Mar 14, 2010 BERLIN (Reuters) — Germany’s Bundesbank would oppose any government initiative to use its gold reserves as backing for a European Monetary Fund (EMF), a spokeswoman said.

German magazine Focus reported on Saturday that the finance ministry was considering the possibility of euro zone countries using their central banks’ gold reserves to back an EMF.

A spokeswoman for Germany’s central bank said she was not aware of any such plans but the Bundesbank would resist them. She added that it was up to the Bundesbank to decide autonomously about the use of its gold reserves and not the government or the European Central Bank.

[source]

RS Comment: The Bundesbank’s resistance or opposition to this scheme is well understandable from the perspective that its gold reserves provide a stabilizing force as the strongest component residing on the asset side of its balance sheet.

Furthermore, for the bank to part with a portion of gold reserves, it would likely be facilitated through either one of two unsavory scenarios. Depending on which entity is to be the actual shareholder in the proposed EMF (likely the Finance Ministry rather than the Bank) the Bundesbank would either 1) receive euros through an off-market sale of the requisite gold with the EMF-founding counterparty, or else 2) receive some sort of newfangled EMF “asset” through what would in essence be an open-ended asset swap with the Fund.

The first option is ill-favored because not only does it politically erode Bundesbank independence through forced relinquishment of its best asset, it does so in a way that would correspondingly shrink the Bank’s balance sheet (and euro money supply) at this time when such monetary tightening might be inauspicious for the eurosystem economy, and thus perhaps ultimately forcing their hand further — to monetize some quantity of EMF debt securities (if deemed allowable under the Maastricht Treaty.) The second option is, frankly, a shortcut to the same end (more or less, depending on the nature of the EMF asset) but either way the “assets” subsequently employed in for gold’s place on the balance sheet would no longer be reserve assets but rather internal (eurosystem) obligations.

That isn’t to say that a gold-holding EMF is an entirely bad idea, it’s just that its own gold reserves can’t be simply pirated from legitimate gold-holding entities through a paper-juggling enterprise. They must be obtained, if at all, through the open market. And who knows… at a sufficiently high (HIGH!!) gold price in the not-so-distant future, even the Bundesbank itself might be more cooperative on the point of dishoarding an acceptably small portion of its gold reserves for certain political objectives…

R.

Gold rises as faith in currencies ebbs

The COMEX April gold futures contract closed up $3.70 Monday at $1105.40, trading between $1101.00 and $1108.70

March 15, p.m. excerpts:
(from Marketwatch)
Gold futures rose after Moody’s Investors Service said risks are growing for the ratings of the four largest AAA-rated economies — the United States, the United Kingdom, Germany and France — leading investors to seek shelter in gold. “Sovereign-debt issues and currency risk remain prevalent and look set to keep gold buoyant for the foreseeable future,” analysts at GoldCore wrote. “Indeed, gold is increasingly being seen as a safe-haven currency.” The Moody’s report helped offset the impact of a stronger dollar…more
(from Dow Jones)
Shortly after gold closed, the ICE Futures U.S. dollar index was up 0.5%, at 80.259 points. Although the dollar also benefited as a safe-haven play, there were concerns about the greenback as well as other currencies, with Chinese Premier Wen Jiabao having sharp words for Washington on currency and trade policy. “Right now there doesn’t appear anywhere safe,” says Michael Gross, broker and futures analyst with OptionSellers.com. “There’s some flight-to-quality issues going on in gold … which is always going to be its own currency.”…more
(from Reuters)
Growing fears over the prospect of monetary tightening in China prompted weakness in assets that are perceived as riskier, such as equities, crude oil and industrial metals like copper. Gold, however, rose 0.5 percent. Commerzbank analyst Eugen Weinberg said the increased focus on growing government debt piles was underpinning interest in gold. “It is helping the market because, if you are looking for security, you buy gold.”…more
(from Bloomberg)
Moody’s said today that under a so-called baseline scenario, the US will spend more on debt service as a percentage of revenue this year than any top-rated country except the UK. The US will be the biggest spender through 2013. Moody’s said the US and the UK have moved closer to losing their Aaa credit ratings. “Gold is a good spot to be parking your money for the time being,” said Frank Lesh, trader at FuturePath Trading LLC. “Gold has that flight-to-safety aspect to it. It’s going to hold its value.”…more

see full news, 24-hr newswire…

By Shashank Shekhar
March 16, 2010 (EmiratesBusiness 24|7) — Companies, fund managers and financial institutions wanting to show a greater proportion of their holdings in gold before March 31 have raised contract volumes and the number of open interests in gold futures contract expiring on April 8 at the Dubai Gold and Commodities Exchange (DGCX), says the CEO of a commodities company that trades at the exchange. The fiscal year comes to a close on March 31 in India, Canada, Hong Kong and Japan and in the UK, from April 6 to April 5.

…the volume of contracts, both in terms of open interests and actual volumes expiring in another gold contract at the exchange three months later, is manifold lower. “You have a larger interest in contracts expiring closer to April 1 at the exchange. That’s because these companies would like to beef up their balance sheets that get converted into a tangible asset on a date close to April 1,” said Sajith Kumar P K, CEO, JRG International Brokerage….

The gold contract with an expiry on April 8 has not only been the favourite contract among available products at the exchange for most of March, but the volume of gold contract expiring three weeks from now exceeds the volume for the gold contract expiring three months later by a multiple of four to five for most of the month.

[source]

16/03/2010 (The Dominion Post) New Zealand — Newmont Asia Pacific regional group executive operations Philip Stephenson told a conference in Perth yesterday that the gold price would remain strong in the short-to-long term.

The US dollar had gained ground, Mr Stephenson said, reflecting uncertainty surrounding European economies, with investors piling out of the Euro and into the greenback.

“It will be interesting to see how long it is until it returns to its normal linkage,” he said.

“Russia and India continue to buy and I don’t see this changing in 2010.

“China’s insatiable appetite for gold remains.”

[source]

by Alix Steel
Mon 03/15/10 NEW YORK (TheStreet) – James Turk, founder of GoldMoney, argues that despite some short term downside, gold prices will still hit $8,000 an ounce.

by Peter Schiff
15 March 2010 (ForexPros) –

…From a technical standpoint, the short dollar trade of late 2009 was too crowded; but from a fundamental standpoint, I don’t think it was crowded enough. As with stocks, there can be no long-term substitute to examining a government’s fundamentals to determine its currency’s worth. Based on the fundamentals, far too many investors remain far too confident about the greenback’s underlying viability.

[...Catalyzed by the Greek debt crisis, the greenback surged by about 8% in six weeks....]

In fact, I do not think I have ever seen so rapid a change in sentiment in my career. The crowd had completely switched sides, with most now betting on the demise of the euro rather than the dollar…

In my opinion, the market is now perfectly positioned for a massive dollar sell-off. The fundamentals for the dollar in 2010 are so much worse than they were in 2008 that it is hard to imagine a reason for people to keep buying once a modicum of political and monetary stability can be restored in Europe… …and refocus everyone’s attention back on the financial train-wreck unfolding in the United States.

Any doubts about the future of the U.S. dollar should be laid to rest by today’s announcement that San Francisco Federal Reserve President Janet Yellen has been nominated to be Vice Chair of the Fed’s Board of Governors, and thereby a voter on the interest rate-setting, seven-member Open Markets Committee. Ms. Yellen has earned a reputation for being one of the biggest inflation doves among the Fed’s top players.

Looking for an ally to paper over the administration’s gaping fiscal holes, it is not surprising that president Obama made this selection. Yellen has consistently downplayed the dangers of inflation and has made statements that indicate she views the Fed as an extension of the Labor Department, rather than a guardian of our currency.

Last month, in discussing what she saw as the Fed’s obligation to promote employment, she said, “If it were possible to take interest rates into negative territory, I would be voting for that.” She may very well make Chairman Bernanke look like a tightwad by comparison.

[source]

Monday, March 15, 2010 (ProactiveInvestors) — Gold retreated after making gains in the morning, settling at US$1,104/oz after almost reaching US$1,110/oz earlier in the day, facing pressure from speculation of a possible gold-backed European monetary fund.

The yellow metal was subdued by rumours that EU states are looking to set up a European monetary fund, which would be backed by their gold reserves. Speculation of possible moves by the EU to confront its mounting debt problem have heated up amid the meeting of European finance ministers that has kicked off in Brussels today with debt issues in some of the euro zone countries, primarily Greece, being on top of the agenda…

All major miners were in decline today.

[source]

by Martin Crutsinger
Monday, Mar. 15, 2010 (The Associated Press) — China retained its spot as the biggest foreign holder of U.S. Treasury debt in January although it trimmed its holdings for a third straight month…

The Treasury Department said Monday that China’s holdings dipped by $5.8-billion to $889-billion in January compared to December… Net foreign purchases [...] of private corporate bonds fell by $24.8-billion, the biggest drop on record…

The decline in Chinese holdings is coming at a time of increased tensions between the two nations. Chinese Premier Wen Jiaboa on Sunday rejected American pressure on China to allow its currency to rise in value against the dollar, saying such efforts amounted to a kind of trade protectionism.

Economists say that unless foreign demand for U.S. Treasury debt remains strong the interest rates that the government has to pay for that debt could rise sharply, making the U.S. deficit picture look even worse.

Rising rates for government debt would also put upward pressure on private debt, sending borrowing costs up for U.S. businesses and consumers adding another risk to the U.S. economy as it struggles to emerge from the worst recession since the 1930s.

The federal budget deficit hit an all-time high of $1.4-trillion in 2009 and the Obama administration is projecting that this year’s deficit will climb even higher to $1.56-trillion.

[source]

by Saibal Dasgupta
15 Mar 2010 (Economic Times) BEIJING — Chinese premier Wen Jiabao on Sunday lent his voice to fears in some quarters that the global economy may be in for double dip recession. He also expressed concern over the stability of the US dollar and hoped Washington would do more to reassure investors of US bonds.

One issue of interest for Indian observers of the Chinese scene is Wen’s assurance that China will never seek hegemony…

He said 2010 would be the most complicated year for China as the world economy still faced a range of challenges with currency fluctuations and volatility in the prices of bulk commodities…

[source]

by Ross Louthean
Monday 15 March 2010 (Mineweb) — …Senior economist Huw McKay told the Paydirt Australian Gold Conference in Perth today that the gold price had stepped up year on year by about US$100 an ounce above predictions, for at least the past five years.

“What we did not know was going to happen was that we were going to have such an enormous collapse in risk appetite that pushed gold beyond the US$1,000 magical barrier,” McKay said.

“That has changed gold trends forever and what was once an invisible ceiling, is now more a level where we talk about the US$1,000/oz price as more of a floor price going forward.”

“World equity markets and financing has so much uncertainty to it that the allure of gold has never been stronger.

“Demands for gold has shifted to the investor, with very strong fundamental trends coming together to fuel investor appetite for things they can see, touch, hold and put in a warehouse. Gold certainty meets those criteria.”

McKay said the turn towards gold had come out of all other asset classes as “investors try to get into something that holds value”.

[source]

We call this one… ‘ The Dismal Rate of Reform‘

Click the image/link to reveal the full Wit & Wisdom of Ed Stein.

Gold chops lower but closes above $1100

The COMEX April gold futures contract closed down $6.50 Friday at $1101.70, trading between $1097.30 and $1119.50

March 12, p.m. excerpts:
(from Dow Jones)
Gold futures fell despite a markedly weaker U.S. dollar as some of the risk premium from euro-zone debt fears left the metal and as it pulled back from an area of price resistance around $1,120 an ounce. The dollar fell against most rivals on reports that the Obama administration plans to nominate Federal Reserve Bank of San Francisco President Janet Yellen for vice chairman of the Federal Reserve Board, leading some to think that monetary policy may stay loose for a while…more
(from Reuters)
Gold prices rose earlier in the session as the euro’s recovery versus the dollar fueled buying. However, a brief retreat in the single currency dragged the metal through major technical support at $1,115 an ounce, analysts said. After rising almost $20 last week, gold was pressured as traders took profits. Speculators had been increasing their net long position in gold for four straight weeks but they may now be trimming those positions, putting selling pressure on the yellow metal…more
(from AP)
Gold had rallied throughout February and into early March as investors pulled out of currencies and opted for safe alternatives. The euro struggled because of debt concerns in countries like Greece, while U.S. government spending weighed on the dollar. Easing concerns about European debt problems, however, have led some investors to return to the currency market and sell gold. April gold fell $6.50 to $1,101.70 an ounce while benchmark crude for April delivery fell 89 cents to settle at $81.54 a barrel…more
(from Marketwatch)
Gold had earlier benefited from a jump in crude-oil prices after the International Energy Agency raised its global demand forecast and as U.S. retail sales rose more than expected in February. But a survey from Reuters and the University of Michigan that showed sentiment among consumers unexpectedly fell in March reversed the trend. The drop in U.S. consumer sentiment also fueled concerns that China will further tighten access to money offset a weaker dollar…more

see full news, 24-hr newswire…

March 12th’s audio MarketMinute

By Jan Harvey
Fri Mar 12, 2010 LONDON (Reuters) – Gold’s rally to record highs in euro and sterling terms and the resilience of spot prices in the face of a rising dollar is sign-posting the metal’s broadening insurance appeal, as sovereign debt fears shift to the fore.

Worries over Greece’s fiscal outlook created a perfect storm for euro-priced gold this month, as some investors selling the single currency chose bullion as an alternative.

News that the next UK general election could result in a hung parliament, making it harder for an incoming government to tackle Britain’s debt, sparked a similar rally in sterling gold, taking it to a record 759.86 pounds an ounce.

Investors’ growing sensitivity towards sovereign risk is starting to suggest dollar-denominated gold can maintain strength even as the dollar rises…

In January the World Economic Forum said the risk that deteriorating government finances could push economies into full debt crises was the main threat facing the world in 2010.

Governments are unlikely to address falling currency values at present, analysts say, as a weak currency can protect exports and boost recovery. Moves to raise cash via bond issuance to steer economies away from crisis are also unsettling investors.

“Long-term investors are beginning to realise that gold is the only thing that is going to protect you from governments who decide that the way out of this problem is to borrow more,” said Bullman Investment Management Managing Director Nick Bullman.

[source] – [alternate link]

Comment: What more must be said?

By Ambrose Evans-Pritchard
12 Mar 2010 (Telegraph.co.uk) — Europe’s governments are at increasing risk of an interest rate shock this year as the lingering effects of the Great Recession drive debt issuance to record levels and saturate bond markets, according to Standard & Poor’s.

“Debt-related sovereign vulnerabilities have increased, particularly in the Eurozone, where we expect government borrowing will rise to further new peaks,” said Kai Stukenbrock, the ratings agency’s European credit analyst. “The resulting fiscal pressure from a sustained increase in financing cost could be significant in our view.”

The warning comes as bond giant PIMCO spoke of a “sovereign debt explosion” that has taken the world into uncharted waters and poses a major threat to economic stability. “Our sense is that the importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,” said Mohamed El-Erian, the group’s chief executive.

Mr El-Erian said most analysts are still using “backward-looking models” that fail to grasp the full magnitude of what has taken place in world affairs since the crisis.

Some 40pc of the global economy is in countries where governments are running deficits above 10pc of GDP, with no easy way out…

Several states have come to rely on cheap short-term funding, storing up “roll-over risk” that will come to a head in coming months.

[source]

RS View: You’ve worked hard in your life to earn and set aside some surplus income, and therefore, above all else, your savings should be SAFE. But whether it is or not remains up to you. You can choose to have your savings in the form of a bank account, CD, bonds, or government currency — all of which are LIABILITIES of others that are beyond your control. Alternatively you can choose to hold your savings in the form of physical gold which, uniquely, is an ASSET, the most highly liquid, portable, and universally recognized and respected asset anywhere on this debt-plagued planet — a lifeboat to any swimmer choosing not to be caught in the riptide.

by Allan Seccombe
Fri, 12 Mar 2010 (miningmx.com) — South Africa has slipped to fourth spot in the global gold producer rankings after its 2009 gold output fell nearly six percent to 204,923kg, a level last seen around 1908, as grades continued to slide… leaving South African gold output behind that of China, Australia and the United States.

The last time South African gold output was this low, Ford built the first Model T, there was the first passenger flight in an aeroplane and Albert Einstein presented his quantum theory of light. General Motors was also founded in 1908, a year in which South Africa produced 219 tonnes of gold. It produced 200 tonnes the year before.

“When the price is slightly higher, provided costs haven’t gone up too much, you can mine a slightly lower grade of gold to break even with your cost,” said Roger Baxter, chief economist at the chamber.

Mining companies would adopt this approach to extend the life of their operations in which they’ve invested a large amount of money and wanting to extract as much of the ore body as possible.

[source]

RS Comment: Whenever I chat with a friend who is hot to invest in a gold mining company, I ALWAYS make a point to educate them in regard to this standard practice by which mining companies in a time of rising gold prices tend to forego fat cash profits (which could come from high-grading), preferring instead to use intermediate gains in profit margins for exploration and to extend the life of the mine (and company) through pursuit of the marginal, lower-grade ore right down to break-even.

That decision is good the company itself (whose workers are all drawing a salary) but not so useful for the armchair shareholders who never quite see their dreams of leverage pan out the way they thought they would. Sure, the share price can wildly fluctuate up (and down) based on with movements of the herd (…there’s one born every minute…) but that’s mostly a game for traders who monitor their portfolios closely and with professional zeal.

For the more typical investor who wants a diversified portfolio and time to enjoy a diversified life, choose physical metal instead of mining shares which are inevitably on the road to utter exhaustion at a break-even pace.

“Gold steady; S&P warns of downgrade to U.S. AAA sovereign debt rating.” Click here to listen.

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Gold price holds steady despite China concerns

The COMEX April gold futures contract closed up $0.10 Thursday at $1108.20, trading between $1100.50 and $1111.70

March 11, p.m. excerpts:
(from Reuters)
Gold prices ended flat as possible monetary tightening by China and lingering currency volatility kept bullion investors on the sidelines. Chinese consumer inflation data spurted to a 16-month high in February, fueling speculation that the world’s most populous nation will tighten monetary supply soon. “The crux of the matter is that China’s economic data is very strong. There is a lot of talk that they will raise rates by the next month or two,” said Bruce Dunn, vice president of trading at Auramet…more
(from Marketwatch)
“Economic data from China today caused investors to pause and ponder just how hard China may have to put on the brakes to curb growth unleashed by stimulus over the course of the last year,” wrote John Stoltzfus, analyst at Ticonderoga Securities. The latest batch of data from China showed faster-than-expected inflation, still-torrid loan growth and heavy capital investment, renewing concerns the economy may be growing too fast…more
(from Dow Jones)
Lending by Chinese banks rose $102.5 billion in February, while money supply as measured by M2 was up 25.5%. If the Asian nation moves to curb its own inflation by tightening, that could cut the threat of inflation worldwide, said Sterling Smith, analyst with Country Hedging. “That’s going to temper any gold buying,” he said. April gold rose 0.01% after pressure from the concerns about Chinese monetary policy tightening weakened the metal, but the $1,100 level proved enough support for gold to bounce…more
(from Bloomberg)
Gold rebounded as investors took advantage of the lowest prices in two weeks to buy the precious metal as an alternative asset to the dollar, which slipped against the euro for a second day. The dollar declined as much as 0.2 percent against the euro, after slipping 0.4 per cent yesterday. “Gold was able to slow the hemorrhaging and claw its way back to the flat line,” said Matthew Zeman, a LaSalle Futures Group metals trader in Chicago. “Bargain hunters came in and the dollar was weaker.”…more

see full news, 24-hr newswire…

By Paul Dobson
March 11 (Bloomberg) — The Swiss franc weakened from its strongest level in a year against the euro after the central bank said it will slow the currency’s appreciation to protect Switzerland’s economic recovery.

“The Swiss National Bank is maintaining its expansionary monetary policy,” the central bank said in a statement today. “It will act decisively to prevent an excessive appreciation of the Swiss franc against the euro.”

[source]

Comment: As discussed earlier, this desire for relative weakness of the domestic currency is the prevailing attitude of international monetary officials. Therefore, choose gold.

By Garfield Reynolds
March 11 (Bloomberg) — Mohamed A. El-Erian, whose company runs the world’s biggest mutual fund, said deteriorating public finances may affect the global economy more than is currently realized.

“The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,” El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site. The potential damage from increased government borrowings is “at present being viewed primarily — and excessively — through the narrow prism of Greece.”…

The increasing debt burdens of countries including the U.S. mean many nations classified as advanced economies now may have weaker prospects than emerging economies, El-Erian wrote in Financial Times’ article.

“Countries will thus be forced to make difficult decisions relating to higher taxation and lower spending,” El-Erian said. “If these do not materialize on a timely basis, the universe of likely outcomes will expand to include inflating out of excessive debt and, in the extreme, default and confiscation.”

[source]

March 11, 2010 (Agence France-Presse) — U.S. President Barack Obama on March 11 called on China to embrace a “market oriented” exchange rate for its yuan currency, saying such a move would help rebalance the global economy.

He said that the world needed to rebalance the mix of exports and imports driving growth in the aftermath of the financial crisis. “Countries with external surpluses need to boost consumption and domestic demand,” Obama said in the remarks released by the White House.

“And as I’ve said before, China moving to a more market-oriented exchange rate would make an essential contribution to that global rebalancing effort.”

…The president was also to use his speech on March 11 to the Export-Import Bank’s annual conference, to unveil an ambitious strategy to double American exports to ease an unemployment crisis at home.

The National Export Initiative will create an export promotion cabinet and other federal agencies linked to exports, which Obama wants doubled in five years to support two million new jobs in America battling nearly double-digit unemployment.

[source]

RS View: Think about this…

In the (im)balance of trade in goods (and services) with the United States, China ends up with a net surplus of dollars to compensate for the shortfall in value of our exports to them versus the value of their exports to us. As these dollars are only non-performing representations of U.S. liabilities, can anyone really fault China for doing the next logical thing — which is to get rid of them for something else? But the big question becomes, what is this “something else”?

Now remember, we’re dealing with the books at the end of the typical month in which China has already satisfied its monthly import needs by bartering away a surplus of its exports, so by the very definition of the imbalanced trade is there is no recourse to exchange this surplus of dollars for a surplus of unneeded/excess imports. The avenues available to China in this situation are either to just sit on these non-productive dollars while the U.S. continues to print them in unprecedented quantities, or else to recycle them through the financial sector in exchange for a “better” form of investment or savings. By and large the choice has been for U.S. Treasuries, effectively exchanging a non-performing generic U.S. liability for a slightly more sophisticated form of U.S. Government liability known as a Treasury bond — a liability that at least carries with it the promise of an interest rate to help compensate somewhat for all the money printing that’s ongoing.

Now, clearly, when the U.S. calls for a more “market-oriented exchange rate” it isn’t suggesting that China has been paying a special “off-market” price for the U.S. bonds being bought with its surplus dollars.

In the ultimate distillation of these affairs — when all the fat has been boiled off the bones, what the administration is suggesting (whether it realizes it or not), is essentially that China ought to make these monthly trade flows balance (from a barter standpoint) by fostering the domestic perception that the given quantity of goods and services received from the U.S. have a sufficiently higher value while those being exported to the U.S. have a sufficiently lower value — a form of economic propaganda to be domestically imparted to the population through the mental transmission mechanism of adjustments to the yuan/dollar exchange rate.

Granted, I’ve taken the liberty of using oversimplification and actually turning the situation inside-out to highlight the ridiculous nature of this affair and the ham-handed policy suggestions by which politicians would set about to make things right. That is to say, the notion of “market oriented rates” won’t mean a damned thing as long as U.S. liabilities (i.e., dollars or bonds) are significantly accumulated among international reserves. Cutting to the chase, the market that needs to function to clear the surplus foreign currency from the books from month to month or year to year (and to thus bring about the desired exchange-rate harmony based on economic realities) is the GOLD market. Hmmmmm…. just think of it — central banks choosing gold (an asset) instead of foreign currency or bonds (liabilities) as their preferred holding among reserve assets. Apparently it’s just too embarrassingly simple for any self-respecting Harvard-trained policymaker to suggest outright…

R.

11 Mar 2010 (Reuters) —
With economic policy stimuli already at full tilt, no government wants an overvalued exchange rate to slay recovery, and the rival “soft currency” needs are producing some elaborate rhetorical jousting…

But nudging markets can be a dangerous game, not least because there’s a risk of panicking foreign creditors at a time of ballooning national debts…

The verbal record suggests that, at the very least, none of the main protagonists want rising currency rates — a factor that may influence the timing of their policy exit strategies.

U.S. officials say publicly they are not relying on a low dollar to meet President Barack Obama’s ambitious pledge to double exports over the next five years but few economists believe this is consistent with an appreciating greenback…

Euro zone governments were publicly fearful of the euro’s steep climb against the dollar over the past 12 months but have been handed a silver lining to the Greek debt saga in the form of a near 10 percent euro retreat as the crisis intensified…

The UK Treasury, wary of the pound’s impact on an intensive gilt sale program and its vulnerability with an election coming, is more circumspect. Finance minister Alastair Darling prefers to play down its fall as a product of “febrile” markets.

Japan, still battling consumer price deflation that has boosted its real interest rates and the yen, is the one of the four that looks like it could go beyond just talk. Last week it raised its borrowing limits for currency market intervention for the first time in six years.

[source]

RS View: As a would-be saver you can either choose currencies and remain part of the paper chase in this “race to the bottom”, or you can choose gold instead to avoid the intentional diminishment of your savings.

Thursday, 11 March 2010 (ABC Rural) — Citigold, one of Australia’s largest gold exploration companies, has signed a memorandum of understanding with Chinese company, Henan Jinqu…

Under the new deal, Henan Jinqu could own up to 50 percent of the project, which has access to 1.8 million ounces of gold.

Citigold chief executive Mark Lynch says it’s proof China has a large interest in the precious metal.

“Gold is important to the Chinese and to the Chinese culture, so I guess it’s just another step along the way, I suppose,” he says.

[source]

Gold dips as Greek fears calm again

The COMEX April gold futures contract closed down $14.20 Wednesday at $1108.10, trading between $1103.10 and $1128.30

March 10, p.m. excerpts:
(from Reuters)
Gold hit its lowest price in nearly two weeks on heavy futures liquidation and as safe-haven buying on Greek sovereign debt worries subsided. After rising almost $20 last week, gold has already dropped by $27 this week as traders take profits. Speculators had been increasing their net long position in gold for four straight weeks but may now be trimming those positions, putting selling pressure on the yellow metal, traders said. Gold weakened despite a stronger euro after Greece said in a report it is ahead of schedule with plans to tame its budget deficit…more
(from Bloomberg)
The euro gained as much as 0.6 per cent against the dollar, erasing an earlier 0.4 per cent decline. Bullion’s euro price dropped as much as 1.8 per cent today. Gold priced in euros reached a record on March 5 as investors, concerned that a Greek debt default may devalue the currency, purchased the metal as an alternative asset. “The European debt crisis is beginning to stabilize,” said Stephen Platt, Archer Financial Services Inc. analyst. “If the euro starts to rally, you end up selling gold and looking for a point to buy back euros.”…more
(from Marketwatch)
Gold and other metals advanced earlier after a report that showed China’s trade surplus narrowed further in February to $7.6 billion from $14.2 billion in January due to soaring imports, reflecting growing domestic consumption. Supporting gold in the early goings, the dollar’s rally against the euro came to a halt following stronger-than-expected economic reports from Germany and France. Analysts at Action Economics said that both oil and gold prices turned lower on expectations that Chinese data due out Thursday will disappoint…more
(from Dow Jones)
Observers said there appeared to be no single news event, or smoking gun, that shot down the market. Several analysts said gold traders still might have been thinking about remarks Tuesday from China’s chief foreign-exchange regulator, who said China’s future purchases would be limited by factors such as the relatively small size of the gold market and price impact of such an action. Others, however, dismissed the Chinese remarks as an attempt to talk down gold so the country could buy at lower levels…more

see full news, 24-hr newswire…

March 10th’s audio MarketMinute

by Allen Sykora
(The Australian) 7:47 AM 11/03/2010 (DJW) — Gold fell sharply today as speculators were exiting positions in which they previously bought, with the decline accelerating on sell stops, which are preplaced orders triggered when certain chart points are hit.

Several observers said there appeared to be no single news event, or smoking gun, that shot down the market…

“A lot of this is technical in nature,” said Dave Meger, director of metals trading at Vision Financial Markets. He cited the inability of an initial uptick to hold above gold’s prior-day’s high.

“Then once it started falling back, there was a significant amount of stop-loss selling going on in the market,” he said.

[source]

Gold falls toward $1,100 on futures liquidation
10 March 2010 (Reuters) — Gold hit its lowest in nearly two weeks on Wednesday, falling toward $1,100 an ounce on heavy futures liquidation and as safe-haven buying on Greek sovereign debt worries subsided.

After rising almost $20 last week, gold has already dropped by $27 so far this week as traders take profits…

The latest Commitment of Traders report by the U.S. Commodity Futures Trading Commission showed net long noncommercial gold futures positions at 207,372 contracts, up 3.4 percent from the prior week and up 14 percent during the last four week.

“We saw some liquidation on futures again, with more than 1 million ounces being sold,” said Christophe Jacot, vice president of FX and precious metals at EFG Bank.

[source]

RS Comment: It’s a funny thing about futures contracts for gold… they sure can weigh upon the price of the yellow metal, and yet they weigh nothing at all in the palm of your hand!

For a well-rounded portfolio, you can’t diversify paper simply with more paper of another color — it can all go up in smoke together as counterparties send each other into a cascading default just like so many falling dominoes. So you should not be surprised that when the futures are falling flat on their face, the phones are ringing with bright-eyed investors seeking instead to gather their fortune in the form of metal — everlasting gold coins and bullion instead of a mere signature scribbled upon the sands of time.

by Jamie Saettele
(DailyFX) — “Gold has traded sideways since December and appears to be building a bullish base. Specifically, the base could be a complex head and shoulders (the head itself is a head and shoulders). In order to complete the pattern, gold would sell off once more towards 1075 before finding a right shoulder low.”

[source]

Comment: Nice CHART. Weathering the monotony of a wee bit of short-term humdrum consolidative trading action is a small price to pay (and a good accumulation period) for the greater joy of future strength.

As investors focus more and more on sovereign risk issues so gold stands to gain

by Geoff Candy
Wednesday, 10 Mar 2010 (Mineweb) — Gold is increasingly being viewed as an alternative currency; a theme that is likely to continue throughout 2010 and, possibly beyond. And, it is a view that changes the way in which investors react to the yellow metal. This is the view of Nicholas Brooks, head of research and investment strategy at ETF Securities.

Speaking on the Mineweb Gold Weekly podcast, Brooks said, “Investors are starting to focus much more on the sovereign risk issue. Greece has obviously brought it to investors’ attention but obviously there is a lot of concern about what’s happening in terms of debt and fiscal balances in developed economies such as the UK, the US and a number of the so-called peripheral European economies and in this environment there is a general concern about the risk of currency debasement and also the concern that governments may be tempted to try and create inflation in order to reduce the real debt levels.”

This thinking has resulted in a shift away from viewing gold purely as a hedge against the US dollar, where investors and, especially, short-term traders tend to buy gold when the dollar is weakening, sell when it strengthens.

What we are seeing more and more of now, Brooks says, is a rising gold price even when the dollar strengthens.

“As an example in February we saw the gold price hit an all-time-high in both euro and in sterling and a lot of that went uncovered by many publications. But I think that is quite significant because of course the gold hit an all-time-high in US dollars last year, we are well over almost $1000, but it is quite a significant event when it moves to an all-time-high in two of the other world major currencies – the sterling and the euro and that highlights to me again that investors are all looking at gold as a place to put cash during a period when there are growing concerns about government intentions and government policies.”
…
“Investors do want to diversify away from the dollar – I’m not arguing that they’re about to aggressively sell dollars necessarily, but on a medium term basis a lot of the central banks and sovereign wealth funds would like to reduce their overall exposure to the dollar. And of course, when you look at the euro it’s an imperfect currency – the yen, you’re dealing with a very large government debt level in Japan. So when you look around the world, there aren’t a lot of options and I think that increasingly the central bank sovereign wealth funds along with private investors, are looking at gold as a place to keep capital in these uncertain times.”

[source]

by CNBC.com
Wednesday, 10 Mar 2010 — The global economy is entering a next “supercycle” phase that will generate inflation necessary for recovery, a strategist and protege of noted economist Nouriel Roubini told CNBC.

Arun Motianey, director of fixed income strategy at Roubini’s RBG Capital, said … the times ahead in fact will be more challenging if the economy isn’t able to create inflation and suffers deflation instead.

“It’s going to be inflation everywhere and it’s going to happen really through the weakness of the US dollar,” he said. “Then inflation in those other parts of the world that are expecting appreciating currencies, they’re going to inflate as well because that’s the way you ultimately correct this.”

[source]

(Mineweb) 03/09/10 — Sprott Asset Management’s Chief Investment Strategist believes gold could gain another 30% this year this year as a greater proportion of the public realizes the degree of difficulty that sovereign debt is in. Interview with the Gold Report.

The Gold Report: John, in Investors Digest of Canada you recently said you’re expecting gold to gain another 30% this year.

John Embry: I would say at least 30%. I said that I thought it would be the best year to date. We’ve had nine years consecutive higher year-end prices and the best year in that span for a year’s return was 31%. I think this will be the year that we exceed it in this, the 10th year of the bull market.

TGR: What’s driving this? Why is this year going to be the best year?

JE: I think we’re getting very close to the point when a greater proportion of the public realizes the degree of difficulty that sovereign debt is in. And at that point, when you can’t depend on your government paper as a safe haven, I think that fact puts gold in a much better light in more people’s eyes. [...] Governments spent dramatically more money and the results are a budget deficit I never thought I’d see in my life. I’m shocked at the numbers in many places.

TGR: It’s been unbelievable. Now when you talk about gold, you’re talking about bullion. How do you see the gold stocks? Do you think we’re going to have a pullback? Ian Gordon of Longwave Analytics and Richard Russell (Dow Theory) predict the Dow will go to 1000.

JE: I don’t agree with them. As much as I love Richard Russell-he’s probably been as big an influence in my career as anyone-I don’t think that deflation is necessarily the outcome when you have a pure fiat currency system. I think the far greater risk is hyperinflation because I believe that these guys that are in control today have seen the depressionary ’30s, and they will move heaven and earth to prevent that outcome. And when you’ve got the capacity to create unlimited money, I believe you can do it. So I hear Gordon and Russell and I respect them, but I’m in the camp that thinks we’ll get hyperinflation first. We’ll eventually have to clean out the debt, but I think we go hyper before that.

TGR: So hyperinflation. Would that include stocks as well?

JE: I think stocks will do fine. They may have a violent correction first because a lot of people don’t know what the heck we’re talking about here. And when they see inflation mounting and economic conditions being less than ideal, they’ll sell their stocks. But the fact is that if you go back and look at any hyperinflationary environment anywhere, stocks did infinitely better than paper instruments. So precious metals first, stocks second.
[...]
TGR: All right. Any last comments?

JE: The only comment I’d make is I really think things are sufficiently serious here in a financial or monetary debasement sense that everybody-and I have never been a table pounder-but I think every single person with a serious portfolio has got to have a reasonably significant exposure to precious metals. This isn’t something that’s just insurance for those who’ve got cold feet. This is something I think is a mainstream thing that people must have.

TGR: When you say a significant portion, what percentages are you thinking?

JE: I used to say 5% to 10% when it was just an insurance thing and the market was pretty sanguine. I say at least 20% now. I see the other assets as being less attractive. I wouldn’t buy a bond if you gifted me with the money to do it.

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By Nicholas Larkin and Glenys Sim
March 10 (Bloomberg) — Gold may rise in New York and London for the first time in three days as industrial metals climb on Chinese import figures and the dollar’s rally stalls. Copper advanced as much as 0.8 percent in London after China said imports of refined metal climbed 10 percent in February from the prior month…

“Recent data from China has been bullish,” Dan Smith, an analyst at Standard Chartered Plc in London, said today by phone. “When people become more optimistic about China, it helps lift the whole complex, including gold.”

Bullion increased to $1,124.50 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,115.75 at yesterday’s afternoon fixing…

“Gold’s getting a small lift from base metals,” said Jia Wei, an analyst at Jiangsu Suwu Futures Brokerage Co. The precious metal is “hovering in the $1,100 to $1,200 range as investors vacillate between liking and avoiding risk.”

Gold futures gained 24 percent last year as governments and central banks worldwide maintained low interest rates and spent trillions to stimulate economies. The Federal Reserve will likely hold its target rate near zero for the next “three or four meetings,” Fed Bank of Chicago President Charles Evans said yesterday.

[source]

Gold trims early losses

The COMEX April gold futures contract closed down $1.70 Tuesday at $1122.30, trading between $1108.20 and $1125.10

March 9, p.m. excerpts:
(from Dow Jones)
Gold futures finished with a slight loss after they were pressured early in the session by a muscular U.S. dollar and by comments from a Chinese official seen as a hint that gold purchases from the country might not be as robust as some expected. The dollar rose overnight when the British pound and euro fell on warnings about deteriorating debt quality in Europe by Fitch Ratings and Moody’s Investors Service. Still, gold recouped most of its initial weakness due to moves in outside markets, such as the dollar paring gains, crude recovering from early weakness and equities trading higher…more
(from Marketwatch)
The recent strengthening of the dollar “as well as general profit-taking from a large run-up seem to be the first lines hitting gold,” said Zachary Oxman, managing director at TrendMax Futures. April gold declined for a second day, off 0.2%. Oxman expects the recent bout of selling to be short-lived. “I’d use these dips to accumulate a long-side trade,” Oxman said. The U.S. dollar gained against most of its rivals on Tuesday, as worries about debt levels in the euro zone were rekindled after Fitch Ratings warned that Portugal remained vulnerable to a downgrade…more
(from Reuters)
Fitch Ratings said it still has a negative outlook on Portugal’s double-A ratings and was studying the details of the country’s new austerity measures. “With the euro below $1.37, gold will be struggling, because it is not going to get the support from the currencies,” said Saxo Bank senior manager Ole Hansen. China’s top foreign exchange manager, head of the State Administration of Foreign Exchange Yi Gang, said on Tuesday Beijing will be prudent in adding gold to its official reserves, wary that such a move would drive prices higher…more
(from Bloomberg)
Gold is “unlikely” to be China’s primary investment to diversify its reserve holdings because of price risks, said Yi Gang. “The size of the world’s gold market is small,” Yi said. “China’s purchase will push up the prices. That will also hurt Chinese gold consumers.” He said private holdings in China are more than 3,000 metric tons. China has increased its reserves of gold by 454 tons since 2003. Analysts at Scotia Capital said that “given the latest fears in the market are about sovereign debt, it seems as though gold prices could have further to climb.”…more

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March 9th’s audio MarketMinute