By Claudia Assis
April 21, 2011 (MarketWatch) — Gold futures on Thursday capped a milestone-studded week with settlement and intraday records as the dollar fell and investors sought gold ahead of a three-day weekend.

Gold for June delivery, the most active contract, added $4.90, or 0.3%, to settle at $1,503.80 an ounce on the Comex division of the New York Mercantile Exchange. The metal hit an intraday high of $1,509.60 an ounce, according to a preliminary tally on CME Group’s website. CME owns Comex. Silver settled at a 31-year high past $46 an ounce.

Gold has been on a record-breaking tear since Friday, and Monday’s move by Standard & Poor’s Ratings Services, which revised its outlook for U.S. debt to negative, and the start of the dollar’s rout merely “added fuel to the fire” for those looking to the metal as an alternative to currencies, said Bill O’Neill, a principal at Logic Advisors in New Jersey.

Investors also didn’t want to spend a three-day weekend without some sort of protection in gold, he added. Most financial markets will be closed in observance of Good Friday.

[source]

by David Berman
April 21, 2011 (Globe and Mail) — Call it a meaningless number, if you like, but gold’s move above $1,500 an ounce is having at least one impact: It is driving target prices higher. UBS analyst Dominic Schnider raised his target price on gold to $1,650 an ounce after his previous target of $1,500 was met.

… He estimates that a 3.5 per cent increase in mine output combined with a 3 per cent increase in scrap isn’t enough. “Hence, only a higher price can balance supply and demand,” he said.

[source]

by Jeff Cox
Thursday, 21 Apr 2011 (CNBC) — Weakness in the US dollar, which is causing everything to go up—including gas prices, food and stocks—is unlikely to go away soon as a selling frenzy hits the currency market.

The greenback is approaching pre-financial crisis lows and threatening to smash through its all-time low when measured against the world’s predominant national currencies.

A combination of factors accounts for the weakness, with the Federal Reserve’s easy-money policies, huge national debts and deficits and the consequential possibility of a debt downgrade because of the financial mess in Washington leading the way.

In short, as trader Dennis Gartman noted Thursday, “the rout of the US dollar” is in full effect. “Panic dollar selling is setting in,” Gartman, a hedge fund manager and author of “The Gartman Letter,” wrote in his daily commentary.

… Gartman described the dollar as being in “serious jeopardy” because of its status against the euro, which was defended recently as European Central Bank President Jean-Claude Trichet announced a rate hike in the zone.

No such defense is being offered in the US, where neither Fed Chairman Ben Bernanke nor most of the rest of the central bank’s Open Market Committee seems much in the mood to raise rates despite the anemic dollar. Though the Fed is ostensibly apolitical, there is no pressure as well from the Obama administration to boost the dollar’s value.

… Some economists believe that a weak dollar is contributing heavily to the surge in prices at the pump, with one speculating that gas could reach $6 a gallon or beyond by summertime, given certain conditions.

[source]

NEW YORK – Standard & Poor’s may have cut its outlook for the U.S., but Bill Gross, head of the country’s largest bond fund, tells R.M. Schneiderman we won’t default on our debt—though it may take a fiscal crisis for Washington to solve our deficit problems.

For all the talk of Republicans gutting entitlements and Democrats raising taxes on the rich to solve America’s long-term budget deficits, the head of the country’s largest bond fund says the gridlock in Washington will not ease over the next two years—and that a fiscal crisis may ensue before any real progress occurs. But a U.S. debt default, he says, will not be the end result.

In an interview Wednesday, Bill Gross, co-founder of the California-based Pacific Investment Management Company, or Pimco, said continued inaction on the budget deficit could lead to an erosion of wealth. “The negative repercussions would be a lower dollar, higher inflation, and artificially low interest rates,” he said. “All surreptitiously pick the pockets of investors.”

[source]

PG View: Gross sums up the US fiscal situation as “God-awful,” adding that “Washington talks a big game [but] then goes off doing what it always does—spending money.” Well the best way for you to prevent your pocket from getting picked as an end result of Washington’s reckless policies, it to allocate a portion of your wealth to gold.

Gold Pushes Higher as Dollar Extends Losses

The dollar continued its precipitous plunge, pushing gold and silver to more new all-time and 31-year highs respectively. The dollar index broke important support at 74.16/74.00, setting new 32-month lows and shifting the market’s attention to the all-time low at 70.67. That’s just about 4% away from today’s intraday low. The dollar’s tumble is being attributed to concerns about the United State’s creditworthiness and expectations of a political stalemates on the debt ceiling, the budget and long-term deficit reduction. While all of this has pushed the inflation threat from the headlines, the falling dollar will make inflation even worse. If the greenback continues on the present trajectory, look for the inflation story to return to the headlines with a vengeance.

Despite all the dire warnings about the US fiscal situation, there continues to be a sense that all is well in America. That delusion is being provided courtesy of of the DJIA, which far too many people continue to rely on as a barometer of the health of the US economy. Arguably much of the rise in the stock market since March of 2009 can be attributed to the Fed’s über-easy monetary policy and various liquidity measures. The dollar has fallen in large part for the same reasons. If the Dow goes up another 10% from here, but the dollar declines another 10% or more, what have you really gained?

And what happens if the Fed starts removing accommodations and/or raising rates? Given the generally lackluster growth in the economy, there’s reason to believe that the stock market gains of the last two-years are built on sand in an earthquake zone. The Wall Street Journal’s FedWatcher Jon Hilsenrath stated in an article today, “The outcome of next week’s Fed board meeting isn’t in doubt. It is likely to decide to allow a $600 billion program to buy Treasury bonds to run its course, as planned, in June.” According to Hilsenrath the end of QE2 “isn’t in doubt,” but he still couches with the word “likely” in the very next sentence. That sounds like there might be some doubt. I’m of the opinion that the Fed is ‘likely’ to continue reinvesting the proceeds of maturing debt after the end of H1. As for a rate hike, that seems unlikely this year.

Even if the Fed is able to manufacture further underpinnings for the stock market, a real foundation for protracted growth is absent. Meanwhile, the unemployment rate remains disturbingly high, the housing market disturbingly fragile. The food and energy price rises that have been fueling inflation have already been dismissed by Fed chairman Bernanke as “transitory,” so it seems unlikely that the Fed will alter its policy stance in any meaningful way. If US policy-makers remains mired in partisan, ideological gridlock into the 2012 election, steering the US economy among the rocks and shoals will remain largely at the hands of Captain Bernanke and his monetary policy. And monetary policy makes for a very small rudder.

Meanwhile the foreign holders of our debt are increasingly unnerved by the low yield on US Treasuries and the mounting currency risk. China’s SAFE has issued a number of warnings recently, essentially saying that the US has an obligation to protect its bond holders. Russian Prime Minister Vladimir Putin excoriated US fiscal policy — or lack there of — this week, saying, “Look at their trade balance, their debt, and budget. They turn on the printing press and flood the entire dollar zone–in other words, the whole world–with government bonds. There is no way we will act this way anytime soon. We don’t have the luxury of such hooliganism.” Russia is the 8th largest holder of US debt.

If the Fed does stop buying Treasuries after June, the market is already wondering who will fill the massive demand void that they leave. The top foreign buyers have already expressed extreme reservations, so we’ll have to wait and see what yield might make our debt attractive once again, given the risks presented by our legislative gridlock and the increasingly pronounced currency risk.

by William Lee Adams
May 2, 2011 (Time Magazine) — These days, Afghanistan is usually associated with war and deprivation. But millennia before the Soviet invasion unleashed 30 years of upheaval, and well before the Taliban’s brutal reign, Afghanistan was a meeting place for artisans and traders, not warlords, insurgents and private security guards.

That’s the message of the British Museum’s latest blockbuster exhibition, Afghanistan: Crossroads of the Ancient World. Running until July 3, it features 230 objects that have survived bombings, lootings and deliberate destruction by the Taliban. “Afghan people aren’t just fighting with each other. They love their culture, their art, and know the value of these things,” says Omara Khan Massoudi, the director of Kabul’s National Museum, which has loaned the artifacts while it is being rebuilt after years of war.

… Over the past 30 years, around 70% of the artifacts — about 70,000 items — housed in Kabul’s National Museum were destroyed or looted. In 1994, a rocket attack destroyed many that remained (and much of the museum, which was being used as an Afghan military base at the time). Taliban officials later smashed other relics in an effort to erase the country’s pre-Islamic history…

During those dark days, museum officials risked their lives to keep some artifacts safe, hiding the treasures — among them a priceless stash of Bactrian gold — in vaults beneath the Central Bank. Five men held a key, and the vaults required all five keys to open. Officials — including Massoudi, one of the key holders — successfully resisted Taliban pressure to reveal the location of the objects. They remain reticent about their suffering, but Aghan President Hamid Karzai, in a prologue to the exhibition catalog, makes clear just how selfless they were. “A single piece of gold would have been a ticket to escape the war and destruction that afflicted our country, but not a single piece was lost,” he writes.

[source]

by Rujun Shen
Thursday, 21 Apr 2011 (Reuters) — … The median forecast of 12 analysts polled in the past two days for the average price in 2015 was $1,700 an ounce, up 12.7 percent from the record of $1,508 struck on Thursday. The price forecasts ranged between $1,000 and $2,750, but even if prices get to the top of that range, they would probably rise at slower rates than in the previous two years, or increases of 30 percent in 2010 and 25 percent in 2009.

… “Much of the reasoning behind our bullish outlook lies with the uncertainty surrounding current events such as Middle East and North Africa unrest, growing inflationary pressure, burgeoning deficits and the longer-term effects of currency debasement,” said James Moore, an analyst at FastMarkets. “All of which will take considerable time to be felt or resolved, if ever.” Moore expected gold to average $1,750 in 2015.

Growth potential in gold demand in India and China, the world’s top two gold consumers, will provide strong support for prices, analysts said. “The increasingly wealthy general public in China will be looking for places to store their value, and gold investment will continue to be one of the most popular choices,” said Li Ning, an analyst at Shanghai CIFCO Futures.

… “In both countries, accelerating inflation has boosted gold’s appeal, while negative real interest rates and poor equity returns have diverted liquidity into the precious metal markets,” analysts at Standard Chartered Bank said in a research note.

“In terms of gold consumption per capita, there is no doubt that these countries have a lot of catch-up potential and the impact on gold prices could be dramatic.” They forecast gold prices to average $1,900 in 2015.

[source]

by Tom Jennemann
21/04/2011 (Fastmarkets) — Gold on the Comex division of the New York Mercantile continued to trend higher on [Thursday] as instability among the major paper currencies and growing concerns about government debt and global inflation have investors looking for a safe location to store their wealth.

… Major support for gold continues to come from the weaker dollar, which has taken a beating this week. The greenback had earlier fallen to a 16-month low of 1.4648 against the euro but has since clawed back to 1.4567 as investors pare their riskier positions ahead of the three-day Easter break.

Nevertheless, some market participants remain quite worried about the health of the US currency. “Panic dollar selling is setting in. This may carry farther than any of us dream of or, worse, have nightmares of,” Dennis Gartman, author of the Gartman Letter, said.

But even with the dollar’s struggles, all is not rosy with the euro either. There is new speculation that Greece might restructure its debt by as early as this weekend.

… A US-based fund manager said. “Many people see gold as the most stable currency out there and that’s the main reason that $1,500 was possible.”

… Standard Bank said in a note, “The main impetus appears to be concerns over rising inflation, leading investors into precious metals as a means of protecting their wealth.” … The precious metals should trend upwards for the rest of the day; however, volumes should be quite thin ahead of the holiday, which means that prices could respond erratically to any fresh news, the analysts added.

[source]

By Jan Harvey
April 21 (Reuters) LONDON — Gold prices hit record highs for a fifth session on Thursday and silver rallied to its strongest since 1980 as the dollar slid to a three-year low against a basket of major currencies.

The action in the currency markets added fuel to a rally sparked by concerns over the U.S. economic outlook, rising inflation, worries over euro zone debt and historically low interest rates in the United States, analysts said.

Spot gold was bid at $1,502.10 an ounce at 1322 GMT, against $1,498.15 late in New York on Wednesday, having earlier peaked at $1,508.75 an ounce.

… “We’ve seen the U.S. dollar weaken pretty much across the board this morning, even against the yen,” said Credit Suisse analyst Tom Kendall. “The carry trade is back in force and so we are looking at the .DXY breaking down through 74, making new lows for the year, and that is certainly playing into precious metals.”

… [Gold] is proving resilient above $1,500 an ounce. “We still expect dips to be viewed as buying opportunities, with gold and silver viewed favorably by investors seeking to hedge against inflation and debt jitters,” said FastMarkets analyst James Moore.

[source]

By Phil Wahba and Lisa Baertlein
April 21 (Reuters) – McDonald’s Corp said higher costs for beef, bread and other items cut into its quarterly margins and that inflation for the year would be worse than expected.

The inflation comments on Thursday sent shares of the world’s largest restaurant company down 2 percent….

“The key question now will be how they are going to raise prices to try to offset some of these food costs,” Edward Jones analyst Jack Russo said.

McDonald’s said it now expects food costs to rise between 4 percent and 4.5 percent in the United States and Europe this year. In January, McDonald’s said it expected its food costs to be 2 percent to 2.5 percent higher this year in the United States and up between 3.5 percent and 4.5 percent in Europe.

[source]

Gold continues to edge higher, posting a new record high at 1509.02 as the dollar extends recent losses. Silver continues to lead the precious metals higher, establishing a new 31-year high at 46.25. The dollar index pushed through important support at 74.16/00 in overseas trading, setting new 32-month lows. There is now little in the way of significant support protecting the all-time low in the DX at 70.67.

Reports from JP Morgan and others are circulating that suggest a technical default stemming from a failure to raise the debt ceiling would indeed be a big deal, posing considerable systemic risks. This has contributed to dollar weakness, as has the growing realization that as a last ditch option, the Fed can always print enough dollars to meet any obligation.

House Republicans are beginning to frame the demands they’ll attach to a debt ceiling hike. House Majority Leader Eric Cantor says “major spending cuts or budget process reforms.” More spending cuts come as no surprise, but there is likely to be a lot of emphasis on reforming the process because as the Washington Post’s Ezra Klein points out, “the debt limit debate won’t offer the time or the space for a comprehensive deficit deal.”

The Wall Street Journal’s FedWatcher Jon Hilsenrath seems pretty convinced that QE2 will be allowed to come to an end in June. Hilsenrath’s says in today’s WSJ, “The outcome of next week’s Fed board meeting isn’t in doubt. It is likely to decide to allow a $600 billion program to buy Treasury bonds to run its course, as planned, in June.” Without the artificial demand provided by the Fed, Treasuries should fall and yields should rise. FX traders don’t seem to be inclined to front-run these expectations.

By Claudia Assis, Sue Chang, Polya Lesova and Virginia Harrison
April 20, 2011 (MarketWatch) — Gold futures settled at a record Wednesday as the U.S. dollar fell sharply and investors bought it as a hedge against inflation and economic uncertainty.

Gold for June delivery rose $3.80, or 0.3%, to end at $1,498.90 an ounce on the Comex division of the New York Mercantile Exchange. It traded as high as $1,506.20 an ounce, according to CME Group, which owns Comex. That is an intraday record for the metal.

… Fears of inflation as crude-oil prices rallied Wednesday also aided gold’s record run. Gold is considered the ultimate storer of wealth and as such gains when investors fear price increases and U.S. dollar debasement.

The International Monetary Fund on Wednesday piled in on the U.S. misfortunes. The French newspaper Le Monde quoted Olivier Blanchard, the fund’s chief economist, as saying there was reason to be concerned about the U.S. deficit, because the country has no credible to cut it.

The IMF issued a warning on Tuesday about the danger of overheating emerging economies, “with explicit reference to mounting inflationary pressure in these countries,” analysts at Commerzbank wrote in a note to clients. “It hardly comes as a surprise, but does reinforce the general concern about inflation, and makes gold increasingly attractive as a store of value.”

The precious metal is likely to continue to gain ground in the short term with technical resistance expected around $1,600, said Jay Feuerstein, chief executive of 2100 Xenon Group.

[source]

by Jason Dean and Tom Orlik
April 20, 2011 (Wall Street Journal) — In official comments that have fueled speculation about faster appreciation of the yuan, senior Chinese leaders seem to be acknowledging an argument long made by Washington and others that a stronger yuan may be helpful in taming the country’s rising inflation.

… Premier Wen Jiabao, at a meeting last week of the State Council, China’s equivalent of a cabinet, listed “strengthening the flexibility” of the yuan’s exchange rate as one of several tools the government should better use to control prices. Less senior officials have made that argument before, but Mr. Wen’s remarks were unusual for a top leader.

… On Monday, People’s Bank of China Governor Zhou Xiaochuan said the government is working to reduce the accumulation of foreign-exchange reserves. They have soared to more than $3 trillion largely as a consequence of China’s currency policy, which forces the central bank to buy dollars from exporters and foreign investors. Mr. Zhou said the reserves pump excess cash into the economy and “exceed our reasonable requirements.”

… Top political leaders in China like Mr. Wen—the ones who ultimately decide key issues like exchange-rate policy—in the past didn’t typically view the currency as a monetary-policy tool, analysts say. But that may be changing.

“There may be a shift under way from thinking about the exchange rate mainly as a variable that affects the competitiveness of exporters to a macroeconomic variable that is part of the management of growth and inflation,” said Louis Kuijs, economist at the World Bank in Beijing.

… “We will further increase the [yuan's] flexibility according to the market,” Mr. Wen said last month. “But we must also keep in mind that this kind of reform is gradual, because it affects companies and employment.”

A hazard of the steady, gradual approach to appreciation is that it invites speculators to pump capital into China to profit on what they see as a one-way bet. Authorities revile such “hot money,” in part because it can further fuel inflation.

… Some economists argue that the general approach to measuring the yuan’s exchange rate is misguided, because it overemphasizes the dollar. While the yuan has gained 4.6% against the U.S. currency since June, its “real effective exchange rate”—taking account of price changes and the yuan’s value against other currencies like the euro—is little changed.

[source]

RS View: Regarding these points… I would be the first to agree that the focus on the dollar must be set aside. Let the yuan be measured and shown to be a consistent and chronic laggard against gold as a reference point. Out of self interest the managers of hot money will be less inclined to harry the demurring yuan, choosing instead to vent their passions through an economically mature and resilient gold market. A happy ending for all parties concerned.

by Gennine Kelly
20 Apr 2011 (CNBC) — In an undisclosed location underground in New York City sit 6,643 gold bars, worth $987 million, recently acquired by the University of Texas Investment Management Corporation, one of the largest college endowments.

“We began buying gold in September of ’09 at about $950 dollars an ounce, our average price is about $1,150, we’ve invested around $750 million dollars in gold over that twelve months and now it has a market value of around a billion dollars,” Bruce Zimmerman, chief investment officer for UTIMCO, told CNBC Wednesday.

… “But rather than continuously roll the futures contracts, it just became easier and more economically for us to take possession of the bullion,” he explained.

Gold represents 5 percent of UTIMCO’s portfolio. “The role gold plays in our portfolio is as a hedge against currencies,” Zimmerman said.

[source]

by Julian Phillips
Wednesday, 20 Apr 2011 (Mineweb) — The attention of the gold world was grabbed by the action of a the University of Texas Investment Management Co. that switched their gold investments to bullion and actually took delivery of around 20 tonnes of gold in the form of 6,643 gold bars, then worth $987 million. It is now stored in a bank warehouse in New York.

This event was treated as remarkable in the United States. In Europe and nations east of Europe, the concept of holding gold bullion is more than normal, it is good sense. So, in a nation that is used to investing in gold derivatives, why has a leading U.S. investment fund turned to physical gold bullion registered in its name?

… The reason given was that the fund’s managers sought to take delivery of bullion to protect against demand for the metal overwhelming supply.

In a nutshell the advisor to the fund gave his reasons for buying gold in the first place. … “Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services. He said, “I look at gold as just another currency that they can’t print any more of.” With that in mind it becomes obvious that gold held in a *derivative* form is not really holding gold at all.

… the reality that there is far less gold available than the sum total of derivatives imply is becoming a market factor.

Overall the concept of the profit motive in gold markets is giving way to the concept of preserving wealth with physical gold bullion, a concept almost foreign to U.S. investors until now.

[source]

A cross section of reactions to gold’s extended, record-breaking run that pushed prices of the yellow metal through the psychological $1,500 level…

by R. Shen, N. Trevethan, C. Mogi, L. Pardomuan and S. Mayanker
Wednesday, 20 Apr 2011 (Reuters) —

Tetsu Emori, Astmax Co.: “Investors are focussing on gold’s nature as a safe asset and its universality, that it can be cashed anywhere at any time.

“Given that few countries in the world appear to be in a sound fiscal state nowadays, the focus is all the more put on safety, as reflected in the strength in gold not only in dollar but non-dollar currencies.

“Market price levels are less relevant now than in the past as investors are looking for what asset is relatively better than others, rather than looking at absolute levels and assessing whether their value is appropriate or not. The market has been rising steadily at a very good pace, neither overshooting nor plunging.

“Speculative positions are not as significant a factor as before, as ETFs are playing a much greater role, reflecting market consensus. Gold has further scope for an upside.”

Li Ning, Shanghai Cifco Futures: “We’ve seen gold rally rapidly in the short term, and may see some small correction coming. But the 10-day moving average around $1,480 should be a strong support level. Investors are still very worried about rising inflation globally, even as some governments have taken various measures to fight rising prices.

“Concerns about debt problems in developed economies heightened after Standard & Poor’s threatened to downgrade the U.S. credit rating. As a result, gold will remain well supported in the medium term as investors seek a safe haven to park their value.”

Yingxi Yu, Barclays Capital: “The environment does seem to have changed to a more gold-positive one, on the back of S&P threatening to downgrade the U.S. credit rating.

“Already we see increasing investor interest in gold, backed by a lot of uncertainties in what’s happening in the North Africa and Middle East region, Japan’s earthquake and its ultimate impact on the Japanese economy as well as increased risk to global economy arising from policy decisions as well as high oil prices.

“The investment sentiment will remain favourable.”

[source]

By Shayne Heffernan
April 20, 2011 (IBTimes) — Gold prices are up 5 percent in April and look set to extend gains as the metal’s appeal as a haven from risk was boosted by talk that Greece may have to restructure its debt and Standard & Poor’s threat to downgrade America’s triple-A credit rating.

HCM research has calculated that an inflation adjusted high for Gold should be $US2500 an ounce in 2012, that amount would be equivalent to the 1980 prices that resulted from global instability and inflation.

Worries about inflation had spurred steady physical demand from China, where the government has vowed to use all tools at its disposal, including bank reserve requirements, interest rates and the yuan’s exchange rate, to wrestle inflation under control.

Gold’s rise to record high only attracted light selling from Thailand and Indonesia, suggesting that investors remained bullish on the outlook.

[source]

Gold Clears $1,500 as Dollar Tumbles

Gold pushed decisively above the $1500 psychological barrier in overseas trading and silver has traded with a 45-handle for the first time in 31-years. Given the pace of recent gains, silver is arguably within striking distance of its all-time nominal high around $50. The metals have been bolstered by renewed weakness in the dollar, which tumbled to fresh 16-month lows.

Dollar losses are attributable to the recent shift in the S&P outlook for US debt from “stable” to “negative” and a growing expectation that nothing meaningful is going to be done about long-term deficit reduction until after the 2012 Presidential election. Arguably there is reason to be skeptical that anything will get done even after the election. Prospects of impending Fed tightening have essentially been dashed, which has prompted an unwind of long dollar positions that were premised on higher rates.

The worsening of the European debt crisis is having a counter-intuitively positive influence on the euro, which rebounded to a 15-month high against the dollar. This is reminiscent of the 2008 dollar rally that was driven by flight to the perceived safety of cash, at the expense of more traditional asset classes likes stocks and bonds. In Europe, it has primarily been flight out of periphery debt and banking shares amid rising concerns of a sovereign default for Greece and likely haircuts for bond holders, along with the realization that Ireland and Portugal may well be on the same path. There were rumors circulating earlier today that the now widely anticipated Greek default could come as early as this weekend.

EU investors are also worried that the gains of the True Finn party in this week’s election could endanger adoption of a permanent bailout facility. Recent electoral losses in Germany and France by are suggestive of populist rebukes of the pro-bailout stances of Chancellor Merkel and President Sarkozy. German Deputy Economy Minister Bernhard Heitzer has demanded that his ministry be included in crafting the details of the European Stability Mechanism (ESM), saying in a letter to the Finance Ministry; “The political and financial ramifications of the planned treaty make an early and comprehensive participation of the Economy Ministry both in the drafting of the ESM treaty as well as the planned increase in the lending volume of the EFSF absolutely essential.” In essence, the ESM is likely to have a negative impact on the German economy, so the Economic Ministry should have a say in what that ESM looks like.

One has to wonder what the more fiscally responsible members of the EU will be demanding from Portugal in return for a bailout, now that the Greek situation has made it glaringly obvious that a bailout is just a kick of the can down the road…and perhaps a surprisingly short kick at that. You may recall that Greece took a €110 bln EU/IMF bailout less than a year ago. With that in mind, it’s no wonder that anti-bailout sentiment is on the rise across core-Europe.

By Andrei Makhovsky

MINSK, April 20 (Reuters) – The Belarussian rouble lost more than a third of its value against the dollar on Wednesday after the central bank introduced a free floating exchange rate for trade between banks.

… Coming nine days after a bomb blast at a Minsk metro station that killed 13 people, the rouble’s fall against the dollar piled on the misery for the average Belarussian citizen who was promised better times ahead when Lukashenko was re-elected for a fourth term last December.

Bankers said the rouble on Wednesday plunged in value to 4,800 to 5,300 per dollar in trading on the interbank market. This compared with the official exchange rate of 3,074 roubles per dollar.

Dealers said demand for dollars on the market had surged after Belarus dropped restrictions on the rate used by banks and companies on Tuesday, opening the door to a partial devaluation of the currency.

“There is a lot of delayed demand (for dollars),” one trader said.

… While ordinary citizens in theory can exchange roubles at the official rate, the reality is that supply of dollars from official exchange points has dried up…… Belarus has lost a quarter of its foreign currency reserves this year, trying to support the rouble as its current account deficit soared, partly under the impact of high pre-election spending late last year.

… In past weeks, as the supply of dollars has run out, Belarussians have been queuing for hours at exchange points to acquire whatever foreign currency was available.

[source]

RS View: In the short term, the people’s migration from Belarus rubles into U.S. dollars may feel like a successful hop out of the frying pan and into the relative safety of the woodpile, but that, too, is descending into flames. The would-be saver must stay very light on his toes until such time as he settles safely into the cool comfort of gold.

by Jan Harvey and Nick Trevethan
April 20, 2011 (Reuters) — Gold has long been seen as the ultimate haven from risk. During the financial crisis that rattled markets in 2009 and 2010 it was heavily bought on that basis, but its rally has since taken on a momentum of its own.

While gold investors in Western markets have been motivated chiefly by risk aversion in recent years, the precious metal is a much more deeply established asset in Asia. India and China are by far the world’s biggest bullion consumers.

While buying of largely Western-based bullion-backed exchange-traded funds has tailed off this year, the slack in demand has been picked up by investors in bullion bars and coins, particularly in the Indian and Chinese markets.

Buying in those countries is being fuelled by rising consumer incomes and higher inflation, against which gold is traditionally seen as a hedge. Both China and India reported higher than expected inflation last week.

… “Although in the developed world signs of inflation are preliminary, expectations of rising prices are increasing,” said Ben Westmore, an analyst at National Australia Bank. “Buying physical commodities, which traditionally are a good store of value, would be wise if you are in the camp that believes expanded monetary policy is likely to fuel inflation.”

[source]

April 20, 2011 (IBTimes) — [Spot] Gold shot above $1,500 an ounce on Wednesday for the first time ever as worries over the outlook for the U.S. economy boosted the metal as a safe haven, while rising inflation lifted Asian demand. Spot gold hit a high of $1,505.40 an ounce and was bid at $1,502.96 an ounce at 1224 GMT, against $1,493.90 late in New York on Tuesday.

Silver hit a 31-year high at $44.79 an ounce … The gold:silver ratio — the number of silver ounces needed to buy an ounce of gold — meanwhile fell to its lowest since 1983 at 33.8. “The last time silver was this expensive in relation to gold was almost 28 years ago,” said Commerzbank in a note.

… “Gold has been acting as a currency in its own right, and that is why we are up at $1,500,” said Simon Weeks, head of precious metals at the Bank of Nova Scotia. … While investors in the United States and Europe are seeing the metal chiefly as a safe store of value and a hedge against currency devaluation, stronger inflation and rising consumer incomes in China and India are also boosting demand there.

“The theme of longer term higher inflation than we have seen in the last 10 years in China is a pretty solid view, so gold is going to be an asset class that is probably going to be more in favor in China than it has been in the past,” said Macquarie analyst Hayden Atkins.

… In the short term, losses in the dollar on Wednesday are supporting the precious metal above $1,500 an ounce. The euro surged to its highest in 15 months against a weaker dollar on Wednesday, boosted by better risk appetite and after a bond auction from Spain was well received by investors.

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Gold has pushed convincingly above the $1500 level, establishing a new record high at 1505.34. Silver continues to charge ahead with a new 31-year high set at 44.79. The metals have been boosted by a collapse in the dollar to new 16-month lows.

Investors continue to dismiss the debt threat in the eurozone periphery, and all of the recent losses in the euro stemming from expectations that Greece will have to default have been retraced.

The highest fix yet in the Chinese yuan is also weighing on the dollar. PBOC deputy governor Hu Xiaolin said China needs to strengthen the flexibility of the yuan to help ease the pressure of imported inflation. This and other yuan supportive rhetoric has prompted speculation of a revaluation.

by David Levenstein
Tuesday, 19 Apr 2011 (Mineweb) — As gold continues to make new record highs, there are many analysts scratching their temples trying to understand what is going on. And, as I have mentioned many times in the past, many of these analysts are stock brokers, financial advisors, accountants and other geniuses. Some of them even have a string of academic qualifications behind their name. But, what has this got to with the gold. The answer is absolutely nothing. And, this is one of the problems facing individuals who are interested in investing in precious metals, in particular gold and silver. … While many of these analysts are brilliant when it comes to evaluating stocks, most of them have no knowledge about the actual physical markets for gold…

… in their confused state, these analysts have failed to make the important distinction between gold mining shares and the reason why someone would want to buy physical gold. And, the majority of these advisors are only familiar with the modern day fiat currency system with some vague understanding of gold. Yet, it is these individuals who proffer advice on investing in gold. If you break your leg, do you go to the nearest library and ask the librarian on duty to help you by looking up the relevant procedure from some medical journal? Or do you go to your doctor? The same applies with investing in precious metals. If you want to know more, go the people who are the experts in this field and not someone who has no idea of what is going on. When it comes to understanding gold it is important to have a knowledge and understanding of money…

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By Claudia Assis and Sue Chang
April 19, 2011 (MarketWatch) — Gold futures closed at a record Tuesday after bouncing off $1,500 an ounce, getting a lift from a weaker dollar and longer-running worries about debt-strapped developed markets.

… Gold for June delivery ended up $2.20 an ounce, or 0.2%, at $1,495.10 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, gold rallied as high as $1,500.50 an ounce, according to the CME Group website, an intraday record for the metal.

Prices had dipped in and out of the red before floor trading began and continued to waver early in the session. But investors, particularly long-term buyers, have shown a tendency to take advantage of short-term pullbacks, noted Bill O’Neill, managing partner at Logic Advisors. “On every dip, trade is consistently buying on weakness,” said O’Neill.

… For some buyers, a main reason to invest in gold is the fear that government debt is spinning out of control, lowering the value of the dollar or other major reserve currencies, such as the euro.

… Silver continued to rally to 31-year highs, with the May contract adding 96 cents, or 2.2%, to $43.91 an ounce.
… Palladium and platinum closed lower, with July platinum off $11.50, or 0.7%, to $1,771.30 an ounce.
… Palladium for June delivery retreated $8, or 1.1%, to $731.10 an ounce.

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By Pham-Duy Nguyen
April 19 (Bloomberg) — Gold futures rose to a record $1,500.50 an ounce as U.S. debt concerns weighed on the dollar, boosting demand for the precious metal as an alternative investment. Silver surged to a 1980 high.

… “The bullish trend becomes pronounced as more and more people get out of the dollar to buy hard assets,” said Lim Chae Myung, a Seoul-based trader with Hyundai Futures Co.

Read more: http://www.theage.com.au/business/markets/gold-touches-record-as-debt-worries-drag-on-us-dollar-20110420-1dnr1.html#ixzz1K0ZORywy

The greenback dropped against the euro on speculation that the European Central Bank will continue to raise borrowing costs as some nations struggle to contain sovereign debt. … The ECB this month raised its main rate to 1.25 percent from a record 1 percent to stem inflation.

The U.S. Treasury Department projected that the government may reach the $14.3 trillion debt-ceiling limit as soon as mid-May and run out of options for avoiding default by early July.

The Federal Reserve has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 and has pledged to buy $600 billion in Treasuries through June to stimulate growth.

… “There certainly has always been that lingering concern over U.S. debt and the S&P people are finally identifying the threat,” said Stephen Platt, an analyst at Archer Financial in Chicago. “The world is awash in liquidity. Gold’s slow, grinding action upward shows the deterioration in the dollar, excess liquidity and deficit problems are still in force.”

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Yesterday’s big news wasn’t really news at all. Standard and Poor’s finally found the nerve to state openly what the rest of the world already knew: the Emperor is naked.

The esteemed ratings service announced that America risks losing its triple-A credit rating. “We believe,” said S&P, “there is at least a one-in-three likelihood that we could lower our long-term rating on the US within two years.”

Officially, America remains the world’s preeminent triple-A credit. Unofficially, America’s triple-A credit is a financial Potemkin Village. It is all façade. The US lost its triple-A credentials years ago, but the rating keeps hanging around – a function of tradition, decorum, politics and complacency.

Behind America’s triple-A façade, its creditworthiness steadily deteriorates.

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PG View: The author of this Christian Science Monitor piece makes the comparison between the US’s AAA rating and Greece’s junk status, noting one critical difference: “The Greeks cannot print the euros they need to repay their debts, but Americans can, and do, print the dollars they need to repay their debts.” That’s the same critical difference I pointed out in this morning’s Daily Market Report.

By Shanthi Bharatwaj
04/19/11 – 12:44 PM EDT (TheStreet ) — Gold prices hit the psychological mark of $1,500 an ounce — an all-time high — in Tuesday afternoon trading, helped by a weaker dollar.

The gold contract for June delivery was last trading up $3.8 at $1496.70 an ounce, off its high of $1,500.50 an ounce.

Silver prices for June delivery were surging 68 cents to $43.65.

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by Debra Borchardt
Tue 04/19/11 (TheStreet) – - Mihir Dange, gold options trader for Arbitrage LLC is seeing thousands of calls being bought in the $1800 to $2000 region.

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Forget the US Debt Rating, The Greater Risk is to Our Currency

Gold has edged closer to the psychologically important $1500 level today. The new all-time high in the yellow metal now stands at 1499.15. The most recent upside extension was largely associated with S&P’s downgrade to its outlook on US debt to negative. While the long-term US sovereign debt rating remains at a “risk free” AAA, by changing its outlook from “stable” to “negative,” S&P indicated “there is at least a one-in-three likelihood that we could lower our long-term rating on the U.S. within two years.” S&P credit analyst Nikola Swann went on to add that, “The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term fiscal challenges will persist until at least after national elections in 2012.”

While there is a slight chance that the S&P outlook may prove to be a much needed wake-up call to our policy makers in Washington, I too find myself doubtful that the wide ideological chasm between the two competing budget/defict-reduction proposals can be overcome with the 2012 Presidential campaign already starting to ramp-up. I do however think the uptick in chatter about a potential US default is misplaced. Paul Donovan of UBS appropriately dismissed the notion of a US default, saying, “The US can print its own money, and the cost of printing is less than the cost of default.” Why would we default when we can simply print dollars to meet any obligation? The ability to create an unlimited amount of dollars ex nihilo technically means our creditworthiness is unassailable, worthy of a AAA rating.

However, make no mistake, reckless expansion of the money supply to service the ongoing reckless expansion of our debt has its own terrible implications. Yet — as I’ve expressed in past reports — this is the path of least resistance, allowing the government to confiscate wealth across the entire socioeconomic spectrum without Congress having to make any hard or unpopular choices. In fact they don’t have to legislate anything. They don’t have to raise taxes, impose austerity or reform entitlements. They simply have to stealthily allow the dollar to continue on its long-term trajectory and let inflation do the dirty work. Recent hints that the Fed will not only maintain its zero interest rate policy (ZIRP), but may also continue with quantitative easing beyond June — despite rising inflation pressures — is reflective of this reality.

One need look no further than the long-term dollar chart to see that America has a long history of racing down this path. Arguably this has contributed to a host of social ills, as Americans struggled to maintain their lifestyles in the face of rising prices and stagnating wages. However, as a recent Time – The Curious Capitalist piece points out, there are broader global implications in terms of widening imbalances and destabilization of the world’s financial system.

The long-term uptrend in gold is also reflective of the dollar realities. As the greenback — and other fiat currencies for that matter — come under increased pressure in a world of competitive devaluations, ZIRP and QE, the need for a reliable store of value is only going to intensify. Gold has been that store of value for thousands of years and may well continue to serve that role for thousands more.

by Yuras Karmanau
Tuesday, April 19, 2011 (Associated Press) — Cash-strapped Belarus announced Tuesday that it would allow its beleaguered national currency to float, effectively permitting its devaluation in a bid to ease a spiraling currency crisis.

… The government’s hard currency reserves plunged 20 percent in the first two months of the year to less than $4 billion, and staples such as vegetable oil and sugar started vanishing from stores as people started to hoard.

Starting next week, banks will be able to buy and sell the Belarusian ruble at a rate determine in open trading, Central Bank deputy chief Nikolay Luzgin said, adding that the government will “take extra steps to balance the situation on the domestic currency market” after next week’s trading.

The U.S. dollar stood at 3,074 Belarusian rubles on Tuesday. Stanislav Bogdankevich, former chief of the Belarusian central bank, told The Associated Press that he expects the ruble to drop by one-third after the float.

… Even before the announcement, frightened citizens had been lining up for hours in the past few weeks to exchange their rubles for euros and dollars.

… “Belarus was living beyond its means…”

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RS View: Given the international hodgepodge of currency management regimes, necessary realignments (usually devaluations) of national currencies can crush the misplaced hopes of citizens in any corner of the world who took inadequate measures to consolidate their life savings safely in the form of physical wealth such as gold and other tangibles which abide outside of the etherial monetary system’s realm of broken promises.