22-May (BusinessInsider) — Frank Holmes the CEO and CIO of US Global Investors is one of the more vocal and articulate gold bulls out there. And his position is rather thoughtful.

Holmes recently hosted a Hard Assets Investment Conference where he gave this monster gold presentation.

Basically, he poses the question of whether you should be bullish or really bullish.

[source]

PG View: The PowerPoint slides used by Holmes build a pretty compelling case for gold ownership.

22-May (HousingWire) — Economic activity remains relatively stable in emerging markets and the United States, but Europe remains a fiscal threat to the entire global recovery, economists with the Organization for Economic Co-operation and Development said Tuesday.

“The crisis in the euro zone remains the single biggest downside risk facing the global outlook,” said OECD chief economist Pier Carlo Padoan.

The international organization, which advises governments, said slow growth, high unemployment and limited room for further expansion into macroeconomic policies is fostering concern about Europe’s fate.

[source]

22-May (USAGOLD) — Gold retreated deeper into the range as the dollar was boosted by renewed weakness in the yen and sterling. While the inability of the yellow metal to regain 1600.00 is disappointing, the market may just be consolidating the gains from late last week, in advance of another challenge of the upside.

The yen fell sharply after Fitch downgraded Japan by two-notches to A+ amid concerns that the current political divide will inhibit the country’s ability to get a handle on its mounting debt problem. The implication of course is that in the absence of any political compromise on the fiscal side, the BoJ will have to step in with additional monetary measures (does this sound at all familiar?). In other words; the BoJ will print more yen. The resulting drop in the yen lifted the dollar.

Meanwhile the IMF increased pressure on both the UK government and the BoE to do more to stimulate growth. The IMF’s position is that the moderating pace of inflation, which fell to 3.0% y/y (EU-harmonized) in Apr, gives the BoE room to cut rates and ramp up its QE measures. Such prospects weighed on Sterling, providing an additional boost to the greenback.

Alexis Tsirpas continues his tough talk, threatening to stop the ongoing austerity programs if his Syriza party wins next month’s elections. It’s all well and good to sling such campaign rhetoric around with abandon to secure votes, but he better also be prepared to answer the following question: If we renege on our austerity promises, where’s the money going to come from? One might imagine that being cut off from bailout funds and global finance markets might just lead to greater austerity than is currently being required.

• Richmond Fed Index falls to 4 in May, below expectations of 11, vs 14 in Apr.
• US existing home sales +3.4% to 4.62M in Apr, above market expectations of 4.61M, vs negative revised 4.47M in Mar.
• Norway Q1 GDP (sa) +1.4% q/q, vs upward revised +0.6% in Q4-11; +4.3% y/y (nsa).
• UK CPI – EU Harmonized +0.6% m/m in Apr, in-line with expectations, vs +0.3% m/m in Mar; +3.0% y/y, vs 3.5% y/y in Mar.
• UK core CPI 2.1% y/y in Apr, vs 2.5% y/y in Mar.
• Hong Kong composite CPI +4.7% y/y in Apr, vs +4.9% y/y in Mar.

21-May (Financial Times) — There has been no official announcement. No terms or conditions have been disclosed. But Greece’s banking system is being propped up by an estimated €100bn or so of emergency liquidity provided by the country’s central bank – approved secretly by the European Central Bank in Frankfurt. If Greece were to leave the eurozone, the immediate cause might be an ECB decision to pull the plug.

Extensive use of “emergency liquidity assistance” (ELA) to help banks in the weakest economies has been one of the less-noticed features of the eurozone crisis. Separate from normal supplies of liquidity and meant originally as a temporary facility for national authorities to use when banks hit problems, ELA proved a lifesaver for the financial system Ireland and is now even more so in Greece. As such, it has given the ECB – which has ultimate control over the facility – considerable power to determine countries’ fates.

…“You don’t say when you are in an emergency situation, because then you make the situation worse. So I really don’t see the usefulness of being more transparent,” Luc Coene, Belgium’s central bank governor, explained in a Financial Times interview this month.

[source]

22-May (Reuters) — Fitch cut Japan’s sovereign credit status on Tuesday to the lowest level among global ratings agencies as a political stalemate dims the chance that the country can curb its snowballing debt.

Fitch Ratings cut Japan’s long-term foreign currency rating by two levels from AA to A plus, the fifth highest investment grade. It cut the more important local currency rating by one notch from AA minus to A plus. Both were given a negative outlook.

Fitch warned further downgrades were possible unless the government takes new fiscal policy measures to stabilize public finances and its ratio of debt to gross domestic product.

[source]

PG View: The yen tumbled as more BoJ printing is looking increasingly likely.

21-May (Reuters) — China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury’s first-ever direct relationship with a foreign government, according to documents viewed by Reuters.

The relationship means the People’s Bank of China buys U.S. debt using a different method than any other central bank in the world.

The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions.

China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn’t been necessary.

The documents viewed by Reuters show the U.S. Treasury Department has given the People’s Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011.

China can now participate in auctions without placing bids through primary dealers. If it wants to sell, however, it still has to go through the market.

The change was not announced publicly or in any message to primary dealers.

[source]

The Gold Bullion Market
by Alasdair Macleod

In the following lecture, economist Alasdair Macleod begins with this: “[F]iat currencies always die. They die because governments always take the process to destruction. Always. And that is true today. That is why gold is so important.” And he ends with this: “With this knowledge, anyone who does not take steps to protect him or herself from the increasingly certain event, a collapse in paper money, a fundamental change in our whole economic paradigm, is nuts.” In between, you will find one of the best structured and convincing rationales for gold ownership and future price appreciation I have read in awhile. As such, “The Gold Bullion Market” by Mr. Alasdair Macleod is a fitting and timely addition to our Gilded Opinion page.

—The U.K. government and the Bank of England should do more to encourage recovery in the country’s economy, the International Monetary Fund said Tuesday, as it warned chaos in the euro zone may require finance chief George Osborne to slow the pace of his aggressive austerity drive.

The IMF said in a regular report on the U.K. that it expects economic growth to resume in the second half of the year after official figures showed the economy slipped back into recession in the first quarter.

But the fund urged the government and the central bank to provide more support for the economy to prevent lasting damage from persistent unemployment and lost capacity.

…The IMF told the Bank of England that “further monetary easing is required.”

[source]

20-May (The Wall Street Journal) — Investors in U.S. Treasurys stand a good chance of losing money over time. And yet they can’t seem to get enough of Uncle Sam’s paper.

Many money managers aren’t thinking about Treasurys’ low yields or long-term performance. They are rushing in because Treasurys are a safe place to stash cash in the short term. Above, the U.S. Treasury building in Washington.

With the European crisis heating up and concerns about economic growth in the U.S. and China, money once again is pouring into safe U.S. government debt, sending Treasury prices higher and yields, which move in the opposite direction, to near-record lows.

…Over the long term, however, Treasurys pose risks of their own.

The biggest risk, experts say, is a prolonged rise in interest rates, which would reduce prices of existing bonds and produce losses for investors holding Treasurys.

…Treasurys pose another big risk: With yields this low, investors could well lose money over time in inflation-adjusted terms.

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PG View: Longer-term yields are already well below the rate of inflation, netting a negative return in real terms.

21-May (The Telegraph) — France and Germany reiterated that they will to “do everything to keep Greece in the euro” on Monday, as French finance minister Pierre Moscovici said the country would push for the introduction of eurobonds at a special EU summit this week.

Following his first meeting with German counterpart Wolfgang Schaeuble in Berlin, Mr Moscovici said, “We both believe that Greece has its place in the eurozone [...] Europe has to send signs to bolster investment and growth in Greece at a time when it is going through a violent recession.”

Mr Schaeuble said that Germany “would participate in all constructive ideas to strengthen sustainable growth,” but added that tough austerity measures were “a necessary precondition” for bolstering this growth.

[source]

21-May (USAGOLD) — Gold is a little easier, but generally well bid in the wake of last week’s rebound from in front of the low end of the range at 1522.40. A short term move back above 1600.00 would offer additional encouragement. Keep an eye on the 1627.95 retracement level.

A slightly calmer tone was evident in Europe today with the G8 throwing at least some verbal support behind keeping Greece in the monetary union. Yeah, everyone is for it, but is it practical or even possible. Certainly there will be a cost: How much will it be? And who will pay? The new French Finance Minister, Pierre Moscovici, said that he will push for eurobonds at the EU summit in Brussels later in the week. This would suggest that France at least wants all of Europe to pay the price. One can reasonably anticipate that Germany will remain a vociferous objector to the notion of eurobonds.

With new Greek elections queued up for June 16, Alexis Tsirpas, leader of the anti-austerity Syriza party is already on the offensive, saying that German Chancellor Angela Merkel “must understand she can’t act as if there are protectorates at the service of their creditors”. Such antagonistic rhetoric is likely to keep markets on edge in advance of the elections.

• Canadian Markets closed for Victoria Day
• Switzerland Q2 SECO Consumer Confidence improved to -8, vs -19 for Q1.
• UK Rightmove House Prices (nsa) unch in May m/m, vs +2.9% in Apr; +2.0% y/y, vs +3.4% y/y in Apr.
• Thailand Q1 GDP +0.3% y/y, vs upward revised -8.9% y/y in Q4-11.
• Japan Leading Index (revised) +0.3% m/m in Mar, vs +1.7% in Feb.
• Japan Coincident Index (revised) +1.5% mm in Mar, vs +0.9% in Feb.
• Taiwan export orders -3.5% y/y in Apr, vs -1.6% y/y in Mar.
• Taiwan Current Account $10.93 bln in Q1, vs $12.30 bln in Q4-12.

Europe-based clients wishing to open accounts in our precious metals trading program enjoy the benefit of allocated/insured storage in a U.S. storage facility. The program features tight trading spreads and the ability to include all four precious metals in your account. Delivery option available.

You will need to establish an account at our storage facility prior to your order. We will help you with this. Call at your convenience.

Over the years, we have worked with our clients in Europe who wish to take delivery. Now we can offer this new service and look forward to working with you.

For details (English only):

1-800-869-5115 (US)
00-800-8720-8720 (EU)

Extension # 100

– or –

[email protected]

– or —

(303)393-0322 (Local, if you are having trouble with the toll free number)

The anatomy of the eurozone bank run/Gavin Davies/Financial Times,5/21/12

USAGOLD’s Precious Metals Trading Program

20-May (Reuters) — A pledge by leaders of industrialized nations to help the troubled world economy is unlikely to herald quick new action by Europe on its debt crisis, meaning more uncertainty for nervous financial markets.

The Group of Eight economies stressed on Saturday that their “imperative is to promote growth and jobs”, as they also recognized problems among European banks and gave verbal backing for Greece to stay in the euro.

Still, despite U.S. calls for immediate moves to boost growth, no sign emerged that Germany would soften its stance on austerity as the cure for Europe’s debt problems.

With no consensus from Europe, markets will remain in a state of alert about the risk of a chaotic Greek exit from the euro, which would hit the region’s banking system and possibly the global economy.

[source]

18-May (The Wall Street Journal) — Jittery U.K. customers of one of Spain’s biggest lenders pulled out funds on Friday, and bad debts held by Spanish banks rose to a 17-year high, underscoring the continuing challenges facing the country’s financial sector.

Lenders have been struggling with the country’s five-year property slump, and the rapid deterioration of the loan books was one of four reasons cited by Moody’s Investors Service for its downgrade of the credit ratings of Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA and 14 other banks in the country late Thursday.

[source]

18-May (ShareCast) — Just in case anyone thought that the Eurozone sovereign debt crisis was coming to an end, German finance minister Wolfgang Schäuble predicted that market turmoil will last up to another two years. In an interview with French radio Europe 1, he said that “with respect to the crisis of confidence in the euro, in 12 to 24 months we’ll see the financial markets calm down.”

[source]

18-May (CNNMoney) — Stocks closed out an ugly week. Despite initial euphoria surrounding Facebook’s public debut, the social network’s shares barely popped above its offering price and failed to inspire investors to buy into the broader market.

All three indexes clocked their worst weekly losses of the year, finishing at the lowest levels since January.

U.S. investors focused on the global issues plaguing world markets Friday, which pushed stocks down for the third straight week.

[source]

PG View: Gold seemed to decouple from shares in the last two days of the week, rising more than $65 from Wednesday’s low.

18-May (USAGOLD) — Gold continues to rebound from this week’s earlier test of the low-end of the range at 1522.40. The yellow metal has already pressured 1600.00 intraday. A move above this level would ease short term pressure on the downside and leave the three lows at 1534.06/1522.40/1527.45 as a key support zone.

Risk appetite improved somewhat today after EU Trade Commissioner De Gucht told the Flemish daily De Standaard that both the ECB and the EC “are working on emergency scenarios in case Greece doesn’t make it.” The market seemed to take some comfort in the suggestion that there may at least be a plan. However, De Gucht went on to say that “the endgame has begun, and how it will finish I do not know.” Such uncertainty is probably little comfort in reality, and the European Commission refuted the notion that they had a contingency plan for a Greek exit from the EMU and the ECB categorized such talk as “unhelpful”. Nonetheless, I think the market was desperate for something to grasp on to as a rather tumultuous week winds down.

Risk appetite also likely got a boost from today’s Facebook IPO. However, while pre-market gains in the equity indexes have already evaporated, gold has thus far been able to hold on to most of its gains.

Canada provided the latest uptick in inflation worries with hotter than expected inflation in April. The rise in core CPI from 1.9% y/y in March to 2.1% y/y (on expectations of 1.8%) was particularly troubling. The Canadian dollar and Canadian yields rose amid rising expectations of a BoC rate hike.

• Canada CPI +2.0% y/y in Apr, above expectations of +1.9%, core +2.1% y/y, on expectations +1.8%.
• Germany PPI +0.2% m/m in Apr, vs +0.6% in Mar; +2.4% y/y.
• Italy industrial orders (sa) +3.5% m/m in Mar, vs negative revised -2.6% in Mar; -14.3% y/y.

17-May (Reuters) — China’s gold demand hit a record high in the first quarter on investor worries over inflation and property market curbs, the World Gold Council said on Thursday, bucking a lower trend in global consumption driven by higher gold prices.

Global gold demand fell 5 percent on the year to 1,097.6 tonnes in the first three months of 2012, as jewellery and technology sectors bought less gold with average prices up 22 percent from a year earlier, but investment demand and central bank buying helped cushion the fall, the industry group said.

China remained the world’s top gold consumer for the second quarter in a row, with its gold consumer demand up 10 percent to 255.2 tonnes, beating India’s 207.6 tonnes, which was a 29 percent decline on the year.

“Further growth is expected (in China): investors remain wary of high inflation rates; and property market restrictions continue to drive demand for gold among investors seeking access to real assets,” said the WGC in its quarterly Gold Demand Trends report.

[source]

17-May (Business Standard) — Central banks across the world have started picking up gold as reserves, observed World Gold council in its first quarter gold demand review report released today.

Although down from buying in the first quarter of 2011, central banks continued to purchase gold as a reserve. In Q1 2012, central banks gold reserve demand was at 80.8 tonne.

…The rapid growth of foreign exchange reserves in a number of expanding economies has required many central banks to increase gold holdings in order to maintain the ratio of gold to their foreign exchange reserves, WGC said.

[source]

By Martin Wolf
17-May (Financial Times) — The irritation of the eurozone with Greece is at extreme levels. After all, 80 per cent of Greeks say they are in favour of staying in the euro, but then they fail to elect politicians prepared to implement the agreed programme. This drives creditors crazy. Increasingly, the latter are inclined to accept Greek exit, even welcome it. But they should be careful what they wish for.

A departure would create severe dangers. The danger of contagion is obvious. The long-run danger is more subtle. But the eurozone either is an irrevocable currency union or it is not. If countries in difficulty leave, it is not. It is then an exceptionally rigid fixed-currency system. That would have two dire results: people would not trust in its survival and the economic benefits of the single currency would largely disappear.

These perils are not of concern to the eurozone alone. Taken as a whole, this is the world’s second-largest economy, with the largest banking system. The risk that a bigger eurozone upheaval would cause a global crisis is real. As frightening is the likelihood that eurozone crises would become permanent features of the world economy.

[source]

17-May (Financial Times) — Spain has been moved to deny reports of deposit withdrawals from Bankia, the part nationalised savings banks, after its shares tumbled as much as 29 per cent on Thursday.

Following reports in the Spanish media that €1bn had been taken out by clients of Bankia, Spain’s second-largest lender by domestic depositors, in the week since it was nationalised, Fernando Jiménez Latorre, secretary of state for the economy, denied the bank was losing client money.

“It is not true that there has been an exit of deposits at this time from Bankia,” Mr Jiménez Latorre told a press conference on Thursday. “There is no concern about a possible flight of deposits, as there is no reason for it.”

[source]

PG View: You may recall that there were all sorts of denials that Lehman Bros and Bear Stearns were in jeopardy several years ago as well…

17-May (USAGOLD) — Gold is back on the rise, more than $35 higher on the day, after tests of the downside earlier in the week were successfully contained by the range low at 1522.40. Today’s bid in the market is a combination of technical factors — the failed test of support and an oversold condition — along with heightened expectations of further central bank measures to prevent the global economy from going off the rails again.

Minutes from the April FOMC meeting were released yesterday, revealing a more dovish tone. With today’s data misses on April leading indicators and the May Philly Fed index, the market is suddenly thinking that QE3 may be back on the table. At the same time, the IMF is ramping up pressure on the ECB to cut rates and continue its sovereign bond buying program. An IMF spokesman also said “further unconventional policy measures may also be needed.”

While Europe just barely avoided slipping back into recession, thanks to better than expected Q1 growth in Germany, the anchor that is the periphery may still lead to a double-dip in the eurozone. Ongoing fiscal stresses and a possible recession in Europe will pose risks to growth here in the US, and as we’ve seen time and time again, risks to growth are met by easier monetary policy from the Fed.

• US leading indicators -0.1% in Apr, below market expectations of +0.1%, vs +0.3% in Mar.
• US Philly Fed fell to -5.8 in May, well below market expectations of 10.3, vs 8.5 in Apr.
• US initial jobless claims 370k for the week ended 12-May, above expectations of 365k, vs upward revised 370k in the previous week.
• Canada wholesale trade +0.4% in Mar, above expectations of +0.3%, vs +1.5% in Feb.
• Spain Q1 GDP (sa) – Final confirmed at – 0.3% q/q, in-line with expectations; -0.4% y/y.
• Japan Q1 GDP SAAR – 1st prelim +4.1% q/q, vs positive revised 0.1% y/y in Q4-11.
• Japan industrial production (sa) – revised +1.3% in Mar.
• Hong Kong unemployment rate (sa) +3.3% in Apr, vs 3.4% in Mar.