By Pham-Duy Nguyen
April 29 (Bloomberg) — Central banks that were net sellers of gold a decade ago are buying the precious metal to reduce their reliance on the dollar as a reserve currency, signaling demand that may extend a record rally in prices.

As developing countries accelerate purchases, gold may reach $2,000 an ounce this year, compared with a record of $1,569.80 today in New York, said Robert McEwen, the chief executive officer of producer U.S. Gold Corp. Euro Pacific Capital’s Michael Pento, who correctly predicted gold’s highs for the past two years, forecasts a 2011 high of $1,600.

[source]

Fri, Apr 29 2011 (FXstreet.com) — The yellow metal skyrocketed on Friday, rising more than $30 within the last hours, and establishing a fresh absolute high at $1569.35 an ounce.

[source]

by Hibah Yousuf
April 29, 2011 (CNNMoney) — Gold and silver prices are surging and the U.S. dollar is slumping. While that’s not great for consumers, investors are loving the dynamic.

“The Fed has made it crystal clear that it is not going to do anything to stop the dollar from falling,” said Kathy Lien, director of currency research at Global Forex Trading, adding that central bank’s unwavering message gives investors the green light to keep adding high-yielding assets to their portfolio.

By borrowing and then selling the greenback, investors are able to take advantage of the cheap currency by using the proceeds to buy up higher yielding assets, such as the euro, gold, silver and even oil. The so-called carry trade has pushed the dollar index … to three-year lows.

… Earlier this month, the European Central Bank raised its benchmark interest rate. And China’s central bank has already hiked rates four times since the end of the financial crisis to combat inflation and prevent asset bubbles.

But the Fed isn’t pulling the plug yet. On Wednesday, the central bank reiterated plans to keep interest rates low, invest the interest earned on its current asset holdings and complete its $600 billion bond buying program in June, as expected.

All of that, of course, deteriorates the value of the dollar.

[source]

By Myra P. Saefong and Chris Oliver
April 29, 2011 (MarketWatch) — Gold futures settled at a record Friday, jumping more than $25 by the close while silver climbed over 2% as weakness in the U.S. dollar and concerns about inflation helped lure investors to precious metals.

“The planet will continue to diversify its sovereign debt holdings into materials and stocks regardless of inflation,” said Richard Hastings, a macro strategist at Global Hunter Securities, adding that gold could approach $1,750 over the next two months.

Gold for June delivery climbed $25.20, or 1.7%, to settle at $1,556.40 an ounce on the Comex division of the New York Mercantile Exchange. That was the biggest one-day dollar gain for gold futures since Nov. 4, 2010, according to FactSet Research. Prices ended the week 3.5% higher and finished out the month with an 8.1% gain.

… Gold is considered the ultimate storer of wealth and as such gains when investors fear price increases and U.S. dollar debasement. Hastings said he would “caution” those who believe the gold market is “toppy and speculative” and poised to fall. That’s not true, he said, “because the amount of money available from big banks globally looking to diversify their sovereign debt positions creates massive waves of speculative money available for materials in spots and stocks and forex.”

… Silver’s July contract also closed up $1.06, or 2.2%, at $48.60 an ounce after trading as high as $49.21 overnight…. silver futures were 5.5% higher for the week, up 28% for the month. … Even so, some analysts are calling a short-term top on silver prices, given its impressive gains. Year to date, futures prices are more than 50% higher.

Ned Schmidt, editor of the Value View Gold Report, said silver prices could drop $5 to $7 on Monday. “Monday-Wednesday will be a bloodbath in silver,” he said. At the same time, gold is benefitting, he said. “Money will move from silver into gold.”

[source]

by Frank Tang
April 29, 2011 (Reuters) — Precious metals rose further after data showed U.S. consumer spending rose in March as households stretched to cover higher costs for food and gasoline, with inflation posting its biggest year-on-year rise in 10 months.

“Gold is showing a text-book bull market behavior, a steady ascent without major spikes. It’s the continuation of the same theme, as the Fed’s posture seems to be fairly dovish still,” said James Dailey, portfolio manager of the TEAM Asset Strategy Fund.

[source]

by Tom Jennemann
Fri, Apr 29 2011 (Fastmarkets) — Gold on the Comex divison of the New York Mercantile Exchange continued to hover around a record high Friday afternoon as investors add precious metals assets to their portfolios as a means to mitigate paper-currency risk.

“We have a weaker dollar and there’s general worry about European credit as credit default swaps for Spain and Ireland got hit again overnight,” Sterling Smith, an analyst with Country Hedging, said. The greenback has fallen significantly following Fed chief Ben Bernanke doveish comments Wednesday that the central bank will keep interest rates unchanged and maintain its loose monetary policy for several more months despite rising inflation. “There’s concern about paper currencies, except for the Swiss Franc. That working to keep gold well bid,” Smith said. Also, the technical picture for gold looks strong. “We’re coming out of a good consolidation, so the market does not look to be that overbought,” he added.

Gold is also supported by strong demand from Asia and emerging market emerging banks, which are looking to diversify away from US and European debt.

Francisco Blanch, head of global commodity research at Bank of America Merrill Lynch, said that countries are now trying to reduce the volatility of their foreign exchange reserves, which now stand at about $6 trillion, though the purchase of gold.

Government banks in developing countries are expected to increase their gold holdings from the current level of about 2 percent to 8-10 percent of reserves over the next decade, according to a Bank of America Merrill Lynch forecast.

[source]

by Ben Traynor
Friday, 29 Apr 2011 (Mineweb) — Governments are often tempted to live beyond their means. Today, that means national debts and quantitative easing. But a few hundred years ago, it meant debasing coinage. … The net result was that coins with identical face values did not necessarily hold the same commodity value. And this often led to a rather interesting phenomenon. When people knew there were both ‘good’ and ‘bad’ coins floating around, they tended to spend the bad and hang onto the good. Before long, all the good money disappeared into hoards. The only money in circulation was bad money.

This is known as Gresham’s Law, named after the sixteenth century financier Sir Thomas Gresham. In its most simple form, Gresham’s Law is often stated as “bad money drives out good money”, and it’s no mere historical curiosity. Gresham’s Law is alive and kicking today, nowhere more than in Vietnam.

Vietnam’s economy uses three different forms of money today. There is the official currency, the Vietnamese Dong. There is also the US Dollar, which Vietnamese people tend to trust a bit more. And then, there is gold. Gold is a big deal in Vietnam. The average Vietnamese spends more of each Dollar of income on gold than anyone else on Earth.

… In Vietnam you can put gold in a bank and earn interest.
[RS note: Interest-earning gold deposits... Not an ideal scenario. The gold depositor, often unbeknownst to himself, goes from being a fully-fledged gold owner to merely an unsecured creditor to the bank. The bank then lends that gold onward in order to earn the interest. In doing so, that act of gold-lending artificially expands the gold supply, putting it into the hands of someone other than the original owner, and in doing so it incrementally boosts supply and thus decreases the dearness of gold at the margin of demand. And of course, it exposes the bank to risk of borrower default (because gold loans, unlike conventional loans denominated in national currency, cannot be infinitely backstopped by central banks) and to subsequent systemic risk of a run on the bank by depositors who suddenly wise-up en masse to the undesirable risk inherent in their interest-earning gold deposits through the banking system. Such are the often overlooked flaws confronting the "gold is money" crowd, shortcomings that are completely avoided by simple unencumbered ownership as held outside the banking system by the "gold is wealth/property" crowd.]

… People will still prefer to hold gold because the Dong is failing to fulfill one of the core functions of money. It is a terrible store of value. That is why the Vietnamese continue to hoard “good” money (gold) while passing the bad stuff around. Just as Gresham’s Law predicts.

… Could this vicious cycle ever strike the US Dollar, British Pound, or the Euro? Maybe it’s already begun. Gold and silver prices have risen strongly over the last decade in all those currencies, and especially versus the Dollar so far in 2011. This tells us that many Westerners – just like the Vietnamese – are keen to swap their paper for metal.

[source]

RS View: See embedded comments [within square brackets] above.

By Pham-Duy Nguyen
Apr 29, 2011 (Bloomberg) — Gold futures rose to a record for the third straight day on bets that the dollar will extend a slump, enhancing the allure of the metal as an alternative asset. Silver headed for the biggest monthly gain in 28 years.

The greenback headed for the fifth consecutive monthly decline against a basket of six major currencies.

Gold futures for June delivery rose $12.80, or 0.8 percent, to $1,544 an ounce at 10:41 a.m. on the Comex in New York. Earlier, the price reached a record $1,545.90. The metal has gained more than 7 percent this month. Gold for immediate delivery climbed as much as 0.6 percent to an all-time high of $1,544.90.

… “The sinking dollar is driving people to the gold market,” said Lim Han Jo, a Seoul-based trader at Tongyang Futures Co.

… The minimum amount of cash that traders must deposit for speculative positions in silver futures will rise 13 percent to $14,513 per contract after the close of business today, CME Group Inc., the Comex parent, said yesterday. Margins were $4,250 a year ago.

[source]

by George Leong
April 29, 2011 (WallStreetPit) — What a few months it has been for gold. With war worries in Libya to debt concerns in Europe and the United States, along with rising demand out of China and India, it appears to be the perfect storm for driving gold prices higher. In fact, the break at $1,500 was much sooner than I had expected and, based on the chart, prices could go even higher, albeit the buying may be somewhat ahead of itself and hence vulnerable to some profit-taking.

… Gold has rallied in each of the last 10 years and shows a beautiful bullish price chart. My gold advice would be to accumulate gold on weakness.

The situation in Libya could worsen and there are also tensions in Iran and other Middle East countries. This means added global risk. Oil is trading at over $112.00 per barrel on the threat of more disruption in oil from Libya and other oil-producing countries.

In my view, the key determinant of how gold will fare will depend on the direction of stocks along with the geopolitical tensions. If the Middle East situation worsens, it would drive up oil prices, which would impact economic growth at a time when the economies continue to be at risk.

Also, don’t forget about the mounting debt and deficit in the United States. The country has over $14.0 trillion in debt and is paying billions in interest daily. Many states are struggling to make ends meet and are looking at severe cuts in the state budgets.

[source]

April 29, 2011 (Bloomberg) — Central banks that were net sellers of gold a decade ago are buying the precious metal to reduce their reliance on the dollar as a reserve currency, signaling demand that may extend a record rally in prices.

As developing countries accelerate purchases, gold may reach $2000 an ounce this year, compared with a record of $1538.80 yesterday in New York, said Robert McEwen, the chief executive officer of producer US Gold Corp. Euro Pacific Capital’s Michael Pento, who correctly predicted gold’s highs for the past two years, forecast a 2011 high of $1600.

… “China is out to have more gold than America, and Russia is aspiring to the same,” McEwen said yesterday in an interview in New York. “When you have debt, you don’t have a lot of flexibility. China wants to show its currency has more backing than the US.”

… China, which has just 1.6 per cent of its reserves in gold, may invest more than $US1 trillion in bullion, Pento said. “China wants to be an international player, and they need to own more gold than they currently have.”

The US Treasury Department projects the government could reach its debt ceiling of $US14.3 trillion as soon as mid-May and run out of options for avoiding default by early July. … “Until monetary policy changes, you’re going to continue to see gold go up,” said Michael Cuggino, who helps manage $US12 billion at Permanent Portfolio Funds in San Francisco.

… The Federal Funds rate would have to rise to “Volcker” levels [i.e., 20%] before gold enters a bear market, said Gold Corp’s McEwen, who expects the metal to rise to $5000 over three to four years.

[source]

April 29, 2011 (AFP) — Kate Middleton’s wedding ring was fashioned by Welsh jewellers from a piece of Welsh gold given to Prince William by his grandmother Queen Elizabeth II, the palace said Friday.

… It has been made out of a piece of gold from the Clogau St David’s mine at Bontddu in north Wales, the source for royal wedding rings since the 1920s. The queen gave the gold to William shortly after he and Kate announced their engagement in November.

[source]

RS View: This article is, admittedly, of little investment value, but is offered rather as day-appropriate gold-related news.

By SUDEEP REDDY And JON HILSENRATH
The U.S. dollar fell Thursday to its lowest point since the summer of 2008, but officials aren’t showing signs that they are alarmed by the currency’s descent or acting to stem it.

In recent days, the nation’s top two economic policy makers—Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner—have publicly expressed their desire for a strong dollar. But there is little indication of a change in policy from either the Fed or Treasury—or in underlying economic conditions—that would alter the currency’s downward course.

The dollar has dropped almost 8% against a trade-weighted basket of currencies this year.

[source]

PG View: The dollar is down nearly 20% since it peaked in June of last year. I’ve said it before and I’ll say it again: A “strong dollar policy” has got to be backed up by…well, policy.

A trade-weighted measure of the U.S. dollar against a broad basket of currencies that includes the Yen, Euro and China’s Yuan is at a post-gold standard low when adjusted for inflation, according to calculations by Deutsche Bank’s economic team. The milestone could be viewed as a failure of the country’s monetary and fiscal policies upon which all paper – or fiat – currencies are based.

“In our risk scenario, little progress on the fiscal front raises the probability of a fiscal crisis and the odds that the Fed becomes the buyer of the last resort,” said David Woo, currency strategist for Bank of America Merrill Lynch, in a note to clients today. “This would accelerate the process of the USD’s demise as the global reserve currency and cause it to decline in a disorderly manner.”

The dollar hit new 2011 lows versus the Euro and the British Pound Thursday as traders increasingly viewed Federal Reserve Chairman Ben Bernanke’s monetary policy press conference a day before as dovish on inflation.

[source]

PG View: Treasury Secretary Tim Geithner on Tuesday: “Our policy has been and will always be, as long as at least I’m in this job, that a strong dollar is in our interest as a country.”

Fed Chairman Ben Bernanke on Wednesday: “The Federal Reserve believes that a strong and stable dollar is both in the American interests and in the interest of the global economy.”

Color me skeptical…

Gold continues to edge higher, establishing yet another new record high at 1540.42 as the dollar extends its slide to new 32-month lows, with the dollar index drawing nearer to its all-time nominal low. There seems to be mounting concerns that the current fairly orderly decline in the greenback could degrade into a disorderly decline.

Tens of thousands of Syrians have reportedly taken to the streets in a new “day of rage.”

US personal income +0.5% in Mar, just above expectations, vs +0.4% in Feb.

US Q1 ECI +0.6%, just above consensus, vs +0.4% in Q4-10.

Canada GDP -0.2% in Feb, below market expectations, vs +0.5% in Jan.

By Kyoungwha Kim
Apr 28, 2011 (Bloomberg) — Gold for immediate delivery advanced as much as 0.3 percent to an all-time high of $1,540.45 an ounce in Singapore today.

[source]

By Chris Oliver
April 28, 2011 (MarketWatch) — Hong Kong is on track to kick off a new gold-futures trading platform with settlement in the physical metal next month, marking the emergence of a second exchange in the city offering leveraged bets on the metal’s rise.

The Hong Kong Mercantile Exchange, known as HKMEx, said it received regulatory clearance to launch gold-futures trading on May 18, according to a statement by the exchange Wednesday.

Debut trade will include one-kilogram gold contracts denominated in U.S. dollars.

Upon maturity of HKMEx’s contracts investors can take physical delivery at a government-operated gold depository located at the city’s main airport.

Actual delivery would be helpful for some investors who have specific uses for the metal, while it’s also in keeping with the city’s growing role as a precious-metals hub, according to HKMEx spokeswoman Aubrey Ho.

Trading volumes in Hong Kong should keep pace with growing demand from across the border, since China lags behind only India in terms of global consumption, the spokeswoman said.

… Meanwhile, Hong Kong also supports the trade via a subsidiary of Hong Kong Exchanges & Clearing, operator of the city’s stock and futures markets. Both Hong Kong and Singapore denominate their gold contracts in U.S. dollars and provide settlement in cash.

The new platform will host trade over a 15-hour window starting at 8 a.m. Hong Kong time, serving as a bridge for markets in the U.S. and Europe. Hong Kong’s current gold-futures trading platform, introduced in 2008, operates over a nine-hour window starting at 8 a.m.

… The China Gold & Silver Exchange Society, also in Hong Kong, supports trade in physical gold but doesn’t offer futures trading services.

[source]

By Claudia Assis and Nick Godt
April 28, 2011 (MarketWatch) — Gold futures settled at a record Thursday as the dollar fell further on a jump in weekly jobless claims and data showing the U.S. economy grew at a slower pace in the first quarter. … Thursday’s macroeconomic reports reinforced the view that loose monetary policy is still needed to prop up the economy.

A weaker dollar lifts gold’s value as a safe-haven alternative to currencies. It also sent gold to an intraday record, and silver futures rallying.

Gold for June delivery rose $14.10 or 0.9%, to $1,531.20 an ounce on the Comex division of the New York Mercantile Exchange. The contract traded as high as $1,538.80 an ounce, according to a preliminary tally on CME Group’s website. CME owns Comex.

… The dollar had already been hit after Federal Reserve Chairman Ben Bernanke said Wednesday he would hold the central bank’s stimulative stance indefinitely…. “Bernanke basically said, ‘hey, we are going to let the U.S. dollar just get crushed,’” said Michael K. Smith, with T & K Futures and Options Inc. in Florida.

[source]

Gold Rises to Record for Second Day as Fed Maintains Rate, Dollar Slumps
by Maria Kolesnikova and Yi Tian
Apr 28, 2011 (Bloomberg) — The gold market is “not a bubble,” and prices will continue to climb in the long term because global monetary policy is “out of sync” with the real economy, John Hathaway, the senior managing director of Tocqueville Asset Management LP, said today at the Bloomberg Link Precious Metals Conference in New York.

[source]

Thursday, 28 Apr 2011 (Rueters) — Central banks in Brazil, Chile and Thailand fretted on Thursday that high consumer prices could eat into economic gains, underscoring emerging markets’ struggles to contain surging inflation. Different policy approaches in Thailand, South Korea, Chile and Brazil have so far yielded all-too similar results: stubbornly strong inflation rates that threaten to soar above policymakers’ comfort zones.

… What makes this episode of inflation particularly tricky is that much of the pressure is coming from abroad, in the form of rising oil and food prices. Monetary policy has its limitations when it comes to cooling imported inflation. Raising rates in Thailand won’t calm unrest in Libya, which is one of the biggest drivers of therecent rise in the price of oil.

“Since the source of higher prices is, for the most part, external to Thailand, the standard medicine for inflation — higher interest rates — may not be that effective in slowing down price increases,” World Bank economist Frederico Gil Sander wrote in a report published on Wednesday.

South Korea has tried another approach, with the central bank leaving interest rates unchanged at its April meeting while authorities are letting the won rise sharply, which can help absorb inflationary pressure.

But that can create another set of headaches. The strong won has fueled sharp gains in short-term foreign borrowing, and South Korea warned on Thursday it may impose new controls to try to prevent a destabilizing flood of foreign capital.

[source]

by Rebecca Patterson, Managing Director & Chief Markets Strategist, J.P. Morgan Asset Management
Thursday, 28 Apr 2011 (CNBC) — While the dollar appears increasingly “cheap” on a backward-looking basis, structural changes in the global economy – mainly outside the U.S. – could pull the dollar down further, potentially significantly.

The US remains by far the world’s largest economy, accounting for 27% of global GDP in 2009. The US dollar, meanwhile, continues to enjoy its place as the most traded currency in the world: The Bank for International Settlements (BIS) latest survey showed that a dollar was used in nearly 87% of all currency transactions as of 2010.

Given this, it’s all the more surprising what is happening in currency markets today. … We believe this could result in a resetting – lower – for the dollar’s long-term fair value, even though the trade-weighted dollar is already close to its weakest point since the early 1970s.

… Structural changes in underlying economies which impact variables such as terms of trade, inflation or interest rates can raise or lower a currency’s fair value. We believe such a shift may be happening today for the U.S. dollar. … Further, US policy officials have been unusually silent during these last two years of the dollar’s decline.

… While central banks are not yet taking big steps into emerging market currencies, a lot of other investors are. Those investors include Americans, who are selling dollars to increase their EM exposures. At the same time, emerging-market central banks are intervening – in size – to control local FX appreciation. In the first quarter of 2011 alone, JPMS LLC estimated that central banks spent $60 billion intervening, accumulating dollars in the process. With diversification programs in place, generally more than a third of those dollars are then sold to buy other currencies…

[source]

RS View: In her commentary Rebb has focused on FX, but the real game-changer is the shift toward the paramount centralization of physical gold reserves within the central bankers’ cosmos of international currency and reserve management. For over ten years at these pages I’ve been detailing this subtle yet steady shift so that you would have the right context in which to proactively understand the upwardly floating gold meme that is gathering pace, and to do so without getting yourself entangled in all the foreseeable distractions yet to be offered by ill-informed bubble-visionaries and in the form of the frozen monetary standards of ideologically arrested gold bugs. Gold shall continue to float higher against national currencies and against other real assets, and in the course of this process the footing of the international monetary system will become surer and better balanced than at any time prior in all of human history. As a productive being you will like it; and as a physical gold owner/saver even more so.

Bernanke Speaks – Dollar Tumbles, Gold Surges

The Fed released its latest policy statement, which was pretty much in line with expectations. While paying modestly more homage to inflation risks the Fed concluded once again that economic conditions “are likely to warrant exceptionally low levels for the federal funds rate for an extended period.” Typical boring FOMC statement. The real fun began when Chairman Bernanke stepped up to the microphone to take questions from the press for the first time. At that point, the dollar slumped, gold surged to new record highs and silver retraced most of its recent corrective move. While the level of questioning was not what I’d call terribly probing, there were at least a couple gems that we would have never been able to glean from the written statement.

A transcript of the press conference is available here.

First the boilerplate: Rates will remain near 0% for an extended period. The Fed wont be tightening any time soon. This confirmation intensified dollar selling interest as those that bet the Fed would adopted at least a modestly more hawkish tone were quick to cover those bets.

Bernanke then reiterated the Fed’s commitment to seeing QE2 through to its scheduled completion at the end of June. However, at that point the Fed’s balance sheet will not begin shrinking, as they will continue to reinvest the proceeds of maturing debt. Such measures were dubbed QE-lite in the period between QE1 and QE2. Treasury pays the Fed on that maturing debt and the Fed turns around and buys more Treasuries with the proceeds. Given the additional $600 bln in Treasuries that will have been purchased over the course of QE2, arguably QE-lite wont be so “lite” any more, but the main take away is that quantitative easing will continue into H2. You could call it QE3 if you were inclined or QE-lite2…but a rose by any other name…

When queried about rising gasoline and food prices and whether the Fed could or should do anything about that, Bernanke confirmed that “the Fed can’t create more oil.” Bernanke continues to dismiss the notion that Fed policy is having any influence on rising commodity prices. As for oil, he added, “We don’t control the growth rates of emerging market economies.” He continues to view food and energy price inflation as “transitory.” What I found interesting though is that he chose to use the phrase “the Fed can’t create more oil,” when so many are understandably worried about what the Fed can create…dollars, which in turn, drives up the price oil in terms of dollars.

Mr. Bernanke reiterated the Treasury Department’s ‘strong dollar’ mantra, saying, ” a strong and stable dollar is both in American interests and in the interest of the global economy.” While he said the Secretary of the Treasury is the spokesperson for dollar policy, everyone knows that interest rates — which are determined by the Fed — arguably have the biggest influence on dollar exchange rates. While that was a complete punt on Bernanke’s part, there is at least still an illusory line between the Fed and Treasury and I understand why he danced along it. Yet it still begs the question that I posed when Secretary Geither recently restated that Treasury maintains a strong dollar policy: Strong (and stable) against what?

This was the most interesting question of the entire presser:

In the past, there have been times when fiscal policy has tightened and the Federal Reserve has chosen to ease its policy and response partly to that, given whatever the circumstances the economy were at the time. Congress appears intent at this point on cutting spending significantly; might restrain the economy, as it appears to be doing in Britain where they’re following a similar path. Is there anything the Fed can or should do if indeed there are large budget cuts sometime in the next 18 months?

Bernanke conceded that the long-term deficit is “unsustainable” and is a top-priority, adding that the budget cuts seen thus far don’t seem to be having “very significant consequences for short-term economic activity.” That’s because the scope of the spending cuts thus far have been inconsequential in relation to trillion dollar plus budget deficits. Bernanke went on to say that the Fed takes a long-term perspective on the long-term deficit problem, but acknowledged that if fiscal policy does have a negative consequence for growth, the Fed is “going to try to set monetary policy to meet our mandate.”

Ezra Klein of the Washington Post interpreted that exchange thusly: “So if Congress tightens too much in the short-term, that’ll hurt economy and Fed will loosen in response. That’s important.” That is important, given the spending cuts that have been proposed in the competing budget proposals. It’s also important when you consider the more likely scenario, that neither of those budget proposals advance ahead of the 2012 Presidential election, in which case the Fed may be forced to ease as well. Given that rates remain at 0%, the easing is likely to be of the quantitative nature. The uptick in QE expectations explains why the dollar tanked and gold surged on Mr. Beranke’s comments.

By James McKeigue
Apr 28, 2011 (MoneyWeek) — Commodities bull Jim Rogers has admitted he is worried that silver might go “parabolic” and crash later this year. The 69-year-old investor remains confident that gold will continue to rise but says that if silver continues to rise at its recent rate, “you’ve got a bubble”.

Rogers is well known for attracting press attention, famously moving his family to Singapore because Asia is “how Europe used to be”. However, investors will particularly interested in his view on silver as he has made several well-timed calls on commodities in the past. Rogers made his name by co-founding the Quantum Fund with George Soros in the ’70s…

Speaking to a US radio station, Rogers acknowledged that “people are starting to notice gold” but remains confident that gold has plenty [headroom] to rise. … He denied that recent purchases by institutional investors, such as Texas University, marked the top of the market. “Gold’s been going up for ten years in a row. I’d hardly call this a tipping point.”

Rogers, however, was a little more cautious on silver. … On the one hand, “maybe the US dollar is going to become confetti in 2011, and if that’s the case and silver goes to $150, then obviously I wouldn’t sell my silver.” But if silver “goes parabolic” this year without an accompanying currency collapse, “I would be very worried.”

[source]

April 28 2011
(Reuters) — Gold hit record highs on Thursday as the dollar’s three-year low against a basket of major currencies attracted non-U.S. investors, after the United States signalled it would retain accommodative monetary policy.

Spot gold ascended to a lifetime high of $1,535.90 an ounce, breaking records for a second straight session.

… U.S. gold futures also hit an all-time high at $1,535.10 an ounce and then trimmed gains to $1,532.

… The weakening dollar has been a key driver behind gold’s rally in recent weeks, alongside concerns over civil disruption in the Middle East and North Africa, sovereign debt problems in the euro zone and rising inflation worldwide.

“Everything is dollar-related and safe-haven buying,” said MKS Finance head of trading Afshin Nabavi. “The Fed decision was not really a surprise. Nothing has changed, but the tone of the statement from Bernanke left the impression that it is going to be awhile before any rate hikes will be considered.”

… Physical gold buying was seen active in Asia, while scrap selling was limited as market participants remained bullish even after gold struck record highs in nine out of the past ten sessions, dealers said.

Spot silver, which has rocketed more than 50 percent so far this year, rose to $49.16 an ounce against $47.76 an ounce late in New York on Wednesday. … Gold and silver may both see more upside, but the risk of a pullback in silver is larger than in gold due to the more speculative nature of the silver market, traders said.

[source]

By Jeannine Aversa
April 28, 2011 (Associated Press) — The economy slowed sharply in the first three months of the year as high gas prices cut into consumer spending, bad weather delayed construction projects and the federal government slashed defense spending by the most in six years.

The Commerce Department said Thursday that the economy grew at a 1.8 percent annual rate in the January-March quarter. That was weaker than the 3.1 percent growth rate for the October-December quarter. And it was the worst showing since last spring when the European debt crisis slowed growth to a 1.7 percent pace.

… But gas prices are still going up. The national average on Thursday was $3.88 a gallon, an increase of 30 cents from a month ago when the first quarter ended.

An inflation gauge in the report showed consumer prices rose last quarter at the fastest pace in nearly three years, with most of the increase coming from higher fuel costs. Rising gas prices are draining most of the extra money that Americans are receiving this year from a Social Security payroll tax cut.

… Economists in a new Associated Press survey predict the economy is growing at a 3.2 percent pace this quarter and that growth will steadily improve over the remainder of the year. An inflation gauge tied to the report showed that consumer prices rose sharply last quarter.

Prices rose at an annual rate of 3.8 percent, the most since the summer of 2008, when gasoline prices hit a record high of $4.11 a gallon nationwide. But stripping out energy and food prices, inflation rose at a rate of 1.5 percent. That’s at the low end of the range of inflation the Federal Reserve believes is needed for a healthy economy.

[source]

by Jim Cramer & Alix Steel
Thu 04/28/11 (TheStreet) –

by Alix Steel
04/28/11 (TheStreet ) — Gold prices were hitting highs while silver prices were moving higher Thursday as investors bought the metals against a weak dollar and higher inflation expectations.

… Thursday’s rally was carry over from Wednesday, when gold and silver popped 1% and 2%, respectively and rose even higher in after-hours trading. Federal Reserve chairman, Ben Bernanke, can be thanked for the rally. The unanimous decision by the Fed to keep interest rates at 0-0.25% until at least the fall as well as keeping its balance sheet the same size after quantitative easing ends in June meant more cheap money for longer.

… This is “adding quite a bit of pressure to the dollar index and investors are going to be searching for those hard assets to protect themselves,” says Phil Streible, senior market strategist at Lind-Waldock. … Streible says the rally was even stronger because speculators who were washed out in the recent selloff could get back into the market as well as those who missed the rally the first time. His forecast for 2011 is $1,650 for gold and $60 for silver.

… Monday on the Comex, trading of silver futures popped to a record 319,204 contracts. Adding to potential volatility is the end of April, where traders must either roll over their existing contracts or let them expire. This could also account for the price discrepancy between the futures market and spot (physical) market.

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Gold extended to fresh all-time highs overseas on follow-through momentum provided by Fed chairman Bernanke’s press conference. The indication from the Fed that US interest rates will remain extraordinarily low for an extended period, despite rising inflation risks, pushed the dollar to new 32-month lows. Bernanke hinted that the Fed might act if actions (or perhaps inaction) from Congress resulted in short-term negative consequences on growth. With interest rates already near 0%, that likely means further quantitative easing.

US Q1 GDP (advance) slows to +1.8%, below market expectations, vs +3.1% in Q4-10.

US initial jobless claims surge 25k to 429k, for the week ended 23-Apr, well above market expectations.

By Myra P. Saefong
April 27, 2011 (MarketWatch) — Gold futures climbed as much as $13 an ounce in electronic trading on Globex Wednesday after ending the New York session at a record, as the Federal Reserve’s decision to continue to keep its key interest rate at an historic low range fueled concerns about inflation.

Gold for June delivery was last up $10 at $1,527.10 an ounce in electronic trading on Globex after trading as high as $1,530.70 as of 4 p.m. Eastern. Earlier Wednesday, the contract had added $13.60, or 0.9%, to close at $1,517.10 an ounce in regular trading on the Comex division of the New York Mercantile Exchange.

… At a news conference after the Fed’s policy statement, Federal Reserve Chairman Ben Bernanke said he didn’t know when the Fed would tighten interest rates.

… “The continued wording of exceptionally low rates for an extended period says it all,” Keith Springer, president of Springer Financial Advisors in Sacramento, Calif., said in emailed comments. “They are more worried about recession and deflation, and will keep rates low.”

“All of this will move gold and silver higher as it will increase inflationary pressures and lower the dollar further,” he said.

… the dollar index, which measures the U.S. currency against a basket of six rivals, traded at 73.330, down from 73.789 in late North American trading Tuesday. It was trading higher before the Fed decision.

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by Heather Struck
April 27, 2011 (Forbes) — David Loesser, president of the Estate Planners Group, said he has no questions anymore about the effects quantitative easing has had on markets. Just look at the charts for gold and silver today, and compare it with FX charts for the U.S. dollar.

“There is a negative correlation rate for the dollar versus gold and silver,” Loesser said. Today the dollar began to fall further today after Ben Bernanke’s press conference to 1.47 against the euro and 1.66 against the British pound. Gold and silver both continued to soar upwards, rising 1.4% and 5.6% respectively after the conference commenced.

“Inflation is the big game that the Fed has to deal with,” Loesser said….

With a slow recovery in unemployment on the horizon, Loesser is advising his clients to short the dollar. When it comes to the future for gold and silver, “I wouldn’t be surprised to see them double to $3,000 and over $100 an ounce.”

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by Tom Jennemann
Wed, Apr 27 2011 (Fastmarkets) — Gold on the Comex division of the New York Mercantile Exchange raced to a fresh all-time record Wednesday soon after the Federal Reserve said that it will not soon raise interest rates or prematurely end its monetary easing policies despite rising inflation.

… “The Fed admits that inflation is going up but at the same time they don’t seem to be in a big hurry to do much about it. [The central bank] is willing to error on the side of higher inflation and isn’t ready to end it’s accommodative money policies,” a US-based gold trader said.

Also, the fact that vote was unanimous is a sign that the Fed could continue with its dovish policies longer than previously expected, the trader added.

“The rest of the world is already taking mild to aggressive steps to combat inflation. The farther the US falls behind (in this regard) the more the purchasing power of the dollar will decline over time. That’s going to lead to higher commodity prices,” the trader said.

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By Pham-Duy Nguyen
April 27 (Bloomberg) — Gold futures rose to a record $1,524.20 an ounce on speculation that the Federal Reserve will be slow to raise U.S. borrowing costs, weakening the dollar and boosting the appeal of the precious metal as an alternative asset.

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Gold, Silver ETFs Surge Before Bernanke Speaks
April 27th (ETF Trends) — Exchange traded funds (ETFs) tracking gold and silver rallied in afternoon trading Wednesday following the Federal Reserve’s statement promising to hold its key interest rate close to zero.

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Dollar dips after Fed holds rates
27 April, 2011 (AFP) — The dollar’s decline against the euro picked up momentum Wednesday after the Federal Reserve announced it would keep ultra-low interest rates to support a fragile economic recovery.

The euro was trading at $1.4706 around 1730 GMT, up from $1.4666 an hour earlier, just before the Fed’s policy-setting panel announced its decision to hold its key interest rate at 0-0.25 percent, as widely expected on financial markets.

… The Fed’s ultra-low rates and accommodating support of the recovery have weighed on the dollar as it faces other key currencies with higher returns, such as the euro which is underpinned by the European Central Bank’s tightening monetary policy.

… All eyes in the financial markets were turned toward the upcoming historic news conference by Fed chairman Ben Bernanke at 1815 GMT, the first for him or for any Fed chief after an FOMC meeting.

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