by Joseph Stiglitz
March 31, 2011 (FT) — The international monetary system needs fundamental reform. It is not the cause of the recent imbalances and current instability in the global economy, but it certainly has been ineffective in addressing them. So a broad set of reforms is required, beginning with an immediate expansion of the current system of special drawing rights or money that can be issued by the International Monetary Fund. And here the Group of 20 leading nations must take the lead.

… we now have a system dominated by holdings of US dollars. This has several disadvantages. The first is it creates a global recessionary bias during and after financial crises – because it places the burden of adjusting to payments imbalances on nations which run a deficit.

The second is the tension it creates, due to the use of a national currency, the dollar, as the global currency. This can lead to global volatility as a result of growing US current account deficits. These deficits are necessary, for creating sufficient global liquidity, but they also generate excessive indebtedness, both external and internal. So if the US were to shrink its deficit too quickly, a deficiency of supply of the global reserve currency could result.

… the G20 should encourage the IMF to issue a significant amount of new SDRs during the next three years, up to a value of $390bn a year.

…Further, when crises occur in many countries simultaneously, as happened, for instance, during the 1998 east Asian crisis, IMF lending could be totally financed by new SDR issues in unlimited amounts. If and when the world economy recovered or boomed, SDR issues could then cease, or even be reabsorbed. Thus the IMF would have a greater role in creating official liquidity, in a way that curbed both recessionary and inflationary trends at different times.

[source]

RS View: Joe has been drinking deep from the special tank of Kool-Aid known only to professional economists, and in a fog of sugar-fueled delirium he is seen here trying to sell his fraternity’s pipe dream of SDRs that NOBODY is seriously buying. But other than that, keep up the good work, Joe!

By Myra P. Saefong
March 31, 2011 (MarketWatch) — Gold futures notched a nominal record high Thursday, as a weaker U.S. dollar, ongoing instability in Arab countries and euro-zone debt concerns lured investors to the precious metal.

Gold for [June] delivery rose $15, or 1.1%, to settle at $1,439.90 an ounce on the Comex division of the New York Mercantile Exchange. That handily supplanted gold’s March 23 close of $1,438 an ounce. Gold tapped an intraday record high of $1,448.60 an ounce on March 24.

“Geopolitical concerns are taking the lead over expectations of [monetary-policy] tightening,” said Jim Steel, a precious-metals analyst with HSBC in New York. A rally for oil and concerns about Portugal’s sovereign debt also propelled the metal higher, he added.

[source]

By Ben Kunz
(Bloomberg Businessweek) — … Nongamers may have missed Facebook’s clever foray into the world of “virtual currency,” where Facebook Credits cost 10 cents each and can be exchanged for game points or cartoony gifts. Those dimes are adding up — the U.S. market for virtual goods will reach $2.1 billion in 2011, according to research firm Inside Network. Facebook’s currency, while just part of that market, is getting real. You can now purchase gift cards for Facebook Credits at Wal-Mart, Target, and Best Buy.

So why couldn’t Facebook use them as real currency, too? In fact, why couldn’t Facebook become your bank? At first blush, this seems like a crazy idea. Facebook would need to overcome consumer privacy concerns, expand its Credits into a payment system that works everywhere, and surmount regulatory hurdles to handle businesses such as deposits and mortgage servicing. Crazy, until you realize how smartphones are changing the world of money. … The next payment platform is no farther than that glass gadget in your pocket.

… Facebook recently expanded its monetary systems with Facebook Payments, purportedly for paying app developers. But the incorporation documents state that Payments is “organized for the purpose of transacting any or all lawful business.” Hmmm.

If only one of every five Facebook users adopted Credits to buy things, Facebook would be as big as PayPal. And once Facebook makes us comfortable with Credits, it could then transition to a “traditional” global bank, storing your financial assets like gem points in Bejeweled Blitz.

[source]

RS View: Squarely bagged, tagged, and identified, the critter that runs amok and answers to the name ‘Money’ is truly little more than an ethereal form of economic communication. No wonder that smartphones and the web-dominating Facebook are well positioned to make inroads on the domain previously dominated by the traditional banks and financial houses. But no matter which entity emerges from the contest as the prevailing monetary messenger, the fact remains that notions of money, being mere words on the wind, can aid in the coordination of the immediate transaction or business at hand, but it can never do adequate service in conveying true wealth across time and space (i.e., geography). For that purpose you need tangible savings, a role for which physical gold is uniquely well-suited and already performing its part.

by Financial Foghorn
March 31, 2011 (SeekingAlpha) — In my last Tuesday memo, I said not owning gold in the current gold bull market is insane. Then I thought, wait, maybe some folks aren’t buying because they’re listening to financial TV that’s telling them gold is in a “bubble.” “Whoa,” say the Wall Street trolls and mavens. Stay away from gold! We’re here to save you.” Yeah, right.

Are these are the same Wall Street idiot-savants who overlooked the tech bubble, failed to notice the credit meltdown, and totally missed the subprime real estate eruption? And now they’ve developed “vision,” and are able to see frothiness in the gold market … the same gold market they ignored for the past 10 years? And why are you listening to those guys?

Yes, we’re in a gold bull market. We’re in Act two of a three Act gold bull market. The upward price slope is nicely positive. Act II is when institutions buy. Today, mutual funds, insurance companies, foreign money managers and hedgies are wading into gold, and the car and pharma company advertisers at CNBC don’t like that. So CNBC knocks gold.

Every bull market ends with a party mania, and Act III is the bubble finale. Act III soars upwards…

… gold buyers in an Act III bubble buy with conviction, not skepticism. As John Templeton said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on Euphoria.” Yes, 2011 is hardly euphoria.

[source]

Gold Moves Back Within $10 of Record High

Gold continues to recoup the latest corrective losses. Well over 61.8% of the recent pullback has already been retraced, returning considerable credence to the underlying uptrend. The yellow metal and silver continue to be supported by ongoing concerns surrounding the nuclear crisis in Japan, as well as geopolitical tensions and war in the Middle East and North Africa. Add to that rising inflation worries across the globe and a continued worsening of the debt crisis in Europe and the result is a greater risk aversion and greater appeal for the precious metals.

Amid ever-more reports about spreading radiation danger in Japan, the market remains understandably tense. We remind ourselves once again that the crisis in Japan is above all else a humanitarian disaster, yet the economics can’t be ignored. In the first indication of the economic impact, Mar PMI plunged to 46.4, the lowest reading in 2-years. However, the drop from the Feb reading of 52.9 was the biggest m/m plunge ever recorded. The data are an ominous indication, given a resolution to the nuclear crisis continues to seem a long way off.

In North Africa, the debate continues about the US role in Libya, as forces loyal to strongman Muammar Gaddafi continue to press their advantage. Elsewhere in the region, anti-government protesters in Bahrain and Saudi Arabia are calling for another “Day of Rage.” Continued regional instability has kept oil prices elevated, stoking inflation worries.

In Europe, Mar HICP unexpectedly accelerated to 2.6% y/y, above market expectations, vs 2.4% y/y in Feb. As inflation continues to surge above the ECB target, tightening expectation obviously go up as well. However, the worsening debt crisis continues hamstring the central bank. A hike to benchmark rates would raise the interest rates in heavily indebted periphery countries, which they can ill-afford. The Portuguese yield curve has inverted for the first time since 2006 amid ongoing political uncertainty — in the wake of last week’s collapse of the government — and continued debate over whether the country should accept a bailout.

S&P downgraded both Greece and Portugal again on Wednesday, despite the fact the eurozone ministers moved closer to a permanent bailout mechanism. The rating service Fitch suggested that the EU plan to give the new ESM preferred creditor status could discourage private investors from buying bonds for fear of a haircut, and actually increase the risks of sovereign defaults. There have already been fractures in the reported solidarity for the ESM this week. The ECB’s Nout Wellink said, “The competition pact (bailout facility) has been weakly designed.” Recent resounding regional election defeats for Germany’s Chancellor Merkel and French President Sarkozy give a pretty clear indication of where the taxpayers in Germany and France stand on the issue of more bailouts.

The Irish government released the results of their third bank stress tests this afternoon. To nobody’s surprised, the banks will need another €24 bln in aid, bringing the total bill to €70 bln. Trading in Bank of Ireland & Allied Irish Banks was suspended ahead of stress test results. Irish Life & Permanent Plc was suspended yesterday. While the ECB’s Axel Weber threw his remaining weight behind Irish PM Kenny’s pledge to protect the Irish taxpayer at the expense of bank bondholders, it remains to be seen if that will actually happen.

Finally, agriculture commodities surged after the latest USDA prospective planting report suggested a further tightening of supplies, despite more acres of primary grains likely to be planted. This will further escalate food price inflation, adding to already substantial global geopolitical risks.

March 31, 2011 MUMBAI (Economic Times of India) — Gold demand in India will continue to grow and is likely to reach 1,200 tonnes [annually] or approximately Rs 2.5 trillion by 2020 at current price levels, according to a research by World Gold Council (WGC). [Comparing, that's up from 963 tonnes (Rs 1.7 trillion) in 2010.]

“The rise of India as an economic power will continue to have gold at its heart. India already occupies a unique position in the world gold market, and as private wealth in India surges over the next ten years, so will Indian demand for gold,” WGC Managing Director, India and the Middle East, Ajay Mitra said in a statement here.

Indian gold demand has grown 25 per cent despite 400 per cent price rise… [reaffirming] the country’s status as a key driver of global gold demand.

… He pointed out that Indians tend to be risk averse and place great faith in the wealth preservation qualities of gold, which inspires confidence, stability and security.

“Therefore, the view that Indian demand for gold will be driven by the concept of enduring value, not price,” he said.

… “We predict that the new demand for gold will be driven by rapid GDP growth, urbanisation, the emergence of a strong middle class and a sustained and potentially rising savings rate of 30-40 per cent of income,” he said.

[source]

RS View: Look long and hard at that list above. Note that the strength of gold does not require the small-minded trading on perpetual gloom and fear, but rather can soar on the wholesome basis of economic growth — a win-win situation worth aspiring to.

By Addison Wiggin, Guest blogger
March 31, 2011 (ChristianScienceMonitor) — Might America’s trading partners one day sell off their US Treasury holdings?

Impossible, said Warren Buffett. In fact, he insisted, they couldn’t…because they’d need to convert it into some other currency, which would be little better than the dollar. No one else chimed in to challenge the assertion.

“Buffett’s answer assumes that there is no alternative,” author, friend and local Baltimore resident Bill Baker writes in his 2009 book Endless Money: The Moral Hazards of Socialism, “because for generations, all the world’s currencies have been backed only by the promise that governments would accept them in payment of taxes.

“But that ignores a currency that has been used effectively by man for thousands of years: gold. China and other countries might exchange their US dollars for it now.”

Indeed, China is quietly building its gold reserves. They totaled 600 metric tons in 2004. Then in April 2009 came an announcement they’d grown to 1,054 metric tons. And the buzz from Beijing is that the central bankers want to grow that stash another tenfold.

… These are the first steps toward what Baker sees as the “remonetization” of gold – coming soon to a country near you.

… we’re approaching the end of the Great Dollar Standard we wrote about in The Demise of the Dollar. The only world anyone below the age of 40 has ever known – in which all the world’s currencies float freely against each other – is nearly over.

[source]

RS View: While it is accurate to say that gold is on track to become the primary reserve asset again, the issue of money is something else entirely different. Contrary to the article’s assertion that the world in which currencies float freely against each other is nearly over, the paradigm in store is that national currencies will increasingly be floating independent of each other (except for a few currency unions modeled after the euro), in which sense it is more accurate to say that it will be gold floating upward into the sky as the currencies independently float (or founder and sink!) upon (or beneath!) an undulating, bottomless ocean.

Alix Steel and Jim Cramer
NEW YORK (TheStreet) — Jim Cramer reveals why he likes junior miners, large caps and the physical metal. Says, “It’s a currency… you NEED to own gold.”

[source]

by Simon Rabinovitch
Thursday March 31, 2011 NANJING, China (Reuters) — Tightly controlled exchange rate regimes are the main flaw in the international monetary system and the solution is simple, U.S. Treasury Secretary Timothy Geithner told a G20 meeting on Thursday. … Geithner said that countries should have flexible exchange rates and permit free flows of capital to be major players in the global currency order.

… The G20 seminar was spear-headed by France, which is pushing a bold reform agenda in its year-long presidency of the group, and was meant to be focused on ills in the monetary system.

Geithner offered a straightforward diagnosis. While major currencies moved freely and most emerging economies were well along that path, there were still some with little exchange rate flexibility and extensive capital controls, he said. This asymmetry fueled inflation risks in the economies whose exchange rates are undervalued, magnified currency appreciation in others and also generated protectionist pressures, he added.

“This is the most important problem to solve in the international monetary system today. But it is not a complicated problem to solve,” he said, according to the prepared text of his remarks.

“It does not require a new treaty, or a new institution. It can be achieved by national actions,” he added.

… The Chinese government told countries attending the G20 seminar in the eastern city of Nanjing not to mention specific currencies in their speeches and to keep their focus on broader questions in the global monetary system, according to a source attending the meeting.

[source]

RS View: Judging from the highlighted quote above, one might develop the crazy notion that I’ve shared more than a casual lunch with someone or two in the inner policy circles…

On November 5th, 2009 I wrote here:
“When you understand that it is economically (and therefore politically) undesirable for other major currencies to appreciate against their peer currencies (which is exactly what would happen to any currency replacing the dollar’s reserve status), you will subsequently know why gold shall continue to emerge as the de facto solution to the international reserve question.
+
And here I emphasize de facto rather than de jure because this has become a global phenomenon driven by a natural evolution (survival and ascent of the fittest) and does not require any additional international treaty or enabling legislation as a prerequisite or for motivation.
+
The breeze is fair and the road ahead is clear for the ascent of gold.”

AND…
almost exactly a year later (just 5 months ago) I touched lightly again on it November 8th, 2010 as I wrote here while detailing an article in which ECB’s President Trichet said the gold standard was not discussed by the central bankers:
“Of course the central bankers wasted no time discussing a gold standard because a fixed (implied) gold standard is too rigid for an international policy prescription that requires greater flexibility. Hence, gold will simply be allowed to float freely in terms of all national currencies as the fair and impartial international monetary arbiter. No muss, no fuss, and its already a done deal… no fancy treaty required.”

AND…
most recently, yesterday March 30, 2011 I wrote of the ease of the implementation:
“CBs need merely to adjust the reserve management decisions at the margin…… [and] need only to enhance efforts of moral suasion, education, and rational adjustments to policy & best practices…”

Piece of cake. Cheers.

R.

March 31, 2011 (Reuters) — Gold rose in Europe on Thursday, rebounding after the previous session’s late price retreat, as dollar weakness, concern over euro zone sovereign debt and unrest across the Middle East supported buying.

The metal is on track for a tenth consecutive quarter of gains, also supported by low interest rates and high liquidity in the wake of a raft of quantitative easing programmes. But its quarterly rise is set to be its smallest since the third quarter of 2008, before the financial crisis took hold, as investors fret over the prospect of monetary tightening in the United States and the euro zone.

[source]

by Philip Haddon
Mar 31, 2011 (CityWire) VIENNA — The former chief strategist of Credit Suisse Asset Management, Philipp Vorndran, thinks inflation levels in the next five years will take everyone by surprise.

… ‘I think we will see double digit inflation in the next few years,’ he said. ‘This is because of rising commodity prices, a devaluation of our currencies, and higher labour costs. This will be the case for both emerging and developed markets.’

In addition, he predicts a ‘crack-up boom’ as people try to spend their cash.

“On the other side, in countries with higher debt, we will see a deflation of trust, leading to higher velocity and a flight out of fiat money. People will buy new cars, new kitchens, afraid that in two years’ time they wont be able to afford these things. This will generate a crack-up boom, built on a distrust of the future. This will lead to much higher inflation numbers. We don’t think we will see hyper-inflation, but it will be high inflation. Over five years we need inflation of around 70%-100%, as the only way to deflate the debt away.”

… He thinks investors need 25% of their portfolio in a mixture of physical gold and precious metal equities. Indeed, he believes gold could hit $2000 in the next 18 months.

[source]

Gold continues its rebound, underpinned by Japanese nuclear disaster and ongoing turmoil in the Middle East and North Africa. The dollar fell overseas as EUR-USD regained 1.4200 after eurozone Mar HICP inflation unexpected accelerated to 2.6% y/y pace, ratcheting higher ECB tightening expectations.

Reports of discord within the ECB regarding the EU “competitiveness pact” (permanent bailout scheme), took some of the wind out of the euro’s sails, which had been supported by month-end flows and rising expectations of central bank tightening.

Portuguese yield curve inverts for the first time since 2006 amid political uncertainty and ongoing debate about need for bailout.

Results of Irish bank stress-tests slated for release at 15:30GMT. Likely to highlight the need for reform as ECB’s Weber throws his support behind PM Kenny’s “burn the bank bondholders” position. Weber said today that it’s a “Mistake to make taxpayers liable for banks.”

US initial jobless claims fell 6k, to 388k in the week ended 26-Mar, above market expectations.

S Chicago ISM slipped to 70.6 in Mar, above expectations, vs 71.2 in Feb.

By Wallace Witkowski and Myra P. Saefong
March 30, 2011 (MarketWatch) — Gold futures quit a four-session losing streak Wednesday as demand for the precious metal as a hedge against euro-zone debt worries and fighting in Libya brought buyers in at recently lowered prices.

Gold for June delivery ended up $7.40, or 0.5%, at $1424.90 an ounce on the Comex division of the New York Mercantile Exchange. The precious metal touched a high of $1,431.70 an ounce early in the day, then dove to a slight loss and an intraday low of $1,413.10 an ounce before rebounding.

Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago, said many of the common themes pushing up gold still apply, such as uncertainty about the Middle East and the impact of crippled nuclear plants in Japan. “Today’s move lower was rejected: There are more reasons to be a buyer than a seller,” Klopfenstein said. “Fresh money likes to come in on any signs of weakness.”

… Standard & Poor’s Ratings Services lowered its rating Tuesday on Portugal to BBB-minus from BBB, one notch above junk status. The ratings agency also cut Greece’s credit rating to BB-minus from BB-plus.

[source]

by The Gold Report
Wednesday, 30 Mar 2011 (Mineweb) — Rick Rule explores some of the implications for resource investors when two megatrends from opposite ends of the socioeconomic spectrum collide.

… “The bottom line is that your own financial and psychological preparedness for dealing with volatility will determine whether you come out of the next year or two substantially better off-or substantially worse,” Rick says. “It’s your responsibility to determine your response and hence your own financial future.”

… And you must have cash, he adds. Despite the fact that the U.S. dollar is losing value (particularly with the help of quantitative easing [QE] initiatives) and real interest rates are at minus 4% or 5%, he tells investors to hold cash as ammunition in a market crash. “Although you get penalized for maintaining liquidity-as investors should recall from the 2008 liquidity crunch-when the market collapses, cash is the only thing that gives you the fiscal and psychological strength to react.”

He further recommends maintaining some liquidity in physical gold and silver and their proxies. “It’s not in anticipation of profiting from a run in gold and silver prices — although that isn’t a bad aim either — but because they increasingly constitute good cash in a world where many forms of cash aren’t so good.”

… the U.S. is coming face-to-face with its inability to service pension obligations that have been promised but not funded for the last generation. “This is truly an ugly set of circumstances that requires substantial savings to deal with,” he summarizes, “and the savings don’t exist.”

And quantitative easing, because it devalues the currency practically by definition, undermines what meager savings do exist in the U.S. and other Western economies. Rick sees a “damned if you do, damned if you don’t” situation. “I don’t think we can continue quantitative easing and I don’t think we can afford to discontinue it either. I really sort of expect that we’ll end up having QE90,” he continues, “and I don’t like the potential of that. Not just in the context of the U.S. dollar, but in terms of the Western world standard of living.”

[source]

by Simon Rabinovitch
Wednesday March 30, 2011 (Reuters) — Dollar dominance is sowing the seeds of financial turmoil, and the solution is to promote new reserve currencies, a Chinese government economist said in a paper published on the eve of a G20 meeting about how to reform the global monetary system.

Although not an official policy statement, the paper by Xu Hongcai, a department deputy director at the China Center for International Economic Exchanges, offered a window onto the domestic pressures bearing on Beijing to move away from a dollar-centric global economy.

… “Nations around the world have no way of restricting dollar issuance by the Federal Reserve. The current international monetary system lacks both stability and fairness,” Xu wrote.

… Chinese central bank governor Zhou Xiaochuan said two years ago that the SDR would be better than the dollar as a supra-national reserve currency, disconnected from the interests of any single country. … But China itself appears to have cooled on the SDR, instead describing it as a largely symbolic issue.

[source]

RS View: The unspoken elephant in the room is a golden one. To bring a gold-centric alternative to the fore (from its waiting-in-the-wings status), CBs need merely to adjust the reserve management decisions at the margin — opting to redeem any retained surplus forex flows for physical gold rather than U.S. bills/notes/bonds or other dollar-denominated debt securities. And finally, to bring such a gold-centric reserve system closer to perfection (i.e., to eliminate the obstructions to full valuation), CBs need only to enhance efforts of moral suasion, education, and rational adjustments to policy & best practices to subsequently restrict the flood of paper gold issuance being perpetrated by the myopic commercial banking and financial sector (and bought by a gullible/vulnerable public.)

Wednesday, March 30, 2011 (Bloomberg) — … The monetary policies of the U.S. Federal Reserve have caused excessive global liquidity and inflation and are the root cause of surging oil and commodity prices, Xu Hongcai, a departmental deputy director at the China Center for International Economic Exchanges, wrote in a paper outlining his views on reform of the global monetary system.

… The current system means the U.S. is the only economy that can pursue an independent monetary policy, which “has led to disorderly capital flows and abnormally volatile exchange rates and affected global financial stability,” Xu wrote. His institute is co-hosting a meeting of finance ministers, central bankers and academics from the G-20 in the Chinese city of Nanjing tomorrow.

Xu’s paper puts the focus on the dollar ahead of meetings where officials including French Finance Minister Christine Lagarde and Chinese central bank Governor Zhou Xiaochuan will discuss topics including “shortcomings in the international monetary system” and dealing with volatile capital flows.

The world has fallen into a “dollar trap” where many countries have developed a growth model that is too reliant on exports and lacks sufficient domestic demand because they seek to accumulate U.S. dollar reserves, Xu wrote.

An increase in such reserves raises exchange-rate risks while a reduction in holdings will weaken the dollar, causing losses on countries’ foreign-exchange reserves, he said.

[source]

by Colin Barr
March 30, 2011 (Fortune) — A top Chinese economist warned that the world has fallen into a “dollar trap,” as U.S. trading partners lack an alternative to the greenback and can’t prevent the Federal Reserve from printing more money.

The arrangement means big holders of dollars – such as China, which holds some $3 trillion of foreign exchange reserves, mostly in dollars – must sit idly by and watch as the value of their holdings erode. They can’t lightly diversify out of dollars at the risk of accelerating the erosion.

The setup “lacks both stability and fairness,” wrote Xu Hongcai, an economist at the China Center for International Economic Exchanges.

He made the remarks in a paper published ahead of Thursday’s meeting of G-20 finance ministers in Nanjing. They will discuss what might replace the current dollar-centric system – a subject that has vexed economists and policymakers for years and has grown more pressing with the rise of China.

[source]

by Alix Steel
March 30, 2011 (TheStreet) — Gold prices were rising Wednesday after a reading on the number of jobs companies added in March failed to meet expectations. … The gold price has traded in a wider range today to a high of $1,431.70 and to a low of $1,415.50.

The ADP employment report, although falling short of expectations, wasn’t interpreted as a significant miss. The private sector added 201,000 jobs in March, in line with what analysts are expecting from Friday’s jobs number. But the snag came in that February’s number was revised lower from 217,000 to 208,000.

… Also supporting gold’s rally is the end of the first quarter on Thursday, which can trigger strong buying or selling from portfolio managers as they want to show they own gold or book profits from it. “I think you are going to find some rebalancing,” says Mihir Dange of Arbitrage. “[But] the majority of the rebalancing you’ll find at the end of [the second quarter] and at the end of the year.”

“Put a feeler on both,” advises Scott Redler, chief strategic officer for T3Live.com. According to Standard & Poor’s, since 1975 the gold price has risen 0.9% in the first quarter but 4.3% in the second. Gold prices are relatively flat for the year.

[source]

By Jan Harvey
Wed Mar 30, 2011 (Reuters) — Gold prices rose 1 percent on Wednesday amid broad support from unrest in the Middle East and North Africa, with investors cheered by the metal’s early recovery from four straight sessions of losses. Gains were capped by expectations monetary policy in key regions may tighten, however, analysts said.

Spot gold was bid at $1,427.70 an ounce at 1255 GMT against $1,415.95 late in New York on Tuesday, having earlier touched a high of $1,430.00. U.S. gold futures for April delivery rose $4.40 an ounce to $1,420.60.

“(Gold) held well technically (over) the last couple of days and there has been reasonable physical support around as well,” said Simon Weeks, head of precious metals at the Bank of Nova Scotia. “Overall it is still rangebound, but dips are there to be bought.”

… Investment in products such as gold-backed exchange-traded funds remained soft, meanwhile, with holdings of the largest, New York’s SPDR Gold Trust , slipping around two tonnes on Tuesday to their lowest in three weeks. The fund is heading for its largest quarterly outflow of bullion since its launch in the first three months of 2011.

[source]

by Sutanuka Ghosal, Pk Krishna-Kumar & Madhvi Sally
March 30, 2011 (Economic Times) — Gold buying in India, the world’s largest consumer of the metal, is set to rise 15% as buyers shrug off record high prices ahead of the wedding season that starts next month. The wedding season, which along with festivals whets the country’s appetite for gold, begins from the second week of April. Purchases start a fortnight before that and account for about half of all purchases.

Jewellers say buyers have been investing more in the yellow metal to cash in on the uptrend in prices. … Reports say India imported over 900 tonne of gold in 2010 as consumers expected prices to climb further.

… “The consumer knows that prices are bound to remain firm and hence there is no impact on the shopping. We expect sales to pick up in April,” said Akhil Jain, owner of Chandigarh-based Nikka Mal Babu Ram Jewellery Arcade.

[source]

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.

[source]

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.

[source]

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.

[source]

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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