Apr 4th, 2011 16:55 by USAGOLD

by Terrence P. Jeffrey

(CNSNews.com) – The U.S. Treasury has released a final statement for the month of March that demonstrates that financial madness has gripped the federal government.

Link

Apr 4th, 2011 15:17 by News

The Honorable Harry Reid
Democratic Leader
United States Senate
Washington, DC 20510

Dear Mr. Leader:

I am writing to update you on the Treasury Department’s projections regarding when the statutory debt limit will be reached and to inform you about the limits of the available measures at our disposal to delay that date temporarily.

In our previous communications to Congress, we provided regular estimates of the likely time period in which the debt limit could be reached. We can now make that projection with more precision. The Treasury Department now projects that the debt limit will be reached no later than May 16, 2011. This is a projection based on the expected level of tax receipts, the timing of our commitments and obligations over the next several weeks, and our judgment concerning the level of cash balances we need to operate. Although these projections could change, we do not believe they are likely to change in a way that would give Congress more time in which to act. Treasury will provide an update of this projection in early May.

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PG View: The very first “available measure” Geither addresses is the sale of the Nation’s gold. Of course, it’s not a viable measure because it “would undercut confidence in the United States both here and abroad.” No mention of the eroding confidence that stems from the ever-larger debt burden.

Geithner reminds us that “Increasing the limit does not increase the obligations we have as a Nation; it simply permits the Treasury to fund those obligations that Congress has already established.” What he doesn’t say, is that the US has never met a debt ceiling it couldn’t meet and ultimately exceed.

According to the Treasury Secretary there is simply no option, the debt ceiling must be raised or the US faces a default. However, there is reason to believe that raising that debt ceiling, pushes us irrevocably closer to that same end result. At best, we may be buying some time.

Apr 4th, 2011 14:25 by News

by Rachelle Younglai
April 4, 2011 (Reuters) — The United States will hit the legal limit on its ability to borrow no later than May 16, Treasury Secretary Timothy Geithner said on Monday, ramping up the pressure on Congress to act to avoid a default.

Previously, the Treasury had warned that the country could hit the $14.294 trillion statutory debt limit between April 15 and May 31.

… If the debt ceiling is not increased by May 16, Geithner said the Treasury has authority to take certain extraordinary measures to temporarily postpone the date the United States would default on its obligations.

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Apr 4th, 2011 14:23 by News

April 04, 2011 (Xinhua) — South Korea’s foreign reserves rose to 298.6 billion U.S. dollars in March mainly due to increased conversion value of non-dollar denominated assets, the country’s central bank said on Monday.

… The March reading marked the record high of reserves and the fourth consecutive month of growth.

The increase was attributable to rising investment profits and growing conversion value [i.e., exchange rate] of non-dollar denominated assets caused by weaker dollar, according to the BOK.

The nation’s foreign reserves consisted of
271.71 billion dollars of securities,
21.93 billion dollars of deposits,
3.7 billion dollars of special drawing rights (SDR),
1.19 dollars of International Monetary Fund (IMF) reserve positions and
0.08 billion dollars of gold bullion.

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RS View: A rationally structured portfolio of reserves, in light of the withering dollar, argues for significantly fewer dollar-denominated items (i.e., fewer U.S. securities and deposits) and significantly more of that universally translatable asset which, at the present time, occupies a space so unjustifiably neglected and underrepresented as a part of the BoK balance sheet.

Apr 4th, 2011 14:00 by News

By Myra P. Saefong
April 4, 2011 (MarketWatch) — Gold futures edged higher and silver soared 2% Monday as oil prices at 30-month highs stoked fears of inflation and helped fuel investment demand for the precious metals.

Gold for June delivery added $4.10, or 0.3%, to $1,433 an ounce on the Comex division of the New York Mercantile Exchange.

Silver for May delivery climbed 76 cents to settle at $38.49 an ounce, the latest in a string of 31-year highs. The metal had bounced off $38 an ounce in recent weeks. As it broke through that ceiling, more investors came to the market in hopes of $40 an ounce in the short term, said Jeffrey Christian, managing director of commodities consulting firm CPM Group in New York.

Silver past $38 is “very expensive,” he added. The average cost of metal at primary silver mines was $5.06 an ounce last year, four times what silver futures averaged in 2010, Christian said. Production costs for most of silver being sold are even lower as the majority of the metal in the market comes as a byproduct of gold and copper mining, he added.

…[Gold] prices are well supported all the way down to a range of $1,410-$1,415 an ounce, said Andrey Kryuchenkov, an analyst at VTB Capital in London. … At current prices, however, physical buyers are sitting out, he said. Their buying on the dips, however, will continue to sustain the uptrend for gold, Kryuchenkov said.

[source]

Apr 4th, 2011 13:26 by News

by Lesley Wroughton
Mon Apr 4, 2011 (Reuters) – A global coalition of development groups on Monday urged the International Monetary Fund to use windfalls from the sale of 403.3 tonnes of IMF gold to write off the debts of poor countries. … the windfall [was estimated] at $2.8 billion. The IMF declined to confirm the number.

… IMF would consider in the meeting on Wednesday three ways to use the gold profits: absorbing the funds into an endowment; placing the money into a reserve fund; and using it to assist poor countries hit by financial and other crises.

An IMF spokesman confirmed that discussions on the matter would begin shortly, ahead of meetings of global finance chiefs in Washington starting next week.

“The executive board will have a preliminary discussion on the use of excess gold profits soon,” IMF spokesman Alistair Thomson told Reuters. “We expect the Board will consider a range of possible options,” he added.

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RS View: Unlike the economically unsound and withering “strong dollar policy”, policy makers are waking up to the bright realization that there is no downside to strong gold…

Apr 4th, 2011 11:03 by News

by Frank Holmes
April 4, 2011 (Mineweb) — Last week I had the pleasure of participating in a webcast for Bloomberg Markets Magazine regarding gold investing. It was a very insightful presentation and I suggest you view the replay at www.bloombergmarkets.com. What struck me on the call was the negativity surrounding the gold market. Call it a bubble, a frenzy or mania, there seems to be a large number of voices in the marketplace who just are not fans of gold, whether prices are moving up, down or sideways.

… The reality is that gold doesn’t possess the traits necessary for a financial bubble to form. Rodney Sullivan, co-editor of the CFA Digest, has done some great research on the history of markets and bubbles going all the way back to the 1600s. He discovered three key patterns in the 47 major financial bubbles that occurred over that time period.

These three ingredients of asset bubbles are financial innovation, investor exuberance and speculative leverage. The process begins with financial innovation, which initially benefits society as a whole. In the exuberance stage, usage of these innovations broadens; they become mainstream and attract speculation. The third step, the tipping point for a bubble to form, is when these speculators pile on massive leverage hoping to achieve greater success.

… Gold as an asset class is far from being overbought by speculators. Eric Sprott recently did a fascinating presentation explaining how underowned gold is as an asset class. Sprott wrote that despite a 30 percent increase in gold holdings during 2010, gold ownership as a percentage of global financial assets has only risen to 0.7 percent. That’s a big increase from the 0.2 percent level in 2002, but Sprott points out that it’s misleading because the majority of that increase was fueled by gold appreciation, not increased level of investment.

Sprott estimates that the actual amount of new investment into gold since 2000 is about $250 billion. Compare that to the roughly $98 trillion of new capital that flowed into other financial assets over the same time period.

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Apr 4th, 2011 10:51 by PG

Silver Leads Gold Higher

Gold is back within striking distance of its all-time high at 1447.40, underpinned by fresh 38-year highs in silver. The ongoing strength in silver has pushed the gold/silver ratio to a 28-year low. While the performance of the white metal is tough to argue with, silver is trading nearly 50% above its 200-day moving average, which warrants a measure of caution. By comparison, gold is a mere 8% above its 200-day MA.

Brent spot crude is presently about 33% above its 200-day MA, driven primarily by ongoing tensions in the Middle East and North Africa. The marked rise in energy prices is putting upward pressure on inflation expectations, which in turn is putting pressure on central banks to tighten policy, even though growth risks persist. Eurozone PPI accelerated to 6.6% y/y in Mar from downwardly revised 5.9% y/y in Feb. An ECB rate hike is pretty much baked into the cake at this point, despite the detrimental impact it would have on the debt saddled PIIGS. While the drive for a permanent EU bailout facility has been anything but smooth, there seems to be an expectation that the stronger EU nations are going to cover the higher refinancing costs in the periphery. However, recent regional elections in both Germany and France suggest that the taxpayers there aren’t so keen on that prospect.

Pressure to Tighten Policy

Last Friday’s robust jobs report ups the pressure on the Fed to tighten as well, although the likelihood remains much more doubtful in my opinion. A Fed rate hike, while the Fed is still engaged in QE2 makes no sense at all. That doesn’t mean I would rule it out completely, but it seems rather unlikely before QE2 winds down at the end of June. It also sort of presupposes that there won’t be a QE3, even if it’s in the form of reinvestment. The Fed is going to be very wary that removal of accommodations and possibly a rate hike would pull the plug on the stock market’s rally and weigh heavily on an already moribund housing market, destroying the wealth effect that the Fed worked so hard to create via ZIRP and QE.

The Options Stink

As the budget and debt ceiling debates continue in Washington, PIMCO’s Bill Gross warned in his April Investment Outlook, entitled Skunked, that our options all pretty much stink. Pick your poison: The burden of ever-more debt or austerity and tax hikes. Neither is a particular appealing option as there will be considerable pain involved, but clearly something must be done. However, our Representatives are squabbling over billions, when we face a multi-trillion dollar problem.

As we butt up against the $14.29 trillion debt ceiling, Gross accurately points out that the “true but unrecorded debt of the U.S. Treasury” is closer to $75 trillion. When the various unfunded mandates are factored in, our debt burden is close to 500% of GDP. Gross quips, “We are out-Greeking the Greeks.” The bond giant famously exited the US Treasury market entirely at the end of Feb because “[Treasuries] have little value within the context of a $75 trillion total debt burden.” Gross goes on to say that “Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates.”

One method to help avoid getting your pocket completely picked is to save a portion of your wealth in something other than the dollar. The traditional alternative to fiat currency based savings is of course physical gold.

Apr 4th, 2011 10:06 by News

by Alix Steel
April 4, 2011 (TheStreet) — Gold prices were reaching for record highs Monday and silver was hitting a 30-year high as investors piled into the metals as protection against inflation.

Gold for June delivery was adding $8.40 to $1,437.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,440.30 and as low as $1,429.10

Silver prices were jumping 75 cents to $38.48 after hitting a 30-year record of $38.62 an ounce. Backwardation in silver has reversed, which means the spot month is now trading lower than future months.

… “While silver is overbought in the very short term, silver’s outlook remains bullish,” says Mark O’Byrne of Goldcore, a bullion dealer. “Silver remains the preserve of a handful of contrarian and hard money advocates and is only beginning to enter the consciousness of the mainstream.”

… Despite the threat that the European Central Bank will raise interest rates on Thursday, investors were piling into gold and silver. The idea that the ECB would have to raise rates regardless of anemic economic growth in Europe underscores how serious inflation actually is.

… Both metals will get some help from a weaker U.S. dollar, which could suffer if the ECB raises rates and boost the euro.

[source]

Apr 4th, 2011 09:59 by News

by Adrian Ash
April 4, 2011 (IBTimes) — The Gold Price rose early Monday in London, nearing last week’s high of $1439 per ounce as energy prices led a surge in commodity prices and Silver Bullion jumped 1.9% to fresh 31-year highs.

… “[The Dollar Gold Price] has closed near $1425 for the past four consecutive weekly sessions,” notes bullion bank Scotia Mocatta, “[and] appears to be consolidating the January to March up move.”

… “It is very difficult to fight the momentum” in Silver Prices, says a London dealer today. Breaking through $38.00 early in Monday’s trade, “it seems the stage has been set for another crazy leg of upward movement in silver,” says a Hong Kong dealing desk. “This is now a classical bubble when price movement itself becomes the reason for price movement.”

Back in the gold market, exchange-traded trust funds experienced a second week of outflows on the latest data compiled by London’s VM Group consultancy, with the giant SPDR Gold Trust shrinking to an 11-month low of 1211 tonnes.

… “[But] while the Gold Futures market is not overly bullish, the physical market is still a steady buyer,” says Standard Bank’s Walter de Wet, repeating his view that real interest rates “remain exceptionally low” and global liquidity continues to rise, pushing gold higher. “The physical market is once again adjusting to a higher Gold Price, which we view as bullish…We now see increased buying whenever gold dips towards $1400.”

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Apr 4th, 2011 09:47 by News

by Sam Bowman
April 4, 2011 (CSMonitor) — There are two insights about human behavior that are pretty fundamental to economics:

1. People respond to incentives.

2. Knowledge is limited.

… It’s hard to predict the consequences of any action that we take in our own lives. Now think about a society with millions of people, each with their own goals and preferences (which are constantly shifting). Governments hire armies of economists and other consultants to try to figure this sort of thing out, but they’re still naked in the dark.

… People respond to incentives. Knowledge is limited. They’re almost self-evidently true, but politicians (and quite a few economists) don’t seem to recognize this. We can’t make water run uphill and we can’t design a chaotic, cloud-like system like society. I wish our rulers would stop trying to do so.

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RS View: To the Wall Street and Ivory Tower snobs who can’t fathom why gold has a key role to play in reserves and savings of public and private portfolios, respectively, a humble acknowledgement of item #2 would contribute to their better understanding of gold’s utility as a vital safety net (i.e., immutable wealth against uncertainty) and an economic touchstone (i.e., a transglobal informational benchmark of value).

Apr 4th, 2011 09:17 by News

April 4, 2011 (Reuters) — Silver prices rallied to their highest in 31 years on Monday and are fast closing in on $40 an ounce, lifted by interest in the metal as a cheaper proxy for gold and expectations that industrial demand is set to improve.

But analysts remain wary of silver’s extreme volatility, which has led to some heart-stopping reversals in recent years. When commodities sold off heavily in mid-March, it dropped nearly 5 per cent in a single day, versus gold’s 2 per cent fall. Silver prices have had an impressive run higher since the financial crisis gripped markets back in late 2008, rallying from below $9 an ounce in October that year to a 31-year peak of $38.40 on Monday.

… Silver’s outperformance of bellwether precious metal gold is partly due to the much smaller size of the market. A lack of liquidity tends to mean any price moves are exaggerated, leading to overperformance in a rising market but underperformance when prices fall.

“There is a huge amount of speculative drive behind silver, and that is off the back of gold,” said Societe Generale analyst David Wilson. “It has such a head of steam it seems difficult to say it won’t (keep going), but there doesn’t seem to be that much of a reason for it to be as strong as it is.”

… Given the amount of silver held by ETFs, which is technically still available to the market, and comfortable mine output, the market is unlikely to be short of metal even though demand may rise.

… “When investor interest wanes in silver, there is every possibility of sharp falls in price amid liquidation and plentiful metal stocks,” said RBS in a report. “Equally, though, we must warn that because of its volatility, silver is too dangerous to short,” it added. “The message is, do not chase silver at these levels.”

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Apr 4th, 2011 07:04 by News

Gold is firmer this morning, led once again by silver, which has established new 38-year highs above 38.14. Oil prices have extended to new 30-month highs on continued turmoil in the Middle East and North Africa, driving broad-based inflation fears.

Eurozone PPI accelerated to 6.6% y/y in Mar from downwardly revised 5.9% y/y in Feb. Australia TDMI surged 0.6% in Mar, with consumer #inflation accelerating to 3.8% y/y. Core +0.3% m/m, +2.4% y/y.

Rising energy prices threaten to derail nascent economic recoveries in the industrialized world. Meanwhile, rising food prices are stoking the political unrest in the emerging world, adding further impetus to the rise in energy prices.

Apr 3rd, 2011 09:49 by MK

The Wikileaks/Financial Times revelations on significant gold buying interest in the Middle East — notably Iran’s central bank, Jordan’s central bank and Qatar’s sovereign wealth fund — brought to mind the story of Saudi Arabia’s King Ibn Saud and his sale of oil concessions to the major oil companies. In payment he received 35,000 British sovereigns — a coin many of you hold in your own sovereign wealth fund. The good king understood the difference between the value of gold and the value of a paper promise.

At the time (1933), the British sovereign’s value stood at $8.24 each, or $288,365 for the lot. The price of oil was about 85¢ a barrel, and a British sovereign could buy about ten barrels.

Today those same sovereigns would bring a little less than $12 million at melt value ($338.00 each) and a barrel of oil is selling for about $115. Thus, a British sovereign can buy a little under three barrels of oil — a statistic which gives you an inkling of gold’s current undervaluation.

For gold to buy the same amount of oil now that it did in 1933, the price would have to go to nearly $5000 per ounce — an interesting calculation for those who think gold is overvalued and in a bubble.

In the gold market where there’s smoke, there’s fire. If members within one class of investors — e.g., central banks, sovereign wealth funds or hedge funds — you can be assured that other members of that same group are similarly involved. Recent activity within the hedge fund industry with respect to gold is exemplary. It follows then that if Iran, Qatar and Jordan — themselves threatened by the popular Pan-Arabic uprisings — are acting on their interest in gold, can Saudi Arabia, the United Arab Emirates and Kuwait be far behind?

If so, they will join several nation states and a bevy of hedge and sovereign wealth funds in the pursuit. The problem they will encounter is an old one. There simply is not enough physical gold available at any given point in time to satisfy the needs of any one of these major players, let alone all of them. All of this, of course, will resolve itself in the price for which the metal sells.

I note with interest that Barclays Bank — one of the five members of the London Gold Fix and an institution well-situated to experience first-hand the interest in physical metal — has predicted a top price for 2011 of $1620 per ounce. Predictions by other Fix members are equally bullish. Scotia-Mocatta predicts a high range of $1500 to $1600 with a possibility of a spike higher. Deutsche Bank is predicting $1511 per ounce for 2011 and $2000 per ounce for 2012. Both Societe General and HSBC, the two remaining members, are calling for a top-end price of $1550 per ounce. These bullion banks are in a better position than most to ascertain the sources of physical demand, and they know better than anyone the extent of global interest among key players. By the way Goldman Sachs, though not a member of the Fix, is still widely monitored for its opinion on gold. It has set a price objective of $1690 per ounce for 2011.

Michael J. Kosares
Author: The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold
Founder: USAGOLD-Centennial Precious Metals

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Apr 1st, 2011 14:15 by News

By Claudia Assis and Virginia Harrison
April 1, 2011 (MarketWatch) — Gold futures settled lower Friday, a day after ending at a record high, hit by hawkish comments from a U.S. Federal Reserve official and a government report that showed the U.S. economy added jobs at the fastest pace since May.

Gold futures for June delivery lost $11, or 0.8%, to $1,428.90 an ounce on the Comex division of the New York Mercantile Exchange. Gold ended at a record of $1,439.90 Thursday.

“People are certainly concerned about what the Fed is going to do,” said Walter de Wet, an analyst with Standard Bank in London. Any talk about the end of monetary easing “is going to be perceived negatively for gold. With the unemployment figures, the market has leaned toward that happening sooner rather than later.”

Worries about loose monetary policy and currency debasement are one of gold’s main pillars of support as the metal is viewed as the ultimate way to store wealth.

[source]

Apr 1st, 2011 14:04 by News

April 1 (Bloomberg) — Spencer Patton, founder and chief investment officer at Steel Vine Investments, discusses the outlook for gold and coffee prices. Patton, speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward,” also discusses investment strategy.

Gold and silver discussion begins at 3:45 mark in video.

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Apr 1st, 2011 12:35 by PG

India’s Demand For Gold Surges Along With Population

Much of the international discussion about populations and gold in recent years has centered on China as they vied with India to become the world’s largest consumer of the yellow metal. However, India is, and will remain, a powerhouse in global gold consumption. On Thursday, census data showed that the population of India now stands at 1.21 billion. That’s an increase of 181 million over the past decade, or as The Wall Street Journal put it, the “equivalent of about five Canadas.”

While population growth in India has slowed, it hasn’t slowed as much as expected, prompting the Planning Commission to push their estimate for population stabilization out more than 15-years to 2065. The UN estimates that India may surpass China as the world’s most populous nation as early as 2030. This reality may change a lot of assumptions about China definitively taking the global lead in gold consumption for good. China may maintain a short-term advantage due to its larger population (for now), more robust economic growth and relatively small per capita gold ownership. However, the rapidly rising population may prompt — or perhaps force — India to remove barriers that have impeded the inflow of foreign capital. If that happens, India could really take-off.

The Indian economy grew 8.7% last year and estimates for this year are running around 8%. Continued robust growth has contributed to the rapid expansion of the Indian middle-class. The new-found wealth of the middle and upper classes stokes a desire for gold. There is a strong cultural affinity toward gold in India, as a store of wealth and as gifts for weddings and various festivals. According to The World Gold Council, in the same decade that saw a 17.6% increase in the Indian population, Indian demand for gold grew by 25%, despite a 400% increase in the price of gold. Clearly the notion that Indian buyers are too price sensitive is misplaced.

And its not just the people of India that are buying. The government has been aggressively building its gold reserves as well. The most notable purchase was the 200 metric tonnes that the Reserve Bank of India purchased in 2009 from the IMF. Indian gold reserves now stand at 557.7 tonnes, ranking them 11th on the list of gold holding countries, but that’s only 7.9% of their total reserves. India’s official holdings — in total and as a percentage of total reserves — are likely to increase in the years ahead as well. It would seem the government’s view of gold, reflects that of the people.

The WGC projects that Indian demand for gold will continue to accelerate, “growing by almost 3% per annum over the next decade.” That’s nearly another 30% rise in demand in the next 10-years. The WGC went on to say that “Indian demand for gold will be driven by savings and real income levels, not by price.” This will continue to be a driving force in the gold market for decades to come. Further amplified by the same circumstances in China and elsewhere throughout the emerging world. Add to that, the heightened interest in gold throughout the industrialized world, along with tighter supplies, and you don’t need to be an economics major to come up with the likely price implications.

A recent WGC report said that “Indian demand for gold will be driven by the concept of enduring value, not price.” Couldn’t we all benefit from an asset with “enduring value” in our portfolios?

Apr 1st, 2011 12:22 by News

By Peter Gorenstein
April 1, 2011 (Daily Ticker) — Congress has a week to reach a budget compromise and prevent a government shutdown. …… As dire as the U.S. fiscal situation may be, the GOP and the Tea Party are playing with fire, says David Walker CEO of Comeback America Initiative, former U.S. Comptroller General and head of the Government Accountability Office (GAO) in both the Clinton and the second Bush administration’s.

“They’re talking about limited government, individual liberty, fiscal responsibility, I’m all for that and most Americans probably are too,” Walker tells the Daily Ticker’s Aaron Task and Dan Gross. “The difficulty is that they have unrealistic expectations about how much you can do and how quickly you can do it.”

On top of staying steadfast on their budget cut goals, House Republicans are holding up the negotiations over ideological issues. Speaker Boehner is standing his ground on the House bill’s defunding of Planned Parenthood and National Public Radio. Negotiating over these items with little economic impact is not time well spent, in Walker’s view. In fact, he says, the entire back and forth over the $30 billion or so on a $3.7 trillion budget misses the point. “This like arguing about the bar tab on the Titanic,” he quips.

[source]

Apr 1st, 2011 12:02 by News

by Michael T. Snyder
April 1, 2011 (SeekingAlpha) — During a recent meeting with USA TODAY’s editorial board, Wal-Mart CEO Bill Simon said that rising inflation in the United States is “going to be serious” and that Wal-Mart is “seeing cost increases starting to come through at a pretty rapid rate.” For many years Wal-Mart has been famous for their “low prices,” so for the head of Wal-Mart to publicly warn that much higher prices are coming is more than a little alarming.

… But Wal-Mart is not the only major corporation that says that inflation is coming. Hershey has just announced price increases of about 10 percent on its line of products.

… In fact, Aaron Smith, the managing director of Superfund Financial, believes that coffee, sugar and cocoa will all be five to ten times more expensive by 2014 than they are today.

… Most Americans don’t realize just how precarious things are at the moment for the global economy. The financial crash of 2008 did a lot of lasting damage, and the next wave of the financial crisis could potentially be even worse. Unfortunately, the global financial system is more vulnerable than ever right now.

… The dollars that you have today are never going to be more valuable than they are right now. Don’t wait too long to use them. If you have a huge pile of dollars sitting in the bank your wealth is slowly but surely rotting away.

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Inflation forecast to swamp consumer
April 1 2011 (Bloomberg) –

… Food costs were at “dangerous levels” after pushing 44 million people into poverty since June, World Bank president Robert Zoellick said last month. That added to the more than 900 million people around the world who go hungry each day.

It was “an incredibly difficult humanitarian story because the poorest countries will be hit the hardest”, [Superfund Financial's Aaron] Smith said. “The average person is going to be swamped by food inflation. The new arms race is food and energy.”

An indirect way of betting on food prices was to buy gold, because it tended to do well when inflation accelerated, he said.

[source]

Apr 1st, 2011 09:54 by News

By Herbert Lash
April 1 (Reuters) — Global stocks rose and the U.S. dollar extended gains on Friday after an upbeat U.S. employment report signaled the recovery in the world’s largest economy remained firmly on track. … The greenback added to early session gains and was up 0.7 percent against a basket of major currencies and up 0.5 percent versus the euro.

A total of 216,000 nonfarm U.S. jobs were added in March, the government said, well above the 190,000 expected in a Reuters poll. January and February employment figures were revised to show 7,000 more jobs than previously reported, and the unemployment rate fell to a two-year low of 8.8 percent.

“The numbers are obviously good, and one can hope that we will continue to see the market rise in continuing months,” said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton, New Jersey. Baumohl cautioned that rising energy prices could threaten the employment outlook by putting a squeeze on household spending and business investment. “One has to wonder whether we’ll see the pace of hiring slow as a result,” Baumohl said.

U.S. Treasuries extended losses after the data, as investors’ hunt for risk picked up pace…. “If the economy has lifted off and the labor market continues to produce jobs, that can only mean one thing … we’re getting closer to the day when the Fed starts to normalize interest rates,” said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ.

“And if the Fed is going to do that, that means 10-year yields under 3.5 percent don’t have a lot of value.”

[source]

Apr 1st, 2011 09:30 by News

by Jan Harvey
April 1, 2011 (Reuters) — Gold fell on Friday after data showed the US economy added more jobs than expected in March, lifting the dollar and supporting expectations US authorities may move towards tighter monetary policy.

Spot gold slipped 1% to a session low at $1419.60 an ounce and was bid at $1421.35 an ounce at 1302 GMT, against $1436.48 late in New York on Thursday. US gold futures for April delivery fell $17.10 to $1421.80.

Gold prices hit a record $1447.40 an ounce last month as unrest across the Middle East and North Africa, the reemergence of euro zone sovereign debt issues and a devastating earthquake in Japan prompted buying of the metal as a haven from risk.

But while they recorded a tenth consecutive quarter of gains in the first three months of 2011, it was the smallest such rise since the financial crisis gripped the markets in late 2008 as investors worried about the prospect of rising rates.

… But elsewhere the US Mint said it sold more gold American Eagles in the three months to end March than in any quarter since the end of 2009, and reported its highest ever quarterly sales of silver American Eagle coins.

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Apr 1st, 2011 07:23 by News

Gold and silver retreated as a robust nonfarm payrolls number for Mar increased risk appetite. Payrolls jumped 216k, which was better than the market was expecting, but below the ‘whisper’. The unemployment rate slipped to 8.8%. The jobs report wasn’t all roses and sunshine though: The average duration of unemployment rose by nearly 2-weeks in Mar to 39-weeks, from 37.1-weeks in Feb. The long-term unemployed’s now account for 45.5% of the unemployed, up from 43.9% in Feb. Hourly earnings stagnated in Mar, when the market was looking for a continuation of the recent modest rise.

Continued acceleration in job growth is going to intensify the already worrisome inflation risks, upping the pressure on the Fed to remove accommodations and tighten. That might prove difficult in the face of still sluggish economic growth and a double-dipping housing market.

Mar 31st, 2011 14:43 by News

by Joseph Stiglitz
March 31, 2011 (FT) — The international monetary system needs fundamental reform. It is not the cause of the recent imbalances and current instability in the global economy, but it certainly has been ineffective in addressing them. So a broad set of reforms is required, beginning with an immediate expansion of the current system of special drawing rights or money that can be issued by the International Monetary Fund. And here the Group of 20 leading nations must take the lead.

… we now have a system dominated by holdings of US dollars. This has several disadvantages. The first is it creates a global recessionary bias during and after financial crises – because it places the burden of adjusting to payments imbalances on nations which run a deficit.

The second is the tension it creates, due to the use of a national currency, the dollar, as the global currency. This can lead to global volatility as a result of growing US current account deficits. These deficits are necessary, for creating sufficient global liquidity, but they also generate excessive indebtedness, both external and internal. So if the US were to shrink its deficit too quickly, a deficiency of supply of the global reserve currency could result.

… the G20 should encourage the IMF to issue a significant amount of new SDRs during the next three years, up to a value of $390bn a year.

…Further, when crises occur in many countries simultaneously, as happened, for instance, during the 1998 east Asian crisis, IMF lending could be totally financed by new SDR issues in unlimited amounts. If and when the world economy recovered or boomed, SDR issues could then cease, or even be reabsorbed. Thus the IMF would have a greater role in creating official liquidity, in a way that curbed both recessionary and inflationary trends at different times.

[source]

RS View: Joe has been drinking deep from the special tank of Kool-Aid known only to professional economists, and in a fog of sugar-fueled delirium he is seen here trying to sell his fraternity’s pipe dream of SDRs that NOBODY is seriously buying. But other than that, keep up the good work, Joe!

Mar 31st, 2011 14:04 by News

By Myra P. Saefong
March 31, 2011 (MarketWatch) — Gold futures notched a nominal record high Thursday, as a weaker U.S. dollar, ongoing instability in Arab countries and euro-zone debt concerns lured investors to the precious metal.

Gold for [June] delivery rose $15, or 1.1%, to settle at $1,439.90 an ounce on the Comex division of the New York Mercantile Exchange. That handily supplanted gold’s March 23 close of $1,438 an ounce. Gold tapped an intraday record high of $1,448.60 an ounce on March 24.

“Geopolitical concerns are taking the lead over expectations of [monetary-policy] tightening,” said Jim Steel, a precious-metals analyst with HSBC in New York. A rally for oil and concerns about Portugal’s sovereign debt also propelled the metal higher, he added.

[source]

Mar 31st, 2011 13:55 by News

By Ben Kunz
(Bloomberg Businessweek) — … Nongamers may have missed Facebook’s clever foray into the world of “virtual currency,” where Facebook Credits cost 10 cents each and can be exchanged for game points or cartoony gifts. Those dimes are adding up — the U.S. market for virtual goods will reach $2.1 billion in 2011, according to research firm Inside Network. Facebook’s currency, while just part of that market, is getting real. You can now purchase gift cards for Facebook Credits at Wal-Mart, Target, and Best Buy.

So why couldn’t Facebook use them as real currency, too? In fact, why couldn’t Facebook become your bank? At first blush, this seems like a crazy idea. Facebook would need to overcome consumer privacy concerns, expand its Credits into a payment system that works everywhere, and surmount regulatory hurdles to handle businesses such as deposits and mortgage servicing. Crazy, until you realize how smartphones are changing the world of money. … The next payment platform is no farther than that glass gadget in your pocket.

… Facebook recently expanded its monetary systems with Facebook Payments, purportedly for paying app developers. But the incorporation documents state that Payments is “organized for the purpose of transacting any or all lawful business.” Hmmm.

If only one of every five Facebook users adopted Credits to buy things, Facebook would be as big as PayPal. And once Facebook makes us comfortable with Credits, it could then transition to a “traditional” global bank, storing your financial assets like gem points in Bejeweled Blitz.

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RS View: Squarely bagged, tagged, and identified, the critter that runs amok and answers to the name ‘Money’ is truly little more than an ethereal form of economic communication. No wonder that smartphones and the web-dominating Facebook are well positioned to make inroads on the domain previously dominated by the traditional banks and financial houses. But no matter which entity emerges from the contest as the prevailing monetary messenger, the fact remains that notions of money, being mere words on the wind, can aid in the coordination of the immediate transaction or business at hand, but it can never do adequate service in conveying true wealth across time and space (i.e., geography). For that purpose you need tangible savings, a role for which physical gold is uniquely well-suited and already performing its part.

Mar 31st, 2011 13:03 by News

by Financial Foghorn
March 31, 2011 (SeekingAlpha) — In my last Tuesday memo, I said not owning gold in the current gold bull market is insane. Then I thought, wait, maybe some folks aren’t buying because they’re listening to financial TV that’s telling them gold is in a “bubble.” “Whoa,” say the Wall Street trolls and mavens. Stay away from gold! We’re here to save you.” Yeah, right.

Are these are the same Wall Street idiot-savants who overlooked the tech bubble, failed to notice the credit meltdown, and totally missed the subprime real estate eruption? And now they’ve developed “vision,” and are able to see frothiness in the gold market … the same gold market they ignored for the past 10 years? And why are you listening to those guys?

Yes, we’re in a gold bull market. We’re in Act two of a three Act gold bull market. The upward price slope is nicely positive. Act II is when institutions buy. Today, mutual funds, insurance companies, foreign money managers and hedgies are wading into gold, and the car and pharma company advertisers at CNBC don’t like that. So CNBC knocks gold.

Every bull market ends with a party mania, and Act III is the bubble finale. Act III soars upwards…

… gold buyers in an Act III bubble buy with conviction, not skepticism. As John Templeton said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on Euphoria.” Yes, 2011 is hardly euphoria.

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Mar 31st, 2011 12:40 by PG

Gold Moves Back Within $10 of Record High

Gold continues to recoup the latest corrective losses. Well over 61.8% of the recent pullback has already been retraced, returning considerable credence to the underlying uptrend. The yellow metal and silver continue to be supported by ongoing concerns surrounding the nuclear crisis in Japan, as well as geopolitical tensions and war in the Middle East and North Africa. Add to that rising inflation worries across the globe and a continued worsening of the debt crisis in Europe and the result is a greater risk aversion and greater appeal for the precious metals.

Amid ever-more reports about spreading radiation danger in Japan, the market remains understandably tense. We remind ourselves once again that the crisis in Japan is above all else a humanitarian disaster, yet the economics can’t be ignored. In the first indication of the economic impact, Mar PMI plunged to 46.4, the lowest reading in 2-years. However, the drop from the Feb reading of 52.9 was the biggest m/m plunge ever recorded. The data are an ominous indication, given a resolution to the nuclear crisis continues to seem a long way off.

In North Africa, the debate continues about the US role in Libya, as forces loyal to strongman Muammar Gaddafi continue to press their advantage. Elsewhere in the region, anti-government protesters in Bahrain and Saudi Arabia are calling for another “Day of Rage.” Continued regional instability has kept oil prices elevated, stoking inflation worries.

In Europe, Mar HICP unexpectedly accelerated to 2.6% y/y, above market expectations, vs 2.4% y/y in Feb. As inflation continues to surge above the ECB target, tightening expectation obviously go up as well. However, the worsening debt crisis continues hamstring the central bank. A hike to benchmark rates would raise the interest rates in heavily indebted periphery countries, which they can ill-afford. The Portuguese yield curve has inverted for the first time since 2006 amid ongoing political uncertainty — in the wake of last week’s collapse of the government — and continued debate over whether the country should accept a bailout.

S&P downgraded both Greece and Portugal again on Wednesday, despite the fact the eurozone ministers moved closer to a permanent bailout mechanism. The rating service Fitch suggested that the EU plan to give the new ESM preferred creditor status could discourage private investors from buying bonds for fear of a haircut, and actually increase the risks of sovereign defaults. There have already been fractures in the reported solidarity for the ESM this week. The ECB’s Nout Wellink said, “The competition pact (bailout facility) has been weakly designed.” Recent resounding regional election defeats for Germany’s Chancellor Merkel and French President Sarkozy give a pretty clear indication of where the taxpayers in Germany and France stand on the issue of more bailouts.

The Irish government released the results of their third bank stress tests this afternoon. To nobody’s surprised, the banks will need another €24 bln in aid, bringing the total bill to €70 bln. Trading in Bank of Ireland & Allied Irish Banks was suspended ahead of stress test results. Irish Life & Permanent Plc was suspended yesterday. While the ECB’s Axel Weber threw his remaining weight behind Irish PM Kenny’s pledge to protect the Irish taxpayer at the expense of bank bondholders, it remains to be seen if that will actually happen.

Finally, agriculture commodities surged after the latest USDA prospective planting report suggested a further tightening of supplies, despite more acres of primary grains likely to be planted. This will further escalate food price inflation, adding to already substantial global geopolitical risks.

Mar 31st, 2011 12:06 by News

March 31, 2011 MUMBAI (Economic Times of India) — Gold demand in India will continue to grow and is likely to reach 1,200 tonnes [annually] or approximately Rs 2.5 trillion by 2020 at current price levels, according to a research by World Gold Council (WGC). [Comparing, that's up from 963 tonnes (Rs 1.7 trillion) in 2010.]

“The rise of India as an economic power will continue to have gold at its heart. India already occupies a unique position in the world gold market, and as private wealth in India surges over the next ten years, so will Indian demand for gold,” WGC Managing Director, India and the Middle East, Ajay Mitra said in a statement here.

Indian gold demand has grown 25 per cent despite 400 per cent price rise… [reaffirming] the country’s status as a key driver of global gold demand.

… He pointed out that Indians tend to be risk averse and place great faith in the wealth preservation qualities of gold, which inspires confidence, stability and security.

“Therefore, the view that Indian demand for gold will be driven by the concept of enduring value, not price,” he said.

… “We predict that the new demand for gold will be driven by rapid GDP growth, urbanisation, the emergence of a strong middle class and a sustained and potentially rising savings rate of 30-40 per cent of income,” he said.

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RS View: Look long and hard at that list above. Note that the strength of gold does not require the small-minded trading on perpetual gloom and fear, but rather can soar on the wholesome basis of economic growth — a win-win situation worth aspiring to.

Mar 31st, 2011 11:49 by News

By Addison Wiggin, Guest blogger
March 31, 2011 (ChristianScienceMonitor) — Might America’s trading partners one day sell off their US Treasury holdings?

Impossible, said Warren Buffett. In fact, he insisted, they couldn’t…because they’d need to convert it into some other currency, which would be little better than the dollar. No one else chimed in to challenge the assertion.

“Buffett’s answer assumes that there is no alternative,” author, friend and local Baltimore resident Bill Baker writes in his 2009 book Endless Money: The Moral Hazards of Socialism, “because for generations, all the world’s currencies have been backed only by the promise that governments would accept them in payment of taxes.

“But that ignores a currency that has been used effectively by man for thousands of years: gold. China and other countries might exchange their US dollars for it now.”

Indeed, China is quietly building its gold reserves. They totaled 600 metric tons in 2004. Then in April 2009 came an announcement they’d grown to 1,054 metric tons. And the buzz from Beijing is that the central bankers want to grow that stash another tenfold.

… These are the first steps toward what Baker sees as the “remonetization” of gold – coming soon to a country near you.

… we’re approaching the end of the Great Dollar Standard we wrote about in The Demise of the Dollar. The only world anyone below the age of 40 has ever known – in which all the world’s currencies float freely against each other – is nearly over.

[source]

RS View: While it is accurate to say that gold is on track to become the primary reserve asset again, the issue of money is something else entirely different. Contrary to the article’s assertion that the world in which currencies float freely against each other is nearly over, the paradigm in store is that national currencies will increasingly be floating independent of each other (except for a few currency unions modeled after the euro), in which sense it is more accurate to say that it will be gold floating upward into the sky as the currencies independently float (or founder and sink!) upon (or beneath!) an undulating, bottomless ocean.

Mar 31st, 2011 11:10 by News

Alix Steel and Jim Cramer
NEW YORK (TheStreet) — Jim Cramer reveals why he likes junior miners, large caps and the physical metal. Says, “It’s a currency… you NEED to own gold.”

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