By Claudia Assis and Kate Gibson
May 2, 2011 (MarketWatch) — Silver prices fell more than 5% Monday after the main U.S. metals futures exchange increased for the second time in a week the amount of cash needed to hold speculative positions in the metal.

Gold, which started floor trading in the red after hitting a record intraday high in electronic trading, turned positive as the dollar weakened and settled modestly higher.

Silver for July delivery fell $2.52, or 5.2%, to $46.08 an ounce on the Comex division of the New York Mercantile Exchange. That was silver’s largest one-day percentage drop since early January.

Gold for June delivery advanced 70 cents to $1,557.10 an ounce. The metal traded as high as $1,577.40 an ounce earlier, an intraday record. It got support from a weaker dollar, and some modest safe-haven bidding on fears of attacks in retaliation to Osama bin Laden’s death.

Silver gathered most of the attention on Monday trading , however, as it plunged as much as 13% to $42.20 an ounce earlier. Monday was the first full session after the increase in margin requirements. Initial margin requirements for silver increased to $14,513 per silver futures contract, from $12,852. Maintenance margins increased to $10,750 from $9,500.

[source]

by Michael Pettis
May 2, 2011 (WallStreetPit) — The week before last on Thursday the Financial Times published an OpEd piece I wrote arguing that Washington should take the lead in getting the world to abandon the dollar as the dominant reserve currency.

… Reserve currency status is a global public good that comes with a cost, and people often forget that cost.

Just as importantly as a public good it requires a number of characteristics. At a minimum these include ample liquidity, central bank credibility, flexible domestic financial markets, minimal government or political intervention, and very deep and open domestic bond markets. …… And no other country, not even Europe, will be willing to pay the cost. If there is any chance that the dollar’s status declines in the future, it will require that Washington itself take the lead in forcing the world gradually to disengage from the dollar.

Ironically, this is exactly what Washington should be doing….. the global use of the dollar has become bad for the US economy, and because of the global imbalances it permits, bad for the world.

… In practice, dollar liquidity, limited Washington intervention, and the size and flexibility of US financial markets ensure that these [other] countries always stockpiled dollars. There is no real alternative to the dollar, and most other governments would anyway actively discourage massive purchases of their own currencies because of the adverse trade impacts. If foreigners accumulate euros or yen at anywhere near the rate they accumulate dollars, they would force Europe and Japan into massive current account deficits, and neither Europe nor Japan has any interest in seeing this happen.

… The massive imbalances that this system has permitted are destabilizing for the world because they permit large and unstable debt buildups both in countries that over-produce, like China and Japan, and those that over-consume, like the US. If the world were forced to give up the dollar, there is no doubt that there would be a cost – it would reduce global trade somewhat and it would probably spell the end of the Asian growth model – but it would also lower long-term economic costs for the US and reduce dangerous global imbalances. … The cost of maintaining sole reserve currency status has simply become too high in the past three decades and is leading inexorably to rising American debt and worrying global imbalances.

[source]

RS View: While this commentary on the whole is usefully sound, I would hasten to take exception with the remark, “There is no real alternative to the dollar…”

In the context of this commentary and all surrounding discussion, it isn’t the CURRENCY (invoicing&payment) aspect of the dollar’s international function that is under scrutiny (because that is merely incidental,) but rather it is the RESERVE aspect that is on the chopping block. And to be sure, there is — quite literally — a very REAL alternative to the dollar in the international monetary capacity as a reserve asset. Gold. As such, gold uniquely would endure an inexorable rise, floating independently higher against all national currencies such that countries need no longer play ‘hot potato’ with the burden of any given national currency bearing the special forces of international reserve usage. Physical (underivatized) gold alone can take the elevating heat and pressure and with it shine all the more as a reliable public and private good in providing that specialized monetary utility. This path becomes ever more discernible with the march of progress. For the sake of your future wealth and well-being, get yourself intellectually and financially firmly on that road.

For the year 2011 so far, 39 banks have gone into FDIC receivership — 13 in the month just ended.

NEWLY FAILED
April 29
Community Central Bank – - – - Mount Clemens, MI
The Park Avenue Bank – - – - Valdosta, GA
First Choice Community Bank – - – - Dallas, GA
Cortez Community Bank – - – - Brooksville, FL
First National Bank of Central Florida – - – - Winter Park, FL

April 15
Heritage Banking Group – - – - Carthage, MS
Rosemount National Bank – - – - Rosemount, MN
Superior Bank – - – - Birmingham, AL
Nexity Bank – - – - Birmingham, AL
New Horizons Bank – - – - East Ellijay, GA
Bartow County Bank – - – - Cartersville, GA

April 8
Nevada Commerce Bank – - – - Las Vegas, NV
Western Springs National Bank and Trust – - – - Western Springs, IL

by Josh Funk
Monday May 2, 2011 OMAHA, Neb. (AP) — Warren Buffett and Jack Welch, two respected business leaders, said Monday the death of Osama bin Laden won’t end the threat of terrorism and might not boost markets.

The pair appeared together Monday on CNBC. Buffett’s interview had been scheduled to discuss the economy and last weekend’s Berkshire Hathaway shareholders meeting, but international relations became a prominent topic because of the bin Laden news.

… Buffett said he felt good when he heard of bin Laden’s death, but he still worries about terrorist attacks. “The desire to do us harm exists in too many people around the world,” Buffett said.

But Buffett doesn’t expect the bin Laden news to affect business much. “I don’t think this is a big market factor,” Buffett said on the Fox Business Network. “The American people feel wonderful today — all of us — but in terms of earning power of American business, I don’t think that factor should change dramatically because of this.”

… Buffett and the Berkshire officials were also asked again about the actions of a one-time Berkshire executive who resigned last month after details emerged about a questionable investment he made. … Buffett called Sokol’s behavior inexcusable, but said he doesn’t think many changes are needed at Berkshire. His friend, [Bill] Gates, supported that view.

“Berkshire has very good compliance rules,” Gates said. “The fact is that no compliance rules are going to stop somebody from making a mistake.”

Buffett and Berkshire Vice Chairman Charlie Munger both said the Sokol situation is a sad one for him and for Berkshire because Sokol did so many good things for the company over the years. “I saw it instantly as tragedy,” Munger said.

[source]

by Jean Folger
May. 2 2011 (Forbes) — Gold has been considered a currency, commodity and investment for thousands of years. Sought after for both its beauty and worth, gold continues its rally to reach new daily highs. There is speculation among anxious investors about just how high gold could go. While no one knows for certain, there is a strong argument in favor of gold climbing even higher.

… Central banks keep paper currency and gold in reserve. For the first time in decades, central banks have begun buying more gold than they are selling, according to the World Gold Council. As these banks move away from paper currencies and towards gold, they in effect remove a significant of supply from the international gold market, driving the price of gold higher.

… Gold and the U.S. dollar have an inverse relationship…. when the dollar is weak and during times of economic uncertainty, more investors look to gold as a safe haven for their investment activity.

… On April 18, 2011, Standard & Poor’s downgraded its credit outlook for the United States…. In addition to worldwide instability, this particular downgrade, coupled with the threat of further ratings cuts, will likely increase gold’s attractiveness to already skittish investors.

… Investors worldwide seek gold as a means to protect wealth and hedge against uncertainty. [Also...] As economies develop and salaries increase in emerging markets, the demand for gold is expected to increase. …… Gold is still far from its January 1980 inflation-adjusted high of $2,300 per ounce, indicating that it can undoubtedly go higher. Also, the fact that gold has been a solid performer over the past decade does not automatically guarantee its near-term failure: gold is not necessarily in a bubble that is about to pop; rather, it could very well continue for some time to reach new highs. How long is not known, but today’s economic and political environment, coupled with increased demand in emerging markets, points to gold’s continued rise.

[source]

by David Levenstein
Monday, 02 May 2011 (Mineweb) — Last week gold prices ended on a high note. The price of spot gold hit another record high of $1570 an ounce and the upward momentum looks set to continue. Gold has risen to new record nominal highs as the dollar continues to be sold in international markets. Gold has eked out smaller gains in other fiat currencies but remains close to record nominal highs in euros, yen and pounds.

While the US Federal Reserve Chairman, Ben Bernanke was giving his first regular conference the price of gold edged higher and the dollar’s down trend accelerated breaching the 73 level on the Dollar index to make a new three year low at 72.83. Almost everything else climbed against dollar….

… Central banks control the supply of the monetary base by buying and selling assets. Purchases of assets, of any type, increase the monetary base when the central bank pays for such assets with currency or increased central bank deposit liabilities. Similarly, central bank sales of assets, of any type, reduce the monetary base when the purchaser surrenders currency or central bank deposit liabilities in payment. From 2008 until now, the US monetary base has increased from a base of around USD800 billion in 2008 to more than USD2.4 trillion. The consequence of such action has led and will lead to the further debasement of the US dollar as well as higher inflation.

… According to Bernanke the current escalation of commodity prices was due to increased global demand. … In a recent interview on King World News, Peter Schiff had this to say. “Ben Bernanke may deny that there is a causal relationship between his monetary policy and rising prices but the market knows differently. In fact when Ben Bernanke denies the relationship, then the expectation is that he is going to continue on his current monetary policy course which is the green light to buy gold, buy silver, buy oil, buy commodities, sell the dollar and that’s exactly what’s happening. That’s why the dollar is hitting new lows today.”

[source]

By Aaron Task
May 2, 2011 (DailyTicker) — Calling David Sokol’s actions “inexcusable”, Warren Buffett sought to distance himself from his former protégé at this weekend’s Berkshire Hathaway annual meeting.

By admitting he made a mistake with his original handling of the situation, Buffett hoped to silence his critics and move on from an issue that has damaged his previously sterling reputation. But Buffett failed to put the matter to rest, according to Paul Argenti, an expert in crisis management and professor of corporate communications at Dartmouth’s Tuck School of Business.

“I don’t think he was as ruthless as I would have expected,” Argenti says. “The unfortunate reality is he’s getting away with something most executives would not be able to get away with.”

… Furthermore, the professor thinks “The Oracle” missed an opportunity to turn the Sokol affair into a “teachable moment” and reaffirm Berkshire’s commitment to ethical behavior. Merely admitting errors in the initial handling of the Sokol matter is “not enough,” Argenti says. “[Buffett] needed to really come down hard and make an ethical example of this and he didn’t do that.”

[source]

RS View: “Et tu, Buffett?” Increasingly spongy ethics in the business world and the resulting difficulties for ensuring and securing square treatment in this trust-dependent economic realm will continue to weigh on the credibility value of every form of promissory derivative. The bankable handshake of bygone years has been reduced in modern times to little more than a quaint notion to be held only by patsies. Until this deteriorating financial climate begins to improve, (as yet inconceivable,) for enduring well-being the savvy saver will wisely keep those handshakes at full arms’ length while keeping his gold much, much closer than that.

By Myra P. Saefong and Virginia Harrison, MarketWatch
SAN FRANCISCO (MarketWatch) — The U.S. dollar traded modestly lower against its major currency rivals Monday morning after U.S. President Barack Obama announced that Osama bin Laden has been killed.

The dollar index, which measures the U.S. unit against a basket of six major currencies, was at 72.869, down from 72.960 in North American trade late Friday.

“Although the death of bin laden is giving all Americans an emotional high, it will have no affect on the financial markets after the first few hours of trading,” said Keith Springer, president of Springer Financial Advisors in Sacramento, Calif.

[source]

bin Laden’s Death and Margin Hikes Don’t Change the Fundamentals for Gold

Silver sold-off dramatically in overseas trading after the CME Group raised margins on COMEX silver futures contracts once again. Margin requirements on silver have risen 241% in the past year. Spot silver plunged 10% and futures were down 13%, dragging gold lower in the process — albeit much more modestly so. Gold fell just 0.5% from Friday’s close to the overseas low and has subsequently rebounded to establish new all-time highs.

Arguable news that Osama bin Laden had been killed by US special forces in Pakistan played some role in the metals’ correction, based on the perception that the global terrorism risk had been reduced in some meaningful way. The ‘Osama factor’ is being widely heralded as the reason US stocks opened higher this morning. However, as one threat is mitigated, others seem to escalate. The situation in Libya took a decided turn for the worse over the weekend after foreign embassies in Tripoli were attacked by mobs loyal to strongman Muammar Gaddafi. The attacks came on the heels of the reported death of one of Gaddadi’s sons from a NATO air-strike. Iran is also reporting that Israel is preparing for air-strikes, presumably on Iran’s nuclear facilities.

It’s not surprising to see gold and silver come charging back from the overnight corrective activity. There continues to be strong buying interest below the market — particularly for physicals. The death of bin Laden and the hike in the margin requirements for silver don’t change the fundamentals that have driven the precious metals higher in recent weeks, months and years. Most recently, it has been persistent dollar weakness. The dollar index fell to new 34-month lows in early US trading, bringing the DX within about 3% of its all-time low. The fresh dollar losses probably deserve more credit for today’s higher equity prices than does the death of Osama bin Laden.

But let’s give credit where credit is due: Ben Bernanke’s recent press conference, where he confirmed that the Fed would maintain its zero interest rate policy for the foreseeable future, is the one that truly lit the fire on gold and silver…and tanked the greenback. Bernanke continued to dismiss inflation as “transitory” and even hinted that if Congress starts cutting spending and it negatively impacts economic growth prospects, the Fed might ease further. With rates at 0%, that translates into more quantitative easing.

by Jim Cramer & Debra Borchardt
Mon 05/02/11 (TheStreet) – - Silver margin requirements shake out weak hands. Jim Cramer still likes silver story.

[source]

ALSO…
Cramer: Dollar Will Stay Weak
NEW YORK (TheStreet) – - Jim Cramer thinks Bin Laden’s death is a psychological boost, but not for dollar.
[source]

By Pham-Duy Nguyen and Jason Scott
May 2, 2011 (Bloomberg) — Silver futures plunged as much as 13 percent, the biggest intraday drop since October 2008, as CME Group Inc. raised the amount of cash that traders must deposit to trade [-- margins for speculative positions now up to $14,513 from $4,500 a year ago]. Gold touched a record before paring gains.

“Silver just got out of control on the upside, and it was only a matter of time before it came down,” said Matt Zeman, a strategist at Kingsview Financial in Chicago. “The higher margins are going to squeeze out the little guys. We’ll see the spread between silver and gold close and a little more buying in gold.”

… Silver also may have fallen after failing to top $50 last week, Zeman said. The Comex record is $50.35 in January 1980. “Silver takes three cracks at $50 and doesn’t make it,” Zeman said. “That’s an excuse to take some profits.”

… Speculators cut their net-long positions in New York silver futures by 26 percent in the week ended April 26, according to U.S. Commodity Futures Trading Commission data.

… Traders may be unwinding long-silver and short-gold positions, said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter.

“Gold is now a currency,” Gartman said. “It will supplant the yen as the third-most-important reservable currency amongst the industrialized world’s central banks. We shall use this morning’s weakness in gold from its highs to suggest to those not long to get so.”

[source]

ALSO…
Gold back above $1570; hits record high at $1575
Monday
May 2, 2011 (FXstreet) — After a brief US dollar rebound earlier in the day, which led gold to taste daily lows near $1540/oz, the yellow metal has managed to regain the upside, erasing previous losses.

Gold has gained as much as $35 an ounce from lows on Monday, matching its record high set last Friday a few cents above $1575/oz. Currently the precious metal is at $1570 an ounce, posting a 1.03% daily gain.

[source]

By Jason Scott
May 2 (Bloomberg) — Silver futures plunged as much as 13 percent on the Comex in New York on investor selling as CME Group Inc., the Comex parent, increased the minimum amount of cash that traders must deposit for speculative positions.

Silver for July delivery dropped to $42.2 an ounce before trading at $44.37 an ounce at 8:56 a.m. in Singapore. The CME increased the so-called initial margin by 13 percent to $14,513 per contract from $12,825 after the close of business on Friday. Margins were $4,250 a year ago.

[source]

PG View: Recent margin hikes have made for a wild ride in silver, but they don’t change the underlying fundamentals that have been underpinning the metals for years. The United States and much of the world is grossly in debt, fiat currencies are being devalued as a result, leading to heightened concerns about inflation. It’s worth noting that volatility in the gold market has been significantly lower.

It was a volatile overseas session in the metals, particularly silver, which fell 10% before rebounding about 5%. The initial drop came on the news that the CME Group was raising margins on COMEX silver futures for the second time in a week. The moves in gold weren’t quite as dramatic and the trend their remains decisively bullish. Persistent weakness in the dollar and the resulting inflation expectations have been the primary drivers behind the metals in recent weeks and that has not changed.

The big overnight news of course is the killing of Osama bin Laden by US special forces in Pakistan. US stocks are called higher this morning and oil is lower, perhaps based on the notion that the general terrorist threat to America has been significantly diminished. That however is probably not the case. In fact, the US is presently on a heightened state of alert in anticipation of possible retaliation for the killing of bin Laden.

Finland’s nationalist True Finns reject Portuguese bailout. If the True Finns are included in the Finnish coalition government, there is a chance that Finland could veto further EU aide for the PIIGS.

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.

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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.

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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.

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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.

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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.

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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.

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