August 04 (The Wall Street Journal) — Oh yeah — there’s a big jobs report tomorrow.

Andrew Johnson over at Dow Jones Newswires:

“Pressure has been sharply ratcheted up on Friday’s US jobs report, with a dismal reading likely to cause the market to crater even further.”

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PG View: Consensus for July NFP is +90k. JPM’s forecast is the lowest at +45k, but there have been some whispers of a negative print. Any kind of significant miss could well pull what little support there is in the stock market.

August 04 (CBSMoneyWatch) — The stock market is finishing its worst day since the financial crisis.

The Dow Jones industrial average plunged more than 500 points Thursday. Investors are concerned that the U.S. economy will enter another recession and that Europe’s debt problems are not closed to being solved.

Major stock indexes fell more than 4 percent.

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PG View: All of the Dow gains for the year have been erased. Gold retreated on deleveraging pressures, but these types of corrections tend to be short-lived.

by Allen Sykora
August 4 (KITCO news) —For the year to date, net purchases by the world’s central banks are 203.5 metric tons, which already is a 168% increase from 76 tons for all of 2010, said Natalie Dempster, director, government affairs, with the World Gold Council

“The central-bank buying is coming on top of speculative buying and creating a Perfect Storm for gold,” said Ross Norman, chief executive officer of Sharps Pixley.

“There is much more emphasis now on risk-management strategies, as opposed to yield enhancement,” Dempster said. “And obviously, if gold is anything, it’s a tool to manage risk.”

“They feel the sovereign-debt risk is high, therefore they’re buying gold even though the price is high,” Clark said. “They are viewing gold as a necessity now and not just one way to diversify, in my opinion.”

[Source]

JK Comment: With central banks now considering gold a “necessity”, it won’t be long for the sentiment to spread to larger and larger groups within the investment community. As sovereign debt risk spreads, and currency wars escalate (as seen by the recent Swiss and Japanese interventions), gold may prove to be the only refuge, a reality that will not only affect the price, but also the ability to acquire it at all.

By LIZ RAPPAPORT
August 04 (The Wall Street Journal) — Bank of New York Mellon Corp. is preparing to charge some large depositors to hold their cash, in the latest sign of the worries roiling global markets.

The big U.S. custodial bank said this week in a note to clients that it will begin slapping a fee next week on customers that have vastly increased their deposit balances over the past month.

The bank cited the heavy dollar deposits it has received over recent weeks, as investors and corporations retreat from financial markets amid Europe’s debt crisis and the recent debate over U.S. government borrowing.

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PG View: A fee for the privileged of earning a negative yield. Nice! So, big depositors are discouraged from holding dollars. The SNB is intervening against the Swiss franc. The BoJ is intervening against the yen. Where do you go if you’re looking for a haven amidst all this global turmoil? Gold of course.

By Frank Holmes
August 03 (EconMatters) — The ongoing debate in Washington prompted increased Fear Trade activity in gold this week. The issue over raising the federal borrowing limit caused the yellow metal to remain around its all-time high of $1,600 per ounce this week.

Gold has now increased for 124 months straight, says Deutsche Bank. The rally is in its 11th year, lasting nearly three times as long as other historical rallies going back to 1971. If the metal rose to $2,100 an ounce, it would represent the most powerful percentage increase in history, according to Deutsche Bank.

…More important to him is what he calls the “transfer of wealth from west to east” and the accumulation of wealth, particularly in China and India. This is what is driving the longer term strength in the gold price.

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PG View: The positive seasonal influence we illustrate every year in our summer doldrums piece is about to kick-in, on top of the current safe-haven demand for gold.

August 03 (The Telegraph) — Last week’s events on Capitol Hill in the US were very damaging. After we abandoned the gold standard, the dollar is now the globe’s reserve currency – and US politicians decided to play a game of chicken with the debt ceiling. Their behaviour verged on the shameful.

The fact that an 11th hour deal was done and the ceiling was raised is a relief, but the process shattered trust and confidence in US politicians.

There is also an uncanny correlation between the gold price and the US debt ceiling. Over the past 30 years, the gold price has tracked the ceiling whenever it has been raised.

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August 4 (Reuters) — “The geopolitical backdrop is inherently bullish for gold,” Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “As risk appetite wanes, people have been piling into gold and Treasuries. Yields are so low that the only alternative is gold.

“With currency wars escalating, people want to buy gold so they don’t have to worry about surprise interventions taking away their purchasing power,” Adam Klopfenstein, a senior strategist at MF Global Holding Ltd. in Chicago, said in a telephone interview.

Legislation passed Aug. 2 to increase the nation’s debt ceiling will “hasten the demise of the dollar as the world’s reserve currency and the desire of investors to own gold” Michael Pento, an economist at Euro Pacific Capital, said in a report.

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August 04 (Financial Times) — The European Central Bank on Thursday resumed buying government bonds and offering loans to the region’s banks in an attempt to relieve tensions in eurozone financial markets.

The announcement is the latest in a flurry of central bank activity as fears mount over the state of the global economy. Hours earlier, the Bank of Japan intervened in the currency markets to slow the yen’s rise and announced an expansion of its asset-purchase programme.

It also follows the Swiss central bank’s decision to drop its target rate close to zero and inject SFr50bn in liquidity to weaken the Swiss franc.

…While Mr Trichet was speaking, traders said that the ECB was buying Portuguese and Irish government debt.

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PG View: Somewhat amusingly, ECB chief Trichet suggested in his press conference today that the central bank’s bond buying did not constitute quantitative easing.

August 04 (USAGOLD) — Gold is surging to new record highs this morning, despite the overnight BoJ inspired rebound in the dollar. The new all-time high presently stands at 1678.40.

The BoJ did indeed follow the path blazed by the SNB yesterday, intervening aggressively to temper the yen’s recent rise. The BoJ was reportedly engaged in direct buying of the USD-JPY pair and also announced liquidity expanding measures. This type of activity is meant to discourage safe-haven buying of yen (and Swiss francs), which narrows the field of safe-havens significantly, increasing the appeal of gold. The yellow metal surged to a new all-time high against the yen of ¥133,696.70.

The BoE and ECB held steady on rates, as was widely expected for both. ECB President Trichet’s press conference is is underway and everyone wants to know when/if the ECB will start buying peripheral bonds again. Trichets response to an early question in the topic was that he had never said SMP was dormant. I guess that means the door is open, which likely means the door will be used.

US initial jobless claims came in right at 400k. With last week’s upward revision to 401k, claims have been 400k or better for 18 consecutive weeks.

• US initial jobless claims -1k to 400k in week ended 30-Jul, below market expectations of 405k, vs upward revised 401k in previous week.
• ECB leaves rates unchanged as expected. Trichet presser underway.
• BoE left repo rate unchanged at 0.50%, as was widely expected. No statement. Minutes due 17-Jul.
• German manufacturing orders +1.8% m/m in Jun, well above market expectations of -0.5%, vs negative revised +1.5% in May.
• France cancels bond auction.
• The BoJ intervened aggressively to squelch the yen’s rise.
• New Zealand Q2 HLFS unemployment rate unch at 6.5%, vs downward revised 6.5% in Q1.

CNBC coverage of gold hitting another record high today, with projections of $1800-$2000…..

Video: 3.5 min

We’re pleased to present our latest RoundTable video discussion with our staff experts George Cooper, Peter Grant and Jonathan Kosares

Immediate access here

Excerpt: Now that the debt ceiling debate is over, and the dust is settling, the market is beginning to get a picture of what, if anything, was accomplished, and can be expected moving forward. The $2 trillion in cuts over ten years amounts to a small dent in our annual deficit, suggesting that the U.S. will continue to increase its debt to GDP ratio over the coming decade. The cuts suggested will merely slow, not reverse, this trend. In the end, this debt deal is nothing more than a giant kick of the can down the road, and a short road at that. The hike to the debt ceiling looks to only buy about six months, so this issue is set to be revisited next year. The market has digested this “resolution” as such, and gold has responded sharply higher, rising $60 in two days. The DOW meanwhile has come under significant pressure, shedding over 800 points in a week. Things across the pond are not looking any better. The credit facility set up by the ECB is insufficient at best, and contagion remains an enormous risk. Spreads on sovereign debt in Italy, Spain, Greece, Portugal and Ireland are at or near all time highs. As talks of dramatically expanding the credit facility heat up, we’re left to wonder if its even possible for Europe to “go big enough” to calm market jitters. With Peter Grant, George Cooper, and Jonathan Kosares. (24 min)

August 03 (Bloomberg) — Gold futures rose to a record $1,675.90 an ounce on signs that the U.S. economy is faltering amid debt woes, boosting demand for the precious metal as an investment haven.

Moody’s Investors Service said the U.S. credit rating may be downgraded and yesterday placed the country on negative outlook after President Barack Obama signed into law a plan to lift the nation’s borrowing limit and cut spending. Gold priced in euros also reached a record on concern that slowing growth will hamper efforts by Spain and Italy to trim debt.

“People want gold for safety,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “People are running away from currency volatility, economic weakness and political instability. Gold is an international currency, and no government can print any of it.”

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Anticipated Correction in Gold Fails to Materialize

It was widely expected that a deal to raise the debt ceiling would prompt an unwinding of safe-haven positions. Nothing could have been further from the truth; for as we had suggested in recent weeks, whatever happened, there was some form of economic peril to contend with. Despite the compromise announced Sunday evening, that was eventually signed into law by President Obama yesterday, gold, the Swiss franc and yen all extended into record territory. While the Swiss franc corrected after the SNB unexpectedly cut the Libor target to 0% and the yen moved off its high on concerns that the BoJ may act as well, the yellow metal remains well bid.

It’s worth noting that the impact of the SNB’s action was short-lived and the franc has retraced nearly all of its intraday losses against the dollar; and most of its losses against the euro. As a general rule, interventions are at best delaying actions. Very rarely are they successful in reversing trends. Nonetheless, the threat of further measures against both the Swiss franc and the yen may actually end up increasing the appeal of gold as the safe-haven of choice.

The debt deal does nothing more than slow the amassing of debt in the US, and there are some serious doubts as to whether it actually will do that. Meanwhile, evidence is mounting that the one thing that is certainly slowing is economic growth. The spending cuts that are part of the deal will not help with reinvigorating growth and may in fact prove to be an impediment. Name your poison: If you think that the focus should be on deficit reduction, the economy is likely to suffer as a result. If you think the government should borrow and spend to fill the void left by private capital during a recession, you get a bigger debt.

Arguably it is decades of government efforts to circumvent normal business cycles that has gotten us to this point. It is the accumulation of that debt over time that is the problem. As debt servicing costs become an ever-larger percentage of GDP our choices become increasingly limited and none of those choices are particularly appealing to large swaths of the voting public: A smaller government and reduced government services. Or higher taxes.

Ah, but there is a third option, one that is perhaps most appealing to our Representatives in Washington because it requires no action on their part: Further devaluation of the dollar. The lack of any meaningful fiscal action by Congress may well prompt the Fed to act, essentially printing money to pay down our massive debts. It is essentially the stealthy confiscation of wealth through inflation on the entirety of the US population, without cutting anything or raising taxes on anyone.

Make no mistake though, there are consequences of such action. The continued erosion of the American standard of living for one thing. As consumers focus more on necessities as they try to stretch their paychecks, nonessential consumer goods are likely to be cut from family budgets. In a consumer-driven economy such as ours, that will result in further economic contraction and even higher unemployment, which may then prompt deflation to rear its ugly head.

It is well documented that the Fed views deflation as a far greater evil that inflation, so the Fed would likely react to the threat of the former by further increasing the money supply. The cycle could repeat time and time again for decades, as evidenced by Japan. Recent lowered expectations of US economic growth have indeed resulted in renewed talk about QE3. If the Fed signals there willingness to launch further accommodations, either at next week’s FOMC meeting or at the upcoming Jackson Hole summit (26-Aug), the latest leg higher in the gold market may have a way to run.

August 03 (USAGOLD) — Gold extended to yet another new record high at 1672.94 in overseas trading and remains well bid thus far during the US session. The US debt deal did little to alleviate market worries; consequently, the correction that everyone seemed to be anticipating failed to materialize and sellers remain an endangered species.

The SNB slashed rates today in an effort to take the wind out safe-haven demand for the “massively overvalued” Swiss franc. The relief they got was short-lived. The franc is back near record high territory versus the dollar and a majority of the retreat against the euro has been retraced as well. Direct FX market intervention would be their next step.

Japan continues to express concern over the high-flying yen as well. With their interest rates already at zero, direct intervention is about their only option. There has also been heightened talk about more quantitative easing.

If intervention — or the threat thereof — makes these two safe-havens less “safe,” it may well end up making gold even more desirable.

• US ISM services index fell to 52.7 in Jul, below market expectations, vs 53.3 in Jun.
• US factory goods orders -0.8% in Jun, about what the market was expecting, vs negative revised +0.6% May.
• US ADP payrolls survey +114k in Jul, above market expectations of 100k, vs negative revised 145k in Jun.
• Eurozone Reuters Composite PMI (final) 51.1 in Jul, below market expectations, vs 50.8 preliminary print.
• Eurozone Reuters Services PMI (final) 51.6 in Jul, above market expectations, vs 51.4 preliminary print.
• Eurozone Jun retail sales -0.4% in Jun, above market expectations, vs negative revised -2.3% in May.
• Swiss Nation Bank unexpectedly cut the Libor target to “as close to zero as possible.”
• UK CIPS Services PMI 55.4 in Jul, above market expectations, vs 53.9 in Jun.

August 03 (Reuters) — Central banks of emerging market countries such as Korea and Thailand have added more than $10 billion of gold to their reserves this year in a sign of waning faith in the West’s benchmark bonds and currencies like the dollar and the euro.

International Monetary Fund data for June on Wednesday showed Thailand bought gold for the second time this year, raising its reserves by nearly 19 tonnes to over 127 tonnes, while Russia bought another 5.85 tonnes, bringing its reserves to 836.7 tonnes, the world’s eighth largest official stash of the metal.

So far in 2011, emerging market central banks have bought nearly 180 tonnes of gold, more than double the roughly 73 tonnes purchased by central banks globally in the whole of 2010.

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August 03 (MarketWatch) — Gold futures kept their rally Wednesday, touching an intraday record on their way to a settlement high mark as the metal’s safe-haven appeal pulled in investors amid a decline for equities worldwide.

Gold futures for December delivery climbed $28.30, or 1.7%, to $1,673.40 an ounce on the Comex division of the New York Mercantile Exchange.

It traded as high as $1,675.90, an intraday record for the metal.

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August 02 (Bloomberg) — Federal Reserve policy makers may start weighing additional steps to prop up the recovery after growth fell below 1 percent in the first half of this year and economists began cutting second-half growth forecasts.

“At a minimum, the FOMC will have a serious debate about the policy options — what they should do, and what they expect to get from it,” said Roberto Perli, a former associate director in the Fed’s Division of Monetary Affairs, referring to the Federal Open Market Committee. “Growth in the first half was dangerously close to zero,” said Perli, director of policy research at International Strategy & Investment Group.

The FOMC will meet Aug. 9 in Washington after the government marked down its measure of economic growth to annual rates of 0.4 percent in the first quarter and 1.3 percent in the second, casting doubt on the Fed’s June outlook of 2.7 percent to 2.9 percent growth for this year.

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PG View: Expectations of more Fed juice equals higher gold prices (see today’s action). Actual Fed juice equals much higher gold prices.

August 02 (CNNMoney) — U.S. stocks plunged on Tuesday as fears about a weak U.S. economy were enflamed after investors got another disappointing economic report – this time on consumer spending.

The selloff was so broad and so deep it pushed the S&P 500 into negative territory for the year and bond yields to their lowest levels in nine months.

…The Dow Jones industrial average plunged 266 points, or 2.2%, to close at 11,867.

…This was the eighth-straight day of declines for the Dow — a losing streak not seen since October 2008, when the financial system was in the depths of the crisis. The Dow has fallen roughly 6.7% since the sell-off began on July 22.

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PG View: Meanwhile, gold was up more than $40 — nearly 2.6% — establishing a new record high at 1660.55.

August 02 (Financial Times) — The spectre of an imminent US default on its debt disappeared as legislation to increase America’s borrowing authority cleared its last remaining hurdle in the Senate and was signed by President Barack Obama.

The last-minute congressional approval of an increase in the debt ceiling came after weeks of aggressive political rhetoric and fraught negotiations over fiscal policy that carried the country to the brink of a potential economic calamity, threatening its triple A credit rating and the status of Treasury bonds as a safe harbour for global investors.

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PG View: Oh, but the saga is far from over. Far, far from over.

August 02 (Politico) — Treasury won an immediate reprieve of $400 billion in new borrowing authority Tuesday, as the Senate gave final approval to a hotly contested debt and deficit-reduction agreement hammered out with the White House Sunday night.

The bipartisan 74-26 roll call followed a 269-161 vote in the House Monday evening and the bill was quickly signed by President Barack Obama, ending an unprecedented, hard-edged political struggle that pushed the nation to the brink of default.

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August 02 (MarketWatch) — Gold futures traded at a record high Tuesday, gathering steam after U.S. government data showed consumers held on to their wallets in June and investors grew more concerned about a double-dip recession in the U.S.

Gold for December delivery added $21.60, or 1.3%, to $1,643.40 an ounce on the Comex division of the New York Mercantile Exchange.

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August 02 (Bloomberg) — Gold futures surged to a record $1,645.80 an ounce as escalating concern that the global economy is losing momentum spurred demand for the precious metal as an investment haven.

U.S. equities headed for the longest slump since 2008 after a report showed that consumer spending unexpectedly dropped in June for the first time in almost two years. Manufacturing indexes in the U.S., Europe and China declined in July. Gold climbed to all-time highs in euros, pounds and Canadian dollars.

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August 02 (Reuters) — Maybe Washington can start paying invoices with $3 bills — because the “dramatic” agreement to “reduce the national debt” is as phony as a three dollar bill.

Weeks of nearly round-the-clock negotiations among the White House, House and Senate have led to an “historic” debt deal that consists almost entirely of fluff, doublespeak and empty promises.

The politicians involved get to claim victory, and presumably will be rewarded with votes and campaign donations from the special-interest groups that, pretty much across the board, were spared any pain. Young people of the United States once again are hammered. If the deal becomes law, the national debt will rise again dramatically, while there’s no guarantee any cut will materialize — and the bill for this recklessness will be passed along to those under age 30.

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