August 24 (MarketWatch) — The CME Group Inc., the parent company of the main metals and energy exchanges in the U.S., on Wednesday announced an increase in margin requirements to trade gold. The money needed to trade gold contracts increased 27%. Initial margin requirements rose to $9,450 from $7,425 per 100-ounce contract; maintenance margin requirements rose to $7,000 from $5,500, both effective as of the close of trading on Thursday. The CME had increased margins for gold two weeks ago.

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August 24 (USAToday) — The Congressional Budget Office projects slow growth and high unemployment for years to come as a result of the financial crisis and recession, a new report shows.

In its semiannual update of budget and economic data, the agency — which serves as the official scorekeeper for President Obama and Congress — projects the jobless rate will fall to 8.9% by the end of this year but remain above 8% until 2014.

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August 24 (MarketWatch) — If gold was actually in a bubble, has that bubble popped? It’s a question some traders are asking today with gold GC1Z dropping by as much as $97 an ounce, or over 5%, but it’s probably safer not to read too much into the metal’s decline.

…But Austin Kiddle, an analyst at London-based bullion brokers Sharps Pixley, said Wednesday that the current downward movement in gold is “more in line with profit taking than a move out of safe-haven territory,” especially given that next month is a big month for gold as the Indian wedding season begins.

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August 24 (MarketWatch) — Gold futures dropped more than 4% Wednesday, trading below $1,800 an ounce and extending losses to a second day as a correction that started after five records in six sessions suddenly got much steeper.

Gold for December delivery dropped $80.20, or 4.3%, to $1,781.10 an ounce on the Comex division of the New York Mercantile Exchange.

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August 24 (Bloomberg) — Central banks, net buyers of gold for the first time in a generation, are likely to retain their holdings even if they need to raise cash to counter an escalating debt crisis, according to Morgan Stanley.

“Once they’ve sold, that’s it, and buying back would be extremely expensive,” said Peter Richardson, chief metals economist at Morgan Stanley Australia Ltd., who’s studied metals markets for 20 years. “They would rather have the backing of a rising asset within their reserve portfolios than use it to reduce debt.”

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August 23 (Financial Times) — A prominent member of Angela Merkel’s government has broken ranks with cabinet colleagues by calling on Germany to ask Greece to post billions in collateral in return for new emergency loans, following in the footsteps of Finland.

Labour minister Ursula von der Leyen, who is also a deputy leader of Ms Merkel’s Christian Democratic Union (CDU), said forcing Greece to put up securities would “ensure that agreements [regulating a second bail-out] won’t be broken”.

She made the suggestion in an interview with the Hannoversche Allgemeine, a German newspaper, and followed this with comments on public television in which she suggested Athens could post gold reserves or stakes in state-owned companies as collateral.

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PG View: Merkel continues to dismiss the need for collateral, but the German people realize that they got taken for a ride on bailout 1.0 and are probably disinclined to provide further support without something of value pledged in return. The surge in Greek yields to new record highs is reflective of the market perception that the risk of a Greek default has never been greater.

August 24 (Washington Times) — The government will run another $1.3 trillion deficit in fiscal year 2011, Congress’s chief scorekeeper said Wednesday — easily eclipsing the $917 billion in savings over the next decade lawmakers scratched out earlier this month in their debt-reduction deal and underscoring the deep challenge they face going forward.

And over the next decade, the Congressional Budget Office said, the federal government will rack up nearly $6 trillion in new deficits — far outstripping the $1.5 trillion in future savings the new deficit super committee is charged with recommending to Congress.

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By Neil Irwin
August 23 (Washington Post) — This time a year ago, Federal Reserve Chairman Ben S. Bernanke headed to an annual gathering of central bankers in Jackson Hole, Wyo., amid a faltering U.S. economy, a perilous global situation, and rising calls on Wall Street for the Fed to do something to address both.

Here we go again.

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Aug 24 (Dow Jones) — Gold waded deeper into negative territory Wednesday as investors continued cashing out after recent record gains.

The most actively traded contract, for December delivery, was recently down $43.00, or 2.3%, at $1,818.30 a troy ounce on the Comex division of the New York Mercantile Exchange.

…Investors streamed out of the gold market as gold’s $100 decline from Tuesday’s intraday record spurred investors to lock in the gains earned on gold’s fast-paced rally.

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Aug 24 (USAGOLD) — Gold remains defensive after coming under corrective pressure on Tuesday. While the market had been stabilizing at modestly higher levels in overseas trading, a better than expected US durable goods print for Jul further heightened risk appetite. Stocks pared pre-open losses, despite rising doubts that Fed chairman Bernanke will hint at further accommodations when he speaks in Jackson Hole on Friday.

Such doubts have likely played a role in gold’s retreat, but if data continue to evidence a deteriorating economy, investors have proven in recent weeks that they will be quick to exit risk trades. If stocks slide again, a rebound in the yellow metal — driven by renewed safe-haven flows — would be likely.

• US durable goods orders +4.0% in Jul, well above market expectations of +2.4%, vs upward revised -1.3% in Jun.
• Germany Ifo Business Climate slipped to 108.7 in Aug, below expectations, vs 112.9 in Jul. Current assessment 118.1. Expectations 100.1.
• Eurozone industrial orders -0.7% m/m in Jun (sa), below market expectations of +0.5%, vs +3.6% in May; y/y pace falls to 11.1%.
• Moody’s downgrades Japan sovereign debt to Aa3, citing frequency in turnover of political leadership.
• Bank of Thailand hikes O/N repo rate 25bp to 3.50%, in-line with expectations.

August 22 (CBSNews) — The latest posting by the Treasury Department shows the national debt has now increased $4 trillion on President Obama’s watch.

The debt was $10.626 trillion on the day Mr. Obama took office. The latest calculation from Treasury shows the debt has now hit $14.639 trillion.

It’s the most rapid increase in the debt under any U.S. president.

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August 23 (Bloomberg) — Gold dropped the most since May as some investors sold the metal after signs of slowing growth spurred a rally to a record $1,917.90 an ounce.

The relative-strength index of futures in New York has topped 70 since Aug. 8, a signal to some investors that prices were poised to decline. Bullion has jumped 14 percent in August amid speculation that Federal Reserve Chairman Ben S. Bernanke will signal further measures to stimulate the U.S. economy later this week and as debt crises spurred demand for haven assets.

…Before today, prices surged 17 percent in three weeks. The metal is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify their holdings away from equities and some currencies. Bullion also reached all-time highs in euros, British pounds and Swiss francs today.

…“In the long-term, gold is attractive,” Zeman of Kingsview said. “Fiscal deficits are completely out of control. It’s no wonder that investors are losing faith in paper money.”

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August 23 (CNBC) — The euro zone could collapse if its member countries do not work together to solve its debt crisis, but China is pleased to see that Germany and France are cooperating to avert that risk, a Chinese vice foreign minister said in an interview.

China’s leaders, including Premier Wen Jiabao, have repeatedly expressed confidence in the euro zone, though officials and media commentary have also reflected anxieties about Europe’s economic prospects.

On Monday, China’s leading official newspaper likened the euro zone debt crisis to the Black Death, days before French President Nicolas Sarkozy is due to meet Chinese President Hu Jintao in Beijing.

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August 23 (Der Spiegel) — Chancellor Angela Merkel will meet conservative parliamentarians on Tuesday evening to try to allay their concerns about her management of the euro crisis. Many are unhappy about the EU deal to increase the scope of the bailout fund — and are dissatisfied with Merkel’s leadership style.

Many in Chancellor Angela Merkel’s conservative Christian Democratic Union party are unhappy about Germany’s growing commitment to euro bailout packages and fear that the nation is being locked into a “transfer union” in which German taxpayers will end up bankrolling high-debt nations that got themselves into trouble through their own profligacy.

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Resentment in the North: Rich EU Members Lose Patience with the ‘Olive Zone’

August 23 (Der Spiegel) — The rich countries of the northern euro zone are bearing the brunt of bailing out their debt-stricken fellow members. Resentment is growing among their populations, helping euroskeptic right-wing populists to win support. But there is little awareness of how much the European Union has done for their own countries.

Officially, of course, the one-euro coin is worth the same everywhere. But given the current state of the euro zone, you could be forgiven for thinking that the coin with the Greek owl or Spanish king on its reverse is worth less than one bearing, say, a German eagle or the silhouette of the Netherlands’ Queen Beatrix.

An invisible crack now divides the euro zone. With their triple-A rating from the American credit rating agencies, six of the euro zone’s 17 member states are considered sound borrowers. And the more government finances in Greece, Portugal, Italy, Spain and Ireland are thrown out of kilter, the more the countries with the best credit ratings are expected to vouch for the euro. They include, in addition to Germany and France, Finland, Luxembourg, the Netherlands and Austria.

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August 23 (BusinessInsider) — The San Francisco Fed has come out with a research paper connecting the dots between the retiring baby boomers and stock prices. The thinking is that the boomers will divest themselves of stocks as they retire and eat into their savings.

…These conclusions are just horrendous! The suggestion is that there is a 15-year bear market in front of us. Multiples will fall by 50%!!

…“We do see it as something of a headwind as the economy is attempting to recover.”

This is worst kind of “Fed Speak” in my opinion. These deep thinkers have it completely wrong. They think that the key to having a stronger economy is higher stock prices. So they spend all of their efforts dreaming up ways to keep the S&P ramping up. I think it is the exact other way around. If the economy were to be growing, it is reasonable to assume that stock price might rise. It is completely false to assume that attempts to jigger stocks higher will lead to a stronger economy.

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August 23 (Reuters) — German Labour Minister Ursula von der Leyen — who is also a deputy president of Chancellor Angela Merkel’s Christian Democrats (CDU) — said on Tuesday that future euro zone bailout payments should be covered by collateral such as gold reserves or stakes in state industry.

Von der Leyen, wading into the debate about Finland seeking collateral from Greece for the Finnish contribution to existing bailout payments, told German public broadcaster ARD that future bailouts should only be made against collateral, according to a news release from ARD.

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PG View: There have been no collateral requirements in the past because there was no real expectations that the bailouts would be repaid. Now that we’re into the second round of bailout, that seems to be an issue for some countries.

August 23 (Financial Times) — Eurozone economic growth remains close to a standstill, with the region’s manufacturing sector contracting this month for the first time in two years, according to a closely-watched survey.

Private sector activity barely increased in August as German prospects weakened further, purchasing managers’ indices for the 17-country region indicated on Tuesday, adding to the difficulties facing the region’s leaders as they seek to restore confidence in Europe’s monetary union.

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August 23 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said fissures in Europe’s common currency may lead to slowing in the U.S. economy.

“The euro is breaking down and the process of its breaking down is creating very considerable difficulties in the European banking system,” Greenspan said today in Washington.

…Greenspan also said that he did not think gold, which reached a record above $1,900 an ounce this week, was in a bubble.

“Gold, unlike all other commodities, is a currency,” he said. “And the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.”

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August 23 (Reuters) — Finland’s prime minister stood by Finland’s demand for collateral for its loans to Greece despite worries that demands for similar treatment from other euro zone countries risked delaying bailout aid to Athens.

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August 23 (USAGOLD) — Gold has turned intraday corrective on some mildly encouraging economic data after trading above $1900 late on Monday and into today’s overseas trading. The new all-time high stands at 1911.69. Bouts of profit taking pressures are likely ahead of the $2000 psychological barrier, but the underlying need for a safe-haven amid rising growth concerns and worries over the health of the banking sector are likely to perpetuate the dominant uptrend in the yellow metal.

Banks within the EU continue to suffer at the hands of their sovereign debt exposures, while troubles in the US seem to be centered on Bank of America. It is widely expected that BofA will need to raise capital to meet the new Basel III requirements. BAC shares have plunged to levels not seen since the worst days of the financial crisis in 2009 and have threatened to move below $6 this morning.

• US new home sales -0.7% to 298k in Jul, below market expectations of 315k, vs downward revised 300k Jun (previously 312k).
• Canada retail sales +0.7% in Jun, just above expectations; ex-autos -0.1%.
• Swiss trade balance climbs to CHF2825M in Jul, vs negative revised CHF1773M in Jun.
• France Reuters PMI – manufacturing (advance) slips to 49.3 in Aug, below expectations, vs 50.5 in Jul; services rises to 56.1.
• Germany Reuters PMI – manufacturing (advance) unch at 52.0 in Aug, just above expectations; services falls to 50.4.
• Eurozone Reuters PMI – composite (advance) 51.1 in Aug, just above expectations, vs 51.1 in Jul; manufacturing slips to 49.7; services rises to 51.5.
• Germany ZEW Economic Sentiment tumbled to -37.6 in Aug, well below market expectations, vs -15.1 in Jul; current situation falls to 53.5.
• Eurozone Consumer Confidence – Flash fell to -12.0 in Aug, in-line with expectations, vs -11.2 in Jul.
• UK CBI Industrial Trends Monthly – Total Orders +1 in Aug, above market expectations, vs -10 in Jul; export orders unch.
• China Flash Manufacturing PMI 49.8 in Aug, vs upward revised 49.3 in Jul.

August 22 (International Business Times) — Gold ripped past $1,900 Monday to a new record, the upshot of enough fears about global wealth-destroying developments to erase any doubts that the world’s oldest safe-haven investment remains the world’s No. 1 safe-haven investment.

Gold for December delivery, the most active contract traded on the CME Comex division of the New York Mercantile Exchange, hit $1,900.70 per ounce in electronic trading, up from Friday’s closing price of $1,852.20.

Gold is now up 33 percent this year and has been in a bull market run for more than a decade.

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PG View: Spot gold has extended to a new all-time high in late trading at 1911.50.

August 22 (Reuters) — Consumer confidence has fallen further after weeks of intensified economic concerns and broad stock market declines, and Conference Board data due later this month could be even weaker than current projections suggest, Consumer Edge Research said on Monday.

Readings from high, middle and low-income consumers all deteriorated sharply, due mainly to dramatic declines in outlook, the independent equity research firm said.

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August 22 (Reuters) — Moves by the Swiss National Bank to curb strength of the Swiss franc will fuel investors’ insatiable demand for gold, adding to its relentless rise to new record highs as confidence in the franc as a safe store of value dwindles.

Analysts say this could help gold vault $2,000 an ounce within the coming weeks, with the potential for very large spikes if risk aversion on financial markets gains momentum.

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August 21 (Financial Times) — During a closed-door summit in June, José Manuel Barroso, European Commission president, made a 14-slide presentation to Europe’s presidents and prime ministers on the state of the continent’s economy – but he dwelt on one slide in particular.

The slide had two bar charts, one showing the level of eurozone debt measured against its economic output (about 88 per cent for 2011) and the other showed the US’s, at nearly 100 per cent of its gross domestic product.

Mr Barroso’s message was clear: despite Europe’s debt crisis, taken together, eurozone countries were in better fiscal health than the US, which continues to borrow at exceedingly low rates.

…Fiscal union may indeed be the debt crisis’s ultimate solution. But it is hard to find the appetite for getting there.

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