02-Apr (MINEWEB) — With the Indian government stating that it would delay the implementation of hiking the excise duty on non-branded gold jewellery, the bullion strike in India has been officially called off. Jewellers in Mumbai and several parts of the country were back to their stores Monday afternoon, expecting a revival in demand.

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02-Apr (Financial Post) — As long as growth in the U.S. economy continues to limp along, the Fed will remain in play and QE3 should become a reality at the central bank’s June 19–20 meeting, according to Tom Porcelli, chief U.S. economist at RBC Capital Markets.

This view is based on his expectation that first quarter GDP looks like it will come in close to 1%. Mr. Porcelli also noted that hiring remains anemic, global risks persist, and little is being done to stem the threat of a massive fiscal contraction by the end 2012.

…Mr. Porcelli thinks the Fed will buy mortgage-backed securities, but expects the purchases will be smaller than both QE1 and QE2.

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01-Apr (Bloomberg) — Since the launch of the euro in January 1999, Germany and the Netherlands have experienced a growth slowdown and loss of wealth for their citizens that would not have happened had they never joined the euro.

We know this to be true, because we can compare the progress of these two Northern European economies with that of Sweden and Switzerland, which kept their freely floating currencies in 1999 and continued to grow as before. Indeed, over the period of the euro’s existence, the German and Dutch economies have grown significantly more slowly than those of the U.S. and the U.K., despite the debt crisis now engulfing the “Anglo-Saxons.”

Sweden and Switzerland grew as fast or faster in 2001-11 as they did in 1991-2001. The German and Dutch economies, by contrast, not only slowed down in 2001-2011 (to 1.25 percent from 3 percent in the case of the Netherlands), they also suppressed wage growth to adjust for the effects of the euro.

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PG View: It would seem the notion that Germany benefited dramatically from the euro over the past dozen years, and should therefore be supporting the profligate Mediterranean states, may in fact be misplaced.

02-Apr (USAGOLD) — Gold is off to a good start for the week, spurred by heightened expectations of further Fed accommodations. The yellow metal surged about $20 from the overseas low and stocks jumped as well, when US construction spending for February came in at -1.1% on expectations of +0.7%. Adding insult to injury, the January data also saw a big negative revision from -0.1% to -0.8%.

The market seems to be getting in through their heads that the likelihood of a QE3 is very data dependent. Last week RBS bond strategist John Biggs told Bloomberg, “In the past week Bernanke’s gotten in front of every microphone he could find and gotten the market to realize that we shouldn’t have priced out QE3 and even if you don’t think it’s going to happen you have to attribute some sort of probability to it, and that he’s going to stay accommodative and potentially increase accommodation.” In a nutshell, that means crummy US data is going to counter-intuitively cause stocks to rise along with the prospects for additional Fed accommodations.

Data coming out of Europe is similarly concerning, further delineating the differences between the north and south. For example, the unemployment rate in the eurozone as a whole climbed to 10.8% in February; while the jobless rate in Germany is nearly half that at 5.7%. German manufacturing PMI came in at 48.8, and while still contractionary, it was better than expected. The Greek economy on the other hand is expected to slump an additional 5% this year.

We hear in the US are inclined to view our economy as a collective, even though some states are fairing far better than others. However within the EU, the entire weight of comparatively weak southern European nations, seems to be falling increasingly on the shoulders of the German taxpayers. Without some signal that this is going to be a short-term reality, there’s going to be increasing push-back from the Germans.

• US construction spending -1.1% in Feb, well below market expectations of +0.7% vs big negative revision from -0.1% to -0.8% in Jan.
• US manufacturing ISM rose to 53.4 in Mar, in-line with market expectations, vs 52.4 in Feb; prices ease to 61.0, vs 61.5 in Feb.
• Eurozone unemployment rate ticked higher to 10.8% in Feb, above market expectations of 10.7%, vs 10.7% in Jan.
• Switzerland retail sales (real) +0.8% y/y in Feb, well below market expectations of +1.5%, vs positive revised 4.7% y/y in Jan.
• Switzerland SVME Manufacturing PMI rose to 51.1 in Mar, above expectations of 49.6, vs 49.0 in Feb.
• France Markit PMI – Manufacturing slipped to 46.7 in Mar, below expectations of 47.6, vs 47.6 in Feb.
• Germany Markit PMI – Manufacturing rose to 48.4 in Mar, above expectations of 48.1, vs 48.1 in Feb.
• Eurozone Markit PMI – Manufacturing steady at 47.7 in Mar, in-line with expectations.
• UK CIPS manufacturing PMI rose to 52.1 in Mar, above expectations of 50.8, vs upward revised 51.5 in Feb.
• China PMI Manufacturing (CFLP) improved to 53.1 in Mar, vs 51.0 in Feb.
• China PMI Manufacturing (HSBC/Markit) deteriorates to 48.3 inMar, vs 49.6 in Feb.
• South Korea CPI moderates to 2.6% y/y in Mar, vs 3.1% y/y in Feb.
• Japan Tankan Index (Large Manufacturers) steady at -4 in Mar; Large Non-Manufacturers 5, vs 4 in Feb.
• Indonesia CPI rises to 3.97% y/y in Mar, vs 3.56% y/y in Feb.
• India Trade Balance-CC -$15.2 bln in Feb, vs -$14.8 bln in Jan.

Marc Faber the editor and publisher of the The Gloom, Boom and Doom Report warns that the crucial question over the next several years will not be ‘where will my returns be highest, but rather where will I lose the least’ as a result of bailouts and money printing. Faber worries that we will experience a “massive wealth destruction” as a result of very high inflation, social unrest, war, or a credit market collapse…”maybe all of it will happen, but at different times.”

Squawk Box guest Sallie Krawcheck pipes in, “Marc, isn’t the answer you hold more gold?”

02-Apr (Reuters) — Unemployment in the euro zone reached its highest level in almost 15 years in February, with more than 17 million people out of work, and economists said they expected job office queues to grow even longer later this year.

Joblessness in the 17-nation currency zone rose to 10.8 percent – in line with a Reuters poll of economists – and 0.1 points worse than in January, Eurostat said on Monday.

“We expect it to go higher, to reach 11 percent by the end of the year,” said Raphael Brun-Aguerre, an economist at JP Morgan in London. “You have public sector job cuts, income going down, weak consumption. The economic growth outlook is negative and is going to worsen unemployment.”

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31-Mar (The Economist) — WHEN the editors of the German tabloid Bild met Mario Draghi recently they gave him a Pic kelhaube—a spiked helmet—to remind the Italian that they had last year depicted him in Prussian garb as the most Germanic of candidates to run the European Central Bank. It may come in useful: hardliners are taking shots at Mr Draghi for spraying banks with €1 trillion ($1.3 trillion) of cheap money. This “powerful drug” may have side-effects, he says, but it works: “The worst is over” for the euro zone.

Don’t be so sure. The fever has been rising again in Spain after the government wildly overshot its deficit target last year. The Italian prime minister, Mario Monti, expressed alarm (which he later withdrew) that the Spanish illness might harm his own country’s convalescence. Portugal and Ireland are in recession, and may need second bail-outs; Greece will probably require a third rescue (and the restructuring of official debt).

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30-Mar (NY Times) — Seeking to reaffirm their determination to put the two-year-old euro crisis behind them, European finance ministers agreed Friday to create a permanent bailout fund for the euro zone with an effective firepower of almost €800 billion.

But the chance for an additional show of unity following the decision was undermined by the group’s chairman, Jean-Claude Juncker of Luxembourg, and the Austrian finance minister, Maria Fekter, when she ended up announcing the agreement first.

…Questions also persist about whether the fund, even at about $1 trillion, will be sufficient to deal with crises in major European economies like Spain and Italy.

…The €800 billion figure agreed to Friday could help to placate Germany and Finland, where there is widespread concern that a more generous backstop could lead other countries to reduce their commitments to austerity and put other European taxpayers, who would bear the bailout funds’ liabilities, at even greater risk.

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30-Mar (Yahoo Finance) — [I]f it weren’t for Apple’s (AAPL) record results, fourth quarter profit growth for the S&P 500 would go from 6.1% to 3.0% Factset data shows. And similar ex-Apple stats will cloud the first quarter too, where profit growth at the maker of iProducts has put estimates at break-even, instead of a 1.6% decline without it.

“Apple is just a juggernaut,” says David Steinberg, founder of DLS Capital in the attached video. “But you need to take that and set it aside because it’s not representative of the average consumer.”

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30-Mar (USAGOLD) — An early modest rally in gold withered, despite a softer dollar tone, as the yellow metal remains well contained within its recent range. However, we’ve had a string of pretty decent price performance on recent Fridays, so we’ll see if a firmer tone prevails later in the session.

Richmond Fed hawk Lacker, offered further discouragement for those breathlessly awaiting QE3. Lacker was the lone dissenter at the last two FOMC meetings, opposed to the message that the Fed would keep interest rates near 0% into late-2014. Today he suggested that his growth expectations of 2-3% this year and “maybe” 3% next year might prompt tightening by mid-2013. I would suggest that the moderates and doves on the FOMC are unlikely to be swayed by 2-3% GDP and start ratcheting rates higher.

Personal income rose a mere 0.2% in Feb, half of expectations. Meanwhile, PCE jumped 0.8% in Feb, above market expectations of +0.6% compared to an upward revised 0.4% (from +0.2%) in Jan. The personal savings rate fell from 4.3% in Jan to 3.7%, a level not seen since August 2009.

The higher spending rate may be partially attributable to higher gasoline prices; consumers are saving less because a greater portion of their take-home pay is being burned in their automobiles. However, one might also read into the data that Fed efforts to discourage saving — by fostering a negative real interest rate environment and advocating for inflation — are finally having the desired impact. Spend your income now, because you lose purchasing power by putting it in the bank and prices are likely to be higher tomorrow anyway.

As I noted in commentary earlier in the week, inflation concerns seem to be mounting. This has been confirmed in conversations with clients and perspective clients in the last two weeks. Gold tends to perform extremely well in an inflationary environment, as it is the classic hedge against price risks. When you consider the performance of gold over the last several years when deflation was the bigger threat, if the central banks get their wish and inflation takes hold, we may not have seen anything yet…

• University of Michigan Sentiment-final revised up to 76.2 for Mar, above expectations of 75.0, from 74.3 initial read and 75.3 in Feb.
• Chicago ISM slipped to 62.2 in Mar, below expectations of 63.0, vs 64.0 in Feb.
• US PCE chain price +0.3% m/m in Feb, largest jump since Aug; 2.3% y/y. Core-PCE +0.1% m/m; 1.9% y/y.
• US personal income +0.2% in Feb, below expectations of +0.4%, vs negative revised +0.2% in Jan; PCE +0.8%, on expectations of +0.6%.
• Canada GDP +0.1% in Jan, in-line with expectations, vs +0.4% in Dec.
• Germany retail sales -1.1% m/m in Feb, well below market expectations of +1.2%, vs positive revised -1.2% in Jan; 1.7% y/y.
• Switzerland KOF Leading Indicator 0.08 in Mar, above expectations of 0.05, vs positive revised -0.11 in Feb.
• Eurozone CPI – Flash Estimate 2.6% y/y in Mar, in-line with expectations, vs 2.7% y/y in Feb.
• South Korea Q4 GDP revised lower to 3.3% y/y, from 3.4% previously.
• South Korea industrial production +14.4% y/y in Feb, vs negative revised -2.1% y/y in Jan.
• Japan Markit/JMMA PMI rose to 51.1 in Mar, vs 50.5 in Feb.
• Japan CPI +0.3% y/y in Feb, vs 0.1% y/y in Jan.
• Japan unemployment rate ticked lower in Feb to 4.5%, vs 4.6% in Jan.
• Japan personal income +2.9% y/y in Feb, vs -2.8% y/y in Dec.
• Japan PCE – overall households 2.3% y/y in Feb, vs -2.3% y/y in Jan.
• Japan industrial production – preliminary (sa) -1.2% m/m in Feb, vs negative revised +1.9% in Jan.

29-Mar (Bloomberg) — South Korea, Asia’s fourth-largest economy, pared the share of dollars in its foreign-exchange reserves to the lowest level since the global financial crisis erupted in 2007.

Dollar holdings dropped to 60.5 percent of foreign- exchange reserves at the end of last year from 63.7 percent in 2010, the central bank said in its annual report for 2011 released today.
Enlarge image BOK Says Dollar Holdings Fell to 60.5% of FX Assets in 2011

…“The move to diversify reserves away from U.S. dollars and the euro accelerated last year, largely on weaker fiscal fundamentals and subdued economic conditions in developed markets,” Wai Ho Leong, a senior regional economist at Barclays Capital in Singapore, said in an e-mail. “At the same time, it marked a move into gold, and bonds of stable emerging-market economies, particularly those with better longer-term prospects and currency appreciation potential.”

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30-Mar (Reuters) — Prime Minister Lucas Papademos said on Friday Greece may need a third bailout package if the sweeping austerity measures demanded by its international creditors fail to stabilize its shattered economy and restore market confidence.

It was the first time Papademos publicly confronted his people with the risk, already mooted by wary EU, IMF and German officials, that the austerity program might fall through if they don’t try hard enough.

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PG View: Further evidence that Bundesbank President Jens Weidmann was spot-on when he said, “Just like the ‘Tower of Babel,’ the ‘Wall of Money’ will never reach heaven.”

U.S. consumers stepped up their spending in February even as incomes rose only modestly, partly reflecting higher energy costs and lower savings.

Personal spending jumped 0.8% last month, the best gain since July, while incomes increased 0.2%, the Commerce Department said Friday. In January, expenditures rose 0.4%, and incomes were up 0.2%, according to newly revised figures.

…The price index for personal consumption expenditures increased 2.3% on a year-over-year basis in February. That’s above the Federal Reserve’s long-term annual inflation target of 2.0%.

On a monthly basis, the PCE price gauge rose 0.3%, the largest gain since August. In January, the index rose 0.2%.

…Meanwhile, the personal savings rate fell to 3.7% in February, it’s lowest level since August 2009. The rate was 4.3% the prior month.

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PG View: The jump in consumption and reduction in the savings rate may also be reflective of rising inflation expectations; spend now in anticipation of higher prices tomorrow, which is a mindset the Fed has been trying to foster ever since the recession.

By Matthew Lynn
28-Mar (MarketWatch) — Has the great bull run in gold run its course?

On the surface it looks as if it might have. After running up close to $2,000 an ounce during the market panic of last autumn, it has slipped below $1,700. And it shows little sign of reclaiming its highs.

But here’s one reason why it could have a lot further to go.

The big, developed world central banks will start buying again. And if they do, it would put real rocket fuel into the price of the precious metal.

…foreign exchange reserves are critical if you face a financial crisis. If the banking system needs to be propped up, then you need some assets to play with. Of course, the central bank can always print some money. But in a crisis, the markets may demand something more solid – and that means having reserves.

…[Reserves] give you the ability to intervene in the currency markets…But you can’t manipulate the markets without anything to sell, and that means holding reserves.

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29-Mar (USAGOLD) — Gold has slipped to a new low for the week, weighed by a firmer dollar, softer oil prices and further evidence that the Chinese government is worried about an economic slowdown. More than 61.8% of the recent rebound has been retraced.

The Chinese government raised its long-term foreign-debt quota amid rising concerns about the pace of foreign capital outflows. Speculative capital is retreating from China on heightened growth concerns. A slow down in China could have significant global implications, but the gold market is particularly worried about the economy contracting and sapping the countries voracious appetite for the yellow metal.

Subtle policy changes in China such as looser reserve requirements and boosting the amount of borrowed foreign money allowed into the country are reflective of the Chinese governments efforts to orchestrate a soft landing. However, I would surmise that more overt and expansive policy accommodations would be forthcoming if the threat of a hard landing becomes more pronounced. Such measures would actually be positive for gold.

US Q4 GDP was confirmed at 3.0%, in-line with expectations, but some analysts were expecting an upside surprise. They were disappointed.

While initial jobless claims fell in the week ended 25-Mar, they fell from a big upward revised 364k in the previous week, vs 348k initially. In other words, while claims fell 5k last week, the previous week was revised +16k. Not exactly a positive turn of events.

• US initial jobless claims -5k to 359k for the week ended 25-Mar, above expectations of 350k, vs upward revised 364k (frm 348k) in prev week.
• US Q4 final GDP confirmed at 3.0%, in-line with expectations.
• Canada industrial product prices +0.2% in Feb, below expectations of +0.4%; RMPI -0.5%.
• UK Nationwide House Prices (sa) -1.0% m/m in Mar, vs negative revised +0.4% in Feb; -0.9% y/y (nsa), vs +0.9% y/y in Feb.
• Germany unemployment change (sa) -18k in Mar, well below market expectations of -10k, vs unch in Feb; rate falls to 6.7%.
• Eurozone economic confidence ticks lower to 94.4 in Mar, below expectations of 94.6, vs upward revised 94.5 in Feb.
• Eurozone consumer confidence edged lower in Mar to -19.1, industrial confidence erodes to -7.2, services better at -0.3.
• South Korea current account (nsa) $4.10 bln in Feb, vs downward revised $1.59 bln in Jan.
• Japan total retail sales +3.5% y/y in Feb, vs +1.9% in Jan; large retailers +0.2%.
• Japan trade balance 1st 10 (nsa) ¥53.8 bln in Mar, vs ¥7.6 bln in Feb.

29-Mar (The Wall Street Journal) — China will allow foreign banks this year to bring in a total of $24 billion in foreign borrowed funds—a sharp increase from last year’s limit, bankers say—in an apparent effort to usher in more foreign investment as a slowing economy prompts capital outflows.

Inbound foreign direct investment declined for the fourth consecutive month in February, and a recent bout of yuan-selling indicates accelerating capital flight amid concerns about China’s slowing economic growth.

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By John B. Taylor
29-Mar (The Wall Street Journal) — America has now had nearly a century of decision-making experience under the Federal Reserve Act, first passed in 1913. Thanks to careful empirical research by Milton Friedman, Anna Schwartz and Allan Meltzer, we have plenty of evidence that rules-based monetary policies work and unpredictable discretionary policies don’t. Now is the time to act on that evidence.

…It is difficult to overstate the extraordinary nature of the recent interventions, even if you ignore actions during the 2008 panic, including the Bear Stearns and AIG bailouts, and consider only the subsequent two rounds of “quantitative easing” (QE1 and QE2)—the large-scale purchases of mortgage-backed securities and longer-term Treasurys.

The Fed’s discretion is now virtually unlimited.

…Before the 2008 panic, reserve balances were about $10 billion. By the end of 2011 they were about $1,600 billion.

…This large expansion of bank money creates risks. If it is not undone, then the bank money will eventually pour out into the economy, causing inflation.

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