Gold dips on India rate hike, ends week up 0.5%

The COMEX April gold futures contract closed down $19.90 Friday at $1107.60, trading between $1101.00 and $1127.50

March 19, p.m. excerpts:
(from Reuters)
Gold fell nearly 2 percent after an interest rate hike in top gold consumer India and as investors cashed in gains from earlier this week ahead of the weekend. The precious metal rose earlier in the week despite a rising dollar, due to fiscal worries about Greece and uncertainty about currencies. But bullion retreated on Friday as the dollar surged against the euro on nagging worries about Greece and as India’s interest rate hike created economic uncertainty about a country whose gold consumption leads the world…more
(from Dow Jones)
“It would probably serve to slow their economy and decrease future consumption of gold for jewelry demand,” said Tom Pawlicki, analyst with MF Global. The most recent World Gold Council report put India’s fourth quarter jewelry demand at 137.8 metric tons, 32.8% of the world total. The combination of a muscular U.S. dollar and the Indian rate hike acted as a one-two punch that sent gold futures reeling. Then the knockout blow came when the market fell through technical levels that triggered additional selling, sending the metal to its lowest level in a week…more
(from Marketwatch)
Gold was able to hold its own Thursday even as it also faced a stronger dollar, with some safe-haven buying offsetting the higher US currency. But prices just couldn’t resist all the negative sentiment on Friday’s thinner trade, said George Gero with RBC Capital Markets. “We’re on the verge of hitting a seasonally soft period for gold over the next couple of months,” commented Brien Lundin, editor of the Gold Newsletter. “But I don’t see anything on the horizon that would point to a big correction in gold, which still has a long-term upward bias.”…more

see full news, 24-hr newswire…

March 19th’s audio MarketMinute

By Christopher Anstey and Susan Li
March 19 (Bloomberg) — Morgan Stanley Asia Chairman Stephen Roach said that Paul Krugman’s call to push China to allow a stronger yuan is “very bad” advice and that increased Chinese spending is a better way of reducing trade imbalances.

“We should take out the baseball bat on Paul Krugman — I mean I think that the advice is completely wrong,” Roach said in an Bloomberg Television interview in Beijing when asked about Krugman’s call, characterized as akin to taking a baseball bat to China. “We’re lashing out at China rather than tending to our own business,” which is raising U.S. savings, Roach said…

The debate between the two economists echoes verbal clashes between the nations, with Chinese leaders repeatedly saying that their yuan policy isn’t the cause of the U.S. trade gap. American lawmakers have urged the Obama administration to step up pressure on China for keeping its exchange rate unchanged, a stance criticized as providing an unfair advantage.

Premier Wen Jiabao’s government has kept the yuan at 6.83 per dollar since mid-2008 to shield exporters from the global recession and a contraction in world trade. It allowed the currency to appreciate 21 percent in the three years before that.

China’s Reserves — The country has accumulated a record $2.4 trillion of reserves, and $889 billion of U.S. government debt, partly a consequence of its exchange-rate policy…

“I’m a little curious what Steve thinks would happen if the U.S. increased savings” without a stronger yuan, Krugman said today. “Where would the demand” for goods and services come from, he asked. Boosting savings should be done “in the long run,” not now, he also said.

Krugman is “giving Washington very, very bad advice,” Roach said in a later interview when asked to respond to Krugman’s reaction to his remarks. “I totally reject his idea that savings is bad.” … He added that while Krugman and he have been in agreement for years, they are in total disagreement right now.

“What the world needs is a shift in the mix of saving,” Roach said in a further e-mail. While China has a “major surplus saving imbalance,” it’s “highly debatable” whether it’s because of the yuan stance. Efforts to boost Chinese consumer spending will be a more effective way to address the issue, he said.

[source]

RS View: The root of the issue here involves the very *nature* of savings and, more particularly, the form in which it occurs. These asymmetries (and the spats surrounding them) arise from faulty conceptions of “savings”. They would be more easily resolved if “savings” were more accurately understood to be the accumulation of durable physical wealth (i.e., hard assets such as gold), whereas the excessive accumulation of liabilities (such as cash, CDs, or bonds) which stand in their skewed perception as “savings” should be more rightly categorized as either currency speculation (only if done specifically with that objective) or else more generally it is an epidemic of economic catatonia stemming from regrettable financial ignorance.

by Geoff Candy
Friday 19 Mar 2010 (Mineweb) — Gold is still on track to return to its record high of $1,227 by the middle of this year and will head toward $1,500 by the end of 2010.

This is the view of Jeffrey Nichols, Senior Economic Advisor to Rosland Capital and Managing Director of American Precious Metals Advisors. … Part of the reason for this belief he says is that “we think the best of the economic news is now behind us, certainly with regard to U.S. inflation rates, consumer spending, and industrial production, is now behind us – and that indicators in March, April, and May will begin painting a gloomier picture of the economy. But, the five main reasons for likelihood that gold will continue its upward trend are:

– Inflationary U.S. monetary and fiscal policies
– An inherently unstable European currency
– Expanding investor interest in gold
– Rising central bank and sovereign accumulation
– Declining world gold-mine production

[source]

By Jordan Roy Byrne
Mar 19, 2010 TheMarketOracle) — [Hyperinflation]… is a confidence issue. It is not a rise in inflationary expectations but a loss of confidence in a country being able to repay its debts. As confidence is lost, interest rates rise. Monetization occurs when the cost of servicing the debt consumes too much of the overall budget, so that the government can’t provide basic services or loses its ability to function on a day-to-day basis…

We don’t believe in Weimar or Zimbabwe style hyperinflation. That is just too extreme. We do believe that we will see severe inflation worldwide as a result of a loss of confidence in governments and currencies. Falling bond markets and rising interest rates will reflect this.

For Gold watchers, now is the time to start watching the relationship between Gold and bonds. According to Wikipedia, the worldwide bond market is $82 trillion and the US bond market is $34 trillion. Clearly, the crowded trade is bonds. Gold’s bull market will accelerate when money starts to move out of bonds and into Gold.

[source]

by Alix Steel
Fri 03/19/10 NEW YORK (TheStreet) – Dennis Gartman, author of the Gartman Letter, talks gold, the U.S. dollar and his outlook.

[video]

By Nick Godt
March 19, 2010 NEW YORK (MarketWatch) — Crude oil and gold futures losses accelerated in late morning trade Friday, as uncertainty about Greece fueled gains for the dollar while the expiration of futures and options contracts led to big swings across markets.

Crude oil for April delivery was down $1.81, or 2.2%, at $80.38 a barrel in electronic trade. Gold for the same month fell $21.10, or 1.9%, to $1,106.40 an ounce.

[source]

“Central banks add gold reserves at fastest rate since 1964.” Click here to listen.

Enjoy our complete archive at iTunes.

by Lewa Pardomuan
Friday 19 Mar 2010 SINGAPORE (Reuters) — Gold edged down on Friday as early bargain hunting subsided and investors turned to currencies for direction, but concerns about Greece’s debt problems could still spur safe-haven buying.

Bullion investors closely watched the dollar index, which measures the greenback against a basket of six currencies and hovered above the 50 and 100-day moving averages, suggesting sentiments for the U.S. currency remained firm…

“The dollar just doesn’t seem to be seeing much downside risk at the moment. The dollar doesn’t look overbought, technically looks quite strong with it staying above the 50-day moving average,” said Mark Pervan, senior commodities analyst at ANZ in Melbourne…

“There’s a bit of selling from speculators and we are watching the dollar movements. I don’t think anybody is taking any positions,” a dealer in Hong Kong said.

“People are waiting for more economic data and would like to see how the situation in Greece develops. Physical buyers are not around and there are only speculators buying and selling. It’s very boring.”

[source]

RS Comment: If the past ten years have taught market watchers anything particularly useful, it would be that this “boring” period is exactly when you should make your purchase because it has always presaged the end of a consolidation period prior to the next jump higher to a new price level.

By Karey Wutkowski
March 19 (Reuters) – U.S. bank regulator Sheila Bair said she has “serious concerns” that the Senate’s regulatory reform bill allows for backdoor bailouts of the largest financial firms…

Bair, a critic of some of the government’s massive rescues of Wall Street firms, has been one of the strongest advocates of creating a “resolution mechanism” that would allow the government to dismantle a failing financial firm.

The lack of a resolution mechanism prompted the government to engineer multibillion-dollar rescue packages for insurer American International Group Inc and Citigroup Inc during the financial crisis…

Bair, a Kansas native who once worked as a bank teller herself, said large banks have pulled back on credit more than smaller institutions, and this is hampering the economic recovery.

Last year, banks’ loan balances fell by 7.5 percent, the steepest decline since 1942. Bair noted that the largest banks accounted for more than 90 percent of the total drop in bank lending in the 2009 fourth quarter.

[source]

Who will win the race to the bottom in the international currency war? C

*******

More and more and more and more and more and more (ad infinitum?) public debt. The financial shocks to come.

*******

Is gold evolving to a higher level in the public consciousness? We think it is. But what do others think?

*******

One man’s golden ceiling is another man’s golden floor, but at what altitude?

*******

That and more from the USAGOLD NewsGroup. We compile, analyze, separate out the most gold important, and distribute the news to our clientele on a weekly basis by e-mail. This service has experienced incredible growth over the past few years and the rate of growth has continued unabated — now numbering many thousands of subscribers. To understand why, all you have to do is read your first issue.

We invite you to become a member of this elite and golden club by registering . . . . . . . .

Here.

And it’s free. . . . . . . .

Gold extends rally as Greek worries resurface

The COMEX April gold futures contract closed up $3.30 Thursday at $1127.50, trading between $1118.20 and $1128.50

March 18, p.m. excerpts:
(from Dow Jones)
Gold futures shruged off a muscular dollar and rose anyway as investors showed a preference to hold the metal rather than the major currencies as uncertainty continues to swirl around Greece’s debt situation. The metal also rose against the British pound and euro. “The gold market is saying today it wants to break away from this nonsense,” said Sterling Smith, market analyst with Country Hedging. “If people don’t want to hold Treasurys or don’t want to hold Treasury bonds and don’t want to hold any European currency, they are looking to gold.”…more
(from Reuters)
“Gold did end higher today despite the weak euro/dollar, and that is a very bullish indicator. With worries about sovereign debt, there is still a safe haven to the gold,” said Mihir Dange, COMEX gold floor trader. Recurring fears over debt-laden Greece and the global credit outlook knocked the euro nearly 1 percent lower versus the dollar. A report earlier said Greece was not hopeful of receiving assistance from other euro zone countries and may seek aid from the International Monetary Fund in April…more
(from Bloomberg)
Greek Prime Minister Papandreou set a one-week deadline for the European Union to craft a financial-aid mechanism for the country. Germany has expressed skepticism on a rescue package. April gold rose 0.3%, capping its longest rally since January, on demand for a haven from the euro. “Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar,” Dennis Gartman, economist and hedge-fund manager, said in his Gartman Letter. “The trend shall continue months, if not years, into the future.”…more

see full news, 24-hr newswire…

March 18th’s audio MarketMinute

NY Fed purchases $10 bln net ($10.6 bln gross) in agency mortgage-backed securities as part of ongoing quantitative easing operations.

by Nicholas Larkin
March 18 (Bloomberg) — Central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades, data compiled by the World Gold Council show.

Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988…

Official reserves of central banks and governments may expand by another 187 to 218 tons this year, CPM Group forecast last month. The council’s data also includes the holdings of the International Monetary Fund, European Central Bank and other international and regional bodies.

“There’s clearly been a renaissance of gold in central bankers’ minds,” said Nick Moore, an analyst at Royal Bank of Scotland Group Plc in London. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.”

“Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar,” Dennis Gartman, a Suffolk, Virginia-based economist and hedge-fund manager, said in his Gartman Letter today. “The trend shall continue months, if not years, into the future.”

[source]

RS Comment: “Why is this?” an observer asks. Because modern man has a vital need for a reliable “economic scorekeeper”, and as far as that goes across our planet’s wide variety of peoples, politics, and cultures, there’s no getting around the fact that physical gold in your vault is better than the bonds of a self-interested foreign government or counterparty.

Gold ends slightly higher on St. Patrick’s Day

The COMEX April gold futures contract closed up $1.70 Wednesday at $1124.20, trading between $1121.00 and $1133.90

March 17, p.m. excerpts:
(from Dow Jones)
Gold futures were helped by increasing risk tolerance a day after the Federal Reserve left interest rates low, but prices were capped as participants’ bullishness was limited. Investors were moving out of the U.S. dollar–with the index down 0.2% shortly after gold closed–and into perceived riskier assets like gold and equities. But after the Fed left interest rates unchanged at ultra-low levels, “the (gold) market is looking to see whether the dollar will actually stay down,” said Ira Epstein, director of the Ira Epstein division of The Linn Group…more
(from Reuters)
Earlier on Wednesday, a government report showed that U.S. producer prices fell more than expected in February as energy costs tumbled, supporting the Fed’s resolve to hold rates near zero. The dollar was mostly flat against the euro, as the currency market took a breather after the report showed that core producer prices rose by 0.1 percent, in line with economists’ forecast. Gold has benefited from currency volatilities related to sovereign credit fears in Greece and major economies such as the United Kingdom and the United States…more
(from Marketwatch)
The precious metal rose even as the dollar posted slight gains earlier on before eventually slipping into negative territory. “We’re in a bit of a transition where gold isn’t marching always in lockstep with the dollar,” said Brien Lundin, editor of the Gold Newsletter. “We’re moving past the crisis of the past few years and investors in the east are looking at large deficits and debased currencies. As a result, the relative value of stuff, metals, and primarily gold, must increase.”…more
(from Bloomberg)
Gold futures for April delivery rose 0.2 percent after climbing 1.9 percent in the previous two sessions.The metal will trade at $1,390 in 12 months, Goldman Sachs Group Inc. said in a report. That compared with an estimate of $1,380 last month. The bank said that “the low U.S. real-interest-rate environment, combined with continued gold exchange-traded-fund buying and reduced central-bank sales, will continue to provide strong support for gold prices in 2010 and 2011.”…more

see full news, 24-hr newswire…

March 17th’s audio MarketMinute

May fortune smile and you find your pot o’ gold . . .

by Alix Steel
Wed 03/17/10 NEW YORK (TheStreet) — Nicholas Brooks, head of research and investment strategy for ETF Securities, says that despite their short term consolidation trend, gold prices will move higher over the next few months.

Brooks says concern over sovereign debt ratings will increase demand for gold.

[video]

By Nick Godt
March 17, 2010 NEW YORK (MarketWatch) — Gold futures got nudged higher Wednesday as investors continued to cheer the Federal Reserve’s latest pledge to maintain U.S. interest rates at exceptionally low levels “for an extended period,” and the Bank of Japan doubled the scale of its lending programs.

Gold for April delivery was up $2, or 0.1%, at $1,123.80 an ounce in electronic trading.

The precious metal rose even as the dollar came off lows.

Also lifting the precious metal, crude-oil futures rose well above $82 a barrel as the OPEC cartel, meeting in Vienna, kept its production quota unchanged.

[source]

Gold jumps higher; Fed reaffirms low rates

The COMEX April gold futures contract closed up $17.10 Tuesday at $1122.50, trading between $1108.10 and $1128.10

March 16, p.m. excerpts:
(from Dow Jones)
Gold futures remained sharply higher after the Federal Reserve left interest rates unchanged, following a higher settlement in which participants were positioning themselves bullishly ahead of the announcement. Weak housing data helped expectations that the Fed will stay on the accommodative side, which would generally support gold and keep the dollar under pressure, said Charles Nedoss, senior market strategist with Olympus Futures. Housing starts decreased by 5.9%, the Commerce Department said Tuesday…more
(from AP)
The Fed concluded that the U.S. job market is stabilizing, but also that consumers may be hesitant to spend more because of high unemployment and the sluggish economy. Commodities prices rose much of the day as traders, analysts and investors anticipated no adjustment to interest rates ahead of the Fed’s decision, which was released mid-afternoon. The dollar was also down after European finance ministers said they had a plan for financial aid for debt-laden Greece if it was needed, stealing some of the dollar’s allure as a safe haven asset…more
(from Marketwatch)
Gold futures gained 1.5% by the official close, and rose further in electronic trades as the dollar weakened after the Federal Reserve maintained its pledge to keep interest rates low. Speculation had mounted that the central bank might remove its pledge to keep interest rates at historically low levels “for an extended period of time.” The dollar had come under early pressure as Standard & Poor’s said Greece’s austerity measures warranted an affirmation of the nation’s BBB+ long-term credit rating and its removal from CreditWatch…more
(from Bloomberg)
The greenback fell as much as 0.7 percent against a basket of six major currencies. “The Fed is going to have a difficult time raising rates during such a fragile recovery” said Frank McGhee, head dealer at Integrated Brokerage Services LLC. “The dollar is weaker, and you have a pop in gold and oil.” Investors in Europe also continued to buy gold as an alternative to holding the euro. “There is still concern about euro policies,” said Bernard Sin, head of currency and metals trading at MKS Finance SA. “There’s some physical demand at $1,100 that’s been supporting the market.”…more
(from Reuters)
The metal, used as a safe haven in times of uncertainties, has gained due to currency volatilities related to lingering sovereign debt worries in Greece and major economies such as the United Kingdom and the United States. “It’s not a case of a weak dollar and strong euro. It’s the fact that currencies in general are not very attractive right now, and that will remain a major benefit going forward,” said Bill O’Neill, managing director at LOGIC Advisors. “Gold is assuming the role of currency of choice.”…more

see full news, 24-hr newswire…

March 16th’s audio MarketMinute

March 16, 2010 Federal Reserve Press Release –

Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly.

However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.

Watch CBS News Videos Online

PG View: An excellent postmortem of the financial crisis by 60-Minutes. Author Michael Lewis is interviewed and recounts the mass delusion suffered by Wall Street in advance of the subprime meltdown and during the resulting financial crisis.

There is seemingly little remorse for the $1.75 trillion in wealth that was destroyed. In fact, the perpetrators of the crisis enjoyed bonuses in 2009 that were only rivaled by the bonuses paid in 2007, as the markets began to unravel. These extraordinary levels of pay continue to be subsidized by the American taxpayer.

Lewis surmises that it might take a while, but Wall Street has done itself in.

If the individual investor has indeed lost all faith in ‘the street’ — due to the monumental hubris, incompetence and downright criminal activity of the past several decades — they may not return to the traditional asset classes. A fact that may already be in play, as evidenced by weak volumes in the stock market and continued outflows from mutual funds.

Where might the individual investor turn then if they seek to preserve wealth? They’ll of course turn to gold.

RS View: That’s an important video, Pete, and an important sentiment for consideration: that Wall Street may have “done itself in” — in more ways than one. This phenomenon of lost faith is not only limited to the typical small-time investor (i.e., Joe Sixpack), but monetary heavyweights are sounding off as well.

The chairman of the Financial Services Authority in the United Kingdom, Adair Turner, was among the voices last Autumn suggesting that a “Tobin tax” could be levied on financial firms, and in doing so said that making the City of London a financial hub had ceased to be a key aim and that much of the City’s [financial] activity was “socially useless”.

And much more recently, at a speech Friday at Stanford University European Central Bank president Jean-Claude Trichet had these pithy comments about the financial sector:

—”Financial innovation is part of scientific progress. It is an engine of growth and prosperity. Yet, the key question, which I would like to highlight in my remarks today, is to what extent financial innovation serves the real economy and to what extent it only serves itself. At some point in our recent past, finance lost contact with its raison d’être. It ceased to be a source of services for the real economy and developed a life of its own. Finance became self-referential.”—

To put my own spin on it, so to speak, the “wizards” on Wall St essentially ate Jack’s magic beans and derivatized the resulting dung into a sufficiently high enough heap to reach the Giant’s castle. Whereupon they stole away the Goose that lays the Golden Eggs and divvied the bird up into a pâté de foie gras and gosling sandwiches as a self-congratulatory meal to be shared amongst themselves — thus providing more dung with which they surely hoped to extend their reach ever higher…

Tues. Mar. 16 2010 (CNBC) “Gold, in dollar terms, may or may not increase much in the next few months,” Francisco Blanch from BofA Merrill Lynch Global Research said Tuesday. “But gold in other currencies, like the euro, should continue to trend higher. I can’t see how the current European situation ends up with a lower euro gold price.”

“And the same thing applies to the UK. For instance, we’ve seen the price of gold in British pounds hit record levels.”

Another issue to consider, “there are $6 trillion in emerging market foreign exchange reserves, and only 1.5 percent of that money is actually invested in gold.”

He sees emerging markets continuing to accumulate reserves “at a pretty rapid pace and some of that will end up in gold.”

“I do think that the gold market is very well supported… and it’s supported by what is a very very large amount of money outstanding around the world. There’s just too much money and too little gold in a certain way.”

[video]

16 March 2010 (Reuters) — Gold jumped above $1,125 an ounce in Europe on Tuesday as the dollar extended losses versus the euro and oil rallied above $81 a barrel ahead of a key Federal Reserve announcement on rates later in the session…

Most commentators expect the bank to leave interest rates at record lows, but its accompanying statement will be closely watched for clues as to the timing of a U.S. rate hike…

The dollar hit session lows versus the euro on Tuesday ahead of the Fed statement.

Gold has also benefited from fears over the sovereign debt of major economies, after rating agency Moody’s said on Monday risks to the blue-chip status of the world’s four largest triple-A sovereign debt issuers had grown.

“The alternative to investment in bonds, given the U.S. TIC flows yesterday, is supporting the market for now,” Saxo Bank senior manager Ole Hansen said, indicating data showing foreign investors were net sellers of U.S. securities in January.

On the physical market, premiums for gold bars in Asia jumped to their highest in more than a month as jewellers restocked and demand from main consumer India started to pick up ahead of the wedding season, dealers said on Tuesday.

[source]

by Jan Harvey
16 March 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…

Spot gold held above $1,115 an ounce on Wednesday, off the record high of $1,226.10 it hit in December but still above the $1,096.25 at which it started the year.

The dollar has gained nearly 4 percent versus the euro in that time, largely on fears over fiscal issues in Portugal, Italy, Ireland, Greece and Spain. But sovereign debt issues don’t stop there. … The U.S. fiscal deficit is projected to reach $1.56 trillion this year, Japanese debt is nearing 200 percent of GDP, while Fitch Ratings said earlier this week that Britain’s sovereign credit profile has deteriorated.

“People have real fears about what is going to happen in Greece and Spain and the effect it is going to have on the euro, and they are saying the only thing that is safe and secure is gold,” said ANZ Bank’s head of metals sales Peter Hillyard…

From a chart perspective, gold has been building a solid base. It has risen steadily in euro and sterling terms since its late December correction, while dollar-priced gold has been on an upward trend since a dip to 2010 lows in February…

Now gold has proved it can hold its own in a rising dollar environment, any change in that trend may prove explosive.

“If dollar gold prices manage to hold up under the prior circumstances, how are they going to perform when the U.S. dollar is back under pressure again?” said Klapwijk of GFMS…

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]

By Matt Whittaker
March 16, NEW YORK (Dow Jones)–Gold futures have moved sharply higher Tuesday morning as participants buy back previously sold contracts to square up positions ahead of the Federal Reserve’s interest rate announcement after the market closes.

In recent trading, April gold was up $17.10, or 1.5%, at $1,122.50 an ounce on the Comex division of the New York Mercantile Exchange. It reached as high as $1,127.

Through Monday, Comex April gold had pulled back some 3% from its highest close this month. That leaves room for the repurchasing of previously sold positions.

Such buying is coming against a background of support from a weaker U.S. dollar. A lower greenback often boosts dollar-denominated gold by making the metal less expensive for purchasers using other currencies, helping demand.

[source]

by David Levenstein
Tuesday 16 Mar 2010 (Mineweb) — While gold continues to consolidate in US dollar terms, it made an all time high in Euros. At €834 per ounce last week, euro gold has never traded higher. Once again we see gold appreciate as the currency devalues. Currency devaluations are a very strong driving force behind gold prices. And, as sterling and the Euro spiral downwards the US dollar has been the main beneficiary of a flight from these currencies. However, what is good about the US dollar?

In the current scenario as global markets try to decipher the daily news and political rhetoric from world leaders, we can expect to see huge volatility in currencies and financials which will then impact on stocks and commodities. And, gold is no exception. But, if history repeats itself as it always seems to do, then we can expect further trouble with these fiat currencies which bodes well for gold.

[source]

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.