11-Apr (USAGOLD) — Gold remains well bid, underpinned by a falling dollar even as stocks are clawing back a portion of yesterday’s sharp losses. With stocks down more than 200 points yesterday and more than 400 points now from last week’s peak, the resurgence in QE3 talk comes as no surprise.

Adding additional shine to gold is the return of the eurozone debt crisis to the front pages of the financial press. You may recall that it was only about a month ago that the second Greek bailout was approved and briefly returned calm to European markets; €28 billion is a pretty big price tag for a month of relative calm. Many are beginning to notice that the extraordinary measures implemented by governments and central banks are having increasingly short-lived impacts…and that’s downright ominous…

• US import prices +1.3% in Mar, well above market expectations of +0.8%; export prices +0.8% on expectations of +0.3%.
• Canada housing starts surged 5.0% to 215.6k in Mar, well above market expectations of 199.0k, vs upward revised 205.3k in Feb.
• Russia Trade Balance (USD) $19.8 bln in Feb, vs $20.5 bln in Jan.
• UK BRC Retail Sales – All +3.6% y/y in Mar, on expectations of unch; same store +1.3% y/y.
• Japan machinery orders ex-Elec&Ship 4.8% m/m in Feb, vs 3.4% in Jan.

10-Apr (BusinessWeek) — With every 200,000-plus jobs report that has come out over the past few months, the odds of the Federal Reserve embarking on a third round of monetary stimulus (known as quantitative easing, or QE3) seemed to get a little slimmer. In Bloomberg’s most recent survey of economists, conducted in March, just after we learned the economy added 227,000 jobs in February, 61 percent of respondents said the Fed would not pull the trigger on QE3, up from 50 percent in January. Recent surveys of primary dealers by the New York Federal Reserve show a similar decline.

After Friday’s weaker-than-expected jobs report, there’s a renewed sense that QE3 may be necessary to keep a waning recovery on its feet.

[source]

Macquarie’s Gibbs Expects Fed QE3 by End of July
10-Apr (Bloomberg) — Richard Gibbs, global head of economics at Macquarie Group Ltd., talks about the outlook for the U.S. economy, Federal Reserve monetary policy and its implications for global financial markets. Gibbs also discusses China’s economic growth.

11-Apr (USAGOLD) — The latest USAGOLD Newsletter is posted and it’s a good one.

The lead article, entitled Surging central bank gold demand adds new dimension to bull market suggests that the recent shift is perhaps the biggest change in gold’s supply/demand dynamic since the Central Bank Gold Agreement.

[Link]

Never miss another USAGOLD Newsletter by subscribing here.

This Reuters chart out today is a timely tip-in for the newsletter article, showing the dramatic rise in Chinese gold imports from Hong Kong.

11-Apr (Reuters) — Gold steadied on Wednesday, after rising for four days straight, as the intensifying euro zone debt crisis threatened to undermine the euro and offset any potential safe-haven demand for the metal.

The euro rose on Wednesday but has come under pressure in the past week as the debt crisis has reignited. The focus is now on Spain, where the head of the central bank said on Tuesday commercial banks would need more capital if the economy continues to deteriorate.

Benchmark 10-year Spanish yields touched 6 percent for the first time since early December on Wednesday, having risen by more than two-thirds of a percentage point in the past week alone, while peripheral banking stocks have been pummeled.

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11-Apr (The Wall Street Journal) — Germany’s auction of government bonds Wednesday was uncovered for the first time since November, as investors balked at accepting the lowest yields on record as the price for safety, while Spanish and Italian bonds recouped some of their recent losses.

Germany auctioned €5 billion ($6.54 billion) of the new 1.75% July 2022-dated bund and sold €3.87 billion. It received bids totaling €4.109 billion, leaving the auction technically uncovered.

…The average yield came in at 1.77%, the lowest ever at a German 10-year auction.

…This yield means that investors effectively don’t make any real return when holding German paper, given the above 2% inflation rate in Germany.

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PG View: It would seem the price of “safety” is a record low yield below the rate of inflation. Seems like if safety is the desire, gold would make a much better choice.

Meanwhile, Italy 12-mo bill yields spiked to 2.84% at today’s auction, vs 1.405% in Mar, raising concerns about tomorrow’s €5 bln bond offering.

10-Apr (USAGOLD) — Gold has traded in a choppy manner thus far today. The yellow metal pushed to a four-session high of 1654.37 overseas before succumbing to risk aversion as European stocks and periphery bonds got hammered on resurgent sovereign debt and growth concerns. Gold retreated more than $20 in early New York trading, before rebounding once again to set new intraday highs after the European close.

Gold is eating deeper into the sell-off that resulted from last week’s release of the March FOMC minutes, when everyone was suddenly convinced by the third iteration of the same story; that the Fed was turning more hawkish. Well it sure didn’t take long for the market to start jonesing for the promise of further Fed accommodations. Friday’s disappointing jobs report pretty much swung expectations back in the other direction.

Interestingly, Fed chairman Bernanke largely ignored the topic in a speech last night, opting to focus instead on new curbs for the shadow banking system. Bernanke did note however that, “About three and a half years have passed since the darkest days of the financial crisis, but our economy is still far from having fully recovered from its effects.”

I worry that like Japan, we’ll never truly recover because the central banks have made it their life’s mission to meddle in markets to the point that they will never truly clear. While the BoJ took a steady policy stance today, it is widely expected to ease further when they release their new economic forecasts on 27-Apr. Such easing is expected to come in the form of additional quantitative measures designed to further devalue the yen.

• US wholesale sales +1.2% in Feb, well above market expectations of +0.6%; inventories +0.9%.
• US NFIB small business confidence fell to 92.5 in Mar, vs 94.3 in Feb.
• Switzerland unemployment rate (sa) steady in Mar at 3.1%.
• Germany trade balance (sa) €13.6 bln in Feb, vs upward revised €15.1 bln in Jan.
• France industrial production +0.3% m/m in Feb, above expectations of -0.1%, vs negative revised +0.2% in Jan; -1.2% y/y.
• Norway CPI – Core +0.4% m/m in Mar, above expectations of +0.3%, vs +0.7% in Feb; +1.5% y/y, above expectations.
• BoJ holds Target Overnight Call Rate steady at 0%-0.1%, no indication of additional quantitative measures.
• China Exports +8.9% y/y in Mar, vs +18.4% y/y in Feb.
• China Imports +5.3% y/y in Mar, vs +39.6% y/y in Feb.
• China Trade Balance (USD) $5.4 bln in Mar, vs -$31.5 bln in Feb.
• Hong Kong FX Reserves (USD) steady at $294.7 bln in Mar.

10-Apr (Reuters) — European shares hit a 10-week low on Tuesday as fresh concerns about global growth and pressure on some highly indebted euro zone countries hurt cyclical stocks, with charts for a major blue-chip index showing scope for yet further declines.

Financials, miners, automakers and energy sectors bore the brunt of the sell-off after trading in Europe resumed following the Easter holidays, reacting to Friday’s weak U.S. jobs report and Tuesday data showing no growth in France’s economy in the first quarter.

…”Investors are in a risk-off mode, with the U.S. job numbers and the situation around Spain becoming an excuse for the sell-off. I expect the market to fall 3 to 5 percent in the next couple of weeks,” Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.

“I would advise investors to take some more profits. If the market falls 10 to 15 percent, you could start buying again as you would expect the central banks to intervene to support the market. Focus on defensive sectors such as pharmaceuticals and food and beverages and companies that give high dividends.”

[source]

10-Apr (Bloomberg) — Spain’s efforts to calm investors with 10 billion euros ($13 billion) of budget cuts in education and health failed to stem concerns the nation may be the fourth euro member to need a bailout.

The yield on Spain’s 10-year benchmark bond surged 20 basis points to 5.95 percent today as Economy Minister Luis de Guindos declined to rule out a rescue for Spain and Bank of Spain Governor Miguel Angel Fernandez Ordonez said the nation’s lenders may need additional capital if the economy weakens more than expected.

[source]

PG View: Italian bonds and stocks are getting hammered too. Nothing has been “fixed” in Europe…

10-Apr (Reuters) — The Bank of Japan kept monetary policy steady as expected on Tuesday, holding off on any further steps to help meet its new inflation target and boost activity ahead of a more thorough assessment of the economy later this month.

The yen edged higher and Tokyo stock prices slid after the board’s unanimous decision to stand pat, although many market players had expected the bank to wait in easing until the next rate review on April 27, when revised long-term forecasts should show that a sustained end to deflation is a long way off.

…When the BOJ next acts, it will probably again expand its 65 trillion yen asset buying and loan program, mostly by committing to purchase more government bonds. In doing so, it may need to extend the maturity of bonds it buys under the program to five years from the current two-year timeframe as two-year yields are already stuck at 0.1 percent.

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PG View: The BoJ will also offer up to $12 bln in 1-yr US dollar denominated loans to companies with high growth potential at the 6-month dollar LIBOR rate, with the option to roll up to 3-times.

09-Apr (The Australian) — It was just the tip of the iceberg. We’re talking about last week’s move by Zijin Mining Group to launch a $299 million bid for Norton Gold Fields (NGF), which operates the Paddington goldmine near Kalgoorlie.

There was some surprise expressed at this: while Chinese companies have been snapping up bulk and base metals projects around the world, it was generally thought they had little interest in picking up gold projects.

Think again. A very reliable source close to several gold companies tells us Chinese interests are not only taking stakes in explorers and miners, they are also buying gold directly from producers and shipping it home.

There is much talk in gold bug circles in the US that the recent purchase by the Bank of International Settlements of more than 4 tonnes of gold may have been wholly or in part on behalf of the People’s Bank of China.

[source]

09-Apr (USAGOLD) — Gold is edging higher in thin market conditions. Most of Europe was closed today for Easter Monday. While there isn’t anything on the US economic calendar today to provide trading inspiration, US stocks are off sharply in the wake of Friday’s disappointing payrolls number. There is a mounting concern that the previous several months of better than expected jobs growth was primarily the result of an unusually mild winter. Basically, the jobs were borrowed forward from the Spring, which would indeed explain the worse than expected March print.

Not surprisingly, the jobs data reignited talk of QE3, just days after the March FOMC minutes were interpreted as having taken additional quantitative measures off the table. Fed chairman Bernanke will be speaking before the Atlanta Fed hosted Financial Markets Conference at 6:00PM ET. It will be his first opportunity to address the March payrolls report, and the market’s ears will be perked for a more dovish tone.

Hotter than expected March inflation in China, amid ongoing worries of a hard-landing, raises concerns that the PBoC may have to be more cautious with their own more accommodative policy. However, I would hazard that the PBoC and the Fed share the view that inflation is the lesser evil, much more palatable than moribund economic growth — or worse yet contraction — and the rising rate of unemployment that would accompany either.

If policies that hopefully lead to more robust growth and lower unemployment foster inflation as a byproduct; so be it. The logic of a central banker would suggest that inflation can be tamed, all in good time. Bolstering ones gold holdings would be a prudent hedge against such hubris.

• BoC Q1 Business Outlook Survey rebounds to 35.0, vs -4.0 in Q4-11; Senior Loan Officer Survey deteriorates to -16.9%, vs -6.3% in Q4.
• South Korea PPI 2.8% y/y in Mar, vs 3.5% y/y in Feb.
• Japan Current Account (nsa) ¥1,178 bln in Feb, vs -¥437 bln in Jan.
• China CPI accelerates to 3.6% y/y in Mar, vs 3.2% y/y in Feb.
• China PPI eases to -0.3% y/y in Mar, vs unch in Feb.
• Singapore FX Reserves (USD) $244 bln in Mar, vs $247 bln in Feb.

By Ambrose Evans-Pritchard
08-Apr (The Telegraph) — Until the rising reserve powers of Asia, Russia and the Gulf regain trust in the shattered credibility of the world’s two great fiat currencies – if they ever do – gold is unlikely to crash far or remain in the doldrums for long. `Peak gold’ cements the price floor in any case.

It has been an unsettling experience for late-comers who joined the gold rush near all-time highs of $1923 an ounce last September. The slide has become deeply threatening since the US Federal Reserve took quantitative easing (QE3) off the table six weeks ago – or appeared to do so – and signalled the start of a new tightening cycle. Spot gold ended the pre-Easter week at $1636.

…central banks will have to keep printing money for a long time, and the Asian surplus powers – as well as Russia and the Gulf states – will have to find somewhere to park their growing foreign reserves.

“These countries don’t want other peoples’ paper promises any longer,” said Peter Hambro, chair of the Anglo-Russian miner Petrovalovsk. “There is no sign yet that we are returning to a well-balanced and normal financial system. The ECB is accepting bus tickets as collateral and the only way out of this debt and banking crisis will be inflation in the end.”

…and the precedent for EMU sovereign default is now established. The Euro zone has become a danger zone. Rules are not upheld. Some bondholders are spared, while others are not.

[source]

09-Apr (Bloomberg) — China’s inflation accelerated more than forecast in March on a pickup in food prices, signaling that policy makers may exercise caution in adding stimulus to boost growth.

Consumer prices rose 3.6 percent from a year earlier, the National Bureau of Statistics said today. That was more than the median 3.4 percent estimate in a Bloomberg News survey of 33 economists. Food-related costs gained 7.5 percent.

Premier Wen Jiabao’s officials may need to remain alert to the risk of inflation bouncing back even after price increases stayed below the government’s 4 percent target for a second month.

[source]

06-Apr (Washington Post) — As most Americans basked in the warmest, sunniest March in half a century, economists stared at the skies with dread:

Could good weather portend bad news for the economic recovery?

Economists say the mild winter has artificially inflated job growth. February alone stole as many as 72,000 positions from March and future months, according to Macroeconomic Advisers.

Translation: The surge in hiring early in the year may not be as strong as it appeared.

[source]

06-Apr (The Wall Street Journal) — India’s gold-jewelry trade associations agreed Friday to end a weeks-long strike, after Finance Minister Pranab Mukherjee promised to look into reducing or possibly annulling newly implemented gold taxes.

Indian retailers have been on strike for 20 days, ever since the government declared in mid March that it would double import taxes on gold and impose excise taxes on most gold jewelry.

The government has said the tax changes are aimed at discouraging purchases of the precious metal to contain the country’s current-account deficit, as gold is the second-largest import item by value after crude oil.

The strike has crippled India’s gold industry. Imports into the country, the world’s top consumer of gold, have all but ground to a halt. That has put a dampener on gold prices globally.

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06-Apr (USAGOLD) — Gold continues its string of solid Friday performances, posting gains as a disappointing payrolls report for March weighed on the dollar and equity futures (the stock market is closed today). The slowdown in jobs growth will likely raise QE3 expectations once again, just days after the market significantly discounted the likelihood of additional quantitative measures following the release of the FOMC minutes from the 13-Mr meeting.

Nonfarm payrolls rose just 120k in March, well below market expectations of +250k and a whisper that was closer to +300k. While the jobless rate ticked lower to 8.2%, this was primarily due to a drop in the participation rate to 63.8%, back within a tenth of a percent of the 29-year low of 63.7%. The jobless rate fell because people are dropping out of the labor force. While there was an upward revision to Feb payrolls from 227k to 240k, January was revised lower from 284k to 275k.

If the government’s mantra of “jobs, jobs, jobs” is to be believed, a sustained slowdown in jobs growth would be simply unacceptable and an ominous harbinger for the stock market. However, in the absence of any meaningful stimulus on the fiscal side — and let’s be honest, nothing is going to happen on that front before the elections in November — all eyes will once again turn to the Fed to provide stimulus of the monetary kind…ramping up pressure for QE3.

One thing is for certain, whether the stimulus if fiscal or monetary, the funds themselves will be borrowed…even if it’s from ourselves. Ratings agency Egan-Jones warned late yesterday that US debt/GDP ratio may rise above 112% by the end of 2013, promoting yet another downgrade from AA+ to AA.

• US nonfarm payrolls +120k in Mar, well below expectations of +210k and higher whisper; unemployment rate 8.2% on Feb revision to +240k.
• NYSE closed for Good Friday. Half-day for bonds.
• Canada and most European markets closed for Good Friday.
• Japan Trade Balance 1st 20 (nsa) -¥191 bln in Mar, vs -¥69 bln in Feb.
• Japan FX Reserves (USD) -$14.1 bln m/m in Mar, vs -$3.8 bln in Feb.
• Japan Leading Index (prelim) +2.1% m/m in Feb, vs +1.1% in Jan.
• Japan Coincident Index (prelim) +1.0% m/m in Feb, vs -0.5% in Jan.

06-Apr (The Wall Street Journal) — The U.S. unemployment rate dropped to 8.2% in March and a broader measure dropped to 14.5% from 14.9% the prior month, but a separate survey noted that the economy added a paltry 120,000. Why the drop?

This month, the decline in the jobless rate wasn’t a positive sign, as it primarily came from people dropping out of the labor force. The unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The rate is calculated by dividing that number by the total number of people in the labor force. When the unemployed no longer count as part of the labor force, both numbers decline and the unemployment rate falls.

In March, the number of unemployed dropped by 133,000, but so did the number of people employed — by 31,000. That indicates that those people didn’t necessarily find new jobs, since the overall labor force declined by 164,000.

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06-Apr (MarketWatch) — The U.S. dollar dropped against other major currencies on Friday after government data triggered worries about the health of the U.S. labor market and the economic recovery.

The dollar index, which tracks the performance of the greenback against a basket of other major currencies, fell to 79.865 in recent trade. It was at 80.084 before the jobs data and at 80.101 late Thursday.

The U.S. economy added 120,000 jobs last month, less than expected and an indication that momentum could be slowing. Phil Izzo and David Wessel have the details.

The decline for the dollar came after the Labor Department reported that the U.S. economy added 120,000 jobs in March. In contrast, economists had expected a gain of 210,000 jobs.

[source]

PG View: The decline in the dollar boosted gold.