By Myra P. Saefong and Sarah Turner
April 13, 2011 (MarketWatch) — Gold futures closed higher for the first time in three sessions Wednesday, snapping back from a quick dip in late trading, as a steep decline in prices over the past two trading sessions lured buyers.

Gold for June delivery climbed $2, or 0.1%, to close at $1,455.60 an ounce on the Comex division of the New York Mercantile Exchange. The contract had tallied a loss of $20.50 in the past two sessions.

In the final hour of trading Wednesday, gold briefly touched a low of $1,452. Analysts blamed the move on a spike in the U.S. dollar…. “Look at the dollar — it’s rallying and breaking away from the 75 mark,” said Charles Nedoss, a senior market strategist at Olympus Futures, referring to 75 as a “critical level” for the dollar.

… Even though gold prices have declined recently, the market has held on to Tuesday’s 10-day moving average of $1,449.30, said Nedoss. A close above that 10-day moving average Wednesday is “very positive and bodes well for higher prices,” he said.

… “We do not expect heavy losses here given continuing economic uncertainty, the ongoing unrest in the [Middle East and North Africa] region, renewed euro-zone debt fears and, most importantly, short-term inflation pressures due to high food and energy prices,” Andrey Kryuchenkov, an analyst at VTB Capital, said in a note to clients.

[source]

(Money and Markets) — In July of 1944, 730 financial bigwigs from 44 nations met at the Mount Washington Hotel in Bretton Woods, New Hampshire for a conference in which they recreated the economic world… They established the U.S. dollar as the world’s reserve currency.

… Now, 67 years later, another conference has just concluded that gives several observers flashbacks to Bretton Woods. Like Bretton Woods, it was held at the Mount Washington Hotel. Also like the original, many of the financial world’s movers and shakers were invited.

The guest list is said to have included former Fed Chairman Paul Volcker, former British Prime Minister Gordon Brown, and former chair of President Clinton’s Council of Economic Advisors, Joseph Stiglitz.

The conference organizer? None other than George Soros — the internationalist and mega-investor who, in his own words, sees a pressing need to “rearrange the entire financial order.”

Soros said that the U.S. dollar is already losing its status as the world’s dominant currency, increasingly being replaced by the euro, gold, oil and other commodities.

… This is precisely why tangible asset and tangible asset stocks are on a rampage. More than that: This is why you can expect this huge, historic rally in oil, gold, silver, food and basic materials to not only continue but to accelerate in the weeks and months to come.

[source]

by Gary North
April 13, 2011 (MarketOracle) — If you did what Bill Bonner and I have been recommending for a decade, you own gold. Bonner began promoting the purchase of gold in the year 2000. I strongly promoted this for my subscribers after September 11, 2001, when the Federal Reserve began pumping up the monetary base in earnest. Neither of us has ever stopped recommending holding money in gold.

… I am writing this for those readers who did what I recommended, have quadrupled their money (on paper and in digits), but who may be getting cold feet.

… Mark Faber, who recommends owning gold as a hedge against a declining dollar, recently wrote this: “In my opinion the Fed funds rate should be at 5% . . . That will provide real interest rates. I don’t think the Fed will increase interest rates to a positive real rate. So, I’d say to an investor, he should have at least 20 to 30 percent of his money in precious metals.”

… WHY GOLD COINS?

The problem with today’s economy is that it is built on promises and trust. It is therefore built on debt. In the United States, the financial promises always come back to these:

1) The Federal Reserve System will remain the lender of last resort.
2) The Federal Deposit Insurance Corporation (FDIC) will pay off all bank accounts up to $250,000.
3) The U.S government stands behind the FDIC’s promise with a $600 billion line of credit.
4) The government can get this money from the Federal Reserve System, if necessary.

The problem with these promises is this: the ultimate insurer – the FED – can fulfill its obligations in a deflationary crisis only by hyperinflation. That means that the only sure guarantee against the systemic failure of the American banking system is the destruction of the dollar.

If we get the latter, do you want promises to pay gold, which can be settled legally by the payment of digital dollars? Or do you want coins where you can get your hands on them? Read more at…

[source]

By Claudia Assis
April 13, 2011 (MarketWatch) — Gold is likely to break through $1,600 an ounce before the end of the year as investors continue to be concerned about inflation and loose monetary policy, metals consultancy GFMS said Wednesday.

“The prospects for gold prices this year remains bright,” said Philip Klapwijk, GFMS chairman, in a news release. “Investors continue to be concerned about the outlook for inflation, with governments in general showing little appetite to tighten monetary policy significantly.”

[source]

AND…
April 13, 2011 (IB Times) — … In addition, with the spotlight also shining on the state of government finances, there is every reason to believe that investors will remain focused on the gold market, Klapwijk said. As a result, Klapwijk noted that he would not be surprised to see if gold breaks through $1600 a troy ounce before the end of the year.

The research firm also expressed concerns that the market may be approaching a turning point are “still premature,” with growing evidence that buyers are adjusting to higher prices.

[source]

AND…
by Javier Blas
April 13, 2011 (Financial Times) — … The official sector, a group that includes central banks and sovereign wealth funds, bought 73 tonnes of gold on a net basis, a “remarkable change of direction for a market that has been used to absorbing substantial volumes of gold sold by central banks over the last two decades,” the consultancy said.

GFMS estimated that central banks had not been net buyers of gold since 1988. It said the official sector’s sales accounted for about 16 per cent of global supply per year from 1989 to 2009. The consultancy expected another strong year of official sector buying, potentially rising to 100 tonnes and setting a new 22-year peak.

[source]

by Clifford Alvares, interviewing Jim Rogers
April (Outlook Money Magazine) — In an interview with Clifford Alvares, the revered investment guru shares his wisdom as he talks about the future direction of gold prices, some cardinal rules to go by, and his very own profit-booking strategy. Excerpts:

Is there enough upside in gold if you invest now?

I am not a great timer of the market, but I certainly expect gold to go higher over the next decade, in excess of $2,000.

How much gold should one own in his portfolio?

That’s impossible to answer. People should have owned 100 per cent of their portfolio in gold in the last decade. It depends on what’s going to happen. If you don’t know anything about gold, you probably shouldn’t own any. If you know a lot, your portfolio will reflect your view of gold. I own few stocks. I mainly own commodities. But I think I know a little bit about commodities. People who cannot spell commodities shouldn’t own any.

Do you have a target for gold?

I will own gold till the mania sets in. I hope I am smart enough to recognise it when it comes and sell it then. I will see when it’s a bubble, wait a while for the bubble to burst, and then I will sell. I hope I am smart enough not to sell it until the bubble occurs. But, who knows that price? It could be any absurd price.

How much of your portfolio is in gold?

I don’t know. I don’t know how big my portfolio is. I don’t have a committee I have to report to. Anybody who knows how much money he has does not have enough money.

[source]

Gold Firms as Market Awaits President’s Deficit Cutting Plan

Gold is higher this morning amid persistent dollar weakness as the market eagerly awaits the details of the President’s plan to deal with America’s long-term fiscal issues. President Obama will deliver a speech at 13:35 ET today to lay out his proposals that will reportedly focus on “shared prosperity and shared responsibility,” (ie spending cuts & tax hikes). In the wake of the recent budget battle and in anticipation of the pending fight over the debt ceiling, speculation is that Obama will largely endorse the recommendations of the Simpson-Bowles commission. However, some are guessing that the speech will be more about “what won’t pass through his White House“, basically the Paul Ryan plan that was unveiled about a week ago. Once the battle lines are clearly drawn (or not), the fight over the FY2012 and the debt ceiling will begin in earnest, and is likely to make the just-ended FY2011 battle look like a little playground skirmish.

The IMF released their half-yearly Financial Stability Report today, concluding that the global financial system remains fragile. The IMF pointed out that, “Nearly four years after the start of the global crisis, confidence in the banking system has yet to be fully restored,” and suggested that it is time to start fixing the causes of that crisis. The IMF recommends: Increased transparency through more credible, rigorous stress tests. Higher capital buffers. And concrete plans to restructure or resolve failing banks, where necessary.

The IMF warned that the policies put in place over the past four years to treat the symptoms of the crisis have resulted in a $3.6 trillion “wall of maturing debt” that comes due over the next two years. This is the net result of trying to borrow and spend our way out of a debt crisis. You end up with a bigger pile of debt and all you can hope for is that you’re in a better fiscal place to start paying that debt down. Arguably the world is not in a materially better place, but the proverbial ‘piper’ still must be paid…unless of course governments want to start having a serious conversation about debt restructuring and haircuts.

The IMF seems particularly worried about the debt situation in Europe, which has taken a decided turn for the worse in the wake of the collapse of the Portuguese government and their much anticipated request for a bailout. Reuters reported today that delays in recapitalising Spain’s ailing savings banks — the cajas — have overshadowed EU efforts to convince markets Spain will not be the next in line for a bailout. If Spain ultimately does need a bailout, it is doubtful that the EU and IMF will be able to come up with the necessary funds.

Amid intensifying global pressure to reign in inflation with tighter monetary policy, the aforementioned ‘wall of debt’ is likely to get refinanced at ever-higher interest rates, further intensifying the drag on the global economy. Faced with the price risks versus growth risks dilemma once again, I would fear that governments and central banks maintain, or revert back to, über-easy policy. Another kick of the can down the road that will only make the ‘wall of debt’ higher when the next round of maturities roll around. This would be bad for global currencies, increasing the demand for hard assets like gold and silver.

A newly released survey of central bank reserve managers is reflective of this very reality. It indicates that central banks are increasingly viewing gold as a “safe” alternative “at a time when rising sovereign debt levels and super-loose monetary policy from the world’s major central banks sapped confidence in more traditional reserve currencies.” Central banks became net buyers of gold in 2010 and 70% of respondents to the survey said “central banks were likely to remain net buyers of gold given the level of uncertainty about sovereign debt.”

by James Moore
April 13, 2011 (Fastmarkets) — Trade in the precious metals, as with the broader markets, proved volatile yesterday as traders and investors reacted to a mixed bag of economic data plus the ongoing issues of Eurozone debt, inflation and unrest in the MENA region.

… Dip buying has again supported the precious metals overnight with gold finding further support around $1450 and silver the $40 mark; platinum is currently up 0.4% and palladium 0.5%. Short-term the complex; particularly silver, remain over-extended and would benefit from further long liquidation. But, it is more likely we will see the metal consolidate rather than correct lower with the mix of MENA, Eurozone debt and inflation drawing further dip-buying interest while bearish dollar sentiment continues to signal a challenge towards $1500 by gold $45 in silver.

[source]

Gold and silver are better this morning, underpinned by persistent weakness in the dollar. Expectations of tighter Fed policy that emerged in the wake of the robust Mar nonfarm payrolls number has all-but evaporated, weighing on the greenback and bolstering the precious metals.

US Treasury reported a budget deficit of $188.2 bln in Mar, near expectations, up dramatically from -$65.4 bln a year-ago.

US retail sales +0.4% in Mar, below market expectations. Ex-auto +0.8%.

An annual survey of central bank reserve managers showed they are increasingly turning to gold as a “safe” reserve asset at a time when rising sovereign debt levels and super-loose monetary policy from the world’s major central banks sapped confidence in more traditional reserve currencies. More than 70% of respondents believe central banks will remain net buyers of gold.

China’s official Xinhua news agency reported that there will likely be at least two more interest rate hikes in Q2 and another increase in banks reserve requirements is being considered as well, as the government continues its efforts to counter persistent inflation.

by Kerri Shannon
April 12, 2011 (MoneyMorning) — Investors have been flocking to precious metals to protect from looming inflation and a weak outlook for the U.S. dollar. … The demand for “safe-haven” metals investments continues pushing prices to new highs:

Gold is up 5% so far this year after a 30% rise in 2010, and hit a record high of $1,476.21 an ounce Monday.
Silver has climbed about 32% this year, after an 83% surge in 2010, and hit a 31-year high this week.
Platinum is up 2.8% this year following a 20% jump last year.
And palladium is holding steady, up 1.8% this year after a staggering 96% leap in 2010.

While gold was the popular topic of 2010, silver has been the star this year, getting more investor interest as a cheaper alternative to the yellow metal.

“People are quick to take profit when gold reaches a record,” Matthew Zeman, a strategist at Kingsview Financial, told Bloomberg News. “The silver market is the one everyone is in love with and afraid of missing the boat. People fully expect silver to get to $50.”

[source]

by Heather Struck
April 12, 2011 (Forbes) — A poll of UBS clients found that 58% expect the Federal Reserve’s Treasury buying program to wrap up at the end of June as intended. While the impact of the end of QE2 may already be priced into some asset classes, UBS precious metals strategist Edel Tully says it presents a “hurdle” to gold prices.

How high or low this hurdle may be depends on the state of the recovering U.S. economy after the Fed’s bond-buying program ends. Investors may continue to seek safety in gold over looking for returns in equities or fixed income. With these options on the horizon, Tully said, gold will continue to rally, and $1,500 won’t be far off. Hurdle cleared.

… Investors are also showing a broader interest in gold as a portfolio component beyond the “safe-haven” nature that most are familiar with, which came into play during the financial crisis. International factors also exist, as central banks outside the U.S. have been adding gold to their reserves, making 2010 the first year in two decades that reserves were net buyers, rather than sellers, of gold. Central banks are continuing to buy gold into 2011, according to UBS.

[source]

By Claudia Assis , MarketWatch
April 12, 2011 (MarketWatch) — Gold futures settled 1% lower on Tuesday as a selloff for oil dampened investors’ appetite for commodities overall and pushed inflation worries to the back burner at least for the day.

Gold for June delivery declined $14.50, or 1%, to $1,453.60 an ounce on the Comex division of the New York Mercantile Exchange. It had traded as low as $1,445 an ounce. … Gold had pared its decline in early floor trading, but the attempt at a comeback evaporated as losses mounted for oil and U.S. equities

Crude futures stumbled after weak U.S. trade data led to a rash of pessimistic views on U.S. economic growth and renewed doubts about oil demand.

“The pullback in oil has helped undermine precious metals,” said Jim Steel, a commodities analyst with HSBC in New York. A 3% drop for oil muted inflation concerns, he said. In addition, several economists have slashed their forecasts for U.S. growth, which diminishes appetite for commodities as a whole, Steel said.

… Gold’s correction is likely to continue in the short term, analysts at Commerzbank said in a note to clients. “The medium- to long-term positive outlook is still intact, especially for gold,” they added. “Gold should remain in demand as a safe haven in any case and the price should be well supported.

[source]

April 12 (Bloomberg) — The U.S. government, on course to reach a record annual budget deficit, posted a monthly shortfall of $188.2 billion in March, wider than a year earlier, Treasury Department statistics showed today.

Last month’s deficit was up from a $65.4 billion gap in March 2010, when the government marked down the cost of the Troubled Asset Relief Program by $115 billion.

The White House and Congress last week reached agreement on a spending plan for the current fiscal year, which started Oct. 1, and face another fiscal hurdle next month with the prospect of reaching the statutory debt limit of more than $14 trillion. Last week’s agreement averted a shutdown of government agencies.

[source]

By Rie Ishiguro and Shinji Kitamura
Tue Apr 12 TOKYO (Reuters) — The economic damage from Japan’s massive earthquake and tsunami last month is likely to be worse than first thought as power shortages curtail factory output and disrupt supply chains, the country’s economics minister warned on Tuesday.

The more sober assessment came as Japan raised the severity of its nuclear crisis at the Fukushima Daiichi nuclear plant to a level 7 from 5, putting it on par with the Chernobyl nuclear disaster in 1986.

The Bank of Japan governor said the economy was in a “severe state,” while central bankers were uncertain when efforts to rebuild the tsunami-ravaged northeast would boost growth…. The government and main opposition party have agreed to a spending package to get some reconstruction work started, but setting a large additional budget will be difficult due to Japan’s heavy debt burden.

… Finance Minister Yoshihiko Noda said on Tuesday that he would explain the Japanese government’s efforts on post-quake reconstruction and the nuclear crisis at a Group of 20 meeting in Washington on April 15.

“We were in recession already,” said Takuji Okubo, chief economist for Japan at Societe Generale. “This time it will take longer for industrial production to rebound, because just-in-time delivery systems have become even more complicated.”

“Our economy is in a severe state,” BOJ Governor Masaaki Shirakawa told lawmakers on Tuesday. … At its latest policy meeting last week, the BOJ launched an ultra-cheap loan scheme for banks in the area devastated by the quake, and has signaled its readiness to ease monetary policy further if damage from the quake threatens Japan’s return to a moderate recovery.

[source]

by Michael Trifunovic
April 12, 2011 (WA Today) — … In a speech at the Council on Foreign Relations last September, the former Federal Reserve chairman Alan Greenspan argued that currencies move in relation to gold and that currencies are themselves a zero sum proposition as they net out. He then went on to argue that if gold was rising it points to a “problem with respect to currency markets globally”. He goes on to describe gold as a canary in a coalmine.

… In a 1966 essay, Gold and Economic Freedom, Greenspan, argued that gold stood in the way of welfare statists using the banking system for an unlimited expansion of credit and the resultant wealth confiscation via the associated inflation. Gold stands as the protector of property rights.

It appears gold is reasserting this function.

Alchemy is the word often used to describe the art of transforming something of value from nothing, a practice of mind over matter. In the realm of money, it essentially is a confidence trick, where one gets others to believe something is of value.

The confidence trick around our currencies is unravelling. In contrast, gold seems to be standing the test of time.

[source]

by Geoff Candy
Tuesday , 12 Apr 2011 (Mineweb) — Speaking on Mineweb.com’s Metals Weekly podcast, Deliberations on World Markets author Ian McAvity said, “The debt numbers that are being created both in Europe and in the United States are absolutely frightening in an historical context and ultimately the perception is that they hope that they can inflate it away without having a deflationary crash in financial assets first.”

… One of the major reasons why he is doubtful of a successful end to the contest is his belief that the U.S. housing market is headed toward a double dip.

… For McAvity in the event of such an outcome, gold and oil (largely as a result of the ongoing destabilisation of the Middle East) are likely to be the least affected. “The gold price holds up even while other markets come off largely as the only place to hide…Gold will come into one of those periods where it loses the least on a sharp decline on the other markets.”

Part of the reason behind gold’s resilience in the face of a very high likelihood of further problems in the west is the monetary role that it has played and, is increasingly playing again.

As McAvity explains, ” These guys are just continually depreciating the purchasing power of money and in fact what you’re seeing in the gold market is gold coming back on stage as a final form of money. I don’t think that we’re ever going to see a viable day-to-day operating gold standard kind of a system and nobody other than the US dollar is really going to replace the US dollar as a global reserve currency. But the US dollar has lost a lot of status.”
McAvity says, at the moment, given the state of the U.S. dollar, with the questions being asked of the euro zone and the yen, “there is a real need for an alternate currency to the U.S. dollar and gold is playing that role to an extent.

[source]

Gold Turns Choppy

Gold is choppy this morning, initially underpinned by risk aversion after Japan’s Nuclear and Industrial Safety Agency raised the severity level of the Fukushima Dai-Ichi nuclear accident from a 5 to a 7, the highest reading on the global scale. This puts Fukushima on par with the 1986 Chernobyl disaster. Oil was underpinned by the news as well and the quick reversal in expectations that an African Union brokered cease fire was at hand in Libya. However, when Goldman Sachs analyst David Greely warned that oil is due for a “substantial pullback”, traders quickly moved to lock-in profits. Crude retreated and the precious metals followed.

The downside in gold and silver is still thought to be limited amid persistent weakness in the dollar and continued worries about inflation. The dollar index extended to yet another 16-month low, weighed upon by the euro, which hit a new 15-month high against the greenback at 1.4518. Only renewed weakness in Sterling prevented a more serious dollar rout. Nonetheless, the 74.16 low in the DX from November 2009 remains vulnerable to a test. This is the last significant barrier ahead of the all-time low at 70.67.

It has primarily been central bank policy expectations that are driving flows in the currency market. Flows chase yield — or yield expectations — in the FX market. The ECB’s recent rate hike — and expectations of an additional 75-100 bps in tightening — have been underpinning the euro, despite worsening sovereign debt crises in the periphery. Meanwhile, The Wall Street Journal’s FedWatcher John Hilsenrath wrote today that the Fed has signaled that they will keep credit cheap, even as other central banks raise rates. Hilsenrath cites particularly dovish Fedspeak by vice-chairwoman Janet Yellen and the New York Fed’s William Dudley in dismissing the notion that tighter Fed policy is in the offing.

While Hilsenrath seems to expect the Fed to complete the bond purchases of QE2 on schedule at the end of June, he doesn’t take on the prospect for further quantitative easing beyond June. I suspect he believes (as do I) that the Fed will keep that option open based on economic conditions as H1 winds down. If for example a continued rise in energy prices threatens the fragile economic recovery, we could very well see further asset purchases. That would add further weight to the already weak dollar, driving up the price of gold in the process.

The grim economic data out of the UK today may give the Fed further pause about removing accommodations. UK BRC retail sales plunged 1.9% y/y in Mar, their biggest decline since the series began in 1995. The BRC says declining real wages (inflation), higher VAT and government budget cuts all weighed on sales. These factors actually contributed to a decline in Mar CPI to a 4.0% y/y pace. As shoppers reigned in their spending, retailers competitively reduced prices in an effort to induce spending. The data reduces the likelihood that the BoE will tighten anytime soon, which in turn weighed on the pound.

12 April 2011 (Reuters) LONDON — Gold slid by more than 1 percent on Tuesday, echoing a sharp decline in the oil price and ignoring the decline in the dollar to succumb to profit-taking after having hit record highs on Monday. … Brent crude oil futures lost more than $3 a barrel after top producer Saudi Arabia cut production in response to weak demand, according to two Saudi-based industry sources.

This added to pressure on the commodities complex from Goldman Sachs’ decision on Monday to book profits on its positions in crude oil, copper, platinum and some agricultural commodities weighed on the raw materials sector, including gold.

Spot gold was last down 1.1 percent at $1,449.66 an ounce by 1419 GMT, having earlier held at a session high of $1,467.10.

… “Market players are taking the opportunity to take some profits after the sharp rises of the last few days or weeks, said Commerzbank analyst Daniel Briesemann, adding that he believed gold would eventually resume its current uptrend to challenge $1,500 an ounce.

Adding to potential support for gold was Japan’s decision to raise the severity of its nuclear disaster to the highest level.

… The gold/silver ratio fell to its lowest since at least 1989 on Tuesday, reflecting silver’s outperformance relative to gold. … “If this was safe-haven buying, you wouldn’t see silver so much stronger than gold. This just shows the spec money is going into silver,” said VTB Capital analyst Andrey Kryuchenkov.

[source]

by Alix Steel
April 12, 2011 (TheStreet) — Gold and silver prices were treading water Tuesday as investors were stuck in wait-and-see mode.

… The International Monetary Fund also released growth and inflation forecasts for 2011, which are a mixed bag for gold and silver. The IMF’s global growth forecast was lowered to 4.4% with the EU predicted to grow the least, at 1.6% in 2011. The downgrade was due to high oil prices and even higher budget deficits. Slower growth would tighten demand for commodities which could hurt gold’s recent rally.

On the flip side, the IMF said that the EU’s inflation rate for 2011 will be 2.3% and the U.S. will hit 2.2%, both only slightly above the 2% target which signals central banks might not have to raise rates. Cheap money is good for gold and the hard asset becomes a more attractive investment.

[source]

by Margie Lindsay
April 12, 2011 (Hedge Funds Review) — Hedge Funds Review talks to Frank Holmes, CEO and chief investment officer of US Global Investors and investment team leader for the Meridian Global Gold and Resources Fund, about prospects for gold.

“I’ve always advocated that people should consider 5% into bullion and 5% into unhedged gold stock and to rebalance,” explained Frank Holmes, CEO and chief investment officer of US Global Investors.

… On the subject of a gold bubble, Holmes dismisses the idea. He believes bubbles occur when there is innovation, people then copy the innovation and leverage to exploit it. “In 1980 when gold went to $850 an ounce from $400 in a short time it was done on the futures market. It was very leveraged. Most of that run was built on fear but the leverage was 10-20:1. When buying ETFs the margin is 2:1, if there is a margin. A lot of pension funds are diversifying into it. It’s a cash trade. So you’re not seeing this huge exponential move like you’ve seen in previous bubbles,” he explained.

… Looking ahead Holmes forecasts a doubling of the gold price from current levels to around $3,000 in 2016 with oil rising to $200 a barrel.

[source]

Gold and silver are higher this morning on an uptick in risk aversion after Japan’s Nuclear and Industrial Safety Agency raised the severity level of the Fukushima Dai-Ichi nuclear accident from a 5 to a 7, the highest reading on the global scale, matching the 1986 Chernobyl disaster. Additionally, as hopes of an African Union brokered cease-fire in Libya quickly faded, prompting a rebound in oil prices.

Despite the worsening EU sovereign debt crisis, the single currency continues to benefit from safe-haven flows, with the EUR-USD rate probing above 1.45 for the first time in 15-months. The dollar continues to look rather weak.

German HICP unexpectedly revised up to 2.3% y/y from 2.2% in Mar, CPI 2.1%. Mar ZEW confidence falls to 7.6, much weaker than expected.

UK BRC retail sales plunged 1.9% y/y in Mar. Biggest decline on record. Like-for-like measure -3.5% y/y. BRC says declining real wages, higher VAT and government budget cuts all weighed on UK retail sales. UK CPI came in at 4.0% y/y in Mar, well below market expectations, vs 4.4% in Feb.

US imported prices surged 2.7% in Mar on rising oil prices. Export prices +1.5%. The US trade deficit narrowed to -$45.76 bln in Feb, above market expectations, vs -$46.97 bln in Jan.

By Claudia Assis
April 11, 2011 (MarketWatch) — Gold futures traded modestly lower Monday, taking a breather after a string of record highs last week and as the dollar gained strength.

Gold for June delivery declined $6, or 0.4%, to settle at $1,468.10 an ounce on the Comex division of the New York Mercantile Exchange. Silver ended a smidge higher, keeping above $40 an ounce.

Gold ended at a record high of $1,474.10 an ounce Friday, the latest in a series of such milestones for the metal on the past week.

Investors took profits following the record, and some discussion in Washington about curbing the U.S. debt also took a toll on gold, said James Cordier, a portfolio manager at OptionSellers.com in Florida. The debate made investors feel “that maybe there’s an end to the dollar printing and the increase in debt,” he said.

Friday’s record was partly achieved on fears of a government shutdown, averted with a last-minute deal, that knocked the dollar. This week, President Barack Obama is expected to unveil a plan to reduce the U.S.’s debt.

The metal notched a 3.2% weekly gain, its highest five-day gain since early December and its third weekly gain in a row.

[source]

April 11 (Bloomberg) — The struggle last week to avert a government shutdown may be little more than the warm-up for a much bigger battle in coming months over raising the debt limit.

The U.S. government is projected to slam into the $14.3 trillion legal cap on government borrowing sometime this spring. As the price of their vote to allow the government to go further into debt, congressional Republicans are demanding far deeper cuts than the $38 billion they got last week in the deal to fund the government for the last six months of the 2011 fiscal year.

[source]

By John Detrixhe and Sara Eisen
Apr 10, 2011 (Bloomberg) — The world economy needs a new global reserve currency to help prevent trade imbalances that are reflected in the national debt of the U.S., said Nobel-prize winning economist Joseph Stiglitz.

A “global system” is needed to replace the dollar as a reserve currency and help avoid a weakening of U.S. credit quality, said Stiglitz, a professor at Columbia University in New York. The dollar fell to an almost 15-month low against the euro last week, and the U.S. trade deficit widened more than forecast in January to the highest level in seven months.

“By taking off the burden of any single country, we don’t have to have trade deficits,” Stiglitz said in an interview in Bretton Woods, New Hampshire. “Things would be much worse if it were not the case that Europe was having even more of a problem, but winning a negative beauty pageant is not the way to create a strong economy.”

… “Reserves are IOU’s,” Stiglitz said. “When IOU’s get big enough, people start saying maybe you’re not a good credit risk. Or at least, they would change in their sentiment about credit risk.”

Stiglitz, who won the 2001 Nobel Prize for economics, was attending the Institute for New Economic Thinking’s conference in Bretton Woods at the hotel where U.S. and European officials met in 1944 to remake the global monetary system.

… The existing monetary system means “there’s a very good risk of an extended period of low growth, inflationary bias, instability,” Stiglitz said. It’s “a system that’s fundamentally unfair because it means that poor countries are lending to the U.S. at close to zero interest rates.”

[source]

RS View: Forgive my old friend Joe for not speaking more clearly on this matter. He said, “Reserves are IOU’s,” which could inadvertently lead a dim listener to draw the erroneous conclusion that reserves must be IOU’s. He should have said, “As presently practiced, reserves today are largely IOU’s”. Expressed in this latter form, it clears the stage of clutter so that any reasonable thinker can more easily see that the practice of reserve management/accumulation has a natural course of evolution ahead, which will shift away from holding IOU’s and move more predominately toward holding that one reserve asset in the present assortment which is NOT an IOU. Gold. Physical gold.

by Kelley Holland
Monday, 11 Apr 2011 (CNBC) — A new report from the Bank for International Settlements suggests that nearly all reserve currencies may be poised to depreciate.

The BIS examined the relationship between foreign-exchange turnover and per capita income, and found that the richer the country, the greater the turnover in their currency. In fact, they were able to fit most of the data along a pretty neat regression line, suggesting that there is a relatively consistent relationship between forex turnover, trade, and GDP per capita.

So who were the outliers? You guessed it: the U.S., Japan, Great Britain, Australia, and a few others have far more forex turnover than their trade and GDP would suggest.

“One interpretation of this analysis is that demand for the all of the currencies that fall above the regression line should decline over time, and should experience at least some depreciation,” the analysis found.

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April 12, 2011 (AFP) — Iran plans to slash four zeros from its national currency in “one to two years”, seeking parity between its rial and the US dollar, Central Bank Governor Mahmoud Bahmani has said.

“The new rial (…) will be equal in value to one (US) dollar,” the official IRNA news agency quoted Bahmani as saying late Sunday. He added the plan would take “one to two years” to be implemented.

Bahmani did not indicate whether the authorities would try to maintain a fixed parity beetween the greenback and the Iranian currency following the planned reform…..

“Some people think removing the zeros will weaken the national currency … but it will instead cut inflation. Removing four zeros will also facilitate trade,” IRNA quoted him as saying.

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RS View: Posted not for any redeeming economic value to be found in the article (i.e., none) but rather for adding incrementally to the general sense of a timeline with respect to consensus change in the international monetary realm… “one to two years” puts us again at mid-2013.

By Pham-Duy Nguyen
Apr 11, 2011 (Bloomberg) — Gold futures fell on sales by investors after a rally to a record of $1,478 an ounce. Silver climbed close to $42 an ounce, extending a surge to a 31-year high. … Silver gained for the sixth straight session, the longest rally in four months.

“People are quick to take profit when gold reaches a record,” said Matthew Zeman, a strategist at Kingsview Financial in Chicago. “The silver market is the one everyone is in love with and afraid of missing the boat. People fully expect silver to get to $50.”

… Silver futures for May delivery advanced 0.4 cent to $40.612. Earlier, the metal reached $41.975, the highest since January 1980. The price has more than doubled in the past year. The record in 1980 was $50.35.

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By John Detrixhe
April 11, 2011 (Bloomberg) — China’s decision to keep its currency weak has caused the government to lose control of inflation and risks fuelling wage-price gains, billionaire investor George Soros said.

While the policy helped insulate China from the financial crisis in 2008, the world’s second-biggest economy has missed its chance to allow the yuan to appreciate to tame inflation, Soros, chairman of Soros Fund Management LLC, said yesterday at a conference in Bretton Woods, New Hampshire.

“It would be very advantageous to allow the currency to appreciate as a way of controlling inflation,” Soros said. “The authorities missed that opportunity. You now have inflation somewhat out of control, and causing some serious danger of wage-price inflation.”

The yuan gained 4.6 percent against the U.S. dollar in the past two years, the second-smallest gain of 10 Asian currencies tracked by Bloomberg…. The yuan’s gain since April 2009 compares with a 31 percent advance for the Indonesian rupiah, a 22 percent climb by the South Korean won and a 21 percent jump by the Singapore dollar. Only the Hong Kong dollar, which is pegged to the U.S. currency, has appreciated less than the yuan.

… [Soros] spoke at a conference sponsored by the Institute for New Economic Thinking, which Soros helped found and supports.

U.S. and European officials met in Bretton Woods in 1944 to draw up rules that governed much of the world economy for almost three decades. Nations agreed to fix exchange rates… in the aftermath of World War II by encouraging coordinated economic policies.

The Bretton Woods era ended in 1971, when inflation forced the U.S. to abandon the dollar’s peg to gold, an anchor of the system, heralding the era of floating exchange rates. The Bretton Woods agreement had linked currencies around the world to the price of gold and restricted their fluctuations versus the dollar, requiring intervention by participants to comply.

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Gold Corrects as Government Shutdown Averted

Gold is modestly lower to begin the week after a budget compromise was reached at the eleventh-hour on Friday, preventing a shutdown of the Federal government. However, it’s worth remembering that the recent budget battle was over the remaining 6-months of FY2011. The real battle — over a hike to the debt ceiling and the FY2012 budget — will begin in earnest, as soon as our representatives in Washington are done patting themselves on the back. Given the contentious nature of the recent battle over what amounted to a paltry $38 billion in spending cuts — trimmed from President Obama’s record $3.69 trillion budget proposal — it’s reasonable to assume that when the stakes are raised by an order of magnitude (or more), things are going to get really nasty again…really quickly.

As we’ve suggested in the past, the most expedient way to deal with exploding debt in the face of a lack of real resolve in Washington, is to devalue the dollar. This allows the Treasury Department to pay down that debt with cheaper dollars. Last week’s plunge in the greenback to new 16-month lows, bringing the dollar index within about 4% of its all-time low is attributable in part to this realization. The return of considerable credence to the long-term downtrend in the dollar threatens to un-anchor inflation expectations, which could drive the US economy back into recession.

Reports that Libyan strongman Moammar Gaddafi has accepted a “road map to peace” proposed by African leaders, knocked oil off its recent highs. However, rebel leaders seem adamant that any deal that doesn’t require Gaddafi to step down immediately is unacceptable. The African Union peace mission reportedly got a pretty frosty reception in Benghazi, the de facto capital ant-Gaddafi rebels. Protesters suggested that most members of the AU delegation were Gaddafi allies. The retreat in oil has been tentative thus far, suggesting the market is skeptical that a lasting peace is at hand.

Just as the EU is taking up Portugal’s request for a bailout, Der Spiegel is reporting that a restructuring a Greek debt is inevitable. Greece was the first EU country to require a bailout, but despite receiving €110 billion in EU and IMF loans nearly a year ago — and presumably at least an attempt at fiscal reforms — the situation in Greece continues to erode. Greek sovereign debt has been downgraded further and yields on that debt have pushed to record highs. Ireland — the second country to request a bailout — also continues to struggle amid speculation about restructuring and haircuts for sovereign bondholders. The market has clearly cast a vote of ‘no confidence’ in EU rescue measures, yet they will continue down the same path with Portugal next.

by Rajendra Jadhav
Mon Apr 11, 2011 (Reuters) MUMBAI — Indian gold futures edged lower on Monday tracking a drop overseas, lifting demand in domestic physical markets, which were subdued on the weekend, dealers and jewellers said. …… the most-active gold for June delivery on the Multi Commodity Exchange was trading 0.1 percent lower at 21,391 rupees per 10 grams.

… “Demand has improved. Jewellers are buying hoping for a rise in retail demand in coming weeks,” said Harshad Ajmera, proprietor of Kolkata-based wholesaler JJ Gold House. With the wedding season underway in India, demand for the yellow metal is strong as gold jewellery forms part of the bridal trousseau.

International spot gold was trading at $1,468.35 an ounce against $1,472.70 late in New York on Friday.

The Indian rupee, which plays an important role in determining the landed cost of the dollar-quoted yellow metal, fell on Monday, limiting losses in bullion.

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April 11, 2011 (FXstreet) — Despite reaching fresh record highs earlier today, gold futures are currently easing to the downside by mid-day over Europe following news of another Japanese earthquake measuring 6.1 on the Richter scale. Currently the most active contract for June delivery trades more than $10 off its maximum at $1467.60/ounce.

While overall market sentiment remains mostly subdued due to little economic information to go on today, it seems gold traders are taking advantage of profit-taking opportunities in light of recent historic highs. … Looking ahead, the HY Markets team suggests: “Stochastics and the RSI remain bullish signalling that sideways to higher prices are possible near-term. The inverted head and shoulders formation projects a potential upside target later this spring. Closes below the 20-day moving average crossing would confirm that a short-term top has been posted.”

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