By Myra P. Saefong and Chris Oliver
April 26, 2011 (MarketWatch) — Gold futures fell Tuesday to end an eight-session winning streak as a climb in consumer confidence and upbeat earnings reports helped feed gains in the U.S. stock market. Prices, however, staged a partial recovery to finish above $1,500 an ounce. … Gold for June delivery closed down $5.60, or 0.4%, at $1,503.50 an ounce on the Comex division of the New York Mercantile Exchange. Prices had traded as low as $1,492 after the U.S. Conference Board reported a climb in the consumer confidence index.

In Monday’s session, June gold closed at a record $1,509.10. That was gold’s sixth consecutive high-water mark and its eighth straight day of gains. During the winning streak, prices gained $55.50 from the April 12 closing level of $1,453.60.

In a review of last week’s trading, which saw strong gains for both gold and silver, analysts at GoldForecaster.com said, “it is clear that gold is neither spiking nor raging. It is being ‘re-evaluated’ in a dramatically changing market.”

“Add burgeoning Asian demand that buys to hold, central bank demand that ‘buys the dips’ and you are seeing a runaway price with only short sharp corrections,” they said.

Strategists remained mostly upbeat over the prospects for gold and silver going forward. … But July platinum ended down $22.70 at $1,805.40 an ounce and June palladium lost $5.10 at $755.70 an ounce. “Platinum has been the forgotten metal during the run-up in precious metals prices, as investors have instead focused on gold and silver,” said Rob Kurzatkowski, senior commodity analyst at OptionsXpress. “That is understandable, as investors do not see the metal as a pure currency like gold.”

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by Frank Holmes
Tuesday, 26 Apr 2011 (Mineweb) — … we emphatically believe the bull cycle for gold still has a long way to run. Last week, one of my fellow presenters at the Denver Gold Group’s European Gold Forum was Dr. Martin Murenbeeld from Dundee Wealth who put the notion of a “gold bubble” in context with the following chart.

If you compare the current bull cycle for gold against gold’s run from the 1970s and 1980s, you can see that today’s run has been slow and steady. It’s also missing the sharp spikes typical of a bubble.

… One of the things we recently pointed out was the effect money supply growth can have on gold. Dr. Murenbeeld also presented this fascinating chart showing how much gold would need to increase in order to cover the amount of money that has been printed since gold was revalued at $35 in 1934. Using that as the cover ratio, gold would need to climb all the way to $3,675 an ounce to cover all paper currency and coins. If you use a broader-and more common-measure of money (M2), gold would need to rise all the way to $7,931 in order to cover the outstanding amount of U.S. money supply.

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By Paul R. La Monica
April 26, 2011 (CNN|Money) — McDonald’s, Hershey and Coca-Cola all announced new price hikes or reiterated previous increases in their latest quarterly earnings reports over the past few days. The reason is obvious. Commodities are running amok.

It’s costing restaurants and food makers a lot more money to produce or buy food as the price of cattle, wheat, sugar, corn and just about every other agricultural commodity has surged in the past year. And even though the Federal Reserve may think that higher commodity costs are “transitory” — which is the econobabble way of saying “Don’t worry about it!” — companies aren’t so sure. That could be bad news for consumers, who are already coping with soaring gasoline prices.

Along those lines, airlines are also boosting prices to deal with surging energy costs. Delta, which reported a quarterly loss Tuesday, was still able to post an increase in sales thanks to “domestic fare increases and international fare surcharges as a means of passing through fuel costs to its customers.”

… But higher prices may not help the Cokes, Mickey D’s and Delta of the world that much longer. If consumers get scared off by rising prices, the fact that profit margins may remain stable may be small consolation to investors if demand starts to wane.

“It’s impossible for corporations to pass on all their input costs to consumers,” said John Norris, managing director with Oakworth Capital Bank in Birmingham, Ala . “If they could, nobody would ever go out of business.”

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By Jeremy Grantham
April 26, 2011 (InvestmentNews) — The purpose of this, my second (and much longer) piece on resource limitations, is to persuade investors with an interest in the long term to change their whole frame of reference: to recognize that we now live in a different, more constrained, world in which prices of raw materials will rise and shortages will be common.

Accelerated demand from developing countries, especially China, has caused an unprecedented shift in the price structure of resources: after 100 hundred years or more of price declines, they are now rising, and in the last 8 years have undone, remarkably, the effects of the last 100-year decline! Statistically, also, the level of price rises makes it extremely unlikely that the old trend is still in place. If I am right, we are now entering a period in which, like it or not, we must finally follow President Carter’s advice to develop a thoughtful energy policy and give up our carefree and careless ways with resources.

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RS View: One of the most egregious examples of such carelessness has been the prevalent use of derivative-influenced pricing within the resource markets. As I’ve previously made the larger point here, a quick summary may suffice: A basic review of economics and market principles reminds us that free price movements are the necessary swing point upon which physical supply and demand can be balanced. A mere discounting of the price/value of commodity derivatives amounts to little more than a cheap parlor trick — a trick which, although creating a nice illusion of cheap prices, completely disregards the physical supply/demand pricing balance and thus sets the stage for shortages and other dire dislocations of the physical supply/demand dynamic.

26 April, 2011 (FinExtra) — The US Treasury is embarking on a publicity campaign ahead of its upcoming move to switch off paper cheques as a payment method for social security and other federal benefits in favour of electronic methods.

Beginning on 1 May, anyone newly applying for Social Security or other federal benefits will need to choose an electronic payment method. People currently receiving their federal benefits by cheque will have to switch to direct deposit by 1 March, 2013.

… Speaking at an event where she ceremonially ‘signed’ a $1 billion cheque to taxpayers, Treasurer Rosie Rios, said: “It costs 92 cents more to issue a payment by paper check than by direct deposit. We are retiring the Social Security paper check option in favor of electronic payments because it is the right thing to do for benefit recipients and American taxpayers alike.”

[source]

April 26, 2011 (China Daily) — The central bank is planning new investment funds to diversify holdings in the nation’s $3 trillion foreign exchange reserves, to hedge against depreciation and inflation risks, according to a news report.

The proposed funds will invest some of the foreign reserves in energy and precious metal markets, the New Century Weekly said on Monday, citing unnamed sources close to the People’s Bank of China. However, the report did not disclose the size of the proposed funds, their operation methods or the timing of their possible launch. The central bank was not available for comment.

… “This is a positive way to diversify investment risk, especially as China holds such large amounts of US debt,” Xu Hongcai, a finance professor at the China Center for International Economic Exchanges, told China Daily.

While China has been slashing its US debt holdings since October, it still remains the largest creditor. At the end of February, China held $1.15 trillion of US debt, down $600 million from the previous month. US debt, once considered gilt-edged, is becoming increasingly risky.

… Earlier this month, Zhou Xiaochuan, the central bank governor, said China’s foreign exchange reserves had exceeded a “reasonable” level and the management and diversification of the holdings should be improved.

[source]

Corrective Dips Attract Physical Buying Interest

Gold is maintaining a mildly corrective tone after establishing a new all-time high at 1518.00 on Monday. Silver nearly reached its all-time nominal high of $50 before succumbing to corrective pressures that drove the market down more than 10%. There has been strong physical buying interest on this pullback. Monday was probably the busiest day here since right before the Greek bailout, about a year ago. Buyers are increasingly keen on precious metals as portfolio diversification, a hedge and a store of wealth amid worsening debt situations both in Europe and here in the States.

I saw the headline this morning ‘Greece budget deficit worse than thought‘ and I thought, ‘now there’s a headline that seems to appear with some regularity.’ Greece’s 2010 budget deficit was revised to 10.5% of GDP, well above the 8% target and significantly higher than the previous estimate of 9.6% of GDP. How does this surprise anyone any more? Obviously this latest revision further intensifies talk that a Greek default and restructuring is in the offing. The euro sold-off modestly, but quickly recovered as this inevitability seems largely priced into the market. Even German Chancellor Merkel now seems to be conceding that Greek debt must be restructured. One of her aides told Bloomberg today that “Greece should restructure sooner than later.”

Persistent strength in the euro continues to weigh on the dollar, despite assurances by Treasury Secretary Tim Geithner this morning that, “Our policy has been and will always be, as long as I will be in office, that a strong dollar is in the interest of the country.” Strong against what Mr. Geithner? The dollar just hit a new all-time low against the Swiss franc today and the dollar index recently fell to new 32-month lows, just 4.5% off its all-time low. Geither told a conference organized by the Council of Foreign Relations, “We will never embrace a strategy to weaken the dollar.” You don’t have to “embrace” a weak dollar to appreciate how effectively it can inflate away debt, stealthily confiscating wealth from rich and poor alike without Congress having to legislate neither tax hikes nor austerity.

That leaves the fate of the economy largely in the hands of the Fed, whose Federal Open Market Committee will meet beginning today to determine Fed policy going forward. The Fed is widely expected to hold steady on interest rates near 0% and restate its commitment to see QE2 through until the end of June. However, confirmation of the double dip in housing courtesy of today’s Case-Shiller home price data provides a conundrum for the Fed. Home prices for both the 20 and 10 cities indexes fell 1.1% in Feb, leaving prices near their 2009 lows. If the Fed starts removing accommodations at the end of June, it is likely to result in upward pressure on mortgage rates, which will further erode already tepid demand. Home prices will have to then fall even further to find willing buyers.

Gold is modestly lower, on the mend from a deeper correction overseas. The correction in silver was a full 10%, from yesterday’s high at 49.77 to the overnight low at 44.62. Silver has since probed back above 46.00. There continues to be strong physical buying interest on dips.

The dollar remains under pressure as policy-makers in Washington dig in their heals and gird for battle on the debt ceiling. In this high stakes game of chicken, the parties will seek to gain budgetary concessions from the other, using our sovereign debt rating as leverage.

FOMC meeting begins today, with the policy statement and Chairman Bernanke’s first presser slated for tomorrow.

The situation in Syria is deteriorating, as UK Foreign Secretary Hague warmed that Britain and its allies must prepare for the “long haul” in Libya.

Greece’s 2010 budget deficit has been revised to 10.5% of GDP, well above their 8% target and worse than the previous estimate of 9.6% of GDP. The euro is recovering from earlier losses, despite rising expectations that a Greek default is in the offing.

By Claudia Assis and Chris Oliver, MarketWatch
April 25, 2011 (MarketWatch) — Gold settled at a record and silver rallied 2.4% Monday as inflation fears kept investors attracted to precious metals, which were also helped by a weaker dollar.

Gold for June delivery added $5.30, or 0.4%, to end at $1,509.10 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, it hit an intraday record of $1,519.20 an ounce. That was gold’s sixth consecutive high-water mark and its eighth straight day of gains.

May silver rallied $1.09, or 2.4%, to $47.149 an ounce. It had traded as high as $49.82 an ounce.

… Investors booked some profits in both metals Monday, said Bart Melek with TD Securities in Toronto. For silver, “the trajectory might be too steep,” bringing to some investors’ minds an asset bubble, Melek added.

… Meanwhile, news reports in China said Beijing is considering the setup of an investment fund targeting sectors such as energy and precious metals, as well as a special fund geared toward foreign-exchange stabilization…. The fund would be structured to intervene in the foreign-exchange market and buy foreign-currency notes without the government having to print new yuan-denominated currency notes, the report said.

The reports said the central bank’s balance sheet would also be extended to support investment in precious metals and other commodities.

[source]

by Jim Cramer
April 25, 2011 (TheStreet) — I think gold has to be an integral part of every portfolio. I have been saying that for about five years now, and I mean it. You have to have it. It has to be part of your diversification, because it is both a currency and a commodity.

Here’s the problem, and it is a real high-quality problem: If you have been listening to me, you are struggling right now with the size of your gold position. I think it should be up to 20% of your portfolio. But for some of us — like in my retirement plan — gold is now 30%. It has just moved up. It is too big. It is now the swing factor. Now I don’t mind that it is so big. There are plenty of places that are worse than gold.

… gold has outperformed all assets in the last decade — all of them — in both high and low interest rates, so don’t expect too big a downturn. Way too many people want in, and way too many have too little exposure. No wonder it keeps going higher!

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By Paul R. La Monica
April 25, 2011 (CNN|Money) — The dollar is getting weaker by the day, and while that may be a plus for the earnings of multinational firms like IBM, Coca-Cola and Procter & Gamble, that’s not good news for many consumers.

The greenback is now trading around $1.46 versus the euro. To put that into context, the once-mighty U.S. currency is now only about 9% above the all-time low it hit against the euro back in July 2008.

… “It is plausible that the dollar will hit another all-time low against the euro. Conditions do not appear to be very encouraging for the U.S. currency,” said Vassili Serebriakov, currency strategist with Wells Fargo in New York.

… “There is no greater indicator of the health of a nation’s economy than its currency,” said Anthony Welch, co-manager of The Currency Strategies Fund, a mutual fund in Sarasota, Fla. specializing in foreign exchange investments. “Fed policies are keeping the dollar down and the world is growing increasingly worried about the debt situation in the U.S. That’s all there is to it,” Welch added.

… It’s a bit odd that one of the primary reasons cited for dollar weakness is the concern about how bad the debt problems could get in the U.S. At the same time, the euro has rallied despite many current problems across the pond.

… James Dailey, manager of the TEAM Asset Strategy Fund added that the problem with currencies — as opposed to stocks and bonds — is that it’s almost impossible to put a hard value on them. That’s another reason why precious metals, a tangible currency alternative, have been rallying.

“…currencies are not normal markets. They are, for the most part, purely faith-based.” And while Dailey said that there is a good chance the dollar could soon enjoy a sharp rally, it’s not hard to envision the exact opposite scenario unfolding.

“As weak as the dollar has been, it’s been an orderly decline,” he said. “We need stabilization soon or there could be growing concerns that the sell-off will turn into a full-blown crisis.”

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by Julian Phillips
Monday, 25 Apr 2011 (Mineweb) — Some months back we pointed out that in their present form, banks had become the arteries and veins of the financial worlds with central banks the heart. Unfortunately, banks are driven solely by the profit motive. As they grew into every aspect of people’s financial lives, they failed to take on the corresponding social responsibilities that came with it.

The result is that when their greed went too far and the banking system was threatened with collapse, they had to be bailed out by their customers at the retail level, the taxpayers. Since then, they have recovered but are not vibrantly underpinning the economies in which their customers are based to promote a recovery.

Still, their total thrust is for profits, meaning that there is just not enough banking support to invigorate developed world economies. Worse still, the public perception of bankers has been eroded so far, it’s common to hear them described as ‘banksters.’

… We are of the opinion that there is little chance of bankers moving away from the profit motive or of lawmakers enforcing social responsibility on bankers.

What is remarkable in the last few years has been the increasing visibility of the actions of bankers and the very public loss of reputation. How long will it take for developed world investors to turn away from their financial systems as Indian investors have done for so many decades and use cash and gold and property in an ‘alternative’ financial system?

… Most importantly, gold and silver bullion, by itself, are places to escape dishonesty and all the common, unethical, core practices of the financial system. Precious metals don’t lie, cannot be unethical, do not have conflicts of interest but are respected by all their investors, whatever the state of these investor’s own morality. So long as this situation persists in the banking world, gold and silver will be bought as long-term money and honest investments.

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25 April, 2011 (RT) — … Bank of Moscow analyst, Yuri Volov, believes investors will remain bullish for gold with confidence in the regulatory framework of the global financial system weakened, and says the price will go higher:

– “Gold is the only attractive alternative to protect investor’s money from depreciation. In the current economic situation the gold prices are rising, reflecting economic volatility and instability. Gold is more or less independent from currency fluctuations which gives it advantages. Lest you forget, all developed economies have at least part of their reserves in gold for protection. All regulatory measures and decisions pushed by the governments look uncertain….”

Dmitry Balkovsky, Head of Goldenfront.ru, said that the economic value of money is decreasing and gold could become a more significant reserve currency globally. He sees gold continuing to firm until well into next year with the world still lacking clear signs that a global economic rebound is sustainable:

– “The Price of gold is a mirror of macroeconomic stability and the price increase shows a lack of confidence in money and governments that print it. …… Gold is a tremendously attractive by all means. It has been used for decades in the past as a robust regulatory instrument maintaining all economic relations. Today this precious metal economic value can be successfully applied to regulation policy and revitalize our economy. Unless major developed economies get rid of gold reserves gold will continue to grow in value and the price can reach $1800 in he 1Q 2012.”

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by Alix Steel
4/25/2011 (TheStreet) — Gold and silver prices were in for a bumpy ride Monday as profit taking and a recovering U.S. dollar capped recent highs. Gold for June delivery was adding 80 cents to $1,504 an ounce at the Comex division of the New York Mercantile Exchange. Gold was backing off from its recent record of $1,518.

… Silver prices had been close to conquering their record high of $50 an ounce Monday, adding as much as $3.03 to $49.10 an ounce. This 6% daily move for silver was sizable, and silver couldn’t hold it, currently trading down 12 cents to $45.93 an ounce.

As the metal approached $50, buy orders were triggered where traders automatically bought silver at a pre-determined price, but the steep move, also ignited profit taking. Also putting pressure on silver were traders betting against the metal’s recent rally.

… Although technical trading was playing a big factor Monday, a weaker U.S. dollar has been the most recent catalyst. The U.S dollar index is 0.04% lower at $74.08, recovering from a deeper selloff earlier this morning which added to volatility in the metals. Low volume was also exaggerating price swings as the London market was closed.

The dollar has been suffering recently as investors worry the U.S. government won’t be able to control rising debt and that the currency will continue to lose value.

… The dollar’s recent slide has also prompted China to hint at diversifying its reserve holdings away from the dollar. The state owned newspaper, Xinhuanet.com, reported that the chairman of China Everbright Group, Tang Shuangning, said “the amount of foreign exchange reserves should be restricted to between $800 billion to $1.3 trillion US dollars.” As of February 2011, China lent $1.2 trillion to the U.S. alone.

If China reduced its foreign exchange reserves, gold and silver would be leading candidates to take their place.

[source]

By Rujun Shen
Mon Apr 25, 2011 (Reuters) SINGAPORE — Spot silver surged more than 5 percent to above $49 ounce on Monday, buoyed by a weak dollar and strong physical demand in Asia that also propelled gold to a record high for a seventh consecutive session.

… Spot silver broke through resistance at $48 per ounce. That triggered some automatic buying, analysts said.

“As the market edged higher, a series of stop-loss buying was triggered, especially after silver rose above $48,” said Yuichi Ikemizu, Tokyo branch manager of Standard Bank. Technical analysis showed silver could be headed towards $54.78 per ounce, said Wang Tao, a Reuters market analyst. Buying interest in physical silver has jumped in markets from China, India to the Middle East.

“Everyone wants a piece of silver, right from a cab driver to a professional,” said Harshad Ajmera, proprietor of Kolkata-based JJ Gold House in India, “It looks like the whole of one billion population is chasing silver.”

For retail consumers, silver at near $50 an ounce is still a lot cheaper than $1,500 gold, but for investors, silver is more expensive relative to gold than it has been for more than three decades.

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By Pham-Duy Nguyen
April 25, 2011 (Bloomberg) — Silver and gold surged to records in London on speculation that China will buy precious metals to diversify its foreign-exchange reserves.

China, with more than $3 trillion in reserves, plans set up new funds to invest in energy and precious metals, Century Weekly magazine reported, citing unidentified people. Silver for immediate delivery surged to a record $49.79 an ounce, and [spot] gold reached $1,518.32 an ounce. … Gold futures for June delivery rose $7.60, or 0.5 percent, to $1,511.40. Earlier, the metal climbed to a record $1,519.20.

“People are expecting China to be a major buyer of precious metals,” said Adam Klopfenstein, a senior strategist at Lind-Waldock in Chicago. “Gold is piggybacking on silver. You’re seeing a blowoff rally in silver, but we don’t know when the bubble gets popped.”

… Before today, spot silver more than doubled in the past year, while gold increased 32 percent.

“Silver in the long run really will end up in a bloodbath, but in the short term, the market loves it,” Dominic Schnider, a Singapore based director of wealth-management research for UBS AG, said today in a Bloomberg Television interview. The commodity’s relative-strength index, which may signal a decline above 70, was over 89.

… “Silver is definitely benefiting from spillover demand from gold as a haven investment,” said Li Ning, an analyst at China International Futures (Shanghai) Co.

[source]

4/26/2011 (Korea JoongAng Daily) — An increasing number of Korean bank depositors are putting their money into foreign-currency denominated deposits or gold-buying deposits this month, data showed yesterday, pointing to a growing appetite for safe assets. … The rise came as customers try to put their money into such deposits when the value of the dollar remains weak.

The Korean currency, which hit a 32-month high to the dollar last week, has risen about 5 percent against the dollar since the start of this year. The won is widely expected to rise further against the dollar, aided by robust exports and sustained inflows of foreign capital.

… As the dollar has slid against major currencies amid the U.S. Federal Reserve’s soft monetary policy, gold has extended its rally, sending the price of the precious metal above $1,500 per ounce.

The risks of global inflation are raising expectations that the price of gold might rise as an instrument to hedge inflation risks, market experts say.

Demand for gold-buying deposits in Korea has risen, reflecting the popularity of gold as a form of investment, industry watchers said.

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Gold Marches Higher as Fed Prepares to Meet…and Speak

Gold established a new record high at 1518.00 in thin overseas trading, led higher once again by silver, which moved within 25¢ of its all-time nominal high of $50.00. Silver has since come under corrective pressure, driven by profit taking ahead of Tuesday’s options expiration. A mix of expectations over the outcome of this week’s FOMC meeting and Fed chairman Bernanke’s first post-FOMC presser on Wednesday has heightened uncertainty.

While it is widely believed that the Fed will hold interest rates steady near 0% — and is likely maintain its ‘extraordinary/extended’ language — there is mounting expectations that Bernanke will indicate QE2 will be allowed to terminate on schedule at the end of June. I would anticipate that Bernanke will leave his options open though, couching with “as economic conditions warrant,” or something to that effect. It is unlikely that the Fed will initiate any action to start draining liquidity from the system and I would argue that there is a good chance that the Fed will at least be reinvesting the proceeds of maturing debt — a new QE-lite campaign — before all is said and done.

Since the Fed has a new unofficial third mandate of supporting the stock market, many believe equities will be the barometer the Fed uses to determine what liquidity measures will look like in H2. If interest rates surge and stocks tank upon the removal of Fed accommodations, it is unlikely that the Fed will sit idly by and allow it to happen. So far, the reviews of Fed efforts have been less than flattering, yet given that legislative gridlock is expected to impede any meaningful fiscal reform, it seems unlikely that the Fed will be completely throwing in the towel on monetary policy any time soon.

The most interesting aspect of this week’s FOMC meeting is that Chairman Bernanke will be holding his first press conference to address media questions about the policy statement. The ECB has been doing it this way for years and much more is divulged in the presser than is revealed in the written policy statement. Bernanke has been grilled by members of the House and Senate, so I wouldn’t expect him to have any problem with the financial press. What will be telling though, is the caliber of the questions posed by the press and how evasive or forthcoming Bernanke is with his answers.

Gold extended higher in thin overseas trading to set a new record high at 1518.00, while silver reached a new 31-year high of 49.77, within 25¢ of the all-time nominal high of $50. The metals are being driven higher by a host of fundamental factors, but a weak dollar and inflation worries remain at the forefront.

Some had speculated that a restructuring of Greek sovereign debt could happen as soon as this past weekend, but that did not come to pass. The ECB’s Stark said “a restructuring would be short sighted and bring considerable drawbacks.” Of course not restructuring brings considerable drawbacks as well, particularly for the Greek people.

The escalation of violence in Syria against anti-government protesters has prompted strong rebukes from the international community. The US is considering sanctions against the Assad regime. Meanwhile, violent clashes continue in Yemen, despite a pledge by President Ali Abdullah Saleh that he will step down in 30-days. If this happens, he would be the third regional authoritarian leader to be forced from power, which could further embolden protesters in other countries.

By Sungwoo Park and Jae Hur
April 22, 2011 (Bloomberg) — Gold advanced for a third week as a weaker dollar and debt concerns boosted the metal’s appeal as an alternative investment. Silver gained to the highest level in 31 years.

Gold for immediate delivery rose 1.4 percent this week and was little changed at $1,506.85 an ounce at 6:48 p.m. in Paris after climbing to an all-time high of $1,512.47 earlier today. June-delivery futures touched a record $1,509.60 yesterday on the Comex in New York, the 10th all-time high this month. The exchange is closed today for the Good Friday holiday.

“The weak dollar is having the most influence on gold at the moment,” said Chae Un Soo, a Seoul-based trader at Korea Exchange Bank Futures Co. … The dollar slid to the lowest level since August 2008 against a basket of six major currencies this week on speculation that the U.S. Federal Reserve will be slow to raise borrowing costs.

… Standard & Poor’s this week cut its debt outlook for the U.S. to negative from stable. Violence in the Middle East, sovereign-debt turmoil in Europe and Japan’s nuclear crisis have helped propel bullion 31 percent higher in the past year.

[source]

by Clancy Yeates
April 22, 2011 (WAToday/AU) — Norway’s got one, so does Chile. For decades, the oil-rich Gulf states have also squirrelled away their export revenue into a public savings pool, known as a sovereign wealth fund. Now, there are growing calls for Australia to develop a fund of its own to make the most of the resources bonanza. Backing from the likes of Commonwealth Bank chief Ralph Norris and Liberal MP Malcolm Turnbull has increased pressure to save more of the boom.

… So if we did choose to go down this path, what might an Australian sovereign fund look like?

… According to the International Monetary Fund, almost all of the sovereign funds established by commodity-rich countries have one of two objectives: saving the windfall from a boom or smoothing the bumpy ride of commodity cycles.

… The former Reserve Bank governor and superannuation chief Bernie Fraser says we should be storing away the valuable ”nuts” of the boom. ”We’re just floating by on the commodity boom, giving most of the proceeds back to the mining companies, which are not going to provide the kind of social and economic infrastructure that will sustain this country over the next 30 to 40 years,” he says.

”I despair about what happened with the resource rent tax – that should have been the big nut that was put away and used down the track when the mines are gone and we’re looking for some way of maintaining activity and infrastructure.”

… The idea is also grabbing attention in Canberra, after the opposition communications spokesman, Malcolm Turnbull, backed calls for a national fund. He thought the stabilisation goal of Chile’s fund was probably appropriate, but the fund could also earmark funds for ”very long term savings”.

… Fraser also warns against trying to manipulate or manage currencies through a fund. ”The magnitude of any sovereign wealth fund are peanuts to the volumes of money that float around on the foreign exchanges,” he says.

Wherever its assets were held, an Australian fund would be under pressure to adopt a conservative investment strategy, after key sovereign funds suffered heavily in the global financial crisis.

[source]

April 22, 2011 (IBTimes) — Spot gold surged to a lifetime high on Friday in thin holiday trade, hitting a record for a sixth consecutive session on a weak dollar and factors ranging from geopolitical uncertainty to inflation concerns. … Spot gold rose to an record of $1,512.50 an ounce, before easing to $1,507.69 by 4:53 a.m. EST, on track for a weekly gain of 1.5 percent — its sixth consecutive week of gains.

… “Gold is likely to consolidate around the $1,500-level next week,” said Li Ning, an analyst at Shanghai CIFCO Futures. “The angle of the recent rally is very sharp, and we are bound to see some correction in the near term.”

… However, Shanghai CIFCO’s Li said gold has more steam to run on and expected prices to peak at $1,550 by the end of the second quarter, buoyed by the Middle East unrest, sovereign debt concerns on both sides of the Atlantic and inflation worries.

The Shanghai Gold Exchange has started a trial for over-the-counter trading, providing a convenient tool for institutional clients to trade large quantities of gold, to catch up with exploding investment demand in China.

… Financial markets in Singapore and Hong Kong are closed on Friday for a public holiday, and Hong Kong will remain closed on Monday.

[source]

by Casey Research
April 22, 2011 (MarketOracle) — A meme is now circulating that gold is in a bubble and that it’s time for the wise investor to sell. To me, that’s a ridiculous notion. Certainly a premature one.

It pays to remain as objective as you can be when analyzing any investment. People have a tendency to fall in love with an asset class, usually because it’s treated them so well. We saw that happen, most recently, with Internet stocks in the late ‘90s and houses up to 2007. Investment bubbles are driven primarily by emotion, although there’s always some rationale for the emotion to latch on to. Perversely, when it comes to investing, reason is recruited mainly to provide cover for passion and preconception.

In the same way, people tend to hate certain investments unreasonably, usually at the bottom of a bear market, after they’ve lost a lot of money and thinking about the asset means reliving the pain and loss. Love-and-hate cycles occur for all investment classes.

But there’s only one investment I can think of that many people either love or hate reflexively, almost without regard to market performance: gold. And, to a lesser degree, silver. It’s strange that these two metals provoke such powerful psychological reactions – especially among people who dislike them. Nobody has an instinctive hatred of iron, copper, aluminum or cobalt. The reason, of course, is that the main use of gold has always been as money. And people have strong feelings about money. Let’s spend a moment looking at how gold’s fundamentals fit in with the psychology of the current market.

Let me first disclose that I’ve always been favorably inclined toward gold, simply because I think money is a good thing. Not everyone feels that way, however. Some, with a Platonic view, think that money and commercial activity in general are degrading and beneath the “better” sort of people – although they’re a little hazy about how mankind rose above the level of living hand-to-mouth, grubbing for roots and berries. Some think it’s “the root of all evil,” a view that reflects a certain attitude toward the material world in general…

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(Reuters) – Gold struck a record high on Thursday at $1,508 an ounce as the dollar fell to a three-year low, supporting sentiment in precious metals.

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PG View: This Reuters piece provides an interesting list of key dates in gold’s trading history since the early 1970s.

Gold remains well bid having established a new record high at 1512.59 overseas. Silver continues its relentless march higher, setting a new 31-year high at 47.71, as all eyes remain on the record nominal high of 50.00. The metals are being driven higher by pronounced weakness in the dollar, global inflation concerns, the dismal fiscal picture in the US and political gridlock, sovereign debt worries in Europe, geopolitical unrest and wars in the Middle East and North Africa, concerns over the economic situation in Japan stemming from the earthquake, tsunami and nuclear disaster.

Much of Europe, along with US markets are closed today for Good Friday.

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.

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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.

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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.

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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.”

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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.