa, Damascus and Hama on Friday. There were reports of more gunfire in Deraa, where as many as 25 protesters were killed earlier in the week. Preliminary reports suggest another 20 anti-government protesters may have been killed today. Yemen’s embattled President Ali Abdullah Saleh indicated that he is ready to give up power, but only if he can leave Yemen in “safe hands.” If Yemen becomes the third country in the region to successfully oust its autocratic leader, protests in places like Bahrain, Saudi Arabia and Jordan, among others may intensify.

Oil prices remain underpinned by continued unrest in the Middle East and North Africa. Additionally, as the nuclear crisis in Japan extends into its third week, there is a growing consensus that the world will become even more reliant on increasingly scarce carbon-based fuels, such as oil. In fact, French President Sarkozy pledged that any nuclear reactor in Europe that doesn’t pass planned stress tests will be shut down. Heightened demand will push the price of such fuels relentlessly higher and threaten some countries with a slide back into recession. In the US, that is likely to lead to further loose monetary policy, which will keep downward pressure on the dollar. A weak dollar is generally supportive to gold.

High oil prices will also weigh on the nascent recovery in the European economy, but that is probably the least of their worries right now. The collapse of the Portuguese government earlier in the week contributed to a two notch downgrade in their sovereign debt by S&P to BBB. S&P cited political uncertainty and eroding market confidence, warning that further downgrades may be in the offing. Nonetheless, the Portuguese “care-taker” government steadfastly maintains that they don’t need a bailout. One market analyst put it quite succinctly, saying that Lisbon is “delusional”.

Amid the rising expectation that Portugal is on the verge of tapping the EU bailout facility, ministers at the eurozone summit in Brussels pressed ahead with plans to create a permanent European Stability Mechanism. There were rumblings today that the EU planned to hold the UK to an agreement signed by outgoing Chancellor Darling to contribute to the bailout facility, even though the UK is not a member of the EU. Many members of the British parliament, and of course UK taxpayers are “furious”. With England in the midst of its own financial crisis, they wonder where those moneys are going to come from. Well, the Bank of England can always print it.

The People’s Bank of China has expressed concerns about that very thing, and not just in the UK. The PBoC warned about the risk of “competitive devaluations” by developed countries in general. In addition, they warned about inflation and asset bubbles in emerging countries. They did get a little more specific about the dollar, saying it was likely to trend weaker throughout 2011. In the PBoC’s opinion, because of these risks, gold is likely to remain high.

by Euan Rocha
March 25, 2011 (Reuters) — Costs are becoming an growing concern for gold miners across the world even while they are rolling in cash as profits soar on the back of record bullion prices. … “The costs of the industry have come up fairly dramatically over the last 10 years, such that the average cash cost for the industry is getting up towards $600 an ounce and that’s not counting capital investment, financing and the other costs on top,” said Greg Hawkins, chief executive of African Barrick Gold.

“The all-in costs for the industry are getting up to $800, $900, even close to $1,000 for certain companies,” said Hawkins, while speaking at the Reuters Global Mining and Steel Summit in London this week.

With big gold deposits getting harder to find, majors are forced to go further afield to replace and expand the size of their reserves and output. But this growth often comes at a higher price. ”This is a tough business and companies are going to have to go into parts of the world that they weren’t contemplating going into 20 years ago,” said Sean Boyd the CEO of Agnico Eagle, which owns a gold mine in the Canadian Arctic.

“If you look at the sector, a lot of the flagship deposits that were the mainstays in the 90s are no longer there,” said Boyd, who participated in the Toronto-leg of the Reuters Summit. “The sector in 2010, produced as much gold as it did in 2001, even with the dramatically higher gold price.”

… INick Holland, the CEO of Gold Fields, notes that miners face, “What might be a very difficult year across the planet in terms of costs.”

“The oil price, the steel price, the price of timber the price of cyanide and the price of even labor is not within our control,” he said. “If these exogenous factors continue to prevail over the balance of the year, I think all of us in the mining industry will be recalibrating our cost profiles.”

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by Pooja Thakur, Unni Krishnan and Andrew Frye
Mar 25, 2011 (Bloomberg) — Warren Buffett, the billionaire who urged Congress in 2009 to guard against inflation, said investors should avoid long-term fixed-income bets in U.S. dollars as the currency’s purchasing power will decline.

“I would recommend against buying long-term fixed-dollar investments,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., said today in New Delhi. “If you ask me if the U.S. dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not.”

Buffett, 80, has shortened the duration of Omaha, Nebraska- based Berkshire’s bond holdings since 2009 as the U.S. Federal Reserve eased monetary policy to stimulate the economy.

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ALSO…

The Treasury Auction Shell Game
by Peter Schiff
March 25, 2011 (ForexPros) — Very few people have either the time or patience to sift through the data released by the Treasury Department in the wake of its bond auctions. But the numbers do provide direct evidence of the country’s current financial condition that in many ways mirror a financial shell game that typifies our entire economy.

… [A] very large chunk of Treasuries go to “primary dealers,” the very large financial institutions that are designated middle men for Treasury bonds.

[Example:] In a late February auction, these dealers took down 46% of the entire $29 billion issue of seven year bonds. … According to analysis that appeared in Zero Hedge, nearly 53% of those bonds were then sold to the Federal Reserve on March 8, under the rubric of the Fed’s quantitative easing plan.

… the Treasury is essentially selling its debt to the Fed, in a process that we would call debt monetization…

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by Lawrence Williams
25 March 2011 (Mineweb) — [Gold] hit $1447 yesterday at the London PM fix before falling back very sharply almost immediately the new milestone had been achieved.

Gold price patterns when new highs have been reached have seen similar reactions on the way up with heavy profit-taking apparent (mostly in the U.S.) as the yellow metal passes its prior high point and this occasion has obviously been no exception…. On balance it would seem likely that gold will first consolidate again in the $1420 to $1440 range before making a further assault on new highs – after all, all the external drivers remain in place and aren’t going away.

… As the Asian economies continue to maintain relatively high growth levels and income filters down to a growing middle class, the strong propensity to save against future difficulties, coupled with worries about inflation, will likely continue to be seen in those nations, keeping gold purchases at a high level. This is, in general, a firm market with a far lower predisposition to trade in and out than in the West as prices move upwards.

But in the West, too, the growing realisation that government printing of money in an attempt to kickstart growth will lead to inflation and the reduction of purchasing power of all the major currencies will likely drive the investing public increasingly into hard assets – a position already having been taken by some of the West’s biggest investors.

… with none of the external factors driving precious metals prices likely to go away in the foreseeable future – indeed some may deteriorate further – to this observer for the moment gold and silver will likely remain on the upwards path, but perhaps with an ever-increasing degree of volatility. Two steps forward, one step back, repeating itself as Western traders continue to see opportunities to take occasional profits.

One scenario which could upset this though is a major stock market crash causing precious metals to be sold for liquidity purposes as was seen in late 2008 – but even if this should occur gold, in particular, would likely bounce back first, although one should probably beware of silver under such circumstances given its far higher volatility on the downside.

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by Julian Phillips
Friday, 25 Mar 2011 (Mineweb) — When inflation hits a healthy economy such as China it has an entirely different impact than it does on today’s developed world.

… China will overcome rising inflation as those suffering it are seeing their incomes rise rapidly and the impact of inflation negligible. As their costs rise, their income rises faster, leaving little pain. Interest rate rises benefit the vast majority of Chinese, who are by nature savers as they increase income to them. But even they can see that inflation is making a mockery of interest rates returns [after bank charges]. The combination of poorer returns, in the current inflationary environment is beginning to make the Chinese saver realize he is better off with gold than deposits at the bank.

In the developed world the same should hold true. Negligible returns from interest rates, after bank charges, are far below growing inflation levels resulting in a drop in total savings, now needed more than ever to live on. While gold does not give a return it does rise faster than inflation, far faster and reflects unstable economies and uncertainty.

With the benefit of hindsight we can see that gold has multiplied almost five times since the turn of the century, only 10 years plus a little. Savers who went for gold are far richer now than they were then, in real terms.

As to the future, it seems that interest rates will not overtake inflation so ensuring that bank deposits returns after bank charges will continue to yield negative returns. If interest rates do rise it is likely that the bond markets will collapse, thus making these forms of almost cash, inadequate investments. Gold is international cash and will flourish while bond markets collapse…. Gold and silver, inside a country suffering stagflation, bring the same benefits as though that wealth were held offshore in nations where the economy is growing, interest rates are real, and the currency appreciating. The joy of gold and silver is that you do not have to worry about government actions, because they have no government!

… For so long the U.S. monetary authorities have been mesmerized by their internal financial problems that the international consequences of their actions have been ignored. The falling dollar and its lessening role as a global reserve currency will shortly deliver the consequences of this myopia. Add these events to the current financial ails and you have a financial situation beyond the power of both the government and the monetary authorities to rectify.

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