July 28 (King World News) — When asked about gold Hathaway remarked, “Basically you have a very orderly rate of increase. If you go back to 1979 gold doubled in a single year, well it hasn’t doubled in any year in the last ten years. So as this move is ending it’s conceivable to me that you are going to see a doubling of the gold price from some higher level, but I feel very good about the sustainability of the current action in the gold price.

Gold is up (roughly)13% year to date, if you tack on another 10% in the second half that is not unsustainable in terms of the macro picture that I see. What’s going to drive it (gold) crazy is when institutional buying starts to take place, and we really haven’t seen that (accelerated) sovereign wealth and (accelerated) central bank buying. That still lies out there and that’s the fuel that’s going to get the gold price up to numbers that I’m almost afraid to mention on air or in print.”

[Source]

July 28 (Commodity Online) — 1) Global financial uncertainties: Deteriorating US economic data and deadlock over the $14.3bn debt ceiling
negotiations, Europe’s sovereign bond crisis, and hints from the Fed that additional policy stimulus may be on the horizon, all fuelled the rally.

2)Energy Inflation: The rapid rise in energy prices over the first half of this year, the fall-out from the Japanese earthquake and tsunami disasters as well as the end of QE2 have dented growth and sparked fears that the US may not be in a soft patch but rather entering a double dip recession.

3) Eurozonde Debt: Investors also focused on problems in the Eurozone, where risks of contagion from the Greek debt crisis also supported investment activity in gold. While disagreement over a Greek bailout plan continued Moody’s downgraded Ireland’s government paper to below investment grade (to junk status, from Ba1 from Baa3).

4)QE 3 possibilities: However, the key catalyst to drive gold over the $1,600-level was news that the Fed was considering further policy easing. The release of minutes from the FOMC’s June meeting revealed that various members were, dependent upon further weakening in the job market, in favour of fresh stimulus so long as inflation remained in check. On 13 July Bernanke in testimony before Congress made a statement long awaited by Gold investors: “On the one hand, the possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might re-emerge, implying a need for additional policy support.

According to Jeff Nichols, the present gold rally “..is just the beginning of gold’s next great leap upward, a move that very likely will carry the metal to $2000 an ounce in 2012 — with prices still headed higher, quite possibly to $3000, $4000, and maybe even $5000 an ounce by the mid-to-late years of the decade.”

JK Comment: Its not hard to understand why Nichols places such a high nominal target for the gold price over the next decade. Quite simply, its hard to envision how the catalysts that drove gold to all time high over the past week have any real chance of reversing. It seems, if anything, they are intensifying. Five years ago, a financial event like the European debt crisis, the debt ceiling debate or energy price shocks due to political upheaval in the Middle East would have been big news. Yet, ever since our own financial crisis, it seems these major catalysts are occurring closer and closer to one another, perhaps diminishing their individual “shock factor”, but collectively fueling a rapidly accelerating pace of ascent in the gold market. As our debt ceiling debate carries on, I find myself concluding that though an agreement may be reached, we will very likely be doing nothing more that kicking the can down the road, leaving ourselves to the very same conversation in the not too distant future. The same can be said of the European debt crisis. And the one consistent theme seems to be that each time these issues come back around, they are bigger and more problematic than our previous encounter with them. Though achieving the $3000, $4000, $5000 levels in gold over the next decade could be perceived as overly bullish….permanently resolving all of these intensifying and increasingly frequent problems is even more far-fetched.

Gold Eases on Latest Debt Ceiling Optimism

July 28 (USAGOLD) — Gold has adopted an easier intraday tone on the latest market rumor about a debt ceiling compromise. It is also looking increasingly like the freshman Republicans in the House are falling in line behind Speaker Boehner. The House plan is likely to be voted on early this evening, although there is still no Democrat support in the Senate. Without some converts in the Senate, the Boehner plan has little hope of reaching the President’s desk. Today’s vote is an exercise in futility that will bring us another day closer to the deadline for a default set by Treasury Secretary Geithner.

James Rickards, Senior Managing Director for Market Intelligence at Omnis, Inc., suggested yesterday that if Geithner had initially projected calm we might be in a better position today with respect to a likely downgrade. However, in setting a hard deadline and saying that the implications of failure to raise the debt ceiling in a timely manner would be “catastrophic,” Rickards believes that Geithner has effectively “forced the raters’ hand.” If the Treasury Secretary of the United States is projecting panic, perhaps there is reason for panic. On the other hand, without a deadline and a sense of urgency, one can be reasonably sure that Congress would not be acting with any urgency either.

Talk about the President invoking the 14th Amendment has also escalated this week. The Constitution says the validity of the US government’s debt “shall not be questioned.” So, some lawmakers believe the President can circumvent Congress and raise the debt ceiling, or suspend the debt ceiling altogether. The White House has said recently that after consulting with counsel, that they did not perceive this to be a viable option.

As the debate rages on, it’s important to remember that whether a compromise is reached on the debt ceiling or not, spending cuts — which are a part of both the Democrat and Republican plans — may well prove to be devastating to the fragile economic recovery. As PIMCO’s CEO Mohamed El-Erian pointed out in a Wednesday Op-Ed in the Washington Post, “In this political mess, already-weak business and consumer confidence is being dealt a further blow. Companies with massive cash holdings now have yet another excuse to stay on the sidelines.”

In seeking to resolve this debt, spending and taxes impasse, we risk undermining an already tepid recovery. If that happens we may return to recession; with its attendant higher unemployment and greater debt as tax revenues continue to contract. We have painted ourselves into a corner from which there is no easy means of escape. The temptation as always will be to kick the can down the road, perpetuating the policies that got us into this predicament in the first place. This is tantamount to give the US more debt ceiling clearance by digging the hole that we’re in ever deeper; which will make it harder to get out of the hole down the road.

July 28 (Bloomberg) — Trading of credit-default swaps insuring U.S. Treasuries soared almost 80 percent as the deadline nears for plans to cut the nation’s budget deficit and raise the $14.3 trillion debt limit to avoid default.

Traders bought and sold 41 contracts in the week through July 22, insuring a daily average of $250 million of U.S. debt, up from $140 million during the past month, according to the Depository Trust & Clearing Corp. The country was the tenth most traded among the 1,000 entities tracked by DTCC, with 1,063 outstanding trades covering $4.9 billion of debt — a third of the total on German bunds.

Failure by President Barack Obama and congressional leaders to reach a debt agreement may force the government to delay bond payments, causing a credit event that would trigger insurance payouts. The parties are struggling to reach a compromise before Aug. 2, the date Treasury Secretary Timothy F. Geithner said the government will run out of options.

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July 27 (The Hill) — Intense pressure from House Republican leaders on their members appeared to build momentum Wednesday for Speaker John Boehner’s (R-Ohio) debt-limit bill, despite conservative doubts and a wall of opposition from Democrats.

“Get your ass in line,” the Speaker told Republican lawmakers in a conference meeting Wednesday, as his proposal to grant President Obama a limited increase in the $14.3 trillion debt ceiling faces a nail-biter of a vote on Thursday.

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PG View: It could be an interesting day: Will the freshman Republicans get in line, or hold their ground?

July 28 (USAGOLD) — Gold remains underpinned as global stocks succumb to rising worries over the US debt ceiling impasse and persistent eurozone jitters. The euro sank and Bund and Gilt futures rose on safe-haven flows after a weak Italian bond auction resulted in a sharp rise in refinancing costs. Indicating once again that last week’s summit and proposed deal on Greece largely failed to stem contagion worries.

The House will consider Speaker Boehner’s debt package today. Whether it has enough votes to pass the House remains in doubt. It is widely perceived not to have the necessary votes to clear the Senate.

The Democrat controlled Senate prefers a deal put together by Majority Leader Reid, which is widely perceived not to have the necessary votes to make it through the House. And the band played on…

China’s SAFE says they will continue to gradually diversify their estimated $3.2 trillion in FX reserves “and continue to optimise the holdings based on market conditions.” China’s reserves are presently about 60% allocated to dollars. If the intent is to diversify, chances are they are looking to pare back dollar holdings. I would also point out that China has displayed a distinct penchant for gold in recent years.

• US initial jobless claims -24k to 398k in the week ended 23-Jul, below market expectations of 415k. Previous week revised higher to 422k.
• Canada average weekly earnings +0.5% in May, +3.3% y/y; nonfarm payrolls -15k
• Reuters poll suggests BoE will hike in Q1-12, but QE2 likely if economy doesn’t improve (see CBI data for this week).
• UK CBI retail survey reflected weakening expectations.
• Eurozone ESI confidence 103.2 in Jul, below market expectations, vs positively revised 105.4 in Jun.
• German unemployment change -11K (SA), rate unchanged at 7.0%.

July 27 (Financial Times) — The cost of buying insurance against a default by the US rose to a record on Wednesday, in a sign of growing unease that gridlock in Washington over raising the federal debt ceiling may result in the Treasury failing to pay interest to bondholders.

The market for buying and selling insurance on the creditworthiness of the US is thinly traded, denominated in euros and dominated by European and UK banks in London. But trading in so-called credit default swaps has picked up as the threat of a default has grown.

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July 27 (Finacial Times) — Gold prices rallied to a fresh nominal high on Wednesday as the stalemate over the US debt ceiling persisted ahead of the August 2 deadline. Without a deal, the US may be forced to default to creditors next week.

Investors are concerned because US debt markets have usually been seen as “risk-free”. Even if a deal is reached to raise the debt ceiling, the US could still lose its coveted triple A rating status. These worries pushed investors into gold.

“Gold, along with a few select currencies, is increasingly the “go to” asset as investors seek it out for.

[source]

By Mary Anne & Pamela Aden
July 27 (SafeHaven) — Gold has been shooting up this week, hitting one record high after another, hovering around $1600. Recently, it sold off on signs a debt-ceiling deal may soon be reached. Nevertheless, gold remains super strong.

This U.S. debt standoff has been dominating the markets, along with almost daily ups and downs in the Eurozone’s debt crisis. That’s especially affected the precious metals markets.

The flight to safety has been the primary market mover and this is unlikely to change in the weeks or months ahead.

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July 27 (CNBC) — A real estate source I knew recently told me about a guy he knows in Atlanta who has been hired by several different banks to winterize their REO’s (real estate owned, i.e. the bank-owned foreclosures).

The homes are abandoned and empty, and clearly the banks think they’re going to stay that way for a while.

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July 27 (BullionVault) — So is the U.S. housing market nearing its low? Priced against gold it just might be.

Falling hard as the gold price doubled and more since 2006, the average US home is now priced at 103 ounces of gold – little more than one gold bar for settlement of a 100-ounce Comex gold futures contract.

Housing has only been cheaper in 26 of the last 121 years, and is currently priced around half the long-run average of 201 ounces.

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July 27 (ZeroHedge) — There’s one question that I’ve been seeing over and over for the last several weeks as the price of gold has taken out its all-time highs and continued a nearly uninterrupted ascent: Should I buy gold now?

It’s understandable, especially for people who don’t own precious metals yet. Nobody wants to be the sucker who buys gold at the top, only to watch it crater back to $1200 or below. But here’s some food for thought–

The US dollar is shattering historic lows against currencies like the Swiss franc, Australian dollar, and Singapore dollar. Any currency that isn’t a complete disaster is now being viewed as a safe haven. And the mainstream world is now, finally, waking up to the reality that the United States might actually default.

…So instead of worrying about buying gold at its all time high, ask yourself another question instead: Over the next few years, do you expect that these broken, bankrupt governments will inspire confidence among institutional investors, or do you think that confidence will continue to erode?

If you’re leaning towards the latter, you can be sure that more money will flow into gold, and that prices will rise.

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July 27 (Politico) — Rep. James Clyburn and a group of House Democrats are urging President Barack Obama to invoke the 14th Amendment to raise the debt ceiling if Congress can’t come up with a satisfactory plan before the Tuesday deadline.

Clyburn, the third-ranking House Democrat, said Wednesday that if the president is delivered a bill to raise the debt ceiling for only a short period of time, he should instead it and turn to the phrase in the Constitution that says the validity of the U.S. government’s debt “shall not be questioned.”

[source]

PG View: So apparently budgets are optional these days and any accountability imposed by the debt ceiling is a political inconvenience. The next thing you know, the Justice Department will start drafting arrest warrants for the executives of the ratings services; just in case they dare to continue questioning the validity of US government debt.

July 27 (RTT News) — In early European trading on Wednesday, the dollar slipped to fresh record lows against the Swiss franc, Aussie and the New Zealand dollar and a 4-month low against the yen amid a lack of progress in talks between U.S. President Barack Obama and congressional leaders to raise the country’s debt ceiling.

Against the Swiss franc, the dollar broke its 0.80 level for the first time in history and touched a record low of 0.7998. This may be compared to yesterday’s close of 0.8017.

[Source]

JK Comment: Its not just all time highs for gold in terms of dollars….its all time lows for the dollar in terms of almost everything.

July 27 (Bloomberg) — Gold surged to an all-time high in New York as investors sought to protect their wealth against the possibility of a U.S. default that may come as soon as next week amid a standoff over the country’s $14.3 trillion debt limit.

U.S. politicians remain deadlocked after a House vote on Speaker John Boehner’s two-step plan to raise the debt ceiling and pare the deficit was postponed from today. President Barack Obama has threatened to veto the measure, sending the dollar to a record low against the Swiss franc yesterday, while pushing the cost of insuring U.S. debt to a 17-month high.

[source]

July 27 (USAGOLD) — Gold continues to march higher as US policymakers continue to dicker over the terms of a debt ceiling hike. The all-time high currently stands at 1628.55. Silver is trading with a 41 handle for the first time in 12-weeks.

In Europe, the relief over the Greek bailout deal struck at last week’s summit in Brussels is proving to be short-lived. While eurozone yield spreads remain within their recent ranges, they are widening out again, suggesting a lack of confidence that the plan for Greece will be successful in containing the crisis. German FinMin Wolfgang Schäuble said today that it would be “a mistake to think that the crisis of trust in the euro area can be solved by a single summit.” Mr. Schäuble also said that Germany would not be writing “any blank checks” to fund bond purchases by the euro-zone’s sovereign bailout fund.

• US durable goods orders -2.1% in Jun, well below market expectations of +0.3%; ex-trans +0.1%.
• US MBA mortgage market index -5.0%; purchases -3.8%, refis -5.5%
• UK CBI reports waning optimism in Jul: industrial trends total orders -10 on expectations of -2; export orders -8.
• Swiss Kof leading indicator 2.04 in Jul, below market expectations of 2.09, vs 2.23 in Jun.
• Eurozone M3 growth unexpectedly decelerated to 2.2% SA y/y in Jun, vs 2.4% in May.
• Taiwan leading economic index +0.2% m/m in Jun, vs negatively revised 0.2% in May.

July 27 (The Wall Street Journal) — Spanish and Italian bonds fell Wednesday, but didn’t break out of their recent trading ranges, after German Finance Minister Wolfgang Schäuble said that Germany won’t write “any blank checks” to fund bond purchases by the euro-zone’s sovereign bailout fund.

Moves to allow the European Financial Stability Facility, or EFSF, to intervene in secondary bond markets and stop funding costs for vulnerable euro-zone countries rising too high were a key element of last week’s emergency package to support Greece and stop its debt crisis spreading throughout the single currency area. Spanish 10-year yields rose back above 6% on Mr. Schäuble’s comments before recovering slightly to trade at 5.967%, according to Tradeweb.

…Mr. Schäuble made his comments in a letter to comrades in the Bundestag. He also said it would be “a mistake to think that the crisis of trust in the euro area can be solved by a single summit“…

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July 27 (Bloomberg) — Treasuries and Asian stocks declined while gold rose for a fourth day as U.S. lawmakers wrangled over the nation’s debt ceiling. The Australian and New Zealand dollars climbed to post-float records versus the U.S. currency.

Ten-year Treasury yields were two basis points higher as of 11:26 a.m. in Tokyo, while the dollar slid against 10 of its 16 major counterparts.

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July 26 (Bloomberg) — The inability of Congress and President Barack Obama to reach a deal on raising the national debt ceiling leaves retired Air Force pilot Phil Pignataro filled with feelings, none of them good.

“All the negative emotions you can think of I pretty much have when I see that there’s no compromise and they’re willing to ruin the economy,” said Pignataro, a 65-year-old who lives in Algonquin, Illinois. “For better or for worse, my retirement is all tied up in the government.”

Polls and interviews conducted over the past two days show Pignataro is among Americans growing disenchanted by and disconnected from congressional leaders and Obama, even as they face a personal economic reckoning.

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