By Myra P. Saefong and V. Phani Kumar
May 9, 2011 (MarketWatch) — Silver futures closed more than 5% higher Monday, leading a recovery in the precious-metals sector, and gold topped $1,500 an ounce, rebounding from last week’s decline as some weakness in the U.S. dollar and concerns over European debt woes lured investors back to metals.

Silver futures for July delivery rose $1.83, or 5.2%, to settle at $37.12 an ounce on the Comex division of the New York Mercantile Exchange after tapping a high of $37.98 overnight.

June gold futures, meanwhile, rose $11.60, or 0.8%, to settle at $1,503.20 an ounce, extending Friday’s $10.20, or 0.7%, increase. Prices are still more than 3% lower in May.

“The gold success today is a nice reflection — a mirror image almost — of the dollar index failure today along the 75 fault line,” said Richard Hastings, a macro strategist at Global Hunter Securities.

… Paul Mladjenovic, author of “Precious Metals Investing for Dummies,” said gold looks “very strong” and any pullback will be minor, as the market expects some dollar strength and some euro weakness.

… The precious-metals complex may have seen some support Monday from political unrest over the weekend in Syria, Egypt and Bahrain, according to Ben Potter, markets strategist at IG Markets in Melbourne.

Several protesters were reportedly killed in Syria over the weekend in clashes with government forces, while the Los Angeles Times reported 12 deaths in Egypt in the wake of violent riots between Muslims and Christians.

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By Michael Lombardi
May 9, 2011 (WallStreetPit) — There’s quite a story going on between China and United States in respect to what each country believes the other should be doing with its interest rates, debt, and currency. U.S. Treasury Secretary Timothy Geithner will be meeting this week with Chinese Vice Premier Wang Qishan.

… Yes, by keeping interest rates so low, running huge deficits and keeping the printing press running overtime, the U.S. has been able to emerge from the worst recession since the Great Depression.

However, the Chinese are right in that the existing U.S. monetary policy is causing inflationary pressures to rise worldwide. According to the Food and Agriculture Organization, a United Nations entity based in Rome, Italy, world food prices rose to a near record in April on soaring grain costs.

The U.S. is the winner today in the fight against the Chinese over currency valuation, but, as I say above, it will be the loser in the long term, as those short-term interest rates that are artificially low, huge deficits, and overtime money printing come back to haunt us in the form of a devalued currency and the rapid inflation that the Chinese are complaining about.

China sat on $1.15 trillion in U.S. Treasuries at end of February. A devaluing greenback and inflation are already paying havoc with the real return of U.S. Treasuries.

Speaking of the “real return” of an investment, it has been months now that U.S. Treasuries have been delivering negative real rate returns. A typical investor looking to park cash buys a U.S. Treasury yielding 1.86%. If we take an inflation rate of 2.7%, the investor is losing 84 basis points over a one-year period in inflation adjusted terms. If he or she held that T-bill for the full five-year maturity, the investor would lose 4.2% in the purchasing power of his or her money. But we all know the inflation rate is much higher than the “official” rate we are given by the Commerce Department….

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May 9 (Bloomberg) — John Burbank, founder and chief investment officer of hedge fund Passport Capital LLC, talks about the outlook for the gold market and his investment strategy. Burbank, speaking on Bloomberg Television’s “InBusiness with Margaret Brennan,” said commodities including gold are seeing a “temporary correction” as markets anticipate the end of large-scale asset purchases by the U.S. Federal Reserve.

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by Josh Lipton
May 9 2011 (Forbes) — It was silver that dominated the headlines last week with an unnerving 27.4% free-fall, but gold also suffered a setback as the yellow metal dropped 4%. For analysis on the barbarous relic, and where gurus see the price of the metal headed from here, we checked in with a couple of market pros who basically argued the following: the decline represented a setback, but not the beginning of some bear reversal.

Curt Hesler, the longtime editor of the Professional Timing Service newsletter … says that a correction might not prove as long or deep as some might suspect. The broader story remains the same: there is a lot of interest among both retail investors as well as central bankers in gold as a hedge against falling fiat currencies.

“Weak currency holders – as well as typical dollar-phobic gold buyers like the Chinese and Russians – are all in the market to hedge their paper assets,” says Hesler, adding that investors are best advised to buy on weakness and not when the metal makes new highs or when gold hits $1800, which he thinks is likely by year-end.

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Gold Recovers Some of Last Week’s Losses

Gold has regained the $1500 level, with more than 38.2%, but less than 50% of the corrective retreat from 1574.66 already retraced. Silver’s hook reversal on Friday is seen as technically constructive, although recent volatility is likely to leave buyers timid in the near term. Not surprisingly, the gold/silver ratio has moved back above 40 and may remain elevated above the recent lows.

Greece remains a member of the EU, despite rumors late last week that they were contemplating an exit from the EMU. That story may have simply been floated to wrest more favorable terms for the next bailout, amid the recent claims from Portugal that they had negotiated a better deal than both Greece and Ireland before them. Greece has indeed requested additional aid to cover €22 bln in debt repayments that are due next year and not covered by the original bailout deal. That prompted S&P to a downgrade Greek sovereign debt once again from BB- to B with a negative outlook. S&P went further, warning that the “burden sharing” being considered for Greece would constitute a “distressed exchange,” resulting in a rating of SD (Selective Default). Moody’s has put Greece’s ratings on review for a possible downgrade as well. Greek CDS premiums responded by surging to new record highs and the euro extended its recent losses.

While the dollar remains underpinned by the latest bout of euro weakness, there have been no fundamental changes that can be remotely construed as positive for the greenback. The dollar is just slightly less ugly at the moment, when compared to the single currency. In fact, Morgan Stanley has followed Goldman Sachs’ lead and downgraded their US economic forecast for 2011. Morgan Stanley lowered their GDP outlook for the third time this year to an anemic 3.3% for 2011, down from 3.6% last month. Goldman Sachs cut their forecasted range for US 2011 GDP by a full 50bps to 3-3.5% from 3.5-4%. The dimming outlook on growth has Goldman believing the Fed is unlikely to tighten until sometime in 2013. This is all dollar negative.

Meanwhile the prospect of another ECB rate hike seems increasingly unlikely any time soon in the current environment. It makes little sense to be providing periphery countries bordering on insolvency below market rates, while raising rates on everyone else. Not to say they wouldn’t try to justify such measures, particularly if inflation expectations come roaring back, but it really does make little sense. The mixed messages currently coming out of the eurozone in the midst of the recent chaos risks undermining confidence in not just the ECB, but the EU as a whole. This all translates to rising systemic risks. A German government adviser suggested today that without a comprehensive solution to the eurozone sovereign debt crisis, the union may not remain intact over next 12 months.

by Jan Harvey
May 9, 2011 (Reuters) — Gold climbed back above $1500 an ounce on Monday and silver rallied more than 6% as a retreating dollar and rising concerns of euro zone debt helped the metals recover some ground after last week’s hefty losses. Worries over the health of some smaller euro zone economies was brought back into the spotlight after ratings agency Standard & Poor’s downgraded Greece’s credit rating.

… Gold was supported by a rebound in the euro after some investors viewed its sell-off last week as overdone, given the fact interest rate differentials between the euro zone and the United States remain favourable.

Prices briefly eased below $1500 an ounce as the euro pared gains after the S&P cut, which dragged Greece’s rating further into junk territory. However, they quickly recovered as traders digested the news.

“The big confusion in the whole picture is what people are going to do with the US dollar,” said Macquarie analyst Hayden Atkins. “You have competing concerns, with a change in policy rhetoric in the US and mounting concerns over the euro.”

“It is too hard to have a lot of conviction. That will probably weigh on pricing (for commodities), though maybe gold will outperform in that sort of environment.”

… From a technical perspective, silver is also looking more vulnerable than gold after last week’s rout, analysts said. “Gold did not break any significant levels on the downside, so long-term investors were not forced out like in silver, where it was pure carnage,” said Saxo Bank senior manager Ole Hansen.

[source]

by Brett Arends
Monday, May 9, 2011 (MarketWatch) — If you thought the housing crisis was bad, think again. It’s worse.

New data just out from Zillow, the real-estate information company, show house prices are falling at their fastest rate since the Lehman collapse.

Average home prices are down 8% from a year ago, 3% over the quarter, and are falling at about 1% every month, according to Zillow. And the percentage of homeowners in negative-equity positions — with a home worth less than its mortgage — has rocketed to 28%, a new crisis high.

Zillow now predicts prices will fall about 8% this year and says it no longer expects the market to bottom before 2012. “There’s no way we can get to flat, from these depreciation levels, in the last nine months of the year,” says Zillow economist Stan Humphries. “Demand is a lot more anemic than we had previously thought.”

… Falling real-estate prices mean spiraling hidden losses throughout the economy, from banks to homeowners.

Remember Japan’s “zombie banks”? These were the financial institutions that haunted that country’s economic recovery after the 1990 crash. They staggered on with huge losses they could never repay — the walking dead. Here in America we have “zombie homeowners.” Millions of them. According to Zillow, a record 16.3 million families are upside-down on their home loans. Sixteen million! And many are a long way upside-down. Their homes may never be worth as much as their mortgage.

[source]

by Geoff Candy
9 May 2011 (Mineweb) — When gold first pushed through $1,500 dollars on April 20, 2011, two opposing choruses rose up, one proclaiming, this must surely be the end of gold’s massive rise and another, deriding the first chorus as myopic, claiming the breach through the round number as the next rung on the ladder toward $5,000 per ounce gold.

In the wake of last week’s spectacular, drop in silver prices and gold’s fall below $1,500, both choruses were once more in full voice, the first proclaiming the start of the long forecast “return to sanity” and the other, viewing it as a little bit of profit taking and a good buying opportunity.

But, as a more sedate pace of trade settled in on Monday, and gold flirts once more with levels above $1,500… “What has actually changed”.

… The state of the US economy remains uncertain, especially as the deadline looms for Congress’s vote on whether or not to raise its debt ceiling above $14.3 trillion. And, have not been helped by rather dovish comments from Fed chairman Ben Bernanke, confirmation of its decision to continue with its policy of exceptionally loose monetary policy and, most recently, rather contradictory jobs data.

… it is also worth bearing in mind that while gold is once more above $1,500 an ounce, in euro-denominated terms it is still below its highs. That said, prices across the board did benefit from the announcement out of Mexico that it bought some 93 tonnes of gold – a clear indication that central bank buying, particularly in emerging markets remains strong and looks set to get stronger still.

[source]

By TIMO SOINI
When I had the honor of leading the True Finn Party to electoral victory in April, we made a solemn promise to oppose the so-called bailouts of euro-zone member states. These bailouts are patently bad for Europe, bad for Finland and bad for the countries that have been forced to accept them. Europe is suffering from the economic gangrene of insolvency—both public and private. And unless we amputate that which cannot be saved, we risk poisoning the whole body.

The official wisdom is that Greece, Ireland and Portugal have been hit by a liquidity crisis, so they needed a momentary infusion of capital, after which everything would return to normal. But this official version is a lie, one that takes the ordinary people of Europe for idiots. They deserve better from politics and their leaders.

To understand the real nature and purpose of the bailouts, we first have to understand who really benefits from them. Let’s follow the money.

Already under this scheme, Greece, Ireland and Portugal are ruined. They will never be able to save and grow fast enough to pay back the debts with which Brussels has saddled them in the name of saving them.

People feel betrayed. In Ireland, the incoming parties to the new government promised to hold senior bondholders responsible, but under pressure, they succumbed, leaving their voters with a sense of democratic disenfranchisement. The elites in Brussels have said that Finland must honor its commitments to its European partners, but Brussels is silent on whether national politicians should honor their commitments to their own voters. In a democracy, where we govern under the consent of the people, power is on loan.

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PG View: Timo Soini of the True Finn Party notes a disturbing expectation within the eurozone: Political commitments to the EU trump political commitments to voters.

by Lawrence Williams
Monday, 09 May 2011 (Mineweb) — In a sign that much of the market feels that perhaps the sharp fall-off in the gold price – and also that of silver in particular – may have been overdone, the prices picked up a little on Friday to well above their low points, and carried on moving upwards Monday morning in Asian and European trade. Gold moved back above the psychological $1500 level….

As we have pointed out before here, virtually all the politico-economic factors which have moved the gold price higher and higher remain just as strongly in place – if not more so given the seeming escalation of the financial crisis in Greece, while one has a strong feeling that defaults in U.S. cities and States are not far away now, which could give another boost to the upwards spiral.

Despite the Eurozone problems, the U.S. dollar still looks weak against other major currencies as other Central Banks are seen as more likely to raise interest rates than the U.S. and some of the recovery so far today has been due to the dollar resuming a downwards path after a very minor recovery last week. Mexico’s gold purchases in February and March (we don’t know yet if the country continued purchases in April) should help underpin the price revival – while Asian buying seems to be continuing apace.

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by The AP
Monday, May 9 BASEL, Switzerland — Rich countries like the U.S., Japan and Britain need to move quickly to get their deficits under control, the head of the European Central Bank said Monday. Speaking on behalf of the world’s major central banks, Jean-Claude Trichet said governments’ financial situation in the developed world “has to be aggressively improved.”

… “The fiscal situation, particularly in the advanced economies, is an issue which is important as far as the global economy is concerned,” Trichet said. “That is true for all of us, including of course in Europe,” he added.

The top central bankers meeting at the Bank for International Settlements in Basel, Switzerland, agreed that the global recovery is solidly under way despite “ups and downs,” said Trichet, who chairs the group.

… He said all central bankers were “concentrating on solidly anchoring inflation expectations.”

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ECB bond-buying programme remains in hibernation
by Paul Carrel
FRANKFURT, May 9 (Reuters) – The European Central Bank extended its abstinence from government bond purchases to six weeks last week, giving further weight to the theory it has put the controversial buying programme into hibernation.

It is the 11th time in 15 weeks the ECB has bought no bonds. No bonds bought previously under the programme matured last week, leaving the overall value of the programme at 76 billion euros…

ECB policymaker Ewald Nowotny said on Friday the central bank would keep the programme for the time being “but with the intention of using it as little as possible”.

Under the rules of the programme, the ECB can buy government and corporate bonds from banks and other investors under the facility but not direct from governments. While it does not break down its purchases, bond market traders and analysts say buying has been limited to Greek, Irish and Portuguese bonds.

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By John O’Donnell and Stephen Brown
BRUSSELS/BERLIN, May 9 (Reuters) – The European Union is looking to lower interest rates on bailout loans to Greece and Ireland and is working on a second rescue for Athens in a chaotic effort to prevent a disorderly debt restructuring.

The executive European Commission said on Monday it hoped to see a decision within weeks on reducing the rate charged to Ireland to make Dublin’s debt more sustainable. [ID:nBRU011475]

“The Commission is clearly in favour of a rate cut,” a spokesman for EU Economic and Monetary Affairs Commissioner Olli Rehn said. “The Commission is against debt restructuring.”

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PG View: In the EU saying their is no mechanism for Greece to leave the EMU, nor are they in favor of of a debt restructuring, the message seems to be that Greece will remain in indentured servitude in perpetuity. Ah, but the EU is apparently prepared to override what was once the normal risk/reward process of price discovery of the bond market to get lower interest rates. What could go wrong? Oh wait, wasn’t mispriced priced risk arguably the root cause of the global financial crisis?

Gold continues to recoup the recent corrective losses, regaining the $1500 level. Silver is on the mend as well, but recent volatility may be curtailing buying interest.

While EU officials continue to deny last week’s Der Spiegel story that Greece was contemplating an exit of the EMU, a ‘select group of top eurozone policymakers’ did indeed meet in Luxembourg on Friday to discuss the worsening sovereign debt crises. Lower interest rates are being considered for Greece and Ireland.

Greece has asked for more aid to cover €22 bln in debt repayments due next year that are not covered by the original bailout deal. This prompted yet another downgrade of Greece by S&P from BB- to B, with a negative outlook. S&P warned that the “burden sharing” being considered for Greece would constitute a “distressed exchange,” possibly resulting in a rating of SD (Selective Default). Meanwhile, Greek CDS hit a new record high of 1440.

While renewed weakness in the euro may keep the dollar underpinned in the short/near term, the fundamentals that recently pushed the dollar index within 3% of its all-time low have not changed. As FX market flows continue to move back and forth between the dollar and euro, a percentage is going to keep peeling off into gold.

by David Cottle
(The Wall Street Journal) — Why shouldn’t cash-strapped European countries be forced to liquidate their gold holdings, German politicians have been asking.

Prices, after all, are close to historic highs. Moreover, bullion is the ultimate hedge against an economic rainy day, and it’s certainly pouring down in Greece, Portugal and Ireland.

… Portugal’s holding would be worth $18 billion at current market rates, which would be a handy offset to the €78 billion ($108 billion) bailout it has just accepted from the European Union. On the face of it, there is an absurdity here. How many of us would toss a dime to a beggar if we knew he had an ingot or two stashed under his sleeping dog?

… Unfortunately for the pair, market economics are never quite as simple as they look, even when considering arguably the simplest asset of all. …… Moreover, as one gold dealer said: “Selling reserves has a finality about it; you never get them back. Governments can tell their people that there is some benefit at the end of austerity and reform, but not at the end of selling gold to plug a debt hole.”

… Monument Securities strategist Marc Ostwald is one analyst who doubts a straight gold sale is likely from either nation… But there is no reason, he said, why the gold of debtor states shouldn’t be used as collateral in repurchase agreements, lent out and bought back later at a small premium, which would represent the interest on the cash paid.

“I think some sort of repo deal using gold might make sense,” he said, “although of course this would really be no more a long-term solution to these countries debt problems than the bailouts are.”

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RS View: For a better context, Ostwald’s rough suggestion should be read in conjunction with today’s news item (and following comment) regarding the use of gold as earmarked collateral. To the extent that Greece (or Portugal or Ireland) has gold with some remaining valuation headroom (that is to say, an excess of Mark-to-Market value of the gold reserves against which specific monetary liabilities (i.e. euros) of the Eurosystem have not been issued), then there is precious little standing in the way of a exploring the utility of properly secured gold-collateralized repos through an agent (specifically the Bank for International Settlements) that would be harmonious with the normal course of affairs in the pro-expansive forex market and equally harmonious (i.e., non-derivative, non-expansive in terms of supply) with the rational gold market.

By Claudia Assis and Sarah Turner, MarketWatch
May 6, 2011 (MarketWatch) — Midsession gains for silver were short-lived on Friday, with the metal extending this week’s rout in its worst five-day period since 1980. Gold futures settled higher, but under $1,500 an ounce.

The thinly traded front-month silver contract had its worst week since late March 1980. Silver for May delivery dropped 27% in the five-day period — its largest percent drop since that date.

… Data from recent Commitment of Traders reports suggest that hedge funds and other large managed funds had left the silver trade long before the week’s rout.

Gold for June delivery rose $10.20, or 0.7%, to $1,491.60 an ounce. Gold lost 4.2% on the week, as it had settled [last] Friday at a record $1,556.40 an ounce.

The yellow metal failed to settle above $1,500, but its ending just in the black gave investors some hope gains could resume next week, according to Adam Klopfenstein, a senior market strategist with Lind-Waldock in Chicago. “It gave investors hope we’re near the bottom for the near term,” he said.

… The earlier leg up for precious metals was mainly due to “oversold” conditions and expectations a mixed jobs report on Friday would cause federal officials to keep loose monetary policy going, said Tom Pawlicki, a metal analysts with MF Global in Chicago.

[source]

By Wallace Witkowski
SAN FRANCISCO (MarketWatch) — Greece’s Ministry of Finance said late Friday a news article saying that Greece was considering an exit from the euro zone was “completely untrue.” On Friday, Germany’s Spiegel Online reported that Greece was considering the move and officials were holding secret talks with representatives of the European Commission and other euro zone countries in Luxembourg. “Such articles are not only provocative but also highly irresponsible as they undermine Greece’s efforts and those of the Eurozone and serve only the interests of speculators,” the ministry said in a statement.

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PG View: I wouldn’t be surprised to find that the Greece story that has dominated the financial press today was floated to rest more favorable terms from the EU for a potential restructuring of Greek debt. However, it’s also worth noting that recent euro strength was likely to have a negative impact and German manufacturing, so they benefit as well from the shellacking the euro took this week.

May 6, 2011 (IBTimes) — PIMCO’s Bill Gross, who runs the world’s largest bond fund, said on Friday the only way he would reverse his “short” position on U.S. government-related bonds is if the United States heads into another recession.

… Asked Friday Gross told Reuters: “Treasury yields are currently yielding substantially less than historical averages when compared with inflation. Perhaps the only justification for a further rally would be weak economic growth or a future recession that substantially lowered inflation and inflationary expectations.”

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NEW YORK — The double-header may be an endangered species in baseball, but a double-header of a different sort last night swept Manhattan, where nearly 1,000 people swarmed into an auditorium on the Upper West Side to hear luminaries debate the question of the gold standard and across town a packed auditorium heard a billionaire investor liken fiat paper currencies, including America’s, to toilet paper.

“The gold standard wouldn’t have allowed forty years of deficits . . . Nations were compelled to live within their means. . . . The gold standard was an honest regulator of Wall Street greed . . . nor did we [in upholding a gold standard] punish people who invested in savings accounts.”

He called the current monetary system a “collectivist top-down tyranny . . . The clever and the nimble play this system for what it is worth.” Gold he referred to as “the people’s money” and the dollar as “America’s credit card.” Said Mr. Grant: “We need a debit card not a credit card.”

[A] return to a gold standard and that a return to a gold standard would translate into $9,421 an-ounce gold based on world reserves and $3,500-an-ounce gold based just on existing currency supply.

“All paper currency,” said Mr. Kaplan, is “toilet paper currency”; the dollar is, on occasion, “double-ply.”

Said Mr. Hathaway, “When someone says to me, ‘I’m trying to make money [in investing in gold], I say, ‘You’re trying to protect your money.’. . . Gold is the best defense . . . That’s the reason to be in metals.”

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by Bill Fleckenstein
May 6, 2011 (MSN Money) — I have spent a fair amount of time in this space writing about gold. And for the most part, when I do so, I am implicitly including silver, because my reasons for owning both are inextricably related.

While the investment cases for gold and silver may be two sides of the same coin, as it were, recent action in the silver market illustrates that the experience of owning them can be very different.

For those who don’t follow this particular asset, the silver market went on tear recently, touching an all-time high price on April 25 — then losing a big chunk soon after.

… Silver is guaranteed to become even more volatile, especially given the fact that a lot of folks who are now involved probably would have a hard time reciting any fundamentals regarding the metal, let alone articulating why they own it, other than the fact that it is moving higher rapidly.

For some reason, I can’t get the analogy out of my head that riding silver these days is somewhat akin to tow-in surfing. It looks spectacular from the beach, but actually doing it is extraordinarily difficult, and can be quite dangerous.

… In addition to pushing up prices, money-printing also distorts capital markets. Thus, in the 1990s we found people forming companies whose business strategy was garnering “eyeballs,” while in the mid-2000s, many homeowners believed they could take money out of their houses forever. Now we are back to an Internet-oriented mania at the same time we have raging inflation.

Thank you, Alan Greenspan, Ben Bernanke and all of the central bank counterparts who have followed your lead.

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By Nicholas Larkin and Pham-Duy Nguyen
May 6 (Bloomberg) — Silver futures fell, capping the biggest weekly plunge since at least 1975, on mounting sales by investors following increases in Comex margin requirements. Gold rebounded, halting a three-day slide.

Silver tumbled 27 percent this week after CME Group Ltd., the Comex owner, boosted the cash amount needed for a speculative position by 84 percent in two weeks. Yesterday, holdings of the metal in exchange-traded products dropped the most in three years. Gold had the largest weekly drop in a year.

“At the close of business on Monday, silver’s got another bump in margins,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Gold doesn’t have the technical breakdown that silver’s had. All gold has to do is hold its value when everything else crumbles around it.”

… “Gold below $1,500 is a line in the sand,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “There’s a scramble for gold because a lot of people don’t want to miss the move up.”

The metal reached a record $1,577.40 on May 2.

Barclays Capital recommended buying gold after the 4.9 percent drop in the previous three days.

[source]

by Rachel Beck
Friday, May. 06, 2011 (AP) — In the boardroom, it’s as if the Great Recession never happened. CEOs at the nation’s largest companies were paid better last year than they were in 2007, when the economy was booming, the stock market set a record high and unemployment was roughly half what it is today.

The typical pay package for the head of a company in the Standard & Poor’s 500 was $9 million in 2010, according to an analysis by The Associated Press using data provided by Equilar, an executive compensation research firm. That was 24 percent higher than a year earlier, reversing two years of declines. Executives were showered with more pay of all types – salaries, bonuses, stock, options and perks. The biggest gains came in cash bonuses: Two-thirds of executives got a bigger one than they had in 2009, some more than three times as big.

CEOs were rewarded because corporate profits soared in 2010 as the economy gradually got stronger and companies continued to cut costs.

… Separately, the bull market has left CEOs enormous paper gains on stock and options they were granted as part of pay packages in 2009 and 2010.

… For companies that the AP analyzed, revenue grew about 12 percent, according to data provider CapitalIQ. That helped lift earnings, as did companies’ ability to hold down costs. Companies could limit raises for rank-and-file workers because of the weak labor market.

The bigger profits helped push up the typical cash bonus given to a CEO by 39 percent in 2010… Meanwhile, pay for workers grew 3 percent in 2010, to an average of about $40,500. The percentage increase was twice the rate of inflation, but the average wage was less than one-half of one percent of what the typical CEO in the AP analysis made.

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RS View: As a shareholder, the question comes back around to this — what is the value that you are reaping in return for this risky investment? If it shapes up to look like little more than a crap shoot, or even worse — a rigged game, then consider consolidating your portfolio into a more personally rewarding form of wealth in which the cream isn’t forever taken off the top. Choose gold — what’s yours is yours.

by Bruce Hextall
Friday, 06 May 2011 (Retuers) — Gold may resume its record-breaking run, despite falling more than $100 an ounce off its high in just four days as countries build more reserves of the precious metal while the U.S. dollar remains weak, a Sydney-based fund manager said on Friday.

Andrew Kaleel, chief executive of H3 Global Advisors, a boutique value fund manager with around A$600 million under management, said the correction came as no surprise as the dollar gained strength. “Our view is gold will continue to move higher but within that you will see 10 to 15 percent draw downs along the way,” Kaleel said. “Gold has had a pretty spectacular run – we’ve seen it just shy of $1,600.”

Gold partially recovered on Friday from a 3 percent fall on Thursday that was sparked by silver slumping 12 percent after another margin call by the CME Group. Spot gold rose by more than 1 percent to $1,489.26 an ounce before easing to $1,484.11 an ounce. It is headed for a 5 percent drop from a week earlier, its worst week since March 2009.

Kaleel said his firm was maintaining its position in gold, betting that the precious metal would reach $1,700 an ounce by the year-end.

H3 Global Advisors bases its view that the dollar will remain under pressure until the United States sorts out it debt problems and countries around the world will shift more of their reserves into gold. … “Gold will move higher as countries diversify away from the dollar as a reserve currency,” said Kaleel.

“The most interesting thing we saw this week was (U.S. value investor) GMO releasing a quarterly newsletter which appears to show that the firm has done a total U-turn on commodities.” said Kaleel. — “Statistically, most commodities are now so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a paradigm shift – perhaps the most important economic event since the Industrial Revolution,” GMO said in its newsletter.

Kaleel said it was a view his firm took two years ago.

[source]

RS View: Two years??? Silly me… I’ve been barking (more or less publicly in various forms) up that tree since the mid 1990′s. Small wonder my voice has grown increasingly hoarse, spent. Time to move aside and make room for the fresh young dogs…

by Julian Phillips
Friday, 06 May 2011 (Mineweb) — We have seen new surprising and strong demand from global central banks in the last week. This demand occurred over the last two months and had to compete with other strong demand from all sides of the gold market. As we move into the quiet season for gold and have experienced a short sharp correction so far how will central banks react? This week we received news that Latin America has now joined Asia, Russia, the Middle East and the Far East in buying gold for the national gold and foreign exchange reserves.

… Bolivia reported an increase of 7 tonnes of gold, taking its gold holdings to 35.3 tonnes, last week. While Bolivia has not made any public comment on this increase, it is very likely that the central bank has simply decided to restore its gold holdings relative to its growing foreign currency reserves, similar to other recent emerging market central bank purchases.

… Mexico’s buying of gold in February and March amounted to 93.3 tonnes of gold, is one of the most rapid programs of accumulation on record. With reserves now just over 100 tonnes in total, the market is holding its breath to see if it is an ongoing buyer.

Mexico’s vigorous purchase of gold over the last two months surprised the market by its speed and size. For any central bank to buy 93 tonnes in this market is a clear statement that faith in the U.S. dollar is falling fast. We do expect other emerging Central and South American nations to follow suit over time, alongside many of the world’s emerging economies.

… Buying programs by central banks usually follow a particular pattern. Central banks buy to hold, not to trade or profit from. They are a monetary asset held for the most extreme of national economic crises. This affects the way they buy for their reserves. The most preferred manner is to buy their own local production, as this is done away from the markets that really do make the gold price… [albeit while curbing the marketable physical] supply through the absence of that country’s production.

… What is clear throughout the world is that Central Banks remain determined to keep their gold and foreign exchange reserves balanced with gold an integral part of those reserves. The cessation of European central banks sales nearly two years ago confirmed this, as do the ongoing purchases by Russia and China. Even in the Middle East oil producing nations are ensuring that they have gold in their reserves. This is a practice that is unlikely to end in the future. The days when the market feared Central Banks unloading all the gold they had are far gone.

… This makes the sudden sell-offs we saw this week and the subsequent recovery so interesting. We won’t be informed of whether it was central banks which picked up the gold coming onto the market, but we do expect them to be one of the buyers.

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RS View: Julian offers some timely insights, although could have more firmly emphasized against the context of his focal point of the CB’s physical gold reserves that the downdraft in pricing this past week has been largely a superficial artifact of the derivatives market — one of price but without any substance.

May 6, 2011 (Times of India) NEW DELHI — Friday saw gold rush in Delhi, with buyers thronging jewellery shops after prices of the precious metal dipped by around Rs 500 per 10 gm, coinciding with the auspicious occasion of Akshaya Tritiya.

The Akshaya Tritiya festival is one of the two most auspicious days of the year to buy gold. Hindus believe they can get lasting prosperity by buying precious metals on the day. The other festival is Dhanteras two days before Diwali in October or November.

“The response is just overwhelming, we are catering to a huge rush at all our showrooms across the country. The mood is upbeat. It seems that those who had not even planned have also turned up today looking at the dip in the prices,” Balram Garg, managing director and chief executive of the Delhi-based PC Jewellers’ Group, told IANS.

“With such a demand, we expect the business today to rise by 30 to 40 percent as compared to Akshaya Tritiya last year,” he added.

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The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government’s actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area’s finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.

Greece’s economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou’s government is considering abandoning the euro and reintroducing its own currency.

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PG View: The euro is plunging in reaction, despite vociferous denials of the story from some officials in Europe. One thing is for certain, I’d much prefer holding physical gold as a “place holder” of wealth during the transition process rather than euros. Fiat paper for fiat paper conversions never seem to work out too well for people.

Gold and silver are tentatively higher after their 2% and 8% falls yesterday. In silver, speculators on the COMEX continue to liquidate on mass after margin was increased a massive 84% and various stop loss levels are hit, leading to further falls in the futures market.

Absolutely nothing has changed regarding the fundamentals driving the gold and silver markets and this will likely be another correction in gold and another sharp correction in silver.

Gold and silver’s rise is likely to continue until we return to a world of healthy economic growth, low inflation and positive real interest rates.

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Gold Rebounds on Better Than Expected NFP Headline

Gold is recouping some of its recent corrective losses and silver has caught a bid as well. We could see a simple reversal day in silver if the white metal manages to close higher on the day, which would mitigate the bearish implications of the overnight breach of the 100-day moving average. The Chinese have reportedly been aggressive buyers of silver on this dip and Indian buyers were taking advantage of this week’s retreat to lock in favorable gold prices. They should both send flowers to the CME Group for providing them with the buying opportunity via the recent dramatic hikes to margin requirements.

Rumors continue to circulate about even more margin hikes, so we can expect silver in particular to remain quite volatile. Recent action in the silver market reinforces our position that gold is a much better asset choice for the purposes of wealth preservation.

Nonfarm payrolls rose a much better than expected 244,000 in April, yet the unemployment rate crept higher to 9.0%. One might expect that the perception of greater prospects for employment might be luring job seekers back to the labor pool, but that doesn’t seem to be supported by the data. The labor force participation rate remained flat in April near its 25-year lows, suggesting that there were indeed job losses in Apr, rather than an expansion of the labor pool. Meanwhile the household survey was more consistent with the low participation rate, showing a loss of 190,000 jobs.

The dollar remains underpinned by renewed weakness in the euro, which gained some impetus today with a story in Der Spiegel that reports Greece is contemplating withdrawal from the eurozone. Der Spiegel says there is a secret crisis meeting scheduled in Luxembourg tonight, which was quickly denied by some eurozone officials. The IMF declined to comment on the story and an official from the French Finance Ministry would neither confirm or deny that a “secret meeting” was planned. That suggests that there may indeed be something to this story. The FX market seems to think so, with EUR-USD off more than 5 big figures, or 11% from Wednesday’s 17-mo high.

This is an interesting turn of events. An exit from the EU might in fact offer the best hope for Greece to revive its economy. Certainly there will be a price to pay in converting from the euro back to its own currency and one would reasonably expected a rather significant devaluation. And a possible default on their debt. If I were Greek, facing a conversion back to the drachma, I’d much rather be holding gold as a store of wealth during the transition period than euros.

The Greeks may also be using the threat of an exit from the EMU as leverage to negotiate better terms for another bailout/restucturing of their debt. Germany and the rest of the deep pockets in the eurozone will have to do some quick cost/benefit analysis. If Greece leaves, does it make the euro area stronger? And even if the answer to that question is “yes,” does it establish a precedent and mechanism for the rest of the PIIGS to flee the union as well? If the dominoes start tumbling, it could conceivable undermine the EU as a whole, with negative splash-back impacting governments and central banks across the Continent.

May 06, 2011 (Reuters) MUMBAI — India’s formal gold loan market is growing at 30 to 40 per cent annually and attracting global interest. Abu Dhabi Investment Authority and a Goldman Sachs fund are among investors in Muthoot Finance, India’s largest specialist gold lender, which starts trading on Friday after a popular $200 million IPO.

The opportunity is clear: Indians have traditionally used gold as a store of wealth and hold 10 per cent of the global supply, much of it in jewelry. At the same time, more than half of Indian adults operate outside of the formal financial sector, according to the Reserve Bank of India.

The risk for the industry is that high interest rates and margins and the potential excesses of accelerating competition will draw a regulatory backlash of the sort that has crippled India’s once-soaring microfinance sector.

Although gold is currently trading at more than $1,500 an ounce and hit a record $1,575.79 on Monday, a plunge in gold prices would erode the value of collateral held by lenders and undermine demand as borrowers receive less cash. The short loan tenors involved in gold loans mitigate risk. The longer the term, the lower the loan-to-value ratio, which is typically 75 per cent for three months.

Gold loans are safe if branches are secure and the lender properly appraises the collateral, which can be liquidated in case of default. Sentimental value means default rates are low. Non-performing assets accounted for less than half a per cent of Muthoot’s retail loan book in recent years. Its gold loans stood at $2.9 billion at the end of November, about six times their total in March 2008, a listing document showed.

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RS View: Provided the gold items are indeed truly sequestered under lock and key while serving as collateral for the duration of the monetary loan (thus allowing these same items to be returned essentially non-fungibly(!) at the completion of the cash repayment), then what you are seeing take shape here is one aspect of the retail/customer side of the new face of the evolving gold-centric banking system in which gold (as store-of-wealth, as reserves) co-exists in a sustainable floating paradigm with the common national currency. For more of the big picture, simply review everything I’ve said over the past decade concerning central banks and the paradigm shift toward mark-to-market gold reserves — particularly well exemplified by the very deliberate yet quiet forefront actions and accounting structure of the ECB.

[Whereas this article dealt with commercial operations, a tangentially related item to gold collateralization as applied to governments can be viewed in a article subsequently posted here.]

Gold rebounds from recent corrective move, leaving the 50-day moving average intact. Some are viewing this morning’s bigger than expected rise in nonfarm payrolls as being an inducement to put their inflation trades back on. Payrolls jumped 244k in Apr.

While the preponderance of recent data suggest the economic recovery is sputtering, the headline NFP number gives some pause. However, there is further reason for concern if one digs a little deeper into the data. Certainly the rise in the unemployment rate is troubling, but apparently that’s not the result of workers being drawn back into the ranks of those actively seeking employment. The participation rate remained flat in Apr, near the recent lows, but the actual number of people not in the labor force hit a new all-time record of 86.248 million.

The dollar is maintaining a decent bid at this point, underpinned by euro weakness stemming from a significant shift in the ECB’s tone amid rising concerns about the health of the eurozone economy. Nonetheless, there is little to suggest this bounce in the dollar is anything more than a correction.

by Steven M. Sears
May 5, 2011 (Barron’s) — Silver is now radioactive. … The implied volatility of SLV’s options is up some 11% Thursday, indicating that even the options market, which is expert in pricing risk, is unsure how to price silver.

Back when silver broke toward $50 in the late 1970s, and then declined, the metal only traded in the futures market. Since then, the Securities and Exchange Commission has allowed financial engineers to create exchange-traded funds that hold commodities like gold and silver. This has made it possible for anyone to invest in commodities in the stock market without opening a separate futures trading accounts.

Commodity investing is now as easy as buying stock. But the decline in silver is proving that is not really true.

Silver’s price is influenced by futures, equity derivatives and stock trading. The action in all the different markets weighs heavily on silver’s price. Selling pressure now stretches across three markets — the futures, stock and options. The selling is exacerbated by an ultrashort exchange-traded fund loaded with derivatives that sharply increase in value if silver prices decline.

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